OZ Minerals Ltd. (OZL) will consider selling a majority stake in its planned A$3 billion ($2.7 billion) development of Australia’s largest unmined copper deposit after receiving approaches from potential partners.
Major copper producers have been involved in “early stage discussions” on the Carrapateena project in South Australia, Chief Executive Officer Terry Burgess, who will be step down within the next 12 months, said today on a media call after reporting the company swung to a full-year net loss of A$294 million. The shares rose to a four-month high in Sydney.
Any partners would be taking a stake amid forecasts global copper supplies could become constrained after producers delayed or canceled development of new mines due to weaker prices. Glencore Xstrata Plc (GLEN), Trafigura Beheer BV and First Quantum Minerals Ltd. (FM) may be among those interested in acquiring a holding in Carrapateena, David Coates, a Sydney-based analyst at CIMB Group Holdings Bhd. (CIMB), said by phone.
“There’s only a handful of local mining companies that could do this” such as BHP Billiton Ltd. (BHP), Rio Tinto Group and Newcrest Mining Ltd. (NCM), CIMB’s Coates said. “I don’t think any of those are on the cards.”
Melbourne-based OZ Minerals, the nation’s third-largest copper producer, rose 13 percent to A$3.83 in Sydney, the highest since Oct. 16.
Baar, Switzerland-based Glencore and closely held Trafigura both declined to comment in e-mails on whether they’ve held or are seeking talks with OZ Minerals. Vancouver-based First Quantum didn’t immediately respond to e-mails seeking comment sent outside usual office hours.
The board will look for a new CEO to succeed Burgess within the next 12 months, Chairman Neil Hamilton said in a statement. This will allow a new management team to “capitalize on our encouraging growth prospects,” Burgess said in the statement.
“There may be an expectation that a new CEO can come in and might be more aggressive, and convince the board to be more aggressive,” Sydney-based UBS AG analyst Jo Battershill said by phone. “In a way, the company has missed an opportunity over the last few years.”
Some parties have signed confidentiality agreements to access more information on Carrapateena, where an initial study is due to be completed this half, OZ Minerals said today in a statement.
“There are a number of large companies, including large foreign companies that are in the copper business, who are talking to us,” Burgess said. “If a large producer came in, it would probably make more sense for them to have the controlling interest and be the operator.” Some discussions include the company’s Khamsin deposit, close to Carrapateena, and neighboring exploration areas, he said.
About 4.5 million metric tons of new production capability is needed from projects to meet demand by 2022, according to Wood Mackenzie Ltd. Copper may return to shortage in 2016, spurring the need for new projects, Macquarie Group Ltd. said in a Jan. 15 note.
Carrapateena may contain as much as 6.3 million tons of copper and 8.4 million ounces of gold, according to a November filing. Khamsin, 10 kilometers to the west, may be a similar copper-gold system, the company said today in a separate statement.
Carrapateena has a potential valuation of A$1 billion and the possible sale of a 50 percent interest for A$300 million to A$500 million “cannot be dismissed as unrealistic,” Credit Suisse Group AG analysts led by Michael Slifirski said in a Feb. 10 note.
The project may cost A$2 billion to A$3 billion to build and produce as much as 110,000 tons of copper a year with a mine life of 20 years, the company said in a May presentation.
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