Oz Minerals lowers production targets

25th July 2022 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – Copper/gold miner Oz Minerals has adjusted its full year copper production expectations to account for a softer start to the year.

Copper production expectations have been lowered from the previous estimate of between 127 000 t and 149 000 t, to between 120 000 t and 135 000 t, reflecting the impact of wet weather conditions and Covid-related absenteeism on operations during the second quarter ended June, as well as materials handling system belt damage at the Carrapateena operation.

In the June quarter, copper production reached 27 423 t, down from the 30 322 t delivered in the previous quarter, while gold production increased from 48 773 oz to 51 184 oz in the same period.

For the full year, Oz Minerals’ gold production target has remained unchanged at between 208 000 oz and 230 000 oz.

“The second quarter was affected by factors including ongoing Covid absenteeism, supply chain disruption and inflationary pressure which resulted in an update in June to our group copper production and cost guidance for 2022,” said MD and CEO Andrew Cole on Monday.

“However, Carajás East Hub is on track to produce at the higher end of its guided production range and we expanded our organic growth pipeline by entering into a conditional term sheet with Havilah Resources for the grant of an option to purchase the Kalkaroo copper project in South Australia after a study phase.

“Our financial position remains strong with A$82-million net cash balance at the end of the quarter and we increased our corporate debt facility limit, early in the quarter, from A$480-million to A$700-million for an extended five-year term. Combined, they provide substantial working capital liquidity and a solid foundation for investment in our brownfield expansion projects at Carrapateena and Prominent Hill. First half revenue was A$909-million,” said Cole.

He noted that the second quarter saw a continuation of Covid-related workforce and supply challenges at the company’s South Australian assets. The quarter was also adversely impacted by further conveyor belt issues on the materials handling system at Carrapateena, which saw the reduction of circa 4 300 t of copper metal produced. The materials handling system returned to operating at full capacity during the quarter and has continued to operate without issue.

The installation of additional semi-continuous condition monitoring of the conveyor and an alternate splicing method also provided confidence in minimising further unplanned conveyor interruptions, said Cole.

“Pleasingly, ramp-up of underground ore movement at Pedra Branca was completed during the quarter ahead of schedule, and the Carajás East is on track to produce at the higher end of its unchanged guided range providing further confidence around our optionality to progress further low-cost expansion options in Brazil.”

Meanwhile, group unit costs were increased in the June guidance update, impacted by lower production at the Australian assets and industry inflation of circa 8% across all assets.

All-in sustaining costs are expected to reach between 160c/lb and 180c/lb, while C1 cash costs are targeted at between 105c/lb and 120c/lb, compared with the previous all-in sustaining cost target of between 135c/lb and 155c/lb, and the C1 cash cost target of between 85c/lb and 95c/lb.

“A stronger operational performance is expected over the second half of the year at our Australian assets with remediation plans being actioned. However, new Covid variants and increasing infection rates across the community more broadly continue to pose a risk to operational productivity and guidance. The assets continue to actively manage resources to maintain safe and productive operations and to minimise disruption,” said Cole.

“Looking ahead, at Prominent Hill, work continues to advance future growth opportunities including increasing mining rates to fully utilise the increased capacity of the hoisting shaft from 6-million tonnes a year to 6.5-million tonnes a year. We also continue to assess the potential to access the near-surface targets at Walawuru and Papa via a trucking operation, in addition to the current trucking operation and future shaft operation.

“Study work has advanced and as we continue to understand the full potential of this opportunity we now expect to provide an update in the third quarter of 2022, earlier than originally planned.

“At Carrapateena, cave management remains the priority with the cave developing towards breakthrough to the surface. The tailings storage facility main embankment lift was completed ahead of schedule and under budget and the liner installation is on track for completion in the fourth quarter.”

Cole noted that the West Musgrave study progressed well during the quarter with the mining lease granted, and that extensive engagement with the Ngaanyatjara Community continued during the quarter and positive progress was made towards completion of the mining agreement.

The company is assessing the impact of cost inflation and the operational environment on project cost and schedule ahead of a final investment decision.

“We continue to explore the province potential of West Musgrave with the assessment of the Succoth copper deposit where drilling was completed in June. We now expect to release a Succoth mineral resource and life of province study in the first half of 2023 due to delays with core processing and laboratory results.

“The accelerated programme to deliver a prefeasibility study for Santa Lúcia, a potential additional satellite mine in the Carajás East Hub, in the fourth quarter of 2022 is progressing well with encouraging results from the drilling completed to date.

“While the copper price has weakened recently, the medium to long-term outlook remains strong for minerals linked to the renewable energy industry, like copper and nickel. Our focus for 2022 remains on safely delivering our operational targets, advancing our current growth projects and adding new growth options to the portfolio while we continue to strengthen our unique company culture, placing us in a positive position against forecast demand trends,” said Cole.