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Oz Minerals posts reduced profit ahead of Carrapateena launch

Resources & Energy

South Australian mining company Oz Minerals has posted a half-year profit of A$43.9 million as it prepares for the first concentrate production from its Carrapateena mine.

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The Adelaide-based copper gold miner’s half-year result was well down on last year’s H1 net profit after tax of $127.8 million. This followed a fall in revenue from $530.3 in the first half of 2018 to $419.2 million this year and a 3 per cent fall in the copper price.

Oz Minerals Chief Executive Andrew Cole said profit was impacted by lower revenue given shipment timing aligned to first half market dynamics and additional growth investment.

“Pleasingly, we have already seen revenue rebound strongly in the second half and all 2019 production tonnes are committed,” he said.

Oz Minerals operates the Prominent Hill copper-gold-silver mine in northern South Australia and the Antas copper-gold mine in northern Brazil. Its Carrapateena copper-gold project, also in northern South Australia is expected to begin concentrate production in November ahead of an 18-month ramp up to full production.

The company will pay a fully-franked dividend of 8 cents per share on September 17 at a cost of $25.9 million.

OZ Minerals’ cash balance of $185.5 million decreased by $319.6 million during the half-year after substantial investment at Carrapateena, expenditure on exploration and evaluation activities, tax payments, and dividend payments to shareholders; partly offset by operating cash flows.

“Our cash balance combined with a solid operating performance from Prominent Hill has allowed us to implement our growth strategy and transition to multiple operations whilst consistently rewarding shareholders,” Cole said.

“Significant progress was made at Carrapateena with above ground construction nearing completion and over 100,000 tonnes of development ore stockpiled.

“The project is expected to deliver first saleable concentrate in November for a capital cost of A$920 million – A$950 million, with 2019 Growth Capital Expenditure of A$540 million – A$570 million continuing to track to guidance.”

Oz Minerals’ pre-feasibility study of its West Musgrave copper-nickel project in central Australia is expected to be completed with a maiden Ore Reserve in early 2020 while a feasibility study is continuing in the Carajas province in Brazil.

“Exploration is an important element of our growth strategy and our pipeline grew with earn-in agreements established in the Carrapateena province and Sweden, as well as a dedicated joint venture established to progress the Jericho project in Queensland,” Cole said.

“Consistent with our capital management strategy, cash resources have been applied to the development of Carrapateena and capital requirements at Prominent Hill. We expect to see our cash reserves continue to deplete as we complete the development of Carrapateena.

“We allocate capital carefully to our growth pipeline and see opportunities for bespoke funding approaches, together with operating cashflows, and are comfortable taking on a level of debt when it makes sense to do so within our stated risk profile.”

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