Sandfire to thrive as copper rises

11th August 2017
Resources Rising Stars

Sandfire Resources capped off the 2017 financial year in a strong cash position, which is set to build further if the copper price continues to rise (MiningNews reports).

Copper reached a 26-month high overnight of US$6298.25 per tonne, or $2.85 per pound.

Sandfire managing director Karl Simich said there was supply issues due to industrial action, government policy and weather disruptions.

“What’s driving the price in our sense I think, more so than anything, is difficulties on the supply side and we see that across the globe on many, many, many major propositions,” he said on a teleconference.

“Longer-term, I think it’s also the struggles with the larger projects that require massive, massive capital to get them off the ground and there is also a barrier to entry.”

Simich noted recent numbers from Chilean state-owned major Codelco which put capital costs to maintain current production at $28-35 billion.

“These are eye-watering numbers and to say them quickly ‘that’ll be fine, they will just do that’ but the reality is that’s not been forthcoming,” he said.

He added that the oversupply situation predicted by analysts simply would not happen.

“Supply is challenged and will continue to be.”

The biggest recent addition to global copper supply has been MMG’s new Las Bambas mine, but that was estimated to have cost more than $10 billion.

“There are barriers to entry to having these massive projects. That is a big wall to get across,” Simich said.

Simich noted Robert Friedland’s recent comments about needing a telescope to see the copper price in 2021.

“Maybe he’s being a little bit extreme but there’s pressure on the upside in the medium to long-term,” he said.

Meanwhile, Sandfire closed the financial year with A$127 million cash, up from $90 million.

The company has the Monty and Black Butte developments to fund, but Simich said the board was still formulating a view on shareholder returns.



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