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Share Watch – 6 February 2022

Updated: Sep 25, 2022

Share Watch –  Sandfire Resources (ASX:CNB)

From Stockhead:

Sandfire Resources is set for its biggest change since the shock discovery of ultra-high grade copper at the DeGrussa prospect in May 2009. That turned a 4c battler into one of the few major pure play copper miners on the ASX, worth $1 billion within just 18 months.

But as the DeGrussa mine winds up this year, Sandfire’s long time MD Karl Simich says it is poised for the next stage of its evolution. He will fly out from the country this week despite the uncertainty posed by WA’s border arrangements to ink the most significant deal in the company’s history, a US$1.865 billion ($2.6 billion) splash on the MATSA copper complex in Spain.

Consisting of three existing underground mines around the province of Huelva — Aguas Teñidas, Magdalena and Sotiel — near the original Rio Tinto copper mine, Simich says the 100,000tpa copper and zinc project will make Sandfire a copper miner of global scale.

But it is just the beachhead. As copper emerges as one of the most critical commodities supporting the world’s transition from fossil fuels to renewable electricity, Simich says Sandfire aims to be a 300,000tpa producer by 2027-2030.

Sandfire came to copper mining via a happy accident of sorts — the DeGrussa discovery came in holes added onto a program drilling a shallow gold anomaly that turned out to be a halo for something much larger.

But Simich is confident it has put the $2.75 billion ASX-listed company in the right place to capture the key investment theme of the coming generation, the energy transition.

“The knock-on impact clearly, you know, whether it be in battery related minerals for lithium, for copper, for nickel, even the boom coming I hear for zinc, is that the fundamental demand for materials that are going to play a part of that, I’ve never seen such a strong sentiment running through the commentators are all collectively at the same time,” Simich said.

“If we just talk about the copper space at the moment, and we see ourselves as moving from being a local, vibrant and lucrative but yet somewhat modest Australian domestic copper producer … to actually rolling on to the beginning of the world stage, let us say, and being relevant in that sense.”

With MATSA and the new Motheo mine in Botswana that Sandfire secured in its takeover of MOD Resources a couple years ago, due to open in 2023, it will be a 150,000tpa producer, with exploration and efficiency gains to potentially drive it beyond that level.

DeGrussa on its own is expected to generate around 64,000-68,000t of copper and 30-34,000oz of gold in FY22, meaning even with the closure of the high-grade WA mine in September this year Sandfire’s corporate successes will double its production profile.

Copper has gone from US$2/lb at the start of the pandemic to US$4.40/lb (around US$9800/t) today, but Simich sees bright trading conditions for the commodity, with Goldman Sachs this month predicting copper will rise to new records of US$12,000/t over the next 12 months and JP Morgan adjusting its 2022 and 2023 price forecasts up 10% and 17% respectively to US$4.20 and US$3.80/lb.

Financial indicators

The VIX fear gauge up by 0.41 of a point since 19 January to 23.22 (and into the danger zone).

The Dow Jones Industrial Average down 278.73 points or 0.79% since 19 January to 35,089.74, the STOXX 600 down 17.64 points or 3.68% to 462.15 and the Shanghai Composite index down 190.44 points or 0.5.36% to 3,361.44.

Gold steady on 1,808.90. US 10-year Treasury Bonds up to 1.913 and oil up to 91.93. Cryptos Bitcoin down by 206 points or 0.49% to 41,598.

ASX 200 down 212.30 points or 2.90% since 19 January to 7,120.20. The Aussie dollar down to 70.78 US cents.

Carbon Market Spot Prices

LGC $44.60                                                     STC $39.25

ESC $36.90                                                     VEEC $80.00

ACCU $55.25                                                  EU ETS €94.81

NZU $NZ77.25                                                UK ETS GBP87.92

Sources: RenewEconomy, demandmanager, Market Watch, CarbonView, Stockhead, Green Car Report, Driven

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