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OZ says cut to diesel rebate would cost $20m

OZ Minerals could suffer a $20 million hit if the federal government abolishes the diesel fuel rebate in next month's budget.

A change to the rule, which gives mining companies and farmers a subsidy for the diesel they use, has been rumoured in recent weeks as the Gillard government desperately seeks to get the budget into surplus.

Speaking this morning, Oz Minerals boss Terry Burgess said the subsidy was warranted because mining companies were often forced to use private roads rather than publicly funded roads, and he said the impact of a change would be in the range of $16 million to $20 million per year.

Fortescue Metals Group last week advised that changes to the subsidy could cost it up to $150 million each year, and that figure could rise as the company expands rapidly over the next few years.

Mr Burgess was speaking as OZ reported a solid batch of March quarter results despite interruptions from rain and the disconnection of the Adelaide to Darwin railway.

The company mined fewer tonnes of ore than in the December quarter, but still increased its production of copper concentrate from 53.1 tonnes in the December quarter to 55.3 tonnes in the March quarter.


The failure of the Darwin railway helped ensure the amount of concentrate sold was lower than the December quarter, but the company expects to catch up in coming months, and said its annual guidance for both copper and gold production remained unchanged.

The weather-related interruptions and smaller volume of sales ensured unit costs were up from 84 US cents per pound to almost 97 US cents per pound.

Mr Burgess said OZ was continuing to monitor the ownership of a copper mine in Romania, which the company unsuccessfully bid for earlier this month.

OZ's bid was trumped by Canadian company Roman Copper, but that company has since failed to finalise terms with the Romanian Government and deal appears to have fallen through.

Mr Burgess said the company had not received any new overtures regarding the mine, but would watch its progress “from a distance”.

“We will just monitor the situation, if it does come back we would have to review that with everything else," he said.

"We were interested in it at the time but there is often a point in time when you have interest in opportunities but time moves on.”

Oz Minerals produced 27,182 tonnes of copper from its Prominent Hill mine in South Australia in the three months to March 31, up 1.4 per cent from the three months to December 31.

Gold production at Prominent Hill in the March quarter was 38,887 ounces, up 2.8 per cent from the December quarter.

The company said it remained on track to produce 100,000 to 110,000 tonnes of copper and 130,000 to 150,000 ounces of gold in calendar 2012.