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OZ Minerals (OZL) - Low Risk Block Cave Strategy

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OZ Minerals (OZL) has released a high-level Scoping Study to transition the Carrapateena mine from sub-level cave (SLC) to block cave (BC) mining from ~2025. This enables OZL to extract a larger portion of the overall resource, increase annual production and lower all-in sustaining costs (AISC). The BC operation will increase mine output to 10-12Mtpa producing 105-125Kt Cu (plus Au and Ag) at an AISC of US$0.90-0.95/lb, versus the current SLC model of 4.25Mtpa producing ~65ktpa Cu at ~US$1.05/lb (LOM average). While block cave mining enables greater extraction rates at low costs, it is a high-risk mining method due to the complexities of scale and the dependence on orebody geomechanics for cavability. OZL will significantly reduce risks by gaining an understanding of the geology and geomechanics from the initial SLC operation. Incorporating the BC mine into Argonaut’s model is largely value neutral due to the long datedness of increased cashflows and the nearer term $1.0-1.3b additional capex. However, we still regard this as a positive initiative given the increased production and higher free cash generation longer term.

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