Junior copper-gold miner Sandfire Resources has made a soft offer on Rio Tinto’s Northparkes copper mine, located in Central West New South Wales.
The West Australian reports managing director Karl Simich has confirmed the company made a $400 million offer on the operation which has an estimated worth of about $600 million to $800 million.
Simich said the vendors "put the phone down pretty quickly" when the offer was made and reiterated Sandfire’s focus will be repaying its $285 million debt and continuing local exploration rather than acquiring a new mine.
The potential Sandfire purchase would reduce the associated risks with being a single mine operator.
To date OZ Minerals, which is a major Sandfire shareholder, has thought to be the leading contender to secure Rio’s 80 per cent share in the mine.
But there have also been reports private equity company KKR & Co. is considering a bid for the Northparkes.
Japanese owned Sumitomo holds the other 20 per cent stake in Northparkes.
In April Australian Mining reported Rio Tinto had hired Macquarie Group to find a buyer for its majority stake in the copper-gold mine.
Rio Tinto last year said Northparkes was valued at $US405 million and expect there to be enough resources to continue mining for at least another decade.
The proposed sale of the mine is in line with newly appointed CEO Sam Walsh’s regime of cost cutting and turning the company’s focus towards more profitable assets like Rio Tinto’s iron ore operations in Western Australia’s Pilbara region.
Releasing its June quarter operations report Sandfire revealed it has fallen short of its production guidance of 65,000t of copper and 44,000oz of gold.
The junior missed its target by about 1000t copper and 1300oz of gold, attributing the underperformance to changes in its underground mine plan and blending issues between its open pit and underground ore.
The company made its first copper shipment from its Degrussa operation in December.
Last week it provided detailed cost guidance of the operation, with cash costs for this financial year expected to be in the range of $US1.05 to $US1.15/lb for copper which Simich said is below life-of-mine guidance of about $US1.20/lb.
But its cash costs were $US1.37/lb for copper in the June quarter.
The miner last week also announced recent exploration successes will see the mine life of its Western Australian Degrussa mine extended to late 2020.