Oz Minerals lifts  profit to $119.5m
Oz Minerals lifts profit to $119.5m

UPDATE 2.40pm The increasingly likely delay of BHP Billiton’s massive $30 billion Olympic Dam expansion is being welcomed by Oz Minerals which has revealed sharp jumps in operating costs.

The copper and gold producer forecast a hike in its cash costs to $US1.10-$US1.20 ($A1.05-$A1.15) per pound for 2012 from $US1-$US1.10 ($A0.96-$A1.05).

The South Australian miner is being buffeted by high operating and labour costs, and the prospect of BHP building one of the largest mines in the world in the same state would make workers and equipment even more scarce.

Production costs jumped sharply by 18 per cent in the June quarter to $US1.185 a pound, having also leapt up by 13 per cent in the March quarter.

However solid copper production and a high average gold price of $US1,651 per ounce helped Oz Minerals lift first half net profit by 4.9 per cent to $119.5 million.

Last year’s figure was hurt by one-off legal costs, with the first half underlying profit far higher at $189.1 million.

Its shares were punished, down 56 cents, or 7.1 per cent, at $7.36.

Chief executive Terry Burgess said the Olympic Dam copper-uranium project was one of the company’s biggest concerns and was a key focus along with increasing costs.

Oz Minerals need workers and machinery as they race against the clock to either extend their producing mine, Prominent Hill - due to run out of copper by 2018 - or bring their Carrapateena underground project into production quicker than the planned 2020.

"We don’t have an over-supply of good quality qualified people whether its truck drivers or mining engineers,” he told reporters.

"If Olympic Dam goes ahead, all the trucks that are going to be used in the open pit and all the tyres needed are going to tighten up supply.

"If Olympic Dam doesn’t go ahead, you could have 100 trucks sitting idle that have been manufactured and can be used elsewhere, suddenly the lid of the pressure cooker’s taken off."

Mr Burgess said he thought labour costs were levelling out.

He was positive about the prospects for the copper price, despite it having fallen nearly 30 per cent to about $3.34 a pound from record highs in 2011.

"We’ve still got a really good margin ... if we have costs increasing to $1.10-$1.20 then a copper price of $3.40 still gives us $2-plus margin,” he said.

"There was really interesting commentary by (Rio Tinto chief executive) Tom Albanese about the supply of copper remaining quite well constrained.

"The market isn’t really increasing as fast as the demand."

Oz Minerals spent $47.7 million on exploration in the first half, compared to $33.6 million a year ago, to try and avoid a hiatus in production.

It said its full year production could come in at the lower end of its forecast 100,000 to 110,000 tonnes of copper and between 130,000 to 150,000 ounces of gold.

Mr Burgess said the company had a cash balance of about $750 million, which it intends to use for merger or acquisition activity, and no debt.

Oz Minerals declared an unfranked interim dividend of 10 cents and has also completed a $200 million share buyback.

The West Australian

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