Melbourne-based OZ Minerals announced on Thursday that it is set to commence development works on its underground mine at Prominent Hill in South Australia, which is projected to yield an average of 25,000 tonnes of copper and 12,000 tonnes of gold every year.

The company reported that the project's feasibility study has already provided for the technical and economic viability of exploring the Western Copper satellite reserves as it added that a contractor tapped to develop ventilation shafts would start immediately so mine development could be initiated by October this year.

OZ Minerals said that the underground ore deposits have the same metallurgical traits with that in the open mining pit at Prominent and blending the ores from two sources should not be a problem as first ore production could be expected by the last part of 2011 while full production capacity should be seen by third quarter of 2012.

The company is expecting preproduction expenditures to reach a total of $135 million while the cost of production should be competitive enough at about $US1.25 per pound.

OZ Minerals chief executive Terry Burgess said that the company is very excited to start the Western Copper project, which should increase production of the company's existing explorations in Prominent Hill, adding that the project "gives us a better platform from which to test the prospective near mine environment with underground drilling in order to further increase the known Resources."

OZ Minerals said that the project site has been granted all requisite government approvals as it revealed that the indicated and inferred ore reserves for the underground mine were about 189,000 tonnes of copper and 114,000 ounces of gold.

As of 1412 AEST on Thursday, OZ Minerals stocks were trading at $1.115, improving by 2.5 cents or 2.29 percent from the previous trading day.