Oz Minerals share price holds tight as profits plummet 60%

Several factors put a dent in the mining company's first half profits.

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Key points

  • The Oz Minerals share price is 0.3% higher to $26.28 on Friday 
  • Profits fell off a cliff as disruptions and inflation took their toll during the half 
  • Costs are forecast to moderate in the second half 

The Oz Minerals Limited (ASX: OZL) share price is remaining steady after the release of a half-year result lacking growth.

At the time of writing, shares in the copper and gold miner are trading 0.3% higher to $26.28.

What is the Oz Minerals share price reacting to?

What happened during the half?

Despite the relative strength of commodities in recent times, Oz Minerals made no secret that the latest half was a challenging period. Yet, investors seem to not be too worried as the Oz Minerals share price inches ahead.

According to the report, a confluence of factors combined during the six-month window. The effects led to a weaker result than was hoped in the first half. These headwinds included inflationary costs, adverse weather, and COVID-19 absenteeism.

In terms of operational developments, the Pedra Branca copper-gold mine at Carajás East in Northern Brazil reached full production in June. The mining hub produced 4,887 tonnes of copper and 3,657 ounces of gold throughout the half.

Additionally, progress was made in the Carrapateenna Province. While the focus was on cave expansion, management is expecting to soon flip the switch to focus on maximising ore production in the second half.

Notably, the team achieved a milestone of 100,000 tonnes of copper produced in April alone at Carrapateena. This could be feeding into the relative optimism around the Oz Minerals share price today.

What did management say?

In the face of a disappointing result, Oz Minerals chief executive Andrew Cole provided some uplifting commentary. Regarding the positive takeaways, Cole said:

The quality and high margin nature of our assets provided a healthy operating margin of 40% and robust operating cash flow during the half. We continue to invest in and advance our unique organic growth pipeline to take full advantage of the growing long-term demand for copper and nickel, driven by global electrification and accelerated decarbonisation.

Furthermore, shareholders might find solace in the fact that Oz Minerals will still pay a dividend. However, the interim payment of 8 cents per share fully franked is half of what was dished out a year ago.

What's next?

A major component of mining profits comes down to the costs associated with receiving the ore. This might explain why shareholders are more forgiving of the Oz Minerals share price today. Importantly, management expects AISC to moderate, reaching a range of US$1.60 to US$1.80 per pound.

Additionally, copper production is expected to be between 120,000 to 135,000 tonnes. While gold production is slated to come in at between 208,000 to 230,000 ounces.

Interestingly, no mention was made of the recent takeover bid lobbed its way from BHP Group Ltd (ASX: BHP).

Oz Minerals share price snapshot

The Oz Minerals share price has been an outperformer of the S&P/ASX 200 Index (ASX: XJO) over the past 12 months. However, that probably wouldn't be the case if not for the recent BHP bid.

Prior to the $25 per share offer, Oz Minerals shares were down 18% from a year ago

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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