Oz Minerals is proceeding with development of an underground mine to extract the satellite Western Copper deposit at its Prominent Hill gold-copper operations in South Australia. The higher-grade, predominantly chalcocite-bornite Western Copper ore has metallurgical characteristics similar to the open-pit ore currently being mined at Prominent Hill and can be blended with the open-pit ore to produce feed for the concentrator. Production at Prominent Hill during 2010 is projected at 100,000 to 110,000 mt of copper and 140,000 to 150,000 oz of gold contained in concentrates.

The underground mine has a targeted production rate of 1.2 million mt/y of ore and is expected to contribute 25,000 mt/y of copper and 12,000 oz/y of gold to Prominent Hill production for up to five years. Pre-production capital spending to develop the underground mine is estimated at A$135 million. Cash costs of production, inclusive of the byproduct credit for gold, are estimated at under $1.25/lb of copper.

A contractor was mobilized in July 2010 to develop the Western Copper underground ventilation shafts, and mining of the access decline is scheduled to begin in October. Geotechnical assessments indicate above-average conditions for development and stoping operations. Mining will be via sub-level open stoping techniques. First ore production is scheduled for the fourth quarter of 2011, and full production is planned for the second half of 2012.

Open-pit reserves at Prominent Hill currently total 75.7 million mt, grading 1.19% copper and 0.59 g/mt gold. The Western Copper underground reserves total 4.5 million mt, grading 2.53% copper and 0.49 g/mt gold. The Western Copper deposit remains open along strike to the east, and the underground mine is expected to provide an improved platform for testing the near-mine environment with underground drilling.

During 2010, Oz Minerals is spending A$20 million on near-mine exploration and an additional A$20 million on regional exploration around Prominent Hill, with the goal of discovering further Prominent Hill-style deposits.