The $1 billion proposed Carrapateena copper and gold mine in South Australia has moved a step closer with OZ Minerals (OZL) releasing an updated assessment of its plans for the huge deposit.
The $980 million mine project will operate for 20 years and generate a 20% rate of return, despite OZ assuming higher power prices in its latest project study. In May the company estimated the project would cost $975 million.
It told the ASX yesterday in a statement that it now thinks annual production of copper will be 61,000 tonnes 15% above OZ’s earlier plans, while gold production will be 19%.
OZ says it can fund the project out of its half a billion dollar cash pile and future cash flows, but it will also consider using debt if necessary.
But the biggest risk to the project going ahead is South Australia’s fragile electricity network, which endured a massive price spike in July and a state-wide blackout in September.
That closed the company’s Prominent Hill mine, forcing OZ to cut its full year (December 31) gold production forecast.
To offset that risk OZ is also investigating options for on-site power generation at Carrapateena, with renewable or hybrid power plants among the options.
“Options for supplemental or partial on-site generation continue to be investigated,” the company said in the prefeasibility statement.
OZ Minerals Chief Executive Andrew Cole said the project could be “funded from our existing cash flows if we so wish.”
The company said it will release a feasibility study early next year, after which its board will make a final decision on whether to invest in the project.
Construction is already under way, and subject to that board approval around April 2017, first production should occur in the second quarter of 2019.
OZ shares rose 1.5% to $7.13 yesterday.
