Sandfire targets African foray via potential MOD Resources takeover offer

Sandfire Resources MOD Resources ASX SFR takeover offer
Sandfire Resources has confirmed media speculation it has approached junior explorer, MOD Resources.

Copper producer Sandfire Resources (ASX: SFR) has made a takeover approach for Botswana-focused explorer MOD Resources (ASX: MOD).

Following a media report concerning its interest in MOD, Sandfire released a statement to the ASX confirming it had formally expressed in writing its interest in “exploring a potential combination of the two companies.”

Sandfire noted the approach was preliminary, indicative and non-binding in nature and stressed it couldn’t provide assurance on whether a deal would eventuate.

Sandfire’s approach was made on the basis of $0.38 per MOD share, representing a significant premium on MOD’s last close of $0.22. The offer places a $94.5 million evaluation on the explorer.

While its early days, a successful takeover remains contingent on satisfactory completion of due diligence, MOD board approval and execution of binding documentation.

MOD was granted a trading halt of its shares pending a capital raising announcement and to respond to the noise around Sandfire’s bid.

Sandfire hunts attractive growth projects

MOD is focused on developing its fully-owned T3 copper-silver deposit in Botswana and is nearing the completion of a feasibility study for the project.

The study, set for completion this quarter, is based on an open pit copper mine with an expanded process plant throughput of 3 million tonnes per annum.

A pre-feasibility for the mine was released last January and determined the project to be financially robust at a 2.5Mtpa base case scenario, generating a pre-tax net cash flow of $697 million.

Located in the Kalahari Copper Belt, the proposed development could produce 23,000 tonnes of copper and 690,000 ounces of silver in concentrate.

As drilling at T3 continues to intersect encouraging results, the process plant has been designed with flexibility to allow for process plant expansion capacity from 2.5Mtpa to 4Mtpa.

Sandfire’s interest in MOD and its flagship Botswana copper project come as the company explores near and medium-term production growth options beyond its DeGrussa copper-gold mine in Western Australia.

The mid-tier copper miner already has an overseas footprint with an interest in the high-grade Black Butte copper project, located in central Montana in the United States.

At the end of September, Sandfire held $218.4 million cash on hand.

The company’s shares were down 1.1% to $6.98.

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