OZ Minerals Limited (ASX: OZL) operates under the metals and mining sector. The Australian based modern mining company has a focus on copper. The company emphasises on the mining of copper, gold and silver exploration activities and development of mining projects.
At the end of March 2019, OZ Minerals Limited attained 70% beneficial interest in the Eloise Joint Venture tenements through an investment of $10 million, which contains the Jericho deposit.
OZ Minerals and Minotaur Exploration Limited made an agreement to form a new joint venture to operate the Jericho project, the area of which is moved from the current Eloise JV area.
Jericho Joint Venture Area (Source: Company’s Report)
The new arrangement will offer to Minotaur to be ‘loan carried’ for all further work related to Jericho, till the project is developed and in commercial production. OZ Minerals will ‘loan carry’ Minotaur’s funding share of Jericho from 1st April 2019, through exploration, feasibility and to commercial production. The loan carry arrangement will include drilling, scoping, feasibility studies, mine development and construction.
The loan is repayable only from a proportion of future positive cash flow from Jericho. The interest of OZL in Jericho has increased from 70% to 80% in exchange for the loan carry. Dilutive capital raisings have been avoided by Minotaur to meet its share of funding for Jericho. The agreement optimises Minotaur’s exposure to Jericho while negating risks and ultimately maximising shareholder value.
OZ Minerals Limited’s beneficial interest in the Eloise Joint Venture had been restructured to reach 70% on 31st March 2019, through project investment of $10 million over three years. From that point onwards, Minotaur Exploration Limited was to co-contribute its 30% share of Eloise JV expenditure. The beneficial interests of 70% OZ Minerals and 30% Minotaur remain unchanged; however, as per the provision by Minotaur of additional tenements, OZ Minerals has committed to contribute a further $3 million towards exploration activity over the next 24 months. The total funding contribution towards the Eloise Joint Venture has increased due to the inclusion of additional tenements near Eloise mine, Cloncurry.
Minotaur and OZ Minerals have entered in a binding term sheet for the restructuring of the Eloise Joint Venture, which will be converted into a full form definitive agreement over the course of the next 60 days. Minotaur, however, avoids diluting shareholders to maintain its 30% stake and can ultimately elect to convert that interest to a 20% ‘loan carry’ arrangement, whereby Minotaur is project funded until cash flow from production.
On the price-performance front, at market close on 15th May 2019, the stock of OZ Minerals Limited was trading at $9.375, with a market capitalisation of $3.03 billion. The stock has yielded a YTD return of 8.46% and exhibited returns of 4.93%, -7.42% and -11.53% over the past six months, three months and one-month period, respectively. Its 52-week high price stands at $11.040 with a 52-week low price of $8.080 and an average trading volume of ~1.75 million. The stock is trading at a PE multiple of 13.090x, with an annual dividend yield of 2.46%.
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