The scoping study for Carrapateena was released this morning, outlining a 2.8 million tonne per annum single decline sub-level caving operation with on-site processing using the hydromet technology.

Capital costs have been outlined at around $A770 million, which the company plans to self-fund.

At consensus pricing ($US3 per pound of copper, $1250 an ounce of gold), the project has a net present value of $A600 million, an internal rate of return of 20%, and a payback period of five years.

Life-of-mine average annual production is expected to be 40,000 tonnes of copper and 38,000 ounces of gold at C1 costs of $US1/lb.

Average annual cashflow is forecast at $A150 million.

As a result, the company is moving to a $20 million prefeasibility study to be completed by the end of this year

“The probability of this project not going ahead is very low,” OZ CEO and managing director Andrew Cole told reporters this morning.

“Everything we know about this project – and everything we know about the market – this project has a high probability of turning into cashflow.”

The company has put the decline out to tender and should make a final decision on its construction by mid-year.

If all goes to plan, OZ will make a development decision early next year for first production in 2019.

Now that the company has identified the way forward for the project, it has updated its capital management framework and announced a $60 million share buy-back.

Based on yesterday’s closing price of $5.23, the program represents the repurchase of up to 11.47 million shares, or almost 3.8% of the issued capital.

The buy-back comes after the company announced a final dividend of 14c per share two weeks ago, taking its full-year dividend to 20c.

OZ had $554 million cash at the end of December.

“The $60 million does not stretch us,” Cole said.

Cole added that the company still had the capacity to look at acquisitions, though the focus was on Carrapateena.

“The best way to create real value is organically,” he said.

Shares in OZ dropped 3.9% to $5.025 after a 6% jump yesterday.