Rio Tinto Downgrade Bumps OZ Minerals’ Share Price (ASX:OZL)

Rio Tinto Downgrade Bumps OZ Minerals’ Share Price (ASX:OZL)

The OZ Minerals Ltd [ASX:OZL] share price has risen today, thanks to some solid half year results.

Not to take anything away from the first half performance, but the company could be in for an even better second half.

Just as OZL announced its financial results, Rio Tinto Ltd [ASX:RIO] said it has cut its guidance for refined copper in 2020.

OZL shares have rallied on the back of global copper disruptions this year, rising from a 52-week low of $5.83 to its current high.

At the time of writing, OZL shares are up 34.5 cents, or 2.45%, to trade at $14.45 per share.

A price not seen since around April 2011.

ASX OZL Share Price Chart - OZ Minerals Share Price

Source: TradingView


Gold or copper to thank for profit growth?

For the half year ended 30 June, OZL announced a net profit of $80 million, up 82% from the previous corresponding half.

OZL said this growth was driven by higher gold volumes and a strong gold price.

And there’s certainly no reason to doubt that.

But there is no pretending the OZL share price hasn’t capitalised on global disruptions in the copper supply.

OZL shares have risen ~142% since their March low.

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This might be thanks to disruptions to copper mines in South America, particularly since production at BHP and RIO’s Escondida mine will be below par for two years.

Today, RIO said it would cut its refined copper guidance by 15% to 135–175,000 tonnes.

RIO cited delays in restarting the smelter at its Kennecott mine in Utah, but expects to have it fully operational in two months.

OZL is largely focused on copper mining and only produces gold as a by-product.

The strong profits were likely helped along by higher than expected production this half, leading to an increase in guidance.

It seems that its new mine at Carrapateena in South Australia is already paying a dividend as it produced more than expected as its operations are ramping up.

Gold epicentre and copper sweet spot

Call it luck if you like, but OZL has found itself a sweet spot.

Both gold and copper prices are heading up — though for different reasons.

Although gold is a fortunate by-product of copper mining for OZL, copper could become even more lucrative.

A common component in many electric products, the global supply of copper is looking flimsy.

South American miners provides 42% of the world’s copper.

But that could change this year.

With the two largest copper exporters, Chile and Peru, struggling with the coronavirus outbreak, the flow-on effects could hit the global supply.

The current estimate is that 4% of the global supply has already been disrupted, and this figure is expected to rise.

On the gold front, Australia seems to be experiencing an unofficial gold rush. Our resident gold expert, Shae Russell, has tipped Australia to become the next ‘gold epicentre’, meaning there could be big spikes in Aussie gold stocks. If you want to learn more, download your free report here.

Kind regards,

Lachlann Tierney,

The Daily Reckoning Australia