Yesterday, Sandfire released an updated mine plan for DeGrussa, comprising 7 million tonnes at 5.1% copper and 1.6 grams per tonne gold for 359,000 tonnes of copper and 368,000 ounces of gold, including the Monty deposit.
The addition of Monty means that DeGrussa will run until 2021.
While the announcement was largely in line with market expectations, RBC Capital Markets analyst Paul Hissey said it highlighted that there was only 4-5 years remaining.
He noted that after discoveries early on, progress over the past 3-4 years suggested discoveries could be intermittent and potentially smaller-scale.
“However, we believe investors are increasingly likely to cite ‘mine life’ concerns as/when the remaining inventory falls below the arbitrary but comforting 5 years currently,” Hissey said.
Sandfire managing director Karl Simich told the Resources Rising Stars conference on the Gold Coast this morning that resources at DeGrussa had increased by 67% since its discovery.
The company started out with a 6-7 year mine life, and if no further discoveries are made, DeGrussa will run for around 10 years.
“I expect we’ll find further discoveries in the region,” Simich said.
“Exploration is the name of the game – if we can find repeats of these deposits, that’s what we’re chasing.”
Sandfire is drilling around 150,000m in the Doolgunna region this year.
“We’ve never drilled more aggressively or more extensively,” Simich said.
“We’re looking for the tell-tale signs of repeat deposits.”
Sandfire’s other main focus is its Black Butte project in Montana, which has formally moved to the development phase.
Permitting is the big hurdle there, but Simich said he was hopeful of receiving news in the next 6-8 weeks over the advancing of the project to the next stage of the process.
“That means, at the end of next calendar year we will hopefully have a permit,” he said.
That would lead into a two-year construction period with capital costs estimated at US$220-230 million for a 15-year operation.
“It’s a clear pathway to making money,” Simich said.
That could see Black Butte in production in 2021, which Simich believes will also coincide with higher copper prices.
Copper is expected to be in deficit by 2019-20.
“In terms of the prognosis for this commodity…supply is going to be challenged big time and demand is going to continue,” Simich said.
Priority areas of focus include Monty Deeps, Southern Volcanics, Red Bore, Vulcan, Homer East, Rooney’s North
THX Price at posting:
4.5¢ Sentiment: Buy Disclosure: Held
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