OZ Minerals released its first quarterly report in its new form of being a single mine operator yesterday and the news was upbeat: copper output from that mine, the new Prominent Hill operation in South Australia, is rising strong and OZL expects to make full year guidance on production.
As well the company is re-starting an intensive drilling program to prove up new reserves around Prominent Hill, especially the already outlined reserve for a possible underground mine.
The company says it is starting work on a feasibility study for the underground mine with a decision hoped for in 2010.
The drilling campaign was suspended when cash ran short and the company went to the brink of collapse, before starting the complicated sale process with China Minmetals that left OZL with Prominent Hill and a stash of cash.
The company said in the report, issued to the ASX yesterday that copper output from the mine jumped to 27,159 tonnes in the June quarter, compared with 4,338 tonnes in the previous quarter as the mine ramped up production.
Gold production from the mine increased to 18,351 ounces, from 5,567 ounces, the company said in the statement.
OZ Minerals reaffirmed its full-year forecast for the mine of 85,000-100,000 tons of copper and 60,000-70,000 ounces of gold.
It said it had an unaudited cash balance of more than $800 million at June 30.
OZ shares jumped by almost 7% on Monday, but yesterday they were a touch easier, finishing down half a cent at $1.015.
The company said the new exploration program includes increasing the drill density to establish an initial Ore Reserve at the ‘Western Copper’ deposit and continuing to test the extent of this newly discovered deposit.
"The drilling program will also test 17 targets in the broader Prominent Hill tenement area, many of which have been generated from recently completed infill gravity (geophysical) surveys and geological research.
"During the quarter, drilling completed up to November 2008 was used to update the Resource estimate for the Western Copper deposit, increasing the known deposit by 32% to 245,00 tonnes of contained copper.
"Inferred Resources now stand at 14.5 million tonnes, grading 1.7% copper and 0.28 grams to the tonne (g/t) of gold and 3.7 g/t silver while the deposit remains open in several directions.
"Results were also received from Resource drilling (conducted in 2008) at the Eastern Underground area beneath the currently defined open pit.
"Better results included: 24 metres at 1.39% copper and 0.49g/t gold and 45m at 2.78% copper and 0.67g/t gold.
"These results confirm the presence of ore grade copper mineralisation, which remains open at depth and to the west and east, around 800 metres east of the centre of the Prominent Hill pit, the company said.
"To date, Mineral Resources additional to those currently included in the mine plan have been defined underneath the open pit, immediately to the east of the pit, immediately to the west of the pit and at the new ‘Western Copper’ deposit located 800 metres to the west of the pit.
"Mining assessments have ascertained that these deposits would be best mined using underground mining methods.
"Following Board approval in June, work has resumed on the Prominent Hill underground full feasibility study on the area immediately below the pit and a pre-feasibility study has commenced on the Western Copper deposit.
"A major exploration drilling program is due to commence in late July to contribute to underground development studies and to assist in determining the preferred order of underground mine development.
"At the Western Copper deposit, a 20,000 metre drilling program is planned to convert resources from Inferred status to Indicated and to test for extensions to the deposit to the east, west and at depth.
"Also planned is drilling to test for entirely new resources at depth beneath known resources in the Western Gold area and below the main deposit.
"It is planned that the findings of the full feasibility study into underground mining options at Prominent Hill will be available in time to enable a decision to proceed with underground development in the first half of 2010 which would allow first underground production in 2013.
"The first export delivery of Prominent Hill concentrate was made in April. Concentrate quality has been excellent with 35,099 tonnes of concentrate at an average grade of 56% copper sold to local and international customers during the quarter.
"Process improvements and blending of ore types saw copper and gold recoveries improve throughout the quarter. Mined ore stockpiles at the end of June totalled 4Mt of copper ore and 3Mt of gold ore.
"Due to the rapid ramp up of production, C1 cash costs for the quarter of US69c/lb are already within the range of US65c/lb to US75c/lb previously forecast for the full year.
"Unit costs for mining were slightly higher than forecast while milling operations and overheads were within expectations.
"In August, a third excavator and associated haul trucks will be reinstated in the mining operation which should reduce unit costs of mining in the second half. The third fleet had been taken out of production to conserve costs in early 2009.
"The previously advised US$0.15c/lb of additional mining costs that was expected to be capitalised was not applicable during the first half due to lower volumes of waste mined. <
