The Oz Minerals Limited (ASX: OZL) share price has edged slightly higher in today’s trade. This comes following the company’s announcement it plans to acquire Cassini Resources Ltd (ASX: CZI). Under the transaction, which will take place via a scheme of arrangement, Oz Minerals will acquire all the share capital of Cassini Resources. This will consolidate the company’s ownership of the West Musgrave Project and surrounding tenements to 100%.
What does Oz Minerals do?
Oz Minerals is an Australian-based mining company with a focus on copper. It owns and operates the Prominent Hill copper-gold mine and the Carrapateena advanced exploration copper-gold project. Both projects are located in South Australia. The Oz Minerals share price has recovered strongly from its March low of $5.99, rising 74% to its current price of $10.43.
In the first quarter of 2020, Oz Minerals produced 20,231 tonnes of copper and 55,606 ounces of gold. The company has provided full-year production guidance of 83,000-100,000 tonnes of copper and 207,000-234,000 ounces of gold. It ended the first quarter with net debt of $89 million. However, the Aussie miner is expected to move to a net cash-positive position in Q2 and remain there for the rest of the year. Net debt was $2 million as at 14 April which is good news for the Oz Minerals share price.
More about the acquisition
The acquisition will give Oz Minerals 100% ownership of the West Musgrave project. This will optimise the development approach, timing, and funding for the project. The West Musgrave Project, located in Western Australia, is Australia’s largest undeveloped copper nickel deposit. A pre-feasibility study released earlier this year estimated the project had a Net Present Value of $800 million and an operational life span of ~26 years.
Regarding the acquisition, Oz Minerals’ CEO Andrew Coles said, “This is a promising project with strong sustainability credentials both in terms of the copper and nickel to be mined, being critical inputs for the renewable economy, and also in relation to its low carbon footprint with some 80% of power generated through renewable sources including solar and wind”.
What’s the outlook for the Oz Minerals share price?
Oz Minerals responded to the COVID-19 pandemic by identifying $150 million in cost savings and deferring all but essential metal production activities. The miner is heavily exposed to copper and gold prices which have moved in opposing directions of late. The copper price came under pressure as a result of reduced global activity due to COVID-19, falling over 12.5% in March. It has since substantially recovered, however, and should be a much needed commodity as the world rebounds from the crisis. The gold price has climbed over the course of 2020, reaching levels not seen since 2013. Only time will tell whether these trends bode well for the Oz Minerals share price moving forward.
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Motley Fool contributor Kate O’Brien owns shares of OZ Minerals Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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