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Equity Bottom-Up

Shares in no-moat-rated Oz Minerals have sold off recently, declining to AUD 9.50 per share from highs around AUD 11 in April 2019. The sell-off probably reflects weakness in base metals prices and concerns around global trade. While iron ore has been shielded from the economic concerns due to tight supply, the prices of copper, nickel, and zinc have all sold off by about 10% in the past few months. Oz Minerals shares fell in sympathy and that provides an opportunity
We make no change to our…

Oz Minerals is looking to expand its Carrapateena mine. The expansion would see the planned mining rate to nearly triple to 10 to 12 million tonnes a year from 2026 versus the base case 4.25 million tonnes. The bulk underground mining method of block caving, as used at Newcrest’s Cadia East mine, would increase ore volumes, lower unit costs and exploit a larger portion of the resource. Copper sales would almost double to 105,000 to 125,000 tonnes a year, from the base case of about 65,000 tonnes…

Oz Minerals is a growth orientated, midtier, copper-focused mining company. The Prominent Hill mine in South Australia began life in the bottom half of the cost curve and except for a brief bout of industry cost inflation around 2013, has remained there since. Reserve life is relatively short, at less than 10 years based on 2018's production rate, and grades will decline with stockpile processing. Management has so far met the challenge to extend life at Prominent Hill, albeit at lower…

No-moat-rated Oz Minerals' first-half 2018 net profit after tax of AUD 128 million was slightly better than our AUD 120 million. The stronger-than-expected result reflected lower than forecast smelter treatment and refining charges. Compared with last year, the 59% rise in net profit was principally due to the 18% higher copper price. We marginally increase our 2018 earnings forecast as a result to AUD 0.86 per share from AUD 0.83 previously. Our AUD 8.30 per share fair value estimate is…

We raise our fair value estimate for no-moat-rated Oz Minerals to AUD 8.30 from AUD 8.00 per share. The increase reflects the time value of money and relatively strong second-quarter 2018 production. Copper output of 32,100 tonnes was 4% ahead of our forecast, and cash costs of USD 0.72 per pound were mildly better than expected. The June quarter was the first following the exhaustion of the open-pit mine and the transition to processing ore from the stockpile.
Analyst: Matthew Hodge

Australia

OZ Minerals Ltd. is an Australian based mining company with a focus on copper. The Company owns and operates the Prominent Hill copper-gold mine and the Carrapateena copper-gold project located in South Australia and has a number of equity interests in listed resource companies.

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