jorc to set wa copper interest higher

DeGrussa is a high quality project with attractive near-term metrics but a relatively short mine life. Mine-life additions are a possibility given the deposit style, but we do not attribute blue-sky value at this stage. Joining the ranks of ASX copper producers: Sandfire’s flagship DeGrussa Project (also known as Doolgunna) has commenced operations, with the processing plant in the ramp-up stage. Direct ship ore (DSO) and laterite gold provide an early cashflow boost. Near-term metrics are attractive… Forward year PER of 5.3x and EPS growth of ~30% compare favourably to peers (see page 14). We forecast C1 cash costs will be in the first quartile at ~US$0.95/lb over the life-of-mine, offering an average operating margin of +50% pa to 2020. …but mine life is limited: A reserve-based mine life of under seven years means a PER discount to peers is justified, in our view. We believe the equity is fairly priced at present, with our price target of A$8.50/sh broadly in line with the current stock price. Deposit style could yield additional reserves: The deposit at DeGrussa appears to be a volcanogenic massive sulphide style, and additional mineralised lodes could be discovered through near-mine exploration; however, we do not, and we believe the market is also unlikely to, price in potential blue-sky value because Sandfire is now a producer rather than a pure explorer. Where we could be wrong: The Degrussa mill is still ramping up, and there is downside risk that this could be protracted. Also, negative grade reconciliation (mined vs reserve) could see our forecasts fall short. On the upside, successful near-mine exploration could yield meaningful mine-life additions. ll have the second largest deposit behind degrussa should let the cat amongst the pigeons,here is an article from morganstanley highlighting the need for a larger copper prospect closer to degrussa to keep its mine life in check,in other words degrussa will need another deposit close by,with horseshoe lights 70k away they must be on the watch list.
After taking report that hor will be the second largest deposit in WA it has to put us in the box seat