Miner OZ Minerals Ltd has scaled back its full year production forecast for copper, after its third quarter was hampered by blast misfires and unplanned shutdowns.
But the copper and gold miner was upbeat about prices, saying copper supply remains constrained, demand strong, and prices expected to be about $US2.50/lb next year.
OZ Minerals expects copper output of between 85,000 and 90,000 tonnes for the year, down from the previous range of between 85,000 and 100,000 tonnes, it revealed on Thursday.
Guidance for gold concentrates remains at 60,000 to 70,000 ounces, the company’s third quarter production report to the stock exchange showed.
“We had some challenges during the quarter in both the pit and on the plant,” OZ Minerals chief Terry Burgess told a media teleconference.
“We had a series of misfires of our explosives in the pit, which has impacted on the ore production that we had.
“We also had some issues in the plant with regard to the mill,” Mr Burgess said, adding that most problems were now resolved.
Third quarter copper production at Prominent Hill, OZ Minerals’ flagship operation, was 28,316 tonnes, up from 27,159 tonnes in the second quarter.
Third quarter gold production was 21,091 ounces, up from 18,351 ounces in the previous quarter.
Mr Burgess said recent consensus figures from commentators put the prices of copper at a healthy $2.50/lb.
“We think that the supply side continues to come under pressure with the difficulties people are having around the world and strikes in certain places like in Chile,” Mr Burgess said.
He said company plans for underground mining were progressing well, with stgelopment expected to begin next year and first production from those activities due in 2013.
Analysts had mixed reactions to the report.
“The stock has had a terrific run and the production report probably doesn’t justify the recent share price increase,” said Pengana Capital fund manager Tim Schroeders.
“Scaling back the top end of guidance is not a disaster, but probably not warranting a premium, given the continued hiccups,” he said.
Resources analyst from RBS Morgans, Lydon Fagan, said he thought the report was fairly positive.
“The highlight for me was their cost performance,” Mr Fagan said.
“Costs remained low, despite the rise in the Australian dollar and the maintenance impacts,” he said.
Total cash costs for the three months to September 30 were 79.5 US cents per pound.
OZ Minerals also said visual evidence from exploration drill cores had been positive and it had 22 targets.
Mr Burgess said the company expected to reveal on November 30 its forward strategy.
“In the next quarter we want to see the mine and the mill going up to the name plate capacity of two million tonnes per year,” Mr Burgess said.
OZ Minerals, the result of a company merger between miners Oxiana and Zinifex last year, retains Prominent Hill as its only key asset after selling off most assets to get out of debt earlier this year.
At 1410 shares in OZ Minerals were trading down two cents, at $1.29.