OZ Minerals share price higher following $1.7 billion thumbs up

A miner in hardhat and high visibility clothing makes a thumbs up symbol against a blue sky.

A miner in hardhat and high visibility clothing makes a thumbs up symbol against a blue sky.The OZ Minerals Limited (ASX: OZL) share price is edging higher today.

In morning trade, the copper producer’s shares are up almost 1% to $26.25.

This compares favourably to the ASX 200 index, which is down over 1% in early trade.

What’s going on with the OZ Minerals share price today?

Investors have been bidding the OZ Minerals share price higher following the release of a major announcement.

According to the release, the OZ Minerals board has given its final investment approval to develop its fourth operating asset. This will be the West Musgrave copper-nickel project in Western Australia and will come with a direct capital investment of approximately $1.7 billion.

In order to fund the investment, OZ Minerals has entered into credit-approved commitment letters with key relationship banks to provide a new $1.2 billion, 18-month syndicated term loan facility.

Management believes that the syndicated debt facility allows the company to maximise stakeholder value by commencing development of the project while optimising the final funding mix, which may come from a range of sources.

It has suggested that these could include existing debt facilities, long-term infrastructure leases, and the potential to sell a minority interest in the project to a strategic partner. The latter follows significant in-bound expressions of interest from parties with a strategic interest in modern minerals over the last ~6 months.

It certainly appears to be worth the investment. Management expects average nickel production of 35,000 tonnes per annum and average copper production of 41,000 tonnes per annum during the first five years. This is expected to underpin average post tax net cash flow of $280 million to $340 million a year.

Management commentary

OZ Minerals Chief Executive Officer, Andrew Cole, said:

Investment approval for West Musgrave unlocks one of the largest undeveloped nickel projects in the world and, with expected lowest quartile costs, it is set to generate ~$9.8 billion7 undiscounted cashflow over its 24-year operating life.

Along with the support we have received from the Ngaanyatjarra people and Western Australian government, with all key regulatory approvals now in place, a number of our relationship banks have provided credit approved commitment letters for a new $1.2 billion syndicated facility to support development of the West Musgrave Project in addition to our existing facilities.

We are also considering the option to selldown a minority interest in the Project to a strategic partner building on the significant in-bound interest we have received over the past six months.

This sentiment was echoed by OZ Minerals chair, Rebecca McGrath. She said:

The Board’s approval of West Musgrave is a fundamental step towards realising OZ Minerals’ strategy to evolve into a modern minerals producer set to supply global copper and nickel markets as the world moves into the de-carbonisation and electrification era.

The post OZ Minerals share price higher following $1.7 billion thumbs up appeared first on The Motley Fool Australia.

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