OZ defers growth capital

OZ Minerals has maintained full-year guidance for 2020, but is deferring growth capital, exploration and study expenditure due to the COVID-19 outbreak.
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The copper miner said it was unaffected by the outbreak, but had undertaken a prudent review of all expenditure to protect its people and maintain low-cost metal production.

At Prominent Hill in South Australia, low-risk and non-time critical capital has been deferred to 2021, though expansion study work will continue.

The company has 18 million tonnes of stockpiled ore should mining operations need to be curtailed.

At the nearby newly commissioned Carrapateena operation, mine strategy will be biased towards level ore development and undercut production, deferring major capital to 2021 without impacting ramp-up.

Carrapateena achieved nameplate throughput of 12,000 tonnes per day this month, including 24 hours at 13,000tpd. The ore stockpile stands at about 305,000t.

The Carrapateena expansion prefeasibility study will continue and is due for completion mid-year. If the project moves to feasibility, low-cost set-up activities will be conducted this year.

The acquisition of new equipment in Brazil has been delayed indefinitely.

Construction of the Pedra Branca decline continues.

Back in Australia, the company is still assessing the path forward for the West Musgrave project after the release of the PFS, but said spend in 2020 would be minimal.

Group guidance for 2020 remains at 83,000-100,000t of copper and 207,000-234,000 ounces of gold.

C1 cost guidance has been lowered to US60-75 per pound of copper from 70-85c, while all-in sustaining costs are expected to be $1.15-130/lb, down from $1.35-1.50/lb.

Site sustaining capital is forecast at A$34-50, down from $45-63 million.

Mine development costs are expected to be $120-140 million, down from $125-145 million, while ‘other' costs have been stripped back to $127-147 million from $207-232 million.

Exploration has been reduced to $15-20 million from $25-30 million, while study spend has been lowered to $30-35 million from $35-40 million.

OZ managing director Andrew Cole said the changes represented the company's stage one response to the pandemic.

"Whilst the circumstances remain fluid, an extensive range of preventative and contingency measures have been actioned across the company to ensure our employees remain safe and our sites continue to operate," he said.

Cole said the company's cultural investment over the past five years was paying off as teams remained calm.

"The introduction of flexible work arrangements for much of our non-frontline workforce over the past 18 months has also allowed a relatively seamless transition to the current remote working environment," he said.

"With over 85% of our Australian sites' workforce based in South Australia, the recently announced South Australian border closures will have limited impact on the continued operation of Carrapateena and Prominent Hill, with all non-frontline functions already working remotely.

"We have planned for a range of scenarios including operating with a South Australian workforce only, extending rosters to enable isolation of sites through to ‘care and maintenance'."

OZ said it would establish a $4 million stakeholder support fund.

The company paid its full-year dividend of 15c per share was paid last Thursday as planned.

OZ said it was in a net cash position at the end of February, with a $300 million revolving debt facility.

Shares in OZ opened higher, rising as high as A$7.18, but were down 1.3% to $7 following the news. The stock started the year at over $10.

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