Could OZ Minerals (OZL) be on the cusp of earnings normality?
The 2014 interim results, released this week, certainly suggest that the company troubled by losses, high costs and shareholder concerns in recent years could be at last heading in the right direction.
But that hope was absent in the market on Wednesday where OZ shares fell 5.1% to $4.25. They lost another 2.1% yesterday to end at $4.20.
OZ Minerals told the market that it incurred a smaller loss for the six months to June, compared to the same period of 2013, and hinted at higher production.
The loss was $7.4 million in the six months to June 30, compared with a loss of $268 million a year earlier.
That was on an 11% rise in revenue to $351million in the half, compared with $316.2 million a year earlier.
Inspite of the loss, OZ said it will pay an unfranked dividend of 10c per share.
OZL 1Y – OZ Minerals narrows losses
The miner said it expected copper and gold production to rise over the years to 2018 as it developed its Malu Underground project, near the Prominent Hill mine in South Australia.
The loss a year ago was driven by gold and copper prices and a $231 million asset write-down.
The company said that stripping out the write-down last year the improvement this year was still there, but not quite as dramatic.
The underlying result for the half year was a net loss of $14.3 million compared to a net loss of $36.1 million for the prior period.
"The improvement in the underlying result compared to the prior period is primarily due to higher sales revenue and lower operating costs," the company said.
OZ Minerals said it would continue looking to cut costs and said it would adjust its dividend policy to strike a balance between investing for growth and returning cash to shareholders.
Cash at the end of the half year was $154.9 million and the company said it has an undrawn debt facility of US$200 million.
OZ Minerals CEO, Terry Burgess said in a statement it was "a strong half year of operations, particularly from the Malu Open Pit, has driven higher revenue and lower operating costs”.
Production for the first half was 40,363 tonnes of copper and 64,528 ounces of gold.
Over the past year open pit operations have delivered significant productivity improvements resulting in high material movements, at a lower unit cost. Gross operational costs were cut with the demobilisation of equipment and lower employee costs.
In July the company raised copper production guidance for the year from 85,000 to 90,000 tonnes, due to the increased production and accelerated access to higher grade ore achieved in the first half. Gold guidance of 130,000 to 140,000 ounces was maintained.
The new Malu Underground operation at Prominent Hill is on track to commence production in the last quarter of this year.
OZ said it will shortly release a study of its $3 billion Carrapateena mining project, also in South Australia
Mr Burgess said yesterday the pre-feasibility study will be released to the market and potential investors in the coming weeks following a review by the board.
The project is too big for OZ and will need co-investors if it is to bring the mine into production in the next decade.
OZL Results Video
