Oz Minerals says it can can finance its future development projects without having to access financial markets and it has apologised for the poor performance on the company’s shares since the merged company started trading on July 1.
“We have a strong balance sheet, no net borrowings and the ability to generate healthy cash flows,” Oz Minerals chairman, Barry Cusack and CEO Andrew Michelmore said in the letter to shareholders.
“At a time when the world’s financial system is in so much turmoil, this is an enviable position to be in.”
“We have a very strong pipeline of growth projects stretching out over the next decade, and we have the financial capability to finance the pipeline without being beholden to the financial markets.
“The outlook for demand for all the commodities we produce remains strong and, although there will be some volatility from one period to the next, we are very confident of ongoing growth in demand for many basic commodities,” shareholders were told.
The company is in the process of completing the $1 billion-plus first sage of the Prominent Hill multi-metal mine in South Australia. It is due to come on stream in the next few weeks.
There are expansion plans for it and for the Golden Grove mine in Western Australia, as well as new gold and copper mining projects offshore, principally in Laos.
Referring to the share price, which “has fallen substantially in recent months”, Messrs Cusack and Michelmore said that investors must keep in mind the company’s achievements and opportunities.
“OZ Minerals’ share price has fallen substantially in recent months.
“While part of the fall can be explained by general share market conditions, lower metal prices and higher costs, our share price performance has been worse than would have been predicted by these external factors alone.
“We understand that some aspects of our financial results have concerned some investors, but we also believe that many investors have lost sight of OZ Minerals’ substantial achievements and its undoubted opportunities.”
“We are very aware that OZ Minerals’ recent share price weakness has had a devastating effect on many of our shareholders. We remind shareholders that the indicated valuation of $3.80 -$4.40 per share determined by Grant Samuel & Associates in May 2008 is substantially higher than the current share price.
“We can assure shareholders that nothing detrimental has happened to those assets over the past 4 months and we implore you not to lose sight of this fact.”
“Whilst the current global economic uncertainties have prompted some investors, including hedge funds, to exit their commodity and basic materials share investments, we have recently seen a number of major, long-term investing institutions take up positions in OZ Minerals,” they said in the statement.
“Operationally, OZ Minerals is performing very well; production levels are in line with our plans, and the integration of the old Oxiana and Zinifex businesses is on track.
“As we have announced, we have already identified almost $30 million of annual cost savings through the integration process, and we are confident there is more to come.
“Your Board and Management are working diligently to integrate the policies, procedures and systems capturing the best of both entities. We are also assessing the combined programs for exploration and growth to align with our strategic objectives.”
OZ Minerals shares gained 10.5 cents, or 6.5% to $1.705 in a market that was off 2% or more yesterday. Firmer metal prices helped as copper and zinc rose and the US dollar fell.
