Dwindling cash pile a burden for OZ Minerals
But it wasn't supposed to be this tough. The copper and goldminer revealed an underlying loss of $36.1 million for the first half, which became a net loss of $268 million once an asset write-down was thrown in.
Long-held plans to mine waste loads out of its ageing Prominent Hill precinct were always going to weigh on the bottom line, but a wall collapse and a sharp fall in metal prices helped force the company into the red.
The $231.9 million of write-downs were spread across property and equipment at Prominent Hill, as well as some low-grade gold stockpiles. The result is a stark contrast to 2012, when the company reported a half-year net profit of $119 million, which became a full-year profit of $152 million.
OZ sought to comfort shareholders with a 10¢ dividend, but strong selling still pushed the stock down more than 4 per cent.
Investors may have been concerned to see the company's cash pile standing at just $432.9 million; a far cry from the billion-dollar war chest of several years ago that was supposed to be quarantined for a major acquisition.
While some incoming payments mean the true state of the cash pile is closer to $550 million, UBS analyst Jo Battershill said some investors might have been spooked to see the cash balance so low.
"The reason people bought this stock historically was because it had a significant cash balance - close to a billion dollars - and was going to do transformational deals. But over the course of the two years we've just seen the cash balance get smaller and smaller, so I think there is a bit of realisation there as well," he said.
OZ chief executive Terry Burgess urged investors to keep the faith because much of the hard work was now complete.
"The outlook from here on is an improving one, we see ourselves at a turning point," he said.
Frequently Asked Questions about this Article…
OZ Minerals reported an underlying loss of $36.1 million for the first half of 2013 and a net loss of $268 million after $231.9 million of write‑downs. The result was driven by costs tied to mining waste at the ageing Prominent Hill precinct, a wall collapse and a sharp fall in metal prices.
The $231.9 million of write‑downs were related to property and equipment at the Prominent Hill operation and some low‑grade gold stockpiles, reflecting the impact of ageing assets, operational issues and weaker metal prices.
The 2013 half‑year loss contrasts sharply with 2012, when OZ Minerals reported a half‑year net profit of $119 million and finished the full 2012 year with a $152 million profit.
The company reported cash on hand of $432.9 million, and the article notes that with some incoming payments the true cash position is closer to $550 million. UBS analyst Jo Battershill said some investors may be spooked by the shrinking cash balance, since the stock was historically bought for its near‑billion dollar war chest earmarked for transformational deals.
Yes. OZ Minerals declared a 10¢ dividend, but strong selling still pushed the stock down by more than 4% following the results.
UBS analyst Jo Battershill pointed out that investors bought OZ Minerals historically because it had a significant cash balance close to a billion dollars for big deals. Over the prior two years the cash balance had been getting smaller, and that reduction likely caused some investor realisation and concern.
A sharp fall in metal prices was cited as one of the factors that helped push OZ Minerals into the red, exacerbating the impact of operational issues and contributing to the need for asset write‑downs.
CEO Terry Burgess urged investors to keep the faith, saying much of the hard work was now complete and that the outlook is improving. He described the company as being at a 'turning point.'
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