Botswana to warm-up Sandfire

Sandfire is not alone in having a beaten up share price in response to the slide in copper prices, first because of the US-China trade war, and now because of the unknowns around the coronavirus (writes Barry FitzGerald on MiningNews).
28th February 2020
Resources Rising Stars

Sandfire is not alone in having a beaten up share price in response to the slide in copper prices, first because of the US-China trade war, and now because of the unknowns around the coronavirus (writes Barry FitzGerald on MiningNews).

But Sandfire has been beaten up more than most, with its 22% share price fall since the start of the year comparing unfavourably with the 10% fall for the copper/gold producer it is most often compared with, OZ Minerals.

As is well known, Sandfire is in the midst of securing a future for itself beyond the three years or so (currently) left at its mainstay DeGrussa/Monty operation in Western Australia.

Forecast production for the 2020FY from the combination of DeGrussa and the more recently developed Monty is what would be a record 70,000-72,000t of contained copper and 28,000-40,000oz of gold at a cash cost (net of gold credits) of US90c/lb. It is nice stuff, even in a lower copper price environment.

The only problem is that it's now short-lived, assuming no exploration success in finding another DeGrussa or Monty in Sandfire's extensive landholding in WA's Bryah Basin, and that nothing much comes from potential tailings retreatment/low-grade oxide treatment options.

Sandfire knows all that all too well, which is why as early as 2014 it began to establish what its ever-bustling managing director Karl Simich likes to describe as a platform for growth in to the future.

It was back in 2014 that Sandfire moved on the Black Butte copper project in Montana which a now long-dated study said would be good for 30,000tpa of copper-in-concentrate over an initial mine life of about 11 years.

In itself, it was not a replacement for DeGrussa/Monty and besides, its development timetable remains subject to Montana's arduous approvals process. Final approvals are said to be close at hand, but that was also the case late last year.

Sandfire's other response - apart from assembling some strategic stakes in explorers with promising exploration projects here and there - was last year's acquisition of Botswana copper developer MOD Resources in a scrip and cash deal worth A$167 million.

MOD came with the development ready T3 open-cut copper project in the underexplored central Kalahari copper belt and it can be said the acquisition is looking to be the one capable of transforming Sandfire in a post-DeGrussa/Monty world, notwithstanding its African address.

Work by a capital constrained MOD contemplated T3 could be in production in 2021, producing on average of 28,000 tonnes per annum of copper for an initial 11.5 years at an all-in sustaining cost of US$1.56 per pound from a three million tonne per annum operation costing $182 million.

T3 is not going to make first production in 2021 but it is in the final stages of the approvals process which Sandfire expects should lead to first production in the first half of (calendar) 2022. So it's likely to beat Black Butte in to production which has a two-year development timeline once the go-ahead is given.

More than that though is that the Botswana copper push is starting to interest the market on two fronts. They are what might come from the optimisation study by Sandfire on MOD's feasibility study on T3, and what might come from the stepped up exploration effort by Sandfire on the prospective belt.

Read more at https://www.miningnews.net/barry-fitzgerald/opinion/1381737/botswana-to-warm-up-sandfire

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