Copper and gold miner OZ Minerals (OZL) will pay an unchanged interim dividend of 6 cents a share after reporting a solid profit for the six months to June.
The South Australian focused miner says net profit $29.5 million for the six months to June fell 43% thanks to higher legal and other costs associated with the settlement of a class action.
But on an underlying basis, interim profit was up to $55 million from $51.8 million a year ago.
That was thanks to a very solid revenue performance. Revenues for half rose 8.2% to $398.3 million, despite a 15% slide in world copper prices in the half year. But that was more than offset by a 10% rise in gold prices in the period.
In June, the company settled a class action with former Zinifex shareholders, who had received OZ Minerals shares after a merger between Oxiana and Zinifex in 2008 as the GFC started. The case was ended with an agreed amount of $32.5 million to be paid by OZ.
That seems to have been the only negative in what was a good half year for the company. It still has no debt and more than half a billion on cash and is pushing ahead with new projects in South Australia. OZ Minerals shares rose 1.6% to $6.37.
But the key to the company’s current performance is its Prominent Hill mine in outback South Australia.
“Prominent Hill is generating significant cash,” chief executive Andrew Cole said yesterday.
“Our strong financial position has enabled the board to declare a dividend of $18.1 million (6 cents a share) to provide consistent returns to shareholders whilst maintaining a strong balance sheet for future investment.”
“Momentum continues to build across OZ Minerals with the Prominent Hill team delivering another strong quarter. The Carrapateena team is progressing studies and decline construction remains on track to deliver first concentrate in the second half of 2019,” Mr Cole said.
“Independent benchmarking studies completed by AMC Consultants clearly show that the Prominent Hill underground operation is performing well with lowest half operating costs relative to comparative underground operators,” said Mr Cole. “Notwithstanding this, we still have a number of opportunities scheduled to further improve performance.”
The Carrapateena team is progressing studies and decline construction remains on track to deliver first concentrate in the second half of 2019,” Mr Cole said. The scoping studies to build a new 4 million tonnes a year mine at Carrapateena and Concentrate Treatment Plant at Whyalla “remain on track in the pre-feasibility study stage.
"Commercial discussions to secure terms to access Arrium’s Whyalla port continue constructively. Pre-feasibility studies are expected to be completed prior to December 2016 after which feasibility studies will commence,” directors said.
Director said in the report that following a record year of production in 2015, OZ Minerals expects 2016 to be another strong year of production with increasing high grade copper ore from the underground. Guidance has been set for contained copper production at 115,000 to 125,000 tonnes.
"Higher grade copper ore from the open pit and the underground mine will continue to be processed until 2018, at which time open pit operations cease. During this period, accelerated open pit mining is creating significant copper ore and gold ore stockpiles, which will be processed from 2018 through to 2022 along with underground ore mined.
"Ore from underground operations will continue to be processed until the end of current life of mine of 2026. OZ Minerals continues its cost focus to maintain its competitive position as a lowest cost quartile producer and protecting its margin despite lower commodity prices.
“We expect 2016 to be another strong year of production with increasing high grade copper ore from the underground. As a result, the dividend declared today reflects the Board’s expectation of strong cash flows through the remainder of 2016 and indeed over the next several years,” Mr Cole added.
