The tumultuous Australian energy market is driving major consumers to defer signing new deals, with OZ Minerals the latest to push their power supply contract talks to a later date.
OZ Minerals chief executive Andrew Cole this week said the company would not be signing either of two major power supply deals it has on the table any time soon.
The supply deal for the company’s Prominent Hill mine comes up in 15 months, and the miner will also need to secure a deal for its in development, $1 billion Carrapateena project.
“We are in the middle of a transition in power pricing and supply in South Australia and indeed Australia,” Cole said at the company’s third quarter presentation on Monday.
“We think this is the wrong time to lock in a price for Carrapateena, which is why we are waiting until some of the transition and debates and policy decisions – which are being debated at a federal and a state level – have been had.
“Give it a year or so and we will have much more directional certainty, and certainly when you look at long run price forecasts for power we are starting to see reductions in those long run price forecasts.”
OZ Minerals secured a short-term deal at Prominent Hill when its existing deal expired on June 30. The new deal expires at the end of 2018.
“We are hoping that we will see lower prices than what we are currently paying at Prominent Hill as we start to negotiate a power purchase agreement next year for 2019-plus, once we get through some of the challenges that the state and the country is working through on power generally.”
Cole’s quarterly presentation focused on a 15% boost to underground production at Prominent Hill, which has coupled nicely with a 21% drop in unit costs.
OZ Minerals revised its open pit unit mining costs for 2017 from $7.25 to $7.00 at Prominent Hill.