OZ Minerals has budgeted for power prices at its flagship Prominent Hill copper mine to rise 30 per cent in 2017 and 60 per cent in following years, as it seeks to protect its profits from further power supply shocks.
While those estimates are deliberately conservative, OZ chief executive Andrew Cole said they had been assumed ahead of the expiry of a major power contract this year.
"Higher power costs, to be conservative, are already baked in to all of the guidance numbers we have issued," he said on Thursday.
"The reason it is 30 per cent this year is because our power agreement is a fixed agreement up until the middle of this year for Prominent Hill.
"We have put them in conservatively whilst we work through our power strategy."
Like BHP Billiton's nearby Olympic Dam copper mine, Prominent Hill suffered a 15-day interruption during September and October after power lines in South Australia collapsed.
That interruption cost OZ about $15 million in lost production, and ensured the company's underlying full-year profit of $134 million was $6 million lower than the previous year's result.
The state has also endured very high power prices at times in 2016 and higher power prices have also been assumed in feasibility studies for OZ's $980 million Carrapateena project.
The OZ board will decide whether to push ahead with development of Carrapateena in April, and OZ is also expected to publish its new power strategy at that time.
Co-operation key
When asked what changes he would like to see governments make to the power sector, Mr Cole said he was agnostic, but wanted to see co-operation. "I would love the state government and the federal government to work together on a solution that benefits Australia," he said.
"I think low carbon generation is important to everybody, there is no doubt about that. What the solution is, I don't know and I don't have a strong preference, but I think collectively we need to work out what the solution is and put it in place.
The comments come after BHP chief Andrew Mackenzie told journalists in London that the blackouts had cost Olympic Dam about $US100 million.
"Let's talk about affordability, reliability and emissions reduction as opposed to having some secondary target about just having more renewables which might deny you all three," Mr Mackenzie said.
OZ shareholders will be paid a final, fully franked dividend of 14¢, which adds to the 6¢ unfranked dividend paid at the half year.
Debtless, cashed up
The company has no debt and a cash balance of $656 million, which could soon come in handy with development of Carrapateena likely to be approved in April.
Despite having that cash on hand, OZ may use debt to fund the Carrapateena development.
Prominent Hill copper production peaked at 130,000 tonnes in 2015, and the mine produced 116,882 tonnes of copper in 2016.
OZ has told investors to expect between 105,000 and 115,000 tonnes of copper from the mine in 2017 and production is tipped to be slightly lower again in 2018 and 2019.
OZ shares were fetching as little as $2.99 in Mr Cole's first two weeks as CEO in December 2014, but the stock has recovered strongly since then and briefly traded above $10 on Thursday.
Like it has done in previous years, OZ declared that the Australian Federal Police were still investigating a 2009 acquisition the company made in Cambodia in relation to bribery claims.
