Despite some impressive results within Oz Minerals’ (ASX: OZL) fourth quarter result, released last Thursday, the copper-focussed miner’s share price continued in the downward trend (-11%) that following the announcement, with the share price -3.24% lower an hour after the open.
What seems to have spooked the market was the company’s weaker than expected guidance, plus a higher medium-term cost outlook for Carrapateena.
It’s understood market conditions prompted the company to raise unit cost forecasts for the mine by 40%, while gold production is forecast to fall by between -3% and -12%.
The company also noted that the medium-term outlook for Carrapateena would be slightly lower (68,000 tonnes) than the previous guidance of 70,000 tonnes a year.
However, based on Citi’s positive outlook on copper, the broker has lifted its rating on the stock to a Buy from Neutral, and after recent share price weakness raises its target to $29.10 from $27.00.
Much of the broker’s outlook is based on the strong growth outlook for copper – up 24% in the last 12 months – especially given demand out of China and a growing addressable market.
While Citi’s concedes Oz Minerals is not a free cash flow yield stock, the broker believes the company’s growth options and low-risk asset locations make it a standout on the global stage.
Citi also notes that the company’s Buy rating requires investors to support a multi-year decarbonisation-driven bull thesis of US$4.0/lb long term.
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