Bumper prices a goldmine for OZ

BUMPER copper and gold prices enabled OZ Minerals to achieve record operating cash flow of $388.3 million in the June half.

By InvestSMART · 17 Aug 2011

By InvestSMART ·
17 Aug 2011

Comments

BUMPER copper and gold prices enabled OZ Minerals to achieve record operating cash flow of $388.3 million in the June half.

But a previously announced litigation settlement, foreign exchange losses and a write-down of its investment in a uranium explorer combined to reduce reported profit to $113.9 million, from $405.7 million previously.

A better indication of the continuing profit performance from the group's Prominent Hill copper/gold mine in South Australia was the $189.1 million "underlying" profit reported by the company.

That was down from $230.5 million previously, and was below market expectations, due to increased costs at the mine, with higher volumes of lower-grade material treated.

A 30?-a-share (unfranked) dividend is to be paid on September 16 after books close on August 29. The payment will absorb $97.2 million. OZ remains on the hunt for an acquisition to increase its mining portfolio. It is well funded for a move, with $750 million earmarked for an acquisition from the group's cash balance at June 30 of $905.6 million.

In addition, the company yesterday revealed it had secured a $200 million bank debt facility to give it greater flexibility when considering "internal and external growth opportunities".

OZ managing-director Terry Burgess said shareholders "remained pretty happy" about the level of cash it had ahead of surplus cash being committed to an acquisition.

"As from tomorrow we can activate our ($200 million) buyback, which can take off some of the excess cash," he said. "I don't get the impression from our shareholders that they want us to rush into something that doesn't make sense. What they want us to do is to find the right transaction and if it adds value for shareholders, then proceed on that."

Mr Burgess confirmed that a decision on whether OZ would sell its Cambodian gold interests would be made by the end of the year.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What caused OZ Minerals to record strong operating cash flow in the June half?

Bumper copper and gold prices drove OZ Minerals’ record operating cash flow of $388.3 million in the June half, boosting the company’s cash generation from its mining operations.

Why did OZ Minerals’ reported profit fall despite strong cash flow?

Reported profit was reduced to $113.9 million (from $405.7 million) after a previously announced litigation settlement, foreign exchange losses and a write-down of its investment in a uranium explorer offset the strong operating cash flow.

What was OZ Minerals’ underlying profit and why did it decline?

OZ Minerals reported an underlying profit of $189.1 million, down from $230.5 million. Management said the decline was driven by increased costs at the Prominent Hill copper/gold mine, where higher volumes of lower‑grade material were treated.

Is OZ Minerals paying a dividend and what are the key dividend dates?

Yes. OZ Minerals declared a 30¢-a-share (unfranked) dividend to be paid on September 16, with the record/book close date on August 29. The dividend payment will absorb about $97.2 million.

How is OZ Minerals positioning itself for growth and acquisitions?

OZ Minerals is actively seeking acquisitions to expand its mining portfolio. It has earmarked $750 million for an acquisition from a cash balance of $905.6 million at June 30, and it has also secured a $200 million bank debt facility to give greater flexibility for internal and external growth opportunities.

Has OZ Minerals announced a share buyback program?

Management said the company can activate a $200 million buyback, which would help remove some excess cash if the board decides not to commit surplus funds to an acquisition.

What did OZ Minerals’ managing director say about shareholder expectations?

Managing director Terry Burgess said shareholders were generally happy with the company’s cash position and do not want OZ Minerals to rush into an acquisition that doesn't make sense. The priority is finding the right transaction that adds value for shareholders.

What is the status of OZ Minerals’ Cambodian gold interests?

OZ Minerals confirmed that a decision on whether to sell its Cambodian gold interests will be made by the end of the year.