OZ Minerals is rolling the dice again with a big new mine development in South Australia that will cost close to $1 billion when finished.
The move comes on top of the multi-million dollar expansion of its already large Prominent Hill mine in South Australia. The new mine is at the company’s Carrapateena copper and gold mine prospect. Prominent Hill has so far cost around $600 million to develop and expand (work started there a decade or more ago.
OZ Minerals spent more than $250 million buying the Carapateena prospect back in early 2011 and for much of the past two years, it has been edging towards a development of the deposit, despite intense market scepticism (and opposition from some big shareholders and analysts).
Now D day is closer after the company yesterday released a feasibility study for the $916 million project and the board gave the investment the greenlight.
The study reckons OZ can expect project payback by 2024 (after it lifted ore reserve estimates by 13) and that the first cash flow from the project would be generated in the fourth quarter of 2019.
That after a phased work program starts next month. Interesting OZ made it clear the company would not take on debt to develop the new mine.
OZ chairman Rebecca McGrath said the Carrapateena project could be funded from the $625 million of cash on hand and expected cash flow from Prominent Hill without the need for debt, and with the current dividend policy maintained (meaning no increase in dividend for the next year at least).
The Carrapateena news overshadowed the comany’s solid interim profit performance.
OZ revealed a sharp jump in net profit after tax to $80.6 million for the six months ended June 30, 2017, up from $29.5 million in the first half of 2016.
Revenue increased to $446 million from $398 million. The company will pay a fully franked interim dividend of 6 cents a share, unchanged from a year ago.
In the Thursday release OZ chief executive Andrew Cole said a tight focus on costs at the Prominent Hill mine and better copper prices were behind the sharp rise in profits.
He said calendar 2017 was expected to be another strong year at Prominent Hill, with copper production expected to be between 105,000 to 115,000 tonnes.
The shares were up 2.5% at $8.97.
