Oz Minerals is moving to boost growth projects at some of its mines as it seeks to take advantage of strong prices for key commodities including copper which hit a 9 year plus high of more than $US4.33 a pound on Friday.
The market has given the thumbs up for the company’s push deeper into copper in particular at its older Prominent Hill mine in South Australia and the newer and developing operation at nearby Carrapateena.
OZ Minerals closed at $24.28 on Friday.
So far this year the shares are up more than 28%.
The Comex copper price is up 23% but gold is down 6.5% up to last Friday’s close.
The ASX 200 is up 7.2%, so OZ shares have outperformed with investors backing the outperformance.
On Monday, investors will have the chance to catch up on the new nine-year-plus high for copper and a rise in the gold price which has bounced more than $US90 a tonne so far in April.
Comex gold steadied around the $US1,777 a ounce on Friday and has been looking to push higher a month after dipping as low as $US1,680 an ounce in a bout of weakness as though those needless fears about inflation have faded.
Oz Minerals told investors in its March quarter production report late last week that it lifted copper output 33% from 20,231 tonnes to 26,842 tonnes in the three months to March 31 (from a year earlier) while gold output dipped marginally to 55,150 from 55,606 ounces.
But Covid-19 is emerging as a big concern in its Brazil mining operations.
“In Brazil, however, the situation continues to deteriorate with COVID-19 impacts escalating. Sadly, this morning, we were advised that one of our employees, who contracted COVID-19, whilst on holiday with his family, died from this virus. We are providing all the support we can to his family,” CEO Andrew Cole told a briefing late last week.
“This is the first employee we have lost to this virus. And unfortunately, the situation in Brazil is as bad as it has ever been and appears to be deteriorating. As a result of this, we are now expecting flow on operational impacts,” Mr Cole said.
The March quarter report saw the company highlighted key drilling programs underway at Prominent Hill, West Musgrave and Santa Lucia (in Brazil).
These projects are all progressing to support key milestones and decision points later this year – especially for copper.
Mr Cole told an analysts’ briefing that; “We do expect copper production to increase over the course of the year as Prominent Hill’s bottom-up mining sequence commences and we’ve resolved a short-term mobile plant availability issue at Carrapateena.”
The company’s board has approved a $23 million investment for the construction of the Carrapateena Western Access road this year after previously scheduling it for 2022.
Mr Cole said the acceleration would help improve site access and concentrate logistics management and the work will occur as OZ Minerals begins early works for a block cave expansion decline at Carrapateena later this year.
OZ Minerals remains confident it will hit is guidance this year after producing nearly 9,800 tonnes of copper and 19,000 ounces of gold at Carrapateena during the quarter, both representing from the previous quarter’s figures.
“Higher copper production is expected in subsequent quarters as grade at Carrapateena increases in line with its mine plan,” Cole said in the March quarter’s report last week
However, the company increased its all-in sustaining costs guidance for the 2021 fiscal year from $US1.10-$US1.25 ($A1.4-$A1.6) to $US1.30-$US1.45 a pound.
“While cost performance during the quarter has been well controlled, the strengthening of the Australian dollar and weaker gold price is expected to negatively impact comparative unit costs over the course of the year and as such we have modified 2021 cost guidance,” Cole explained.
“Counter to this, the strong copper price environment continues to support robust operating cashflows.”
Comex copper prices are now up more than 23% so far this year after a 1.4% rise on Friday to more than $US4.33 a pound – last seen in August 2011 in the last resources boom. In fact, the copper price is up more than 10% so far in April alone.
Meanwhile at the Prominent Hill copper-gold mine in South Australia, OZ Minerals is mining at a rate of four million tonnes of gold copper ore a year.
The accelerated decline development has also reached the bottom of the current life-of-mine level ahead of schedule, according to Mr Cole.
“Lateral development is now under way to establish level infrastructure for the commencement of the bottom-up mining sequence,” Mr Cole said.
“The bottom-up and top-down mining will enable an increasing mining rates from 2022, to between (four million tonnes a year) and (five million tonnes a year).”
It was a bullish CEO who told last week’s briefing “As you can see in 2021, our Australia portfolio aims to produce circa 160,000 tons of copper equivalent, excluding Brazil.”
“However, with the Carra Block Cave now approved and assuming the Prominent Hill shaft expansion is approved in Q3 and West Musgrave project approved in 2022, assuming they are approved investable, of course, OZ Minerals could produce more than double this number, once all are operating. This is quite a transformative period for the company,” he added.
