OZ Minerals shares hit by falling copper output
OZ Minerals shares fell nearly 10 per cent on Monday after the copper and gold miner revealed it would miss its full-year copper production forecast for the second time this year.
In a set of September-quarter results that stunned the investment community, OZ said copper grades in an area of its Prominent Hill mine had been as much as 50 per cent below expectations.
OZ had long warned that 2013 would be a difficult year as large amounts of waste material were moved out of the Prominent Hill mine in a bid to allow access to better grades of copper in years ahead.
Part of that process has seen OZ mine through areas on the periphery of Prominent Hill that have not been extensively drilled, and it appears that lack of solid information led OZ to overestimate the amount of copper that could be extracted.
The low grades in that area ensured copper production for the September quarter was almost 20 per cent lower than forecast by analysts at Credit Suisse, and forced OZ to rush its results out several days early.
Wilson HTM analyst Cameron Judd said the results were very disappointing. "The grade coming in 30 to 50 per cent below what they were expecting, and what the reserve model suggested for that region, was quite staggering," he said. "I think that was where a lot of people were disappointed."
OZ originally promised to produce as much as 95,000 tonnes of copper in 2013, but downgraded that to a maximum of 88,000 tonnes in April.
On Monday, OZ managing director Terry Burgess said those forecasts would be lowered again, with full-year copper guidance now expected to be in a range between 70,000 tonnes and 78,000 tonnes.
"I cannot pretend I'm not very disappointed to report this guidance to you," he said.
Mr Burgess said the waste removal process at Prominent Hill would continue into the early stages of 2014, but overall strip ratios would be only half as bad in 2014 and then gradually improve.