Sandfire- Resources & Energy Symposium 2012
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Sandfire Resources has begun mining at its new DeGrussa copper-gold mine in Western Australia, opening a new chapter of growth for the company. Key points: - Mining commenced in February 2012 with the first shipment of development ore. Underground mining will begin in Q3 2012. - DeGrussa is expected to produce on average 77,000 tonnes of payable copper and 36,000 ounces of gold annually for the first three years. - The mine has a projected life of over 7 years and is fully funded. Production will establish Sandfire as a mid-tier mining company and generate significant cash flow. - Exploration potential remains along a 30km prospective corridor, providing
Sandfire- Resources & Energy Symposium 2012
- 1. Australia’s newest copper-gold producer: Start of mining at DeGrussa opens a new chapter of growth
- 2. Important information and disclaimer Competent Person’s Statement • The information in this public presentation that relates to Exploration Results and Mineral Resources is based on information compiled by Mr John Evans who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Evans is a permanent employee and Director of Sandfire Resources NL. Mr Evans 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 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 • This presentation has been prepared by Sandfire Resources NL. This document contains background information about Sandfire Resources NL current at the date of this presentation. The presentation is in summary form and does not purport be all inclusive or complete. 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. • This presentation 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 Resources NL, its officers, employees, agents and advisers do not make any 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. • 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 Resources NL. 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 Resources NL 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. 2
- 3. Sandfire – corporate snapshot • Issued capital: 151.1M ordinary shares, 9.7M options • Market capitalisation: ~$1.0 billion (at $6.80/share) • Key project: DeGrussa (Doolgunna) • Strategic partner: POSCO • Product customers: POSCO, Yunnan Copper, MRI Trading Board Derek La Ferla Non-executive Chairman OZ Minerals 19.8% Karl Simich Managing Director / CEO W. John Evans Executive Technical Director Posco 15.8% Soocheol Shin Non-executive Director Institutions 22.8% Robert Scott Non-executive Director Founders/Board 8.0% Management Matt Fitzgerald Chief Financial Officer Others 33.6% Martin Reed Project Manager – DeGrussa Rob Klug Commercial Manager 3
- 4. Sandfire – the vision • To deliver superior returns to our owners from the premier high-grade DeGrussa VMS copper-gold mine • To discover additional VMS deposits within the emerging Doolgunna mineral field • To explore for, develop and mine key raw materials, in Australia and overseas • To foster and develop long-term strategic relationships with raw materials end-users and traders • To maintain the highest standards of safety, integrity and quality at all times • To develop a world-class mining company 4
- 6. DeGrussa – current status Construction of mine and infrastructure +70% complete 6
- 7. DeGrussa – current status Underground: Massive Sulphide Mineralisation at C1 footwall contact On track for first ore to SAG Mill in Q3 of CY 2012 7
- 8. Production...the “sweet spot” for investors Production: Financial Performance: Growth: • First DSO and underground ore • Forecast $2.4 billion operating cash • Organic growth – exploration mined – February 2012 flow, $4.2 billion revenue (DFS: life- of-mine) success • First DSO shipment – May 2012 • 77kt (170Mlb) payable copper metal • Joint Venture opportunities • Plant commissioning – Q3 2012 per annum in first three years • Acquisitions – Business • Ramp-up to 70-80ktpa Cu, • Current spot price US$8,500/t, 36kozpa Au by year end Development Team US$3.85/lb 8
- 9. DeGrussa : a new era of growth begins • 900km NE of Perth, established mining district • Discovery to first production in <3 years • Open pit and underground mining operation: +7 year mine life • 100% debt funded through $390M ANZ facility • Conventional 1.5Mtpa on-site concentrator • Life-of-mine extraction: 10.72Mt @ 5% Cu, 1.7g/t Au: • 541,000t copper, 599,000oz gold – contained) • Early extraction of DSO Ore Reserves (open pit): • 37,000t of copper (25.6% Cu), 12koz gold (2.5g/t) • Production of high-grade, high-quality copper concentrate grading 27% Cu: • 480,000t of payable copper metal • 270,000oz of payable gold 9
- 10. Cashflow – a mid-tier mining powerhouse DFS Outcomes First Production Q1 2012 (DSO), Q3 2012 (Conc.) 10.72Mt @ 5.1% Cu, 1.7g/t Au Life-of-mine extraction from Ore (541,000t contained copper, Reserves and Mineral Resources 599,000oz contained gold) discovered to date 93% Mineral Resource to Ore Reserve conversion – contained metal 480,000t payable copper (~77,000tpa in first 3 years) Production 270,000oz payable gold (36,000oz pa in first 3years) C1 cash costs (life-of-mine) US$1.02/lb Project revenue A$4.2 billion Pre-tax project operating cash flow A$2.4 billion 10
- 11. Growth – future catalysts • Organic growth – exploration success: • Extensive bank of information now accumulated within prospective DeGrussa mine corridor • Prospective corridor extended to +30km, providing outstanding exploration upside • Regional exploration across Australian portfolio • Joint Venture opportunities • Farm-in at Kennedy Highway Project (Qld) • Farm-in at Bland Creek Project (NSW) • Acquisitions – Business Development Team • Experienced Business Development team in place • Assessing opportunities globally 11
- 12. DeGrussa – unlocking the “Corridor of Riches” + 30km strike length prospective for VMS mineralisation • 30km long, 1.2km wide prospective corridor which can be explored to +2km vertical depth • Of this, only 1.2km strike length has been intensively explored to 600m vertical depth • Minimal drilling has been conducted below 50m depth outside of the central mine corridor campaign 12
- 13. Growth – Joint Ventures • Reviewing asset-driven exploration opportunities in Australia and abroad • First opportunity secured: • Farm-in agreement with Global Resources Corporation (ASX: GRM) • Kennedy Highway Project (North Queensland) • $3M expenditure to earn 60%, with option to earn up to 80% for additional A$5M • Exploration target = large-scale IOCG base metal deposits • Potential to identify strong pipeline of similar or more advanced exploration opportunities 13
- 14. Summary – a new global mining company in the making • Flagship DeGrussa Project moving into production: • First truck of DSO – 17 February 2012 • First truck of underground ore – 29 February 2012 • First ore in the SAG mill – Q3 2012 • High-margin production profile • Regional exploration objective to establish a VMS copper-gold camp • Strong and supportive major shareholders • Quality project pipeline + ability to secure new quality projects • Experienced Board and Management 14
- 15. Appendix: Competent Person’s Statements 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 – 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 Member 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. 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. 15
- 16. Australia’s newest copper-gold producer: Start of mining at DeGrussa opens a new chapter of growth
- 17. Appendix – DeGrussa: Financial Evaluation and Price Assumptions Life-of-mine (LOM) $ Billion Project revenue 4.2 Royalties (5% weighted average) (0.2) Operating costs and sustaining capital (1.6) Project operating cash flow (pre-tax) 2.4 Pre-production capital expenditure (0.4) Project cash flow (pre-tax) 2.0 Project NPV (8% discount rate) 1.3 Project IRR (%) 108 2013 2014 2015 2016 2017 2018 2019 Copper price (US$/tonne) 9,136 8,004 7,110 6,576 6,367 6,163 5,879 Copper price (US$/lb) 4.15 3.63 3.23 2.98 2.89 2.80 2.67 Gold price (US$/ounce) 1,294 1,252 1,307 1,273 1,166 1,166 1,166 USD/AUD 0.91 0.87 0.84 0.82 0.81 0.81 0.81 Financial Evaluation Revenue forecasts were based on a consensus of copper, gold price and foreign exchange forecasts from leading international broking firms, investment banks and leading independent commodity forecasters. The pricing applied in the model is presented in 30 June financial years. 17
- 18. Appendix – DeGrussa: Capital and Operating Costs Capital Cost Breakdown A$M Construction (plant, equipment and infrastructure) 267 Open pit mining to access DSO 44 Underground mine development 56 Other pre-production 17 Total pre-production capital 384 Life-of-Mine Operating Cost Estimates Payable Copper (US$/lb) Mining 0.48 Processing and maintenance 0.35 Administration 0.06 Transport 0.28 Treatment and refining 0.18 By-product credits (0.33) Total C1 cash costs 1.02 18
- 19. Appendix – DeGrussa: Mineral Resources Table 1: DeGrussa Copper-Gold Project – March 2011 JORC Resource Statement Resource Contained Contained Competent Zone Location Tonnes (Mt) Copper (%) Gold (g/t) Category Copper (t) Gold (oz) Person Gold Measured Open Pit 0.14 - 1.5 - 7,000 1 Laterite Copper Measured Open Pit 2.17 1.1 0.5 24,000 37,000 1 Oxides Indicated Open Pit 1.41 1.4 0.4 20,000 19,000 1 Supergene Indicated Open Pit 0.25 17.6 2.6 43,000 20,000 2 Chalcocite Inferred Open Pit 0.19 4.4 1.2 8,000 7,000 1 Primary O/Pit / Indicated 7.80 5.8 2.0 456,000 502,000 1 Massive U/Ground Sulphides Inferred Underground 2.32 4.3 2.0 100,000 149,000 1 Total 14.33 4.6 1.6 652,000 742,000 Note: Refer to the Competent Person’s Statements – Mineral Resources 1. Competent Person for these zones of resource was Diederik Speijers of McDonald Spielers 2. Competent Person for these zones of resource was David Slater of Coffey Mining 19
- 20. Appendix – DeGrussa: Ore Reserves Table 2: DeGrussa Copper-Gold Project – March 2011 Ore Reserve Statement Reserve Mining Contained Copper Contained Gold Deposit Tonnes (Mt) Copper (%) Gold (g/t) Category Method (t) (oz) Open Pit - DeGrussa Probable 0.14 25.6 2.5 37,000 12,000 DSO DeGrussa/C1/ Probable Open Pit 0.23 6.1 2.4 14,000 17,000 Chalcocite DeGrussa Probable Underground 1.50 6.6 1.9 99,000 90,000 Conductor 1 Probable Underground 5.76 4.9 1.8 283,000 337,000 Conductor 4 Probable Underground 0.76 4.4 1.2 33,000 30,000 Total Probable 8.39 5.6 1.80 465,000 485,000 Note 1: An open pit cut-off grade of 8.5% Cu is applied on the Chalcocite to provide a targeted 26% Cu direct sale product (Achieved 25.6% Cu after dilution). 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. These Ore Reserves occur within an open pit design containing 26Mt of total material, resulting in a waste to ore strip ratio of 70:1. Note 2: Underground 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’s Statement – Ore Reserves at the end of this release. Resource zones still to be converted to Ore Reserve status: Open pit oxide copper resources of 3.58Mt @ 1.2% Cu and 0.5g/t Au (44kt contained copper, 56koz contained gold) 2.32Mt of Inferred Massive Sulphide resources @ 4.3% Cu, 2.0g/t Au (100kt contained copper, 149koz contained gold) 20