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Prominent Hill Oz Minerals (OZL)

Post a Comment August 29, 2009 – 6:05 am |   | Permalink |  Print This Post |

Thanks to Slumdog, we had a quick look at OZ Minerals - we will need to crunch more numbers and wait to see how Prominent Hill performs. Based on 2 months of operations:

• Prominent Hill’s operating profit before tax is $19 mil since May 1 2009. If this was until 1 July, that would be a full two months of operation. Annualised, this would bring us to approximately $120 mil profit before tax. Since this is the initial phase of production, applying a 30-50% ramp up in production (a very generous assumption), profit before tax estimates are  $156-180 mil.
• Number of shares outstanding: 3121 mil shares
• Market cap at time of writing ($1.05 per share): $3.28 billion
• Cash: $1 bil
• Total liabilities: $332 mil
• Enterprise value :$2.6 billion
• Other asset (apart from prominent Hill): Toro (49%) - worth about 49 mil at current prices
• Actual PE (based on Prominent Hill operations at CURRENT ramp up production rates without 50% increase): 32
• “50% ramp up scenario” PE (Estimate NPAT 100-130 mil for full year of operations): 19.7 - 25.6

Prominent Hill ACTUAL Production Statistics (rounded up)

• 15500 tonnes Copper / month (annualised: 186000 tonnes)
• 12000 ounces Gold / month (annualised: 144000 ounces)
• 70000 ounces Silver / month (annualised: 840000 ounces)

Assumptions:

• 50% ramp up of production at Prominent Hill - PBT of 150-180 million for full year.
• Average price of Copper realised at $2.20/lb

Conclusion

• Current annualised PE: 32
• 50% ramp up of production, forecast PE: 19.7-25.6
• Cash $1 billion (one third of market cap is backed by cash)
• Upside potential: investment opportunities as a cashed up producer, increase in price of gold/silver/copper.
• We will opt to sit out for now. The PEs above are a touch high for our liking.

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Prominent Hill: Summary