BHP will inherit mines and growth projects that are suffering cost inflation if it proceeds with a plan to acquire copper and nickel producer OZ Minerals.
OZ Minerals has warned the cost of producing South Australian copper could rise a further 10 per cent this year as soaring electricity prices add to the inflationary pressures that have more than trebledThe inflation won’t be confined to OZ’s existing mines, with the upfront spend on the company’s $1.7 billion West Musgrave nickel project set to rise by at least $110 million as the company pays some of the upfront construction costs for workforce accommodation.BHP’s $9.
Aside from lower volumes, OZ blamed the higher costs on; “adverse weather, COVID-19 absenteeism, supply chain disruption and inflationary pressure”. Mr Ranson said electricity prices had recently become “one of the major uplift factors” in the company’s production costs, with OZ now buying power for its mines in the daily spot market after the expiry of multi-year supply contracts.Mr Ranson said the company had been hit with a 60 per cent increase to power costs and in terms of unit costs of copper, it would translate into an extra US17¢ per pound produced.
That average was raised to $US1.05 a pound in January 2022 and on Monday OZ raised the forecast again, predicting each pound of copper from Carrapateena would cost $US1.30 between now and 2025. OZ said it had deferred some ‘low priority’ spending items for Carrapateena as it seeks to avoid the impact of rampant inflation in the “external environment”.