OZ Minerals says pandemic crisis in Brazil threatens copper output

OZ Minerals warns soaring Covid cases could hit its copper output in Brazil, where a fifth of its workforce is infected.

Miners at OZ Minerals' Pedra Branca project in Brazil. Picture: Supplied.

OZ Minerals says soaring coronavirus cases could have a material impact on its Brazilian copper operations, with the miner flagging the loss of output amid the “deteriorating” situation in the pandemic-wracked nation.

OZ Minerals on Thursday maintained its annual production guidance of 120,000 to 145,000 tonnes of copper output for the year.

It said Australian operations at Prominent Hill and Carrapateena put in a solid performance in the March quarter, although the company expected higher annual average costs in 2021 due to the strengthening Australian dollar and a lower gold price.

Prominent Hill produced 15,165 tonnes of copper in the quarter, down 4 per cent from the December period, with Carrapateena output off 10 per cent to 9799 tonnes.

But the accelerating impact of the pandemic in Brazil has hit its Carajás operations, with about 20 per cent of the company’s Brazilian workforce infected with the virus.

Carajás produced 1878 tonnes of copper and 1469 ounces of gold during the quarter, down from 2196 tonnes of copper and 1847 ounces of gold in the December period.

Almost 375,000 Brazilians have died from COVID-19, according to recent reports, with almost half of the total coming this year. OZ Minerals managing director Andrew Cole said the impact of the pandemic meant its Carajás operations may not meet annual output guidance.

“During 2020 the team in Brazil managed to maintain operational plans through the disruptive environment. With conditions still deteriorating we expect development progress at Pedra Branca to be impacted which may result in Carajás East Hub production not meeting annual guidance (10,000-15,000 tonnes of copper), however this is not expected to impact group 2021 guidance.

Mr Cole told The Australian Brazil’s COVID-19 crisis had not raised any doubts about the long term value of OZ Minerals assets in the country, acquired through the $440m takeover of Avenco Resources in March 2018.

‘The fundamentals of Carajás, and the investment proposition, are very sound, so we’re not worried about the fundamentals underlying our investment thesis in the Carajás. This COVID-19 overlay is something we didn’t plan for, and I’m sure nobody else did,” he said.

RBC Capital Markets analysts said the results were weaker than expected, with costs above expectations and production largely in line.

“OZL finished the quarter with $19m net cash, we had expected $32m. Cost appears to be the key driver of the cash flow miss,” RBC analyst Kaan Parker said in a client note on Thursday.

OZ Minerals lifted its annual cost guidance from a range of $US1.10 to $US1.25 per pound of copper produced, to a new range of $US1.30 to $US1.45 a pound.

Mr Cole said the upwards revision of the company’s cost guidance was entirely related to the strength of the Australian dollar, and a lower gold price, and did not reflect any underlying lift in the company’s operating costs.

OZ Minerals shares closed down 27c, or 1.1 per cent on Thursday, at $24.35.