OZ Minerals versus PanAust
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Nicholas Grove is a Morningstar journalist.
But when looking beyond the "big two," they may stumble across companies such as OZ Minerals (OZL) or PanAust Limited (PNA) - and may discover a couple of mid-tier miners that have something to offer those who are willing to take on a tad more risk.
OZ Minerals, a South Australia-based miner, is focussed on its sole operating mine of Prominent Hill, which produces over 100,000 tonnes of copper and nearly 150,000 ounces of gold a year.
In May 2011, the company acquired the Carrapateena project, which Morningstar senior resources analyst Mathew Hodge says has the potential to be a second mine for the company that is similar size to Prominent Hill.
Hodge says part of the appeal of OZ Minerals lies in the fact that the commodity of copper is "not a bad place to be in" at the moment.
"It's pretty difficult to find big new copper deposits and whatever is being found tends to be deeper, take longer to get to, and have a lower grade. So, copper is becoming a scale business and there's a 'geological scarcity' angle to it too," he says.
Hodge explains that OZ Minerals' two deposits are reasonably large, and if a copper miner has a large deposit, it tends to have more exploration upside.
"They (OZ Minerals) are sort of in the medium-to-large range … so you would expect there would be some exploration upside," he says.
When it comes to the degree of risk tolerance investors should have when it comes to OZ Minerals, Hodge says that it "would be towards the outer edge".
"It's basically got a single commodity. It has got a little bit of 'kicker' from gold, it's not long-life, and Prominent Hill is only going to be around probably until the end of the decade … and in the meantime it has to develop Carrapateena, which is going to be significantly more expensive to develop than Prominent Hill was," he says.
But one thing in the company's favour, Hodge says, is that the "heat" is coming out of its capital and operating costs.
"So, in a year's time or so, it might not actually be a bad time for the company to spend money," he says.