OZ Minerals announced a 59 per cent increase in net profit after tax and its intent to prioritise shareholder returns whilst continuing to deliver on its value-based growth strategy.
|Image Courtesy ©OZ Minerals|
OZ Minerals Chief Executive Officer, Andrew Cole stated that the first half of the year saw a strong financial performance with net profit after tax of $128 million bolstered by higher copper prices, ongoing operational efficiencies and a continued focus on costs.
OZ Minerals’ earnings and margins improved during the half year with net revenue of $530 million – 19 per cent higher than the comparative period, driven by an 18 per cent increase in the average A$ copper price, partially offset by a 3 per cent decrease in the average A$ gold price. Copper prices have moved lower during H2 2018 from those levels achieved towards the end of the first half.
Underlying EBITDA of $290 million at an improved margin of 55 per cent reflected the continued focus on operational efficiencies. Operating costs were broadly flat versus the comparative period, outside of power costs which reflect the current short-term supply rates contracted from H2 2017 to the end of 2018.
A strong cash balance of AU$493 million followed significant growth investment into the business of AU$162 million (net of cash received) for the Avanco Resources Limited acquisition and AU$143 million for the development of the Carrapateena project. Tax payments of $118 million correspond with the payment of the FY 2017 tax provision and ongoing instalments for 2018. Shareholder payments of $42 million for the 2017 fully franked final dividend of 14 cents per share were also made in the first half of 2018.
The company’s growth pathway is now more assured with a range of assets in various stages of development. Prominent Hill production is supported by a new operating mine in Antas, which is currently undergoing an optimisation review. Carrapateena construction is on track for first concentrate production in Q4 2019 and a progressive stream of projects will potentially advance to construction in the coming years, including West Musgrave in Western Australia and Pedra Branca and CentroGold in Brazil.
“Having undertaken an intensive review of the newly acquired Brazilian assets over the past six weeks, we have developed an optimisation plan based on project value and maturity”, commented Mr Cole.
“Further reviews, drilling and detailed costing is required to finalise the scopes and metrics of various studies, but the development pathway enables us to progress sequential works across the new portfolio to manage workload, expenditure and effective implementation of each stage. An upgraded Definitive Feasibility Study scope for the Pedra Branca project in the Carajás Province incorporates a potential 30 per cent increase in throughput to 1.6Mtpa and is expected to be completed in late H1 2019, followed closely by a decision to mine. Further drilling to increase resource confidence is planned for the CentroGold project in the Gurupi Province, with an update on the optimised Pre-Feasibility Study expected in Q1 2019.”
OZ Minerals expects in the second half to see the fourth access decline break through at Prominent Hill, facilitating more efficient vehicle movements as the underground ramps up, and sustaining capital expenditure to increase to the guided range for 2018.
Carrapateena construction remains on schedule for commissioning in Q4 2019 and continues to track in line with the published total project guidance. Whilst Carrapateena capital expenditure will increase this half, overall capital spend for 2018 has been revised downwards from “circa $500 million” to $400-$430 million. The reductions are value driven and are primarily due to the deferral of the Western Access Road and optimisation of the tailings storage facility design. The Western Access Road will be completed late in 2020 to allow OZ Minerals to take into consideration the requirements of a potential Carrapateena expansion.