Upbeat Updates from OzMin and Evolution

Oz Minerals has lifted full year gold guidance and kept its copper estimate for 2021 intact after a solid three months to the end of September.

Gold guidance for the year has been raised by around 7% to a range of 220,000 to 243,000 ounces which will help overcome the weakness in world prices for much of this year compared to 2020.

Copper guidance has been left steady at 120,000 to 145,000 tonnes which will be boosted by the record prices for the metal (twice – May and this week) as a global supply shortage develops.

The company said it produced 65,932 ounces of gold in the September quarter, down a touch from the 66,746 ounce in the September quarter of 2020 while copper production of 33,794 tonnes was the highest for the past year and more an 40% above the 23,873 tonnes produced in the same quarter of last year.

With copper prices up more than 40% over the same period, Oz is looking at a big revenue and earnings surge from its copper operation. Gold prices are down around 8% from a year ago, so the drop in costs in the business will help.

On top of this news, Oz revealed a fall in its costs in the September quarter and for the full year – especially for gold.

The all-in-sustaining-cost is also expected to be slightly lower than previously forecast. Now it will be between $US1.25 ($A1.68) a pound) and $US1.40 ($A1.89) a pound, down from between $US1.30 ($1.75) a pound and $US1.45 ($1.95) a pound.

The Spot gold price was near $US1,769 an ounce at Wednesday Comex close in New York. Comex copper was trading around $US4.6.4 a pound after hitting an all-time high of $US4.815 a pound on Monday (topping the $US4.77 a pound reached in mid-May).

In a commentary with the results, OZ’s CEO, Andrew Cole said

“Full year group copper production is tracking in line to achieve guidance. Prominent Hill copper and gold production and Carrapateena gold production are expected to be at the top end of the updated guided range, while Carrapateena copper production is likely to be at the lower end of its range as we drew from lower grade areas during Q3 to encourage cave propagation.

“We have now returned to drawing from higher grade areas and still expect to trend towards reserve grade over the coming quarters. Pleasingly, plant performance continues to improve with production rates of 5.3Mtpa achieved during September, demonstrating that higher throughput rates planned can be achieved.

“Prominent Hill copper and gold production remains strong with continued higher than expected gold grade in stockpiles resulting in a further increase to annual gold production guidance. With the Wira shaft mine expansion approved during the quarter, the project team has quickly moved to awarding critical work packages. Approximately one quarter of the capital budget has already been awarded allowing a significant portion of the budget to be locked in.

“COVID-19 outbreaks in the eastern states of Australia have led us to limit the movement of people from these areas to all but critical specialist workers. Limiting movement is focused on reducing the health risk to our workforce and the community, and requires some additional administrative and logistics management. With the COVID environment in Australia remaining dynamic as States prepare for border openings and restrictions to be eased, we will continue to carefully monitor and review our processes.

“At the Carajás East Hub, (in Brazil) a significant milestone was achieved with the commencement of processing production ore from Pedra Branca, the first of our satellite mines to be realised under the Hub Strategy. The team in Brazil has now taken Pedra Branca from a concept study to being permitted, built and into production within three years.

“A maiden Mineral Resource at Santa Lúcia was released during the quarter and is a further step in progressing our Brazil Hub Strategy. The team is now advancing a project study, assessing the viability of the Santa Lúcia run-of-mine ore being processed concurrently with Pedra Branca ore at the central Carajás East Hub processing facility.

“We continued to advance our growth pipeline projects with a drilling program commencing at the Succoth copper deposit. Succoth has a published Inferred Mineral Resource totaling 156Mt @ 0.60% Cu which was not factored into the West Musgrave Pre-Feasibility Study Update (PFSU) and can potentially add upside in mine life or production rate to the West Musgrave Province.

“The West Musgrave team continues to progress the final study phase, with many aspects of the project well advanced and technically de-risked. With project activity advancing and commencement of the Succoth drilling program earlier than anticipated, 2021 project studies cost guidance has been adjusted by $30 million.

“Overall, we continue to gain confidence in the project. We are also taking the opportunity to consider opportunities to further advance our company aspirations and create additional stakeholder value prior to a potential final investment decision in H2 2022.

“Our financial position remains strong with $188 million cash balance at the end of the quarter and significant liquidity available. Our capital management framework provides a strong platform for allocating capital to the right projects and accessing finance, should it be required, to fund our considerable growth pipeline.”

On top of the cash, Oz said it retains the fully undrawn debt facility of $480 million, providing significant liquidity to progress expansions at Carrapateena and Prominent Hill.

“Investment in Carrapateena growth has continued with mine development activities to accelerate decline development, crusher procurement and Western Access Road construction progressing.

“Exploration and studies expenditure was higher with increasing activity at West Musgrave and the Carajás. During the quarter a stage gate payment of $6.3 million was made in relation to the Santa Lúcia project.”

Proceeds of $3 million were received during the quarter after selling equity securities in Toro Energy Limited.

The shares dipped 0.4% to $25.88.


And Evolution Mining beat its gold production guidance for the September quarter as well as lowering costs to below guidance.

The company said gold production reached 170,681 ounces – topping guidance of 155,000 to 167,000 ounces, while the all-in sustaining cost (AISC) of $1,413 an ounce (US$1,039/oz) was lower than the $1,450 an ounce forecast.

It also reports mine operating cash flow of$193.7 million, and net mine cashflow of $67.5 million after investment of $89.6 million in major projects.

Evolution sold 163,046 ounces of gold in the September 2021 quarter at an average gold price of $2,364 per ounce.

Cash in the bank was $422 million at the end of the quarter.

Net debt of $467.8 million was slightly higher than the $451.2 million at the end of June.

Evolution did not provide any forward-looking guidance in conjunction with its quarterly report.

The shares rose 1.3% to $3.77.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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