Bell Potter gets excited about Sandfire.

Sandfire Resources NL (SFR)
Monty comes out: a genuine value add
First look at Monty interpretation
SFR has released updated drilling results, further assays, an updated long-section interpretation and the first cross-section interpretation of the copper-gold discovery at the Monty Prospect. SFR is earning a 70% interest in Monty, part of the Springfield Project farm-in agreement with Talisman Mining Ltd (TLM). The latest drilling results from hole TLDD0021 have successfully intersected massive sulphides, approximately 64m up-dip of those found in hole TLDD0009. Together with additional assays the latest holes have led to an initial interpretation of the Monty discovery and reinforced the case for a high grade deposit.

Comfortably accommodates our estimate, adds $219m NPV
Our most recent detailed estimates indicate that the Monty deposit may comprise 1.0-1.4Mt of ore grading 7% Cu, containing 70-100kt copper. The latest drilling results and updated sections indicate to us that even the top of our range may be conservative. We can see potential for up to 1.6Mt of ore contained in the Lower and Upper Zones. Modelling the top end of our conservative estimate (100% basis) adds $219m to our NPV, increases head grades by 12%-16% over the remaining life-of-mine, maintains copper production between 70-75ktpa, lowers C1 costs by 12-15% and delivers a 32% increase in earnings for the first year of full production. Strategically, Monty also has the potential to fill a crucial gap in SFR’s development pipeline and take significant pressure off an acquisitive growth strategy.

Investment thesis – Buy, TP$7.20/sh (from $6.25/sh)
We do not yet incorporate any potential production from Monty into our production and earnings forecasts so there are no changes there. We do reflect our latest analysis with an increase of $150m to our exploration valuation, increasing our NPV-based, sum-of-the-parts target price by 15% to $7.20/sh. SFR remains our preferred ASX-listed copper producer due to its strong operational track record, cash generation, improving balance sheet and leverage to exploration success at the Springfield JV.