MENU

The Writedowns of OZ

Gold and copper miner OZ Minerals (ASX: OZL) has today disappointed the market with a $268 million loss for its financial first half, largely on the back of a $232m writedown.

The company has given a positive outlook, with the Prominent Hill mine ready to recommence full production after repairs were conducted to fix damage caused by a slip. Cash flow is expected to be “significant” from that mine, but OZ will still need a significantly higher gold and copper price to allow it to return to profitability over the medium and long term.

OZ Minerals is just the most recent mining company to take writedowns, on the back of impairments from BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) earlier this year and Newcrest (ASX: NCM) and Silver Lake (ASX: SLR) more recently.

Foolish takeaway

While it’s true that “the plural of anecdote isn’t ‘trend’”, investors should rightly be concerned about the billions of dollars that were wasted by mining company directors and executives chasing overpriced acquisitions in the past.

On the evidence, investors should be very scared any time a miner gets the chequebook out.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool advisor Scott Phillips doesn’t own shares in any company mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.