OZ Minerals is on the hunt for additional copper projects to complement its flagship Prominent Hill mine.
The company’s chief executive outlined plans to rebuild the “project pipeline” in an address to the Sydney Mining Club today.
He said the company would prefer projects that could deliver a second source of production in the near-term.
“We have a business development team who are working around the clock to identify these opportunities,” he said.
“We have looked at three to four projects in great detail, including due diligence, and in some cases we made non-binding offers.
“This is against a backdrop of many, many others that we have reviewed.”
These new acquisition plans are the latest chapter in the resurgence of OZ Minerals.
Only 18 months ago, the company was struggling severely to repay loan debts totalling $987 million.
However, OZ managed to repay its debts by the middle of 2009, thanks to the sale of all of its assets bar Prominent Hill, to China’s Minmetals Group for US$1.2 billion.
“Our focus has been on re-building a project pipeline – the closet was left fairly bare after the asset sales in 2009,” Burgess said.
“I have already talked about Prominent Hill and the fact that our greatest opportunity is both extending the life of the mine and further exploration in the Prominent Hill area and region.”
OZ Minerals two weeks ago acquired a 19.9% stake in Sandfire Resources for $100 million.
“This is an investment entirely consistent with our strategy and provides exposure to Sandfire’s high-quality De Grussa copper discovery in Western Australia,” Burgess said.
“Sandfire made the discovery at De Grussa early last year which made the whole world, well our world anyway, sit up and take notice.
“In February 2009, Sandfire announced a JORC Resource of 7.1 million tonnes at 5.2% copper and 1.9 grams per tonne of gold which covered Degrussa and Conductor 1 deposits.
“This was updated last week to 9.6 million tonnes at 5.5% copper and 1.8 grams per tonne of gold.”
Burgess said these updated results did not include the additional discoveries at Conductor 5, which contained intercepts including 10 metres at 7.8% copper and 3.25 grams per tonne gold and 10.2 metres at 9.2% copper and 4.1 grams per tonne gold.
“We had been interested in Sandfire for some time but could not find an entry point,” Burgess said.
“However in recent weeks we saw an opportunity to take this position through some major shareholders and institutional investors.
“Korean steel maker Posco is also a significant shareholder with 17% and another Korean company LS Nikko, the world’s third largest copper smelter group, intends to take 12.5% through a placement.
“We know both of these groups and are pleased to be fellow shareholders.
“Their desire to secure potential future off-take from the project is a good sign for the tightness of the copper market and for the outlook for the project.”
Burgess likened the company’s approach to the acquisition to a marathon rather than a 200 metre sprint.
“As you would expect we have been asked why we didn’t take over the whole company,” he said.
“There is still drilling to do, permits to be achieved, studies to be done, not to mention construction and then of course further exploration.
“Obviously, having spent approximately $A100 million on this purchase we still have quite a bit of cash in the bank for further acquisitions.”
Burgess said the company would take a long-term view to further acquisitions.
“We know that not all of these projects are going to come into production immediately but they are critical for the future of our company,” he said.
“By keeping the pipeline stocked for the next 10, 15 and 20 years we will be in a great position in the long-term.”
He said the company signed an agreement with IMX Resources, which expanded its exploration ground to 7000 square kilometres.
The company also has a development joint venture with Azure Minerals for the San Eduardo property in Mexico.
The San Eduardo project is 200 square kilometre Greenfield site considered prospective for porphyry copper deposits, Burgess said.