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SANDFIRE RESOURCES LIMITED Interim / Quarterly Report 2011
65773_rns_2011-03-10_13a1b9d6-5cd4-44cb-98a7-6c3b2c1b4a09.pdf
Interim / Quarterly Report
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Interim Financial Report
For the six months ended 31 December 2010
ASX Code: SFR
| CORPORATE INFORMATION | 1 |
|---|---|
| DIRECTORS' REPORT | 3 |
| AUDITOR INDEPENDENCE DECLARATION | 7 |
| INTERIM STATEMENT OF COMPREHENSIVE INCOME | 9 |
| INTERIM STATEMENT OF FINANCIAL POSITION | 10 |
| INTERIM STATEMENT OF CHANGES IN EQUITY | 11 |
| INTERIM STATEMENT OF CASH FLOWS | 12 |
| NOTES TO THE INTERIM FINANCIAL STATEMENTS | 13 |
| DIRECTORS' DECLARATION | 16 |
| INDEPENDENT AUDITOR'S REVIEW REPORT | 17 |
ABN 55 105 154 185
Directors
Derek La Ferla Non-Executive Chairman Karl M Simich Managing Director and Chief Executive Officer W John Evans Executive Technical Director Jonghun Jong Non-Executive Director Robert N Scott Non-Executive Director
Company Secretary
Matthew L Fitzgerald
Registered Office and Principal Place of Business
Level 2, 31 Ventnor Avenue West Perth WA 6005 Tel: +61 8 6430 3800 Fax: +61 8 6430 3849 Email: [email protected] Web: www.sandfire.com.au
Share registry
Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Tel: +61 8 9315 2333 Fax: +61 8 9315 2233 Email: [email protected]
Auditors
Ernst & Young Ernst & Young Building 11 Mounts Bay Road Perth WA 6000
Home Exchange
Australian Securities Exchange Limited Exchange Plaza 2 The Esplanade Perth WA 6000
ASX Code: Ordinary fully paid shares: SFR
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 – Ore Reserves
The information in this report that relates to 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 – Exploration Results
The information in this report that relates to Exploration Results is based on information compiled by John Evans who is a Fellow of the Australasian Institute of Mining and Metallurgy. John Evans is a director and permanent employee of Sandfire Resources NL 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. John Evans 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.
The directors present their report together with the interim financial report of Sandfire Resources NL (the Company or Sandfire) for the six months ended 31 December 2010 and the independent auditor's review report thereon.
1. Directors
The directors of the Company at any time during or since the end of the interim period are set out below. Directors were in office for the entire period unless otherwise stated.
| Name | Period of Directorship |
|---|---|
| Mr Derek La FerlaIndependent Non-executive Chairman | Appointed 17 May 2010 |
| Mr Karl M SimichManaging Director and Chief ExecutiveOfficer | Appointed Director 27 September 2007, Managing Director and Chief Executive Officersince 1 July 2009 |
| Mr W John EvansExecutive Technical Director | Appointed 2 October 2007 |
| Mr Jonghun JongNon-Executive Director | Appointed 24 July 2008 |
| Mr Robert N ScottIndependent Non-Executive Director | Appointed 30 July 2010 |
2. Review and results of operations
The principal activity of the Company during the six months ended 31 December 2010 was the exploration and evaluation of mineral tenements in Australia.
Project review, strategies and future prospects
DeGrussa Copper-gold project, Western Australia (100%)
The DeGrussa Copper-Gold Project is located within Sandfire's 100%-owned Doolgunna Project, a 400 square kilometre tenement package in Western Australia's Bryah Basin. The Project is located within an established mining district, approximately 900km north-east of Perth and 150km north of the regional mining hub of Meekatharra. The project area has excellent infrastructure with the Great Northern Highway transecting the Doolgunna tenement package and the Goldfields Gas Transmission Pipeline located nearby.
Maiden Ore Reserves and Updated JORC Resources
Sandfire has completed a maiden Probable Ore Reserve estimate for the DeGrussa underground mining operation comprising 8.02Mt grading 5.2% Cu and 1.8g/t Au for an estimated 415,000 tonnes of contained copper and 456,000 ounces of contained gold, as set out in Table 1 below:
| Deposit | ReserveCategory | Tonnes(Mt) | Copper (%) | Gold(g/t) | Contained Copper(tonnes) | Contained Gold(ounces) |
|---|---|---|---|---|---|---|
| DeGrussa | Probable | 1.50 | 6.6 | 1.9 | 99,000 | 90,000 |
| Conductor 1 | Probable | 5.76 | 4.9 | 1.8 | 283,000 | 337,000 |
| Conductor 4 | Probable | 0.76 | 4.4 | 1.2 | 33,000 | 30,000 |
| TOTAL | Probable | 8.02 | 5.2 | 1.8 | 415,000 | 456,000 |
Table 1: DeGrussa Copper-Gold Project – March 2011 PFS Ore Reserve Statement*
* 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; 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's Statement – Ore Reserves at the end of this release.
The maiden Ore Reserves were derived from the updated JORC compliant Measured, Indicated and Inferred Resource inventory for the DeGrussa Project of 14.33Mt grading 4.6% Cu and 1.6g/t Au for 652,000 tonnes of contained copper and 742,000 ounces of contained gold, which includes additional resource modelling completed since the updated JORC Resource inventory reported in the Company's December 2010 Quarterly Report.
The updated JORC resource statement is set out in Table 2 below, which highlights the Primary Massive Sulphide resources, the Indicated component of which (shown in red) was available for conversion to Ore Reserves. Inferred Resources (shown in yellow), by definition, are not available for conversion to Ore Reserves.
2. Review and results of operations (continued)
| Zone | ResourceCategory | Tonnes(Mt) | Copper(%) | Gold(g/t) | ContainedCopper (t) | Contained Gold(oz) | CompetentPerson |
|---|---|---|---|---|---|---|---|
| Gold Laterite | Measured | 0.14 | - | 1.5 | - | 7,000 | 1 |
| Copper | Measured | 2.17 | 1.1 | 0.5 | 24,000 | 37,000 | 1 |
| Oxides | Indicated | 1.41 | 1.4 | 0.4 | 20,000 | 19,000 | 1 |
| Supergene | Indicated | 0.25 | 17.6 | 2.6 | 43,000 | 20,000 | 2 |
| Chalcocite | Inferred | 0.19 | 4.4 | 1.2 | 8,000 | 7,000 | 1 |
| Primary Massive | Indicated | 7.80 | 5.8 | 2.0 | 456,000 | 502,000 | 1 |
| Sulphides | Inferred | 2.32 | 4.3 | 2.0 | 100,000 | 149,000 | 1 |
| TOTAL | 14.33 | 4.6 | 1.6 | 652,000 | 742,000 |
Table 2: DeGrussa Copper-Gold Project – March 2011 JORC Resource Statement
Note: Refer to the Competent Person's Statements – Mineral Resources, included as part the corporate information section of this Interim Financial Report.
-
Competent Person for these zones of resource was Diederik Speijers of McDonald Speijers.
-
Competent Person for these zones of resource was David Slater of Coffey Mining.
The 2.32 million tonnes of Inferred Resources of Primary Massive Sulphide have been included within the PFS life-ofmine plan.
Table 3 below reflects an overall 93% conversion of contained copper metal from underground Indicated Resources to Ore Reserves:
Table 3: DeGrussa Copper-Gold Project – Ore Reserve Conversion
| Copper | Gold | Contained | Contained | ||
|---|---|---|---|---|---|
| Tonnes (Mt) | (%) | (g/t) | Copper (t) | Gold (oz) | |
| Total Indicated Resources of | |||||
| Primary Massive Sulphide | 7.80 | 5.8 | 2.0 | 456,000 | 502,000 |
| Indicated Resources of Primary | |||||
| Massive Sulphides within the open | |||||
| cut shell | (0.14) | 7.0 | 2.5 | (11,000) | (12,000) |
| Indicated Resources of Primary | |||||
| Massive Sulphides within | |||||
| underground mine plan | 7.66 | 5.8 | 2.0 | 445,000 | 490,000 |
| Conversion (%) | 93% | 93% | |||
| Ore Reserve | 8.02 | 5.2 | 1.8 | 415,000 | 456,000 |
The conversion of Indicated Resources to Ore Reserves resulted in a marginal increase in tonnage and associated reduction in copper and gold grades due to mining dilution and the application of mining recoveries and economic parameters.
In the case of Inferred Resources in the Conductor 4 and 5 deposits, further drilling is planned from underground drilling positions to in-fill these deposits and determine their Indicated Resource status, and make them available for potential determination of Ore Reserves. Surface drilling does not currently represent a cost effective or technically sound method for drilling out these remaining resources and will therefore be drilled from underground as drilling locations become available.
As noted above, work is also continuing – including as part of the DFS – to determine Ore Reserves of the high-grade chalcocite material in the open pit and the oxide copper Resource.
Project Execution Plan
The DeGrussa Project will be developed as an integrated open pit and underground mining operation with a conventional copper processing facility and supporting infrastructure located on site.
Key elements of the project execution plan include:
- Conventional two-stage open pit mining operation over a period of approximately two years to extract the previously reported high-grade Indicated Resource of Direct Shipping Material (DSO) of 151,000 tonnes grading 25.6% Cu and 2.6g/t Au (39,000t of copper metal and 12,000oz of gold) and oxide copper resource of 3.58Mt grading 1.2% copper and 0.5g/t gold (44,000t of copper metal and 56,000oz of gold);
- 298,000t of chalcocite and massive sulphide material at 6.0% Cu and 2.4g/t Au (18,000t of copper metal and 23,000t of gold) to be mined and stockpiled to allow accelerated plant ramp up;
2. Review and results of operations (continued)
- A long-term underground mine which will be undertaken using long-hole open stoping (both transverse and longitudinal) with minor areas of jumbo cut and fill or up-hole benching in some of the narrower areas. Open stopes will be up to 50m high by 25m long by the orebody width (up to 40m, but averaging 20m), with the proposed mining sequence aiming for maximum extraction of the resource using pastefill;
- Underground ore to be processed via a conventional 1.5Mtpa processing facility. Based on metallurgical test work undertaken on DeGrussa ore, the processing facility will utilise conventional crushing, milling and classification circuits followed by conventional flotation, de-watering and filtration to produce a high-grade, high-quality copper concentrate; and
- Annual average production of 220-240,000 tonnes of high-quality copper concentrate grading 27% Cu to be transported by road to Port Hedland for export to international customers.
Key Project Fundamentals
The DeGrussa Project PFS has confirmed a technically and financial robust mining operation with the following key project life-of-mine (LOM) parameters:
| Item | PFS Fundamentals LOM |
|---|---|
| Mining method: | Open pit (2 years), underground (7+ years) |
| Construction time: | 13 months (commencing June 2011) |
| First production: | Open pit – Q1 CY 2012 |
| Underground – Q3 CY 2012 | |
| Processing rate: | 1.5Mtpa |
| Metallurgical recovery: | 91% |
| Average annual concentrate production: | 220-240,000tpa grading 27% Cu |
| Average annual payable metal output: | 60-70,000tpa payable copper |
| 40-45,000oz gold | |
| Pre-production capital cost estimate: | A$270M (plant and infrastructure) |
| A$130M (open pit/underground development) | |
| A$400M total (including contingencies) | |
| C1 cash operating costs: | US$0.90–$1.00/lb (including gold credits) |
| Annual gross sales revenue (average): | A$550-600M |
| Annual pre-tax operating net cash flow (average): | A$330-$350M |
Assumptions used in the PFS, determined in consultation with long term independent concensus views:
- Life-of-mine copper price of US$7,673/tonne (US$3.48/lb)
- Life-of-mine gold price of US$1,300/oz
- Long-term exchange rate of A$1.00:US$0.86
- Cost of extracting open pit copper oxide and gold material incurred as waste with no allowance for revenue benefit (process route design in progress to determine revenue stream)
Project Implementation Timeline
- Q1 CY 2011:
- o Award of open pit and underground mining contracts
- o Award of key construction contracts
- Q2 CY 2011:
- o Delivery of DFS
- o Completion of project funding package and final development approval
- o Commencement of pre-strip of open pit
- Q3 CY 2011:
- o Commencement of on-site construction
- o Commencement of box-cut excavation and underground mine development
- Q1 CY 2012:
- o Commencement of DSO and oxide copper extraction
- Q2 CY 2012:
- o First sales of direct shipping material to customers
- o Initial access established to underground deposits
- Q3 CY 2012:
- o Commissioning of 1.5Mtpa concentrator using stockpiled chalcocite and sulphide material from the open pit
The company is preparing to install, subject to government approvals due imminently, the 200-person construction camp currently stored on site. The company has also prepared documentation to place an order for a further 400-rooms that will satisfy the long term requirements for accommodation.
2. Review and results of operations (continued)
Exploration Update
In parallel with pre-development activities, Sandfire is continuing an aggressive exploration program at DeGrussa including a recently commenced deep diamond drilling program targeting potential repetitions of the VMS lenses at depth beneath the known cluster of deposits.
Drilling has been hampered by the extreme wet weather conditions in the Northeastern Goldfields caused by the recent cyclonic activity. Drilling of the first deep diamond drill hole recently resumed with the hole targeting a position directly below Conductor 4. A total of 6-8 holes are planned as part of this program.
Several other diamond, RC and RAB drilling rigs are currently active at DeGrussa. Work being carried out includes extensive sterilisation drilling for all site infrastructure and cementing and casing existing diamond drill holes as required prior to commencement of development and mining.
Borroloola Project, Northern Territory (100%)
The Borroloola Project comprises a total area of approximately 10,887 square kilometres, following a compulsory partial surrender, of granted tenements and tenements under application in the Northern Territory. The Project encloses a significant proportion of the Batten Fault Zone, host to the giant McArthur River lead and zinc mine deposit. This deposit is the second largest SEDEX base metal deposit in the world. The Project also covers near-coastal areas of Cretaceous rocks considered to be highly prospective for sedimentary manganese mineralisation, similar to the world-class Groote Eylandt manganese deposits north of the Borroloola Project in the Gulf of Carpentaria.
Base Metal Exploration
Four prospects were targeted in the 2010 field season across the Northern Territory tenements. These were Tawallah 1 and 2, prospective for base metal SEDEX style deposits; Yiyintyi for unconformity related Uranium mineralisation and the Emu Fault prospect – a series of deep stratigraphic drill holes designed to access the stratigraphy around foulted sections of the Emu Fault Zone and the presence and location of the Barney Creek Formation, that hosts the giant McArthur River Mine, lead and zinc deposit.
A total of 94 reverse circulation drillholes and 4 diamond drillholes were completed across the four projects. Of these, 69 RC drillholes tested the Tawallah 1 prospect, 17 tested the Tawallah 2 prospect, 8 tested the Yiyintyi prospect and 4 diamond drillholes were drilled across the Emu Fault Zone.
| Number ofdrillholes | Tenement | Total metres |
|---|---|---|
| 69 | SEL26939 | 8179 |
| 17 | SEL26833 | 3840 |
| 8 | SEL26837 | 1193 |
| 4 | SEL26835 | 738 |
A wide zone of visible copper oxide mineralisation has been intersected at the Tawallah 1 prospect. This shallow (approximately 20-40m deep) zone has thus far returned subeconomic grades of copper. Twenty two RC drillholes in the Tawallah 1 prospect area, largely confined to an area of 500 by 200m, encountered visible copper oxide mineralisation. Complete analytical results are awaited. A typical interval was recorded in hole BLRC062 from 25 to 39m recording 0.3% copper. This is associated with elevated trace elements of cobalt, manganese, bismuth and antimony. Further exploration on the Tawallah 1 Prospect is planned for 2011.
Corporate
In November 2010, Sandfire announced plans to undertake a capital raising to underpin initial development activities and ongoing exploration at DeGrussa. The raising comprised a 1-for-12 accelerated non-renounceable pro rata entitlement offer to raise approximately $72 million, and an underwritten institutional placement to raise a minimum of $30 million. The Entitlement Offer was underwritten with an offer price of $6.60, and included an institutional component and a retail component.
The institutional entitlement offer closed on 17 November 2010, and enjoyed strong support from shareholders with a 90% take-up rate and $35 million raised. New shares under the placement and new shares equivalent to the entitlements not taken up by institutional shareholders were offered via an institutional bookbuild process. The final price for this institutional bookbuild was $7.00.
The retail component of the entitlement offer closed on 8 December 2010, and raised a total of $37 million with 90% of eligible shareholders participating in the offer. The offer was fully underwritten, and new shares not subscribed for by eligible shareholders were allocated to Goldman Sachs in accordance with the underwriting agreement.
The combined entitlement offer and institutional placement raised a total of $103 million, which increased the Company's cash reserves at the end of the six month period ended 31 December 2010 to $124 million.
3. Events subsequent to reporting date
Issued capital
Subsequent to 31 December 2010, the Company has announced the following issue of ordinary shares resulting from the conversion of options:
| Number | Exercise price | Expiry date |
|---|---|---|
| 141,430 | $0.35 | 7 February 2011 |
| 1,000 | $1.40 | 6 July 2013 |
Investment in Chilean Copper-Gold Explorer
On 8 March 2011, the Company announced its intention to subscribe for a 17.1% stake in junior explorer Whinnen Resources Ltd (ASX: WWW; Whinnen). The Company will subscribe for 26.5 million shares ($1.855 million) as part of a $7.28 million share placement being undertaken by Whinnen to sophisticated investors at $0.07 per share. In addition, Sandfire will be issued with 17 million Whinnen shares and 14.5 million options with an exercise price of $0.20 per share and an expiry date of 30 April 2014 as part of Technical Services Agreement between the companies.
The capital raising and acquisition are both subject to Whinnen shareholder approval and other conditions as outlined in the ASX announcement made by Whinnen on 8 March 2011.
4. Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable and where noted ($'000)) under the option available to the Company under ASIC CO 98/0100.
5. Auditor independence declaration
We have obtained the following independence declaration from our auditors Ernst & Young.
Signed in accordance with a resolution of the directors:
Derek La Ferla Non-executive Chairman
Dated at West Perth this 11th day of March 2011.
Karl M. Simich Managing Director and Chief Executive Officer
INTERIM STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
| Note | 31 Dec 2010$000 | 31 Dec 2009$000 |
|---|---|---|
| Other revenue4 | 1,558 | 76 |
| Exploration and evaluation expenses | (33,052) | (10,739) |
| Administrative expenses | (3,709) | (957) |
| Loss before income tax | (35,203) | (11,620) |
| Income tax | - | - |
| Net loss for the period | (35,203) | (11,620) |
| Other comprehensive income for the period, net of tax | - | - |
| Total comprehensive income for the period | (35,203) | (11,620) |
| Loss per share | ||
| Basic and diluted loss per share attributable to ordinary equity holders (cents) | (26.25) | (12.20) |
The interim statement of comprehensive income is to be read in conjunction with the accompanying notes.
| Note | 31 Dec 2010$000 | 30 Jun 2010$000 |
|---|---|---|
| ASSETS | ||
| Cash and cash equivalents5 | 124,230 | 55,834 |
| Trade and other receivables | 514 | 767 |
| Other current assets | 41 | 185 |
| Total current assets | 124,785 | 56,786 |
| Receivables | 1,348 | 395 |
| Property, plant and equipment | 3,705 | 2,874 |
| Total non-current assets | 5,053 | 3,269 |
| TOTAL ASSETS | 129,838 | 60,055 |
| LIABILITIES | ||
| Trade and other payables | 4,971 | 2,784 |
| Interest bearing liabilities | 138 | 87 |
| Provisions | 187 | 102 |
| Total current liabilities | 5,296 | 2,973 |
| Interest bearing liabilities | 376 | 262 |
| Provisions | 473 | 68 |
| Total non-current liabilities | 849 | 330 |
| TOTAL LIABILITIES | 6,145 | 3,303 |
| NET ASSETS | 123,693 | 56,752 |
| EQUITY | ||
| Issued capital6 | 207,082 | 105,096 |
| Reserves | 2,728 | 2,570 |
| Accumulated losses | (86,117) | (50,914) |
| TOTAL EQUITY | 123,693 | 56,752 |
The interim statement of financial position is to be read in conjunction with the accompanying notes.
INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
| Note | Issuedcapital$000 | Share basedpaymentsreserve$000 | Accumulatedlosses$000 | Total equity$000 | |
|---|---|---|---|---|---|
| For the six months ended 31 December 2010 | |||||
| At 1 July 2010 | 105,096 | 2,570 | (50,914) | 56,752 | |
| Loss for the period | - | - | (35,203) | (35,203) | |
| Other comprehensive income | - | - | - | - | |
| Total comprehensive income for the period | - | - | (35,203) | (35,203) | |
| Transactions with owners in their capacity as owners | |||||
| Shares issued | 6 | 103,259 | - | - | 103,259 |
| Share issue costs | (4,792) | - | - | (4,792) | |
| Exercise of options | 6 | 2,954 | - | - | 2,954 |
| Transfer from share-based payments reserve on exerciseof options | 6 | 565 | (565) | - | - |
| Share based payments recognised at fair value | 6 | - | 723 | - | 723 |
| At 31 December 2010 | 207,082 | 2,728 | (86,117) | 123,693 | |
| For the six months ended 31 December 2009 | |||||
| At 1 July 2009 | 22,089 | 2,069 | (21,368) | 2,790 | |
| Loss for the period | - | - | (11,620) | (11,620) | |
| Other comprehensive income | - | - | - | - | |
| Total comprehensive income for the period | - | - | (11,620) | (11,620) | |
| Transactions with owners in their capacity as owners | |||||
| Shares issued | 11,660 | - | - | 11,660 | |
| Share issue costs | (200) | - | - | (200) | |
| Contributing shares paid up in full | 1,862 | - | - | 1,862 | |
| Exercise of options | 1,173 | - | - | 1,173 | |
| Transfer from share-based payments reserve on exerciseof options | 728 | (728) | - | - | |
| Transfer from share-based payments reserve oncontributing shares paid up in full | 40 | (40) | - | - | |
| Share based payments recognised at fair value | - | 771 | - | 771 | |
| At 31 December 2009 | 37,352 | 2,072 | (32,988) | 6,436 |
The interim statement of changes in equity is to be read in conjunction with the accompanying notes.
INTERIM STATEMENT OF CASH FLOWS
FOR SIX MONTHS ENDED 31 DECEMBER 2010
| Note | 31 Dec 2010$000 | 31 Dec 2009$000 |
|---|---|---|
| Cash flows from operating activities | ||
| Cash paid to suppliers and employees | (32,502) | (8,350) |
| Interest received | 1,606 | 237 |
| Net cash inflow (outflow) from operating activities | (30,896) | (8,113) |
| Cash flows from investing activities | ||
| Payments for property, plant and equipment | (1,138) | (1,460) |
| Payments for security deposits and bonds | (953) | (74) |
| Net cash inflow (outflow) from investing activities | (2,091) | (1,534) |
| Cash flows from financing activities | ||
| Proceeds from issue of shares and options | 106,213 | 14,695 |
| Share issue costs | (4,792) | (124) |
| Repayment of finance leases | (38) | - |
| Net cash inflow (outflow) from financing activities | 101,383 | 14,571 |
| Net increase (decrease) in cash and cash equivalents | 68,396 | 4,924 |
| Cash and cash equivalents at the beginning of the period | 55,834 | 2,645 |
| Cash and cash equivalents at the end of the period5 | 124,230 | 7,569 |
The interim statement of cash flows is to be read in conjunction with the accompanying notes.
1 Basis of preparation and accounting policies
Basis of preparation
Sandfire Resources NL (the Company or Sandfire) is a company domiciled and incorporated in Australia. The address of the Company's registered office is 1 Ventnor Avenue, West Perth WA 6005. This general purpose condensed financial report for the half-year ended 31 December 2010 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001.
The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the entity as the full financial report.
It is recommended that the half-year financial report be read in conjunction with the annual report for the year ended 30 June 2010 and considered together with any public announcements made by the Company during the half-year ended 31 December 2010 in accordance with the continuous disclosure obligations of the ASX listing rules.
The annual report of the Company as at and for the year ended 30 June 2010 is available on request from the Company's registered office or at www.sandfire.com.au.
The interim financial report was approved by the Board of Directors on 11 March 2011.
Accounting policies
The accounting policies applied by the Company in this interim financial report are the same as those applied by the Company in its financial report as at and for the year ended 30 June 2010. The adoption of new and amended standards and interpretations had no impact on the financial position or performance of the Company. Certain comparative amounts have been reclassified to conform to the current year's presentation.
At 30 June 2010 the Company adopted the amendment to AASB 107 Statement of Cash Flows arising from the Annual Improvement Project, which requires that only expenditure resulting in the recognition of an asset in the Statement of Financial Position is eligible for classification as investing activities in the Statement of Cash Flows. The adoption of the amendment has resulted in the reclassification of the 31 December 2009 Statement of Cash Flows balance of exploration and evaluation expenditure, amounting to $7,639,421, from investing activities to operating activities.
The Company has not elected to early adopt any other new Standards or amendments that are issue but not yet effective.
2 Estimates
The preparation of interim financial reports requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this interim financial report, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual financial report as at and for the year ended 30 June 2010.
3 Operating segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the Board of directors.
Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive management team and the Board of directors.
The Company continuously reviews the progress of its various exploration projects in Australia and allocates the projects to operating segments as to their relevant stage of development, that is, whether the project is in exploration, development or production stage. It is on this basis that the executive management team and the Board of directors makes decisions about the allocation of resources and assesses the Company's performance.
The Company's most significant project, the DeGrussa Copper-Gold Project located within the Doolgunna tenement area, is considered to be in exploration and evaluation phase as at 31 December 2010 and accordingly the Company effectively operates as one segment as at that date, being the exploration of mineral resources in Australia. The Company will review its operating segment classification at the next reporting date, with the DeGrussa Copper-Gold Project moving into a development phase subsequent to 31 December 2010.
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
4 Other revenue
| 31 Dec 2010$000 | 31 Dec 2009$000 | |
|---|---|---|
| Interest income – bank deposits | 1,558 | 76 |
| 5 Cash and cash equivalents | ||
| 31 Dec 2010 | 30 Jun 2010 |
| $000 | $000 | |
|---|---|---|
| For the purposes of the half-year statement of cash flows, cash and cashequivalents are comprised of the following: | ||
| Cash at bank and on hand | 13,700 | 14,901 |
| Short-term deposits | 110,530 | 40,933 |
| 124,230 | 55,834 |
6 Issued capital
Issued ordinary shares
The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company. Shares rank equally with regard to the Company's residual assets and have no par value.
| 2010Number | 2009Number | |
|---|---|---|
| On issue at 1 July | 130,009,760 | 82,844,965 |
| Contributing shares paid up in full | - | 12,410,979 |
| Issue of shares for cash | 15,352,779 | 9,716,933 |
| Exercise of options | 2,805,000 | 2,528,570 |
| On issue at 31 December | 148,167,539 | 107,501,447 |
Posco Australia Pty Ltd (POSA)
ASX has granted the Company a waiver from listing rule 6.18 to the extent necessary to permit the Company to give POSA the right to maintain its percentage interest in the issued capital of the Company by participating in any issue of shares or subscribing for shares (the "Top-Up Right") in respect of a diluting event which occurs or is announced in the period of 5 years following completion of the subscription agreement entered into between the Company and POSA on 2 May 2008. The Top-Up-Right:
- (i) lapses if POSA's percentage holding in the Company falls below 10%;
- (ii) lapses if the strategic relationship between the Company and POSA ceases or changes in such a way that it effectively ceases; and
- (iii) may only be transferred to an entity in the wholly owned group of POSA.
Any securities issued under the Top-Up-Right are offered to POSA for cash consideration that is no more favourable than offered to third parties.
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
6 Issued capital (continued)
Movement in shares under option
| Options expiring on or before | ExercisePrice | On issue1 Jul 10 | Issued | Exercised | On issue31 Dec 10 |
|---|---|---|---|---|---|
| 7 February 2011 | $0.35 | 141,430 | - | - | 141,430 |
| 8 August 2011 | $0.40 | 1,025,000 | - | (600,000) | 425,000 |
| 30 September 2011 | $0.50 | 1,600,000 | - | - | 1,600,000 |
| 6 July 2012 | $1.40 | 882,000 | - | (285,000) | 597,000 |
| 30 September 2012 | $3.00 | 200,000 | - | - | 200,000 |
| 12 July 2013 | $0.60 | 1,690,000 | - | (680,000) | 1,010,000 |
| 12 July 2013 | $0.80 | 2,000,000 | - | (660,000) | 1,340,000 |
| 12 July 2013 | $1.00 | 2,000,000 | - | (400,000) | 1,600,000 |
| 27 November 2014 | $4.68 | 390,000 | - | (60,000) | 330,000 |
| 27 November 2014 | $5.44 | 390,000 | - | (60,000) | 330,000 |
| 27 November 2014 | $6.22 | 390,000 | - | (60,000) | 330,000 |
| 15 June 2015 | $3.80 | 333,332 | - | - | 333,332 |
| 15 June 2015 | $4.40 | 333,333 | - | - | 333,333 |
| 15 June 2015 | $5.00 | 333,335 | - | - | 333,335 |
| 11,708,430 | - | (2,805,000) | 8,903,430 |
7 Commitments
Contractual commitments
On 2 May 2008, the Company entered into a commercial agreement with Posco Australia Pty Ltd (POSA), whereby POSA, or POSA nominated affiliates, has the right to purchase 30% of the Company's future mineral production at fair market value excluding gold and diamond production. The rights under the commercial agreement remain for as long as POSA has at least a 10% holding of Sandfire ordinary shares and entitles POSA to a 7.5% discount on the first $100 million of offtake.
8 Events subsequent to reporting date
Issued capital
Subsequent to 31 December 2010, the Company has announced the following issue of ordinary shares resulting from the conversion of options:
| Number | Exercise price | Expiry date |
|---|---|---|
| 141,430 | $0.35 | 7 February 2011 |
| 1,000 | $1.40 | 6 July 2013 |
Investment in Chilean Copper-Gold Explorer
On 8 March 2011, the Company announced its intention to subscribe for a 17.1% stake in junior explorer Whinnen Resources Ltd (ASX: WWW; Whinnen). The Company will subscribe for 26.5 million shares ($1.855 million) as part of a $7.28 million share placement being undertaken by Whinnen to sophisticated investors at $0.07 per share. In addition, Sandfire will be issued with 17 million Whinnen shares and 14.5 million options with an exercise price of $0.20 per share and an expiry date of 30 April 2014 as part of Technical Services Agreement between the companies.
The capital raising and acquisition are both subject to Whinnen shareholder approval and other conditions as outlined in the ASX announcement made by Whinnen on 8 March 2011.
In accordance with a resolution of the directors of Sandfire Resources NL ("the Company"), I state that:
In the opinion of the directors:
- (a) The financial statements and notes of the entity are in accordance with the Corporations Act 2001, including:
- (i) Giving a true and fair view of the financial position as at 31 December 2010 and the performance for the half-year ended on that date of the entity
- (ii) Complying with Accounting Standard 134 Interim Financial Reporting and the Corporations Regulations 2001
- (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Signed in accordance with a resolution of the directors:
Derek La Ferla Non-executive Chairman
Dated at West Perth this 11th day of March 2011.
Karl M Simich Managing Director and Chief Executive Officer
