OZ shares tumble as lower yields at copper mine continue

The light at the end of the tunnel just moved further away for OZ Minerals shareholders, after the copper and gold miner revealed its difficult year would become a difficult 18 months.

OZ had always warned that 2013 would be typified by lower yields as it chewed through lower-grade ores at Prominent Hill in a bid to access more favourable ground below.

But the struggling miner revealed on Wednesday that more optimisation work was required, and shareholders would not start to see the benefits of that work until the latter months of 2014.

Production guidance for 2014 will now be little better than 2013, with no more than 80,000 tonnes of copper and 140,000 ounces of gold to be delivered.

JPMorgan had expected 2014 copper guidance to be closer to 90,000 tonnes in October.

"Obviously it's not as high as the market had expected, but it is higher than in 2013 and there's more confidence in those numbers," said OZ managing director Terry Burgess.

The news came on the same day that OZ updated the market on the geological composition of the Prominent Hill precinct, which - due partly to higher standards being enforced under new reporting guidelines - saw the company's official resource size decline by 26 per cent.

The combination of information sent OZ shares tumbling by more than 30 per cent in early trading, but the losses were contained to 15 per cent by the close as the market digested the quirks of the new reporting code.

The 44¢ decline to $2.65 means OZ is fetching its lowest price since July 2002 and is rapidly losing ground to rival ASX-listed copper miners PanAust and Sandfire Resources.

Both rivals now have bigger market capitalisations, and the Sandfire comparison is particularly galling for OZ, given it was touted as a probable acquirer of Sandfire when it purchased 19 per cent of the company three years ago.

OZ was close to 11 times bigger than Sandfire back then, but now has a market capitalisation that is about $100 million smaller than the West Australian upstart.

On the positive side, new underground developments at Prominent Hill mean the precinct could continue producing beyond 2022, rather than 2018 as previously believed.