OZ Minerals produced one of the surprise results of the December 31 reporting period, and as a result has rewarded shareholders with a higher final dividend and a higher payout for the year as a whole.
For a mining company, especially in copper and gold, the higher profit and higher dividend will prove to be a rarity, not only in Australia, but globally.
The higher result was struck despite weaker copper and gold prices for much of 2015 as the great commodities slide took a toll on many competitors.
Helping the company was the sharp fall in the Aussie dollar last year, which when allied to higher copper output, almost offset the 20% fall in world copper prices. All up the company’s average received copper price only fell 4% in $ terms last year.
The dramatic improvement in mining operations at the company’s Prominent Hill mine in South Australia saw copper output surge 40% last year to an all time high (especially in the December quarter) which in turn saw profits almost triple to $130.2 million.
Helping in a small way was a 10% rise in gold prices in Australian dollars.
That was much better than the $48.5 million statutory profit earned in 2014.
Shareholders will be paid a 14 cent unfranked dividend on March 10, taking the total shareholder returns for 2015 to 20 cents; well above the 10 cents paid during 2014.
Also helping was a share fall in costs last year as the company accesses higher quality ore after two years of removing lower grade and worthless overburden to get at new parts of the deposits at Prominent Hill.
In a surprise, the company has not revealed its plans on how to develop the Carrapateena copper asset in South Australia (as it was supposed to), but has vowed to reveal that decision before the end of February.
OZ Minerals boss Andrew Cole said the good times should continue into 2016.
“We expect 2016 to be another excellent year with copper production guidance increasing to (a range between) 115,000 to 125,000 tonnes and gold production guidance increasing to (a range between) 125,000 to 135,000 ounces,” he told an investment briefing yesterday after the profit release.
“We still have lots to do, but I think we have a great asset in Prominent Hill that puts us in the enviable position to explore internal and external growth opportunities on the path to delivering shareholder value.
“We’ve made a strong start to the year with the results of our gold trial and a decision to expand the underground at Prominent Hill by building a second decline announced. With an announcement on Carrapateena due before the end of the month, we expect that the momentum will continue to build,” Mr Cole said.
OZ changed its dividend policy last year to pay out a minimum 20% of net cash generated so long as it is not needed for investment purposes.
Yesterday, Mr Cole said he expects the company should be able to continue paying dividends even if it goes ahead with development of the large Carrapateena prospect, which is in the same area as Prominent Hill in outback South Australia.
OZ had a cash balance of $552.5 million as at December 31 and no debt.
OZ shares fell 0.9% to $4.20 in another example of buy the story, sell the news.
