Oz Minerals takes asset haircut
OZ Minerals’ valuation of its Prominent Hill mine is expected to be cut by more than $200 million, the company forecast today.
Citing falling copper prices and exchange rates, Oz Minerals said it anticipated “an estimated non-cash charge for asset impairment in the range of $200 million to $240 million (after tax)”.
“This estimate is subject to further work to confirm the amount, to approval by the board and to review by the auditors as part of the process of finalising the financial statements as at 30 June 2013, which are expected to be announced on 14 August, 2013,” the compnay said in a statement to the stock exchange today.
“The accounting standards require an asset impairment test at this time as the market capitalisation of the company is lower than the carrying value of assets.
Oz Minerals said contributing factors to the impairment included lower expected prices for copper and gold, lower A$/US$ exchange rate forecasts, higher asset values as a result of capitalisation of work towards developing the new Malu Underground mine, capitalisation of deferred waste movements in the Malu open pit which are currently at a peak level, and capitalisation of the work conducted to remediate the south wall overburden slip in the open pit.
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“As a result, the carrying value of assets as at 30 June prior to impairment are expected to be in a range of $1,585 million and $1,625 million,” the company said.
“The impairment assessment has also considered further work on the development concepts for the potential new Malu Underground mine, leading to improved confidence of its expected value, and which has largely confirmed the value of the previous assessment.
“It should be noted that this work, which includes further drilling and stope design, is ongoing and is not expected to be completed until later in 2013.”
The company pointed to previous asset value adjustments in its decision to make it a non-cash change.
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“In December 2008, an asset impairment charge of $251 million (after tax) was taken against the Prominent Hill asset, following the impact on commodity price outlook following the GFC.
“This impairment was subsequently reversed in June 2010 when the outlook for commodity prices improved.
“As noted, the anticipated asset impairment charges are non-cash in nature and significant remaining work is required to finalise the amount.
“As the company has no drawn debt,this will have no impact on its gearing level.”
The company last week cut its production guidance for 2013 to between 120,000 ounces to 130,000 ounces of gold, from the previous range of 130,000 to 150,000 ounces, as a result of the landslip.
Shares in OZ Minerals dropped more than than seven per cent last Thursday, after the lower production guidance was announced and fell a further four per cent Friday.
Oz Minerals opened at $4.13, well off its price of $7.50 six months ago.
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