Copper/gold miner OZ Minerals was another resource company to confirm earlier guidance of a fabulous 2021.
As we have seen with the likes of BHP and South 32, as well as Santos and Woodside, last year turned out to be the best year in decades as a commodity price boom was sustained through the year (with even iron ore peaking, sliding and coming back), helped towards the end by Vlad Putin’s aggressive moves at Ukraine.
OZ Minerals’s mix of gold and copper echoes that of Newcrest and Evolution which reported weak interim results last week.
With just two mines in South Australia (and a third to be started in the next year to 18 months near the WA-SA border), OZ Minerals is a bit smaller than Newcrest for example, but far more profitable and efficient. A 4th mine in Brazil is starting to tune up its production phase.
The existing mines are the gold copper operation at Prominent Hill, currently being expanded significantly and the newer Carapatenna which is at full stretch now and will see more expansion in the next two years.
OZ made it clear the record performance came despite a tough final three months given the impact of Covid lockdowns and labour shortages as well as logistics hiccups.
Newcrest chopped its interim, OZ lifted its full year dividend payout by more than 35% to 34 cents a share with the payment of an 18 cents per share final. The total was up 9 cents from 2020’s 25 cents per share.
OZ reported a net profit of $531 million on record revenue of $2.096 billion.
Earnings before interest tax depreciation and amortisation (EBITDA) climbed to $1,162 million for the year for an operating margin of 55% which is not bad seeing BHP with its ultra-low-cost dirt mining business (AKA its Pilbara iron ore operations) managed a gross margin of 64% for its December half.
OZ CEO Andrew Cole said in the earnings release that the record figures resulted from “Higher production volumes, with Carrapateena now fully contributing and gold stockpiles complementing Prominent Hill production, combined with effective cost control allowed, us to take full advantage of robust copper prices during the year.
“These results were delivered notwithstanding a more difficult final quarter impacted by COVID related absenteeism which has continued into 2022. When combined with an extreme rain event that affected our South Australian logistics, we are likely to see a slower start to 2022 production, building back in line with full year guidance as the year progresses.
“In 2021 we continued to invest in our growth projects with expansions at Carrapateena and Prominent Hill approved and now underway.
“The West Musgrave Project study advanced as we progressively de-risk the project towards a final investment decision in the second half of 2022 and our new Pedra Branca mine in Carajás began producing production ore.
Looking ahead to 2022, OZ was cautious – which is prudent given the uncertainty caused by Covid, the antics of Russia near Ukraine and high levels of inflation, especially energy costs.
“Looking ahead as we transition to living with COVID across the community we will be closely monitoring and managing potential supply chain interruptions and labour shortages along with the inflationary cost environment that we began to experience in Q4 2021.
“Our portfolio of assets located in low-risk jurisdictions, combined with long mine life, and bottom half of the global cost curve attributes, provides us with confidence that we can continue to deliver both operational and growth plans,” Mr Cole said.
OZ shares eased 0.46% to end at $26.03.
