Some more commentary on the strategy OZ Minerals looks to...

Some more commentary on the strategy

OZ Minerals looks to explore and acquire

AAP and a staff reporter 30 Nov - Business Spectator

http://www.businessspectator.com.au/bs.nsf/Article/OZ-Minerals-signs-joint-venture-with-IMX-Resources-pd20091130-Y9TG2?OpenDocument&src=srch

Copper and gold producer OZ Minerals Ltd says it will use its cash reserves predominantly for mergers and acquisitions in the coming year.
OZ Minerals chief Terry Burgess said the company was expecting to spend between $40 million and $50 million on exploration in 2010.
OZ Minerals, which had been deeply in debt earlier this year, sold off most of its assets to a Chinese company in May. This allowed it to pay off creditors and left it with about $1 billion in available funds.
The company now focuses activities around its flagship Prominent Hill mine in South Australia.
"Our key area of exploration potential of course is around Prominent Hill," Mr Burgess said.
"A discovery there would add more value for our shareholders than anything else could do," he said.
OZ Minerals chief financial officer Andrew Coles said the company would consider gearing levels of up to 20 per cent in order to make an acquisition.
He said that the company had a debt capacity of between $200 million and $400 million depending on how it was measured.
Miner ups shipments to Olympic Dam
OZ Minerals has also increased its shipments of copper concentrate to BHP Billiton Ltd's damaged Olympic Dam mine, Mr Burgess said.
BHP was forced to shut down the main haulage shaft at Olympic Dam, the world's fourth-largest copper deposit, in October after a breakdown of the haulage system.
The concentrate is coming from OZ Minerals' nearby Prominent Hill mine, which has produced 85,000 tonnes of copper in concentrate so far this year, Mr Burgess told Reuters in an interview.
"We have increased slightly our deliveries of concentrate to assist them through this difficult time. Normally we ship about 10 per cent of our concentrate to Olympic Dam and we've slightly increased that."
Olympic Dam is expected to continue running at 25 per cent of capacity until full output resumes in the first quarter of next year, according to BHP.
BHP has declared force majeure on some copper shipments and analysts estimate it could cost the company 50,000 tonnes in lost 2009/10 production before the shaft is repaired.
BHP declined to comment on whether it was importing concentrate from other sources besides Oz Minerals.
Available supplies of concentrate are seen as already tightening due to supply cuts in Chile following strikes and mining difficulties. Copper prices have more than doubled since January and were quoted at $US6,905 a tonne at 0119 GMT (1219 AEDT).
Mr Burgess said global copper markets were heading for a supply deficit in the next few years due to disruptions at mines and a lack of discoveries to replace depleted deposits.
The start-up stage of Prominent Hill mine was now over, enabling it to run above production targets in order to meet growing markets, Mr Burgess said.
"We're forecasting mill throughput in 2010 10 per cent above nameplate capacity," he said.
He also said a recent visit to China convinced him the world's largest copper-consuming nation was no longer stockpiling imported concentrate and that demand was growing.
"We visited some of customers (in China) and I checked around to see if there were any copper stocks lying around the smelters and I certainly didn't see any," Mr Burgess said.
"They want to take it into production rather than having it as an inventory cost," he said.
OZ inks IMX joint venture
OZ Minerals also signed a heads of agreement with junior explorer IMX Resources Ltd to explore its tenements in South Australia, and will acquire 13 per cent of the company through a share placement worth $10 million.
Under the agreement, OZ will earn a 51 per cent interest in the joint venture, provided it spends a minimum of $4 million per year over the next five years.
The miner will forfeit its 51 per cent stake in the venture if it fails to invest the required $20 million.
As part of the joint venture, Perth-based IMX will place 26.1 million shares – or 15 per cent of its issued capital – to OZ at a price of 38.5 cents per share, for a total of $10 million.
In a statement to the Australian Securities Exchange (ASX), OZ said IMX's Mt Woods tenements were largely contiguous with its own, including its Prominent Hill mine.
"OZ Minerals considers the area surrounding the Prominent Hill copper-gold mine to be prospective for the discovery of similar types of deposits and as such, the tenements surrounding Prominent Hill are a high exploration priority," the company said.
The placement price represents a 25 per cent premium to the 30-day volume-weighted average price of IMX shares.
Under the deal, IMX retains the rights to any iron ore discoveries.
"The joint venture will allow exploration on the IMX tenements to be expedited, for the benefit of both OZ Minerals and IMX shareholders," Mr Burgess said.
"The proximity of the tenements to the existing Prominent Hill mine infrastructure greatly enhances the chance of an economic discovery."
IMX Managing Director, Duncan McBain, said IMX saw the proposed copper-gold Joint Venture as "a win-win situation that will result in a greatly increased level of exploration expenditure for copper-gold targets during the next five years."
"With IMX retaining the rights where iron ore is the dominant economic mineral, it means we are able to continue to expand our iron ore strategy in the Cairn Hill/Mt Woods area," Mr McBain said.
OZ Minerals executive general manager – projects and technical services, John Nitschke, will join the board of IMX following the agreement.
Mr Burgess also said that the Prominent Hill mine had exceeded nameplate capacity, and had already exceeded the lower level of gold and copper guidance that the company had set at the beginning of the project.
He said the company was confident in achieving its the cost guidance for the project despite the weakening US dollar.
OZ Minerals rose 3.38 per cent to $1.22, alongside a 2.82 per cent rise in the benchmark index.

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Dasa, agree with your comments.
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