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Aug 2012 - DeGrussa Jewellery

Mining the DeGrussa Jewellery Box

We visited Sandfire's DeGrussa mine ~900km north of Perth in WA, ahead of Diggers 'n Dealers 2012 as part of a group of about 76 people (~6 were SFR personnel) on a 100-seater Cobham aircraft that flew to the new airstrip in about 1.5hours.

Sandfire is a classic VMS orebody due to the presence of chimneys (like Nautilus' Solwara 1) having been identified in Conductor 1, the first lens, with the boundaries in the drill core very sharp between the chalcopyrite and the clayey sediment (since altered to a volcaniclastic).

The copper-gold deposit lies between two major structures and has been folded and then faulted, leaving some of the mineralised lenses clearly identifiable, with a gap until the reminder of the VMS orebody can be located and a number of exploration techniques are to be trialled in the coming year, now that construction of the plant is almost complete.

At this stage the power was expected to be connected (from the diesel power station) in about mid-August with the sag mill in the plant expected to be receiving and hence treating ore in early September 2012.

The orebody contains a jewellery box of copper minerals, some of which are shown inset in Figure 1, with blue azurite, black chalcocite, red cuprite, blue chrysocolla, green malachite, white calcite and brown native copper. There is some lacy copper in calcite (crystals) as also shown inset in the Figure. Underground there is the golden to light yellow coloured chalcopyrite of the main ore zone plus occasional peacock-blue coloured bornite.

The orebody grades are spectacular, with the chalcopyrite weathered and altered to black chalcocite (pure chalcocite contains ~75%Cu) as shown in the pit in Figure 1. This chalcocite DSO (direct shipping ore) is contained within the nose of an anticlinal fold and grades about 25% to 40% Cu, averaging ~35%Cu. The dilution ore adjacent to the chalcocite, grades ~30%Cu.

As shown in the sequence of inset figures, the DSO is mined with an excavator, and dumped into a truck until ~100t is reached (the SG is very high). It is then hauled to the DSO stockpile, tipped and then crushed to gravel. The gravel is then picked up by a loader and dropped into a road train where it is currently being hauled to Geraldton for shipment at the rate of 2 shipments per month of ~10,000t each.

During the time we were on site it has been estimated that ~ 30 trucks x 100t or 3000t of ore @ 25% to 35%Cu (750t to 1050tCu) were hauled to the stockpile. With current (8 August 2012) Copper prices of ~US$7500/t that is equivalent to ~$5.6m to $7.9m and the DSO ore is expected to sell at a premium due to its high grade.

There is about 140,000t of DSO ore in the Stage 1 part of the pit that is scheduled to be completed in December 2012, with Stage 2 due for completion in mid-2013 (SQ2013). Some DSO has also been found in Stage 2 (located left of the inset picture) of the pit. The DSO ore was expected to realise ~$300m to $350m or so, and with the capex expected to be ~$385m SFR's Degrussa Project was hence expected to effectively achieve payback in less than 6 months, during MQ2013.

The underground is being developed and stoping was expected to start on 1 November 2012 at ~5% Cu, ramping up to full plant production from JQ2013. According to a wall display, one of those stopes was ~4.2% to 4.5%Cu (after applying ~10% dilution factors) with 1.3g/t to 1.5g/t gold. Copper recoveries were expected to be ~90% to 92% with gold ~50% to 55% as a by-product credit of the floated concentrate, or ~77,000tpa Cu and 36,000ozpa gold for the first 3 or 4 years from the 1.5mtpa rated plant.

As the grades decrease (beyond year 4 according to current scheduling and increased mining from Conductors 2 and 3), the throughput was expected to increase as it is limited to some degree by the flotation circuit back-end of the plant (the crushing capacity is ~2.2mtpa, and there is flexibility to add an additional ball mill to the current sag and ball mill configuration). The plant initially draws ~13.5MW from the 19MW power station.

There is also an oxide modification that is expected to be made to the plant in which that ore was expected to be upgraded using gravity before being batch fed through the sag mill.

Cash costs over the life of the mine are expected to be ~US$1/lb, and exploration for the coming year ~$20m to $25m. Sandfire has stated that it intends to pay dividends as soon as practically possible.

Sandfire was deservedly awarded the "Digger of the Year" at the 2012 Diggers' n Dealers Conference, having gone from discovery to production in less than 3 years. To which may soon be added achieving its ~$385m capex payback in possibly only 3 or 4 months!. Followed by stoping an orebody grading ~5%Cu for the next 3 to 4 years at ~1.5mtpa, producing and expected average  ~77,000tpaCu and 36,000ozpa gold at a cash cost ~A$1/lb. A jewellery box.

Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, (an independent research company) who is a Financial Services Representative with Taylor Collison Ltd.

Figure 1.Sandfire's DeGrussa Jewellery Box and DSO Chalcocite at ~25% to 35%Cu.

  • Written by: Keith Goode
  • Sunday, 01 July 2012