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Growth Portfolio: OZ Minerals Limited (ASX: OZL)


Published 31-MAR-2016 00:00 A.M.


2 minute read

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Overview: OZ Minerals Limited ("OZ Minerals", "the Company") is an Australian resources company, primarily focused on gold and copper mining. OZ Minerals owns and operates the Prominent Hill copper-gold mine and the Carrapateena exploration project in South Australia. OZ Minerals was formed through a merger of Oxiana Limited and Zinifex in 2008.

Catalysts: OZ Minerals is generating free operating cash flow which has consistently risen since 2013. The Company announced a $60m share buyback in February 2016 for capital management purposes. OZ Minerals targets extension of the Prominent Hill mine beyond 2026 and is moving towards completion of the PFS for Carrapateena in Q4 2016. The Company has a strong balance sheet with ~$550m in cash and no debt.

Hurdles: Even though OZ Minerals has a positive track record of successful mine operations, there is no guarantee that the Carrapatena exploration project can be transformed into a financially viable mining site. OZ Minerals operations are capital intensive and any further deterioration in gold and copper prices could impair the Company's financial performance.

Investment View: OZ Minerals offers profitable exposure to the gold and copper mining industry. We are attracted to the Company’s share buyback program, strong balance sheet, and cash flow generation. Its capital intensive operations and reliance on the volatile gold price are principal risks. OZ Minerals’ stock is trading ~25% below its Net Tangible Assets ("NTA") and the company is well-positioned to benefit from any cyclical recovery in the gold price. We initiate coverage with a buy recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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