EARNING THE POTENTIAL TO GROW STRATEGY RELEASE DISCLAIMER This - - PowerPoint PPT Presentation
EARNING THE POTENTIAL TO GROW STRATEGY RELEASE DISCLAIMER This - - PowerPoint PPT Presentation
EARNING THE POTENTIAL TO GROW STRATEGY RELEASE DISCLAIMER This presentation has been prepared by OZ Minerals Limited (OZ Minerals) and consists of written materials/slides for a presentation concerning OZ Minerals. By
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DISCLAIMER This presentation has been prepared by OZ Minerals Limited (“OZ Minerals”) and consists of written materials/slides for a presentation concerning
OZ Minerals. By reviewing/attending this presentation, you agree to be bound by the following conditions: No representation or warranty, express or implied, is made as to the fairness, accuracy, or completeness of the information, contained in the presentation, or of the views, opinions and conclusions contained in this material. To the maximum extent permitted by law, OZ Minerals and its related bodies corporate and affiliates, and their respective directors, officers, employees, agents and advisers disclaim any liability (including, without limitation any liability arising from fault or negligence) for any loss or damage arising from any use of this material or its contents, including any error or omission therefrom, or otherwise arising in connection with it. Some statements in this presentation are forward-looking statements within the meaning of the US securities laws. Such statements include, but are not limited to, statements with regard to capacity, future production and grades, projections for sales growth, estimated revenues and reserves, targets for cost savings, the construction cost of new projects, projected capital expenditures, the timing of new projects, future cash flow and debt levels, the outlook for minerals and metals prices, the outlook for economic recovery and trends in the trading environment and may be (but are not necessarily) identified by the use of phrases such as “will”, “expect”, “anticipate”, “believe” and “envisage”. By their nature, forward- looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be outside OZ Minerals’ control. Actual results and developments may differ materially from those expressed or implied in such statements because of a number of factors, including levels of demand and market prices, the ability to produce and transport products profitably, the impact
- f foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic conditions in
relevant areas of the world, the actions of competitors and activities by governmental authorities, such as changes in taxation or regulation. Given these risks and uncertainties, undue reliance should not be placed on forward-looking statements which speak only as at the date of the
- presentation. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, OZ Minerals does not
undertake any obligation to publicly release any updates or revisions to any forward looking statements contained in this presentation, whether as a result of any change in OZ Minerals’ expectations in relation to them, or any change in events, conditions or circumstances on which any such statement is based. Certain statistical and other information included in this presentation is sourced from publicly available third party sources and has not been independently verified. All figures are expressed in Australian dollars unless stated otherwise. This presentation should be read in conjunction with the Quarterly Report released today. Production Target - A proportion of the production targets for 2016, 2017 and 2018 on page 16 is based on non reserve material. There is a low level of geological confidence associated with inferred or unclassified mineral resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised. The Reserves and Resources underpinning the production targets for 2016, 2017 and 2018 on page 16 have been prepared by a Competent Person in accordance with the JORC Code 2012.
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DISCLAIMER Prominent Hill Mineral Resource and Ore Reserve estimates
The information in this presentation that relates to the Prominent Hill Mineral Resource estimate and the Prominent Hill Ore Reserve estimate is extracted from the report entitled “Annual Resource and Reserve Update for Prominent Hill” which was released to the market on 20 November 2014 and is available to view on www.ozminerals.com/operations/resources--reserves.html. The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources and Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement. Carrapateena Mineral Resource estimate The information in this presentation that relates to Carrapateena Mineral Resource estimates is extracted from the report entitled “Annual Carrapateena Mineral Resource Update and Mineral Resource Explanatory Notes as at 30 June 2013” which was released to the market on 28 November 2013 and is available to view on www.ozminerals.com/operations/resources--reserves.html. The company confirms that it is not aware
- f any new information or data that materially affects the information included in the original market announcement and, in the case of estimates
- f Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement
continue to apply and have not materially changed. The company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement. Carrapateena Ore Reserve estimate The information in this presentation that relates to Carrapateena Ore Reserve is extracted from the report entitled “Carrapateena Ore Reserves Explanatory Notes as at 15 August 2014” which was released to the market on 18 August 2014 and is available to view on www.ozminerals.com/operations/resources--reserves.html. The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Ore Reserves , that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.
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EARNING THE POTENTIAL TO GROW
A NEW STRATEGY – FOCUSED ON VALUE CREATION
- Safety – Safe work above all else, strive for a
workplace with no injuries.
- Values – Integrity and strong governance in all
aspects of the way we work.
- Capital discipline – Commitment to reliably
and predictably deliver with disciplined capital deployment. How we will work
- Lean business – Fit for purpose today with an
agile and flexible approach to opportunity.
- Customer focus – Preferred supplier of mineral
products to customers.
- Copper core – Foundation built of copper with
base metals and gold opportunistically pursued.
- Multiple assets – Build and maintain a portfolio
- f valuable, risk managed cash generating assets.
What we will focus on
EARNING THE POTENTIAL TO GROW
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SAFETY
- Safety performance in 2014 was not acceptable.
- Safety performance vs our peers demonstrates
clear room for improvement.
- No risk appetite to place employees and
contractors in harm’s way.
- All activities must have appropriate controls in
place with strong leadership present.
- Program of actions focused on:
- Site safety acceleration program.
- Mental health awareness.
- Leadership development.
- Focus on significant incidents.
- Increased risk awareness.
WE WILL HAVE A WORKPLACE WITH ZERO HARM TO OUR PEOPLE
Performance vs peers Safety performance
* CY or FY 2014 comparison, Source: Company data, Citibank. Selection of peers includes PanAust, Sandfire, Illuka, Newcrest, Fortescue, BHPBilliton. 2 4 6 8 10 Peer 1 OZ Minerals Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 TRIFR*
5 10 15 20 25 2010 2011 2012 2013 2014 TRIFR LTIFR
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VALUES
WE MAINTAIN OUR COMMITMENT TO STRONG VALUES AND GOVERNANCE
- We will always stay true to our values of
integrity, respect, action and results.
- We will always behave in an ethical and
transparent manner.
- We recognise that we play a key role in local
communities and continue to actively support and participate in the local community to strengthen our social licence to operate.
- We will increase our engagement with our
stakeholders.
- We will constantly strive for local win-win
solutions through employment, local business development and partnerships.
- Winner 2015 South Australian Premiers
Community Excellence Awards in Mining and Energy: OZ Minerals Excellence in Leadership, Women in Resources. Commendation: Excellence in Supporting Communities.
Provide opportunities for local communities
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CAPITAL DISCIPLINE
CAPITAL WILL BE DEPLOYED IN THE MOST VALUABLE MANNER
- We will continue to apply a highly
disciplined approach to use of capital.
- Internal and external growth options must
compete for capital vs. shareholder distributions.
- Strong balance sheet must be engaged to
facilitate growth options.
- Shareholder distributions must be simple,
transparent and consistent.
Uses of Capital
External growth Internal growth Shareholder distributions Capital discipline
STRATEGY DELIVERY PLAN
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DEFINED PATH TO CREATE VALUE
We have a crystal clear and very achievable plan to grow OZ Minerals in a disciplined value accretive way. Our engine room in Prominent Hill will deliver significant reliable cash flow to fuel the creation of a diversified operational portfolio. Our approach will be underpinned by fundamentals, a rigorous understanding of risk and a relentless focus on value creation.
LEAN BUSINESS MULTIPLE OPERATIONS
‘Vision without execution is Hallucination.’ Thomas Edison
EARNING THE POTENTIAL TO GROW
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Assess
- New approach to managing risk.
- LOM value creation.
- Strengthen and embed lean accountability.
Identify
- Continuous reinvention and improvement.
- Supplier optimisation and value extraction.
Implement
- Clear responsibilities and accountabilities.
- Safe work is non-negotiable.
- Our values will govern all our behaviours.
WE HAVE ALREADY MADE SIGNIFICANT INROADS, BUT MORE TO COME
DEVELOPING A COST CULTURE
LEAN BUSINESS
- We’ve already taken decisions to remove
˷$40m from the business with favorable market conditions removing an additional ˷$8m
- Relocation of Corporate office to Adelaide and
structure simplification
- ~$10 million annualised savings (~+Net $5 million
expense in 2015)
- Restructure and leaner Prominent Hill
- ~$9.5 million in annualised savings (neutral in 2015)
- Reduction in exploration expenditure and
refocused activity
- $10 million saving
- Reduction in sustaining capital
- $6 million saving
- Resequencing of Malu UG resource drilling
- $5 million saving
- Market based, diesel and power
- $8 million saving
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LEAN BUSINESS
RELOCATION PROCESS RELOCATION OUTCOME
April
- Executive team recruited.
- Broader recruitment commenced.
May-June
- Handover plan commenced.
- Staged redundancies in Melbourne.
July - August
- Handover completed.
- Final redundancies in Melbourne.
- Functional closure of Melbourne office.
- Lean flatter decentralised business model.
- Low cost, agile and decisive operating rhythm.
- Risk mitigation strategies in place.
- Clear corporate knowledge handover requirements.
- Net 2015 cost ~$5 million.
- Annualised savings of ~$10 million.
NEW FLATTER CORPORATE STRUCTURE WITH MATERIAL COST SAVINGS
CEO Andrew Cole
CFO Andrew Coles Successor identified Operations Manager Brian Kilgariff Head of Corporate Affairs Peter Hannam Successor identified Head of Human Resources Dorothy Tonna Successor identified Head of Project Services Brett Triffett Head of Corporate Development Richard Hedstrom Head of Legal Helen Dyson Successor identified
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LEAN BUSINESS
- Revised open pit mine plan involves accelerated
mining rates through to mid-2017 when we switch the fleet to our smaller (primarily OZ
- wned/Thiess operated) mining fleet.
- Current end of open pit mine life is 2018, but
cash will be realised from stockpiles beyond this.
- Open pit performance significantly improved
with 2 excavators + 32 trucks (Avail. > 70%).
- Predictable and reliable production paramount
with clear accountabilities, investment in monitoring and modeling capabilities, and clear risk and control framework.
- Monitoring of cover sequence for movement
will continue, unloading overburden will continue to de –risk the pit in 2015 (expenditure estimated at $4m).
- Continued constructive discussions with Thiess
to reduce ongoing costs. Current contract drives increasing unit costs going forward.
Accelerated mine plan implications Implication Outcome Lowest total mining cost over LOM Highest NPV Working capital investment in ROM De-risk open pit Flexibility in concentrate blend
ACCELERATED OPEN PIT MINE PLAN CREATES VALUE, BUT TIES UP CASH INITIALLY
Open pit movement and strip ratios
Strip Ratio: 4.6 2.8-3.2 1.0-1.2 0.4-0.6 0.1-0.4 20 40 60 80 2014 2015 2016 2017 2018 Mt Waste Ore
✔ ✔ ✔ ✔
x
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MALU UNDERGROUND REVIEW RECONFIRMS VALUE ACCRETIVE
LEAN BUSINESS
- First ore from Malu UG delivered on schedule
in Q4 2014.
- Malu UG business case has been reconfirmed
to deliver incremental value to Prominent Hill ₋ Long life. ₋ Synergies across site, specifically with Ankata UG and processing. ₋ Current production assisting to offset remaining capital expenditure.
- Focus for Ankata and Malu UG in 2015 is to
improve development rates.
- Stockpile of open pit ore and continual mining
from UG will allow efficient use of the plant well past the closure of the open pit.
- Malu Deeps provides longer term optionality
subject to outcomes of 2015 scoping study.
Increased value & extended life through UG mining
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LEAN BUSINESS
Copper production Range 2015 Copper production 110,000 to 120,000 tonnes 2016-2017 Copper production 105,000 to 115,000 tonnes 2018 Copper production 90,000 to 100,000 tonnes Gold production Range 2015-2018 Gold production 100,000 to 110,000 ounces Production*
- Copper ore will be priority milled, high
grade UG copper ore first then OP copper
- re.
- Copper production above 105,000 tonnes
until 2018.
- Gold production above 100,000 ounces until
2018.
- Ankata, Malu UG and open pit gold
stockpiles will facilitate production 2020+. * Refer to Production Target cautionary statement on page 2.
LONG TERM GUIDANCE REFLECTS START OF STRATEGY EXECUTION
Production targets based on; Reserves Proven material 35.6% Reserves Probable material 56.8% Resources Measured material 1.0% Resources Indicated material 0.6% Resources Inferred material 3.5% Non classified material 2.5% Previously multi year production outlook issued pre Malu Underground reserve. Further information on Prominent Hill Resources and Reserves is available in the Annual Resource and Reserve Update for Prominent Hill released on 20 November 2014 which is available
- n the OZ Minerals website at http://www.ozminerals.com/operations/resources--
reserves.html and in the OZ Minerals 2014 Annual Report.
EARNING THE POTENTIAL TO GROW
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CUSTOMER FOCUS
A SOLUTION TOOL KIT TO LEVERAGE A GLOBAL CONCENTRATE MARKET
- Ongoing customer base diversification into
smelting and blending markets to optimise concentrate value.
- Continued management of uranium through
both technical and commercial solutions.
- As planned, approximately 90% of 2015 sales
committed under long term contracts with long term customers.
- Our integrated value chain from mine to market
allows OZ Minerals to anticipate and respond to customer driven market changes.
- Consistent with prior periods full disclosure of
selling costs included in C1 breakout. Understand market conditions and have strong relationships with customers
- Ore stockpile
management
- Jameson cell
- Customer
diversity
- Blending
Technical solution Commercial solution Customised qualities to meet customer needs Maximise value at each stage Robust reliable mine plan with strong understanding of mineralogy
Integrated value chain
EARNING THE POTENTIAL TO GROW
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COPPER CORE
- Copper is a global metal exposed to
infrastructure and consumer growth – with no significant substitution risk.
- Tightening supply growth post 2016,
with exploration budgets reduced globally.
- Lower A$ has offset the recent reduction in
US$ prices, providing Australian producers with an advantage.
- A$ pricing vs US$ pricing spread has increased
from mid 2014 onward as the A$ has fallen.
Source: WoodMackenzie (March2015)
COPPER OUTLOOK HAS PROVED MORE ROBUST THAN OTHER COMMODITIES
Average A$ Cu price 28% above US$ in 2015 Tightening global copper mine supply growth
Source: Bloomberg
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- Significant Reserves and Resource base.
- Revised exploration program reflects significant
mineral inventory already available.
- Current Prominent Hill Reserves support mining
into mid 2020s.
- Current Prominent Hill Resources allow studies to
expand and extend life, and create further value.
- In 2015, further work will occur to create value
from 800Mt Carrapateena Resource:
- Rail Studies
- Hydromet Studies
Prominent Hill1 Carrapateena2
Significant Ore Reserves and Minerals Resources*
COPPER CORE
OZ MINERALS HAS A SIGNIFICANT COPPER RESOURCE BASE TO LEVERAGE
*Further information on OZ Minerals reserves and resources can be found at http://www.ozminerals.com/operations/resources--reserves.html and in OZ Minerals Annual Report 2014.
1 Refer to page 3 for compliance statement 2 Refer to page 3 for compliance statement
EARNING THE POTENTIAL TO GROW
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MULTIPLE ASSETS
- OZ Minerals has significant organic growth
- ptions with a strong proven team;
− Carrapateena (Khamsin and Fremantle Doctor) − Malu Deeps − Jamaica
- Current environment is bringing numerous assets
to market.
- Internal discipline requires strong due diligence,
clear pathway to cash and thorough risk management frameworks.
- Activities focused on advanced development
projects and producing assets.
- New revised OZ Minerals investment criteria and
existing skill sets opens the window for other
- pportunities.
TODAYS MARKET CONDITIONS ENABLE VALUE ACCRETIVE ACQUISITIONS
Pipeline Market conditions
50 100 150 200 250 500 1,000 1,500 2,000 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 MSCI Global Index Bloomberg Commodity Index Source: Bloomberg
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MULTIPLE ASSETS
- Target size, country listing and mine life criteria
removed – focus on value and risk only.
- Investment decisions made on a case-by-case
basis.
- Thorough understanding of risks critical.
− zero tolerance for safety or personnel risk − zero tolerance for values or governance risk
- “Value extraction” approach to assets in
copper, other base metals or possibly gold – where we can leverage our skills in marketing, processing, and balance sheet strength.
- Assets which may be ‘too small’, non core or
distressed can allow OZ Minerals to leverage expertise.
- A portfolio of many small or a few large are
equally acceptable.
A NEW INVESTMENT APPROACH OPENS DOOR FOR NEW OPPORTUNITIES
Retain historic discipline and analysis methodology Expanded set of assets in market with realistic pricing Overlay competitive skills sets to derive value Larger investment set Leverage competitive advantage to new investment criteria
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- The Gawler Craton is a world class mineral district
and OZ Minerals has numerous resources (Carrapateena, Khamsin, Fremantle Doctor) and new targets in our extensive (>6,500km2) exploration lease.
- Carrapateena PFS details significant value (>$1B)
from long life low cost mine.
- All activities in 2015 focused on increasing value and
de-risking Carrapateena .
- Unique SA Government partnership to assist with
Hydromet and infrastructure solutions.
- Studies underway
- Hydromet to upgrade concentrate to ~60%
- Rail to transfer capital cost and improve IRR
- Capital review to ensure lean project
- Large size of Carrapateena means it will not be OZ
Minerals’ only operating asset and will only be developed with a partner.
GAWLER CRATON HAS THE PEDIGREE OF A WORLD-CLASS COPPER DISTRICT
MULTIPLE ASSETS
Gawler Craton – regional solutions
EARNING THE POTENTIAL TO GROW
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VALUE CREATION
NEW DIVIDEND POLICY REFLECTS STRATEGY AMBITIONS
New dividend policy
Consideration of dividend payments will be made subject to;
- Legal and prudential requirements
- Investing or balance sheet activity required
“Endeavour to pay a minimum of 20% of net cash generation not required for investing or balance sheet activity”
- Our new dividend policy represents a
disciplined approach to capital management.
- OZ Minerals has a strong growth focus.
- The dividend policy will allow transparent and
consistent distributions to shareholders.
- The majority of cash generated will be invested
in the company to enable this strategy.
- OZ Minerals currently expects to be paying tax
from Prominent Hill earnings in 2017.
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VALUE CREATION
OUR STRATEGY WILL DRIVE VALUE CREATION
Clear value proposition Reliable and strong cash generation from optimised Prominent Hill Internal and external growth options to meet strategic goal of multiple cash generating assets Clear and reliable dividend policy Superior returns to shareholders Strong balance sheet
- A clear and constant focus on delivering value
for our shareholders is at the forefront of the strategy.
- Each decision we make will be analysed
against a clear value creation criteria.
- The process of understanding risk and linking
risk with value will be built into all business processes.
EARNING THE POTENTIAL TO GROW
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CREATING A MODERN MINING COMPANY
A NEW BUSINESS MODEL IS REQUIRED TO DELIVER THIS NEW STRATEGY
Value creation: A growth company creating long term value
- Declining safety record
- High overhead costs
- Centralised business
- Unpredictable production
- Insufficient cost culture
- Constraining investment
criteria
- Mismatched exploration
search criteria
Prior
- Safe
- Lean and decisive
- Transparent, open and
collaborative
- Decentralised: corporate
delivers the strategy and assets run the operations
- Value decisions to
maximise cash realisation early
- Cost culture
- Change risk profile with
increased risk in some areas (e.g. plant) and less in others (e.g. open pit).
Lean
- Removed target size and
mine life restrictions
- Expanded opportunity
window to Copper, Base Metals and Gold
- Removed ‘approved
country’ list and focus on asset risk only
- Carrapateena: focus on
improving value and decreasing risk to attract partners for development
Multiple assets Clear goals and accountabilities to drive strategy delivery Lack of accountability culture
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DEFINED PATH TO CREATE VALUE
Completed Underway
New strategy and new targets Relocating Corporate office Restructuring whole of business Divested Sandfire Suspend Fremantle Doctor exploration Revised mine plan. Recognised favorable external market New investment criteria defined Commenced active due diligence Improve safety performance Strengthen and embed lean accountability New Adelaide corporate team Further de-risk Malu Open Pit Grow concentrate ‘toolbox’ Supplier optimization and value extraction Expand pipeline of opportunities Add new assets/operations to portfolio
Prominent Hill Malu Deep study
Carrapateena value adding studies Partner for Carrapateena Disciplined exploration activities LEAN BUSINESS MULTIPLE OPERATIONS ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
‘Vision without execution is Hallucination. ’ Thomas Edison
✔
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SUMMARY
- A strong first quarter production result
reflecting the significant improvements in productivities within the Malu Open Pit.
- A new and fully endorsed strategy defined
as “earning the potential to grow”.
- We have a clear execution plan.
- We will deliver reliable results and be
accountable for our actions.
- We will assess all actions on a value basis.
- We will take risk where value equation is
clear.
- Unique opportunity with strong balance
sheet, favourable markets and the support
- f all stakeholders to grow the business.