Why the OceanaGold Corporation share price stormed higher today

OceanaGold Corporation (ASX:OGC) shares have jumped higher today after full-year production hit its guidance range. Does its low costs and increasing production this year make the gold miner a buy?

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Although the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has dropped lower for a second day in a row, that hasn't stopped OceanaGold Corporation (ASX: OGC) from storming higher this morning.

In morning trade the leading gold producer's share price has jumped over 4% to $4.46.

The reason for today's gain is the release of an impressive full year production report for the year ended 31 December 2016.

Despite inclement weather and the threat of closure from President Duterte's Philippine government, OceanaGold's production landed in its guidance range.

For FY 2016 the miner delivered consolidated production of 416,741 ounces of gold and 21,123 tonnes of copper. All-in sustaining costs (AISC) came in at US$708 per ounce, down US$1 an ounce from a year earlier.

Looking ahead the future looks bright for the miner. Not only has management forecast a massive increase in production of between 550,000 to 610,000 ounces of gold in FY 2017, but it expects to achieve a sector-leading AISC of between US$600 to US$650 per ounce.

With the gold price hovering around US$1,200 an ounce at present, OceanaGold will be in a great position to deliver bumper profits this year if the gold price remains steady.

But whether it stays at current levels or not over the next 12 months is a matter of debate.

I don't expect it to unfortunately. I believe President Trump's policies will generate higher levels of inflation which leads to three to four rate hikes in the United States this year.

As rates rise I expect significant pressure will be placed on the gold price and the shares of gold miners such as OceanaGold, Newcrest Mining Limited (ASX: NCM), Resolute Mining Limited (ASX: RSG), and St Barbara Ltd (ASX: SBM).

However, if you're confident that the gold price will remain close to current levels for the foreseeable future then OceanaGold's low-cost operations make it a stand out pick in the industry in my opinion.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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