Shares in copper and gold miner OZ Minerals (OZL) shed 7% in value yesterday after the company beat market expectations by posting its first full-year profit in two years, but surprised by omitting a dividend.
The company said it earned $48.5 million in the year to December (ahead of the $42.85 million by analysts) and way better than the $294 million loss in 2013.
The turnaround came on the back of higher production and output of gold and copper at its Prominent Hill mine in South Australia, as a long period of mining low-grade came to an end.
Higher gold prices also helped, which have helped offset the 20% fall in copper prices in the past few months.
Despite this improvement, the company said there would be no dividend for now, despite paying dividends for the past three half year periods when the company incurred losses.
OZ shares fell just over 7% to $3.78, having risen from $3.50 at the start of the year to $4.08 earlier this week as investors took a punt on the higher than forecast result, and dividend.
OZL 1Y – OZ Minerals fails to pay dividend
OZ Minerals said the dividend decision was to allow the review of the company being conducted by new CEO Andrew Cole to continue unhindered.
That raises the prospect of a dividend later this year – perhaps for the June 30 half year, if possible.
It’s not that OZ lacks cash (it had over $1.3 billion several years ago after selling assets to a Chinese mining company).
The company’s cash balance reached $218.5 million at the end of December, up from the $154.9 million on hand at June 30, 2014.
Mr Cole said the company had met or exceeded all of its production targets in 2014, and had "laid a solid foundation for OZ Minerals going forward".
As part of the review, Mr Cole has also decided to halt a sale process for the company’s Carrapateena deposit near Prominent Hill in South Australia, to give the company time to trial methods to make the mine more valuable.
The company says that recent tests have suggested the copper concentrate from Carrapateena could be raised from its current 35% grade to as much as 60% copper, and OZ will spend $18 million on further works to try and achieve the improvement on a major scale.
OZ is also using the extra time to study lower-cost options for developing Carrapateena, including potentially processing Carrapateena ores at the existing Prominent Hill facilities 350 kilometres away.
"There had been strong interest from over 25 parties in partnering in the development of the Carrapateena project," Mr Cole said yesterday, adding that some of those were Australian companies.
Details of the review are expected to be announced around the time of the AGM in a couple of months time.
