OZ Minerals Ltd. (OZL.AU) said Monday it will focus its hunt for
acquisitions on advanced copper projects that have the potential to
produce more than 50,000 metric tons of the red metal a year.
"Copper, in our opinion, is the best commodity to be in, with
strong demand fundamentals in the longer term," Chief Executive
Terry Burgess told analysts and investors.
Burgess was outlining his new strategy for the company, which
has had a turbulent year in which it dodged the threat of
receivership by selling most of its assets to China Minmetals
Non-Ferrous Metals Co. for US$1.39 billion.
As a result of that sale, the miner has a cash balance of A$1
billion and there has been plenty of market interest in how it
plans to spend its cash pile.
Burgess said the company would expand its Prominent Hill mine in
South Australia state and spend on exploration but would also be on
the look out for acquisitions.
Burgess said OZ will consider strategic positions or
partnerships in promising projects, target non-core assets of major
resource companies and consider taking stakes in projects that need
a capital injection.
Richard Hedstrom, head of business development, said the company
has already looked at some potential acquisitions and is focusing
on Australia and Asia.
There has been speculation that OZ could be interested in Rio
Tinto Ltd.'s (RTP) 80% stake in the Northparkes copper-gold mine in
New South Wales state, which the mining giant has said it would
consider selling when market conditions were favorable.
Burgess said that even though production from Northparkes falls
slightly below the 50,000 tons a year OZ is targeting, the company
could still take a look if it came on the market.
"If assets like that in Australia are in copper and have that
sort of production level and are up for sale, then certainly we
would be interested in looking at them," he said.
"The company has looked at Northparkes before and I guess that,
if we did look at it, we would need to see what upside potential
there was."
The miner said it sees drilling work around Prominent Hill as
its number one exploration priority with the best chances of
delivering value to shareholders.
In line with this, it has struck a deal to form a joint venture
with IMX Resources Ltd. (IXR.AU) to explore for and develop
cooper-gold projects on the smaller company's Mount Woods
tenements, which are adjacent to Prominent Hill.
As part of the deal, IMX has also agreed to place 26.15 million
shares representing 15% of its issued capital to OZ at 38.5 cents a
share.
Prominent Hill Output Above Capacity
The ramp up of Prominent Hill, which started production in
February, is now complete and the processing plant at the
copper-gold mine is currently operating above its capacity of eight
million tons a year, Burgess said.
"We are forecasting mill throughput in 2010 at 10% above
nameplate capacity," he said.
Burgess said the mine has produced more than 85,000 metric tons
of copper and 65,000 ounces of gold so far this calendar year and
is on track to meet full-year cost guidance.
OZ now plans an underground expansion of the mine and is
targeting board approval in the first quarter of 2010.
The underground expansion, which Burgess said is likely to cost
between A$250 million and A$300 million, would produce at the same
time as the existing open pit operation and OZ is targeting first
output in 2012 ramping up to full production in 2013.
The miner said approval of the underground project would lead to
a significant increase in reserves at the mine.
OZ released an updated total mineral resource for Prominent Hill
on Monday, with contained copper metal rising 2.6% to 2.5 million
tons.
The total gold resource at Prominent Hill now stands at 6.3
million ounces, although the resource for the gold only
mineralization fell 19.2% to 3.4 million ounces due to higher cut
off grades being applied.
OZ said ongoing drilling for the underground project was
continuing to return results that confirmed the high grade nature
of the mineralization.
The Melbourne-based company plans to spend between A$40 million
and A$50 million on exploration in 2010.
OZ's head of exploration, Tony Houston, said the exploration
program at Prominent Hill is aiming to prove up 100 million tons of
ore at a copper grade of 1% and gold at 0.6 grams per ton.
In Cambodia, the company is aiming to define a resource at its
Okvau project in the first quarter of 2010 and to identify
potential gold targets of more than two million ounces by early to
mid-2011.
OZ will not be paying a dividend for 2009 but said it aims to
initiate payments in the next few years.
Burgess also said that if the company had not identified a
project to spend some of its cash reserves on within a year it
would have to consider returning some funds to shareholders.
-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094;
alex.wilson@dowjones.com
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