Upbeat news has been in something of a short supply lately for Oz Minerals (OZL), but yesterday it delivered something investors were happy to read – a strong operating performance for the three months to September which has left the company on track to meet its December 31, 2014 financial year guidance.
As a result, the shares jumped nearly 8.5% to $3.98, and touched a high of $4 during trading, the highest the shares have been for a month. They ended up 7.6% at $3.95.
That took the gain so far this year to 26%, but the shares remain well shy of the year’s peak of $4.88 reached in July.
OZ Minerals has been a disappointing stock for many investors – it’s spent more than many have liked on its Prominent Hill mining complex in South Australia and on other investments, and has been hit by the downturn in copper prices for much of this year, as well as gold prices – until the last few days.
But the company told the ASX in its quarterly report that, "This quarter’s performance sees production firmly on track to meet current guidance of 85,000 tonnes to 90,000 tonnes of copper and the upper end of the guidance range of 130,000 ounces to 140,000 ounces of gold for 2014.
"There was strong operating performance in both the open pit and underground mines in the third quarter. Copper metal production of 26,249 tonnes marked a return to the 100,000 tonne per annum copper production run-rate, with gold production of 47,376 ounces,” it told the market in the exploration and production report.
As well, the company also said it was now talking to multiple parties interested in being partners or buying its Carrapateena copper gold deposit in South Australia (near Prominent Hill).
Carrapateena is the miner’s key growth project, worth an estimated $3 billion and with reserves that would support a 24-year mine life, but Oz Minerals needs a partner to fund the development.
It has opened a data room for the project and said yesterday discussions were continuing on the basis of the pre-feasibility report released during the quarter. Some parties were reported to be undertaking due diligence, according to OZ’s statement.
OZL 2Y – Oz Minerals improving
The company also revealed that, “Significant mineralisation returned from a new zone identified at the Fremantle Doctor prospect close to Carrapateena".
The company said the September quarter benefited from not having a repeat of operational problems and lower grades during the same quarter of 2013.
And as a result of that improvement it expects to produce 85,000 to 90,000 tonnes of copper and 130,000 to 140,000 ounces of gold in calendar 2014.
That would be ahead of 2013’s 73,362 tonnes of copper and 128,045 ounces of gold.
In September Oz announced that former Rio Tinto executive Andrew Cole would take over from CEO Terry Burgess in December.
The company has posted three successive half year losses, including a $7.4 million net loss in the six months to June this year.
The company said sales of concentrates for the quarter totalled 38,835 tonnes, containing 20,179 tonnes copper, 30,658 ounces of gold and 150,433 ounces of silver. For the nine months to the end of September, 115,365 tonnes of copper concentrate was sold, containing 57,632 tonnes of copper, 100,220 ounces of gold and 493,616 ounces of silver and "during the quarter all concentrates sales were made directly to end customers”.
Oz said its cash costs – including only on-site production, and not other costs – are predicted to be at the lower end of $US1.10 to $US1.20 a pound guidance compared to nearly $US1.80 in 2013.
"With sustained lower cost performance in the Malu Open Pit (as discussed in the subsequent costs section), the Company is confident that costs will be towards the lower end of the current C1 cost guidance of US$1.10/lb to US$1.20/lb," OZ said yesterday.
"C1 cash costs of production for the quarter were low at US60.5 c/lb. This good cost performance was driven by higher payable gold production, lower processing and maintenance costs and higher payable copper production. This was partially offset by increased milled tonnes resulting in a smaller ore inventory adjustment,” it added.
It also revealed that “Significant mineralisation returned from a new zone identified at the Fremantle Doctor prospect close to Carrapateena”.
