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SYDNEY, Jan 24 AAP

January 24 2013, 3:39PM

OZ Minerals shares have dropped 5.6 per cent after it forecast falling copper production and rising costs at its ageing Prominent Hill open cut mine in South Australia.

The share price fall wiped out gains made since OZ Minerals upgraded its resource deposit estimates for its Carrapateena copper and gold project, also in South Australia, three days ago.

OZ Minerals said on Thursday it expects to produce between 90,000 tonnes and 95,000 tonnes of copper in 2013, a fall of up to 12 per cent from 101,737 tonnes in 2012.

The geometry of the remaining copper requires waste to be removed from the mine, a process that will restrict production, OZ Minerals said.

Copper production will be most heavily impacted in the first six months of 2013, but will then increase in the second half of the year to achieve OZ Minerals' forecast.

The lower production forecast is consistent with the long-term plan for the Prominent Hill mine, OZ Minerals said, where activity will peak in 2013 then begin to reduce.

Costs are also forecast to rise in 2013, by as much as 27 per cent, due to the waste removal process and the first full year of production at the Ankata underground mine at Prominent Hill.

Cash costs in 2013 are expected to be between $US1.50 and $US1.65 per pound, up from an average of $US1.20 per pound in 2012.

OZ Minerals shares were down 45 cents, or 6.2 per cent, at $6.86 at 1518 AEDT, well down from its recent peak of $7.50 on January 21.

The company provided a more positive outlook for its gold operations.

It produced 140,746 ounces of the precious metal in 2012, and forecast production of between 130,000 ounces and 150,000 ounces in 2013.

OZ Minerals reports its 2012 financial results on February 13.

By Drew Cratchley