Ann: Diggers & Dealers Presentation, page-87

https://www.resourcesrisingstars.co...-stocks-hots-investors-prepare-supply-deficit

Copper producers:
As is often bemoaned, there is not much on offer in the ASX copper producer space. It’s a case of OZ Minerals (OZL) or Sandfire (SFR).

OZ has been a star performer thanks to growing production from its Carrapateena copper-gold development in South Australia while Sandfire has underperformed as mine depletion looms at its mainstay DeGrussa/Monty operation in WA’s Bryah basin.

On the assumption that OZ is being priced for perfection, Sandfire comes in from the cold as a value proposition, notwithstanding the two-and-a-bit years or so left at DeGrussa/Monty, assuming no immediate exploration success.

It last traded at $4.65 for a market cap of $827m.

Apart from the volume of post-tax cash to be reamed from DeGrussa/Monty in its latter years – say $500m or so – Sandfire has about $330m in cash at bank, a 16% stake in Adriatic Metals (ADT) worth $60m, and large exploration positions in Australia and overseas that would have to be worth another $100m or so.

All that is before the two development projects that Sandfire has assembled to take over from DeGrussa/Monty – Botswana copper and Black Butte copper in the US.

Sandfire’s current value suggests the market is reluctant to give the projects much value. Fair enough too as they are not in production. But to give them next to nothing as Sandfire’s valuation figures above suggest – and in a rising copper market to boot – seems to be seriously on the mean side of things.

Upcoming derisking events could turn that around in a flash.

A DFS on Botswana is likely in mid-November, with production early in 2023 possible, starting out at 30,000tpa of copper from the first deposit, rising to 55,000tpa within 12-18 months from two deposits.

Exploration upside along Sandfire’s portion of the Kalahari belt is extreme, so the 55,000tpa rate could well be just the start of the story.

The high-grade Black Butte is close to emerging from a feasibility study and is expected to show it is good for 20,000-30,000tpa of copper. Like the initial development in Botswana, it should be thought of as the basis for the development of a regional processing hub, with other deposits tied in over time.