As far as OZ Minerals is concerned, it’s full bore ahead deeper into copper with a side of gold as the company looks to exploit its considerable prospects for the red metal here and in Brazil.
And yet some investors didn’t see what the company was getting at in a half year result that was full of benefits – higher revenue profits, higher dividends and an ultra-strong balance sheet.
OZ shares were up, then down to a low of $21.34, then recovered to end at $22.01 fora small loss of 0.4% on the day.
The shares eased 0.3% to $22.015, valuing the company at $7.35 billion, which in these days of multi-billion-dollar bids and deals in energy (Santos/Oil Search and BHP oil and gas and Woodside), would be a snip for a major looking to bolster its position in one of the hot renewable metals of the future.
OZ Minerals produced an impressive triple-digit surge in the first half, driven by a strong operational performance, higher copper volumes and record copper prices.
Net revenue of $986.1 million was 71% higher than the first half of 2020, primarily due to higher copper volumes and price, with copper sales 14,000 tonnes higher and the net Australian dollar copper price 61% higher.
That saw net profit of $286.6 million for the half, up 236% on the $79.8 million earned in the first six months of 2020.
Revenue would have been more than $1 billion for the half but for a $34 million loss that was included within net revenue as final gold hedge contracts were extinguished. Earnings would have therefore topped $300 million for the period.
The surge in copper output and prices saw operating cash flows of $457.4 million for the half, up a huge $306.7 million than in the comparative period in 2020.
The Company ended the half-year with a cash balance of $133.8 million after repaying the $100.0 million corporate debt balance existing at the end of 2020.”
Shareholders will get an unchanged interim of 8 cents a share and a special dividend of the same amount. That 16 cents a share leaves most of the 81 cents a share of earnings in the company to help finance the rapid expansion plans it has.
Earnings before interest, tax, depreciation and amortisation jumped 123% to $561 million.
In addition, the company finalised its next growth phase with expansions at key copper-producing projects, Prominent Hill (a $600 million new shaft) and Carrapateena.
According to Wednesday’s announcement, the go ahead for the mine expansion at Prominent Hill will create “an exciting future for the asset by extending the mine’s life, lowering unit operating costs, increasing annual copper production by 23% and enabling lower emissions.
“Importantly, investment in the shaft mine expansion not only provides access to areas previously thought uneconomic, it also opens up potential new prospects”
OZ Minerals said the new Prominent Hill expansion would enable an increase of mining rates to between 4 and 5 million tonnes a year from 2022 onwards, ahead of the shaft mine expansion which will lift mining rates to 6 million tonnes a year from 2025 (ie a 50% plus expansion in annual capacity).
Looking at Carrapateena (to the southeast of Prominent Hill) the company said production at continued to increase during the half year as expected.
“In January the board approved the block cave expansion … to increase mine production to a proposed 12 million tonnes a year Mt. The block cave decline early works are scheduled to begin in Q4 2021 while the team continues to focus on debottlenecking and optimising the current sub-level cave production rate to 5 million tonnes a year from 2023.”
CEO Andrew Cole said in the statement “A three-fold increase in our financial performance for the first half of the year has been driven by a strong operational performance and higher copper production, supported by favourable copper pricing.
“The Board was keen for shareholders to share in the significant uplift in first half profit, prior to heading into our next growth phase with expansions to commence this year at both Prominent Hill and Carrapateena and a decision on West Musgrave expected in 2022.
The company said that in addition to the first half approvals of the Block Cave expansion at Carrapateena and mine shaft expansion at Prominent Hill 2022 will also see the following decisions:
- West Musgrave project on track for an investment decision in the rest of this year and 2022
- An integrated targeted geophysics and drilling program planned to commence in Q3 2021 at the Succoth copper deposit with a view to growing the West Musgrave Province
- A maiden Mineral Resource at Santa Lucia (within the Carajás East Hub) in Brazil to be declared and a study update during Q3 2021
- A Mineral Resource and study update at Pantera (within the potential Carajás West Hub) during Q4 2021
- A Mineral Resource and Ore Reserve and study update at CentroGold currently nearing completion. That’s in brazil as well.
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Investors should watch for the West Musgrave copper nickel decision – it could mean a third huge mine in South Australia for OZ. it has taken years of exploration, rumours, failures and quiet determination to find and outline what could be a major new metals province.
In its half year report, OZ Minerals said the West Musgrave copper-nickel project has progressed through the last stage of study with drilling at Nebo- Babel, “increasing confidence in our understanding of the ore bodies.”
“The study team continues to develop the business case, with increasing levels of accuracy around project definition and optimisation. This includes developing a business case around the development of a downstream intermediate nickel product.
“There remains strong alignment with representatives of the Traditional Owners and government approvals continue to progress as planned.
“The investment decision remains on track for 2022. The West Musgrave province strategy was also advanced during the first half with the integration of a targeted geophysics and drilling program scheduled to commence in Q3 2021 at the Succoth copper deposit located 13 Km from Nebo-Babel. Succoth has the potential to add upside to the West Musgrave project.”
OZ Minerals clean balance sheet gives it the strength to finance not only the expansion of Prominent Hill and Carapateena but also the start at West Musgrave.
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A day after revealing its proposed marriage to BHP’s oil and gas division, Woodside has revealed a solid half-year profit and dividend.
The company’s improvement from 2020’s horror year of record low prices for oil and LNG, massive impairment losses of key assets and a deep cost cutting campaign and project deferments, has given way to surging prices and more revenue and earnings.
Oil prices fell to negative readings in April, 2020, liquefied natural gas (LNG) prices fell below $US2 a million British thermal units (MBtus) as demand collapsed in northern Asia, projects globally were cut, chopped or ended, banks rescheduled loans or extended existing credits to help companies large and small.
But 2021 saw the tentative rebound in demand which up to this week has strengthened, lifting the prices of oil and gas to the point where LNG prices in northern Asia have risen above $US13 a MBtus and Woodside has ridden that recovery to the point where it was confident to grab BHP’s oil and gas business when it was put onto the market.
Revenue for the six months to June 30 bounced 31% to $US2.5 billion ($3.4 billion) as sales volumes increased 6% to 53.9 million barrels of oil equivalent for the half.
Woodside declared a first-half dividend of $US0.30 per share, up from $US0.26 for the first half of 2020.
Net profit of $US317 million, compared to a $US4.06 billion loss at the same time last year (driven by asset value write downs because of weak oil and gas prices cutting expected cash flows).
In the statement on Wednesday, new CEO Meg O’Neill said the combination with BHP’s Petroleum division would increase Woodside’s cash flow and financial strength to fund near-term projects and new energy sources.
“The proven capabilities of both Woodside and BHP will deliver long-term value for shareholders through our geographically diverse and balanced portfolio of tier-one operating assets and low-cost and low-carbon growth opportunities,” she said.
BHP and Woodside are already partners in two Western Australian projects: the North West Shelf joint venture and the $A16 billion Scarborough LNG project which they hope to green-light this year.
Woodside shares fell 2.1% to $20.29 because of the uncertainty about the ownership structure for the merged company and weakening global oil prices.
If oil prices continue to ease (thanks to the rise in Covid delta cases), don’t discount pressure from some BHP shareholders for Woodside to offer some cash to anchor the value of the BHP oil and gas assets.
