Ann: DeGrussa Operations Ore Reserve and Mineral Resource Update, page-37

Hartley's latest report
Sandfire Resources Ltd

(SFR $6.86) Buy, Re-Initiation of Coverage

	Analyst	Date	Price Target
1	Steven Clark	6thJuly 2021	$10.00/sh

Please see attached for full report.

War-Chested for Life After DeGrussa

Key Points

• The copper bull run has continued subsequent to our cessation of coverage of SFR in Oct’20:

• • Copper prices have appreciated by 41% from US$3.06/lb to US$4.30/lb;

  • A record high of US$4.90/lb was reached in May’21;

  • Limited ASX exposure to copper production has been magnified;

  • We have lifted our LT copper price forecast to US$3.50/lb (prev. US$3.00/lb);

• SFR has adjacently progressed the development of its Tshukudu Operations:

• • The Nov’20 DFS for the T3 Project outlines avg. annual Cu in concentrate production of 31kt over a >12 year mine life;

  • A Maiden MRE for the A4 deposit has been delineated at 6.5Mt at 1.5% Cu for 100kt of contained Cu;

  • Initial upfront investment has been approved for the planned expansion of Motheo Production Hub capacity to 5.2mtpa;

• We model the following on our current commodity price deck:

• • An uplift in cash and liquid investments to $622m as at Jul’21 (implied EV of ~A$630m);

  • FY22 free cash contribution of A$415m from DeGrussa on our assumed copper price of US$4.00/lb;

  • NPV₈of A$3.14/sh for Tshukudu, assuming an expansion in Motheo Production Hub capacity to 5.2mtpa from FY25;

  • Our SOTP valuation increases by 36% to A$12.54/sh at spot commodity prices;

• We see multiple catalysts for a rerating of the stock in the near term:

• • Award of the T3 Mining License;

  • Jun’21 quarterly result and Annual Report;

  • Maiden Indicated Resource for the A4 deposit;

  • Motheo Expansion Project exploration results;

  • Maiden Old Highway JORC Rsc and Scoping Study;

  • Potential resolution of Black Butte legal challenges;

  • M&A activity;

• We Re-Initiate Coverage with a Buy rating and Price Target of $10.00/sh.