OZ Minerals to Commence Work at Carrapateena; Project Scope Upgraded to 4Mtpa
“The larger Carrapateena project is very compelling." - Andrew Cole, CEO
OZ Minerals Limited (ASX:OZL) announced that the company intends to commence work at the Carrapateena Project immediately and upgraded the scope of the project to 4 million tonnes per annum. The company announced that the venture’s economics have improved, and that OZ Minerals now expects approximately $4.8 billion in life of mine (LOM) net cash flow before tax.
The Pre-Feasibility Study’s (PFS) scope of the Carrapateena Project in South Australia has been increased to 4 metric tonne per annum after additional PFS scope optimisation work.
Construction of Underground Decline to Start in 2H16
Tenders have been shortlisted for the underground decline, which is expected to start imminently. OZ Minerals aims to award the decline contracts in June 2016, with construction commencing immediately. The company intends to generate first operating cash flow from the project by 2019.
A separate Concentrate Treatment Plant (CTP) has been proposed for the Whyalla mine, which is also aimed at significantly reducing costs and enhancing capacity benefits for Carrapateena. The CTP also provides new options to access the deeper Prominent Hill resource.
OZ Mineral’s Managing Director and CEO, Mr. Andrew Cole commented on the Carrapateena project’s progress: “The larger Carrapateena project is very compelling. With such strong financial metrics, we have decided to commence development of the mine’s decline and accelerate the prefeasibility study with a larger 4Mtpa scope with the aim of first copper concentrate production in 2019.”
OZ Minerals Estimated Combined NPV to be $800M
The Carrapateena project and the proposed CTP at Whyalla have a combined net present value (NPV) of $800 million (discounted over a period of 9.5 years) and an internal rate of return (IRR) of 24%. The company expects to generate $4.8 billion in net cash flow before tax over the life of mine (LOM).
Approximately 67k tonnes of Copper and 76k ounces of gold are anticipated to be generated during the first three years of production. Overall, the LOM production has been estimated at 53k tonnes of copper and 53 tonnes of gold per annum.
The company is confident that this project can be fully funded from existing cash reserves and cash flows, and states that this venture is set to become a second operational asset to complement the Prominent Hill mine while remaining debt free.
OZL has risen 2.3% since the announcement, and was last traded at $5.87 (as at 1:55 pm).
Author: Kaivalya Kandarpa
May 06, 2016
Kaivalya is an equity analyst and a client advisor at Wise-owl. She specialises in fundamental and technical analysis for large and mid-cap companies. Having completed her bachelor's degree in Business Administration majoring in Finance, Kaivalya has a comprehensive understanding of international stock market movements. She tracks local and overseas markets and compiles analytical reports for various industries.