Key points from OZ Minerals’ financial results for the six months to 30 June 2008:
- Merger synergy benefits of A$27.5 million/y identified; more targeted
- Industry-competitive operations; cash costs well below current commodity prices
- Dividend of A$0.05/share (unfranked) declared; DRP maintained at 2.5% discount
- Sound underlying performance in a volatile environment
- Pro-forma consolidated revenue of A$1 billion and underlying NPAT of A$70.9 million for the half-year
- No share buy-back.
“Excluding the effect of one-off items, net profit after tax attributable to members of the company (that is, for the entity that was known as Oxiana before implementation of the merger) was A$72.2 million for the six months to 30 June 2008”, said Andrew Michelmore, Managing Director and CEO of OZ Minerals. “This result does not reflect a consolidation of the former Oxiana and Zinifex”, he continued, “as the implementation of the merger occurred after the period being reported on today.
“OZ Minerals’ operational performance has been very sound and, as reported in our recent Quarterly Report, production volumes at all sites has been strong. However, LME prices for copper and zinc (in Australian dollars) have been volatile; in the first half of 2008, copper was 6.2% higher on average than in the previous six months while zinc was 31.7% lower. This outcome, combined with the generally higher operating costs we reported in the Quarterly Report, has been the primary reason that the financial performance we are reporting today is not better,” Michelmore added.
“Notwithstanding the negative impact of commodity price movements on our short-term performance,” he continued, “the long-term demand strength that we and many participants in the minerals industry have referred to many times remains intact, and OZ Minerals is exceptionally well-positioned to benefit”.
The company has also released the full-year financial results for Zinifex and unaudited pro-forma financial information which is based on the assumption that Oxiana and Zinifex had been merged for the whole of the six-month period to 30 June 2008. The pro-forma data is provided solely for the purpose of providing market participants with a profile of the merged Company and should not be seen to be as a definitive statement of actual performance. Excluding the effect of one-off items and discontinued operations, Zinifex earned net profit after tax for the year ended 30 June 2008 of A$226.7 million.
“Mining companies are faced with considerable volatility in both selling and input prices”, said Michelmore. “We can’t control everything, but we one key area we must control is the efficiency of our operations. OZ Minerals has five very efficient operations, which is a wonderful situation to be in, and we will continue to focus on continuous improvement in operational efficiency.”
“In the first 50 days since the merger between Oxiana and Zinifex was implemented, we have identified net synergy benefits of A$27.5 million/y,” said Michelmore, “and we are all committed to attaining further benefits”. OZ Minerals has also identified one-off merger implementation costs of A$41.4 million. “Our target is to achieve a pay-back of the one-off costs of the merger within a year”, added Michelmore, “and I am confident we will do that.”