OZ Minerals had made its first major investment in the mining industry.
While the company has invested in the shares of several companies (including Sandfire Resources, IMX and Toro Energy) and announced a major capital management program, yesterday’s deal is the first direct investment to expand its mining and producing interests.
OZ Minerals Ltd said it has agreed to acquire the Carrapateena copper-gold project in South Australia for $248.23 million.
OZ Minerals said Carrapateena has the potential to produce between up to 150,000 tonnes of copper per annum, similar to the company’s Prominent Hill copper mine.
OZ said the project comprises four exploration licences covering 1,070km2 located in central South Australia on the eastern margin of the Gawler Craton.
It is 130 kilometres from the regional centre of Port Augusta, 100 kms south east of BHP Billiton’s Olympic Dam operation and 250kms south east of OZ Minerals Prominent Hill operation.
The deposit is deep, around 470 metres underground at its shallowest and over 1.5 kilometres at the deepest.
But the current very high prices for copper and gold make it attractive for OZ.
OZ Minerals’ Managing Director and CEO Terry Burgess said "In acquiring this exciting project we are significantly adding to the growth potential of OZ Minerals. We have a successful operation at Prominent Hill, and clearly synergies will be available to us as we move to develop this quality copper-gold asset."
"This is one of the largest undeveloped copper projects in Australia today.
“It is also a project which fits our stated parameters – it is copper-gold, in a very favourable jurisdiction and has the potential to produce copper at between 50,000 and 150,000 tonnes per annum for a significant mine life."
"Carrapateena meets our stated strategy: it is in copper, has appropriate production potential, is at an advanced exploration stage and is in a favourable jurisdiction,” he said.
"The Board believes that it represents a rare opportunity to purchase 100% of a project which has the potential to produce at similar rates to Prominent Hill, with what appears to be a considerable mine life."
"Large bulk tonnage underground operations are at the forefront of global copper production and mining expertise and methods for these operations continues to evolve and improve.
"While there is a significant amount of work required to drill out the project and complete feasibility studies, with 100% ownership, OZ Minerals will be in control of this process and able to learn from the increasingly large number of underground mines globally.
"The project represents a significant long term option for OZ Minerals, not just over the Carrapateena deposit, but on the exploration potential of the region," the company said in yesterday’s release.
OZ Minerals says it will fund the purchase from current cash resources, with development studies and construction capital expenditure to be funded from Prominent Hill cashflows.
The new area appears to have very similar geology to Prominent Hill and Olympic Dam and contains copper, gold, silver, uranium, iron ore and rare earths.
OZ says there hasn’t been sufficient drilling or exploration to define a resource but thinks it possible the deposit could contain a resource of between 225 million and 250 million tonnes grading between 1.2% 1.3% copper, 0.5 grams per tonne gold and 124 Million pounds (Mlbs) to 138 Mlbs uranium oxide.
These figures are a bit pie in the sky at the moment and will be until more drilling is conducted.
A $US10 million deposit will be paid immediately with the balance payable on transfer of the asset.
Further payments of US$50 million will be paid on first commercial production of copper, uranium, gold or silver, with a further $US25 million on first commercial production of rare earths, iron or any other commodity.
Carrapateena is jointly owned by Rudy Gomez (58%) Teck Australia (34%) and minorities (8%).
OZ Minerals says the plan won’t affect the company’s plans to pay out $360 million in a 12 cents a share special dividend and do a $200 million buyback.
OZ Minerals shares fell 2% or 3.5c to $1.575 yesterday in a market that was off around 0.8%.
