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Why this miner is defying today’s sharp sell-off in the sector to hit a 10-month high

Resource stocks are dragging the market lower as commodity prices surrendered some of their recent gains in overnight trade, but there’s one major miner that is bucking the downtrend as it races to a 10-month high.

The miner is copper and gold producer OZ Minerals Limited (ASX: OZL), which is up 2.2% to $9.28 in morning trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is 0.5% in the red – no thanks to mining giants BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), which have tumbled by nearly 3% each.

 

Source: NAB Trade

But investors are snapping up shares in OZ Minerals after its bullish production report. The miner has produced 112,008 tonnes of copper and 126,713 ounces of gold in 2017. This is the top end of the miner’s copper forecast with gold production coming in slightly ahead of its guidance of 115,000 to 125,000 ounces.

Just as significant is its production costs. OZ Mineral’s C1 cash cost for the year was US83 cents a pound versus management guidance of between US85 cents to US95 cents.

The big rally in the miner’s share price today is more than justified as the stock has been lagging the sector. OZ Minerals is barely keeping its head above breakeven on a one-year performance basis when South32 Ltd (ASX: S32) has surged over 40% and BHP is up over 15%.

This was one of my three predictions for the mining sector for 2018 and I am expecting OZ Minerals to make further gains as I am bullish on the outlook for copper while I think gold will be well supported on dips.

The miner also upgraded its copper production guidance by over 15,000 tonnes for 2018 and 2019 and further extended the mine life of its flagship Prominent Hill mine to 2029 following an 18% growth in underground ore reserve.

OZ Minerals is pretty cashed up too with its cash holdings increasing to $729 million from $639 million and management reported that the construction of its Carrapateena project is on schedule and on budget. The miner is spending around $500 million on the project.

Resources isn’t the only sector that is well placed to do well this year. The experts at the Motley Fool are bullish on another sector that they believe will have a big impact on markets in 2018 and beyond.

Click on the link below to get your free report on the sector and to find out which stocks you should be watching in the year ahead.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Rio Tinto Ltd., and South32 Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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