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OZ Minerals Ltd  HY21 Profit Result – Profit Up Strongly On Back Of Higher Copper Prices And Production

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

OZ Minerals Limited (ASX: OZL) is a copper-focused international company based in South Australia. OZ Minerals operations include Prominent Hill, Antas, Carrapateena, Pedra Branca, West Musgrave and CentroGold. OZ Minerals has a market capitalisation of A$7.3 billion.




What are the key features of OZL profit result?

OZ Minerals reported net profit after tax (NPAT) of A$269 million, up 237% compared with HY20 and cash flow of A$457 million, up 204% compared with HY20. Oz Minerals will pay a fully franked dividend of A16 cents per share (which includes a special dividend of A8 cents per share). This result was primary driven by strong copper prices and production in the period.

Regarding OZL production and costs, copper and gold production for the half year is reported at 59,523 tonnes and 113,025 ounces respectively. All-In Sustaining Costs (AISC) of 136 c/lb. Copper production increase by 25% compared with the previous period while gold production is mostly in line with the previous period.


What is the outlook for OZL?

Management did provide production guidance for the full year. Copper and gold production is expected to be 120,000-145,000 tonnes and 205,000-228,000 ounces. OZ Minerals is on track to meet this full year production guidance target.

Regarding the outlook for commodity prices, the long-term outlook for copper and gold prices is positive. Global demand for copper could significantly increase as the world moves to renewable resources. Copper is a highly efficient conductor of electricity and heat. Renewable resources such as solar, hydro, thermal and wind energy systems use copper. In addition to power generation, copper is also used in batteries, which may also see an increase in demand due to a boom in electric vehicle production.

Central banks and governments around the world have undertaken expansionary monetary and fiscal policies to increase economic activity in response to COVD-19. On the monetary side, this has included quantitative easing (purchasing of financial assets), which has expanded central bank’s balance sheets. This printing of money is seen to devalue the real purchasing power of existing money in circulation. Therefore, economic agents may buy additional quantities of gold to protect themselves against a devaluing of their real purchasing power. On the fiscal side, the gold price is correlated with government deficits. The relationship is when government deficits increase, so does the gold spot price.


What is the market reaction to OZL minerals profit result?

The market reaction to OZ Minerals profit result is slightly negative with the share price down around 1% to A$21.87 while the market is slightly up by 0.2% (18 August 2021). OZ Minerals trades on a forward P/E ratio in the high-teens and has a dividend yield of around 1.2% (fully franked).


This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purposes only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceedings. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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