OZ Minerals enjoyed the surge in gold prices to June 30 (which has continued up to Tuesday when they moved back above $US2000 ounce again) more than the more sedately performing price of copper in the six months to June 30.
The company said on Wednesday that net profit leapt 82% to $80 million driven by higher gold output (thanks to the coming on line of the Carrapateena mine) and strong gold prices (and the lower value of the Australian dollar against the greenback for most of the half).
The company operates the Prominent Hill and Carrapateena copper and gold mines in South Australia and lifted net revenue by $156.5 million to $575.7 million, as a result of higher gold volumes and price.
Gold sales increased by 53,800 ounces and the net A$ gold price was 36% higher.
That helped the company’s earnings before interest tax depreciation and amortisation (EBITDA) jump 44% to $251 million for the half with a very tasty operating margin of 44%.
As a result, the company will pay an interim dividend of 8 cents a share.
That’s unchanged from a year ago despite the sharp rise in earnings for the June half, a sign of wariness about the outlook for the rest of 2020 and early 2021 because of the COVID-19 pandemic.
The shares rose more 3.9% to $14.65
Despite that caution, the company has brought forward plans to further expand its huge Prominent Hill mining operation in outback South Australia.
OZ says it is looking to further consolidate underground ore movement and support future increases to mining rates at Prominent Hill.
OZMinerals CEO Andrew Cole said: “Our strong financial performance for the first half of the year has been driven by a solid operational performance at all our sites and has benefited from higher gold production and favourable gold pricing through the period.
“This strong first half enabled us to increase our 2020 guidance last month for both copper and gold production with a significant reduction in expected C1 and All-In Sustaining Costs. With this improved outlook and ample liquidity available to both execute the Company’s growth strategy and reward shareholders, the Board has declared a fully franked interim dividend of 8 cents per share. In line with our Capital Management Strategy and following feedback from our shareholders, we have also reinstated our Dividend Reinvestment Plan.
“The ramp-up at Carrapateena during the half-year has exceeded expectations with a strong performance from the underground materials handling system, production system, and plant allowing an increase to production guidance. The Block Cave Expansion Pre-Feasibility Study also demonstrated significant increases to the Ore Reserves and potential increases to value and mine life with studies progressing to Feasibility in June.
“The Prominent Hill underground is performing well, and we have seen annualised ore mining rates of ~4.5Mtpa achieved through July. With sustainable annualised rates at or above 4Mtpa in recent months, we have brought forward future decline development spend to further consolidate underground ore movement and increase mining rates to between 4 Mtpa and 5 Mtpa from 2022, prior to any additional tonnage from a potential underground expansion.
“Bringing forward the decline is also an enabler for the potential expansion and will allow for extended resource drilling from depth. A study update is expected towards the end of the year on the expansion which is contemplating a shaft haulage system.
“The strong start at Carrapateena is expected to see the mine achieve 4.25Mtpa run rates by year-end which will further strengthen cash flows. This encouraging performance also provided the confidence to re-introduce ~$45 million of deferred growth capital funding last month for plant and infrastructure projects that will benefit production beyond 2020,” he said in Wednesday’s statement.
The Company ended the half-year with a cash balance of $114.5 million and a gross debt balance of $100 million.
Perth-based Mineral Resources can thank a major asset sale, along with the rise in iron ore prices for its sharp rise in statutory profit for the year to June 30.
The company revealed a $1 billion profit for the year to June thanks to the profit on the sale of a 60% stake in the Wodgina lithium project in WA during the year.
A strong rise in iron ore production and shipments and high as prices (which remained above $US100 a tonne for most of the period) also helped.
Mineral Resources increased both iron ore exports and lithium sales in the year to June 30.
Those factors saw a record statutory earnings before interest, tax, depreciation, and amortisation (EBITDA) of $2.01 billion.
This result included a $1.30 billion gain on the disposal of the controlling stake interest in the Wodgina Lithium Project.
Underlying EBITDA was $765 million, up 77% on the prior corresponding period “underpinned by strong growth in both MRL’s Mining Services and Commodities operations.”
Statutory Net Profit After Tax (NPAT) was $1.002 billion and underlying NPAT was $334 million, up 63% from 2018-19.
Statutory NPAT included $200 million of post-tax impairment charges ($286 million pre-tax) relating to the write-down of capitalised exploration and mine development expenditure, intangibles, plant and equipment, and stockpiles.
The higher result will see the company pay a 77 cents a share final dividend. With the 23 cents paid as an interim, that’s $1 a share for the full year against 23 cents for 2018-19.
The company exported 14.1 million wet metric tonnes of iron ore during the financial year, up 134%
MinRes also sold 408,000 wet metric tonnes of lithium, which up 8% on2018-19.
MinRes is looking for further growth in 2021, particularly in iron ore as the Koolyanobbing project in Western Australia achieved an annualised shipped tonnes run rate of more than 12 million wet metric tonnes during 2020.
It is also targeting growth at the Mt Marion lithium project, also in Western Australia, targeting a plant output increase of 17 per cent, despite the challenging market conditions.
In Wednesday’s statement, CEO Chris Ellison described 2020 as “the most extraordinary year in the company’s history” as he reflected on 2020 and looked forward to 2021.
“Notwithstanding the fact the impact of COVID-19 dominated much of the past financial year, MinRes has delivered record production and record profitability,” Ellison said.
“MinRes has entered the 2021 financial year with a strong balance sheet and positive momentum in our operations.
Investors took profits and sent the shares down 5% to $27.42.
