Sandfire Resources has announced it will go ahead with a $400 million development of its DeGrussa copper-gold project, on the strength of a "robust" pre-feasibility study.
Sandfire Resources has announced it will go ahead with a $400 million development of its DeGrussa copper-gold project, on the strength of a "robust" pre-feasibility study.
The conditional investment decision will enable Sandfire to enter into key mining and construction contracts, paving the way for the development of the mine to begin by midway through this year.
Sandfire has estimated it will spend $270 million developing the mine's plant and infrastructure, and $130 million on its open pit and underground development.
The pre-feasibility study, compiled by WA-based engineering company Mintrex, forecast annual production of 60,000 to 70,000 tonnes of copper concentrate and 40,000 to 45,000 ounces of gold.
Sandfire said the mine would generate pre-tax operating cash flows of $330 to $350 million each year from the 2012/2013 financial year onwards.
Sandfire's managing director, Karl Simich, said the conditional development approval reflected the company's confidence in the outcomes and quality of the study and its commitment to progress development of the DeGrussa project.
"This will enable us to award the open pit and underground mining contracts and place orders for key long-lead items this quarter ahead of the final DFS - which we expect to complete during the June 2011 quarter," he said.
"The PFS shows that DeGrussa will be a high-grade, high-margin operation capable of generating substantial pre-tax cash flows in the order of $330-350 million a year and rapidly repaying its capital.
"Given the project's technical and economic strengths, $114 million cash holding and the strong outlook for the copper market, we are well advanced in discussions with potential financiers regarding funding options, and we are confident that a suitable funding package will be completed in parallel with delivery of the DFS".
Mr Simich said DeGrussa was expected to become one of the largest copper producers in Western Australia, generating substantial export revenue over its initial estimated life and total royalties to the state of Western Australia and indigenous communities of more than $240 million.
"The construction phase will employ over 600 personnel at peak construction with long-term employment of around 400," Mr Simich said.
"In addition to the benefits to the community, DeGrussa will also be a great project for our shareholders and for our staff and contractors, creating exciting business and career opportunities for many people from different walks of life."
Shares in Sandfire had gained 1.2 per cent at 11:50AM (WST), trading at $7.20.