MINING & PRODUCTION

Overview

Note: Mining and production statistics are rounded to the nearest 0.1% Cu grade and 0.1 g/t Au grade. Errors may occur due to rounding. Production Statistics are subject to change following reconciliation and finalisation subsequent to the end of the Quarter.

Underground Mining

A total of 730.9 metres of ore drive development was completed during the Quarter, resulting in the production of 85,326 tonnes of development ore. In addition, 306,943 tonnes of stope ore was produced, resulting in total ore production for the Quarter of 392,296 tonnes grading 4.6% Cu.

This reflects an annualised production rate from the mine of approximately 1.6Mtpa. This strong performance confirms the new mine production target of 1.6Mtpa and reflects a continued focus on reliable stope design and excavation, as well as mining fleet productivity.

The mined copper grade was higher than planned as a result of positive reconciliations from a number of stopes mined during the Quarter, improved drill and blast practices and minor adjustments to the mine schedule. On a total mine basis, project copper ore reconciliations remain slightly positive against the resource model.

The increased mine production performance reflects an overall 7% increase in future annualised mine production with the same mine personnel and mining fleet. Opportunities to further enhance mine production will continue to be explored.

The mine remains in balance between production and back-fill. Given the maturity of production in the C1 and DeGrussa lenses, opportunities to replace paste back-fill in some stopes have been identified for FY 2016, therefore reducing overall paste requirements and waste haulage to the surface.

The Conductor 1 decline was not advanced during the Quarter with the focus on development of the Conductor 4 and 5 declines. The development of this decline will recommence as required for the extraction of the lower Conductor 1 ore. Conductor 4 decline development advanced 171 metres in good ground conditions and intersected the first development ore early in the Quarter which will allow stoping to commence in the December 2015 Quarter.

The Conductor 5 decline development advanced 61 metres during the Quarter, with all development advance occurring in good ground conditions. C5 ore development is on target to commence in the March 2016 Quarter, with stoping planned to commence early in the 2017 financial year.

Processing

Key processing metrics for the September Quarter included:

• 387,864 tonnes milled at an average head feed grade of 4.7% Cu (June Quarter: 399,525 tonnes at 5.05% Cu);

• Overall copper recovery of 91.2% (June Quarter: 92.4%);

• Concentrate production of 67,024 tonnes (June Quarter: 75,082 tonnes); and

• Metal production of 16,638 tonnes of contained copper and 7,885 ounces of contained gold (June Quarter: 18,637 tonnes of contained copper and 9,499 ounces of contained gold).

Mill throughput was maintained at an annualised rate of approximately 1.55Mtpa inclusive of an 8-day shutdown completed during the quarter to re-line the mill, refurbish the thickener and service the concentrate filter. Mill throughput operating rates continue to demonstrate that the capacity of the process plant is close to 1.7Mtpa.

Copper recovery for the period averaged 91.2%, reflecting the positive impact of the processing plant enhancement projects implemented earlier in the year, which were aimed at delivering copper recoveries of 92% for grades of around 4.5% Cu.

However, copper recovery was below targeted levels due to elevated levels of MgO compared to previous quarters and the geo-metallurgical characteristics of the ore treated during the Quarter. Testing has confirmed that the recovery achieved was in line with the recovery model given the geo-metallurgical characteristics of the ore treated.

Following the successful commissioning of the major enhancement projects completed during FY 2015, Sandfire is continuing to investigate opportunities for further improvements in copper recovery. These include examining additional flotation capacity, further improvement in grind optimisation and operating tactic optimisation.

Guidance - FY2016

SALES AND MARKETING

Copper Concentrate Shipments

INFRASTRUCTURE

Solar Power Project

FEASIBILITY STUDIES & METALLURGY

Oxide copper

DEGRUSSA EXPLORATION

Overview

Sandfire continues to progress a tightly focused, multi-disciplinary exploration campaign to test for extensions to the known cluster of VMS deposits at DeGrussa and to unlock the broader potential of the Doolgunna region for additional VMS and structurally-hosted copper deposits. Key components of the Company's exploration activity at DeGrussa during the September Quarter included:

• Additional Diamond and RC drilling at the high-grade Monty VMS copper-gold discovery, part of the farm-in with Talisman Mining, which has significantly enhanced the Company's understanding of the nature and controls of the mineralisation;

  
  

• Continued underground resource definition drilling of the Conductor 5 deposit to allow conversion of the existing Inferred Resource to Indicated and Measured status; and

  
  

• RC drilling at the Thaduna Copper Project with the aim of targeting gaps in drill coverage over the main orebody between known mineralised intercepts and to test drill methods in order to maintain RC resource definition holes and Diamond pre-collars at the proposed trajectory.

  The aggregate exploration metres drilled on Sandfire's tenements during the September 2015 Quarter are summarised below:

  
  

  Drilling	AC/RAB Drilling (m)	RC Drilling (m)	UG Diamond Drilling (m)	Surface Diamond Drilling (m)	Total Drilling (m)
  Q1FY2016	49,654	8,868	2,190	5089	65,801

  Note:

• 49,654 metres of AC/RAB drilling, 7,654 metres RC, and 5,089 metres of DDH during the quarter related to the Talisman farm-in.

• 1,214 metres of RC drilling during the quarter related to the Ventnor Joint Venture.

DeGrussa Near-Mine Extensional Exploration

During the Quarter, Swick completed nine resource definition drill holes for a total of 2,190 metres. Drilling was primarily designed to allow upgrading of the C5 orebody from an Inferred to an Indicated Mineral Resource status, as well as testing the eastern extents of the currently modelled C5 orebody.

DeGrussa Regional Exploration

The Greater Doolgunna Project now includes the Talisman Farm-in and the tenements acquired from Sipa Resources, which have increased the aggregate contiguous exploration area to 1,700km2. This includes over 65km of strike extent in VMS lithologies. Much of this stratigraphy is obscured beneath transported alluvium and requires systematic aircore (AC) drilling to test the bedrock geochemistry and identify prospective areas.

VMS Discovery - Talisman Farm-In

The Talisman Projects comprise the Springfield, Halloween and Halloween West Projects, which abut Sandfire's DeGrussa-Doolgunna tenements and contain extensions of the lithological sequence which hosts the DeGrussa VMS deposits. The projects are being explored under a Farm-in Agreement with Talisman Mining Limited (ASX: TLM) under which Sandfire has the right to earn up to a 70% interest by spending $15 million on exploration over five-and-a-half years.

During the Quarter, Sandfire carried out extensive Diamond (DDH) and Reverse Circulation (RC) drilling at the Monty VMS copper-gold discovery announced in the June 2015 Quarter. To date, 5,998m of Diamond drilling and 6,960m of RC drilling has been completed at Monty.

This work has resulted in the delineation of two mineralised horizons to date - an upper horizon and a lower horizon - with significant intersections including (not true width):

 16.5m @ 18.9% Cu, 2.1g/t Au from 409.5m (TLDD0004A) - Lower Zone;

 9.2m @ 11.8% Cu, 2.9g/t Au from 417.0m (TLDD0005) - Lower Zone;

 7.9m @ 8.3% Cu, 2.4g/t Au from 363.1m and 4.8m @ 4.9% Cu and 1.1g/t Au from 385.8m (TLDD0009) - Lower Zone;

 10.5m @ 18.9% Cu, 3.1g/t Au from 359.7m and 4.7m @ 12.8% Cu, 2.5g/t Au from 373.6m (TLDD0010) - Lower Zone; and

• 18.0m at 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.

  
  

  Initial interpretation of Lower Zone

  
  

  Ongoing work at the Monty Prospect has resulted in an initial interpretation of the setting of the Lower Zone. The Lower Zone incorporates the massive sulphide mineralisation intersected in TLDD0004A, TLDD0005, TLDD0009, TLDD0010 (previously reported), TLDD0021 (assays pending), and TLDD0026 (assays pending) drilled subsequent to the end of the quarter.

  
  

  The mineralisation can variably be seen as an individual primary lens (as seen in holes TLDD0004A and TLDD0005), and as a primary lens with minor subordinate lenses (as seen in holes TLDD009, TLDD0010 and TLDD0021). An updated collar plan is provided in Figure 3 below, an updated Vertical Longitudinal Projection in Figure 4 and the interpretive cross-section for the Lower Zone is shown in Figure 5.

  
  

  Other minor intersections of massive sulphides in surrounding holes, and the top of alteration and disseminated sulphides in the periphery of the mineralisation, have informed this interpretation. The primary zone of mineralisation strikes approximately 220° and ranges in dip from 65°- 85° to the north-west.

  Initial interpretation of Upper Zone

  
  

  Ongoing work at the Monty Prospect has also resulted in an initial interpretation of the geometry of the Upper Zone mineralisation currently defined by RC holes TLRC0004, TLRC0008 and TLRC0009 (as previously reported, see Figure 4). This interpretation suggests that the mineralisation in the Upper Zone, and its host stratigraphy, may be steep to sub-vertical in dip.

  
  

  As a result, the RC holes in the Upper Zone are likely to have intersected the mineralisation at a low angle, with the reported intersections being considerably thicker than the anticipated true width. The grades reported in this Upper Zone may also therefore not be fully representative and further drilling is required to confirm the interpretation and determine the optimum angle for drilling to further define the mineralisation.

  
  

  Thick zone of massive sulphides intersected in Lower Zone

  
  

  Subsequent to the end of the Quarter, Sandfire reported further encouraging results from ongoing Diamond drilling at Monty including a thick intersection of bornite-bearing massive sulphides in the Lower Zone.

  
  

  Diamond hole TLDD0026, which was drilled approximately 45 metres along strike from recently reported hole TLDD0021 (which returned 7.3 metres of massive sulphides from 286.2m down-hole) and 46 metres up-dip from the halo mineralisation intersected in TLDD0014 (see Figures 2 and 3), has intersected three horizons of massive sulphides within the host sequence of the Lower Zone:

  
  

  • 3.0 metres of massive sulphides from 325.6m to 328.6m down-hole (true width not known at this time, top of intercept is approximately 275m metres vertically below surface);

    
    

  • 2.4 metres of massive sulphides from 330.5m to 332.9m down-hole (true width not known at this time, top of intercept is approximately 279m metres vertically below surface); and

    
    

  • 19.9 metres of massive sulphides from 340.2m to 360.1m down-hole (true width not known at this time, top of intercept is approximately 286 metres vertically below surface).

    
    

    The 19.9 metre intersection of massive sulphides in TLDD0026 is interpreted to be a continuation of the 7.3m (down-hole width) primary mineralisation previously reported from TLDD0021 in the ASX announcement on 2 October 2015 (Figures 3 and 4).

    
    

    The mineralisation in the upper two intersections in TLDD0026 appears to be consistent with that of the higher level, subordinate mineralisation zones intersected in TLDD0021 (Figure 4).

    
    

    Based on field observations, the mineralogy of the 19.9 metre intercept in TLDD0026 differs from that observed in the previously reported intersections of the primary mineralisation in TLDD0004A, TLDD0005, TLDD0009, TLDD0010, and TLDD0021. The massive sulphides intersected in these earlier holes comprises variable amounts of chalcopyrite (main copper-bearing sulphide mineral), pyrite and pyrrhotite, minor sphalerite and galena, along with silicate and talc gangue minerals (with gold and silver).

    
    

    The primary mineralisation in TLDD0026 has a similar composition to that of the earlier holes but also contains variable amounts of bornite (a copper-bearing sulphide). Both the bornite and other sulphide minerals are deformed and exhibit features consistent with re-crystallisation, which suggests that modification of the massive sulphide may have occurred during deformation.

    
    

    Bornite is an important copper mineral and commonly occurs in VMS deposits globally, along with the more common chalcopyrite. Bornite, in isolation, typically has a copper content of approximately 63 per cent by mass.

    
    

    Further work is required to put the presence of bornite in TLDD0026 into further context and determine its significance in the exploration campaign at Monty and further afield at Doolgunna. Diamond core from TLDD0026 will be despatched for analysis.

    Additional Lower Zone Drilling Results

    
    

    Diamond hole TLDD0024, which was drilled approximately 66 metres down-dip of previously reported hole TLDD0010 (which returned intercepts including 10.5m at 18.9% Cu and 3.1g/t Au from 359.7m down-hole and 4.7m at 12.8% Cu and 2.5/t Au from 373.6m down-hole), intersected a single horizon of massive sulphides within the Lower Zone host sequence:

    
    

  • 1.8 metres of massive sulphides from 445.6m to 447.3m down-hole (true width not known at this time, top of intercept is approximately 381 metres vertically below surface).

    
    

    Diamond hole TLDD0028, which was drilled approximately 37 metres along strike from previously reported hole TLDD0021 (7.3 metres of massive sulphides from 286.2m down-hole) and 46 metres from the mineralisation intersected in TLDD0020 (1.2 metres of massive sulphides from 272.6m down-hole), intersected the prospective horizon with weak haematite, jasper, and minor disseminated sulphides logged in the core. No massive sulphides were encountered and further drilling will be undertaken down-dip to help define the extents of the mineralisation in this area.

    
    

    Assay results have also been received for previously reported drill-hole TLDD0014, which was completed 45 metres along strike of TLDD0026 (see Figures 3 and 4). TLDD0014 intersected:

    
    

  • 0.5 metres at 3.6% Cu and 0.1g/t Au from 334.2m to 334.7m down-hole (corresponding to the stratigraphic position of the main mineralised zone); and

    
    

  • 3.4 metres at 3.5% Cu and 0.8g/t Au from 359.4m to 362.8m down-hole (true widths for both intersections not known at this time).

    
    

    Diamond hole TLDD0011, which was drilled along strike of TLDD0010 (see Figures 3 and 4), returned an intersection of:

    
    

  • 0.4 metres at 1.2% Cu and 1.3g/t Au from 370.9m to 371.3m down-hole (true width not known at this time).

    
    

    Upper Zone Drilling

    
    

    Reverse Circulation holes TLRC0015, TLRC0016 and TLRC0017 were drilled up-dip of, and at the opposite orientation to, previously reported holes TLRC0004, TLRC0008 and TLRC0009 to test for potential mineralisation (Figures 3 and 4).

    
    

    No visible mineralisation was observed and the mineralised zone is therefore interpreted to not reach the surface (see Figure 4). The spatial position of the host horizon intersected in TLRC0016 and TLRC0017 indicates that the host horizon in the near-surface portion of the Upper Zone may be locally overturned and dip at approximately 75° to the south-east.

    
    

    As the earlier drill-holes that intersected mineralisation in the Upper Zone (TLRC0004, TLRC0008 and TLRC0009) were drilled at a dip of 60 - 62° to the south-east, the true widths of mineralisation in these holes is anticipated to be significantly lower than the down-hole widths (as previously announced).

    
    

    Additional Diamond holes are planned to be drilled below TLRC0004, TLRC0008 and TLRC0009 in order to test for down-dip mineralisation as well as to provide information to accurately constrain the dip of the Upper Zone.

    
    

    Assay results have been received for drillhole TLRC0009 drilled during the quarter, which returned an intersection of:

    
    

• 12.0 metres at 5.7% Cu and 1.8g/t Au from 133m - 145m down-hole (true width unknown but anticipated to be significantly less than down-hole widths).

  Figure 3: Monty Prospect showing drill-hole collar locations and interpreted schematic geology

  
  

  
  

  Figure 4: Vertical Longitudinal Projection and initial interpretation of the Monty Prospect showing drill-hole pierce-points at the top of the primary intercept shown in bold. All intercepts are down-hole widths.

  
  

  Figure 5: Interpretive cross-section of the Monty mineralisation (Lower Zone)

  
  

  
  

  Sandfire is encouraged by the results to date from this exciting new area, which has the hallmarks of a significant new centre of VMS mineralisation within the greater Doolgunna Project.

  
  

  Homer Prospect

  
  

  With the focus of exploration at Doolgunna remaining on the Monty VMS discovery during the Quarter, the priority exploration opportunity at Homer, located approximately 4km east of the DeGrussa Copper Mine, remains to be tested.

  
  

  Drill sites are prepared and it is envisaged that the first phase of drilling following up the initial encouraging results from TLDD0001 and TLD0003 will commence in the coming quarter. These drill-holes intersected haematitic exhalite with jasper clasts, which is interpreted to be the C5 target horizon. This horizon returned weakly anomalous base metal and trace elements.

  
  

Seismic Survey and Other Regional Exploration

Processing of the recently acquired seismic data has been unable to definitively demonstrate that the method can be used as an exploration tool for the direct detection of massive sulphides at DeGrussa. The focus with this seismic dataset now shifts to better utilising it to define basin architecture, including the location and depths of prospective stratigraphy as well as significant faults.

High-powered electromagnetic surveys are continuing as part of the exploration program with all RC and DDH holes being surveyed. In addition to this, further surveys are being conducted where more detailed information gained through drilling may indicate that the original survey did not optimally couple with the prospective stratigraphy.

Litho-geochemistry processing and interpretation continued throughout the reporting period. This project was successful in identifying two significant geochemical indices that correlate to areas of known mineralisation. Drill targeting is progressing and is focused on areas where the geochemical anomalism aligns with favourable stratigraphy and structure.

Thaduna Project Joint Venture

The Thaduna Project is located 40km east of DeGrussa and represents the largest copper resource in the Doolgunna-Bryah Basin Region outside of Sandfire's DeGrussa-Doolgunna Project (7.9Mt @ 1.8% Cu for 142,000 tonnes of contained copper). Sandfire currently owns a 35% interest in the project, and has entered into a farm-in agreement to earn up to a further 45% (total of 80%) with Ventnor Resources (ASX: VRX).

During the Quarter, Sandfire completed an RC drill program at Thaduna with results including:

• TDRC001: 5m @ 3.2% Cu and 9.6g/t Ag from 251m down-hole

• TDRC004: 4m @ 1.5% Cu and 1.9g/t Ag from 193m down-hole

  
  

  The RC drill program comprised five holes drilled at a dip of 63o to an average depth of approximately 240m down-hole. Holes had been planned and selected to target gaps in drill coverage over the main orebody between known mineralised intercepts, and to test drill methods in order to maintain RC resource definition holes and Diamond pre-collars at the proposed trajectory given that the Thaduna Copper Project is susceptible to significant drill-hole deviation.

  
  

  The Company plans to undertake a Diamond drilling program comprising six drill-holes during the December 2015 Quarter aimed at resource definition.

  
  

Ned's Creek Project

AUSTRALIAN EXPLORATION

Sandfire has a number of exploration joint ventures around Australia. The Company recognises that its activities impact directly and indirectly on the local environments and communities in which we operate. Sandfire is committed to conducting its activities in a sustainable and socially responsible manner to minimise and mitigate these impacts. In order to achieve its sustainability objectives, Sandfire applies the same high standards and commitment to absolute safety in the workplace, environmentally sound practices and transparent social responsibility at its exploration joint ventures as it does at its DeGrussa Copper Mine in Western Australia.

Borroloola Project