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OZ Minerals (OZL) - Production Strong, But A Wall Of Worry

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OZ Minerals (OZL) released June Q production of 28.1kt copper and 32.1koz gold at an all-in sustaining cost (AISC) of US$1.15/lb (vs 25.1kt Cu, +12% and 26.1koz Au, +23% at US$1.35/lb for the March Q). Production rebounded after a rain affected Q1 CY17 and is on track to meet CY17 guidance of 105-115kt copper and 115-125koz gold. Of concern was the mention of a potential pit stability risk in the south wall of the Malu open pit. In 2012/2013, a failure in the upper south wall disrupted production and severely impacted the profitability of the mine. OZL retains a strong balance sheet with a $31m increase in cash QoQ (no debt) after $22m for Carrapateena development, a $20m addition to ore inventory and a $69m tax payment. BUY maintained with a $8.20 price target.  

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