Could Auris be Sandfire’s next pick to boost copper supply?
With only about four years of copper left at Sandfire Resources’ big DeGrussa operation in Western Australia, the $1.5 billion producer is sussing out its options.
And with a number of junior players active in the area, Sandfire (ASX:SFR) has its pick.
Prior to that, in February, Sandfire struck a deal with Auris Minerals (ASX:AUR), which has a market cap of just under $30 million, to earn up to a 70 per cent interest in a project called “Morck’s Well”.
Hartleys resources analyst Paul Howard told Stockhead there appears to be a trend of companies striking earn-in deals as a precursor to a full project acquisition.
“I think it’s sort of like the dating process – we’ll do an earn in and then we’ll JV [joint venture] if we see something positive. That sort of gets the ball rolling and I suppose the next thing would be potentially M&A [merger and acquisition] as a result,” he said.
“It definitely seems to be the trend at the moment.”
Sandfire initially paid Auris $1.2 million for the right to earn into the Morck’s Well project and has to spend at least $2 million within two years before withdrawing.
The company can then earn 70 per cent by completing a feasibility study on any future discoveries of at least 50,000 tonnes of in-ground copper resources.
The partners recently intersected copper mineralisation in drilling at the Morck’s Well project which analysts suggest could indicate they have hit the edge of a larger orebody.
“It suggests that while they’re definitely in the right area … just this particular accumulation of massive sulphides doesn’t have significant size, but the positives to take away from it is they have now located the correct stratigraphy,” Mr Howard explained.
“And [Sandfire] will just continue testing further along strike from that and if there’s something to be found they have the very best chance of finding it.”
The hits were made very close (less than 200m) to Enterprise Metals’ (ASX:ENT) project, which is also a joint venture with Sandfire.
An added bonus for Sandfire is that the copper price recently punched through the $US7200 per tonne mark – its highest point since the start of 2014.
Although it has edged back to $US6818 per tonne, it is still trading well above the multi-year low of $US4310 per tonne it sunk to at the start of 2016.
Sandfire itself is also in good shape, trading at 10-year highs.
“Sandfire has the whole area sewn up in joint ventures and earn-ins,” Mr Howard said.
“They have the money to spend, they have the technical know-how and the incentive obviously is that their mine is closing in four years’ time should they not find more ore.
“I think if they do uncover something material that will add to the mine life I would expect them to have a crack at Auris maybe at a project level.”