Khoemacau - is SFR interested?, page-7

AFR today:

New Sandfire Resources boss Brendan Harris says the company is ‘‘playing in the right space at the right time’’ amid intense interest in securing copper assets and has no choice other than to look at a major mine up for sale close to its emerging operations in Botswana.

Mr Harris, who took on the job of managing director and chief executive earlier this month, said Sandfire focused on its operations in Spain and its new Motheo mine in Botswana as well as other growth options in its portfolio.

‘‘It is very hard to find copper units. It is very hard to buy them in the environment today for value. And so, when you’ve got them, make sure you understand and make sure you optimise those resources to the maximum extent possible,’’ he said.

In Botswana, Sandfire’s Motheo mine is expected to begin producing copper concentrate in the next few days ahead of a visit by Mr Harris in May.

The completion of the initial stage at Motheo comes with Global Natural Resources Investments-backed Khoemacau Copper Mining operation in Botswana on the market.

Mr Harris said it would be remiss of Sandfire not to consider the Khoemacau mine, which produces about 60,000 tonnes of copper a year.

‘‘The most important thing for shareholders is that we don’t get distracted, and we deliver on our promises. If the Khoemacau asset comes to the market as people suggest it will, of course we need to look, but again I will never take my eye off shareholders value,’’

‘‘I’ve always believed that M&A is a nice to have if it makes sense, it is never a ‘have to have’.’’

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Looks and sounds like BH & team want Khoemacau.

as I said above:

The synergies in combining Motheo and Khoemacau operations are obvious and substantial.

These will be well understood by Global Natural Resources and partners, who expect to pocket the synergy gains as they cash-out.

SFR has optons. it could, for example, let Khoemacau go elsewhere at a no-synergy price and negotiate a JV with the new owner. Joint Ventures are powerful financial tools - have a look at S32's Sierra Gorda JV for a template. No extra capital required.

If SFR did buy, it would need a lot more equity as it is already heavily geared. Well executed, holders will happily pay up for another capital raise pushing annual output well over 200,000tpa Cu and SFR up the league tables.

Among the contradictions, BH knows the value of a very strong balance sheet and will be pushing the business in that direction, notwithstanding likely expensive capacity increases at Matsa, with Mothea in ramp-up also sporting forecast capacity increases.

Khoemacau is an exciting option. But it is in Botswana. Price must include a risk discount - Africa is a graveyard for capital unless closely managed..

If predicted Cu shortages come to pass, SFR will unwind its debt quickly and self-fund expansions.

We shall see.

Ash