Cashed-up OZ takes $100m stake in copper, gold miner

The $100 million acquisition (at an average of $3.87 a share) makes OZ the biggest shareholder in Sandfire ahead of South Korean steel giant Posco with its 17 per cent interest a stake it acquired for Sandfire's manganese and iron ore interests.

The acquisition is the first to take advantage of the Gillard government's removal of copper and gold from its proposed resource rent tax.

The first resource estimate for Doolgunna was announced in February and came in at an estimated 372,000 tonnes of copper, 439,000 ounces of gold and 3.4 million ounces of silver. Drilling continues in surrounding tenements and prospects are rated highly.

OZ has more than $1 billion in cash and has been on the lookout for project and development opportunities since being forced last year to sell most of its mines in a drastic refinancing brought on by the global financial crisis.

OZ was able to hang on to its new $1.1 billion Prominent Hill copper and gold mine in South Australia's outback. Most of its other mining assets were picked up by China's Minmetals.

OZ managing director Terry Burgess said yesterday that while the Doolgunna project was still at a relatively early stage, OZ had been impressed by the work undertaken by the Sandfire team. "We hope to be able to work constructively with them in maximising the full value of this asset," he said.

Sandfire managing director Karl Simich was equally effusive about the group's new shareholder.

Mr Simich said the OZ entry to the share register was a vote of confidence in the group's project and its explorations.

Analysts suggest that should Doolgunna eventually prove to contain more than 500,000 tonnes of copper, OZ Minerals would probably be looking to take the company over ahead of the project being developed.

Sandfire was a $415 million company at yesterday's closing price of $3.22 a share a 17 per cent discount to OZ's acquisition price.