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Sydney, Oct 22, 2008 (ABN Newswire) - OZ Minerals Ltd, the world's second largest zinc producer, went on the hard sell yesterday to try and convince investors that the commodity price crunch would not take too greater toll on the company and its future prospects.
CEO, Andrew Michelmore used the release of the company's third quarter production and exploration report to outline in some depth those steps to cut the short term exposure to the weak prospects for zinc and boost copper.
He held a tele-conference for analysts and the media and sold the line that Oz Minerals remained well placed and there was still solid demand for the company's products.
It was a notable attempt to try to counter the negative feeling about commodities, given the global sell-off and the comments by Rio Tinto last week which painted a picture of a cooling China which wouldn't see any bounce in demand until next year.
"There is still demand growth. We have not witnessed a decline for our products," OZ Minerals chief executive Andrew Michelmore told analysts in a conference call yesterday.
The sell must have worked because the shares rose 9.5c yesterday to $1.16, a rise of nearly 9% when the market was up 3.9%.
"All of our customers still want and need our products and no one is cancelling contracts,"he said.
OZ Minerals was formed this year through the merger of gold miner Oxiana and zinc producer Zinifex.
The company also produces copper, nickel, gold and lead. It wasn't the best of times for two miners to get married.
The merger was consummated as of July 1, just as the global picture for commodities, especially oil and metals, was starting to sour. Zinc, lead, nickel and copper had been weakening gradually from before then, but the negative sentiment emerged from mid-year onwards and hasn't gone away.
Zinc has lost a third of its value since July, nickel is down 50% (after a big fall in the year to July) and copper is off 43%.
The company is the world's second-largest zinc miner and said it produced 174,158 tonnes of zinc in the September quarter and also repeated plans to slash zinc output from its Australian mine by up to 40% in 2009.
Oz Minerals said that next year's zinc output at its Golden Grove mine in Western Australia would be between 80,000-85,000 tonnes, down 35-40% from an earlier plans. As announced six weeks ago, the company will instead lift copper output at the mine by 14,000 tonnes to between 35,000-40,000 tonnes for 2009.
Zinc production from Golden Grove for the quarter to September fell 33.5% to 23,778 tonnes, while copper output more than doubled to 6,692 tonnes.
That's because the company expects underlying copper demand to hold at current levels, with total global stocks still relatively low. Lead supply remains the tightest of all metals, underpinned by strong China.
Oz said it is on track to meet guidance for full-year gold and copper output in Laos.
Copper output at its Sepon operation in Laos reached a record 17,546 tonnes in the quarter, despite the impact of heavy rains, while gold production at Sepon for the quarter was 22,190 ounces.
The firm said construction at the Prominent Hill copper mine in South Australia was 88% complete and the processing plant remained on track for commissioning in the fourth quarter.
Elsewhere, copper production from the company's Sepon operation in Laos climbed 8.7% to 17,546 tonnes.
OZ Minerals said output from the Avebury nickel mine in Tasmania, which has just come on stream, was 26% above budget at 4,796 tonnes of nickel in concentrate.
Zinc output during the three months from the old Zinifex Century mine in Queensland dropped 3% on the previous corresponding quarter to 129,241 tonnes.
And the company is considering whether it should cut production or defer a life-extending waste rock removal program at Century.
It has also made clear that one of its key growth projects, the proposed $500 million development of the Dugald River project, also in Queensland, will not proceed until metal prices recover.
Oz Minerals believes overall that the strength of its balance sheet will get it through by completing all of its committed projects.
These include the Prominent Hill copper/gold in South Australia, Martabe gold in Indonesia, the copper expansion in Sepon in Laos, and the Century waste rock removal program.
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