OZ Minerals

[Daytr]

I used to deal with these guys, always found them very conservative & they used to frustrate me.
However they typically deliver albeit they have had the odd glitch.
One of the few independent good sized copper plays in Australia & reasonable gold production as well.
Debt free with I think $150M or so in the bank.
Standby debt facility of $200M.
Market cap around $900M.
Costs should have reduced as they are a fairly substantial diesel consumer.
Copper on the bounce by looks, gold soaring & Aussie behaving.
Picked some up Friday just above $3, should be a good start after both copper & gold are up Friday night.

[Daytr]

Flicked out at $3.40 and went short yesterday after down grade to world growth.
Not hugely bearish, I just think the hedgies are going to have another crack at copper to the downside.

[Daytr]

Much stronger quarterly than I anticipated.
Weakness in copper price being offset by stronger gold & lower Aussie.
Closed out my short for small loss & have gone long.
I do like the long term prospects of suite of projects for development.
Also like the relationship they have formed with the SA government.
SA when I was there were doing a huge push in the resources sector & wanted to take on Perth as a mining city.
Long time before they can claim that mantle but they are certainly supportive to the resources sector as a whole.

[macduffy]

Various brokers' comments on OZL. Generally positive.

http://sharecafe.com.au/sharecafe.asp?a=AV&ai=33291&symbol=OZL

[Daytr]

Yeah I think it is now getting a bit pricey here.
Obviously copper will dictate, but they also do have quite a gold & AUD kicker.
Not sure I'm that bullish on copper.
Not hugely bearish either mind you, but there has been a bit of production curtailed due to current prices that can be quickly turned back on.
BHP have highlighted they want to produce more copper.
Plenty of large projects on the radar.
Demand should continue to be strongish at least.
I suspect we may see lower CU prices yet before we get a recovery.
Sub $5k/ton quite possible and some are calling for $2/lb or $4500/ton.

[h2so4]

Yeah I think it is now getting a bit pricey here.
Obviously copper will dictate, but they also do have quite a gold & AUD kicker.
Not sure I'm that bullish on copper.
Not hugely bearish either mind you, but there has been a bit of production curtailed due to current prices that can be quickly turned back on.
BHP have highlighted they want to produce more copper.
Plenty of large projects on the radar.
Demand should continue to be strongish at least.
I suspect we may see lower CU prices yet before we get a recovery.
Sub $5k/ton quite possible and some are calling for $2/lb or $4500/ton.

$2 is very low........sub inflation adjusted price which I calculated at $2.80. I'm very happy buying at this price. And why buy copper when you can buy a producer at a low price. It's a steal. Read the copper company thread.....it still applies nothing has changed.

[Daytr]

Was it low at $3.05 2 weeks ago or low now at $3.90?
I wasn't suggesting buying copper, but by buying OZL you almost may as well be.

[h2so4]

Was it low at $3.05 2 weeks ago or low now at $3.90?
I wasn't suggesting buying copper, but by buying OZL you almost may as well be.

Well you work it out. 440kt @$2.50lb=$2.2b US plus .61mt gold. Now these are proved reserves.
Cash $154.9m
Debt nil
20% stake in SFR
Market Cap @ 3.90 = $1.18b

Didn't get as far as cash flow but that's low isn't it?

[h2so4]

$4500/ton= $2.25lb

[Daytr]

Yes but that's sales revenue, which mean bugger all.
You have to remove costs.
Historically they are cheap, however that is because copper was a lot higher & the expectation was it was going higher still.
That's not the view right now.
Sentiment & copper price will see OZL back at better levels imho.

[macduffy]

Well you work it out. 440kt @$2.50lb=$2.2b US plus .61mt gold. Now these are proved reserves.
Cash $154.9m
Debt nil
20% stake in SFR
Market Cap @ 3.90 = $1.18b

Didn't get as far as cash flow but that's low isn't it?

Not so sure about the USD2.2b though. That's a gross "value" but OZL had a C1 cash cost of around US90c lb in the last quarter and the bulk of the production is still coming from the open cast. These costs will presumably increase as the underground mine becomes progressively more important. On the other hand, OZL's cash at 31 December had increased to $219m.

Too hard for me!

:mellow:

[h2so4]

Yes but that's sales revenue, which mean bugger all.
You have to remove costs.
Historically they are cheap, however that is because copper was a lot higher & the expectation was it was going higher still.
That's not the view right now.
Sentiment & copper price will see OZL back at better levels imho.

I don't have to. That's an in the ground proved resource figure at today's commodity prices. A gross figure if you like.
Would you know what a producers costs are? Of course not. The costs or total costs is the figure they want you to look at. There is no accounting standard nor is it an audited figure so it's an easily manipulated figure. I would not trust it.

I like the company because of its asset value, the fact that they mainly produce copper, and that copper is at a near 15 year low. At $2.50lb is lower than the inflation adjusted figure of $2.88lb

[Daytr]

Well that's not right, prior to 2004 copper was trading $1.50/lb & below.
You do not value a mining asset by just valuing the metal in ground.
You value it on future cashflow.
You then need to PV those casflows.
Some of the reasons why commodities went up exponentially besides the obvious demand from China was that other commodities were being driven up causing costs to rise. Obviously energy was a big one, so was steel, so was labor etc.
The cost of mining is gong to reduce, which is good for OZL, but also gives more room to the downside for the CU price.
The last 10 years weren't the norm, they were the exception.
There has never been a commodity boom where all commodities were going up in multiples at the same time, perhaps WW11 aside.
I do like that OZ I moving to Adelaide as this should see a reasonable cost reduction.
Their current offices in Melbourne are pretty smick & must have cost a bomb.

[macduffy]

I've had another look at OZL's Resources and Reserves numbers for Prominent Hill.

At the annual review announced in November, Mineral Resource was 1.9mt of contained copper and 4m oz contained gold. Within this resource, Ore Reserves were 800 kt contained cu and 1.4m oz contained gold.

All we need now is higher prices for copper and gold!

[h2so4]

I've had another look at OZL's Resources and Reserves numbers for Prominent Hill.

At the annual review announced in November, Mineral Resource was 1.9mt of contained copper and 4m oz contained gold. Within this resource, Ore Reserves were 800 kt contained cu and 1.4m oz contained gold.

All we need now is higher prices for copper and gold!
Agree
Thanks for the update.

[h2so4]

Well that's not right, prior to 2004 copper was trading $1.50/lb & below.
You do not value a mining asset by just valuing the metal in ground.
You value it on future cashflow.
You then need to PV those casflows.
Some of the reasons why commodities went up exponentially besides the obvious demand from China was that other commodities were being driven up causing costs to rise. Obviously energy was a big one, so was steel, so was labor etc.
The cost of mining is gong to reduce, which is good for OZL, but also gives more room to the downside for the CU price.
The last 10 years weren't the norm, they were the exception.
There has never been a commodity boom where all commodities were going up in multiples at the same time, perhaps WW11 aside.
I do like that OZ I moving to Adelaide as this should see a reasonable cost reduction.
Their current offices in Melbourne are pretty smick & must have cost a bomb.

Have a look at LME warehouse levels prior to 2004 make an adjustment for inflation and compare LME warehouse levels today. You might see where I'm coming from.

[Daytr]

Mate I traded copper for a living.
How about adjusting copper for future deflation as that is what is happening now.
Agree LME stocks aren't that high, but they are growing and just reached a 9 month high.
Where were Shanghai stocks in 2004 compared to now?
You need to look at both.
Copper could do ok if the US housing market holds up & China continues the same Rate of expansion.
I just question why it is Chinese hedge funds that are shorting copper?
What do they know perhaps we don't?

[h2so4]

Mate I traded copper for a living.
How about adjusting copper for future deflation as that is what is happening now.
Agree LME stocks aren't that high, but they are growing and just reached a 9 month high.
Where were Shanghai stocks in 2004 compared to now?
You need to look at both.
Copper could do ok if the US housing market holds up & China continues the same Rate of expansion.
I just question why it is Chinese hedge funds that are shorting copper?
What do they know perhaps we don't?

Ok. What's the US deflation rate?
Shanghai stocks, US housing, China expansion, Chinese hedge funds, it's all a bit macro for me. I'm not a trader and will continue to buy on a yearly basis if copper stays before it's inflation adjusted price.

[Daytr]

Who knows they don't include energy in their stats.
What I am saying is the cost to develop a mine or produce copper is actually dropping.
That leaves more room for the CU price to drop.
Over a period of time OZL will quite likely be a lot higher.
Although I have been chatting with another knowledgeable guy on HC & thinks Carpentaria requires a copper price of over $3 to get off the ground & even at that the IRR is marginal.
We obviously look at things from much different time horizons as I am a trader.

[Daytr]

I shorted again this morning as I think its heading back toward a SP of $3ish.
May not be that bad, will depend on the CU price as previously stated.

[Daytr]

Copper down 2%, gold down $30 OZL should get crunched Monday

[macduffy]

OZL returns to profit, suspends dividends and is re-thinking the need to "partner" the Carapateena project.

http://www.asx.com.au/asxpdf/20150211/pdf/42wjh19jzpzlpf.pdf

[Daytr]

That divi suspension isn't going to go down well with instos, although I think its the prudent thing to do.
Copper & gold both down overnight so should see OZL lower.

[h2so4]

Seems OZL doing better than the commodity........

[macduffy]

It must be that the market liked OZL's latest strategy presentation.


http://www.asx.com.au/asxpdf/20150420/pdf/42xzfjxbn44kjl.pdf

[Daytr]

I've been reasonably impressed by the new CEO. They have been too conservative in the past & too corporate for a mid tier miner.

[Daytr]

Back in on this puppy for pretty much the same reasons as I bought into IGO today.
OZ have Aussie production exposure which I like.
They are a higher cost producer, but have about $400M sitting in cash & adding to it every day.
Not a bad position to have in this market.

[h2so4]

Yep looking very cheap no two ways about it.

[Daytr]

Gold up, copper down slightly, but more importantly Aussie thumped.
Great for Aussie ccy based producers!

[Daytr]

Copper up 3.5% overnight! Should be a good day for Oz & IGO today.

[Xerof]

someone after a 10% stake today (I hear)

[h2so4]

At a 7.3% premium that's not going to happen.

[macduffy]

OZL issues market update. Knows nothing!

http://www.asx.com.au/asxpdf/20151001/pdf/431s3m482fgxyb.pdf

[Daytr]

Yep, all great speculation that will drive the SP higher.
IGO I think is even better value than OZL.

[h2so4]

Yep, all great speculation that will drive the SP higher.
IGO I think is even better value than OZL.

....and the reason is?

[Daytr]

For what the SP higher or IGO being better value?

[h2so4]

IGO being best

[Daytr]

Their low cost production assets & they have multiple assets whereas OZL only have one & a maybe reasonably high cost production project.
IGO's Nova acquisition has the lowest nickel production costs I have ever seen by a long way.
Tropicana is a fantastic cash cow.
Just take a look at their latest prezo.

[macduffy]

Record copper production from OZL. Just a pity that the price ( of copper) is so low!

http://www.smh.com.au/business/mining-and-resources/record-copper-haul-puts-oz-minerals-back-on-the-front-foot-20160120-gmahiy.html

[h2so4]

Record copper production from OZL. Just a pity that the price ( of copper) is so low!

http://www.smh.com.au/business/mining-and-resources/record-copper-haul-puts-oz-minerals-back-on-the-front-foot-20160120-gmahiy.html

A pity or an opportunity?

[macduffy]

A pity or an opportunity?

I was meaning that it was a pity to sell record production at low prices. The opportunity would be to hold the stocks for a better price, which OZL may be able to afford with its $550m cash, but predicting higher prices - and when they might arrive - might be a risk too far. In fact, OZL shipped more metal in the quarter than it produced.


Meanwhile, Credit Suisse rates OZL as an Outperform.

[h2so4]

Zooming up today.
Holding the shares better than holding copper.

[h2so4]

There seems to be a shift taking place in the price of copper.

[h2so4]

......must be the trump thing.
Up 3.3% today!

[macduffy]

......must be the trump thing.
Up 3.3% today!

Also, LME copper stocks are well down on a month ago - 360,000lb down to around 300,000. Encouraging noises from the company about Carapateena also encourages the OZL shareprice.

[shasta]

CVV one to look out for then, micro cap with large copper project/resource.

OZL funding MEP and CZI, both takeover targets especially if copper price does keep moving north.

MLX took over ABY's copper project at Nifty, so set to benefit from increased copper pricing.

Am keeping close watch on CVV, MEP and CZI, all potential options for OZL to increase resources

[macduffy]

OZL at a four year high today, $9.16. Copper price strong; Carapateena prospects looking promising.

:)

[macduffy]

This broker likes OZL's prospects!

http://www.theage.com.au/business/markets/citigroup-says-copper-fever-could-raise-the-temperature-for-australian-miners-20170221-guictg.html

[peat]

This broker likes OZL's prospects!

http://www.theage.com.au/business/markets/citigroup-says-copper-fever-could-raise-the-temperature-for-australian-miners-20170221-guictg.html

I had a look at this after Copper price started moving a lot. But when share price has moved 300% in the last year you start to wonder if there is any meat left on the bone. Perhaps Sandfire is a better option ?

[h2so4]

I had a look at this after Copper price started moving a lot. But when share price has moved 300% in the last year you start to wonder if there is any meat left on the bone. Perhaps Sandfire is a better option ?

I rate it very cheap. Cashflow is huge. The copper price hasn't played out yet and its the reason why I continue to hold and accumulate along with CZI CVV and MLX.

[macduffy]

Presentation by OZL:

http://www.asx.com.au/asxpdf/20170228/pdf/43gfpf69f7cyf0.pdf

I hold a few. A great performance in recent times but unfortunately mine date from Oxiana days! :mellow:

[h2so4]

Presentation by OZL:

http://www.asx.com.au/asxpdf/20170228/pdf/43gfpf69f7cyf0.pdf

I hold a few. A great performance in recent times but unfortunately mine date from Oxiana days! :mellow:

The global supply demand chart shows an increasing demand and falling supply add to that the inflation adjusted price of copper which I calculate at roughly $3 USD/LB and you can see there is a perfect storm brewing.

...and OZL looks perfectly placed to benefit.