OZ Minerals’ HY profits down -59.3% but claims operations are back on track

Despite underlying strength within commodity prices, inflationary costs, adverse weather, and covid absenteeism, saw Oz Minerals (ASX: OZL) post half year profits after tax of $109.2m, down -59.3% from the year before on revenue of $908.6m which was also down -7.9% on the previous period.

Underwhelming news also extended to the dividend, with management declaring a fully franked interim dividend of 8 cent per share (CPS) for the half-year 2022, virtually half of what was paid out a year earlier.

The company also suspended the dividend reinvestment plan (DRP) for the half-year dividend.

But despite missing estimates, the copper and gold miner’s share price still managed to move forward, up 0.53% in early afternoon trading.

However, the share price was down -0.50% an hour out from the close.

Impressive growth pipeline

What clearly captured the market’s imagination early this morning was the quality and high margin nature of the company’s assets, with an operating margin of 40% and robust operating cash flow generated during the half.

In an attempt to appease disenchanted investors today, Oz Minerals CEO Andrew Cole reminded the market the miner was beginning to regain operating momentum at both Prominent Hill and Carrapateena.

The miner is also benefitting from lower absenteeism, resulting in fewer shift losses and improved equipment availability.

In short, the company expects to capitalise on growing long-term demand for copper and nickel, driven by global electrification and accelerated decarbonisation.

“Current conditions reinforce the value of the OZ Minerals strategy. Our portfolio of long-life, low-cost assets in low-risk jurisdictions and a pipeline of organic growth options provide confidence in delivering our operational and growth plans.” noted Cole.

Highlights within today’s interim result include:

• Copper and gold sales down -6% and 25% respectively

• Earnings (EBITDA) down -36% to $358.3m

• Closing cash at $107m, down from $215.4m at December 2021

• All-in cost (AISC) of US$1.91 per pound, up from US$1.36

• Increased working capital liquidity from $480 to $700m

• Operating cash flows of $374.8m for the half-year were $82.6m lower than previous period

Other milestones within today’s result include:

1. The Pedra Branca copper-gold mine at Carajás East in Northern Brazil reached full production in June, producing 4,887 tonnes of copper and 3,657 ounces of gold during the half.

2. Copper production at Carrapateena hit 100,000 tonnes in the month of April.

3. Following the recent focus on cave expansion at the Carrapateenna Province, management is expected to refocus on increasing ore production in the second half.

What’s in store?

While no reference was made to the recent $8.3bn takeover offer by BHP Group Ltd (ASX: BHP) – which Oz Mineral’s rejected early August - management expects all-in costs (AISC) to moderate to between US$1.60 to US$1.80 per pound.

The company also guided to copper production of between 120,000 to 135,000 tonnes, while gold production is expected to come in between 208,000 to 230,000 ounces.

As previously flagged, the miner plan to increase spending on nickel exploration over the next 24 months years to cater for growing demand for the metal from manufacturers of EV batteries. 

The miner is also aiming to get to 344,000 tonnes of annual copper equivalent production over the medium term.

Today management also announce approval to invest a further $12m to progress work at Prominent Hill to evaluate the potential to access the near surface targets of Walawuru and Papa.