Carrapateena deposit better than Oz expected

OZ MINERALS expects its Carrapateena deposit in outback South Australia to be more prospective than first thought, and will spend $110 million getting to know it better.

By InvestSMART · 26 Jul 2012

By InvestSMART ·
26 Jul 2012

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OZ MINERALS expects its Carrapateena deposit in outback South Australia to be more prospective than first thought, and will spend $110 million getting to know it better.

The company announced it would build a 625-metre decline tunnel at Carrapateena in a bid to aid exploration on site and perhaps shape the eventual mining operation.

Oz bought Carrapateena about 15 months ago from Australian prospector Rudy Gomez, and chief executive Terry Burgess said the asset was continuing to justify its purchase.

"Without over-exaggerating the upside of Carrapateena, we are seeing extension beyond the resource we came out with previously," he said.

The news was less positive at Oz's existing mine Prominent Hill, where costs have blown out 18 per cent over the past three months.

Mr Burgess said some of that blow-out had been expected, given the company had transported a large number of trucks and digging machines to the site to remove waste ore.

Mr Burgess said such high costs were not expected to persist once waste stripping was completed.

"Once we've gone through this waste-stripping period by 2014, we will start getting rid of trucks and excavators and all that waste-stripping will be done, and we will be producing copper without much stripping required and the costs will go down," he said.

Oz has not ruled out more share buybacks to appease shareholders, who yesterday watched their stocks fall 10? to $7.43.

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Frequently Asked Questions about this Article…

What did Oz Minerals say about the prospectivity of the Carrapateena deposit?

Oz Minerals said the Carrapateena deposit in outback South Australia looks more prospective than first thought, with exploration showing extensions beyond the resource they initially identified and continuing to justify the company’s purchase.

How much will Oz Minerals spend to learn more about the Carrapateena deposit?

Oz Minerals plans to spend $110 million to get to know the Carrapateena deposit better, funding work to better define the resource and support future mine planning.

What is the purpose of the 625‑metre decline tunnel at Carrapateena?

The company will build a 625‑metre decline tunnel at Carrapateena to aid on‑site exploration and potentially help shape the eventual mining operation by providing underground access for drilling and assessment.

When and from whom did Oz Minerals acquire Carrapateena?

Oz Minerals bought Carrapateena about 15 months before the report from Australian prospector Rudy Gomez.

Why have costs at Oz Minerals’ Prominent Hill mine increased recently?

Costs at Prominent Hill rose about 18% over the past three months largely because the company moved a large number of trucks and excavators to the site to remove waste ore — a temporary waste‑stripping activity that boosted short‑term costs.

Will the high costs at Prominent Hill continue, and when should investors expect them to fall?

Management says the high costs are not expected to persist; once the current waste‑stripping period is complete (they expect this process to be finished by 2014), the company plans to remove many trucks and excavators and costs should come down as production requires less stripping.

Is Oz Minerals considering more share buybacks to support shareholders?

The company has not ruled out further share buybacks as a way to appease shareholders, according to the report.

How did the market react to Oz Minerals’ update and what happened to the share price?

Investors reacted negatively to the update: Oz Minerals’ shares fell about 10% to $7.43 following the news.