A rather ‘ho-hum’ reaction from investors yesterday to OZ Minerals (OZL) long awaited revamp and results of its strategic review.
The shares eased 0.6% to $3.88, well under the most recent high of $4.25 reached in early February, just before the great copper sell-off that month started.
That fall was about what the wider market ended up losing yesterday, after losses had been double that in late morning trading.
The feeling is the new strategy is a bit like the old one – look beyond OZ Minerals gold and copper base for good assets and investments.
That has been tried (Sandfire Resources and Toro Minerals shareholdings come to mind) before without much success.
Some analysts say the new strategy is a bit like the one the former CEO Terry Burgess revealed back in 2009.
Now there’s a lot of talk about ‘value accreting’ deals and investments – ie, buying assets as cheaply as possible and selling them for a lot more, or developing them to make money.
Of more interest was the upgraded full-year copper and gold production guidance after a solid performance in the three months to March.
The new strategy has been under development since late last year and has seen the company relocating to Adelaide to be closer to its asset base (its Prominent Hill mine is in the state).
OZL 1Y – Muted reception for OZL review
OZ also revealed that a new dividend policy will see shareholders receive 20% of net cash generation, excluding the amounts required for investments or any future debt repayments.
The new dividend policy would be “disciplined, transparent and consistent”, chief executive Andrew Cole said in a statement to the ASX.
The new policy means OZ won’t be paying dividends where it makes a loss for a year or half year – the company has done that several times in the past couple of years.
“This is about positioning OZ Minerals as a growth company in a down resources cycle,” Mr Cole said in yesterday’s statement.“This new strategy is not business as usual and it is not a cost-cutting strategy.”
“A mature resources company must have a balanced growth pipeline,” he said, noting OZ Minerals would focus on producing or nearly producing assets to fill a gap between the end of Prominent Hill and possible start of its Carapateena project, where development has been suspended to look for a partner.
“Our new strategy will touch every part of our operation and demand a new way of working,” Mr Cole said.
OZ Minerals ordered the review as it sought to cut costs following a downturn in commodity prices.
The company will also look to operate with a leaner, flatter structure, and will look to cut $44 million off its cost base in the near term, which will almost certainly mean job losses.
OZ revealed earlier this year that it will work with the South Australian government to try to develop an infrastructure link to its prime development asset, the Carrapateena mine in South Australia.
OZ had tried to sell all or part of Carrapateena last year, but has suspended sale negotiations while its work with the government continues.
The future of Carrapateena remains the major issue for OZ to determine. It will be a big development – well over $1 billion, but its infrastructure can be tied into Prominent Hill.
The completion of the review comes as OZ Minerals unveiled its first-quarter production results, and lifted its outlook for 2015.
In the three months to March 31, OZ Minerals produced 31,160 tonnes of copper and 32,874 ounces of gold. That compares to 18,182 tonnes of copper and 33,792 ounces of gold in the previous corresponding quarter.
The company said the first quarter performance would mean the company was now well placed to deliver full-year production of between 110,000 and 120,000 tonnes of copper and between 100,000 and 110,000 ounces of gold.
