Bullish outlook for copper fuels hopes for Sandfire’s latest exploration success

17th May 2018

The US dollar gave gold a blood nose this week in a powerful demonstration that America remains the 600-pound gorilla in the financial world, but across the border in Canada there was a conference where another metal shone: copper.

The optimistic outlook for copper, aired at the Cambridgehouse Mining Investment Conference, dovetailed neatly with what appears to be a significant copper discovery by Sandfire Resources and partners at the Morck’s Well project near Sandfire’s DeGrussa mine in WA.

In a coincidence that did much to demonstrate what a very small world we live in, I was at the Canadian event in the city of Vancouver as Sandfire was reporting the intersection of massive sulphides in first pass air-core drilling with assays pending.

It was almost exactly nine years ago that Sandfire made its original DeGrussa discovery, flipping a low-priced explorer into one of the modern Australian mining industry’s success stories.

Fingers are crossed that the Morck’s Well find could extend the life of DeGrussa just as the price of copper settles into a strong upward trend, which was the theme of a talk given by Michael McCrae, publisher of the Canadian-based website, Mining.com.

Much of what McCrae said has been heard before but to hear it immediately after Sandfire’s latest discovery was interesting, particularly McCrae’s central argument that a whopping deficit in the global supply of copper is looming thanks to a lack of discovery and a declining grade in the mines which are in production – and that’s before considering the effect on the demand for copper from electric vehicles.

Interest in the Sandfire discovery is high because the company needs more ore to maintain production at DeGrussa with Macquarie Bank doing the best job in wrapping a value around Morck’s Well, admittedly at an early stage of the discovery process.

According to Macquarie, which has a hold tip on Sandfire with a price target of $8.30 (which is below the 12-month high of $8.81 reached on Tuesday), if Morck’s well adds one year’s life to DeGrussa it lifts the value of the stock by 23%, two years extra life equates to a 36% boost in net present value, and three years add 51% -- estimates which emphasises why Morck’s Well could be an important development for Sandfire.

If copper and Sandfire were the good news of the week, gold was the bad news, slumping back below $US1300 an ounce in a remarkable rush for the exits by investors when US interest rates continued to ratchet higher.

 

Signs of stability in the gold price have emerged since the fall to $1287 an ounce but it came too late to save a number of leading gold stocks from losing ground, including Newcrest which fell by $1.30 over the week to $21.14. Evolution, which lost 20c to $3.19 and Northern Star which was down by 30c to $6.54.

Before looking at other moves by ASX-listed resource stocks, it might be useful for Australian investors to get a feel for the mining investment mood in Canada, a country with many similarities to Australia, just colder.

Miners in Canada, like those in Australia, are fighting the increasingly heavy hand of government at a national and provincial level. Discoveries are getting harder to develop and investors who once followed the industry are being lured into alternatives with at least three crypto-currency promoters marketing their alternative investment product at the mining conference.

Other points of interest were the dominance of gold exploration stocks, which were easily the biggest group of exhibitors at the conference, along with a surprisingly large number of uranium explorers, which outnumbered the battery-metal community.

Closer to home there were a number of reports filed at the ASX which generated investor interest, led by Sandfire, but followed by:

  • Sipa Resources enjoying a modest rise of 0.3c to 1.1c after announcing a deal to introduce Rio Tinto to its nickel exploration project in Uganda. Any price rise is welcome but investors would have been hoping for something better from what could be a company-changing joint venture.
  • Peel Mining added 8c to 68c after reporting strong zinc and copper assays from the latest drilling at its Southern Nights project in NSW project with a best result of 22.1 metres at 6.62% zinc, plus 2.19% lead and 0.87% copper. The company said the importance of the assays was in confirming the continuation of mineralisation at depth.
  • Base Minerals put on 3c to 28c after announcing the appointment of two external consulting firms to deliver a pre-feasibility study on the proposed Toliara mineral sands mine on the island of Madagascar.
  • Sheffield Resources said it had secured access agreement at the north-west port of Derby, an important step in the development of its Thunderbird mineral sands project in WA. On the market, Sheffield added 6c to 88c.
  • Alchemy Resources got a boost of 0.5c to 1.5c after announcing encouraging drilling results from its Hermes South project in the Bryah Basin of WA with a best hit of 3m at 37.7 grams a tonne.
  • Lefroy Exploration reported an encouraging drill result of 5m at 13.6g/t from its Lucky Strike project on Lake Lefroy near the big goldmining centre of St Ives in central WA. The company said the result strengthened and expanded earlier results.
  • Aeon Metals hit a 12-month share price high of 39c as interest grows in its Walford Creek copper project in Queensland.
  • Ramelius Resources also reached a 12-month high during the week when its shares traded at 64c on Monday before the gold price slide knocked it back to 62c, and

 

  • Alt Resources said it had encountered bonanza grade gold at its Southwark prospect which lies within the larger Bottle Creek project in WA. Best hit was 21m at 10.8g/t, with a 4m core grading 49g/t, and 1m of that assaying 140g/t. On the market, Alt added 1.5c to 6.4c.

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