OceanaGold has signed a non-binding letter of intent with Newmont Mining to acquire Newmont’s Waihi gold operations in New Zealand for $101 million in cash. Newmont will also retain a 1% net smelter royalty for gold ounces mined from one specific exploration tenement capped at 300,000 oz of production. The companies expect the transaction to close in the third quarter of 2015.

OceanaGold is forecasting 2015 production of 295,000 to 335,000 oz of gold, not including Waihi, and 21,000 to 23,000 mt of copper.

Newmont Mining is the world’s second-largest gold mining company, with operations in North and South America, Africa, the Australian Pacific, and Indonesia. The company is forecasting 2015 production of between 4.6 million and 4.9 million oz of gold.

Newmont’s Waihi operations are located on New Zealand’s North Island, approximately 150 km southeast of Auckland. Open-pit mining began in 1988 and underground mining began in 2005. Current production is from the Correnso underground mine.

Production at Waihi totaled approximately 132,000 oz of gold in 2014 and is forecast to average 100,000 oz/y of gold through 2018. All-in sustaining costs are forecast in the range of $760 to 820/oz.

Mining at Waihi is based on low-sulphidation epithermal gold and silver deposits hosted in quartz veins. Ore is processed through a conventional SAG mill, ball mill, and carbon-in-pulp circuit, with plant capacity of up to 1.3 million mt/y. Current reserves total 2 million mt grading 5.52 g/mt, containing approximately 360,000 oz of gold.

OceanaGold Managing Director and CEO Mick Wilkes said, “We recently announced a mine life extension to the Frasers underground mine at Macraes in New Zealand, which combined with a weaker New Zealand dollar and lower fuel prices has enhanced the value of our Macraes operations. We are investing in exploration along strike and underground at Macraes and believe there is good potential to underpin three to five years of steady operations producing around 150,000 oz/y of gold while generating material free cash flow. This combined with the proposed Waihi transaction creates an attractive and profitable gold business in New Zealand that we believe will generate strong returns for years to come.”