1025 Sandfire Annual Report FULL (web ready).pdf
OPPORTUNIT Y REDEFINED
2 0 1 5 A N N U A L R E P O R T
CO RP OR AT E DIREC TOR Y
DIRECTORS
Derek La Ferla Independent Non-Executive Chairman Karl Simich Managing Director & Chief Executive Officer W John Evans Non-Executive Director
Robert Scott Independent Non-Executive Director
Paul Hallam Independent Non-Executive Director
SENIOR MANAGEMENT & COMPANY SECRETARY
Michael Spreadborough Chief Operating Officer
Matthew Fitzgerald Chief Financial Officer & Joint Company Secretary
Robert Klug Chief Commercial Officer, Joint Company Secretary & Acting Business Development Officer
PRINCIPAL PLACE OF BUSINESS & REGISTERED OFFICE
Level 1, 31 Ventnor Avenue West Perth WA 6005
T: +61 8 6430 3800
F: +61 8 6430 3849
E: admin@sandfire.com.au W: www.sandfire.com.au
SHARE REGISTRY
Security Transfer Registrars Pty Ltd 770 Canning Highway
Applecross WA 6153
T: +61 8 9315 2333
F: +61 8 9315 2233
E: [email protected]
AUDITORS
Ernst & Young
Ernst & Young Buillding 11 Mounts Bay Road Perth WA 6000
HOME EXCHANGE
Australian Securities Exchange Limited Exchange Plaza
2 The Esplanade
Perth WA 6000
ABN
55 105 154 185
ASX CODE
Ordinary fully paid shares: SFR
S A N D F I R E A N N U A L R E P O R T 2 0 1 5 [ I ]
BOARD OF DIRECTORS
C O NTE NTS
SENIOR MANAGEMENT
2 BOARD OF DIRECTORS
4 SENIOR MANAGEMENT
-
BUSINESS OVERVIEW
-
HIGHLIGHTS AND ACHIEVEMENTS
10 CHAIRMAN'S LETTER
BUSINESS OVERVIEW
12 MANAGING DIRECTOR'S REPORT
14 OPERATIONS REVIEW
-
SUSTAINABILITY REPORT
HIGHLIGHTS AND ACHIEVEMENTS
-
CORPORATE GOVERNANCE STATEMENT
33 FINANCIAL REPORT
118 SCHEDULE OF EXPLORATION AND MINING TENEMENTS
121 ASX ADDITIONAL INFORMATION
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
SUSTAINABILTY REPORT
OPERATIONS REVIEW
MANAGING DIRECTOR'S REPORT
CHAIRMAN'S LETTER
123 IMPORTANT INFORMATION AND DISCLAIMER
B O ARD OF DIREC TORS
(Left to right) W John Evans, Robert Scott, Paul Hallam, Karl Simich, Derek La Ferla.
[ 2 ] S A N D F I R E A N N U A L R E P O R T 2 0 1 5
Mr Derek La Ferla
Independent Non-Executive Chairman
Qualifications B.Arts, B.Juris, B.Law, Fellow of AICD
Mr La Ferla is an experienced corporate lawyer and company director with more than 30 years experience. He has held senior positions with some of Australia's leading law firms, and is currently a Partner with Western Australian firm, Lavan Legal, in the firm's Corporate Advisory Group (which includes mining and resources).
He is also a member of the firm's Advisory Board and previously served on the Norton Rose Australia National Board (while the firm was Deacons). Mr La Ferla also serves as the Chairman of OTOC Limited, Cashmere Iron Limited and Threat Protect Australia Limited and was previously a Director of the listed company, Katana Capital Limited. He is a fellow of the Australian Institute of Company Directors, and a member of the AICD Council (WA Division).
Mr Karl Simich Managing Director and Chief Executive Officer
Qualifications B.Com, FCA, F.Fin
Mr Simich is an experienced international mining executive who has been involved in the financing, construction, development and operation of five mining projects in New Zealand, Australia and Africa. Specialising in resource finance and corporate management, Mr Simich has been a Director of and held senior executive positions with a number of ASX-listed mining companies. Mr Simich is a Fellow of
the Institute of Chartered Accountants and a Fellow of the Financial Services Institute of Australasia and has completed post-graduate studies in business and finance.
Mr W John Evans
Non-Executive Director
Qualifications B.Sc
Mr Evans graduated from the University of Auckland New Zealand in 1970 with B.Sc. Major in geology. Between 1970 and 1987, he was employed by various divisions of CRA Limited, including being in charge of all field operations for iron ore in the Pilbara, Western Australia and gold and base metals in the Murchison, Western Australia. He was the Managing Director of Marymia Exploration NL for 12 years until 2002 and has been a geological consultant to numerous companies during and since.
SENIOR MANAGEMENT
BOARD OF DIRECTORS
Mr Robert Scott
Independent Non-Executive Director
Qualifications FCA
BUSINESS OVERVIEW
Mr Scott is a Chartered Accountant with 35 years experience as an adviser on corporate services and taxation. Mr Scott holds a fellowship of The Australian Institute of Chartered Accountants and The Taxation Institute of Australia. He is also a member of the Institute of Company Directors. Mr Scott serves as the Chairman of Homeloans Limited, a non- executive Director of Lonestar Resources Ltd and a non- executive Director of RTG Mining Inc.
Mr Paul Hallam
HIGHLIGHTS AND ACHIEVEMENTS
Independent Non-Executive Director
Qualifications BE (Hons) Mining, FAICD, FAusIMM Mr Hallam is a highly experienced resource industry
executive with more than 35 years experience working
for a number of blue chip Australian and International mining companies, including 15 years at senior executive
MANAGING DIRECTOR'S REPORT
CHAIRMAN'S LETTER
management level. His experience spans a range of corporate and operating environments, both in Australia and overseas, covers a range of commodities (iron ore, bauxite, alumina, aluminium, gold, silver, copper, zinc and lead) and includes both surface and underground mining. His former roles include Director - Operations with Fortescue Metals Group and Executive General Manager - Development & Projects with Newcrest Mining Limited. Mr Hallam retired from executive roles in 2011 to pursue a career as a professional non-executive Director. He also serves on the boards of Altona Mining Ltd, Gindalbie Metals Ltd, Enterprise Metals Ltd and Powertrans Pty Ltd. Mr Hallam is a qualified
SUSTAINABILTY REPORT
OPERATIONS REVIEW
mining engineer and holds a BE (Hons) from Melbourne University and a Certificate of Mineral Economics from Curtin University. He is a Fellow of the Australian Institute of Company Directors and the Australasian Institute of Mining & Metallurgy.
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
S A N D F I R E A N N U A L R E P O R T 2 0 1 5 [ 3 ]
SE NIOR M ANA G E ME NT
(Left to right) Matthew Fitzgerald, Michael Spreadborough, Karl Simich, Bruce Hooper, Shannan Bamforth, Robert Klug
[ 4 ] S A N D F I R E A N N U A L R E P O R T 2 0 1 5
Mr Michael Spreadborough
Chief Operating Officer
Qualifications B.MEng, MBA
Mr Spreadborough is a mining engineer with over 20 years of experience in mining lead, zinc, uranium, copper, gold and iron ore, including 16 years of underground mining experience. Prior to joining Sandfire Resources in 2013, Mr Spreadborough was Chief Operating Officer at Inova
Resources Ltd (formerly Ivanhoe Australia), General Manager
- Coastal Operations for Rio Tinto and General Manager - Mining for WMC and later Vice President - Mining for BHP Billiton at the world-class Olympic Dam Mine in South Australia. Mr Spreadborough holds a Bachelor of Mining Engineering from the University of Queensland and an MBA from Deakin University, as well as a WA First Class Mine Manager's Certificate of Competency. He is a member of the Australian Institute of Company Directors.
Mr Matthew Fitzgerald
Chief Financial Officer and Joint Company Secretary
Qualifications B.Com, CA
Mr Fitzgerald is a chartered accountant with extensive experience in the resources industry. He began his career in the Assurance & Advisory division of KPMG, before joining ASX-listed Kimberley Diamond Company NL in 2003, where he held the position of Chief Financial Officer and Director until July 2008. Mr Fitzgerald holds a Bachelor of Commerce from the University of Western Australia.
Mr Robert Klug
Chief Commercial Officer, Joint Company Secretary and Acting Business Development Officer
Qualifications B.Com, LL.B
Mr Klug has held accounting, senior legal and corporate finance roles in his 18 year career. Initially trained as an auditor with KPMG Perth, Mr Klug worked in London as a corporate lawyer after having completed his law degree at Murdoch University in Perth. Upon his return to Perth, he joined Freehills Perth Office, where he worked almost
exclusively with small and mid cap resource companies. After a number of years at Freehills, Mr Klug worked in corporate finance as a Director of Carmichael Capital Markets, the Corporate Finance arm of DJ Carmichael Stockbrokers.
In 2005, Mr Klug became General Manager Business Development with St Barbara Limited until St Barbara relocated its head office to Melbourne in early 2007 when he joined Heron Resources Limited in a senior management role.
SENIOR MANAGEMENT
BOARD OF DIRECTORS
Mr Bruce Hooper
Chief Business Development Officer Current Role: On Secondment - President, Chief Executive Officer and
Director of Tintina Resources Inc.
Qualifications B.Sc, RPGeo
HIGHLIGHTS AND ACHIEVEMENTS
BUSINESS OVERVIEW
Mr Hooper is a registered professional geoscientist with extensive experience in the resources industry including the energy, base metal and precious metal fields in Australia, Asia, the Americas and Africa. Prior to joining Sandfire Resources in 2012, Mr Hooper worked in a number of senior exploration, operational and business development roles for a variety of companies including BP, Rio Tinto, North Ltd, Straits Resources, Perilya Ltd and Ivernia.
Mr Shannan Bamforth
Acting Chief Exploration Officer and General Manager Geology
Qualifications B.Sc (Geo)
CHAIRMAN'S LETTER
Mr Bamforth is a geologist with 19 years experience in the resources industry with a focus on base metals, gold and coal. He has worked in exploration and operational roles in Australia, Africa, China and Indonesia. Prior to joining
SUSTAINABILTY REPORT
OPERATIONS REVIEW
MANAGING DIRECTOR'S REPORT
Sandfire Resources in 2010, he held various senior positions with a variety of companies including Regent Pacific Group, St Barbara Mines, AngloGold Ashanti, and Acacia Resources. He is a member of The Australian Institute of Mining and Metallurgy.
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
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[ 6 ] S A N D F I R E A N N U A L R E P O R T 2 0 1 5
BOARD OF DIRECTORS
BUSINE SS O V E R VIEW
SENIOR MANAGEMENT
Sandfire's vision is to be a significant, mid-tier mining company that
operates in the top quartile of international performance benchmarks for the industry.
VALUES
The following core values are the basis for how Sandfire does business:
t Operate and explore safely with minimal impact to the environment at all times;
t Co-operate with all of our communities for the mutual benefit of all;
t Attract and retain the very best people for jobs at all levels;
t Reward good performance;
t Place a high value on diversity, teamwork, respect and integrity;
t Value technical excellence and innovation; and
t Place a high value on cost consciousness among our employees.
GOVERNANCE
Sandfire is committed to the highest standards of corporate governance and transparency. We uphold a Sustainable Management Framework that ensures the:
t Health and well-being of our workforce;
t Provision of economic benefit to the communities in which we operate;
t Sustainable use of our natural resources; and
t Return of value for our stakeholders and shareholders.
We have a suite of policies that govern our business activities and articulate our expectations for ethical business behaviours.
MISSION
BUSINESS OVERVIEW
Sandfire is in the business of producing base and precious metals safely and profitably for the benefit of its shareholders and stakeholders. The Company's focus is on three core business elements:
1
Increasing its mineral resource base by discovering new deposits through its exploration programs.
2
HIGHLIGHTS AND ACHIEVEMENTS
Securing assets that meet its investment criteria through business development initiatives and
developing new assets that meet strict economic and technical criteria.
3
Managing the productivity of its operations by maximising production and rigorously controlling
CHAIRMAN'S LETTER
expenditure at all times.
Our policies include:
t Sustainability Policy;
MANAGING DIRECTOR'S REPORT
t Code of Conduct; t Our People Policy; t Diversity Policy;
t Occupational Health and Safety Policy;
t Environmental Policy;
t Stakeholder Engagement Policy;
t Donations, Sponsorship and Partnership Policy;
t Dealing in Securities Policy;
t Disclosure and Communication Policy; and
OPERATIONS REVIEW
t Whistle-blower Protection Policy.
These policies are available online at www.sandfire.com.au
CORPORATE GOVERNANCE STATEMENT
SUSTAINABILTY REPORT
Sandfire regularly reviews its governance practices, taking into account the recommendations in the Corporate Governance Principles and Recommendations of the Australian Securities Exchange Corporate Governance Council. Refer to the Company's Corporate Governance Statement for more details.
FINANCIAL REPORT
S A N D F I R E A N N U A L R E P O R T 2 0 1 5 [ 7 ]
H I GH L I GHTS & A C H I E V E M E N TS
'Our flagship DeGrussa Copper-Gold Mine in Western Australia is now firmly established in
steady-state production with 2015 marking our third successive year of strong, low-cost and, most importantly, safe operations…' - Sandfire Chairman, Derek La Ferla.
OPERATIONS, CORPORATE AND FINANCIAL
t The DeGrussa Copper-Gold Mine produced 67,154t of copper and 37,386oz of gold at a C1 cash operating cost of US$1.09 per pound of payable copper.
t Underground mining rates were maintained at ~1.5Mt for the year and increased to over 1.7Mtpa by year-end with underground development to access the Conductor 4 and 5 deposits proceeding on schedule. First stope production from Conductor 4 is scheduled for FY2016 and from Conductor 5 in FY 2017.
t Milling rates were maintained at ~1.5Mt for the year, increasing to 1.7Mtpa by year-end following the completion of plant optimisation programs which have seen copper recoveries increase by up to 2% due to flotation improvements and the installation of the column cell.
t Sandfire has issued production guidance for FY2016 of
65-68,000t of copper and 35-40,000oz of gold at C1 cash operating costs in the range of US$0.95-1.05/lb.
t Sandfire posted an annual net profit after income tax of
$69.0M for the 12 months to 30 June 2015 on sales revenue of $548.6M. The profit was underpinned by strong cash flow from operating activities of $224.0M and translated to earnings per share of 44.18c.
t A final fully-franked dividend of 10.0cps was paid on 24 September 2015, increasing the annual payout to 13.0cps.
t The DeGrussa Project Finance Facility has been restructured into a separate $85M Revolver Facility and
$35M Amortising Facility, with the Facility term extended to December 2017.
t Sandfire had $107M in cash at financial year-end.
SALES REVENUE & OPERATIONS CASH FLOW - PRIOR TO EXPLORATION
NET PROFIT AFTER TAX & EARNINGS PER SHARE
[ 8 ] S A N D F I R E A N N U A L R E P O R T 2 0 1 5
EXPLORATION
t The DeGrussa mine life was extended until mid-2021 with the delivery of an updated Mine Plan, Mineral Resource and Ore Reserve, including a maiden Ore Reserve for the Conductor 4 deposit following successful in-fill drilling. A maiden Ore Reserve for the Conductor 5 deposit is planned for Q1 FY 2016.
t A significant new zone of high-grade VMS copper-gold mineralisation was discovered at the Monty prospect located on the Talisman farm-in ground, ~10km east of DeGrussa, with results to date including (down hole width, not true width):
-
16.5m grading 18.9% Cu, 2.1g/t Au from 409.5m (TLDD0004A) - lower zone;
-
9.2m grading 11.8% Cu, 2.9g/t Au from 417.0m (TLDD0005) - lower zone;
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7.9m grading 8.3% Cu, 2.4g/t Au from 363.1m and 4.8m grading 4.9% Cu and 1.1g/t Au from 385.8m (TLDD0009) - lower zone;
-
10.5m grading 18.9% Cu, 3.1g/t Au from 359.7m and 4.7m grading 12.8% Cu, 2.5g/t Au from 373.6m (TLDD0010) - lower zone;
-
18.0m grading 5.7% Cu, 2.4g/t Au from 107m and 4.0m grading 4.2% Cu, 0.7g/t Au from 158.0m (TLRC0004) - upper zone; and
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6.0m grading 7.8% Cu, 0.9g/t Au from 89m and 11.0m grading 15.0% Cu and 1.9g/t Au from 112m (TLRC0008) - upper zone.
t The Monty prospect is the first significant high-grade VMS deposit to be discovered on the Doolgunna Project outside of the original DeGrussa discovery. This represents a major breakthrough for exploration in the immediate near- mine region.
t A major 2D seismic survey was also completed over the near-mine area - designed as proof-of-concept testing
for utilising this technique as a direct detection tool for VMS deposits.
SUSTAINABILTY REPORT
OPERATIONS REVIEW
TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR)
SENIOR MANAGEMENT
BOARD OF DIRECTORS
BUSINESS DEVELOPMENT
t Sandfire completed the acquisition of a cornerstone 36% stake in TSX-listed North American copper developer Tintina Resources (TSX-V: TAU), with an opportunity to increase to 53%. Tintina is developing the advanced, high quality Black Butte Copper Project in central Montana, USA, one of the highest grade undeveloped copper deposits in North America.
BUSINESS OVERVIEW
SUSTAINABILITY
t Work continues on initiatives to improve safety performance including development of safety systems, improved safety leadership, enhancement of safety culture and risk and assurance management.
HIGHLIGHTS AND ACHIEVEMENTS
t Total Recordable Injury Frequency Rate (TRIFR) of 9.7 at year-end.
t Final agreements were signed with juwi Renewable Energy Pty Ltd as part of an extensive international consortium assembled to finance, construct, operate and own a
$40 million solar power plant at the DeGrussa Copper-Gold Mine. The Project has received significant financial support from the Australian Renewable Energy Agency (ARENA) and Clean Energy Finance Corporation (CEFC).
CHAIRMAN'S LETTER
Construction of this innovative 10MW solar power plant, with 6MW of battery storage, is expected to significantly reduce diesel consumption and cut carbon emissions by over 12,000 tonnes of CO2 annually. It will be the
largest integrated off-grid solar power system in Australia.
MANAGING DIRECTOR'S REPORT
t Sandfire published its inaugural Sustainability Report in October 2015, outlining its achievements and ongoing initiatives in the key areas of health, safety and environment, community and stakeholder relations and corporate performance and governance.
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
S A N D F I R E A N N U A L R E P O R T 2 0 1 5 [ 9 ]
[ 1 0 ] S A N D F I R E A N N U A L R E P O R T 2 0 1 5
C HAIRM AN ' S LE T T E R
Dear Shareholders
I am pleased to report on what has been another outstanding year of progress and achievement across all parts of our business at Sandfire. We have continued to cement our position as a top quality mid-tier mining house.
'DeGrussa has now produced more than $1.6 billion worth of copper and gold since mining commenced - a remarkable performance which has allowed us to fund our maiden and subsequent dividends, as well as continue
to fund mine development and our exploration and business development footprint both in Australia and overseas…'
- Sandfire Chairman, Derek La Ferla
Our flagship DeGrussa Copper-Gold Mine in Western Australia is now firmly established in steady-state production with 2015 marking our third successive year of strong, low-cost and, most importantly, safe operations. DeGrussa produces a clean, quality copper concentrate which is highly sought-after in the international market.
DeGrussa has now produced more than $1.6 billion worth of copper and gold since mining commenced - a remarkable performance which has allowed us to fund our maiden and subsequent dividends, as well as continue to fund mine development and our exploration and business development footprint both in Australia and overseas.
The consistent cash-flows and profits being generated by DeGrussa - when linked with an appropriate focus on cost reductions - has enabled us to post another strong financial result, which includes a fully-franked final dividend of 10 cents per share, increasing our total payout for the year to shareholders to 13 cents. This affirms our aim of always running the Company in a manner that adds - and returns - value to our shareholders.
Our mantra as a company has always been that we will leave no stone unturned to make the most of the opportunities in front of us, and I believe our achievements this year speak volumes for the professional, committed and dedicated way that the Sandfire team has gone about its business.
At DeGrussa, we continue to innovate and improve with the aim of maximising the efficiency and profitability of the
operation. During the past year, we made particularly pleasing progress in this regard with the completion of a number of enhancement projects which have delivered pleasing results at the processing plant.
From an exploration perspective, we maintain our significant ongoing commitment to exploration - adhering to our stated strategy of being not just a producer, but also an innovative explorer and resource developer which is aiming to expand its sphere of influence and, ultimately, mining operations.
The recent VMS copper-gold discovery at Monty, which is part of our farm-in with Talisman Mining, shows that there are significant opportunities in the area in and around DeGrussa. This breakthrough discovery is a tribute to the outstanding work of our exploration team in understanding the complex geology of the Doolgunna region and identifying the first significant accumulation of high-grade copper-gold mineralisation outside of DeGrussa.
We have long believed that this region has the potential to host multiple clusters of VMS mineralisation and this discovery represents an important 'proof of concept', substantially upgrading the value of our regional exploration portfolio and providing us with important leads to help find more high-value deposits.
In terms of Business Development, we have continued to advance our strategy of investing in projects that we feel either meet our high investment hurdles from the outset or are highly