oz minerals downgrades revenue hopes

Thewest.com.au ...................



19th December 2008, 11:04 WST

Debt-laden diversified miner OZ Minerals Ltd says it has lost almost $400 million in expected revenue for the half year as its mineral sales dwindle after several projects were called off.

The company on Friday decided to put its flagship Avebury nickel mine in Tasmania on care and maintenance due to the low price of the metal, culling 189 jobs.

"We're caught in this perfect storm where we're getting squeezed on our cashflow from operations - they are much lower," chief executive Andrew Michelmore told a teleconference on Friday.

"So to put it in perspective, for the second half of this year, we were expecting $1.1 billion in revenue.

"It now looks like its going to be low 700s (million)."

He said the company would sell its Martarbe gold project in North Sumatra as part of non-core asset sales and "a number of parties are very interested".

"The price of gold is going up and it's worth more to a pure gold company than it is for us," Mr Michelmore said.

"It's not part of our key strategy.

"It was an obvious candidate to be able to let go."

The company said last month it would merely suspend the Martarbe project.

Last month, OZ Minerals deferred surface facility upgrades at its Rosebery base and precious metals mine in Tasmania, its expansion of the Sepon copper mine in Laos and the development of the open pit copper prospect at the Golden Grove gold mine in Western Australia.

It also laid off 135 staff at its Century lead and zinc mine in Queensland on Tuesday.

Mr Michelmore said the company's substantial cash burn in recent months related to curtailing projects.

"The cash burn comes with stopping a number of those projects - you can't just turn off the button," he said.

"Also, with redundancies you incur a cost immediately.

"At the same time, we have two very important projects that consume cash as we complete them."

These projects are the Century lead and zinc mine in Queensland, where the company is working on a large cut back through to mid next year, and the Prominent Hill copper and gold mine in South Australia, which is due to begin production in 2009.

"Both of those require cash," Mr Michelmore said.

While efforts continue to refinance several debt facilities, OZ Minerals is considering a capital raising to ease liquidity issues.

"In the current climate, it is extremely hard to get cash," Mr Michelmore said.

"We're working very positively with our banks but also looking at other ways to raise some extra cash."

OZ Minerals shares remain suspended as it attempts to improve its financial position.

As at December 8, OZ Minerals' gross debt was $1.08 billion.

"Growth is off the agenda - we're in cash conservation mode now," Mr Michelmore said.

OZ Minerals also faces class actions led by litigation funder IMF Australia in relation to its debt disclosure.

AAP