Sandfire Resources Ltd
ASX:SFR
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Sandfire Resources Ltd
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Welcome, everybody, to the Sandfire March 2021 Quarterly Report Advisory Call. [Operator Instructions]Thank you all for joining us today. I'd now like to hand over to our first speaker, Nicholas Read.
Thank you very much, Luke. Welcome, everyone. And on behalf of Sandfire, thanks for joining us for today's March quarterly investor conference call and webcast. We do appreciate your time on what we realize is a very busy day. Just some very quick introductions for the Sandfire team here in Perth, who will run you through the quarterly results before opening the floor to questions. Firstly, the company's Managing Director and CEO, Karl Simich, will deliver an overview before handing over to Sandfire's Chief Operating Officer, Jason Grace; and Chief Financial Officer, Matt Fitzgerald, for an operational and financial update. The company's Head of Growth and Exploration in Botswana, Julian Hanna, is also present on the call and available to take any questions. Just a reminder that a recording of this live teleconference and synchronized slide presentation will be available later today. I'd now like to hand over to Karl Simich to kick off today's call. Please go ahead, Karl.
Thank you very much, Nicholas, and welcome, everyone, to the March 2021 quarterly update for the Sandfire. Just to set the scene, we are working very hard in terms of strategy execution and looking to create value through the opportunities that we have in our business. In regard, just to give you a very high level sense of that, we are immediately looking to execute delivery on the optimization of DeGrussa and Monty cash flow. Jason will give you an update on that. We are progressing with vigour for T3 and the development of the T3 Motheo Production Hub in Botswana. Under sustainable production, we continue to look and are very active in the inorganic space, looking at business development and operating opportunities and also development opportunities. We continue to manage our ventures investments. We are looking to continue to fast track the A4 development in Botswana to then form part of that T3 Motheo Production Hub there. And we're also optimizing -- looking at optimizing the Black Butte project, while we have a period in which we're dealing with the legal matters there. In terms of accelerating discovery, we have a budget in the order of AUD 50 million. We've got a number of exciting -- highly exciting prospects, particularly in Botswana where we have done a lot of work on the ground, and I've got a number of targets that we're looking a follow-up drilling over the next enduring period. Western Australia still has some exciting results to come from DeGrussa. And also with regard to our gold strategy, New South Wales, we are busy at the Endeavour project and look forward to drilling some targets there. And in the U.S.A., as mentioned earlier, previously, we are embarking upon exploration for the first time around the Black Butte project. And with regard to our people and empowering them, we have upgraded our management systems, increased our communications globally to ensure all our people are aligned and operating within the Sandfire culture, which is critical to us and the success in managing our business across the globe. And under optimization of capital structure, we will diligently consider and prudently consider cash debt funding requirements for our strategic imperatives and balancing that with the appropriate return to shareholders. In terms of highlights for the last quarter. DeGrussa, once again, the engine room and generating excellent cash flow for the business. It's been an excellent quarter again. There continues to be good production at close to 17,000 tonnes of copper, good gold and very pleasing year-to-date figures. We've reduced our cost C1 guidance for the full year. And with the current copper price, we're seeing upward pressure on revenues, margins and profitability. So that's very pleasing to see. Just to reiterate, the guidance for the year is towards the top end of our range that we put forward, close to that 70,000 tonnes of copper. And as I -- sorry -- just mentioned, we're looking at a reduction in our C1 cost for the entire year. So very pleasing results expected for DeGrussa in the engine room for the year coming up. Resource drilling continues at Old Highway. And we are looking at an extension of mine life at DeGrussa with the gold project. We will be looking to make a decision with regard to that, together with the feasibility study in hand, by the end of this calendar year. So we're hopeful that we might be able to continue operations there. A significant highlight for us during the quarter and over the last little while has been the momentum that has been gathered in Botswana with essentially what we believe will be a 5.2 million tonne production operating hub at the Motheo center of operations, and that will be initially underpinned by the development of the 3.1 -- 3.2 million tonne per annum T3 operation, which we expect to go for at least 12.5 years and produce 30,000 tonnes of copper per annum. There's pressure on the upside there. We're seeing growth from the A4 deposit. We're continuing to work our way on that deposit and bringing together a resource, an expanded resource, as well as mineral reserves for that, and looking at blending that into a combined study with T3 in due course with the expanded 5.2 million tonne per annum operation. So that's exciting for us, and a lot of progress has been made in that regard. Not to underestimate the extensive ground holding. We are the largest tenement holder in Botswana. We have close to 30,000 square kilometers, and we see that potentially moving upward as well. And for us, strategically, we are looking at -- to essentially secure the most strategic parts of ground in Botswana in the Kalahari Copper Belt to ensure that we can leverage off that going forward with 1 and potentially more than 1 production hub and extensive exploration with primary ore feeds and then, in due course, satellite ore feeds as well. So hopefully, mirroring what we see at T3/A4 and other parts of the belt as well. And I think there's significant opportunity for many decades to come in that belt, and we're only at the tip of the iceberg in terms of the work we are doing there. But we need to move forward and keep the momentum going for our business to create that value proposition. A further development upside for us is also the Black Butte copper project. We have completed that feasibility study. We're looking at enhancing that, optimizing that study. We're looking at new resource potential around the Johnny Lee deposit and also the Lowry resource as well as other extensions there, too. So we continue to work there. And we expect, over a period of time of that work -- strong improvements to that work that we have done. We closed the end of the quarter with a very pleasing and strong cash position of 5 -- $463 million. We have no debt. So that's very pleasing. We also, in addition to that, have in excess of $70 million in what we would consider to be relatively liquid investments. The largest one being we are the largest shareholder in Adriatic Resources at 16.1%. So our cash and liquids amount to about $535 million at the end of the quarter. And based on the current market capitalization, we have an estimated enterprise value on that of about $641 million. My internal workings would indicate to me that the EV should be 3x that at about $1.4 billion, and we should have a market capitalization of $2.4 billion or $2.5 billion. So we've got some way to go to catch up to get the market fully respecting the inherent value within our business. So thanks very much for all listening to the introduction. I'll now hand over to Jason Grace, our Chief Operating Officer.
Thank you, Karl, and welcome to everybody on the call today. Starting with HSEC. Across the company, unfortunately, we did lose some ground on our TRIFR, which was 4.7 as at the end of the quarter. This was a result of a very small number of very low potential injuries occurring, and all Sandfire teams remain highly focused on safety and continue to strive towards elimination of all injuries. Our COVID-19 response remained a major focus for the quarter. And at the company's head office, we were impacted by a 1-week lockdown across the Perth metropolitan area due to a reported case of community transmission. Staff were able to work from home during this period, and there was no impact to the company's operations. The flow-on effects to the DeGrussa operations and Doolgunna exploration teams were minimal during this period, and both groups continue to function as normal with heightened infection control measures in place. In Botswana, COVID-19 infection rates continued to rise throughout the quarter, to a point where medical and isolation facilities in the Ghanzi region are now under great pressure. During this time, our Tshukudu exploration team continued to work safely with increasing levels of controlled measures, which now includes routine mandatory COVID-19 testing for all employees. In Montana, in the U.S., the COVID-19 vaccination program is now well advanced with infection rates in the area stabilizing. Our Black Butte team continue to maintain strict infection control across all aspects of the project during this time. And from a community perspective, we're very proud of our Botswana employees who gave their time to renovate an old building on the grounds of the Ghanzi District Hospital. And this building will be used to provide greatly needed additional COVID-19 isolation and a combination facilities for the community. If we now move on to an update on DeGrussa operations. The team up there has delivered another strong performance for the March quarter. Underground mine production at DeGrussa closed out the quarter at just over 299,000 tonnes at a grade of 3.5% copper and 1.4 grams per tonne gold. This mine production rate was higher quarter-on-quarter and is expected to continue throughout the year. Monty underground produced just over 111,700 tonnes at a grade of 7.8% copper and 1.7 grams per tonne gold. And when combined, this delivered total production of 410,000 tonnes -- 410,835 tonnes at a grade of 4.7% copper and 1.5 grams per tonne gold. Ore processing achieved a mill throughput rate of 395,671 tonnes at a grade of 4.6% copper and 1.5 grams per tonne gold. All of these production metrics are in line with the mine plans for the year. Concentrate production for the quarter was slightly above 71,000 tonnes at a grade at 23.7% copper and 3.8 grams per tonne gold. Concentrate sales were slightly above the production rate with 93,374 tonnes sold during the quarter, and this was a result of shipments originally planned for late December quarter, occurring early in the March quarter. And finally, for the quarter, DeGrussa operations produced 16,803 tonnes of copper and 9,100 ounces of gold.
Moving to operating costs and capital. Another pleasing quarter in terms of costs with headline C1 cost of USD 0.87 per pound, a little higher than we've seen in year-to-date numbers mainly driven, as you can see by, by-product credits with slightly lower gold production in the quarter with a credit at $0.48. As mentioned, we're looking at the upper end of copper guidance and gold guidance for the year, and we've reduced our copper -- our cost guidance down to $0.80 to $0.85. In terms of copper, that will suggest production for the June quarter in the range of 16,000 to 17,500 tonnes. And in terms of gold, between 8,000 and 10,000 ounces for the June quarter, which is in line with our internal estimate. Mine development continues at both DeGrussa and Monty with around $39 million of development at DeGrussa scheduled and -- for the year and also $9 million at Monty. We ended the quarter with low copper concentrate stocks of 9,000 tonnes with those 9 shipments completed during the year and had a reduction in copper concentrate holdings of 22,000 tonnes during the quarter.
In line with the Sandfire strategic plan, as mentioned by Karl earlier, we've continued to work to assess the potential transition to gold production at DeGrussa. During the quarter, resource definition drilling and Old Highway deposit continued with 18 diamond drill holes, totaling just over 2,600 meters were completed to support geotechnical and specific gravity measurements, and a total of 318 RC holes, totaling 40,000 or just under 40,500 meters, were also completed. With the drill out now well advanced, geological modeling is underway to underpin a maiden mineral resource estimate, and we have now moved our focus to assessing other gold prospects in the local area. Scoping study work also continued throughout the quarter with open pit mining, ore haulage, metallurgical test work and ore -- and process plant engineering studies and environmental baseline studies now well advanced. In addition to the resource definition drilling at Old Highway, Sandfire's continued exploration across the Greater Doolgunna region. During the quarter, the key activities were: Deep diamond drilling at the Red Bore prospect, which I'll touch on more in the next slide; and we also undertook a major air core drilling program to provide litho-geochemical data at the Bitter Well, the Dead Horse Well, the McLean Well and No 26 Well prospect areas. Earlier in the year, Sandfire entered into an agreement to acquire an 85% interest and joint venture interest in the Red Bore Copper Project, which is located 1 kilometer to the east of DeGrussa and covers an area of 2 square kilometers. Since entering into the agreement, work has commenced on reviewing existing geological and geophysical information. We have commenced Moving Loop Electromagnetic surveys, and we have also commenced drilling of deeper targets adjacent to the DeGrussa ore body, which represent potential structural offsets to the known C4 and C5 ore bodies. The design of this deeper drilling is certainly not conventional and given -- particularly given that it's not designed to directly intersect mineralization targets. Instead, it has been designed to sit below the target area and allow us to use downhole electromagnetic geophysical methods to detect massive sulfide mineralization over a much larger area. As at the end of the quarter, this drilling had advanced to a depth of 1,753 meters with the final design depth at around 2,400 meters downhole. We now move on to Tshukudu project. During the quarter, project development, resource definition and exploration activities continued within the Tshukudu project area, which covers 26,650 square kilometers in Botswana and Namibia and running approximately 400 kilometers along the Kalahari Copper Belt. The Kalahari Copper Belt is a major zone of strata-bound copper and silver deposits, extending from North Botswana through to Central Namibia. The belt holds approximately 7 million tonnes of contained copper with resources grading from 0.9% copper to 2.2% and an average grade of 1.4% copper. The T3 and A4 resources sit towards the northeast of Sandfire's tenements and are surrounded by several high priority exploration targets, which we collectively call the Motheo Expansion Project. Given the enormous potential of the Motheo Expansion Project area, and in particular, Sandfire's discovery of the A4 deposit, we have not limited our project development work to the T3 deposit alone. In addition to the completion of the definitive feasibility study in the December quarter, we have also completed the engineering to identify a pathway for rapid and low-cost expansion of processing capacity to a 5.2 million tonne per annum rate, which will support the concept of the Motheo Production Hub. The Motheo Production Hub has the potential to provide processing capacity for potential new mines at A4 and any other future discoveries in the area. To support this, in December last year, Sandfire announced that in addition to approving USD 259 million for construction of the T3 Motheo mine, a further commitment of USD 20 million was approved to increase the capacity of several key components of the plant and readily enable future expansion. If we now focus on the T3 Motheo projects, all key items remain on track, both from a timing and a budget point of view. And with reference to the development time line previously reported, the next milestones to be achieved are basically the obtaining and approval of the mining license, securing of the remaining land titles and also the approval of the camp Environmental Management Plan, all of these are expected in the June quarter. The processing plant, engineering and preconstruction works are now well advanced with plant design and detailed plant design now 50% complete and preconstruction works, including road access clearing and accommodation area, village area clearing now completed. The next milestones following that are the accommodation facility and commencement of construction there, and also the 132 kv power line and substations, which are on track and contracts ready to award. And as mentioned previously, all longer-term milestones remain on track as we stand today. If we look specifically at key progress areas. We have submitted the T3 DFS to the Government of Botswana. We've commenced recruitment of key members of the in-country team. We've secured land access that covers the mine area. And we've secured tenure over the access roads area that sits on the farm adjacent and also commenced clearing of access road areas and accommodation village areas as mentioned previously. Project debt funding is well advanced, and submissions have been received by 9 banks. We've completed infill drilling of the A4 deposit as the basis for feasibility and engineering studies. Detailed engineering of design of the process plant is 50% complete. And detailed engineering on the TSF is now 75% complete. Ordering of long lead items is also largely completed, with currently, as we stand today, the primary crusher, recycle crusher, apron feeders, SAG mill, float cells, tailings and concentrated thickness and concentrate filters all now fully committed and ordered. Negotiation of key contracts around operations and suppliers are also well advanced, with the formal stages of assessing the mining contract tenders now in play, a combination of village, HV power design and construction and access road construction contracts all ready to award. If we look at the next steps for the project, we will complete the final permitting and secure the grant of the mining license for the T3 project, finalize the recruitment of the key members of the in-country team, finalize all land access arrangements and all due in the coming quarter. We'll progress with project debt funding evaluations and present -- and put together a short list for that. We'll order the remaining long lead items. And we'll move forward with the completion of A4 studies as quickly as possible. And further underpinning that further expansion, we'll continue with our exploration efforts both along the belt, but also targeting the Motheo Expansion Project area. As the first potential additional ore source for the Motheo Production Hub, Sandfire was very pleased to announce a maiden mineral resource for A4 during the December quarter. This initial resource estimate was based on a total of 79 drill holes. And since this time, the company has continued with the second phase of drilling, which had a total of 74 diamond drill holes planned. As at the end of the quarter, all of these holes have been completed. And as part of the second phase of drilling, high-grade vein mineralization was intersected in localized structures at the eastern end of the deposit. This style and tenor of mineralization has not previously been identified in the region and demonstrates the potential for further high-grade mineralization discoveries. Geological and mineral resource modeling of the A4 deposit are now underway, and an updated JORC mineral resource estimate is expected to be released in the June quarter. And stepping out to the Motheo Expansion area, we have also aligned exploration plans and focused our work to further support the Motheo Production Hub concept. This has included targeting of deeper Ngwako Pan Formation contact targets. And during the quarter, drilling was undertaken at the western end of the A4 dome and immediately south of the A4 deposit. Exploration drilling of further targets in the A4 and T3 areas will continue in the June quarter. And once land access negotiations are finalized, drilling will focus on the high priority exploration targets at A1, A13, A27, T1, T2 East and T2 West. And finally, moving on to the Black Butte project in Montana. Our key areas of focus have been to firstly continue to deal with the legal challenges associated with regulatory approvals. But more importantly, we have been undertaking additional work to add value to the project. In line with this, we have continued to work on enhancing the Johnny Lee feasibility study. And as Karl mentioned earlier, for the first time since Sandfire has been involved with the project, we have undertaken exploration for potential extensions to copper mineralization at the Johnny Lee and Lowry deposits. This has involved the completion of 2 dimensional seismic surveys completed in the December quarter and to identify key structures associated with copper mineralization and enhance the geological interpretation of the area. And early in the March quarter, a diamond drilling program targeting prospective areas commenced. This drilling program consisted of a total of 8 diamond drill holes for a total of 5,267 meters drilled. As at the end of the quarter, geological logging was still in process with assay results expected in the coming quarter.
Thanks, Jason and Matt. And just to summarize, we really had a very pleasing quarter. It's been a very strong 9 months for the company in terms of what we've achieved in terms of operations and also laying the foundations for the future. So we see a very exciting future coming forward for us. We've got a number of prospects we're working on. And we really do believe we have the team with the appropriate focus in the right areas to execute that strategic imperatives that we've got, and we do have a strong platform for growth. So we're looking forward to a very exciting future from where we sit today. And I think the next 6 months, we will continue to meet those and achieve those hurdles and milestones. And really over a period of the next 12 to 18 months, we start to really see bidding down the significant transformation of Sandfire from a single asset company into a multiple asset company in multiple jurisdictions and executing that properly. Just as a postscript, just to let you know on the call, I'd also like to welcome, as of next Monday, Ben Crowley to the Sandfire team. Ben is a long-serving senior analyst at Macquarie Bank. He'll be joining us as Head of Investor Relations. And he will help us ensure that we disseminate our information in greater detail and granularity for our analysts that follow us, investors and various other stakeholders. So just to welcome him on board and look forward to having him. And hopefully, that will enable you, people like you on the call, to get access to much more information and understand it better with someone giving you that detail. So thanks very much for listening, everyone, and I look forward to receiving your questions now, if you have any.
Thank you to the Sandfire team for that presentation, and welcome all to the Q&A session. [Operator Instructions] As we pause a moment to assemble a question queue, I'll hand back over to Nicholas to orchestrate any questions that have come through from the web.
Thank you, Luke. We have received 1 question online from an investor who would like to put the following to the Sandfire team. Can you give a guide as to how long the objections can be extended at that period? Are we looking at months or years? I know it's difficult to tell, but can they go all the way to the Supreme Court? Over to you, please, Karl or Jason?
Yes. So we're right in the middle of the process at the moment. The next hearing is expected in the middle of May. We do expect some slight delays on that, given some issues with legal counsel from the DEQ. But likely time on this is another 12 months. We understand that would entail basically a final determination occurring this year going into an appeal process. And then after that, our advice is that, that would end the process. Roughly 12 to 18 months from now.
Thanks. Back to you, Luke.
Peter O'Connor from Shaw and Partners. Peter?
Karl and team, congratulations on the good results. A couple of quick ones on finance. The change in guidance, was that more about economies of scale on the cost side or the denominator? Or gold price or Aussie dollar assumption change? Or both?
Sorry, Peter, just -- I missed the first part of that. Do you mind repeating?
That's all right. Just on the cost change where you've lowered the cost for the year, how much of that was driven by volume change that the better production you're forecasting? And was there any tweak to either the gold or the Aussie dollar assumption that goes with that?
Thanks, Peter. Yes, it's certainly well impacted by the upper end of a production numbers coming through our models, and that helps bit of an adjustment for currency, which is mainly actually gone the other way. But also on the gold side and gold price. So mixing all of those together is probably -- C1 is probably the hardest one to predict for the total year because there's so many moving parts. But with that and some cost savings, we end up in $0.80 to $0.85, we think, for the full year.
And if you normalize the cash you generated in the March quarter, which is substantial because of the extra shipments that you made, which you explained to us last quarter, this quarter, it was a normal quarter, you had a normal flow on concentrate sales. Could you ballpark what that cash position would have been? So it was up about $135 million. Would it be close to that $90 million to $100 million?
I would think so. I haven't done the numbers, Peter, but yes, I would think it's probably around $100 million a quarter. And potentially [indiscernible] obviously spot prices that are prevailing down. Because that was only obviously during the March quarter that we expect cash.
Yes. Got it. And Karl or Jason, now because it's getting closer to wrapping up, the [indiscernible] can you give us a sense of the final quarter of mining, the final quarter of processing, the final quarter of shipments, given we're getting that close? And then on that basis, Old Highway/gold strategy how does that overlap with the wind down of DeGrussa? Is there an overlap? Or is there not an overlap?
So Peter, it's Jason here. So if we look at next year, we are planning to maintain production rates basically as they have been this year. So obviously, we can use the ore reserve to forecast out to the end of mine life. So once we go beyond next financial year, we have stated previously that we see the end of production being September 2020. I would say that we'll ramp down or production rates from our core production rates during third quarter of FY '23.
But I mean, mining, milling as well as you get a tail of milling and selling?
Yes. Look, absolutely. But I wouldn't expect that it goes that far beyond, far beyond September 2022.
Okay. And final CapEx for development on that plan time frame?
Are you talking sustaining cap?
When does the capital wind down to basically as you get to close to the end of the line?
It will progressively start to wind down mainly during the next financial year.
And Old Highway?
Old Highway, as Karl mentioned earlier, we're doing the completion of the feasibility study by the end of the calendar year. On our knowledge that you give us enough time to the plan mode and potentially develop -- start development on the open pit out there in time but closely coincide with end of production at DeGrussa.
Our next question comes through from Paul Young, Goldman Sachs.
So I have a few questions on Botswana and T3. Can you step through the mining license, I guess, process -- procedure from here along the lines of -- has the environmental submission or Environmental Impact Statement, has that been approved by the environmental department? And then does it go to the Mines Minister for sign off? Can you just maybe just explain the steps through that process and where we actually are at the moment?
All right. Thanks, Paul. It's Jason here. So I'll start with the environmental approvals. So Sandfire has all of the environmental approvals that we need to develop the project and commence operations. So there's no -- environmentally, there's nothing more that we need to do, and we're ready to go. The final step in the process is the granting of the mining license. Now as part of that work, the company needs to submit a number of things, but probably the 2 major items are: firstly, the definitive feasibility study; and also what we call a HR plan, which outlines broadly the number of Botswana nationals that will be on our workforce as well as the number of expats. Now at this point in time, we're forecasting a very low number of expats that will be included in that overall work structure on -- within Botswana. And that's supported by, if you like, an existing strong mining industry in Botswana and availability skill within the country. So where we're at, at the moment, we submitted all of that information and an application for the mining permit back in February. We've had follow-up meetings with the Department of Mines over there. The director and all of their key people, in terms of technical reviews, they requested some follow-up information, which we provided early in April. And we've been since advised that the department now has all of the information that they need to process the application. So as we stand today, basically, the mines department over there is processing that application. And that will go to the minister for final approval.
Jason, is there any, I guess, examples of how long it might take between when it hits the minister's desk and sign off on a -- as a comparison with other projects?
Yes. It's hard to know from the date that it hits the Minister's desk. But initial advice that we had was roughly about a month for processing of the application.
Okay. Okay. And in the interim, until you receive that, the mining license, what can you actually do on the ground? Is it really around the camp and access roads and the infrastructure with respect to power and water, you can't start mining?
That's correct. Yes. So -- and at this point in time, we're not scheduled on the development plan for the project. First mining is scheduled to start in, hopefully, early 2022.
Okay. That's helpful. Next question is around, I guess, mobility of the workforce in Botswana. Any impacts from COVID, if you can comment on that? And also with respect to any border restrictions with South Africa and Namibia or neighboring countries and how that -- if there are restrictions, how that works into your plan? I'll ask a further question on that. It's around the, I guess, the mining contractor, which -- I know you're down to the final 2 there. With respect to maybe beyond the mining contract and looking at earthworks contracts and civils, et cetera, are those contractors coming from -- into country? Are they coming from South Africa, the majority of the contract workforce?
Yes. If you look at the civils and a lot of the earthworks, there's strong capability within Botswana. So that will all be done by Botswana-owned entities and Botswana nationals as employees. So that work can move ahead very quickly. The rest, particularly around electricals, engineering, that type of stuff, is mainly out of South Africa. And as we stand today, there are no real border restrictions, other than just COVID protocols. So that's not like Australia where people have to go into 2 weeks of isolation, things like that. It's much more open. And at this point in time, we've going -- been going very hard on particularly identifying key contracts and key contractors. And as I kind of touched on in the presentation, we're at the point of award for most of all of the critical contracts as we stand today. Now from a mining contractor point of view, and I touched on it before, on our HR plan that we submit to the Botswana government, we see between 90% and 95% of our workforce being Botswana nationals. So I touched on it, there's a strong mining industry, and particularly open pit mining skills within the country. We'll get the bulk of those people from within Botswana, and they will be supplemented by skills out of other countries. And one of the things that we are seeing at the moment, particularly with our recruitment of senior roles, in that, to a degree, COVID-19 is probably helping us to get some good people. Because people that previously were able to work sort of reasonable rosters out of Australia or out of Europe, places like that, into and out of African countries, are finding that, that's much harder, particularly going back to their destination. And what we are seeing is certain people or good people are being very open to relocating and setting up Botswana as a home base for an extended period of time.
Okay. A question on the cash flow, maybe a question for Matt in that case. Matt, were there any provisional pricing gains that you received in the March quarter from copper that you had to, I guess, provisionally priced at the end of December?
Yes is the short answer. So probably a little bit flatter in the March quarter coming out of December than it was -- than it certainly was at the back end of last year, but also through probably the month of March and into the month of April, clearly with this copper price, we're seeing QP gains well and truly above that sort of $50 million NPAT impact. So that, touch wood, bodes well for the year-end. If these prices remain, we obviously expect a very strong end -- financial end to the financial year.
Our next question comes through from Sophie Spartalis.
I just wanted to further explore the Botswana and the impact of COVID over there. Are you seeing any impact on CapEx costs? And if you can just also outline what the tolerance that you factored into that $259 million CapEx estimate that you've given in the market?
Sophie, it's Jason here again. One of the things we did well in the definitive feasibility study was for all key items, we actually went to tender during the process. So we actually had good information underpinning that capital estimate. As we stand today, we've committed around about 30% of the total budget on particularly long lead items. And we are seeing that all of that is currently falling within our budget estimates. The only pressure that we are seeing is some fluctuations around FX. But other than that, it's looking really good.
Okay. That's good. And are you doing anything around the FX exposure?
Yes. We're looking at options as we stand at the moment. There are a number of options open to us. But given this project, it covers multiple currencies. So we've got Aussie dollar from the parents. We've got Botswana pula, obviously, operating there. We've got South African rand, and we've also got U.S. dollars and euro. So we're just working through some strategies there on a horses for courses basis depending on the currencies that we're working with.
Okay. So then if we fast forward post DeGrussa exhaustion and we've got Botswana and potentially Black Butte, does that mean that we're likely to see you guys change your reporting currency to U.S. dollars?
Sophie, it's Matt. At this stage, we will look at that. Of course, as things develop, see what our Australian operations look like, we'll see what our international operations look like. So at this stage, no. I would say we're in Australian dollars. But clearly, there'll be some assessment of that required into the future as we have U.S. revenue, U.S. debt around different operations. But yes, certainly front of mind as we head into these other countries.
Okay. And then just changing gears to Black Butte. You talked around it seems as though these legal challenges all sort of adding opportunities for you to optimize the project. Can you just provide -- in terms of today, without the optimization, does the project economics still fly in the current form?
I mean, given pricing increases that we've seen on long-term consensus at the moment, if we reran, if you like, that financial model at those assumptions, it will be significantly better.
Okay. All right. So you're basically relying on the higher copper prices. But in terms of the cost position, are you needing to -- in terms of that value enhancement, is it really around mine life and your cost position? Or is it also the CapEx side of things as well?
Look, there's elements of that. The big lever that we see are additional resources and reserves and particularly bringing in some more high grade into the schedule as well. So that's why we're focusing on near-mine exploration at the moment. We believe it's very, very prospective. And we did announce the resource estimate on Lowry earlier, and we're looking to take that forward and do some more mining studies on that to look at enhancing the business case even further.
We have another question that's come through from Peter O'Connor.
So you mentioned the currency mix in Botswana. And then you also mentioned that your solid debt and hedging. Could you just give us a sense of what the currency split would be in that 4-way deal in Botswana? And I take it by your comments that you would take on board a project facility in U.S. dollars, and that would be the U.S. dollar hedge. Can you just give us a sense for what those currency splits are and how that plays out in terms of natural hedging and otherwise?
Peter, it's Matt. Yes, it's predominantly U.S.-based. So there's U.S. There's in-country pula in terms of internal cost. There's also some of the equipment coming out of Europe. So probably around 10% to 15% coming out of euro. So that's exactly what we're working on at the moment. Just in terms of currency exposure, as you rightly mentioned, you don't -- shouldn't look at these things just in isolation as a project, we need to look at it as an overall group. We still have U.S.-denominated copper coming out of the adjustment. We've had likely U.S. debt at Tshukudu [indiscernible] together just to make sure that we get any new protection right now and that then it does actually get us towards what we targeted in terms of ultimately Australian dollar returns. So that's a work in progress. We'll give a little bit more update probably as we get to the middle of the year. And once we've got all approvals and all contacts locked down, that's the sort of time that we'd look at locking down some of those rates and exposures. But hopefully, that answers your question, but a lot of U.S. and otherwise some rand and [indiscernible].
Okay. And the mix of funding via debt, is it 50%, 60%? Is that what you're looking at?
Yes. We're targeting around 50%. So the USD 259 million is the CapEx number. We're building into that, probably the requirement for another, say, $30 million or $40 million of working capital. And then when you put that together and combine that, around half through, for instance, debt funding in the country is our target range and the other half provided from the parent in terms of Sandfire sending money across. So around 50-50 split when you put CapEx and working capital together.
Okay. And can I ask one more to, Jason? Just a follow-up jason, on Old Highway. I know you're doing a scoping study in doing the reserve resource statement so I'm not trying to preempt you, but just a sense of the scope. And when you look at the scope of this project are you constrained by the resource availability? Or is the mill throughput at DeGrussa? Is it tailings availability at DeGrussa? What are the factors that are either limiting or giving upside in this approach? And what type of grade in tonnes are we looking at if you got any idea?
Yes. Look, in terms of grade and tonnes, we are working through that at the moment. The overall constraints to production there will be is the lack of resource. So the Old Highway resource itself. We've actually got -- we'll use the front end of the crushing and comminution circuit that we already did at DeGrussa. And then looking at putting a conventional leach -- gold leach circuit on the back end of that. So in terms of production, it's not going to be a worldbeater, but it's still early days, and we're working through all the options on that line. But at a high level, like the processing plant there that's part DeGrussa existing, a new leach circuit will utilize all of the infrastructure that sits on the site. And then potentially look at an open -- of open pit operations, sitting out of the Old Highway deposit itself.
Paul Young has raised his hand for a question once more.
I got a question on Old Highway as well. And just to further maybe ask Jason or add some comments there and clarify a few of your points. So what you're saying, just to clarify, you're saying that the mill at the moment at DeGrussa is 1.6 million tonnes a year. Now you think that, that will be the throughput? I know that harness and et cetera, will be one of the factors. But -- or do you think you can actually squeeze more of the gold through and actually increase the rates beyond the 1.6? And then with respect to the back end, ripping out the float circuit and putting the serial tanks in. Can you use any of the pumping and piping equipment with the float circuit? Or do you have to start afresh with the tanks and -- well, certainly the tanks, but the pumping and pipe. Just sort of trying to get a sense of maybe the capital intensity or the CapEx associated with the conversion?
Yes. So I'll start with that CapEx side of things. So we actually won't be ripping out the existing float circuit on there. So we are looking to build an optionality for us as part of this project going forward as we still plan to undertake exploration for further massive sulfide copper deposits in the area as well. So what we're looking at is basically an additional gold leach circuit at the back end of the existing comminution circuit. And in the future, we'll have the option to either flip between gold processing or copper processing, depending on future discoveries and what adds or what's going to generate the most value at any point in time. In terms of the rate, touched on it there with Peter's question. The rate is going to be -- at this moment, the studies that we've done, we wouldn't be able to fill the 1.6 million tonne per annum capacity. It will be lower than that, probably closer to around about 1 million tonne per annum, right.
Okay. That's helpful. Look forward to the study results.
We have another question that's come through from [ Alex Tatiana ] from Citi Research.
Could you expand if -- on the status of the DeGrussa tailings retreatment project and if it's still being considered?
Right. Alex, it's Jason here again. We've been working on that in parallel with the Old Highway assessment as well. We've been doing a lot of metallurgical test work, particularly looking at the recoveries associated with putting it through a conventional gold leach circuit. One of the issues we have, we can see that we can get about 50% recovery of the gold sitting in the tailings dam. The issue, however, is cost associated with that. So we do have remnants of copper sitting in that ore at the same time. And what it does is really increases significantly our cyanide consumption rates on our gold processing or gold leach circuit and really starts to drive those -- or that cost of production up. And at this point in time, there is still further work to go. It is subeconomic. So we are prioritizing all of our efforts, particularly on the Old Highway as basically the primary breed to any potential gold plant at DeGrussa.
We don't have any further questions on the phone.
Thanks very much, everyone, for listening to our quarterly update. It's been a very pleasing quarter till March and an extraordinarily solid 9 months to where we are at the moment. We look forward to the next quarter being positive as well, and looking for a solid year-end to finish. The next -- the pipeline over the next 3 to 6 months should see a number of key milestones being delivered in terms of the progress at T3 and the Tshukudu operations, and we look forward to updating to you with those material hurdles being achieved as they are achieved and obviously, continued solid operations from DeGrussa. So thanks once again for listening in, and we look forward to presenting to you again soon.
Thank you. That concludes Sandfire March 2021 Quarterly Report Advisory Call. Thank you for joining us today. And thank you for your interest in Sandfire Resources. You may all disconnect.