Investors turn on board as OZ Minerals shares tumble
The copper miner's board was greeted by hostile investor questions in relation to the plunging values of their shareholdings, including a near halving in just over three months.
Sentiment around OZ Minerals has been buffeted by a weak copper price and rising mining costs that left the company barely breaking even in the March quarter, with a weaker production outlook for the year.
There is also uncertainty about where the company's future production is coming from, although OZ Minerals says it is confident of extending the life of its Prominent Hill mine to 2030.
"Like most resource companies we are trading at a very significant discount to our fundamental value - be that our NTA (net tangible assets) or any net present value calculation," Neil Hamilton, the company's chairman, said at the general meeting in Melbourne.
"I can't tell you why such a discount is justified. It is industry-wide ... perhaps the discount is greater because of where we find ourselves in this life-of-mine program and because we are going through this period of tough cashflow."
The company's shares closed 14¢, or 3.5 per cent, down at $3.86. That is the lowest since the financial crisis, when OZ Minerals was a far bigger beast with many mines that it was forced to offload in a fire sale to pay off debt.
One angry investor at the meeting pointed out the company had thrown away money by buying back $200 million in shares at $10.51 and $9.18 each over the past two years.
"There was no tangible benefit to the average shareholder from those buybacks ... for the same $100 million per year, the dividend could have been increased by 30 per cent," the shareholder said.
OZ Mineral's Carrapateena copper-gold project in South Australia is highly regarded but no decision to mine has been made. It could cost up to $3 billion to develop.
More doubt about Carrapateena was created when Mr Hamilton said the board had decided to delay building an exploration decline until testing had been completed.
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OZ Minerals' share price fell after a mix of weaker copper prices, rising mining costs and a softer production outlook left the company barely breaking even in the March quarter. Those factors dented investor sentiment and helped drive the near-halving in the share price over just over three months.
The company’s chairman said the near-record low share price does not change OZ Minerals' underlying value. He argued the stock is trading at a significant discount to its fundamental measures (NTA or net present value) and that the discount appears to be industry-wide and tied to the company’s current life-of-mine position and cashflow pressures.
Neil Hamilton told shareholders the company is trading at a "very significant discount" to its fundamental value and that he could not explain why the discount is justified. He suggested the larger discount may reflect where OZ Minerals sits in its life-of-mine program and the period of tough cashflow the business is going through.
The shares closed down 14 cents, or 3.5%, at $3.86 — the lowest level since the financial crisis. The article also noted the stock had fallen by nearly half in just over three months, prompting hostile questions from investors.
An angry investor criticized the company for buying back $200 million of shares at prices of $10.51 and $9.18 over the past two years, saying those buybacks delivered no tangible benefit to the average shareholder. The investor argued the same $100 million per year could have funded a roughly 30% higher dividend instead.
OZ Minerals said it is confident it can extend the life of its Prominent Hill mine to 2030, though overall sentiment has been affected by production and cost pressures across the business.
Carrapateena in South Australia is described as a highly regarded copper-gold project, but the company has not made a decision to mine it. Development could cost up to $3 billion, and the board has delayed building an exploration decline until testing is completed.
A weaker production outlook for the year, combined with rising mining costs, left OZ Minerals barely breaking even in the March quarter. That tough cashflow environment has contributed to negative investor sentiment and the share price discount the company is experiencing.
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