PERTH (miningweekly.com) – Takeover target OZ Minerals has seen net profits after tax for the 2022 financial year fall by 323.4% to A$207.3-million, while earnings before interest, taxes, depreciation and amortisation fell by 469.7% to A$692.7-million.

“2022 saw the OZ Minerals team end the year on a strong note after a challenging first half impacted by adverse weather, Covid-19 absenteeism, supply chain disruption and inflationary pressure. Despite the impact to production and costs, and a weaker copper price, we delivered net profit of A$207-million on revenue of A$1.9-billion,” said MD and CEO Andrew Cole.

Net revenue of A$1.9-billion, was lower than the previous year by A$175-million mainly owing to reduced sales volume and weaker copper prices. The realised Australian dollar copper price was 7% lower than the comparative period while the net Australian dollar gold price was 7% higher.

Contained copper and gold sold during the year were lower than the comparative period by circa 2 900 t and 40 200 oz respectively. The lower gold volumes were mainly the result of the depletion of high-grade gold ore stockpiles at Prominent Hill in the prior year, OZ Minerals told shareholders.

Total production costs of concentrate sold were A$176-million higher than the comparative period. The increase reflects the challenging operating environment with the one-off disruptions in the first half, inflationary pressures felt industry-wide, and additional labour and equipment requirements for production optimisation.

An extreme weather event during the first quarter and isolated conveyor belt failures at Carrapateena led to an increase in mining costs with repairs to the Western Access Road and repairs to the materials handling system. The impact of the downtime was partially offset by reduced power usage and running costs, together with opportune maintenance scheduling. Operating assets experienced Covid-related disruptions and absenteeism requiring additional support from contractors, increased labour and equipment requirements for production optimisation, and industry-wide inflationary pressures, the miner added.

These pressures included uplifts in hourly rates for both operator and maintenance crews due to interstate market demand and turnover rates and increases to diesel and utilities prices.

During the year, OZ Minerals invested A$951-million in construction and expansion activities across all its operations as it implemented its growth strategy, resulting in an increase to property plant and equipment balances. The West Musgrave study progressed during the year with a positive final investment decision taken in September 2022. Construction of Prominent Hill’s Wira Shaft mine expansion and Carrapateena’s block cave expansion continues, with capital development and other related growth activities advancing throughout the year.

“In 2022 we continued to invest in our growth projects with expansions advancing at Carrapateena and Prominent Hill and final investment approval to develop our fourth operating asset, the West Musgrave copper/nickel project in Western Australia,” said Cole.

The company in January announced the decision for the West Musgrave Living Hub to be delivered under a design and construct model requiring A$110-million capital funding, to be initially sourced from project contingency. The OZ Minerals board has now approved an increase to the capital budget of A$110-million to A$1.81-billion to reflect the inclusion of the Living Hub.

The change in contracting strategy will result in a reduction in operating costs for the project of A$170-million over 10 years. The West Musgrave 2023 capital guidance has been revised to between A$625-million and A$725-million to reflect timing of the expected spend and the revised capital budget.

Looking at production for 2023, OZ Minerals has set a copper target of between 120 000 t and 143 000 oz, and a gold target of between 191 999 oz and 213 000 oz, at an all-in sustaining cost of between 187c/lb and 207c/lb.

OZ Minerals in December entered into a binding scheme implementation deed with major BHP, under which BHP will acquire all of the shares in OZ at a price of A$28.25 each, valuing OZ Minerals at A$9.6-billion.

The offer price represents a 49.3% premium to OZ Minerals closing price on August 5, when the initial proposal was made, and a 59.8% premium to the 30-day volume weighted average share price up to August 5.

Oz Minerals shareholders are expected to vote on the offer in April this year.