25/11/2008 - 13:24

OZ Minerals defers $495m work

25/11/2008 - 13:24

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OZ Minerals says it will defer $20 million of work at its Golden Grove operation in Western Australia, as part of a wide ranging review of its assets in light of the financial crisis.

OZ Minerals says it will defer $20 million of work at its Golden Grove operation in Western Australia, as part of a wide ranging review of its assets in light of the financial crisis.

In a statement today, the company said it will defer $495 million of total project expenditure, cut annual zinc production from its Century mine in Queensland by 20,000 tonnes and flagged a $185 million cut in operating costs for 2009.

"The decisions we are announcing today will enable us to either eliminate or defer substantial cash outflows at a time when access to capital is more difficult than at any time in the last decade and when we are in the middle of re-financing our debt facilities," managing director Andrew Michelmore said in a statement.

The review follows a cut in zinc production at the Golden Grove mine, announced in September.

Today, OZ said it will defer the development of a open pit copper prospect at Golden Grove, and defer capital expenditure at the mine worth some $20 million.

Meantime, OZ Minerals said it was seeking extensions to $US560 million ($A857.51 million) in debt facilities, with negotiations continuing for a $US420 million ($A643.14 million) facility.

The company has suspended expenditure on the Martabe gold project in Indonesia and the Sepon copper expansion in Laos and deferred work until after 2009 on both.

OZ Minerals said the Prominent Hill copper gold project in South Australia would be completed, but the Dugald River zinc project in Queensland would not commence in 2009.

The group has deferred feasibility studies into the Izok Lake and High Lake project in Canada and reduced output from the Century mine.

OZ Minerals will cut about $98 million from the operating budgets of its Australian operations, with further cost reductions expected through a reduction in contractor numbers.

"The review process will be ongoing, in order to ensure we do not miss any opportunities to strengthen OZ Minerals now and for the future," Mr Michelmore said.

OZ Minerals was formed this year through the merger of Oxiana and Zinifex and produces zinc, copper, nickel, gold and lead from operations in Australia and Laos.

The company said it had identified synergy benefits of $54 million per year from the merger through the rationalisation of exploration teams, IT and labour savings.

OZ Minerals will also cut the size of the board from 11 to eight, with non-executive director and one of the architects of the merger, Owen Hegarty, retiring from the group at its next annual general meeting.

Mr Hegarty, the former managing director of Oxiana, was forced to sell 10 million shares in OZ Minerals after receiving a margin call on the plummeting stock.

 

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