OZ Minerals Ltd. (OZL), Australia’s third- biggest copper producer, headed for its biggest drop in more than a month in Sydney trading after the company cut its output target and forecast on an increase in costs this year.
The stock fell as much as 6.9 percent to A$6.81, set for its biggest decline since Dec. 19, and was trading 6.4 percent lower at A$6.84 as of 11:27 a.m. local time.
OZ Minerals downgraded its full-year output target to a range of 90,000 metric tons to 95,000 tons today and estimated costs will rise at least 25 percent due to underground mining and as it digs out harder material from its Prominent Hill open pit mine.
Output fell to 23,296 tons in the three months ended Dec. 31 from 26,802 tons a year earlier. The median estimate of three analysts surveyed by Bloomberg was 23,600 tons.
“Production guidance is as expected but costs are a little higher,” Credit Suisse AG analysts Michael Slifirski and Sam Webb said in a research note today. The analysts rated the stock outperform with a 12-month target price of A$9.70.
OZ Minerals this week cut the mineral resources estimate at Prominent Hill due to mine depletion and raised its estimate for its Carrapateena project in South Australia by 43 percent.
“The company has a finite mine life of 6-7 years and requires growth to ensure it still exists post-2019,” Goldman Sachs Group Inc. said in a Jan. 18 report. “Carrapateena is the only growth project in the company, however we are concerned about the capital intensity, lead time and availability of suitable expertise to build and operate such a project.”
The revised target today compares with the 90,000 to 100,000-ton range estimated in December. Cash costs may rise to between $1.50 and $1.65 a pound, compared with $1.20 a pound last year, the company said.
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