Cashed-up Sandfire Resources treads carefully in hunt for new assets

Sandfire Resources boss Karl Simich says the miner is open to acquisition opportunities
25th July 2019
Resources Rising Stars

Sandfire Resources boss Karl Simich says the miner is open to acquisition opportunities within Australia including existing operating assets, but they need to be value accretive and make sense (reports The West Australian).

Speaking after the company reported record quarterly and full-year production from its flagship DeGrussa gold copper operation near Meekatharra, Mr Simich said the company’s business development team was eyeing all opportunities that could add to Sandfire’s production pipeline.

Sandfire produced a record 69,394 tonnes of copper and 44,455 ounces of gold at C1 costs of US83¢ a pound in the 12 months to June 30, with new ore coming online from its high-grade but small Monty satellite deposit at DeGrussa.

But the company is facing a potential gap in its production profile with DeGrussa set to be exhausted in 2022, possibly before it can bring new development projects on-stream.

The cashed-up miner, which had $247 million in the bank at the end of June, has been busy on the acquisition front with last month’s announcement that it would take over Botswana-focused copper developer MOD Resources in a $167 million cash and scrip deal.

It is also hopeful of securing a mine operating permit for its Black Butte copper project in Montana later this year, but it is yet to complete a feasibility study for the project.

Sandfire is also fervently exploring on a 7000sqkm footprint around its DeGrussa mine in search for extra ore feed for its processing plant.

“Just because discovery has alluded us, it doesn’t mean that the ground is not highly prospective,” Mr Simich said.

He also expressed caution about the company’s 11 per cent investment in Adriatic Metals, which this week announced a maiden 16.8 million tonne resource for its Vareš polymetallic project in Bosnia and Herzegovina.

He said developing a mine in that part of the world was “not without its challenges”.

“There is a lot of i’s that need to be dotted and t’s that need to be crossed before that resource can be converted into mineable reserves that can be realised as cashflow,” he said.

Sandfire gave full-year 2020 production guidance of 70,000t-75,000t of copper and 38,000oz-42,000oz of gold at C1 costs of US90¢-US94¢ a pound.

RBC Capital Markets analyst Paul Hissey said: “Despite the strong near-term outlook for cashflow, we flag the changing nature of Sandfire as it transitions from producer to developer, and therefore we require greater implied upside to offset what we believe is an increase in risk with regards to project execution”.

RBC rates the stock as a “sector perform” with a price target of $9, nearly 30 per cent above where the stock currently trades.


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