OZ slides on Prominent Hill forecast
Shares in OZ Minerals have slumped sharply this morning, after the company portrayed a tougher future for its flagship mine, Prominent Hill.
The market has been well aware that Prominent Hill was approaching the end of its life, but forecasts released today for both production and costs have underlined just how much tougher it has become to produce copper and gold from the South Australian site.
OZ forecast that copper production from the mine will fall by about 10 per cent next year to a minimum of 90,000 tonnes.
The cost of production is tipped to increase by up to 40 per cent, with OZ offering an average range between $US1.50 and $US1.65 per pound.
The company has warned that the cost of production will be even higher than that in the first half, but unit costs will fall in the second half to achieve that guidance.
The news gave investors a fright, and shares were 51 cents lower at $6.80 just before noon.
Today's dip in the share price has almost entirely wiped out solid gains that were made on Friday and Monday, when trading appeared to focus on good news about OZ's growth asset Carrapateena.
One bonus for OZ is that Prominent Hill also produces gold, and production of the yellow metal is forecast to be steady between 130,000 and 150,000 ounces.