UPDATE: OZ Minerals Acquires Carrapateena Copper Project
09 März 2011 - 1:44AM
Dow Jones News
Australian copper miner OZ Minerals Ltd. (OZL.AU) will spend up
to US$325 million buying the Carrapateena copper-gold project in
South Australia state controlled by mining prospector Rudy Gomez,
the company said Wednesday.
The deal, OZ's largest 100% acquisition since it emerged from
the wreckage of the merger between Oxiana Ltd. and Zinifex Ltd.
after the global financial crisis, could more than double the
company's resources of copper and gold and consolidate its land
holdings in the Gawler Craton, a geological region of South
Australia which also holds OZ's main Prominent Hill asset and BHP
Billiton Ltd.'s (BHP) massive Olympic Dam mine.
"This is one of the largest undeveloped copper projects in
Australia today," said OZ Minerals chief executive Terry Burgess in
a statement.
Mergers and acquisitions have roiled the copper sector in recent
months, with OZ's peer Equinox Minerals Ltd. (EQN.AU) acquiring
Citadel Resource Group Ltd. for A$1.25 billion last year and
launching a C$4.8 billion bid for Lundin Mining Corp. (LUN.T) last
week.
However, OZ has been reluctant to deploy its A$1.33 billion cash
pile in the red-hot sector since it took out a 19% share in Western
Australian copper miner Sandfire Resources NL (SFR.AU) last July,
with executives saying that valuations demanded by miners looked
too high against a backdrop of record copper prices.
Three-month copper futures on the London Metal Exchange hit an
all-time intraday record of $10,190/ton on Feb. 15, compared to a
low of $2,845/ton in the wake of the global financial crisis.
OZ said that Carrapateena could potentially have 2.7 million to
3.3 million tons of copper, 3.6 million to 4.0 million ounces of
gold, and 124 million to 138 million pounds of uranium oxide, as
well as economic levels of silver and rare earths.
That compares to 2.5 million tons of copper and 3.1 million
ounces of gold at Prominent Hill, although the resource at that
site has been more carefully measured than the preliminary work
done at Carrapateena.
The deposit is 250 kilometers southeast of Prominent Hill and
the company said it would be able to produce at similar rates, with
synergies between operations at the two sites.
Anna Kassianos, a resources analyst at Austock Securities in
Sydney, said the deal was "prudent on price", in contrast to some
more generous recent offers in the copper sector.
"It's a fairly interesting acquisition. It's a bigger and better
step than the one they made for Sandfire and it reinforces their
strategy of being in the Gawler Craton," she said.
Rudy Gomez, who started working in a Philippines gold mine aged
16 before emigrating to Australia in the late 1950s, stands to earn
up to US$188.5 million from his 58% stake in the project if
Carrapateena goes into production.
OZ is paying US$10 million up front and a further US$240 million
on completion of the acquisition. A further US$50 million will be
paid when copper, uranium, gold or silver is first produced, and a
final US$25 million on first production of rare earths, iron or
other commodities.
Canadian diversified miner Teck Resources Ltd. (TCK) owns a
further 34% of the project and minority shareholders account for
the remainder.
Gomez first discovered the site in 1989 and attempted to explore
it with a series of joint venture partners, to little success.
Following a A$100,000 grant from the South Australian state
government in 2004, he drilled a hole that found 905 meters of rock
containing 2.17% copper--an unusually high grade at a time when the
world's copper deposits are thought to be in terminal decline.
"Carrapateena is one of the richest ore deposits you could find,
but it's more complex and deeper than Prominent Hill," he told Dow
Jones Newswires.
The project has been on the market since early last year and was
marketed to potential Chinese acquirers, but disagreements on price
and some of the difficulties in developing the deposit deterred
some bidders.
"In the end, OZ were the natural owners for this project. It's
right next door to Prominent Hill, they've got the right sorts of
skills to develop it, and OZ needs a longer-term development
project. This is going to need a lot of capital and a lot of love
to develop," said one person familiar with the process.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689;
david.fickling@dowjones.com
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