UPDATE 2-Oz Minerals May Buy Assets to Boost Output-Shanghai Metals Market

Hot Keywords

  • Market commentary
  • Rare earth
  • Aluminium
  • Macroeconomics
  • Copper
  • Zinc
  • Sales data
  • Customs data
  • MMi Iron Ore Port Index
  • Inventory data
  • precious metals
  • Rare earths
  • Nickel
  • Iron ore
  • Futures movement

UPDATE 2-Oz Minerals May Buy Assets to Boost Output

Industry News 03:15:54PM Jul 16, 2010 Source:SMM

SYDNEY, July 16 (Reuters) - Australia's Oz Minerals (OZL.AX) plans to buy assets that could more than double its copper concentrate production as output at its existing mine declines, and to cash in on current demand for the commodity.

Australia's third-largest supplier of copper concentrates was looking to acquire assets capable of yielding between 50,000 tonnes and 150,000 tonnes of copper in concentrate annually, Managing Director Terry Burgess told reporters on Friday.

The move is being triggered by global fundamentals for copper demand favouring suppliers of concentrates, with smelters continuing to face difficulties securing adequate volumes, he said.

"We're very clear on the scale of the projects we are looking for," Burgess said.

The company's shares rose 2.2 percent to A$1.14 by 0502 GMT, bucking a downtrend in the wider market .AXJO and in the mining sector.

"Oz obviously sees its future in copper, which has one of the strongest fundamental outlooks among the base metals," said Nick Raffan, senior mining analyst for Fat Prophets in Sydney. "This is giving the market certainty in the company's direction and how it intends to grow."

Oz Minerals expects to produce between 100,000 and 110,000 tonnes of copper in concentrate this year, of which 90 percent to 95 percent will be sold under multi-year contracts in China, India and Europe.

Oz Minerals' Prominent Hill mine yielded 28,236 tonnes of contained copper in the second quarter, up 4 percent from a year ago but down 11.5 percent from the previous quarter.

Burgess warned that second-half production will be lower due to an expected decline in head grade over the year.

But even with the decline, he said Oz Minerals was on target to meet its full-year guidance as first-half production exceeded 60,000 tonnes.

Oz Minerals is also digging an underground extension at Prominent Hill that would yield an average of 25,000 tonnes of copper a year starting in the second half of 2012.

The A$135 million ($119.2 million) project will complement the existing Prominent Hill open pit mine at a time when its production levels are expected to decline and will allow the company to maintain overall production close to current levels.

PROCESSING FEES

Burgess said spot fees paid to smelters to process copper concentrates are averaging around $20 a tonne and 2 cents per pound, though some smelters were receiving as little as $10 a tonne and 1 cent per pound.

"I found this to be positive news, though I'm not sure that's good news for the smelters," Burgess said. "This really indicates where the supply balance is at the moment."

The fees, known as the treatment charge and the refining charge (TC/RC), represent the profit margin for smelters.

When concentrate supply is tight, smelters are forced to offer lower fees to attract sufficient raw material to maintain high operating rates.

Analysts have suggested mid-year contract charges should settle around $40 a tonne and 4 cents/lb -- the lowest since at least 2001. 

Full-year fees were brokered in January by BHP Billiton (BHP.AX) (BLT.L) at $46.50 per tonne and 4.65 cents per pound.

Rio Tinto (RIO.AX) (RIO.L) this week said its mined copper production dropped 19 percent, primarily due to lower ore grades at its Kennecott and Grasberg mines.

However, a 6 percent rise in output from Rio's 30 percent-owned Escondida mine in Chile -- the world's biggest -- in the second quarter, points to stronger showing from majority owner BHP when it reports production data on July 21. ($1=1.133 Australian Dollar) 
 

UPDATE 2-Oz Minerals May Buy Assets to Boost Output

Industry News 03:15:54PM Jul 16, 2010 Source:SMM

SYDNEY, July 16 (Reuters) - Australia's Oz Minerals (OZL.AX) plans to buy assets that could more than double its copper concentrate production as output at its existing mine declines, and to cash in on current demand for the commodity.

Australia's third-largest supplier of copper concentrates was looking to acquire assets capable of yielding between 50,000 tonnes and 150,000 tonnes of copper in concentrate annually, Managing Director Terry Burgess told reporters on Friday.

The move is being triggered by global fundamentals for copper demand favouring suppliers of concentrates, with smelters continuing to face difficulties securing adequate volumes, he said.

"We're very clear on the scale of the projects we are looking for," Burgess said.

The company's shares rose 2.2 percent to A$1.14 by 0502 GMT, bucking a downtrend in the wider market .AXJO and in the mining sector.

"Oz obviously sees its future in copper, which has one of the strongest fundamental outlooks among the base metals," said Nick Raffan, senior mining analyst for Fat Prophets in Sydney. "This is giving the market certainty in the company's direction and how it intends to grow."

Oz Minerals expects to produce between 100,000 and 110,000 tonnes of copper in concentrate this year, of which 90 percent to 95 percent will be sold under multi-year contracts in China, India and Europe.

Oz Minerals' Prominent Hill mine yielded 28,236 tonnes of contained copper in the second quarter, up 4 percent from a year ago but down 11.5 percent from the previous quarter.

Burgess warned that second-half production will be lower due to an expected decline in head grade over the year.

But even with the decline, he said Oz Minerals was on target to meet its full-year guidance as first-half production exceeded 60,000 tonnes.

Oz Minerals is also digging an underground extension at Prominent Hill that would yield an average of 25,000 tonnes of copper a year starting in the second half of 2012.

The A$135 million ($119.2 million) project will complement the existing Prominent Hill open pit mine at a time when its production levels are expected to decline and will allow the company to maintain overall production close to current levels.

PROCESSING FEES

Burgess said spot fees paid to smelters to process copper concentrates are averaging around $20 a tonne and 2 cents per pound, though some smelters were receiving as little as $10 a tonne and 1 cent per pound.

"I found this to be positive news, though I'm not sure that's good news for the smelters," Burgess said. "This really indicates where the supply balance is at the moment."

The fees, known as the treatment charge and the refining charge (TC/RC), represent the profit margin for smelters.

When concentrate supply is tight, smelters are forced to offer lower fees to attract sufficient raw material to maintain high operating rates.

Analysts have suggested mid-year contract charges should settle around $40 a tonne and 4 cents/lb -- the lowest since at least 2001. 

Full-year fees were brokered in January by BHP Billiton (BHP.AX) (BLT.L) at $46.50 per tonne and 4.65 cents per pound.

Rio Tinto (RIO.AX) (RIO.L) this week said its mined copper production dropped 19 percent, primarily due to lower ore grades at its Kennecott and Grasberg mines.

However, a 6 percent rise in output from Rio's 30 percent-owned Escondida mine in Chile -- the world's biggest -- in the second quarter, points to stronger showing from majority owner BHP when it reports production data on July 21. ($1=1.133 Australian Dollar)