The OZ Minerals Limited (ASX: OZL) share price outperformed this morning after it posted a 30% increase in net profit.
The Oz Minerals share price jumped 0.6% to a 13-year high of $21.75 when the S&P/ASX 200 Index (Index:^AXJO) struggled at breakeven at the time of writing.
The copper miner’s gains stand in contrast to the mining sector, which is trading in the red. The Sandfire Resources Ltd (ASX: SFR) share price lost 0.8% to $5.25 while the BHP Group Ltd (ASX: BHP) share price shed 0.5% to $48.35.
Oz Mineral’s reports higher profits and sales
Oz Minerals reported a $48.7 million increase in its FY20 underlying net profit to $212.6 million as group revenue improved 21.2% to $1.34 billion. The miner’s financial year is the same as the calendar year.
The miner’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) also jumped by 31.1% to $606.3 million.
Gold to take more credit than copper
It wasn’t so much copper that allowed management to deliver the improved result. It was gold.
Gold is a by-product of copper mining and is sold to recoup costs. The net Australian-dollar gold price rose by 20% during the year compared to an 11% increase in the copper price.
What’s more, Oz Minerals managed to sell more gold in 2020 than the year before, but the same can’t be said about copper.
“Copper sales were lower following the depletion of high-grade copper ore stockpiles and the prioritisation of processing high-grade gold stockpiles at Prominent Hill,” said the miner in its ASX statement.
“However, this was partially offset by the first year of production at Carrapateen.”
Copper could outdo gold in 2021
No doubt, it’s the gold credits that helped Oz Minerals achieve an enviable 45% operating margin and lifted operating cash flows by 8% to $550 million.
But copper may soon be playing catchup at a time when gold’s bull run seemed to have stalled. The analysts at Citigroup are forecasting copper to hit US$10,000 a tonne in 2021-22 as the world decarbonises.
The rise of electric vehicles and renewable energy sources require a lot of copper, according to the broker. Under its “bull case” scenario, copper could even hit US$12,000 a tonne compared to its current price of around US$8,400 a tonne.
Oz Minerals’ outlook
“2021 will be a year where OZ Minerals will move into our next phase of growth with major growth catalysts at all of our assets,” said the miner’s chief executive Andrew Cole.
“The focus will be on safe operational delivery, on starting early works on the Carrapateena block cave following Board approval, advancing the project studies at Prominent Hill, Carrapateena and West Musgrave, and developing out the Carajás Hub strategy in Brazil.
We’ll also be continuing our exploration activities where possible.”
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