OZ Minerals lifted half year profit 59% in the six months to June 30 from a higher copper price and lower average production costs.
OZ Minerals reported a net profit of $127.8 million for the six months through June, up from $80.6 million a year ago.
The company will pay an interim dividend of 8 cents per share, up from 6 cents a year earlier.
OZ Minerals shares rose by around 2% in early trading yesterday, but lost ground as the session went on and ended the day at $8.99, up 0.4%.
As solid as the first half result was, a slide in the world copper price – which started in mid June, has continued into August with the LME price dipping under $US6,000 a tonne on Tuesday of this weak after hitting a four and a half year peak of $US7,348 a tonne on June 7.
The LME price has been under pressure from the rising trade tensions between the US and China and the slowing pace of activity in China, even though Chinese copper imports have held up in the past two months.
As well there’s been the tensions in Turkey and the smashing of emerging markets in the wake of the slump in the value of the lira and other emerging markets currencies.
Comex copper prices are down 22% so far this year with much of that – nearly 22% coming since mid June with the Comex price falling from $US3.3195 on June 8 to $US2.59 a pound on Wednesday. Gold prices have also weakened into August, so the outlook for OZ Minerals for this half is not as upbeat as it seemed in early June. Comex gold prices are down more than 11% so far this year and nearly 10% in the past three months.
However, helping to offset that will be the fall in the value of the Aussie dollar, which is now around 72.5US cents from more than 76 US cents two months ago. The Aussie dollar tends to be a proxy for China especially and the weaker conditions reported there have pushed the currency lower.
OZ Minerals CEO Andrew Cole was upbeat in yesterday’s commentary “The half year saw a strong financial performance with net profit after tax of $128 million bolstered by higher copper prices, ongoing operational efficiencies and a continued focus on costs.
“Our revised capital management strategy takes into consideration our broader asset base and a healthy project pipeline as well as the expectations of our shareholders. It recognizes the importance of shareholder returns as we allocate capital to grow.
"Our new dividend policy is designed to prioritise returns to shareholders by paying a sustainable ordinary dividend from pre-growth cash flow, while having regard to near term, identified capital investment opportunities that create superior value, and the need to maintain a strong balance sheet.
"The framework also sees the intent to return surplus cash to shareholders as the cycle permits and to consider access to debt funding for future growth projects, if required, with a targeted gearing ceiling of 20%.
“Our growth pathway is now more assured with a range of assets in various stages of development. Prominent Hill production is supported by a new operating mine in Antas, which is currently undergoing an optimisation review. Carrapateena construction is on track for first concentrate production in Q4 2019 and a progressive stream of projects will potentially advance to construction in the coming years, including West Musgrave in Western Australia and Pedra Branca and CentroGold in Brazil.
OZ Minerals said its earnings and margins improved during the half year with net revenue of $530 million 19% higher than the comparative period, driven by an 18% increase in the average A$ copper price, partially offset by a 3% decrease in the average A$ gold price.
The company was debt free at June with $493 million in the bank.
"A strong cash balance of $493 million followed significant growth investment into the business of $162 million (net of cash received) for the Avanco Resources Limited acquisition and $143 million for the development of the Carrapateena project. Tax payments of $118 million correspond with the payment of the FY 2017 tax provision and ongoing instalments for 2018. Shareholder payments of $42 million for the 2017 fully franked final dividend of 14 cents per share were also made in the first half of 2018,” the company said in yesterday’s statement.
