$8-$9 in 2018, page-12

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• May 3 2018 at 5:41 PM
• Updated May 3 2018 at 5:41 PM

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by Vesna Poljak
Sandfire Resources will increase its spending on exploration and could theoretically fund a $1 billion to $2 billion development project with its improved cash-flow profile.

Chief executive Karl Simich does not know what he might do with that war chest.

"We're going to spend more money exploring, how's that?" Mr Simich told Macquarie's conference on Thursday.


Sandfire's high-grade DeGrussa copper and gold mine and the nearby Monty project will – over the next four years – support a strong balance sheet with the ability to reinvent Sandfire beyond the expected conclusion of DeGrussa's lifespan in 2022.


"The big picture for us from a [business development] point of view is looking for something more significant [than a portfolio investment]," Mr Simich said.

SFR
SANDFIRE FPO (SFR)
$8.340.182.21%
volume 891487value 7407915.6

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"What could we transact in? I think anywhere between zero and a billion dollars if it was worthwhile as a number, whether it be an acquisition, whether it be a development project, that's the order of magnitude."

His customers have indicated they would be willing to partner in other projects, he said.

"We've potentially for example got a partner in the Temora project if it made sense," referring to a copper-gold discovery. So I think we've got lots of options in front of us and we're looking hard at all of those options."

All the same, Mr Simich is counting on further discoveries in the DeGrussa and Monty region, "mark my words".


A difficult question
Asked specifically if there were enough targets to return to drilling at DeGrussa, Mr Simich said the problem with exploration in a province "that's not really been looked at properly" was its best targets are potentially still to be drilled.

"Just when you think you've spent too much you haven't spent enough," he said. "And it's a question that is really, really difficult to answer."

Mr Simich recalled a discussion with Mark Bennett of Sirius Resources, which merged with Independence Group, about his exploration out in the Fraser Range.


"It was like his last drill hole. I had a funny conversation with him once upon a time, when he said, 'I had six drill holes I was going to drill, I ended up changing the order. Had I not changed the order of the drilling, I wouldn't have discovered Nova-Bollinger'.

"DeGrussa – essentially the drill rig was leaving the site after having completed a small drilling program for a shallow gold ore body and something was odd, and we held the drill rig back and without approval the young geologist drilled six vertical holes because the guy was leaving, and that essentially made the discovery. Just when you're exhausted, that's when you need to think about 'should we go again?' "

ASX-debutant Adriatic Metals counts Sandfire as a shareholder following its float this week. "Really interesting, love it, the guys have done a wonderful job and we look forward to their further exploration results on a high-grade zinc project [in Bosnia and Herzegovina]," Mr Simich said.

Sandfire spent $2 million for a 7.7 per cent stake in Adriatic. The company is also backing the Black Butte copper project, located in central Montana in the US.


Shares of Sandfire rose 2 per cent on Thursday to $8.34, which the CEO argues ignores the value of Sandfire's exploration, US assets and other interests. "I don't necessarily think there's a lot of value attributed to the business for our other growth aspirations," he said.



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