The share price of OZ Minerals Limited (ASX: OZL) is leading the miners higher today after the copper miner posted a better-than-expected quarterly production report. The stock surged 3% higher to $9.27 in afternoon trade when sector leaders like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are lagging with a 0.4% and 1.5% gain, respectively. Today belongs to the second-tier mineral producers. Shares in Sandfire Resources NL (ASX: SFR) and South32 Ltd (ASX: S32) are only just trailing OZ Minerals with a 2% plus gain each, when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is up 0.4%. What…
The share price of OZ Minerals Limited (ASX: OZL) is leading the miners higher today after the copper miner posted a better-than-expected quarterly production report.
Today belongs to the second-tier mineral producers. Shares in Sandfire Resources NL (ASX: SFR) and South32 Ltd (ASX: S32) are only just trailing OZ Minerals with a 2% plus gain each, when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) is up 0.4%.
What the latest batch of quarterly production reports show is that miners are cementing their pole position ahead of the August reporting season at a time when the profit outlook on other sectors like banking and industrials is wobbling.
Coming back to OZ Minerals, it’s hard to find anything not to like. The miner has delivered at or above most of its targets in the June quarter and is likely to either exceed or hit the top end of its 2018 full year copper production target of 100,000 to 110,000 tonnes.
Total copper production for the first half of 2018 (its financial year ends in December) hit 54,957 tonnes. While the June quarter figure was a little lower than the same time last year, the 1H18 total is running slightly ahead of 1H17 when OZ Minerals produced 53,242 tonnes.
It was essentially the same picture for gold production with the miner producing 58,994 ounces of the precious metal in 1H18, which was a touch ahead of what it produced this time last year.
What is perhaps more significant is the big drop in C1 cash cost in the latest quarter to US72 cents a pound, down from US97 cents in the March quarter this year and US81 cents a year ago.
It will be interesting to see if C1 costs (which is the net direct cost of mining and processing the mineral) will creep up from here as management has not changed its 2018 guidance of between US75 cents and US85 cents a pound.
But given that the Australian dollar is on a downtrend and OZ Mineral’s flagship mine, Prominent Hill, is based in Australia, the exchange rate should help keep costs at the lower end of the guidance range.
“Prominent Hill saw solid, consistent production that is tracking to guidance. With the drawdown of the open pit stockpile now in place for a full quarter, AISC [all-in sustaining costs] and C1 costs are lower with no further open pit mining costs or related overheads to be incurred,” said the miner.
While Prominent Hill is OZ Minerals’ only operating mine, it’s on track to develop its Carrapateena and West Mulgrave projects.
It is also in the process of compulsorily acquiring fellow copper miner AVANCO RESOURCES ORD, which has tenements in the Carajas Province in Brazil, which will give OZ Minerals a second operating mine.
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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 Scott Phillips.