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Why OZ Minerals Limited is picking a fight with heavyweight BHP Billiton Limited

Shares in copper miner OZ Minerals Limited  (ASX: OZL) opened down 1.2% to $9.05 at the time of writing after the company announced plans to develop an on-site power plant and 270km transmission line to power its Prominent Hill and Carrapateena copper-gold mines in South Australia.

The power plant plan comes after BHP Billiton Limited (ASX: BHP) announced it would block Oz Minerals from access to its infrastructure from August 31, 2020. The new line is rumoured to cost $1 million per kilometre and will likely run in parallel to BHP’s.

Shrugging off Oz Minerals will allow BHP to focus on its long-term power strategy for Olympic Dam.

Operating expenditure costs will increase for Oz Minerals as the power strategy is put into play, but a note out of Deutsche Bank has labelled the construction a “positive development” with Oz Minerals “working with a number of potential energy developers” to put the strategy into play.

Shares in OZ Minerals have delivered a volatile 12-months and it remains to be seen how investors will view the power development, although Oz Minerals has said the execution is unlikely to materially impact the economics of Prominent Hill.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. 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 Scott Phillips.

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