I think a number of people need to step back and take a look at what Oz have achieved. Ramp up is successful and is now operating at a very low cost. I can only imagine the cries if Oz was producing at cash cost over $1 per pound!
I think there has been a very significant push in both exploration around PH and resource definition. Going from the presentation there is a large number of areas to be drilled this year with the aim of infill drilling and moving further resources to reserves.
Another point I think a lot of people are missing is with the apparent short mine life. This is the life of the open pit which only represents a small fraction of the overall resources. A move to underground is necessary due to the small footprint of the deposit and the fact that it continues at depth rather than lateral extent.
From reading the reports this resource is still not closed off, once starting underground operations start further underground drilling will give them an extra few hundred meters of depth reducing drilling overheads.
I must admit that from past performance the company faces some significant challenges. Going forward it will take continued production whilst maintaining cash costs to see runs put back on the board. BUT the company is significantly cashed up and is operating at nameplate production at a very low cost.
What I do like about the deposit is that the zones such as western copper extending from the main pit are in very close proximity, this means less cost for a decline to be sunk as the decline will be pushed through mineralised zones. This will help enormously when moving to u/ground.
Lastly those exploration drilling results are great IMO, some large intercepts of low grade mineralisation. Now that is certainly not the grade that we want BUT it gives a very good indication that there are more mineralised systems in the exploration areas. I would be concerned if those holes came back completely barren. Interesting that the Triton hole came back with low mineralisation and presented as such a small IP target on the geophys. From the looks of the survey still numerous targets to be drilled.
IMO Oz are cheap due to poor historical performance BUT with continued sound production and good change mgt will start to be rerated in value.
OZL Price at posting:
$11.45 Sentiment: LT Buy Disclosure: Held
