Confirmation yesterday that 2013 was a slow motion train wreck (financially speaking) at OZ Minerals (OZL) which saw a $294 million loss and the departure of the CEO, but a final dividend declared.
The loss was messy, driven by more than $230 million of impairments made during the year, and then higher production costs and lower selling prices for a smaller amount of copper and gold produced.
But offsetting the bad news was the market reception to the news the leadership change announced at the same time.
Perhaps the latter was the reason for the positive market reaction yesterday with the shares jumping more than 12% at one stage.
Or was it the final dividend of 10c a share (steady with the interim paid last year), making 20c for the full year, down 33% from the 30c a share paid for 2012?
Whatever the reason, there’s no doubt the loss was widely expected after OZ Minerals had a year from hell, with write downs, poor production reports and downgrades in production guidance, all of which helped undermine investor confidence in the company and its management.
Despite all the negatives, the shares ended up 12.6% at $3.83, a touch under the day’s high of $3.84.
For whatever reason, the departing CEO Terry Burgess has the further ignominy that he has added significant value to the company’s shares, rather than losing it, which sometimes happen when a CEO departs.
OZL 1Y – A miserable year for OZ Minerals, the CEO to go – up go the shares
In June of last year the company revealed asset write-downs of $231.9 million (net of tax) in relation to the impairment of Prominent Hill mine assets, the company’s only income source. That helped produce the after tax loss of $294.4 million for the full year.
The company’s cash pile – which was over $1.2 billion a couple of years ago – has shrunk to $364.0 million and the company has an undrawn debt facility of US$200 million. The final dividend of $30.3 million has to be paid, which will shrink the cash reserve to around $330 million.
The company revealed the CEO’s departure (called a "succession plan" yesterday) and under that CEO, Terry Burgess will leave within the next year.
OZ chairman Neil Hamilton said Mr Burgess would play a key role in the transition, and would remain with the company at least until a new leader is found.
Mr Burgess has led OZ since August 2009, and pledged to help see the company through the change.
”I think it is the appropriate time to embark on a well considered leadership change,” said Mr Burgess in a prepared statement from the company.
The problems last year were not new news – it’s just they ended up being worse than forecast, compounded by weaker world prices for copper and gold.
Mr Burgess and the company had warned that 2013 would be a difficult year as it extracted low grade material at Prominent Hill to prepare the ground for a new phase in the mining plan.
And that had a financial impact on the company which (excluding the impairments) had a loss of $62.5 million, down around $450 million from the 2012 result.
The lower grade ore mined and processed in 2013 meant the company produced less copper and gold than the previous year, but the company was also hurt by lower prices for both metals (especially gold which had a rotten second half of the year).
As announced in January, the company produced 73,362 tonnes of copper and 128,045 ounces of gold in 2013. Production guidance for 2014 is for between 75,000 and 80,000 tonnes of copper and between 130,000 and 140,000 ounces of gold.
OZ expects to produce the extra copper and gold at significantly lower costs, especially for copper which is forecast to fall to between 115 USc and 125c a pound, from just over 179c a pound last year.
