Shares in OZ Minerals (OZL) leapt more than 6% yesterday after it produced a very strong production report for the 4th quarter and 2015.
In fact, given the slide in copper prices this year and the way commodity producing companies like OZ Minerals are regarded in the market, the surge in the shares was quite surprising.
OZ shares finished the day up 6.8% at $3.74.
OZL 1Y – OZ Mineral bucks commodity downturn
OZ said it had record copper production in 2015 of 130,305 tonnes, which was at the top end of the guidance range and more than 40% better than volumes produced in 2014.
And to improve its standing with worried investors, OZ said production costs were at the bottom end of guidance, and the processing plant has been operating at up to 25% above its official capacity.
The result is well above the low 73,362 tonnes of copper the mine produced in 2013, when the company was shifting through lower grade ores in a bid to reach better copper and gold grades lower down in the Prominent Hill mine in South Australia.
Even though the 24% slide in Comex copper price in 2015 will hit earnings, OZ Minerals is a very rare beast at the moment – no debt and with $553 million in cash at December 31.
“Prominent Hill had an excellent year in terms of safety, production and cost reduction,” said Andrew Cole, Managing Director and CEO in yesterday’s statement.
“We’ve had a record year of production and even with the current state of commodity prices, Prominent Hill is generating very significant cash flows with healthy margins. Our focus in 2015, which is to become a lean business, has driven down our costs whilst improving our operational output and reliability. This sets us up for another strong year in 2016."
Shipments of Prominent Hill concentrates for the quarter totalled 73,369 dry metric tonnes, containing 37,091 tonnes copper, 29,870 ounces of gold and 223,822 ounces of silver. Year to date, 254,119 dry metric tonnes of copper concentrate were shipped, containing 130,316 tonnes of copper, 116,471 ounces of gold and 747,439 ounces of silver.
The strong performance has helped protect the company to some extent against the slide in metal prices and the sell-off in commodity stocks. OZ shares are down 11.7% so far in 2016, but up 3.2% in the past year.
That will no doubt please its newest shareholder – UK buyout group KKR – which moved onto the OZ share register during 2015 and currently owns 10% of the company.
