ozl

From the AFR today

Note that as recently as two weeks ago OZ seemed pretty committed to the decline, I wonder what may have occurred in the last two weeks that could make them reassess the decline commitment?

Note also they are tipped to be amongst those who would have bid on Rio’s asset in NSW earlier this month. They seem to be ready for an acquisition.



“Copper and gold miner OZ Minerals has been applauded by analysts for demonstrating prudence and deferring the construction of a $100 million exploration decline at its Carrapateena project in South Australia.

OZ told shareholders at its annual meeting in Melbourne on Tuesday that after receiving tenders from contractors that were significantly higher than expected, it had decided not to build the decline until a pre-feasibility study and further metallurgical testing was completed.

Wilson HTM analyst Cameron Judd recently highlighted his belief that in its current form, Carrapateena generated a sub-economic internal rate of return of 11 per cent. In a note on Tuesday, he said the decision to delay the exploration decline indicated that OZ had similar concerns around the project risk.

“This is evidence of prudent capital management and that the project will not be developed at any cost,” Judd said.

“Our preferred strategy is to continue regional exploration at Carrapateena, which has the potential to be more value-adding with less company risk.”

The decision to defer construction of the decline has also resulted in increased speculation that OZ is preserving capital for an acquisition, potentially Rio Tinto’s Northparkes copper-gold mine in NSW.

Deustche Bank analyst Brett McKay said he was surprised by the move, given the commitment to the decline project displayed by the company on a site visit to Carrapateena two weeks ago.

“We assume OZ ends 2013 with $288 million in cash so arguably some budget overruns for the decline could have been absorbed and would be small in the scheme of a $3 billion project,” he said.

“It therefore appears, in our opinion, that OZ is looking to preserve cash, possibly to assist with funding an acquisition.”

The company is viewed as a logical owner of Northparkes and is tipped to be among those that would have submitted an indicative bid for the mine earlier this month.”