Sandfire Resources managing director Karl Simich had the opportunity to reflect on the company’s remarkable and rapid transformation from cash-strapped junior explorer in the global financial crisis to the owner and operator of Australia’s highest grade copper mine.
“The challenging environment the industry is currently experiencing is similar in many ways to the period in early 2009 when Sandfire rolled the dice and committed to one last gold drilling program,” Simich said at the official opening of DeGrussa earlier this month.
“Back then, we had just been through a round of retrenchments and cost-cutting, our balance was dwindling, our share price was A4-5c and there was virtually no market interest.
“We were just another struggling junior exploration company trying to stay alive.”
The company had been exploring its Doolgunna gold project for many years but had faith the area would yield discoveries.
“So it was late in April 2009, in a drilling program designed by Sandfire’s chief technical director John Evans, that young contract geologist Margy Hawke reported back to Perth that they’d hit some remarkable sulphide intersections, which changed the course of history for Sandfire,” Simich said.
“John and his team were primarily targeting oxide gold mineralisation but John always said that volcanic massive sulphides associated with copper were considered a good second prize – and I think he was right.”
Tuesday, April 28, 2009 is now known as “Discovery day” for Sandfire, with Hawke deciding to revisit a previously drilled area, drilling vertically, rather than on an incline – and deeper than before.
Evans and Hawke knew they were on to something and Evans sent an update to the Australian Securities Exchange the next day, notifying the market of hits of up to 70m of sulphide-rich mineralisation, with geological evidence of copper.
It immediately caught the market’s attention, with Sandfire shares gaining some 114% in the first two weeks of May.
The company called a trading halt on May 14 and it wasn’t until May 18, 2009 that the DeGrussa discovery was formally announced.
Sandfire’s shares jumped as much as 82% that day after the company unveiled assay results showing wide, high-grade copper intervals, with associated gold, silver and zinc values.
These included 47m at 5.3% copper, 20.1 grams per tonne silver and 1% zinc from 93m, and 22m at 3.6% copper, 3.8gpt gold and 13gpt silver from 96m.
The best gold intercept was 19m at 4.3gpt gold and 19gpt silver from 40m, including a 12m intercept at 6.2gpt gold.
The prospect was named after Dave DeGrussa, a former Sandfire drilling contractor who had passed away suddenly in 2007. DeGrussa’s wife Lynley still works for Sandfire today.
The results from the find kept on coming – as did the share price gains – and in June the company announced the discovery of the Conductor 1 deposit.
After rising by a spectacular 4205% in 2009, in early 2010 Sandfire announced the much-anticipated maiden resource of 372,000 tonnes of copper and 439,000 ounces of gold for DeGrussa and Conductor 1.
Over the next few months, Sandfire raised $65 million and applied for a mining lease, getting the wheels in motion for the initial direct shipping ore operation at DeGrussa.
The company caught the eye of OZ Minerals, which snapped up a 19.9% stake, which is still the subject of much speculation today.
By late 2010, Sandfire had become a $1 billion company and had raised another $100 million to continue the rapid progress at DeGrussa.
Like the previous years, 2011 proved busy for Sandfire, completing a prefeasibility study, formally approving the $384 million development of the project, celebrating the maiden blast and securing finance and offtake.
DSO mining started in early 2012 with the first shipment in May of that year.
Sandfire’s success was applauded when it took out the Digger award at Diggers & Dealers last year, which it quickly followed up with first concentrate production from the project.
In March this year, the company posted a maiden half-year profit of $79.2 million.
Ramp-up of the concentrator has not been without its hiccups but the company is confident it has ironed out recovery issues.
Guidance for the 2014 financial year has been set at 65,000-75,000t copper and 35,000-45,000oz gold at C1 cash costs of $US1.05-1.15 a pound.
Simich acknowledges how rare a story like Sandfire’s is.
“Of course we are realistic enough to know that our story is exceptional and that for every story like ours there are hundreds that don’t make it,” he said.
“All the more reason to celebrate our success and to acknowledge those people who have helped us to make the most of our good fortune, the rapid drill-out and discovery of the four key deposits which underpin the project and the pace with which we completed our feasibility studies and secured the necessary approvals, under the control of our project manager Martin Reed, are achievements which we are very proud of.
“It is remarkable to reflect on the fact that DeGrussa was discovered, evaluated, drilled out, fully permitted, developed into production and achieved its ore sales all within the first term of [WA Premier] Colin Barnett’s government.”
The DeGrussa mine life extends to 2020 but Sandfire is confident of extensions and has committed to spending $A20 million in the area over the next year, pursuing further discoveries and extensions.
Simich said the company’s strong cashflow position also allowed it to collaborate with other explorers and acquire new projects.
“These are opportunities that are very realistic for a company like ours and they are opportunities we’re working hard to crystallise,” he said.
“In the meantime, we will continue to focus on making sure that DeGrussa remains a strong, robust and highly profitable mining operation.”