Kalahari exploration fires up Sandfire Resources

That came through in Tuesday's market when Sandfire gave the go-ahead for a $371 million development of T3 on the emerging Kalahari copper belt.The investment decision followed the completion of definitive feasibility study into a base case 3.2Mtpa operation producing on average 30,000 tonnes of copper and 1.2 million ounces of silver annually at an all-in sustaining cost of US$1.76/lb in the first 10 years of operation.It was nice that the DFS figures were in line with what the market had been expecting for T3 since Sandfire took ownership in October last year as part of its efforts to replace its near depleted DeGrussa/Monty copper-gold operation in Western Australia's Bryah Basin.It was also nice timing to be announcing a new copper mine now that copper has picked itself up off the floor, with the price rising from the June half average of $2.50/lb to $3.48/lb in response to COVID-related supply constraints and COVID-related economic stimulus.But in themselves, it wasn't the go-ahead or copper's recent price strength that fired up the market in Sandfire shares, with the stock rising 9.8% to A$4.81 in Tuesday's market.It was the exploration news that accompanied the T3 go-ahead announcement that fired up Sandfire, with the market accepting there was more to the MOD acquisition than was previously being factored into the company's share price.The exploration news came in two parts - a maiden inferred resource estimate for the recent A4 discovery of 100,000t of copper at an average grade of 1.5% with 24gpt silver, and the release of high-grade results from latest drilling at A4 outside of the resource estimate.A4 lies all of 8km west of T3 and is central to Sandfire's proposition that while it has given the go-ahead for T3's development, the market should really be thinking about T3's processing plant and infrastructure becoming what it now calls the Motheo production hub.It sees A4 as being the first of many satellite deposits to be fed into the Motheo hub, with A4 capable of carrying copper production from 30,000tpa from T3 alone to 55,000tpa within 12-18 months of first T3 production from the second half of 2023.To that end, the DFS pointed to A4 being able to underpin a near-term expansion of the Motheo hub to 5.2Mtpa, with an additional $28 million earmarked for capital works to support the "rapid future expansion."The high-grade hits at A4 were the best to date by either Sandfire or MOD and occurred in localised zones associated with extensional veins situated below A4's shear-hosted mineralisation.Results included 33m grading 4.6% copper and 74.3gpt silver from 109m in one hole. In another hole 50m to the east, there was a 35.7m intersection grading 7.1% copper and 116gpt silver from 128.5m, while another hole a further 50m east returned 6.4m grading 5.8% copper and 80.9gpt silver.Infill drilling is underway. "Results from this drilling are awaited before an interpretation of the significance of the very high-grade vein intersections can be made," Sandfire cautioned.But it added that the results demonstrated the potential for further high-grade mineralisation elsewhere along the A4 dome and in other untested targets in the T3 expansion area - 1000sq.km chunk of ground which has been first to be the subject of systematic exploration on Sandfire's 26,645sq.km Botswana to Namibia coverage of the Kalahari copper belt.Within the expansion area other high priority targets within a 30km radius of the planned Motheo hub include A1 dome and the T1, T2E, A27 and A13 prospects.Without COVID-19, the exploration upside of the MOD acquisition (and the DFS) would have been hitting the screens sooner than has been the case. Not to worry though, it is much better to be making progress on such things in a rising copper market.It remains debatable whether the full value for T3 is now reflected in Sandfire's market cap. The exploration upside is more problematic to value. But Sandfire boss Karl Simich gave it a good go in Tuesday's DFS and exploration announcements."Drilling will soon ramp up across a series of high-priority targets in the T3 expansion area ... which have the potential to yield new discoveries."Plus, the discovery of the high-grade bornite and chalcocite zones at A4 has confirmed that this district has excellent potential for smaller-scale, extremely high deposits as well as large scale, bulk mining deposits such as T3," Simich said.More telling was his comment that Sandfire's confidence was growing that it was at the start of a "long journey in this emerging copper province which, in comparison with other more mature districts, is one of the very few globally that is really at the start of its evolution with a rising discovery rate".*Barry FitzGerald writes a regular column for www.miningnews.net

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