Sandfire Resources Ltd
ASX:SFR
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
6.12
11.14
|
| Price Target |
|
We'll email you a reminder when the closing price reaches AUD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Sandfire Resources Ltd
You don't have any saved screeners yet
Thank you for standing by, and welcome to the Sandfire Resources 2018 December Quarterly Update Conference Call. [Operator Instructions]I would now like to hand over to Mr. Nicholas Read, Managing Director and CEO. Please go ahead.
Thanks, Jennifer. Hello, everyone. Thanks for your time today. We appreciate it. And on behalf of Sandfire, a warm welcome to the company's December 2018 quarterly investor conference call and webcast.I'd like to introduce the Sandfire team this morning. In the room here over in the office in Perth, we have the company's Managing Director and CEO, Mr. Karl Simich; and joining him, the company's Chief Operating Officer, Richard Beazley; Chief Financial Officer, Matt Fitzgerald; and General Manager, Geology, Shannan Bamforth.Please note that today's call follows the release on the ASX platform earlier this morning of the December quarterly activities report and an associated presentation. As normal, a live webcast of this teleconference and a synchronized slide presentation is available through the company's website or through the BRR Media service using a link on the front cover of the presentation and a recording will be available at the same link shortly following the conclusion of today's call.So without further ado, over to the real Managing Director, Mr. Karl Simich. Thanks, Karl.
Thank you very much, Nicholas, and welcome everyone to the quarterly update for December '18.And can I just start off in saying it was a very pleasing quarter in terms of our operations and development works and exploration endeavors and also culminating in really what has been a half year for the September and December quarters, probably on pound for pound as good as we've seen in the journey of DeGrussa since inception and first production in 2012.For the quarter, nearly 17,000 tonnes of copper, 10,000 ounces of gold at an extraordinarily pleasing C1 cost of USD 0.85 a pound. And for the first half, just under 35,000 tonnes of copper and excess of 21,000 ounces of gold at an average C1 cost of USD 0.87 a pound. So really when we look at the project and the DeGrussa operations, it just keep on giving. And as we sit here today, that will continue to give substantially more as we start to blend in the Monty deposit at some 9%, close to 10% and sprinkle that into the DeGrussa feed and that blending as we start heading to the next few cycles.Our guidance for financial year has been maintained, but at the upper end of both copper and gold. So at that 63,000 to 67,000 tonnes of copper, but looking towards that upper end of that. And for gold, touching or closer to 40,000 ounces. But as a consequence of better copper estimates and better gold estimates and U.S. currency, we see the C1 costs and our guidance for C1 costs lowered to around USD 0.90 a pound, USD 0.90 to USD 0.95 per pound. And previous guidance was USD 1 to USD 1.05. So in a financial sense, significantly lower, as good as 10% or 11% or 12% lower than previously considered for the 12 months. So very, very pleasing operations and very solid and really building the foundation for even better and more -- a better performance going forward.With regard to development in Monty, the first ore has been mined from the development ore out of Monty, so pleasing on track. Richard will touch more on that and give you an update. And also, just to complete matters, the completion of the acquisition of our -- essentially the 30% of that Springfield joint venture but via acquisition of a company called Talisman i.e. -- now called Sandfire, I believe, was completed during the quarter. And just to let you know, I think, the cash outflow for that transaction and most of the cost associated thereto was AUD 73 million that was spent from our treasury. So that will allay or adjust for some of the cash flows below.Turning to the other development project that is continuing to gather good, solid momentum as we chip away and it is a journey, it is certainly a marathon. We all know that, but we are continuingly to steadily make progress on the Black Butte Project that is owned by our 86% subsidiary called Sandfire Resources America. And during the quarter, we increased our position from, I think, it was 78% up to 86% by virtue of subscribing and taking up a shortfall essentially in their rights issue during that period. So that company, at the moment, is well funded to complete its next key milestones.The other important element through this very -- this process of permitting, which is critical, of course, and the Environmental Impact Statement permitting. The draft is expected. There has been some slight delays, previously flagged as December '18, now flagged as a March '19 quarter to see that draft EIS. And from there, it will go into public comment period, which is a statutory. I think, it's a 4-week period from the time it goes public, 4 or 6 weeks or thereabout, that goes public and then it closes off. Then they will be issued a final Environmental Impact Statement. Our indications are that will be a positive report and it will then lead to a -- together -- at the same time, we're undertaking and completing our feasibility study for the project and it will lead to the issue of final EIS by about the middle -- during the middle of financial -- during the middle of calendar 2019, at which time, the company will be in a position at Sandfire Resources America supported strongly by Sandfire Australia, of course, lead us to a decision to mine during the middle of that year. And what I can say is there is full support to undertake that forward project and to move it into construction and development and into production in an expeditious manner, and we are looking forward to doing that and getting on with achieving our objectives there. So quite excited about the progress we're expecting to see in the U.S.Exploration. Once again, a multiple exploration effort's on foot in the Greater Sandfire Doolgunna region. And in that significant ground holding that we've got of almost -- just under 7,000 square kilometers and Shannan will give you an update about that.Corporately and financial. Pleasing to see that we still maintain solid cash reserves and that will continue to build up, as performance continues to deliver consistently and the group sits with about $180 million at Sandfire, here main company and the American subsidiary. So a very, very pleasing quarter and half year.I'm going to pass over to Richard to take you through the other details, and I look forward to wrapping up at the end of the call. Thank you very much.
Thanks, Karl. We'll just open up on the safety front. So during the quarter then, a pretty strong and solid focus over this quarter on safety and occupational health through the group. And as a consequence, our lagging indicators are starting to move down. So we closed the quarter at 7.3 as our TRIFR.Some of the major focuses for the period has been looking at our major contracts, on call it group 3 and group 4, where we've been focusing on their systems and processes in relation to their principal hazard management. Key focus -- everybody get realigned with what's important in the workplace. Actually, the focus is maintain and get cautiousness back in line with what we're trying to achieve in terms of having a safe workplace.Similarly, with our employees, which also then rolls out to all our contractors on the sites, we've had a program, what we call switch into safety. And that pays attention to the level of detail we need to have when we're carrying out at our various tasks around the site and that has also had a major impact. Also, important that the program was run through the Christmas period and New Year period and it's still going now because we tend to find, traditionally, that this period of time is -- there are other distractions on the family and personal front and puts us at a level of heightened risk through the industry. So this kind of focus for us is important and I think we're seeing the benefits of it over this period.Just looking forward, we are moving to reimplement our leadership development program with a very strong safety focus in there to continue that theme of reeducating and getting people refocused on the tasks in hand. And similarly during the year, we're going to expand the group 3 and 4 contractors on-site by looking at the OH&S management systems audits. Again, part of that is the principal hazards, but it's also much broader in terms of how they go about their business on a day-to-day basis and at operational level and at corporate level in regards to safety management and health systems as such. So there, that focus is coming up in the last half of this current financial year. So all in all, safety is tracking quite well now.Operationally, mining wise, look, very strong quarter, this quarter, on the back of the first quarter as well. In essence, hauling some 392,000 tonnes up in the quarter, 4.67%. So tonnage is about 4% down against the original plan. The grade, on the other hand, is about 6% up on plan. So we've got the benefit there of some positive reconciliation from a number of stopes that have assisted us in achieving, what we say is, a fairly strong metal production of maybe 11% above budget.The change in tonnes delivered up from the mine is simply dealing with some of the logistical issues we've had in the first half, but that's all being rescheduled through into the second half to make sure we still achieve on budget. So don't see any particular issues there as we manage the operations on a day-to-day basis. So no challenges there at all in the broader sense. So as we said earlier or Karl said earlier, we'll make guidance in the upper band and it's still quite achievable based on all the aspects we seeing in front of us now.Overall, the operations at DeGrussa itself is quite well and balanced, with all the issues around drilling and hauling, paste fill and such like. So again, that's all in control. We'll make the comment now as we get to the back end of the schedule for DeGrussa. It is tight in terms of the ability to reschedule and realign the stoping sequences. So we're essentially now between here and the next 3 years where we are locked in pretty much on our schedule. So -- but that said, we've got all the learnings over the past several years now, and I think it's going to be just a much more stronger performance going forward.In terms of Monty, yes, we achieved our first milestone in terms of getting ore up in this quarter past, as we said. So it was great. And we are now targeting first stoping ore to hit the surface in this current quarter as of now. Monty itself, we're focusing on the lower zone, as we're calling it. There's 2 zones there, an upper zone and a lower zone. It needs to be quite agile and flexible the way we operate this mine, driven principally by grade control drilling, which is well and truly underway. We've got some 20-odd thousands meters drilled to date. On the back of that drilling, we've got to get the sampling done, the analysis done, the interpretation work, remodel and then back into a mine plan as we move.So the change to the modeling and the plan, particularly in the top reaches of the upper zone is relevant to what we do since on the peripheries of these types of ore bodies where this is, as we get in more close-space drilling, I'll say the interpretation changed a little bit. And it's important that we get the mining in place, in the right place to achieve our end goals.Again, everything is going reasonably well to plan, a little bit behind on decline meters, but there really we've just put some of those meters back into the development side of the program. So in the longer term, that's not going to be an impediment for the development of the Monty mine itself.During the quarter, as we said, first ore up in the -- just under 5,000 tonnes on the ROM pad at 2.66%, so a lower grade than what the expectation has been. But in essence, it's only the real initial development headings, which to be honest, is quite expected from the grade control drilling in the top reaches of the upper zone. So just a weak mineralization we're following and developing and getting set up for the high grades yet to come, and we'll see that in this quarter come through.In terms of diamond drilling, we're well and truly in the second and third chamber set up now and moving ahead with that program, and it's going all to schedule. So don't see any particular surprises on the Monty front at this point.Moving then to processing. Following on from some of mining production for the quarter, same -- or similarly with the processing side, so some -- just over 400,000 tonnes milled at 4.57%. So from a year to point -- a year-to-date point of view, similarly down by about 4% on tonne throughput. That's well and truly offset by the head grade coming in, normally about 14% above budget. So total metal through the front feeders, just on 10% above budget. So pretty solid start to the half, again driven principally by period of reconciliations on some individual stopes underground.Recovery-wise, for the quarter, at 91.7%, and all up year-to-date; 92.2% recovery on copper, which is again above forecasted 91.2%. So we're getting the recovery up as well as much as the grades coming through, which is expected. Higher grades generally mean higher recoveries.And in terms of concentrate and metal production, just under 70,000 tonnes of concentrate produced, some 12% up year-to-date. In terms of contained copper, 16.888 for the quarter. Year-to-date-wise, it's 11% up. We'll see that come back somewhat on our plan to normally about 6% up on end of the financial year, assuming our assumptions on reconciliations and other matters go to the reforecast looking forward. And certainly for gold for the last quarter, 10,427 ounces.So all up from an operational point of view, a very solid and very pleasing quarter and the first half for that matter.Right, that's it for myself. I'll hand you over to Matt.
Thanks, Richard. Just moving over to the sales side. From -- so from that 17 -- 70-odd thousand tonnes of concentrate produced, we actually sold just above 83,000 tonnes of concentrate from 8 shipments. So you'll remember from the September quarter, there were 5 shipments, and we finished the September quarter with a very high concentrate holding. So there's certainly a catch-up in this quarter of shipments from both Port Hedland and Geraldton through our contracted shipments and also some spot shipments as well. That gets us for the half year to December, after 13 shipments, 136,000 tonnes of concentrate in those and just shy of 33,000 tonnes of contained copper. That leaves us with just over 22,000 tonnes of concentrate on hand at the end of December, containing around 5,500 tonnes of copper. So we're probably 0.5 to 1 shipment above what our normal average would run at. We tend to run at 1 to 1.5 shipments in stock. But we're fairly comfortable with that 22,500 tonnes of concentrate at the end of December.Just to note here as well for our financial results. So sort of a prerelease of our revenue results you'll see there, but also to just make particularly analysts aware that we will change our presentation of revenue as part of aligning to the new revenue standard. And also -- it also aligns a little better with some of our peers as well. So we will be netting off treatment and refining charges and QP adjustments against the headline revenue numbers. So the total revenue number will sit on the face of the income statement, and then these other detailed numbers will sit back in the note. So just something maybe to note when you're planning out your models and expectations for a headline revenue number for the December results coming up in around 4 weeks' time. And that will also have a change in the comparative numbers as well when we put those results out.So largely, a good result in terms of sales. Sales are progressing well through Port Hedland and Geraldton. And we, as I said, have been able to catch up with some of that high inventory holding.Moving across to unit operating costs. As Karl touched on and Richard touched on, that high copper and gold production has driven a very pleasing result in terms of costs, mining costs particularly pleasing, and that's largely driven by that higher mining grade and some of that positive stope reconciliation that we've seen. C1 costs for the half year USD 0.87 a pound. It's also been affected by reduced FX rate with the currency now looking to be sustainably in the low USD 0.70s, bounced around during the early part of the year, but certainly settled fairly well in the second half of that period into the low USD 0.70s. And increasing gold production affects our byproduct credits and also some lower costs and some cost control as well.Per our previous commentary though, we do have Monty coming in into the second half and particularly into that fourth quarter. So we do expect the Monty mining costs to start coming in. Monty, as we've previously guided, is below life of mine grade when it first comes in. So we don't get that positive effect this year. We'll clearly get that positive effect in the following couple of financial years as that production builds up, but we'll also see some costs at DeGrussa adjust as well as we make room in the mining schedule for Monty to come in, while maintaining that 1.6 million tonnes per annum.On the capital side. Mining development at DeGrussa $7 million for the quarter, heading towards just above $30 million for the year as a projection. Monty capital, $13 million for the year (sic) [ quarter ]. We expect that to be somewhere about $27 million as well as we progress that Monty capital works to get all of that ready for production in the future years. And sustaining capital, $2 million, and around $8 million for the year.Just a note here for cash flow modeling. Tax payments, $51 million for the year. We did note this when we did the June 2018 financial results. We've paid out what was our tax payable from the previous period, and we do tend to have a bit of a catch-up payment every December. So there was a payout of around $32 million for previous year tax and then another $19 million on top of that for our provisional tax payments up to December.For the full year, we expect at this stage, obviously, there's a lot of things to happen: production, copper price, costs and all sorts of things. But as a general projection, we expect tax payments to be around $75 million for the full year.Also, just a note on depreciation and amortization. We put some preliminary numbers in that we need to finalize part of our order process, but we expect D&A for the 6 months to be somewhere around $60 million to $65 million. We'll see more detail on that when we release our results in around 4 weeks' time.I'll hand back to Karl for Black Butte.
Thanks, Matt. Just a very quick update on Black Butte. I think I've been through most of it. Other than to, I suppose, reemphasize what it is. We own 86% of it. It is almost 600,000 tonnes of a fabulous resource at about a 3.3% copper grade, 18 million tonnes and -- of resource there. And essentially, I suppose, just to highlight once again, it is also a highly prospective mineral province and we have a great footholding in the region. And just to note that very insignificant work has been done ever outside of the current resource. It's always been a focus on staying within side the envelope. So I think, at the appropriate time and upon permits being forthcoming and decision to mine and moving into production profile, there's great opportunity there.Once again, just to reiterate, expecting during the March quarter the draft EIS to be presented, followed by a public commentary period. And then during the middle of the year, expectations of final EIS together with, during that period, a feasibility study; and during the middle of the year, after those things have occurred, a decision to mine, at which we are in a position to progress immediately once we've been given the green light in terms of moving forward and having all the -- essentially the ducks lined up to move forward into a construction phase. The time frame is also -- was something in the order of 2 years from breaking ground to first production and cash flow essentially from that operation. So looking forward to seeing more coming from there.And I suppose, just to finalize there, I don't think there is a fair or appropriate value proposition for Sandfire America as a listed vehicle and certainly not sitting in Sandfire main company for the value of the inherent value of this asset, but we need to deliver, obviously. And when we do deliver, we expect to see a value rewrite off the back of this project and its significant prospectivity.Not without further ado and listening more to -- or hearing more about exploration and organic opportunity, I'll now pass over to Shannan Bamforth to give you an update of our activities.
Thanks, Karl. It's been a pleasing quarter with exploration, as we've continue to see very good exhalative mineralization or we had trace levels at this stage along the Vulcan, Vulcan West, Homestead and Morck Well trend. We've extended that trend some 4 kilometers to the southwest of Morck Well, and that is really a highly prospective zone for us, where we are doubling down our efforts in that area. We have continued RC and diamond work planned to commence during the quarter. And we are very, very positive in our outlook for that part of the world.To continue our exploration in a more regional sense, our Aircore rigs, we have 2 at the current time with a third joining in the near term. We'll continue to work along the Auris joint venture ground and doing some in-fill into the enterprise joint venture ground. And then we will actually have a nice step change and start work on the Alchemy joint venture in the quarter.The Alchemy joint venture is on the northern limb as the Bryah Basin, along strike from DeGrussa. And there's been no real data-rich exploration work conducted out there in the last number of years, and so we're looking forward to getting out there and understanding what that may contain.On the ground, we're continuing to have our geophysical crews doing a lot of data catch up with 3 geophysics crews doing gravity data collection, helping us to find major lithology contacts and structure and our 2 EM crews are working ongoing on the southern limb of the Bryah Basin through the Auris and Enterprise JVs. They switched from Moving Loop EM to Down-hole EM when we actually have some RC holes and diamond holes to come back and test. And we think it's a very robust tool for us to use in the district. And we'll roll those out, obviously, into the Alchemy joint venture as well.As Richard touched on earlier, as we continue to develop underground at Monty, we're starting to see ore exposures and we're mapping those very closely, trying to extract any information we can out of the context that we see from underground and the geological setting and we extrapolate that into our regional exploration, feed that back into the exploration team. Buoyed also by the fact that we've got another 20 kilometers of diamond drilling into the underground, but we're really starting to paint a clear picture of the local geology at Monty, which will allow us to again look with a wide lens. And with that, I'll hand back to Karl for a summary.
Thanks, Shannan, and thanks, everyone, once again. Look, just to highlight and recap, obviously, the quarter has been great. The half year has been probably, on pound-for-pound, one of our best. Production and cost performance, we've talked about it. For the half year, 35,000 tonnes of copper almost and over 21,000 ounces of gold and this pleasing C1 cost of USD 0.87.I'd just like to highlight where we sit at the moment. In the last 6.5 years, we're producing around $3.5 billion worth of revenue, 440,000 tonnes of copper and 254,000 ounces of gold or thereabouts. Guidance, maintained at the top end in terms of physicals copper, gold; at the low end, down 10%, 12% in terms of C1 costs, so fantastic. Tremendous production today. And in fact, if we think about not only going forward, not just for the second half of this year, but in '20 and '21 years, we will see our best years of production from what we know today. So really looking very positive in that sense.Monty, obviously, bringing that in stream and essentially on plan, on budget, blending in now, looking forward to that and well ready for that and looking to benefit from all of that.U.S.A. It's been the consistent, persistent and a very disciplined approach to moving that forward in a very solid basis. And we're looking forward as we sit at 86% of this project via Sandfire Resources America, they're really achieving those milestones during financial -- during calendar '19, and we do honestly see that occurring. The environment is right for it. The setting is right for it and I really do think that will come together.So looking to be able to create some value from that and from our solid investment there. As you just heard from Shannan, I think the level of exploration, the doubling down of our efforts in the field, in the province of our somewhat, just under 7,000 square kilometers, it really is an exciting time for us, understanding what might be occurring from a geological sense. And I suppose, just to reflect on at the moment, what the impact may be if the company was to make a discovery like Monty, if it was to make a discovery half of the DeGrussa or if it was to make a discovery like a DeGrussa, what that could mean for a company that has only 159 million shares on issue. And I think you would see a significant value accretion and the company is, to that extent, in a wonderful position to benefit from that.We have many other interests in a number of small ventures, whether it be in Adriatic, in White Rocks, in Alaska and a number of other ventures and exploration on the eastern seaboard, Queensland, New South Wales, that are well funded and we're looking for interesting things to occur from those ventures. And we put ourselves in interesting position to be able to work with those groups and various companies to build and assist and taking forward and to give them the support structures as well to make sure that value can be achieved in a sensible way.Business development. The company is active looking at transactions. We have been very active of late, and we will continue to be. And there are a number of other -- there are a number of opportunities on the horizon at the moment that we are looking at. The company is positioned for success. We have the capacity. We have the resources. We have the support structures. We have the network. We have the finance capacity. We have the debt markets open to us. We have the equity markets open to us. And I think we're in a tremendous position to be able to benefit from this, and the company is positioned for success.So thank you once again for listening to us and for the quarterly results. I'll just take it to the floor and look forward to answering any questions and we're all here, but thanks, once again, for listening to us.
[Operator Instructions] Your first question comes from Michael Slifirski from Crédit Suisse.
Two quick ones from me. First of all, the terrific grade outperformance at DeGrussa, what's driving that? Was it an area there was less well-known? Is it a single stope? Is there something about the area that you're in that might be more pervaded? Just trying to understand why it's suddenly occurring now?
Michael, Shannan here. I think if we look at a rolling reconciliation over a 12-month period, we'll actually have a really tight reconciliation. And what we've seen over the short term is where we can get little highs and lows. What we can then say as well is some of our mining, where we did get some high-grade stopes, are in areas where we didn't plan to mine, so it's a little bit of a scheduling adjustment. So some of the lower grade stopes will come through into the next quarter or half year. And all in all, we know with this ore body, we can get very small, tight pockets of high grade in terms of copper grades, plus 25% copper, where we get up close to pure chalcopyrite. And this will be -- little bit of slopes, but they have a significant impact when you're going through with a head grade of about 4% or 5%.
Okay. Just to understand, if you're saying that the overall, you expect reconciliation to be in line on a rolling basis. So therefore, in guidance, the outperformance because of the 10% more metal than what you expected, do you sort of reverse that out in terms of what you're expecting from stope performance in the second half?
There might be a slight increase, Michael. And so we probably wouldn't reverse out 100%. And again, we talk about resources at measured still being plus or minus 10% in our tonnes and grade. So we -- and let's be mindful of that as we look forward and actually make our assumptions.
When we do our forecasting or when we are budgeting, we do run with assumptions on reconciliation. They're based on trend lines set up from previous periods of time, and we try and make -- well, year-to-date -- I'm sorry, project-to-date, I think our metal is close to 100% upon reconciliation. So our expectation really at the end, in my mind, would be a similar number, 100%, with variations in the short term as we normally do with these types of things.
Okay, Karl (sic) [ Richard ]. Secondly, about the -- just the time line and the deliverables over the next sort of while. I guess I get slightly confused about the draft EIS in the March quarter -- end of March, the complete of the EIS in June at the same time as the DFS. Is there any risk between the draft and the complete of the EIS that there might be a change of scope that then impacts the [ stamps ]? Seems like there's not a lot of time between submitting an EIS and all that might encompass and require of the design and completion of the feasibility study?
Yes, fair question, Michael. Look, at the end of the day, we don't have quite all the answers to all the questions and it has to evolve. The critical thing is, we are involved in an interactive process with providing all the information pursuant to the mine operating permit application, which was a very extensive document that was lobbed and lodged with the department, which the department assessed with their own experts as being complete and compliant, number one. And at that point, it tripped over into the final phase of permitting. So once the department had issued a formal statement that the permit was complete and compliant, it goes through independent review with an independent contractor, which we pay for, for the department who's responsible for having an EIS prepared by a third-party consultant. The third-party consultant must, one, have a public hearing to address the scope of what the EIS needs to deal with, and that has occurred a long time ago, and that scope's frankly developed. We had nothing to do with it. We sit in the background just providing information as and when required. So it's gone through that, and it's there for the consultant after having tweaked his scope, which didn't change much from what we thought it would be, to then prepare the EIS, and it's going through that process. There was recently an -- some work to do with some nitrogen that required -- that was extra work that was required that has caused the preparation of the draft to go -- to roll out an extra 3 months from December to this March period. Upon the completion that we should also be seeing during the period of preparation of the draft EIS, the key matters that need to be addressed, the key matter that might change a scope, a change of scope to the operations or the construction or the process flow sheet, and we are not seeing any of those. The possibility of alternative measures or alternative activities to deal with something, we are not seeing those. So the expectation is in the draft EIS, it will be fairly consistent with what we have proposed in the mine operating permit application. There be some tweaks but they are getting dealt with in due -- through the draft EIS. Once the draft EIS is complete, it really is something that it is all but subject to public commentary, and the public or the interested and affected parties being able to raise a new issue that no one has considered or thought about before and it has not been addressed, it is the last opportunity to then raise that. And it needs to be a new issue that has not been considered by the thousands or hundreds of experts and numerous people that had been -- are going through this with a fine-toothed comb as to why it should not occur. So we do think that it is a very small sort of opportunity to raise. I'm not saying there couldn't be new issues, but there's not a long piece of string here in terms of what they might be. This is a state-of-the-art modern mining technique. So then there is a statutory period and I don't precisely know. Matt, I don't know if you know when it is, a public commentary period. It starts on a formal date and close on a formal date. But it might be 6 -- 4 weeks, 6 weeks or 8 weeks or thereabouts, I'm not sure. It will be held in 3 or 4 different locations as was the scoping public hearing. And at the end of that, they'll take on board any comments of concerned party or parties and see whether anything needs to be done. And we are waiting for that to occur. Our expectations are, given the work that has been done and the thoroughness of that work and the extensiveness of it and the breadth of it and the number of people, is that we don't expect something new to come out of the woodwork. At that point in time, the independent contractor can complete and issue a final EIS and sign off on it. He will hand that to the regulator, the Department of Environmental Quality, who then will sit there. And at that point in time, after some administrative processing, they will be in a position, assuming nothing new has come out or nothing material needs to change, to issue then what will be called a Record of Decision, an R-O-D, a ROD. And a ROD is subject to the incumbent and contained conditions of operation, including, for example, bonding, et cetera. These are the -- this is the decision by the department for a state-issued permit to go and mine on these conditions and, therefore, you can break ground, assuming you got these preconditions satisfied and we're happy with them and off you go. So it really is building up to that. So there are a couple of key little things to occur. Hopefully, that explains it reasonably well. I think there was some detail in the quarterly and certainly, we -- as we go along, we'll update timings and all the rest of it, but essentially, that is as we see it.
Your next question comes from Larry Hill from Canaccord Genuity.
Just a quick question around Monty. A fair bit of grade-controlled drilling occurred over the quarter. How's that shaping up in terms of reconciling with your block model, and when would you expect to sort of have a medium-term mine plan out on Monty?
Larry, Shannan here. The grade-controlled drilling on the upper parts of the lower zone of Monty has been fairly confirmatory of our geological understanding for the bulk of the ore. What we're seeing is there's lots of other little wispy bits of ore, which don't equate to much tonnage in terms of the resource. It's not really a plus or a negative. It's going to be a fairly net neutral gain. It's more just positioning of morphology, shapes that we're making sure we've got right for the engineers. We're working on resource updates in that part of the ore as we move forward, and we'll have a formal resource and reserve update mid to late next quarter.
Okay. Great. And just on the exploration. Your budget for this year, is that sort of still -- maybe you got about $35 million or so. Is that staying independent -- maybe a question for Karl, is that sort of earmarked as independent of your other activities, like your interests in White Rock or -- White Rocks or Adriatic or other sort of opportunities that you're looking at?
Look, I think, that's probably all up in terms of what we expect that could be spent during the course of the year. And obviously, with regard to -- and those guys are -- and there are more independent things, White Rocks and various other things, independent of Sandfire main. But in terms of Sandfire main, the capacity and the ability to actually, as Shannan talked about, doubling down or funding it further and aggressively, subject to results, is obviously something well and truly at the -- the availability for us. So at this stage, we look like having a fairly aggressive year, but that would essentially be whole of the group and the various other activities that we're investing into at the moment as well. So I think earmarked for Doolgunna, it's probably order of magnitude in the order of, Shannan, $20 million to $25-ish million for the year, but it really is results driven, and the capacity to open up the purse strings, the capacity to, if it's -- as someone said to me once upon a time, if it's between here and a discovery, it's drill meters, well, let's get on and drill the meters. You know what I mean? I know it's not as simple as that, it's never as simple as that because you need to be drilling in the right locations and for the right reasons. But there is certainly the opportunity for us to open up the floodgates in that sense for the right reasons. And there will continue to be, whilst it will be aggressive exploration, it will once again still be a disciplined approach to exploration. It will not just be drilling for the sake of drilling. However, it will be aggressive, there's no question about that.
Your next question comes from Sophie Spartalis from Merrill Lynch.
Just wanted to touch on your comments regarding M&A. You said that you're actively looking at discussions. Obviously, we've all seen the press reports regarding MOD, but you're talking about a number of opportunities that you're looking at. Can we just be reminded again just in terms of your filters and your appetite for geographical diversification? I guess, when you look at Tier 1 jurisdictions, where does Africa sit in your mind for that? And do you think that you've got management and operational capability to be operating multi-jurisdictions given the size of the company?
Thanks, Sophie. Look, quickly on the filters, in terms of our strategic plan, we have said time and time and time again, where we sit at the moment, essentially, the key filters for us looking for opportunities where we could earn somewhere in the order of a 10% internal rate of return using consensus sort of commodity and currency numbers, so from the mining proposition. Number two, that it had a production profile of sort of, hopefully, 30,000 tonnes of copper equivalent or thereabouts or could have the capacity to get to those sorts of threshold, even if it wasn't quite there initially, and that it had the opportunity to have a mining period of time that was at least 5 years, but it was that short that there was significant prospectivity. So that caters for possibly mine lives running down somewhere in the world and you're picking up someone else's asset out of a major and saying it's got 3 to 4 years to run but you might be able to squeeze more out of it, because it's prospective but the major doesn't want to spend money à la, you look at Northern Star, Pogo, in theory, I think the -- a lot of those, had a couple of years to run, but we all believe that the chaps there will be able to do a great job and get more on these exploration potentials. So it gives us that sort of opportunity as well. Our cost structures, it goes without saying a little bit, but C1 costs sitting in the sort of around the 50% or better part of the cost curve or quartile, we could tolerate a little bit out of that. But as long as we could see opportunity to bring it into that 50% lower part of the cost quartile is important. And to be in a situation for a more significant transaction, a meaningful one, where we have the ability, whilst not initially, but over time to be in a position to pull the levers and, I suppose, have a pathway to be in a controlling style of position or a meaningful position. So the only thing that's occurred -- so then -- and something -- finally, that our balance sheet and our network and our resources and our capacity to fund by debt and equity sensibly with the cash flows that we've got, that we have the capacity to do. So not necessarily going to blow ourselves up. And what does that mean? Well it means, I suppose, that we'd spend anything from, I've said it before, 0 dollars to essentially our market capitalization, depending on the type of deal. If there was another company like Sandfire around today, would we merge with another billion dollar company if it had similarities to what we've got today? Potentially, if we thought that made sense in the market, had appeal. So in those circumstances, we wouldn't be blowing ourselves up. It could be a merger of equals type of concept. As you saw many years ago, we saw Independence and Sirius do something like that. So that's not beyond our company at the moment. So -- but we still want to be very active and very proactive, and the management group here I think is very interested in being involved in doing things, and we like being active and proactive and stuff. So that sort of gives you a bit of a sense of the filters. In terms of jurisdictions, I've said it, I suppose, sometime before, almost -- I'd like to initially say, we're -- number one, we are interested in projects, and the quality of projects is the key element, and then we'll see whether we can tolerate the jurisdiction. There are parts of the world that we find somewhat difficult to operate in at the moment and that might be hearsay. But Indonesia, we've struggled with in terms of trying to be -- work through that. I worked there many, many, many years ago. Philippines, parts of that are potentially difficult. Botswana, for example, you mentioned MOD. Botswana, we've been looking at various things in that part of the world over the years. It's -- De Beers plays a huge role in that country, small country. It's an interesting country and it sort of ranks, I think, on the Fraser Institute as the best country in Africa to operate, albeit it's still Africa. You know what I mean? So -- which might be different compared to some other parts of the world, but it's tolerable. So I think initially, we would say that we're looking at the quality of the asset predominantly before we discount it and then we'll see whether we can tolerate the jurisdiction. In terms of being able to operate in multiple jurisdictions, look, I do believe, as we go forward, we are looking at essentially establishing hubs. So for example, we sit here today, we've got a corporate hub. It is West Perth. It's the center of the universe for us. It's a great mining district or an area where we've got great skill sets here and we're able to operate. The tyranny of distance is less of an issue these days than technology and people. We're establishing essentially an epicenter in Central Montana. And so for us, looking at the U.S., potentially Canada and even down to South Americas in due course, potentially, somewhere out of the U.S. and West Coast of the U.S., whether it'd be Montana/alternatively depending on project, Vancouver is a base, potentially is something that would be -- something we could run a satellite. So I don't see -- and we're looking at establishing capable teams in those jurisdictions. So for example, if we were to take -- and we will take the Black Butte into operations. Initially, it will have a base in White Sulphur Springs in Montana. If we were to do something else in North America, in Canada or America, we might find it might make logical sense to have a base out of Vancouver. And it's easy to get to and all the rest of it, but we will establish a competent team, and we've already commencing with that. Rob Scargill, heading up Sandfire America in the U.S.A., is a very competent and capable individual. He's been doing this for a long time. He knows what he's doing. And he and his team, they're building it up. So we're building skills on the ground. So I think, to that extent, we don't see it as being a hurdle that is of issues, making sure we have good people, look after and support them well and give them the opportunity to create their own success and I think we look forward to do that.
Okay. Great. Just one final question. You talked about you're prepared to do a meaningful transaction and you would merge with a similar-sized market cap company, potentially. Is that with support of your shareholders, your major shareholders? Have they given an indication that they are willing to -- or willing for the board and management to do a company transformational deal?
Well, look, I think I'm just using it -- I really judge at opposite ends of the spectrum. So I don't think it's something that's necessarily on the table. So you're sort of jumping a bit further down the track than where we're at. But the point being is, we could transact across a wide range of possibilities. And even if you might have noticed recently, on the opposite end of that spectrum, we, over the last 12 or 18 months, have instigated the concept of Sandfire ventures, which is to take strategic positions in other special situations, and that's an Adriatic situation, that's been a White Rock situation, where it's having a little bit of a toe in the water and something significant could come out of that. If it doesn't, no matter. It might be an interesting proposition where we create a small amount of value and nothing comes of it. But in Adriatic, we've made a small investment, it was $0.20. The stock's about $0.60. We are hoping that positive things will come from that. If nothing else, it might be a wonderful investment and we've made a very good return. Now that could lead to something else. So I suppose, without jumping to any conclusions, we have got the capacity as a business, we have a clean set of heels, we have got 159 million shares on issue, we've got access to -- we've got nearly $200 million in treasury and that continues to grow rapidly. We have got access to our investment banks and very good and strong relationships, access to our financial institutions and a normal commercial path, and access to customers and potential funding lines there and a great customer base. And what I'm saying is, we've got great capacity and flexibility and a clean set of heels to go and do a variety of things over a wide spectrum. So I think, if it was a transaction that was a transformational all-of-company for something significant, if it makes sense to both parties, then we would have a look at it, simple as that.
Your next question comes from Stuart McKinnon from West Australian.
I just was seeking a little bit more color around the -- off of the MOD Resources, if I could, Karl. I know it didn't happen in the December quarter, but -- yes, it came out of left field a bit and I just thought it must -- that particular project of MOD must really be ticking quite a few boxes for you given its location. Can you talk us through a little bit more about why you've probably overlooked a few other more closer-to-home potential acquisitions in favor of this? I mean, what do you like about it so much?
I think -- thanks, Stuart. I think, look, without getting into too much detail, I suppose the most important thing to note is that, one, it's not a bid. That's the first thing. I think there's been, as can be the case, just to -- to start off on the right foot, it was a letter that was sent to the company that was highly confidential. It was preliminary. It was non-binding, and it was an expression of interest and it talked about a scrip combination. So I think -- and it put a value on the company at 38% per share at that point in time. And it's interesting to note that at that point in time, the share price was around $0.22. So the only thing that's changed in the meantime has been some leakage to the market and that leakage was, I think, in the newspapers around 20th of January. And that leakage also included something about a -- telegraphing a placement by the company at that time. So it was curious how those 2 things were released in the same leakage to the press. So -- and at that point in time as well, I suppose, it was at a 65% premium to the spot and about a nearly 40% premium to the 30-day VWAP, so it was interesting. But look, I think, the thing is, really to highlight and more to your point, is that I see -- we are looking at a number of things. Our business development team are actively looking at numerous things all over the globe and consistently and have been doing for since the beginning of time, but more intensely, let's say, whilst we've clearly established ourselves as having some consistency and the ability to transact. And so we're interested in building a pipeline of assets where we can roll up our sleeves and get our fingers dirty and create value potentially and work together with people, collaborate and working together in a very positive fashion. And what I do think is in this situation that is now been talked about publically, it is just something that is an opportunity for both companies. There's an opportunity there because there's a number of -- that MOD's worked hard to establish their position, their ground hauling and working through this asset. Let's bear in mind, it's still Africa, it's 1% copper grade, so it's not without challenges to some extent, but I think, it's an opportunity. And I think if you can bring the things together, it is an opportunity for Sandfire, but it's a wonderful opportunity, I believe, also potentially for MOD. So really, I suppose, that's it to some extent. It's an opportunity. As I said, I think Botswana, in terms of the country in Africa, is probably one of the better ones to be able to try and operate in. And De Beers have been operating there for many, many, many years successfully. So therefore, it's okay from a jurisdictional point of view. And I really do think if -- a lot of these situations, Stuart, it's about being able to execute at the right time of the cycle, in the cycle and not being -- going through a period of time where it's hard work, putting everything together and then trying to fund the various machinations and the risks along the way. And so it's a situation where we see it's potentially an opportunity for both companies essentially, and that's the proposition. So where we sit at the moment, we're looking forward to -- there's been a lot of noise carrying on, but really, we're looking forward to getting a formal response back from MOD and we're very happy and willing to engage with the board of the company and see where -- we can both see where we can create some value for each other, I think, in this -- at this time.
Your next question comes from John Deniz from Paragon Funds Management.
Question for Karl. Congrats on the quarter and your sound, early moves into some of these strategic investments you've talked about. It's fair to say, and you've touched on it, Adriatic is probably one of the best in your portfolio. It's discovery is going from solid to exciting. You guys are well aware of it. Listening to you talk about your investment criteria, well, it meets all of that. Financial capacity, yes, you've got lots of it and it's clear, given what you spent at DeGrussa last few years, not a lot of inventory add. Instead, Adriatic, it's getting bigger and better through every step out. Its resource delineation, I'm sure, is exciting you guys. My question really is, when does Sandfire go from being a passive to an active driver there in light of all the things you talk about that seemed to tick every box?
Well, I think -- thanks, John. I think every situation is different. There are different circumstances in every situation. What you have got in Adriatic, you've got a very strong group of vendors effectively that holds a significant position. And really, once again, that's another situation. And I think most of the positions we've talked about, they're all ones where we're going directly into talk to management and groups. And so in that situation, you've got a very, I suppose, a very supportive and strong vendor position, the market's very attractive to it at the moment, and that they are able to continue to drive it without us. So -- but we continue to have an open -- we've got a strategic relationship agreement with them to share confidential information, to assist technically and do other things. And really, it's just a bit of a function where we're in the background essentially. We are obviously a shareholder sitting just under 10%. And I think it's kind of worked out in each unique situation when potentially you can play a bigger role or if you're not invited necessarily, where you can't, you can't. So I don't necessarily think we want to be in a position where it's anything but being a collaborative, supportive combination style of transaction. So -- and I suppose, to some extent, if it turns out Adriatic goes from strength to strength to strength, we may -- unless something changes, we might turn out to be a 7.7% shareholder and that will be it. So I think, it's -- from that point of view, we don't want to pursue necessarily only things where we don't have some certainty of outcomes.
There are no further questions at this time. I'll now hand back to Mr. Simich for closing remarks.
Once again, thanks, everyone, for listening. I think we've summarized earlier on, but the company's obviously had a wonderful quarter and half year and the future is ours to succeed in. We're looking at further value creation for our shareholders. We think the opportunity is to be able to undertake a number of activities over and above our operations and exploration site to look at value-seeking opportunities and we'll continue to do that. So look forward to talk to you again soon. But once again, thank you very much for your time.