OZ Lowers Expectations, Talks of ‘Disappointment’

The Australian miner OZ Min­erals announced yesterday that recent exploration activities in Cam­bodia had produced disappointing results and the company would re­assess its investment here in March.

In its fourth-quarter report for 2010, the company also announced that drilling within its operational site in Okvau Ochung in Mondol­kiri province had returned no “significant results,” and that the company had reached a joint venture agreement with an unnamed company to explore in a nearby location known as Mesam.

“What we’ve said is that we want to have a review of where we are in March. Some of the results that you’ll see in this quarterly report and the previous quarterly report have not been as exciting as we would have hoped,” CEO Terry Burgess said in a conference call to investors yesterday.

“We now have a new agreement at an area called Mesam, and we need to make a judgment on where we want to take this gold exploration in Cambodia,” he added.

In March, OZ Minerals an­nounced that it was targeting 2 million ounces of gold resources in Cam­bodia and released exploration results finding an initial resource of 605,000 ounces of gold at its Okvau operational.

OZ Minerals began exploration in Cambodia in 2006 under the name Oxiana Ltd and changed its name after a corporate merger. Expectations for the discovery of gold would appear to have been slashed from a March 2010 announcement, when the company predicted a potential for upward of 2 million ounces from its Okvau site.

In responding to questions from investors, Mr Burgess said the poor results in the Okvau area should not take away from the 605,000-ounce resource the company has already declared. He also made no mention of OZ Minerals leaving Cambodia for good.

“What we have at Okvau is a good resource,” he said. “There are opportunities in the Okvau region that will add additional resources if the geology hangs together. The question we have to look at is how extensive the mineralization is that could end up being in an operation that can be economic, and whether or not that fits into what we want within OZ Minerals.”

OZ Minerals has committed a total of $95 million for exploration purposes worldwide in 2011. According to the company, 8 percent of that amount will go toward Cambodia and more drilling will take place in the new Mesam exploration area during the first quarter of this year.

Mr Burgess did admit, however, that recent exploration results had been “disappointing for the exploration guys” in Cambodia.

Despite signs that OZ Minerals has reduced expectations for its Cambodian operations, other mining companies appear bullish on the prospect of finding mineral wealth here.

Australian-listed Brighton Mining Group announced to the market on Wednesday that it had started drilling at its 58.5-square-km exploration area in Mondolkiri province, where it is also looking for gold.

Indochine Mining Ltd and Liberty Mining International—both Australian mining companies with exploration operations in the northeast of the country—are also planning more exploration activities this year.

Analysts say the announcement by OZ Minerals does not necessarily mean the company will leave Cambodia. However, it does appear that Cambodia will not be as central to the company’s future as first expected. They also say the current resource is probably not enough for the company to extract but that a smaller miner would be interested in a resource of 605,000 ounces.

“The project hasn’t met their expectations and is likely to be no longer a core asset,” Jo Battershill, a mining analyst at UBS Bank in Sydney, said in an e-mail. “I don’t think it necessarily means they will leave Cambodia. If another project piques their interest, I’m sure they would look at it.”

Mr Battershill added that should OZ Minerals decide to leave Cambodia, it was not likely to have any lasting aftershocks for business in Cambodia.

“I think most people would say that Cambodia is underexplored by modern standards and presents as an exciting opportunity,” he said.

Richard Stanger, president of the Cambodian Association of Mining and Exploration Companies and managing director of Liberty Mining International, said that although he had not looked at the latest quarterly report from OZ Minerals, prospects in the Mondolkiri region were still promising.

“I think you’ll find that they [OZ Minerals] will increase the size of that resource. It is a good area, a very interesting area,” he said. “From what I gather, they are fully committed to being here. I certainly know that they are working on it and they like it.”

Mondolkiri province “is highly prospective. It’s a very interesting area due to the geological structures in the area,” Mr Stanger added.

Shares in OZ Minerals closed yesterday at A$1.72, or $1.71, down 3.37 percent on the previous day’s close but up 11.33 percent in the past three months.



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