Sandfire Resources has decided not to let OZ Minerals, which recently took a large stake in the company, have a seat on its board.
Sandfire Resources has decided not to let OZ Minerals, which recently took a large stake in the company, have a seat on its board.
Earlier this month, the copper miner acquired a 19.9 per cent shareholding in Sandfire and requested a seat on the company's board.
The company's second and third largest shareholders, Posco and LS-Nikko do have seats on the board.
In a letter to shareholders Sandfire chairman Derek La Ferla said, "After careful consideration your Board has unanimously resolved that it is not appropriate for OZ Minerals to be represented on the Board at a time when we are working to build additional Board independence and, at the same time, accommodate our important arrangements with the Company's strategic alliance partners, Posco and LS-Nikko."
"We have however expressed our willingness to discuss with OZ Minerals what other avenues can be explored for the benefit of all Sandfire shareholders and look forward to proceeding with those discussions," he said.
Shortly after releasing the letter Sandfire announced the appointment of Robert Scott as an independent non-executive director.
Mr Scott is a Fellow of the Institute of Chartered Accountants, a Fellow of the Taxation Institute of Australia and a member of the Institute of Company Directors.
See letter to shareholders below:
Dear Shareholder
I am delighted to be writing to you for the first time since becoming Chairman in May this year. I find it hard to believe that more than two months have passed since I was appointed. When I look back at what has been achieved by the Sandfire management team, it is little wonder that the time has gone quickly.
DeGrussa Copper-Gold Project
The recent increase in the JORC Mineral Resource estimate at our DeGrussa Copper-Gold Project, by 43% to 533,000 tonnes of copper and 559,000 ounces of gold, highlights the success of our strategy and exploration program, with the significant potential of this project being further realised. This latest upgrade is a further credit to the skills and sheer hard work of the dedicated team that has worked on this project from the outset and, on behalf of the Board, I thank them for their dedication.
Our exploration team recently received worthy recognition for their achievements with the award of the prestigious AMEC "Prospector of the Year" Award for 2010. We will do everything we can to ensure that this highly skilled team with an enviable track record is provided with every assistance to continue their excellent work.
Your Board is hopeful that the discoveries already made at DeGrussa have only begun to unlock the significant value of this project area. The four deposits discovered so far represent just a small portion of our landholding. These deposits - DeGrussa, Conductor 1, Conductor 4 and Conductor 5 - are all contained within a 1.5km stretch of land in the middle of a 6km corridor which has been confirmed to be highly prospective for additional copper-gold deposits.
Sophisticated exploration technology has also revealed there are further highly prospective targets elsewhere within our broader 400sq km landholding at the Doolgunna mineral field and NT project areas.
It has been rewarding to see that a 15-month exploration and evaluation program has driven our share price from 11 cents to nearly $4.80, giving us a market capitalisation of around A$630 million, and attracted interest from major national and international resource houses, as well as investment funds from around the globe.
Strategic alliance partners
In 2008 we formed a strategic alliance and shareholding with major Korean steelmaker Posco, with our collective vision and funding leading to the discovery of the first-class DeGrussa orebodies. Posco has remained a strong and supportive shareholder since the signing of this important alliance and has been invaluable in adding value for all Sandfire shareholders.
Following from the success of our alliance with Posco, we are delighted that another globally-respected group, LS-Nikko Copper, has recognised the significant value of Sandfire by last week agreeing (subject to the satisfaction of certain conditions) to take a 12.5 per cent stake in Sandfire at a total cost of $93.9 million (at a premium to the share price when the agreement was signed). LS-Nikko's confidence in Sandfire's potential is further reflected by its agreement to enter into sales arrangements covering 45 % of Sandfire's future production at fair market prices. We look forward to working with LS-Nikko as a second key strategic partner to develop Sandfire's full potential.
Investment by OZ Minerals Ltd
Earlier this month, Australian copper company OZ Minerals Ltd acquired a 19.9 per cent shareholding. This is yet another vote of confidence in the strength of your company and its projects and we welcome OZ Minerals as a shareholder. Simultaneously with becoming a shareholder, OZ Minerals requested that it be able to nominate one director to the Sandfire Board. After careful consideration your Board has unanimously resolved that it is not appropriate for OZ Minerals to be represented on the Board at a time when we are working to build additional Board independence and, at the same time, accommodate our important arrangements with the Company's strategic alliance partners, Posco and LS-Nikko. We have however expressed our willingness to discuss with OZ Minerals what other avenues can be explored for the benefit of all Sandfire shareholders and look forward to proceeding with those discussions.
Development and exploration funding
When completed, the share placement to LS-Nikko will increase Sandfire's cash position to approximately $145 million. These funds will provide cornerstone finance for the planned development of the DeGrussa Project and underpin an exploration campaign that is unprecedented in that area. This campaign will include further drilling at the recently discovered Conductor 5 deposit to enable it to be brought into the resource estimate as well as an intense exploration focus within the 6km priority corridor on either side of the existing deposits.
Board composition
Increased company value and market presence brings a need to continue to build appropriate corporate governance practices. To this end we have today appointed Mr Robert Scott to your Board to add further independence to Board deliberations and take a leading role in Board committees. Robert is an experienced company director in the West Australian corporate community and has had a long and distinguished career in the accounting and finance area. Accordingly, Robert has also been appointed Chairman of the Audit & Risk Committee and a member of the Remuneration & Nomination Committee. We are continuing to search for other appropriate independent Board candidates.
As I am sure you will agree, it has been an extremely busy period at Sandfire, during which time substantial progress has been made on many fronts. The Board is confident in the Company's exciting future and we look forward to sharing it with you.
Yours faithfully
Derek La Ferla
Chairman