Why the OceanaGold Corporation share price was crushed today

The OceanaGold Corporation (ASX:OGC) share price has dropped lower after its Didipio mine was threatened with suspension. Should you buy the dip?

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The OceanaGold Corporation (ASX: OGC) share price is falling today, although Australia's gold miners may be climbing higher.

In morning trade its shares have tumbled 6% to $4.19 after it updated the market on its Philippines-based mining operations.

A couple of weeks ago I wrote about how the company's Didipio mine had been named as one of six mines that were threatened with suspension by the Duterte government due to allegedly causing a decline in agricultural production.

At that point in time OceanaGold responded to the news by confirming that it had not received a formal suspension order from the Department of Environment and Natural Resources (DENR), nor did it believe there was any legal basis for the proposed suspension.

Unfortunately this morning the company has acknowledged receipt of an order from the DENR calling for the suspension of its Didipio operations.

The suspension notice alleges damage to houses caused by the blasting operation and the potential adverse impact to the agricultural areas of the Province.

OceanaGold has been given three months to address the issues raised against it and it has already lodged an appeal directly with the Office of the President which stays the execution of the suspension order. The company believes Didipio will continue to operate during the appeal process.

What now?

Much like last time, I expect the miner will rectify any outstanding issues with the DENR and Didipio will remain operating unabated. If this happens I would expect to see its share price rebound.

Whilst I'm a big fan of the miner and believe its Haile mine in the United States could prove to be a world-class asset when production commences this year, I think the political risks in the Philippines makes it a high-risk investment.

For this reason any investors that are bullish on gold and looking to invest in the gold miners might be better off with an investment in Resolute Mining Limited (ASX: RSG), Northern Star Resources Ltd (ASX: NST), or St Barbara Ltd (ASX: SBM).

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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