It must be a tough time being the chairman of a miner, especially when your stock has plunged 41 per cent in the year to date.
That’s what has happened to the shares this year of copper and gold miner OZ Minerals, whose chairman is Neil Hamilton. As recently as May 16, OZ Minerals shares hit a 52-week low of $3.82 compared with a 52-week high on June 7 last year of $9.02.
At 1458 AEST OZ Minerals shares were down 2.5 cents, or 0.63 per cent, to $3.90 against a benchmark S&P/ASX200 Index rise of 0.27 per cent.
“Like so many directors and executives of resource companies all over the world I am often asked whether we believe our share price represents fair value,” Hamilton said in a speech to shareholders today. “It will probably come as no surprise to any of you for me to say that none of the directors believe the present market price fully takes into regard our true position and the aggregate value of principal assets.
“We have not been immune to the negative sentiment in the broader market to resource stock which has seen many companies’ share prices fall well below the fundamental value of their assets,” adds Hamilton.
OZ Minerals is trading at a price-to-book of 0.43, according to Bloomberg data.
The company’s major asset is its South Australia Prominent Hill mine that produced 101,737 tonnes of copper and 140,746 ounces of gold last year. But a movement of “soft overburden material” at Prominent Hill has forced the company to cut its forecast of copper production in 2013 to between 82,000-88,000 tonnes as it is mining lower grade copper ore and must mine denser material from deeper levels. Gold production this year is expected to be 130,000-150,000 ounces.
As production declines, OZ Minerals costs are increasing. In 2012 the company’s costs were 120 US cents per pound of copper. In 2013 it will increase to 165-180 US cents per pound of copper.