MACQUARIE AUSTRALIA CONFERENCE 07 MAY 2015

Transcription

1 MACQUARIE AUSTRALIA CONFERENCE 07 MAY 2015

2 DISCLAIMER This presentation has been prepared by OZ Minerals Limited ( OZ Minerals ) and consists of written materials/slides for a presentation concerning OZ Minerals. By reviewing/attending this presentation, you agree to be bound by the following conditions: No representation or warranty, express or implied, is made as to the fairness, accuracy, or completeness of the information, contained in the presentation, or of the views, opinions and conclusions contained in this material. To the maximum extent permitted by law, OZ Minerals and its related bodies corporate and affiliates, and their respective directors, officers, employees, agents and advisers disclaim any liability (including, without limitation any liability arising from fault or negligence) for any loss or damage arising from any use of this material or its contents, including any error or omission therefrom, or otherwise arising in connection with it. Some statements in this presentation are forward-looking statements within the meaning of the US securities laws. Such statements include, but are not limited to, statements with regard to capacity, future production and grades, projections for sales growth, estimated revenues and reserves, targets for cost savings, the construction cost of new projects, projected capital expenditures, the timing of new projects, future cash flow and debt levels, the outlook for minerals and metals prices, the outlook for economic recovery and trends in the trading environment and may be (but are not necessarily) identified by the use of phrases such as will, expect, anticipate, believe and envisage. By their nature, forwardlooking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be outside OZ Minerals control. Actual results and developments may differ materially from those expressed or implied in such statements because of a number of factors, including levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors and activities by governmental authorities, such as changes in taxation or regulation. Given these risks and uncertainties, undue reliance should not be placed on forward-looking statements which speak only as at the date of the presentation. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, OZ Minerals does not undertake any obligation to publicly release any updates or revisions to any forward looking statements contained in this presentation, whether as a result of any change in OZ Minerals expectations in relation to them, or any change in events, conditions or circumstances on which any such statement is based. Certain statistical and other information included in this presentation is sourced from publicly available third party sources and has not been independently verified. All figures are expressed in Australian dollars unless stated otherwise. OZ Minerals 2

3 COMPLIANCE STATEMENT Prominent Hill Mineral Resource and Ore Reserve estimates The information in this presentation that relates to the Prominent Hill Mineral Resource estimate and the Prominent Hill Ore Reserve estimate is extracted from the report entitled Annual Resource and Reserve Update for Prominent Hill which was released to the market on 20 November 2014 and is available to view on The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources and Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competent Person s findings are presented have not been materially modified from the original market announcement. Carrapateena Mineral Resource estimate The information in this presentation that relates to Carrapateena Mineral Resource estimate is extracted from the report entitled Annual Carrapateena Mineral Resource Update and Mineral Resource Explanatory Notes as at 30 June 2013 which was released to the market on 28 November 2013 and is available to view on The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competent Person s findings are presented have not been materially modified from the original market announcement. Carrapateena Ore Reserve estimate The information in this presentation that relates to Carrapateena Ore Reserve estimate is extracted from the report entitled Carrapateena Ore Reserves Explanatory Notes as at 15 August 2014 which was released to the market on 18 August 2014 and is available to view on The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Ore Reserves, that all material assumptions and technical parameters underpinning the estimate in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competent Person s findings are presented have not been materially modified from the original market announcement. OZ Minerals 3

4 OZ MINERALS COMPANY OVERVIEW ASX Code Shares on issue Market Capitalisation OZL million ~$1.4 billion 12 Month share price 12 Month TSR 30% Dec 2014 Cash balance Proceeds from Sandfire disposal Debt A$219 million A$125 million No Debt Prominent Hill Three ore sources: open pit and two underground operations. Cash flow positive. Open pit mining to cease in 2018 with copper/gold stockpiles milled until Long life underground mines. South Australia OZ Minerals 4

5 2015 FIRST QUARTER OVERVIEW A STRONG BASE FROM WHICH TO BUILD Strong copper production of 31,160 tonnes, best quarterly production since Q Gold production slightly lower than prior quarter with maximum value derived from prioritising copper ore. Ankata and Malu Underground mining as planned. Focus for 2015 remains on improving development rates. Open pit unit costs increased from Q4 due to demobilisation charges, lower total tonnes, offset by lower diesel prices. Sales lower than production due to shipment timing, with March shipment occurring in April. Lower C1 costs reflect higher copper production and falling A$/US$. First Quarter Results Key Statistics Item Value Contained Copper produced (t) 31,160 Contained Gold produced (oz) 32,873 Open pit waste (Mt) 9.94 Open pit ore (Mt) 2.85 Underground ore (Mt) 0.46 Milling (Mt) 2.48 Copper sold (t) 25,289 Gold sold (oz) 29,650 Open Pit unit costs $/t 5.77 C1 costs USc/lb 63 Favorable to guidance Unfavorable to guidance OZ Minerals 5

6 2015 FULL YEAR GUIDANCE 2015 GUIDANCE REFLECTIVE OF A LEANER, MORE AGILE BUSINESS Accelerating mine plan pulls copper production forward. Reducing mine volumes release cash flow earlier. Mine unit costs influenced by fixed costs which don t adjust with mined volumes. C1 costs benefit from higher total copper production and lower A$/US$. Malu UG capital expenditure lower than previously advised with deferral of drilling and reduced development rates. Studies focused on unlocking Carrapateena value and reducing risk. Exploration focused on drilling at very promising Jamaica prospects and advanced target identification Production and Costs Item Copper production Gold production Open pit strip ratio 2.8 to 3.2 Open pit material movement Open pit unit mining costs Range 110,000 to 120,000 tonnes 100,000 to 110,000 ounces 48 to 52 Mt $5.80 to $6.10/t C1* US80 to US95 c/lb Malu Underground capital expenditure Sustaining capital expenditure $80 million $16 million Studies and Exploration Hydromet $19m Other studies (Rail, Malu Deeps) $6m Carrapateena drilling $5m Global drilling $8m Other Carrapateena activities and lease retention $7m * Assumptions: Gold US$1,200oz, A$/US$ 78c OZ Minerals 6

7 EARNING THE POTENTIAL TO GROW A NEW STRATEGY FOCUSED ON VALUE CREATION How we will work Safety Safe work above all else, strive for a workplace with no injuries. Values Integrity and strong governance in all aspects of the way we work. Capital discipline Commitment to reliably and predictably deliver with disciplined capital deployment. What we will focus on Lean business Fit for purpose today with an agile and flexible approach to opportunity. Customer focus Preferred supplier of mineral products to customers. Copper core Foundation built on copper with base metals and gold opportunistically pursued. Multiple assets Build and maintain a portfolio of valuable, risk managed, cash generating assets. OZ Minerals 7

8 SAFETY WE WILL HAVE A WORKPLACE WITH ZERO HARM TO OUR PEOPLE Safety performance in 2014 was not acceptable. Safety performance vs our peers demonstrates clear room for improvement. No risk appetite to place employees and contractors in harm s way. All activities must have appropriate controls in place with strong leadership present. Program of actions focused on: - Site safety acceleration program; - Mental health awareness; - Leadership development; - Focus on significant incidents; and - Increased risk awareness. TRIFR* Performance vs peers Safety performance Peer 1 OZ Minerals Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 * CY or FY 2014 comparison, Source: Company data, Citibank. Selection of peers includes PanAust, Sandfire, Illuka, Newcrest, Fortescue, BHPBilliton TRIFR LTIFR OZ Minerals 8

9 VALUES WE MAINTAIN OUR COMMITMENT TO STRONG VALUES AND GOVERNANCE We will always stay true to our values of integrity, respect, action and results. Provide opportunities for local communities We will always behave in an ethical and transparent manner. We recognise that we play a key role in local communities and continue to actively support and participate in the local community to strengthen our social licence to operate. We will increase our engagement with our stakeholders. We will constantly strive for local win-win solutions through employment, local business development and partnerships. Winner 2015 South Australian Premiers Community Excellence Awards in Mining and Energy: OZ Minerals Excellence in Leadership, Women in Resources. Commendation: Excellence in Supporting Communities. OZ Minerals 9

10 CAPITAL DISCIPLINE CAPITAL WILL BE DEPLOYED IN THE MOST VALUABLE MANNER We will continue to apply a highly disciplined approach to use of capital. Uses of Capital Internal and external growth options must compete for capital vs. shareholder distributions. Strong balance sheet must be engaged to facilitate growth options. Shareholder distributions must be simple, transparent and consistent. External growth Capital discipline Shareholder distributions Internal growth OZ Minerals 10

11 DEFINED PATH TO CREATE VALUE LEAN BUSINESS MULTIPLE OPERATIONS We have a crystal clear and very achievable plan to grow OZ Minerals in a disciplined value accretive way. Our engine room in Prominent Hill will deliver significant, reliable cash flow to fuel the creation of a diversified operational portfolio. Our approach will be underpinned by fundamentals, a rigorous understanding of risk and a relentless focus on value creation. Vision without execution is hallucination. Thomas Edison OZ Minerals 11

12 LEAN BUSINESS WE HAVE ALREADY MADE SIGNIFICANT INROADS, BUT MORE TO COME We ve already taken decisions to remove $40m from the business with favorable market conditions removing an additional $8m - Relocation of Corporate office to Adelaide and structure simplification ~$10 million annualised savings (~+net $5 million expense in 2015) - Restructure and leaner Prominent Hill ~$9.5 million in annualised savings (neutral in 2015) - Reduction in exploration expenditure and refocused activity $10 million saving - Reduction in sustaining capital $6 million saving - Resequencing of Malu UG resource drilling $5 million saving - Market based, diesel and power $8 million saving DEVELOPING A COST CULTURE Identify Continuous reinvention and improvement. Supplier optimisation and value extraction. Assess New approach to managing risk. LOM value creation. Strengthen and embed lean accountability. Implement Clear responsibilities and accountabilities. Safe work is non-negotiable. Our values will govern all our behaviours. OZ Minerals 12

13 LEAN BUSINESS NEW FLATTER CORPORATE STRUCTURE WITH MATERIAL COST SAVINGS RELOCATION PROCESS April Executive team recruited. Broader recruitment commenced. RELOCATION OUTCOME Lean flatter decentralised business model. Low cost, agile and decisive operating rhythm. May-June Handover plan commenced. Staged redundancies in Melbourne. Risk mitigation strategies in place. Clear corporate knowledge handover requirements. July - August Final redundancies in Melbourne. Functional closure of Melbourne office. Net 2015 cost ~$5 million. Annualised savings of ~$10 million. Senior Executive announcements Chief Financial Officer: Luke Anderson. 20+ years finance and corporate development experience within the natural resources sector, most recently at Unimin Corporation, a leading industrial minerals company Head of Corporate Affairs: Damon Hunt. Joins OZ Minerals from Santos. Considerable South Australian and international experience in government, media and community relations. Head of Human Relations: Mark Rankmore. Experienced Human resources professional with specific experience within mining services providers, specifically Forge and UGL. OZ Minerals 13

14 CUSTOMER FOCUS A SOLUTION TOOL KIT TO LEVERAGE A GLOBAL CONCENTRATE MARKET Ongoing customer base diversification into smelting and blending markets to optimise concentrate value. Continued management of uranium through both technical and commercial solutions. As planned, approximately 90% of 2015 sales committed under long term contracts with long term customers. Our integrated value chain from mine to market allows OZ Minerals to anticipate and respond to customer driven market changes. Consistent with prior periods full disclosure of selling costs included in C1 breakout. Integrated value chain Understand market conditions and have strong relationships with customers Robust reliable mine plan with strong understanding of mineralogy Technical solution Ore stockpile management Jameson cell Commercial solution Customer diversity Blending Maximise value at each stage Customised qualities to meet customer needs OZ Minerals 14

15 COPPER CORE OZ MINERALS HAS A SIGNIFICANT COPPER RESOURCE BASE TO LEVERAGE Significant Ore Reserves and Mineral Resources base. Revised exploration program reflects significant mineral inventory already available. Significant Ore Reserves and Minerals Resources* Prominent Hill 1 Carrapateena 2 Current Prominent Hill Ore Reserves support mining into mid 2020s. Current Prominent Hill Mineral Resources allow studies to expand and extend life, and create further value. In 2015, further work will occur to create value from 800Mt Carrapateena Mineral Resource: Rail Studies Ore Reserve Mineral Resource Ore Reserve Mineral Resource Hydromet Studies 1 Refer to page 3 for compliance statement 2 Refer to page 3 for compliance statement *Further information on OZ Minerals reserves and resources can be found at and in OZ Minerals 2014 Annual Report. OZ Minerals 15

16 MULTIPLE ASSETS TODAYS MARKET CONDITIONS ENABLE VALUE ACCRETIVE ACQUISITIONS OZ Minerals has significant organic growth options with a strong proven team: Market conditions 2, Carrapateena (Khamsin and Fremantle Doctor) Malu Deeps Jamaica. Current environment is bringing numerous assets to market. Internal discipline requires strong due diligence, clear pathway to cash and thorough risk management frameworks , , MSCI Global Index Bloomberg Commodity Index Source: Bloomberg Pipeline Activities focused on advanced development projects and producing assets. New revised OZ Minerals investment criteria and existing skill sets opens the window for other opportunities. OZ Minerals 16

17 MULTIPLE ASSETS A NEW INVESTMENT APPROACH OPENS DOOR FOR NEW OPPORTUNITIES Target size, country listing and mine life criteria removed focus on value and risk only. Investment decisions made on a case-by-case basis. Thorough understanding of risks critical: zero tolerance for safety or personnel risk zero tolerance for values or governance risk. Value extraction approach to assets in copper, other base metals or possibly gold where we can leverage our skills in marketing, processing, and balance sheet strength. Leverage competitive advantage to new investment criteria Retain historic discipline and analysis methodology Larger investment set Expanded set of assets in market with realistic pricing Overlay competitive skills sets to derive value Assets which may be too small, non core or distressed can allow OZ Minerals to leverage expertise. A portfolio of many small or a few large assets is equally acceptable. OZ Minerals 17

18 MULTIPLE ASSETS GAWLER CRATON HAS THE PEDIGREE OF A WORLD-CLASS COPPER DISTRICT The Gawler Craton is a world class mineral district and OZ Minerals has numerous resources (Carrapateena, Khamsin, Fremantle Doctor) and new targets in our extensive (>6,500km 2 ) exploration tenements. Gawler Craton regional solutions Carrapateena PFS details significant value (>$1B) from long life low cost mine. Large size of Carrapateena means it will not be OZ Minerals only operating asset and will only be developed with a partner. All activities in 2015 focused on increasing value and de-risking Carrapateena. OZ Minerals 18

19 GAWLER CRATON CARRAPATEENA: INCREASE THE ATTRACTIVENESS OF THE PROJECT Hydromet- Carrapateena: Rationale: Create world class concentrate: Open project up to Asian partners looking for 20+ year mine with low political risk Potential to increase Carrapateena Cu concentrate grade to approx. 60% and reduce deleterious element to very low levels. Savings in transport logistics and increased payability, potential to offset additional capital cost. Enhance the Gawler Craton value proposition Significant Mineral Resources and Ore Reserves at both Carrapateena and Prominent Hill Program of work to maximise value from both assets Hydromet process makes use of existing technology. Rail- Carrapateena: Rationale: Potential to lower upfront capital and phase cost over mine life. Undertake a pre feasibility study into the ability to rail ore from Carrapateena to the existing Prominent Hill processing plant. Rail volumes of circa ~12-13Mt tonnes per annum with ability to expand. Hydromet Malu Deeps Rail Maximise value Capital optimisation High grade OZ Minerals 19

20 VALUE CREATION NEW DIVIDEND POLICY REFLECTS STRATEGY AMBITIONS Our new dividend policy represents a disciplined approach to capital management. OZ Minerals has a strong growth focus. The dividend policy will allow transparent and consistent distributions to shareholders. The majority of cash generated will be invested in the company to enable this strategy. OZ Minerals currently expects to be paying tax from Prominent Hill earnings in New dividend policy Consideration of dividend payments will be made subject to: Legal and prudential requirements; and Investing or balance sheet activity required. Endeavour to pay a minimum of 20% of net cash generation not required for investing or balance sheet activity. OZ Minerals 20

21 DEFINED PATH TO CREATE VALUE LEAN BUSINESS MULTIPLE OPERATIONS Completed Underway New strategy and new targets. Relocating Corporate office. Restructuring whole of business. Divested Sandfire. Suspend Fremantle Doctor exploration. Revised mine plan. Improve safety performance. Strengthen and embed lean accountability. New Adelaide corporate team. Further de-risk Malu Open Pit. Grow concentrate toolbox. Supplier optimization and value extraction. Recognised favorable external market. New investment criteria defined. Commenced active due diligence. Expand pipeline of opportunities. Add new assets/operations to portfolio. Prominent Hill Malu Deep study. Carrapateena value adding studies. Partner for Carrapateena. Disciplined exploration activities. Vision without execution is hallucination. Thomas Edison OZ Minerals 21

22 SUMMARY EARNING THE POTENTIAL TO GROW A strong first quarter production result reflecting the significant improvements in productivities within the Malu Open Pit. A new and fully endorsed strategy defined as Earning the Potential to Grow. We have a clear execution plan. We will deliver reliable results and be accountable for our actions. We will assess all actions on a value basis. We will take risk where value equation is clear. Unique opportunity with strong balance sheet, favorable markets and the support of all stakeholders to grow the business. OZ Minerals 22

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