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Why the Oz Minerals (ASX:OZL) share price will be on watch today

close up of man's eye looking through magnifying glass representing asx 200 share price on watch
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The Oz Minerals Limited (ASX: OZL) share price will be on watch this morning following the company’s update late yesterday on the transition of its underground mining services. After yesterday’s market close, the Oz Minerals share price finished the day down 0.6% to $19.98.

What did Oz Minerals announce?

The Oz Minerals share price will be in focus after the company advised it has signed an agreement for Byrnecut Australia to deliver underground mining services at the Carrapateena mine.

According to the release, Byrnecut will take over from integrated service provider Downer EDI Limited (ASX: DOW) which originally held the mining contract.

Byrnecut, established in 1987, is an international, mechanised, underground mining contractor. The company specialises in a range of mining services such as shaft sinking, shotcreting, raise-drilling, equipment rebuilds, maintenance engineering, labour hire, and consultancy services. Recently Byrnecut had its Prominent Hill contract renewed, under which it has been running underground mining services for the last 10 years.

The reason behind the change of contractors is due to Downer’s strategic direction to divest its mining services.

Downer CEO Mr Grant Fenn commented on the exit strategy for its capital-intensive mining businesses. He said:

Downer’s exit from underground mining follows the sale of Open Cut Mining West, Downer Blasting Services, the Snowden consulting business and our share in the RTL Mining and Earthworks joint venture.

Terms of the deal

Under the new contact, Byrnecut will begin a seven-week mobilisation of personnel and equipment to the site. It is expected the company will be up and running from 4 March 2021.

The agreement will generate around $130 million in revenue per year over a 5-year term for Byrnecut.

Oz Minerals stated that all three companies will work together to ensure a smooth transition of services. This includes transferring of equipment and maintaining operational performance, as well as providing roles for the majority of Downer’s existing workforce at the site.

Oz Minerals share price snapshot

Oz Minerals is a copper-focused mining company based in South Australia. It has been listed on the ASX since 1970. The Oz Minerals share price is up over 84% when compared to this time last year. The company’s shares hit a low of $5.83 in March following COVID-19 worries, but have stormed higher ever since.

Just two weeks ago, the Oz Minerals share price reached a decade-high of $21.23, reflecting positive investor sentiment. The company has a current market capitalisation of around $6.7 billion.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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