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SANDFIRE RESOURCES LIMITED Interim / Quarterly Report 2022
65773_rns_2021-10-27_2b84fda2-7553-4700-afec-239af5e5f1c5.pdf
Interim / Quarterly Report
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September 2021 Quarterly Report Presentation
Karl Simich, Managing Director & CEO 28 October 2021
Access the live webcast of this presentation commencing at 10.00am (AWST) / 1.00pm (AEDT) at the link below:
Important Information and Disclaimer
This presentation has been prepared by Sandfire Resources Ltd (Sandfire or the Company) and contains information about Sandfire current at the date of this presentation. The presentation is in summary form, has not been independently verified and does not purport to be all inclusive or complete. The Company is not responsible for providing updated information and assumes no responsibility to do so. Recipients should conduct their own investigations and perform their own analysis in order to satisfy themselves as to the accuracy and completeness of the information, statements and opinions contained in this presentation.
This presentation is for information purposes only. Neither this presentation nor the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of shares in any jurisdiction and may not be distributed in any jurisdiction except in accordance with the legal requirements applicable in such jurisdiction. Recipients should inform themselves of the restrictions that apply in their own jurisdiction. A failure to do so may result in a violation of securities laws in such jurisdiction.
This presentation does not constitute investment advice and has been prepared without taking into account the recipient's investment objectives, financial circumstances or particular needs and the opinions and recommendations in this presentation are not intended to represent recommendations of particular investments to particular persons. Recipients should seek professional advice when deciding if an investment is appropriate. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments.
To the fullest extent permitted by law, Sandfire, its related bodies corporate, and each of their officers, employees, agents and advisers expressly disclaim, to the maximum extent permitted by law, all liabilities (however caused, including negligence) in respect of, make no representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of any information, statements, opinions, estimates, forecasts or other representations contained in this presentation. No responsibility for any errors or omissions from this presentation arising out of negligence or otherwise is accepted.
Certain statistical and other information included in this presentation is sourced from publicly available third party sources and has not been independently verified.
All figures are expressed in Australian dollars unless otherwise stated.
This presentation should be read in conjunction with the Company's September 2021 Quarterly Report released today, 28 October 2021.
This presentation is authorised for release by Sandfire's Managing Director and CEO, Mr Karl Simich.
Forward-Looking Statements
This presentation may include forward-looking statements. Forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions which are outside the control of Sandfire. There is continuing uncertainty as to the full impact of COVID-19 on Sandfire's business, the Australian economy, share markets and the economies in which Sandfire conducts business. Given the high degree of uncertainty surrounding the extent and duration of the COVID-19 pandemic, it is not currently possible to assess the full impact of COVID-19 on Sandfire's business or the price of Sandfire securities. Actual values, results or events may be materially different to those expressed or implied in this presentation. Given these uncertainties, recipients are cautioned not to place reliance on forward-looking statements. Any forward-looking statements in this presentation speak only at the date of issue of this presentation. Subject to any continuing obligations under applicable law and the ASX Listing Rules, Sandfire does not undertake any obligation to update or revise any information or any of the forward-looking statements in this presentation or any changes in events, conditions or circumstances on which any such forward-looking statement is based.
Strategy
Our Purpose 'Creating value through opportunity'
Highlights
September 2021 Quarter
- DeGrussa copper production: 15,946t of contained copper and 7,515oz of contained gold at C1 US$1.13/lb:
- FY2022 guidance maintained: 64-68kt Cu and 30-34koz Au; C1 costs ~US$1.00-$1.10/lb
- Maiden Mineral Resource estimate pending and Scoping Study in progress for the Old Highway Gold Prospect and expected to be completed in the March 2022 Quarter
- 5.2Mtpa Motheo Production Hub concept confirmed:
- Pre-Feasibility Study for expansion of Motheo Copper Mine supports development of 5.2Mtpa Production Hub
- Maiden Ore Reserve delivered for the satellite A4 Deposit, 8km west of Motheo: 9.7Mt at 1.2% Cu and 18g/t Ag for 114,000t of contained copper and 5.7Moz of contained silver, representing 85% of the contained copper in the updated A4 Mineral Resource announced last Quarter
- Construction activities continued to ramp up at the Motheo Copper Mine with the 200-person construction camp operational, construction of the access road continuing and bulk earthworks underway
● Transformational acquisition of MATSA:
- Sandfire announced the transformational US$1.865 billion (A$2.572 billion) acquisition of the MATSA Mining Complex in Spain, delivering a world-class mining complex comprising three underground mines feeding a 4.7Mtpa central processing facility producing 100-120ktpa Cu Eq
- Strong $405.5 million cash holding at 30 September 2021
HSEC
The safety, health and wellbeing of our people is integral to our success
Safety, health and wellbeing
- Total Recordable Injury Frequency Rate (TRIFR) of 5.6 at Quarter end (4.0 at June 2021 Quarter end).
- Continued focus on employee and contractor health and wellbeing during the COVID -19 pandemic and response.
- Sandfire awarded the Resources Sector Award for Community Partnerships by DMIRS, Western Australia for the Dandjoo Darbalung - Indigenous Access Program .
Doolgunna
Strong foundations in Western Australia
DeGrussa Operations | Operating costs and capital
| Unit operating costs | Q1 FY2022(US$/lb) |
|---|---|
| Mining | 0.53 |
| Processing | 0.32 |
| Business services | 0.13 |
| Transport Costs | 0.39 |
| Treatment and refining | 0.16 |
| C1 cost (pre by-productcredit) | 1.53 |
| By-product credit | (0.40) |
| C1 cost | 1.13 |
| Royalties | 0.22 |
| Production cost | 1.35 |
| Depreciation and amortisation | 1.07 |
| Total production cost | 2.42 |
- Q1 FY2022 C1 operating costs of US$1.13/lb Cu was marginally above plan (+2%) driven by increased ore tonnes mined at a lower grade, higher power costs due to diesel price and higher cement costs for paste fill. Overseas shipping and demurrage aligned with higher market rates.
- Q1 FY2022 DeGrussa Mine development $9M; FY22 guidance $41M.
- Q1 FY2022 Monty Mine development $3M; FY22 guidance $6M.
- 20,225t of copper concentrate holding at Quarterend.
Doolgunna | Old Highway Gold Project Resource Definition
Remaining resource definition drilling programs currently ongoing.
Central Deeps:
- 25m x 25m diamond pattern revised to 50m x 100m spacing designed to test for down-dip extensions to mineralisation at Old Highway.
- Planned total of 25 diamond drill holes totalling 9,370m.
Central-East Links:
- 25m x 25m RC pattern revised to 50m x 50m spacing, with a focus on the deeper portion of the program.
- Planned total of 20 RC holes totalling 2,445m.
Doolgunna
Dual-track exploration strategy
Kalahari
Expanding horizons in Botswana and Namibia
Kalahari (Botswana and Namibia)
- Motheo Copper Mine
- Motheo Expansion Project
- Extensive Kalahari exploration portfolio (Botswana and Namibia)
A4 Mineral Resource update
July 2021 A4 Mineral Resource
| Cu%Cut-Off | Mineral ResourceCategory | Weathering | Tonnes | Copper Grade(%Cu) | Silver Grade(ppm Ag) | ContainedCu (t) | Contained Ag(oz) |
|---|---|---|---|---|---|---|---|
| 0.50% | Indicated | Saprolite | 550,000 | 1.0 | 7.0 | 6,000 | 100,000 |
| Saprock | 1,340,000 | 1.5 | 14.0 | 20,000 | 600,000 | ||
| Fresh | 7,000,000 | 1.4 | 24.0 | 99,000 | 5,400,000 | ||
| Total Indicated | 8,900,000 | 1.4 | 22.0 | 124,000 | 6,200,000 | ||
| Inferred | Saprolite | 30,000 | 1.4 | 2.0 | - | - | |
| Saprock | 40,000 | 0.9 | 6.0 | - | - | ||
| Fresh | 850,000 | 1.0 | 16.0 | 9,000 | 400,000 | ||
| Total Inferred | 920,000 | 1.0 | 15.0 | 9,000 | 400,000 | ||
| GRAND TOTAL | 9,820,000 | 1.4 | 21.0 | 134,000 | 6,600,000 |
Notes:
Calculations have been rounded to the nearest: 10kt; 0.1% Cu grade; 1kt Cu metal, 1g/t Ag grade; and 100koz Ag metal. Differences may occur due to rounding. Full details of the A4 Mineral Resource update were provided in the Company's ASX Announcement titled 'Updated Mineral Resource for a$ Copper-Silver Deposit' dated 21 July 2021.
• Updated Indicated and Inferred A4 Mineral Resource delivered a 34% increase in contained copper compared to the maiden Inferred Mineral Resource (released December 2020).
A4 Maiden Ore Reserve
A4 Open Pit Ore Reserve
| Ore ReserveCategory | Tonnes(Mt) | Copper Grade(%) | ContainedCopper (Kt) | SilverGrade (g/t) | ContainedSilver (Moz) |
|---|---|---|---|---|---|
| Probable | 9.7 | 1.2 | 114 | 18.0 | 5.7 |
| Total | 9.7 | 1.2 | 114 | 18.0 | 5.7 |
Notes:
-
- The Probable Ore Reserve is based on the Indicated category of the Mineral Resource. No Inferred category has been included.
-
- The copper cut-off grade is variable, based on silver credits, contaminant penalties and variable metal recovery dependent on head grades for copper, silver, sulphur, arsenic, lead, zinc and the ratio of copper to acid soluble copper. A net smelter return (NSR) value was used to define the economic material for the Ore Reserve Estimate. An elevated copper cut-off grade of 0.5% was used for the majority of the life of mine (LOM). Material between the NSR marginal cut-off and the elevated cut-off was used to maintain plant feed and manage total material movement rates.
-
- The minimum copper grade used in the NSR calculations was 0.25% Cu after deducting any acid soluble copper. In a scheduling period, the lowest average grade of ore added to the process plant feed was 0.54% Cu.
-
- Ore Reserves are estimated based on a copper price of US$3.40/lb and a silver price of $18.77/oz.
-
- Ore loss and dilution were applied to the Mineral Resource model which resulted in an ore loss of approximately 12% at 0.79% Cu and a diluted tonnage addition of approximately 16% at 0.0% Cu.
-
- Metallurgical test work recoveries were applied in accordance to the recovery algorithms developed from the variability test work program conducted for the prefeasibility study.
- Completion of Motheo Expansion Case Pre-Feasibility Study (PFS) supported reporting of a maiden Ore Reserve for A4.
Expansion Case PFS key elements
-
Open pit mine at A4 1.2km long x 0.5km wide to be mined in 2 stages
-
Expansion of the Motheo Processing Plant to 5.2Mtpa capacity
-
Supporting infrastructure breakdown workshops, fuel storage, power and office facilities
-
Open pit dewatering infrastructure
-
Haul road and services corridor linking A4 to the Motheo Processing Plant
-
Light vehicle access road linking A4 to the permanent accommodation facility
Expansion case pre-feasibility study outcomes
- 47% increase in estimated life-of-mine revenue to US$3.6 billion (A$4.9 billion) using an updated forecast longterm copper price of US$3.49/lb
- 116% increase in pre-tax NPV7% to US$682 million (A$937 million) and IRR of 36%
- 99% increase in post-tax NPV7% to US$417 million (A$574 million)
- 88% increase in pre-tax net cash-flow to US$1.24 billion (A$1.70 billion)
- Payback period reduced to 2.9 years (previously 3.2 years) from production start
- US$71 million (A$98 million) preproduction capital (inclusive of US$20m pre-approved) for process plant expansion to 5.2Mtpa and development of A4 open pit
- Mine life of 10.5 years with a peak production of 60Ktpa of copper in concentrate
- 20% decrease in LOM C1 cash costs to US$1.32/lb and 15% decrease LOM AISC to US$1.56/lb
| Key drivers | Unit | 3.2MtpaBase Case | 5.2MtpaExpansionCase | Var. % |
|---|---|---|---|---|
| Physicals | ||||
| Life of Mine (processing) | Years | 12.5 | 10.5 | -16% |
| Waste : Ore (inc. pre-strip) | 6.1 | 6.5 | 7% | |
| Cu grade | % | 0.9 | 0.96 | 6% |
| Ag grade | g/t | 12.2 | 13.4 | 10% |
| Cu recovery | % | 92.1 | 92.3 | 0% |
| Ag recovery | % | 87.3 | 88.2 | 1% |
| Cu in concentrate | kt | 331 | 437 | 32% |
| Economic | ||||
| Cu price (LOM average)1 | US$/lb | 3.16 | 3.49 | 11% |
| Ag price (LOM average) | US$/oz | 18.48 | 21.51 | 16% |
| Capex: Development & Pre-strip | US$'M | 259 | 366 | 41% |
| Capex: LOM | US$'M | 324 | 454 | 40% |
| Net cash flow (pre-tax) | US$'M | 661 | 1,241 | 88% |
| NPV (pre-tax, real, 7.0%) | US$'M | 316 | 682 | 116% |
| NPV (post-tax, real, 7.0%) | US$'M | 210 | 417 | 99% |
| IRR (pre-tax, real) | % | 25.5 | 36.2 | 42% |
| Capital payback (from 1stproduction) | Years | 3.8 | 2.9 | (24%) |
| C1: LOM | US$/lb | 1.65 | 1.32 | (20%) |
| AISC: LOM | US$/lb | 1.84 | 1.56 | (15%) |
- Financial outcomes from the Base Case 3.2Mtpa DFS released on 1 December 2020 have been updated using an assumed copper price of US$3.49/lb, reflecting long-term consensus forecasts, and bringing them in-line with the assumptions used in the Expansion Case 5.2Mtpa PFS reported in this announcement.
Motheo Development Timeline
| Mining License Approval & Land Titles | |||||
|---|---|---|---|---|---|
| Accommodation Village EMP | |||||
| Process Plant Engineering & Pre-ConstructionWorks | |||||
| Accommodation Facility | |||||
| 132KV Powerline & Substations Design &Construction | |||||
| Process Plant Construction | |||||
| Mining Contractor Mobilisation & Establishment | |||||
| Mining Prestrip | |||||
| Process Plant Commissioning | |||||
| Process Plant Concentrate Ramp Up &Production | |||||
| Financial Year | 2021 | 2022 | 2023 | 2024 |
Motheo Copper Mine
Key Progress
- Development is proceeding to plan
- Perenti is on track to commence mobilisation to site in November 2021
- Country Head and GM Operations now incountry
- The major earthworks contractor has mobilised to site and commenced works
- Construction accommodation village is now well advanced with 200 rooms operational
- Concrete, permanent accommodation village and HV contractors are currently mobilising to site
- Detailed engineering design of the process plant complete
- Expansion Case PFS and Maiden Ore Reserve estimate for A4 completed. Feasibility Study is on track for completion in March 2022 Quarter
- Project debt funding discussions progressing
Kalahari Copper Belt
Consolidation of exploration ground in Botswana
Kalahari Exploration – Priority Target Areas
- Currently 8 diamond and reverse circulation drill rigs in operation – increasing to 10 drill rigs in November
- Motheo Expansion Project remains a high priority targeting high grade vein mineralisation (A4 West, A1 Dome)
- Sheared NPF contact zones targeting vein hosted Cu mineralisation similar to Zone 5 Mine (T1,T2E)
- Regional drilling targeting major mineralised shear zones (T23,T4,T46 and T14,T5,T45)
New identified/acquired targets FY21
Previously identified Cu-Ag targets
Black Butte
Montana, USA
Black Butte Copper Project (Montana, USA) (87%)
- Johnny Lee Copper Deposit
- Lowry Deposit
Black Butte
Montana, USA
- Acquisition of key mine property
- Enhancement of Feasibility Study being progressed
- Exploration program within the Mining Lease targeting potential extensions and other near-mine opportunities
- Continuing response to legal challenges to permitting
Montana, USA Exploration
- Hole SC21-262 Strawberry West Upper Copper Zone – 6.8m of 1.2% copper and 33.0g/t silver
- Hole SC21-263 Lowry North extension in Lowry Middle Copper Zone - 9.8m of 1.7% copper and 12.2g/t silver
- Hole SC21-263 Lowry North extension in Lowry Lower Copper Zone - 7.1m of 1.4% copper and 6.5g/t silver
Full details of the assay results reported from Black Butte during the Quarter are available from Sandfire Resources America's website, www.sandfireamerica.com.
Key takeaways
September 2021 Quarter
Global vision – transformational acquisition of the MATSA Mining Complex
Strong growth platform – DeGrussa cash-flows, $405.5m cash at 30 September 2021
New production hub – construction of expanded 5.2Mtpa Motheo Copper Mine in Botswana underway
Strong pipeline – high-quality development opportunities and a global exploration portfolio in Tier-1 jurisdictions
Refreshed and focused – an
international exploration, development and mining team strongly aligned with our growth objectives
Competent Person's Statements
A4 Ore Reserve
The information in this presentation that relates to Open Pit Ore Reserves, is based on information compiled by Mr Jake Fitzsimons who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Fitzsimons is employed by Orelogy Consulting Pty Ltd and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Fitzsimons consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Refer to ASX Announcement, dated 22 September 2021, titled 'Maiden Ore Reserve for A4 Deposit and PFS confirms 5.2Mtpa Motheo Copper Project'.
T3 Ore Reserve
The information in this presentation that relates to Open Pit Ore Reserves, is based on information compiled by Mr Jake Fitzsimons who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Fitzsimons is employed by Orelogy Consulting Pty Ltd and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Fitzsimons consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Refer to ASX Announcement, dated 1 December 2020, titled 'Sandfire Approves Development of New Long-life Copper Mine in Botswana'.
T3 and A4 Mineral Resource
The information in this presentation that relates to T3 Mineral Resources is based on information compiled by Mr Callum Browne who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Browne was a permanent employee of Sandfire and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Browne consents to the inclusion in this release of the matters based on his information in the form and context in which it appears. Refer to ASX Announcement, dated 1 December 2020, titled 'Sandfire Approves Development of New Long-life Copper Mine in Botswana'.
The information in this presentation that relates to the A4 Mineral Resource is based on and fairly represents information and supporting documentation prepared by Mr Mark Zammit who is a Member of the Australian Institute of Geoscientists. Mr Zammit is a full-time employee of Cube Consulting Pty Ltd. Mr Zammit has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves'. Mr Zammit consents to the inclusion in this release of the matters based on the information in the form and context in which it appears. Refer to ASX Announcement, dated 21 July 2021, titled 'Sandfire delivers 34% increase in contained copper at satellite A4 Copper-Silver Deposit at Motheo'.
Motheo Expansion Case
The Expansion Case to 5.2Mtpa referred to in this presentation, where it relates to A4 and other prospects, is based on the T3 Mineral Resource Estimate and Ore Reserve, the 3.2Mtpa Definitive Feasibility Study completed in December 2020, A4 Mineral Resource Estimate and Ore Reserve and the 5.2Mtpa Pre-Feasibility Study. The 5.2Mtpa Pre-Feasibility Study has been completed to an overall level of accuracy of ±15-25% and is based on material assumptions outlined elsewhere in the ASX announcement titled 'Maiden Ore Reserve for A4 Deposit and PFS confirms 5.2Mtpa Motheo Copper Project' dated 22 September 2021.
Exploration and Resource Targets
Any discussion in relation to the potential quantity and grade of Exploration and Resource Targets is only conceptual in nature. While Sandfire is continuing exploration programs aimed at reporting additional JORC compliant Mineral Resources, there has been insufficient exploration to define mineral resources in addition to the current JORC compliant Mineral Resource inventory and it is uncertain if further exploration will result in the determination of additional JORC compliant Mineral Resources.
Contact Details
Level 2, 10 Kings Park Road, West Perth WA 6005 Australia PO BOX 1495, WEST PERTH WA 6872 AUSTRALIA +61 8 6430 3800 +61 8 6430 3849 www.sandfire.com.au