Sandfire looks near and far to strike a goal

The DeGrussa site. Image: Sandfire Resources.

Sandfire Resources has proven there is plenty of life left in the DeGrussa mine and beyond. Chief executive Karl Simich tells Vanessa Zhou about the company’s growth strategies.

Winning the Australian Mining Prospect Awards Hard Rock Mine of the Year and the Australian Mine of the Year in 2016 hasn’t stopped Sandfire Resources from gaining even more momentum.

The DeGrussa operation in Western Australia has delivered $4 billion worth of revenue at a 50 per cent margin for Sandfire in the 10 years since the volcanogenic massive sulphide (VMS) copper-gold deposit was discovered in 2009.

Sandfire made another discovery at around nine per cent copper at its Monty VMS project in 2016. Collectively, the two sites have guided the company to a positive operating result in the years since.

During the 2019 financial year, Sandfire maintained its production guidance at 63,000–67,000 tonnes of copper and 37,000–40,000 ounces of gold, following a strong return in the December quarter and ramp up at the Monty copper-gold mine.

DeGrussa has produced more than 438,000 tonnes of copper and 254,000 ounces of gold, in excess of five per cent copper, since production commenced in 2012. But Sandfire chief executive Karl Simich believes the company is yet to hit its straps despite approaching the end of DeGrussa’s initial seven-year mine life in mid-2019.

“We’ve been able to extend the mine from seven to about 11 years. That’s very positive from that perspective. For us at the moment, it’s been a pre-dominantly copper business that has gone from strength to strength to strength,” Simich tells Australian Mining.

“We will see with the addition of multi high-grade complexes of over nine per cent copper to the DeGrussa complex over the next four years.

“We will have our best production profile in the next two to three years that we’ve ever had, even though we’ve already had good ones.

“And we’ll be generating it at stable copper prices – the most copper tonnes but at the lowest cost – and also the greatest revenue and the greatest margins. So it’s pretty exciting times for us at the moment.”

Simich’s confidence isn’t unfounded, as Sandfire is eager to make further discoveries in the 7000 square kilometres of tenements it has in the greater Doolgunna province, also home to the DeGrussa and Monty mines.

Sandfire is now speeding up its exploration endeavours in the region, which is considered extraordinarily prospective after the discovery of its two VMS high-grade copper deposits. The opportunity to make further discoveries is, therefore, highly probable, according to Simich.

The company is also unfazed about jumping on one of the world’s top 10 undeveloped copper projects by grade as far away as the United States.

Sandfire owns the Black Butte copper project in central Montana through its North American-listed subsidiary, Sandfire Resources America. The project’s copper concentration is 10 times higher than many existing mines.

The company has spent five years and an investment of $60 million to bring Black Butte to its final permitting stages, which has been a long and intensive journey for the company, the chief executive says.

“Essentially, the Black Butte project has a very good grade of about 3.5 per cent copper – a quite lucrative grade relative to other potential mines around the world,” Simich says.

“The project contains about 600,000 tonnes of copper, with significant potential to have greater mineral resources.

“We will embark upon further exploration once we have that mine permitted.”

An aerial shot of the Monty site. Image: Sandfire Resources.

 

Sandfire aims to have Black Butte fully permitted in the September quarter this year to allow it to break ground and move into the construction phase in 2019.

But this shouldn’t be too hard for Sandfire, which finds itself trading at an almost $1 billion market capitalisation (at time of writing) and sitting with access to $200 million in treasury.

Additional discoveries at DeGrussa, Monty or in the Doolgunna region, as well as approval for the Black Butte project, should have significant potential to add further value to the company.

Sandfire will have the ability to then advance its exploration endeavours in the central Montana region, which has never had any further exploration since the Black Butte discovery was made in the 1980s, Simich says.

The company’s growth ambitions don’t stop there. According to Simich, Sandfire has not only developed its capacity to continue with its exploration endeavours, but also in capturing business development opportunities.

“We are very active in the business development space at the moment, both in the inorganic and organic parts of the business,” Simich says.

“So we’re looking at other exploration projects further afield, as well as looking at business acquisition opportunities – projects, near-term mine development opportunities or operating assets … that we could acquire, bolster or add in to Sandfire.”

In April, Sandfire committed to a farm-in partnership with Alchemy Resources at its Bryah Basin project in the Gascoyne region of Western Australia, adjacent to the DeGrussa mine.

The copper-gold miner can earn up to 80 per cent in Alchemy’s interests by spending $3.1 million prior to October 28 this year.

Sandfire has also progressed its Morck Well joint venture with Auris Minerals in the same region, with the partners spending $9.4 million to complete a diamond drill and eight reverse circulation holes at the site in April.

“We are looking for where we can strategically create and add some value to another group in a lot of these situations,” Simich says.

“By joining forces with projects or companies, that potentially opens up opportunity to create value for the greater sum rather than having individual situations.

“From a business development perspective, we see that we’re in a very strong position to be able to add value – that’s what we’re doing at the moment.”

Nominations for the 2019 Prospect Awards are now open. Visit the Prospect Awards website for more information.

This article also appears in the June edition of Australian Mining.

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