SANDFIRE RESOURCES LIMITED — Capital/Financing Update 2012

Jul 15, 2012

Sandfire Resources NL ABN 55 105 154 185 Level 1, 31 Ventnor Ave, West Perth Western Australia 6005 Phone: +61 8 6430 3800 Fax: +61 8 6430 3849 Email: info@sandfire.com.au Web: www.sandfire.com.au

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ASX/Media Release 16 July 2012

DEGRUSSA OPEN PIT OXIDE COPPER ORE RESERVE

DEVELOPMENT OF PROCESSING ROUTE PAVES WAY FOR OXIDE COPPER PRODUCTION

HIGHLIGHTS

• Maiden Oxide Copper Ore Reserve (Proved and Probable) for the DeGrussa open pit totalling 1.04Mt @ 2.3% Cu ( 23,000t contained copper ):

• Includes 0.47Mt at 2.0% Cu ( 10,000t contained copper ) already mined and stockpiled.

• This follows the successful development of a processing route for an oxide copper circuit , to be located proximal to the 1.5Mtpa DeGrussa concentrator.

• Design studies and statutory approval processes underway for the oxide processing plant and infrastructure , which will have an estimated capital cost of $15-$17M .

• Processing of oxide copper reserves targeted to commence by mid-CY 2013 , providing a lowcost addition to Sandfire’s copper production profile.

• Additional Massive Sulphide ore brought forward from the Underground to Open Pit Ore Reserve, delivering 0.14Mt @ 3.8% Cu (5,000t contained copper).

Sandfire Resources NL (ASX: SFR; “Sandfire”) is pleased to announce that it has commenced design studies and statutory approvals for an oxide copper circuit at its 100%-owned DeGrussa Copper Mine in Western Australia following completion of a maiden Oxide Copper Ore Reserve for the open pit, which is expected to provide a low-cost, high-margin addition to its production profile.

The maiden Oxide Copper Ore Reserve – which totals 1.04Mt @ 2.3% Cu for 23,000t of contained copper – follows extensive metallurgical testwork which has enabled Sandfire to scope out the design of a low-cost recovery circuit for the oxide material.

Oxide Copper Processing Plant

Investigations into a suitable processing route for the oxide copper ore commenced in 2011, culminating in successful bench-scale processing to produce a saleable concentrate. This has enabled conversion of the higher grade portion of the previously announced Measured and Indicated open pit Oxide Copper Mineral Resources to Ore Reserves.

The proposed Oxide Copper Processing Plant will include crushing, wet scrubbing and screening to three size fractions, followed by gravity separation at a scoped processing rate of 350-400,000 tonnes per annum. This will produce an intermediate concentrate suitable for further batch treatment in the 1.5Mtpa DeGrussa concentrator through the addition of sulphidising agents allowing conventional flotation.

Testwork completed to date indicates that approximately 40% of the material will be removed by the oxide plant, resulting in a 50% increase in grade ahead of delivery to the DeGrussa concentrator.

ASX / Media Release

16 July 2012

Testwork is continuing aimed at further refinement of the processing route and enhancement of the metallurgical performance of the proposed oxide plant. The objective of this testwork is to deliver further conversion of in situ Mineral Resources (including current lower grade stockpiles) to Ore Reserves.

Figure 1 – Oxide ore from the open pit

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Sandfire considers that the DeGrussa concentrator will have sufficient capacity to process the sulphidised intermediate oxide material in addition to the 1.5Mtpa of underground massive sulphide ore during the early years of operations.

Subject to final engineering studies, it is estimated that the construction of the Oxide Copper Processing Plant, infrastructure and integrating modifications to the DeGrussa concentrator required to integrate the new processing circuit will incur a capital cost in the order of $15-$17 million.

Scoping level estimates indicate an operating cost of around $10-$12 per tonne of Oxide Copper Ore Reserves and completed initial testwork indicates an overall metallurgical recovery to saleable concentrate of 73% of the contained copper of this material.

First production from the Oxide Copper Ore Reserve is planned to begin in mid-CY2013, in addition to the previously announced annualised production profile in the first three years of operations of 77,000tpa of copper and 36,000ozpa of gold.

DeGrussa Open Pit

A significant portion of the Oxide Copper Ore Reserve has already been mined and stockpiled as part of the DeGrussa open pit operations, which commenced in May 2011. As at the end of March 2012, 0.47Mt of copper oxide ore grading 2.0% Cu and 0.7g/t Au had been mined from the open pit and stockpiled in close proximity to the planned Oxide Copper Processing Plant.

Chalcocite below the DSO cut off grade and massive sulphide from the open pit will be stockpiled and processed during the commissioning and initial production phases of the 1.5mtpa on-site concentrator commencing in Q3 CY2012.

At the base of the Stage 2 Open Pit is 0.14Mt of massive sulphide ore at a grade of 3.8% Cu which was originally included within the Underground Ore Reserve but which will now be mined in the Stage 2 open pit and is planned to be processed in mid-CY 2013.

As a result of this massive sulphide now being mined as part of the open pit and the maiden Oxide Copper Ore Reserve, the overall Open Pit Ore Reserve for the DeGrussa Project, stated as at 31 March 2012, total 1.63Mt @ 4.9% Cu, 1.2g/t Au for 79,000 tonnes of contained copper and 64,000 ounces of contained gold.

Further detail of the open pit Ore Reserves is provided in Table 1 and a schematic representation of the distribution of the reserves is shown in Figure 2.

DeGrussa Laterite Gold Processing

Sandfire is also pleased to advise that it has signed an Ore Sale and Purchase Agreement with Barrick (Plutonic) Ltd to process the lateritic gold material mined as part of the open pit operations. Some 0.1Mt of this material at an average grade of 3.0g/t (9,000oz contained gold) has been mined and stockpiled.

The current schedule for this material, which is included in the Reserve Statement in Table 1, is to be processed before the end of CY2012.

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ASX / Media Release

16 July 2012

Figure 2 – DeGrussa Project Open Pit

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Table 1: Updated DeGrussa Project Open Pit Ore Reserve – stated as at 31 March 2012*

Reserve Classification	Treatment Destination Deposit Material Tonnes (Mt) Copper (%) Gold (g/t) Contained Copper (t) Contained Gold (oz)
Proved	Ore Sale Laterite Gold 0.10 - 3.0 - 9,000
Proved	Oxide Copper Processing/ Concentrator Oxide Copper 0.52 2.0 0.7 10,000 11,000
Probable	Oxide Copper Processing/ Concentrator Oxide Copper 0.52 2.5 0.4 13,000 7,000
Probable	Direct Sale Ore Chalcocite 0.15 25.9 2.5 38,000 12,000
Probable	Massive Sulphide Chalcocite 0.09 5.1 2.5 5,000 7,000 Concentrator Conductor 1 MS 0.14 3.8 1.9 5,000 9,000 DeGrussa MS 0.11 7.5 2.4 8,000 8,000
	Massive Sulphide Concentrator Sub-Total: 0.34 5.3 2.2 18,000 25,000
Total Open Pit Ore Reserve 1.63 4.9 1.2 79,000 64,000

**Note *** Ore Reserves contained in this table have been updated from the Ore Reserve Statement disclosed by the Company on 29 March 2011. Mining activities, including stockpiling, and sale of product have continued since 31 March 2012.

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ASX / Media Release

16 July 2012

The inclusion of the Copper Oxide open pit reserves has resulted in a revised Ore Reserve inventory for the DeGrussa Project, which is summarised in Table 2 below:

Table 2: DeGrussa Copper-Gold Project – Ore Reserve Statement stated as at 31 March 2012*

Deposit	Reserve Category	Mining Method	Tonnes (Mt)	Copper (%)	Gold (g/t)	Contained Copper (t)	Contained Gold (oz)
Laterite Gold	Proved	Open Pit	0.10	-	3.0	-	9,000
Copper Oxide	Proved	Open Pit	0.52	2.0	0.7	10,000	11,000
Copper Oxide	Probable	Open Pit	0.52	2.5	0.4	13,000	7,000
DeGrussa	Probable	Open Pit - DSO	0.15	25.9	2.5	38,000	12,000
DeGrussa/C1/ Chalcocite	Probable	Open Pit	0.34	5.3	2.2	18,000	25,000
DeGrussa	Probable	Underground	1.50	6.6	1.9	99,000	90,000
Conductor 1	Probable	Underground	5.70	4.9	1.8	281,000	333,000
Conductor 4	Probable	Underground	0.76	4.4	1.2	33,000	30,000
Total	Proved		0.62	1.7	1.0	10,000	20,000
Total	Probable		8.97	5.4	1.7	482,000	497,000
Total	Proved & Probable		9.59	5.1	1.7	492,000	517,000

• **Note *** Ore Reserves contained in this table have been updated from the Ore Reserve Statement disclosed by the Company on 29 March 2011. Mining activities, including stockpiling, and sale of product have continued since 31 March 2012.

• Note 1 A cut-off grade of 8.5% Cu is applied on the Chalcocite to provide a targeted 26% Cu direct sale product. All other material within the defined deposit boundaries has been included in the reporting of Ore Reserves with any sub-economic grade material being treated as internal dilutents. These Ore Reserves include an overall assumption of 2.5% mining dilution at nil grade for all grade categories along with an assumed 2.5% mining loss of ore tonnes when mined. Calculations rounded to the nearest 10,000 tonnes; 0.1% Cu grade, 0.1 g/t Au grade; 1,000 tonnes Cu metal and 1,000 ounces Au metal. Errors of rounding may occur. The in-situ Ore Reserves occur within an open pit design containing 14Mt of total material, resulting in a waste to ore strip ratio of 12:1. Low grade laterite gold stockpiles not included in reserve.

• Note 2 A 1.0% Cu lower cut-off grade has been applied to the copper oxide open pit in-situ Ore Reserves. The reported copper oxide stockpiles only include existing stockpiles with an estimated average grade above 1.0 % Cu.

Note 3 Mining recovery factor of 95% applied to diluted stoping blocks, with cut-off grade of 1.5% Cu and minimum stope size of 2,000t. Calculations rounded to the nearest 1,000t, 0.1%, 0.1g/t and 1,000 ounces; errors of rounding may occur; assumes commodity prices of US$7,673/t for copper and US$1,300/oz for gold with a USD/AUD exchange rate of $0.86; assumes 91% metallurgical recovery rate. Note: Refer to the Competent Person Statements – Ore Reserves at the end of this release.

Note 4 These Ore Reserves are stated as at 31 March 2012.

Sandfire’s Managing Director, Mr Karl Simich, said the initial DeGrussa open pit operation was focused on rapid extraction of the high-grade DSO reserves to generate early revenue, along with primary sulphide material, with the second stage of the open pit focused on mining further copper oxide and primary sulphide material.

“The completion of a maiden Ore Reserve for the oxide copper follows an extensive programme of metallurgical testwork which will enable us to unlock additional value from the open pit” he said. “This will further add to our production profile in the early years of the operation.”

ENDS

For further information contact: Sandfire Resources NL Karl Simich – Managing Director/CEO Office: +61 8 6430 3800

Read Corporate Mobile: +61 419 929 046 (Nicholas Read) Mobile: +61 421 619 084 (Paul Armstrong)

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ASX / Media Release

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Figure 3 – DeGrussa Copper-Gold Project location

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Appendix 1: DeGrussa Copper-Gold Project – Mineral Resource Statement stated as at 31 March 2012

Total in situ Mineral Resources stated as at 31 March 2012:

	Resource	Tonnes	Copper	Gold	Contained	Contained	Competent
Zone - in situ	Category	(mt)	(%)	(g/t)	Copper (t)	Gold (oz)	Person
Au Laterite	Measured	0.04	0.00	1.17	-	2,000	1
Copper Oxides	Measured Indicated	0.23 1.06	0.8 1.6	0.1 0.5	2,000 17,000	1,000 16,000	1 1
Supergene Chalcocite	Indicated Inferred	0.23 0.19	17.9 4.4	2.6 1.2	42,000 8,000	19,000 7,000	2 1
Primary Massive	Indicated	7.84	5.8	2.0	456,000	502,000	1
Sulphides	Inferred	2.31	4.4	2.0	102,000	146,000	1
	Total	11.91	5.3	1.8	627,000	693,000

Total Stockpiles stated as at 31 March 2012:

	Resource	Tonnes	Copper	Gold	Contained	Contained
Stockpile	Category	(mt)	(%)	(g/t)	Copper (t)	Gold (oz)
Laterite Gold	Measured	0.17	0.2	2.2	-	12,000
Copper Oxide	Measured	1.42	1.1	0.3	16,000	16,000
Supergene Chalcocite	Measured	0.01	34.2	2.7	2,000	-
Total	Measured	1.59	4.4	1.2	18,000	28,000

Resources are stated inclusive of Ore Reserves.

Note: Refer to the Competent Person’s Statements – Mineral Resources below.

• 1 Competent Person for these zones of resource was Diederik Speijers of McDonald Speijers.

• 2 Competent Person for these zones of resource was David Slater of Coffey Mining.

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ASX / Media Release

16 July 2012

Competent Person’s Statement – Mineral Resources

The information in this report that relates to Mineral Resources (except the Indicated Resource of Supergene Chalcocite) is based on information compiled by Diederik Speijers who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Speijers is a permanent employee of McDonald Speijers and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Speijers consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Competent Person’s Statement – Mineral Resources

The information in this report that relates to the Indicated Resource of Supergene Chalcocite is based on information compiled by David Slater who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Slater is a permanent employee of Coffey Mining and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Slater consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Competent Person’s Statement – Underground Ore Reserves

The information in this report that relates to Underground Ore Reserves is based on information compiled by Shane McLeay of Entech Pty Ltd, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr McLeay has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr McLeay consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Competent Person’s Statement – Open Pit Ore Reserves

The information in this report that relates to Open Pit Ore Reserves is based on information compiled by Quinton de Klerk of Cube Consulting, who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr de Klerk has sufficient experience which is relevant to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr de Klerk consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Forward-Looking Statements

Certain statements made during or in connection with this statement contain or comprise certain forward-looking statements regarding Sandfire’s Mineral Resources and Reserves, exploration operations, project development operations, production rates, life of mine, projected cash flow, capital expenditure, operating costs and other economic performance and financial condition as well as general market outlook. Although Sandfire believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward looking statements and no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, delays or changes in project development, success of business and operating initiatives, changes in the regulatory environment and other government actions, fluctuations in metals prices and exchange rates and business and operational risk management. Except for statutory liability which cannot be excluded, each of Sandfire, its officers, employees and advisors expressly disclaim any responsibility for the accuracy or completeness of the material contained in this statement and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this statement or any error or omission. Sandfire undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of unanticipated events other than required by the Corporations Act and ASX Listing Rules. Accordingly you should not place undue reliance on any forward looking statement.

Exploration and Resource Targets

Any discussion in relation to the potential quantity and grade of Exploration Targets for the DeGrussa Project is only conceptual in nature. While Sandfire is confident that it will report additional JORC compliant resources for the DeGrussa Project, there has been insufficient exploration to define mineral resources in addition to the current JORC compliant resource inventory and it is uncertain if further exploration will result in the determination of additional JORC compliant Mineral Resources.

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