Approval of $259m Sandfire T3 Project proof Botswana is “new global copper province”

Approval of $259m Sandfire T3 Project proof Botswana is “new global copper province”

Karl Simich, MD, Sandfire Resources

By David McKay

THE approval today of the $259m copper and silver mining T3 (“Motheo”) Project proved a new global copper province had been established in Botswana, said the project’s backer, Australian-listed Sandfire Resources.

“This is, in effect, the dawn of a new global copper province ,” said Karl Simich, MD and CEO of Sandfire Resources. He was commenting following publication of the firm’s definitive feasibility study into Motheo which set out $259m in pre-production capital.

The study also scoped for annual production of 30,000 tons of copper and 1.2 million ounces of silver. First production would be in the third quarter of 2023. Motheo would have an initial life of mine of about 12.5 years, the study said.

There was also potential for expansion from a 3.2 million tons a year operation to 5.2 million tons via the development of the A4 deposit situated eight kilometres from Motheo.

“While the definitive feasibility study and board approval announced today encompass the base case 3.2Mt/y development of the T3 Project, the key message for our shareholders and investors is that this is the start of a much bigger long-term copper production and exploration story for Sandfire in Botswana,” said Simich.

“This was evidenced by the scale of the new underground mining operation currently being constructed immediately to the north-east of our project by Cupric Canyon Capital at their Khoemacau Project,” Simich said.

Khoemacau Copper Project, which is backed by US private equity firm Cupric Canyon, is developing a 60,000 tons a year copper project in an area which runs north east to south west in a band across northern Botswana, known as the ‘Kalahari Copper Belt’. About $550m was raised in 2019 for development of the Khoemacau Project.

Based on the Motheo feasibility study, Sandfire said its project would have life of mine revenue of $2.45bn, and earnings before interest, tax, depreciation and amortisation of $987m assuming a long term copper price of $3.16/lb. Payback of some 3.8 years from production start was forecast for the project.

Copper has the best medium- to long-term price prospects of all the metals with application in the decarbonisation of the world economy as it plays a much greater role in the manufacture of renewable applications than in conventional fossil fuel power.

According to a report by Jefferies analysts, copper demand will “significantly” exceed supply from next year with deficits set to blossom over the next seven to eight years. The multi-year deficits will drive the price of copper inexorably upwards.

“We forecast copper demand in renewable energy to increase from 997,000 tons in 2020 to 1.9 million tons (Mt) in 2030 in our base case and to 6.4Mt in our bull case,” the bank said. Copper demand in renewable energy would fall to 343,000 tons in 2030 as per the bank’s base case scenario. Copper demand this year is estimated to total just over 20Mt.

It takes about seven years to permit and develop a new copper mine.

“The bull market for copper is now fully underway with prices up 50% from the 2020 lows, reaching their highest level since 2017,” said Goldman Sachs in a recent report. “This current price strength is not an irrational aberration, rather we view it as the first leg of a structural bull market in copper,” it said.