Less than a week ago OZ Minerals was talking about doing a major impairment test of all its assets and deciding early in the New Year about deferring, cutting back or just abandoning projects and prospects.
Asset values would have been tested against market prices, demand, currencies and costs.
They still will be, but the company couldn’t wait until then for a full statement, given the way the share price has tanked, and remains depressed.
Yesterday it sent a six page statement to the ASX detailing hundreds of millions of dollars of changes and cuts.
It was the first major statement of its kind from a major Australian miner and it won’t be the first.
Investors are looking to Thursday’s BHP Billiton AGM for a detailed view on its long pipeline of projects, starting with the takeover offer for Rio Tinto which was called off last night.
OZ Minerals says not only has it deferred a number of development projects, started cutting operational costs and production, it had has entered negotiations to refinance debt.
Clearly management and the board see falling commodity prices and the toll they are now taking on the company (which was only formed from the merger of Zinifex and Oxiana from July 1 this year) as continuing well into 2009.
The company has deferred $495 million of project expenditure, cut annual zinc production from its key Century mine in Queensland by 20,000 tonnes and highlighted a $185 million cut in operating costs for 2009.
"The decisions we are announcing today will enable us to either eliminate or defer substantial cash outflows at a time when access to capital is more difficult than at any time in the last decade and when we are in the middle of re-financing our debt facilities," managing director Andrew Michelmore said in the statement.
OZ Minerals said it was seeking extensions to $US560 million ($A857 million) in debt facilities, with negotiations continuing for a $US420 million ($A6434 million) facility.
The company has suspended expenditure on the Martabe gold project in Indonesia and the Sepon copper expansion in Laos and deferred work until after 2009 on both. Half of the cuts will come in the delays to these two projects: around $A422 million all up.
OZ Minerals said the Prominent Hill copper gold project in South Australia would be completed, but the Dugald River zinc project in Queensland would not commence in 2009. The group has deferred feasibility studies into the Izok Lake and High Lake project in Canada.
Dugald River was to be the replacement mine for when Century starts running down in around six years time. $125 million will be saved by not proceeding with surface facility renewal work at the Roseberry mine in Tasmania.
Work will still continue on the new tailing storage facilities and upgrading the underground ventilation.
The cutback of 20,000 tonnes at Century will save $A20 million of cash outflow.
OZ Minerals said it will cut close to $100 million from the operating budgets in Australia, with further cost cuts expected through a reduction in contractor numbers.
Exploration will be cut by $A18 million in 2009 to $63 million, on top of "synergies" of $A20 million already identified from merging the two companies exploration teams.
"The review process will be ongoing, in order to ensure we do not miss any opportunities to strengthen OZ Minerals now and for the future," Mr Michelmore said.
OZ Minerals will also cut the size of the board from 11 to eight, with non-executive director and one of the architects of the merger, Owen Hegarty, retiring from the group at its next annual general meeting.
Mr Hegarty, the former managing director of Oxiana, was forced to sell 10 million shares in OZ Minerals after receiving a margin call on the plummeting stock on Monday. He was the architect for the OZ Minerals merger.
OZ Minerals shares rose in the early upswing yesterday, but closed up 5.7% at 55c after hitting its all time low of 48.5c during trading.
