By Cameron Drummond
COPPER miner Sandfire Resources has been busy in 2016, increasing production at its DeGrussa mine and upgrading exploration results inside its Greater Doolgunna project.
Sandfire intends to build on strong cash flows developed from its high-grade DeGrussa copper-gold mine in a year where it has reduced its debt from $120 million down to $75 million.
A high grade deposit find in the surrounding Doolgunna region is also being explored, with positive initial results for future mining capability.
DeGrussa
The DeGrussa copper-gold mining venture near Wiluna – 900kmnorth of Perth in the state’s Mid West – has been a shining star for Sandfire in a depressed copper market. It is also the recipient of a government-funded solar array project that will help power mining operations.
The mine has progressed rapidly since its discovery in 2009, with the company taking just three years to start production.
Sandfire has steadily increased its production guidance for FY2016 and expects to be within the range of 65,000 to 68,000 tonnes of contained copper metal and 35,000 to 40,000 ounces of contained gold metal.
An updated mine plan for DeGrussa released on 14 April showed 8.1Mt grading 4.4 per cent copper and 1.7g/t gold for 357,000t of contained copper and 443,000oz of contained gold to the year 2021.
The company said it is committed to high-grade returns, with DeGrussa producing up to 300,000 tonnes of high-grade copper concentrate annually.
According to the 2015 WA Mineral and Petroleum Statistics Digest, DeGrussa will become the largest copper production site in the state.
Monty
Sandfire’s Greater Doolgunna Project, 1700 square kilometres of contiguous tenements surrounding the Degrussa mine site, contains the newly discovered Monty copper-gold prospect – part of the Springfield joint venture with Talisman Mining.
Sandfire entered the JV in December 2015 as the controlling operator with a 70 per cent stake in the operation.
Monty is the first significant high-grade Volcanogenic Massive Sulphide (VMS) deposit to be discovered at Doolgunna outside of the original DeGrussa discovery.
On 7 April, the company released a total indicated and inferred mineral resource for Monty of 99,000 tonnes of copper and 55,000 ounces of gold grading 9.4 per cent copper and 1.6g/t gold.
A high-grade massive sulphide resource of 763,000t grading 12.1 per cent copper and 2.1g/t gold for 92,000t of contained copper and 52,000oz of contained gold was estimated in the report.
According to Sandfire, the discovery and rapid delineation of the high-grade Monty deposit is a watershed in its ongoing exploration of the Doolgunna district, providing an important ‘proof of concept’ for the potential of the region to host multiple plots of VMS copper-gold mineralisation.
Sandfire managing director Karl Simich said the mineral resource drill-out, which was undertaken by up to four drill rigs using state-of-the-art navigational drilling techniques, highlighted the exceptional grade, tenor and internal complexity of the Monty mineralisation.
“Exploration is continuing as a priority both in the vicinity of the deposit, where Sandfire believes there is excellent potential to discover more VMS mineralisation, and at several other emerging prospects within the region,” Mr Simich said.
“The focus of these studies will be to determine the best way of unlocking the value of the deposit, including leveraging off the existing processing plant and infrastructure at DeGrussa.”
“It is important to remember that this was a blind discovery in an area which already had significant previous exploration, using sophisticated techniques building on the excellent work carried out by Talisman historically in the area,” he said.
Solar Power
The DeGrussa copper-gold mine is gearing up to become a world-leading reference site for use of renewable energy in the mining industry, following the construction of a 10.6MW solar power station to be fully operational this year.
Sandfire is participating in the project with an international consortium formed to finance, develop, operate and own the facility.
The company has a Power Purchase Agreement with German engineering outfit Juwi Renewable Energy, who will develop and operate the project, which will help fuel DeGrussa’s mining operations.
Infrastructure services provider OTOC will handle the procurement and installation, and French renewable energy firm Neoen will own the facility.
Government agencies the Renewable Energy Agency and the Clean Energy Finance Corporation are providing $35.9 million of funding to the project, with Sandfire committing about $1 million.
The project will utilise 34,080 solar panels across 20 hectares of land near the site of the current DeGrussa underground mine and 1.5mtpa concentrator.
The solar array will be fully integrated with the existing 19MW diesel power station at DeGrussa.
The company hopes to achieve savings on diesel fuel consumption and benefit of the environment by reducing its CO2 emissions by about 12,000 tonnes per year.
Financials
Sandfire posted an annual net profit after tax of $69 million for the 12 months to 30 June 2015 on sales revenue of $548.6m. The profit was underpinned by strong cash flow from operating activities of $224.0M and translated to earnings per share of 44.18c.
However, company profits dropped 48.6 per cent down to $15.7 million for the six months to December and revenue was down 12.8 per cent to $228.3 million.
The miner referred to the profit fall as a reflection of lower copper prices during the half year to 31 December; despite this Sandfire was able to repay $45 million worth of debt.
“The cash-flow generation of the DeGrussa mine segment, notwithstanding the lower copper price environment, enabled Sandfire to further reduce its debt while at the same time continue to fund capital development, as well as an aggressive exploration campaign primarily focused on the high-grade Monty copper-gold discovery east of DeGrussa,” Mr Simich said.
In light of this, the miner was able to produce a fully franked interim dividend of 2 cents per share for investors.
Production levels for Sandfire were down in the first quarter of 2016 compared to the previous due to a planned eight day processing shutdown in February, but remained on track to meet its cost guidance and production for the full financial year.
Future focus
With a growing exploration portfolio here in Australia and overseas, Sandfire said its aim was to continue its focus on discovering, developing and operating high quality resources.
While Monty remained a priority exploration focus in the near term, the company would be looking at other promising opportunities in the Greater Doolgunna region.
Planned exploration activities were set to commence near Monty over the coming months, including aircore, reverse circulation and diamond drilling in anticipation of another significant discovery.
The Homer corridor, 4km east of DeGrussa, will undergo down-hole electromagnetic (DHEM) surveying where a thick exhalative package had been intersected in previous drilling and in-fill aircore drilling at the nearby Homestead Prospect.
“We have long believed that the Doolgunna field contains multiple VMS deposits, and we now have definitive proof of that theory,” Mr Simich said.
“We are confident that this is just the beginning of a new chapter of exploration success at DeGrussa and with the recent breakthrough at Monty, we intend to leave no stone unturned to find more.”
