Sandfire Resources needs to run hard to stand still with a market value of six times cash flows from a mine with a seven year life
Sandfire Resources needs to run hard to stand still with a market value of six times cash flows from a mine with a seven year life. Today, it completed its latest deal to help engineer a growth profile. Acquiring up to 53% of Tintina Resources gives access to its 11 year 30,000 tpy Montana copper mine development and sub-$2/lb operating costs. At less than half the size of the current Degrussa copper output, the added momentum will be modest. As an equity holding, there are no meaningful synergies. In assessing the strategy, investors need to ask why they should pay $900 million for SFR to get access to a company valued at $18 million. Wouldn't it make more sense for any current investor to sell and simply buy direct (and less expensive) stakes in the targets SFR will rely on for its growth.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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