Professional’s Pick – OZ Minerals (OZL)

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How long have you held the stock?

We initiated our position in May 2014 post operational improvements over two successive quarters, and conducting further site based due diligence at Prominent Hill copper/gold mine, located 130km SE of Coober Pedy in NW South Australia.In January 2016, we increased our OZL position to become our largest Materials exposure, a timely move, taking advantage of the sector’s rally over the last six months. On our recent site visit, we pleasingly witnessed progress on the second underground decline access development; key to enabling more efficient ore development and mining.Furthermore, we obtained further insight into key development project – 100% owned Carapateena copper/gold, located 250km SE of Prominent Hill, and the commerciality benefits of linking both operations to a larger, centralised concentrate treatment process (CTP) at Whyalla.

What do you like about it?

We like management’s low risk approach; focused on progressing mine life extensions, prioritising higher grade ore feed and selecting fit for purpose mining method e.g. investigating the use of sub level cave mining (sub level open stoping used currently) for extracting much wider portions of Prominent Hill mineralisation, which we see as a well-timed investigation prior to mining Carapateena.

How is it better than its competitors?

It stands out from the pack with our expectation for up to $375 million free cashflow generation this year, and capability to self-fund project development without equity market assistance.Its ASX listed mining peers fail to compete on these commerciality metrics. Globally it’s one of few miners successfully generating cashflow against a tough commodity price backdrop.

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