Khoemacau - is SFR interested?

The AFR suggests SFR might like to buy Khoemacau

Just 1 1/2 years after Sandfire spent $US1.9 billion on Spain’s MATSA, sources said Khoemacau Copper Mining’s private equity owners Global Natural Resources Investments (Barclays Bank’s natural resources private equity business) and Resources Capital Fund VIII LP had hired Credit Suisse and Bank of Montreal to run an auction for the copper/silver assets.

Khoemacau is capable of producing 60 kilo tonnes a year copper and 2 million ounces silver metal as concentrates. Its owners have tested interest in the asset over the past 10 years, with a different combination of assets.

Sell-side bankers were expected to kick off the auction in May, but were understood to have pushed it out to the second half of this year.

That gives Sandfire Resources a few more weeks to think if Khoemacau is an asset that would fit within its stables.

The ASX-listed miner’s already got its Motheo copper mine across the Kalahari copper belt in Botswana and Namibia.

Motheo is expected to churn out its first concentrate before year-end. Sandfire’s ticked off construction, started early commission works and has applied for approvals to expand it to 5.3 million tonnes a year. It’s about 27 per cent of Sandfire’s net present value, behind MATSA (70 per cent), Black Buttle (2 per cent) and former boss Karl Simich’s original kingmaker Degrussa which is now just 1 per cent of the total NPV, on Morgan Stanley’s numbers.

Sandfire’s had a stellar rise out of the obscurity of small caps and been turned into a $2.7 billion player.

But the past few years have been all about filling the hole left by Degrussa reaching its end of life (the project is currently up for sale via Azure Capital). Obviously, MATSA was a big bet which is heading into its peak production years, but Black Buttle doesn’t come online until the 2031 financial year.

The share price is down from $6.22 on the day before it announced the MATSA acquisition to $5.88 at Monday’s close.

Naturally, shareholders and the Sandfire bosses would be thinking if another acquisition could make sense, and if Khoemacau would be juicy enough for them to make another big acquisition.

Fortunately, it’s got just the person to weigh the decision.

Simich’s permanent replacement as Sandfire’s chief executive and managing director Brendan Harris, who’s previously headed Macquarie’s metals and mining research, is due to join on the coming Monday.

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This is a producing mine. I dont know how attractive the grades are.

Old hands have learned African mining is hard work.

If Brendan wants Khoemacau, it complements Motheo and is VERY CHEAP, he should buy.

Ash