Sandfire Resources Limited (SFR) Earnings Call Transcript & Summary

Welcome, everybody, to the Sandfire Resources Investor Update Strategy and Outlook Call. [Operator Instructions] Thank you again for joining us today. And I'll now hand over to Nicholas Read, who will run through the agenda for this morning and introduce the Sandfire team.

Thanks very much, Luke. Good morning, everyone, and thank you for your time today. On behalf of Sandfire, I'd like to extend a very warm welcome to all of you to this investor update and strategy outlook teleconference and live webcast. Before I introduce the Sandfire team here in Perth and give you a short overview of the format of this morning's call, I'd like to quickly refer you to a number of important ASX announcements made by the company yesterday, including the announcement of a final investment decision for the T3 project, a maiden inferred resource for the A4 deposit, the announcement of some significant new high-grade drilling results at A4, and a detailed company update, strategy and outlook presentation, all of which are available on the company announcements platform. The agenda for this morning. The Sandfire team will shortly step you through an abridged version of this presentation, focusing on the key highlights from each section, the objective being to enable us to move as quickly as we can to open the floor to an interactive Q&A. You can follow a synchronized presentation of this abridged version using the Redback Connect portal that you've logged into. Roughly in order of appearance this morning, you'll hear firstly from Sandfire's Managing Director, Karl Simich; Chief Operating Officer, Jason Grace; Chief Financial Officer, Matt Fitzgerald; Head of Growth in Botswana, Julian Hanna; General Manager of Geology, Shannan Bamforth; and then handing back to Jason; and finally, Karl for closing before opening the floor to comments. Please note that this call is being recorded and an audio recording and subsequently a web recording will be available using the Redback Connect service. I'd now like to hand over to Karl Simich to kick off today's presentation. Please go ahead, Karl.

Thank you, Nicholas, and welcome, everyone, to this strategic investor update, and it is a pleasure to be presenting today to talk about a new era for Sandfire after we have reset our strategy through the earlier part of this year and as we announced to the market on the 1st of July. It is really the template for the future for our business. We do have the credentials, the capability, the capacity, the people. We clearly have a market and we now can clearly see an emerging pipeline and the opportunities that we have in front of ourselves. We have opportunities in Botswana, in U.S.A., in Australia, and we have a clear picture for the future. Clearly, we're predominantly a base metals player and listed on the ASX, as most of you know. We've been generating some exceptionally strong cash flows from the Doolgunna operations in the DeGrussa and Monty mines. We've built a strong cash treasury, and we continue to accrete excellent cash flows from that wonderful mine in the northwest of Western Australia growing from those operations. We now position ourselves with a long-life project pipeline possibility in Botswana and also in the U.S.A. Pleasing for us yesterday, the Board has approved the development of the T3 project, and that will be the platform for a greater expansionary project to be developed there. We're in an excellent position in what is truly a new global copper province in the Kalahari Copper Belt. There has been, order of magnitude, around 7 million tonnes of contained copper that have been identified in resources as we sit today in that copper belt. And the 2 owners of the majority of those resources are Cupric Canyon, our neighbors to the northeast, and Sandfire now with our significant positioning of some 26,000 square kilometers in the dominant part of the belt. Closer to home, we'll -- at DeGrussa, we're very positively looking forward to a transition in the future from our copper operations into a gold strategy and gold operations, and we continue to be absolutely focused. And the only way to make discoveries is to continue to be an explorer. We have substantial exploration on foot and approximately 25 drill rigs operating in one place or another in Western Australia, New South Wales, in Botswana and also soon to be in the U.S.A. We have a budget in this calendar year -- this financial year of, order of magnitude, $50 million. We, well and truly, are leveraged to this copper market, and we see over the last little bit predictions from various broking houses and banks of potentially a pathway to USD 10,000 a tonne of copper or the equivalent of $4.54 a pound. As you know, recently, the DFS that we released yesterday for the T3 Motheo Hub project was set at a copper price of $3 -- long-term copper price of $3.16. So -- and as we sit today with a copper price of about $3.50, the NPV as presented yesterday would probably be, order of magnitude, 50% greater than the number we presented yesterday. I do believe we have the appropriate systems, procedures, infrastructure and also a well-credentialed and experienced team that can deliver on our aspirations for the future. So it's a bit of a -- just as a sort of an overview, I just want to quickly reinforce the strategy that we have as a business to ensure that we are able to create value through these opportunities that we have in front of ourselves. And we are crystal clear in what we want to do. Number one, we want to execute delivery. That is delivering on the things that we have inside the business at this point in time. That is maximizing the cash flow from DeGrussa, Monty. That is looking to extend the mine life of DeGrussa and our gold transition as we continue to explore for peak VMS deposits. And let's not forget that DeGrussa is in excess of 5% copper ore body, and Monty was in excess of 9% copper ore body as resources. Let's not forget the potential there to obviously execute delivery to take Botswana, T3, the Motheo Hub, A4 into production; to look at other satellite projects in and around that hub to look at further opportunities in that belt; to bring the U.S. -- to continue to move the U.S. project, the Black Butte project along its pathway and into -- and enhance that value proposition so that at some point in the not-too-distant future, we can make positive investment decisions of taking that project forward. Under sustainable production, we look at, ultimately, an aspirational target in the next 5 years of achieving 150,000 tonnes of copper production on an annualized basis, at benchmark operating C1 cost. To do that, that will need to come from us executing delivery or alternatively seeking to acquire an appropriately criteria-ed asset that is either in production or near production or can be taken into production. So our business development team continues to look at opportunities that fit within our criteria and a very disciplined criteria that potentially could add to our portfolio and be another platform to creating value. I would just like to make the point that it's a disciplined approach for that, and so far, we've never been in a position where we've frivolously looked at spending our shareholders' funds on either an acquisition or an exploration. If we look at accelerating discovery, and as I've just mentioned in terms of our exploration push, we've always been a significant explorer. We will continue to be that. And as we can see, the pathway to extraordinary value can come from exploration and discovery, and that has been the case for us in Western Australia, DeGrussa, Monty. It is the case for us with the work that we are doing in Botswana with the delivery of a new discovery in A4, and that project will continue to grow and you'll hear a little bit more about that in the future. We have a disciplined approach to exploration, but we will continue with a very strong organic push. We want to make sure our people are empowered. We will support them. We will give them freedom, and we'll give them all the resources that they need to achieve great outcomes from what they're doing. And we have a framework to support them to do that, and we will empower them. So we're very excited with the group of people that we have, the wonderful women and men in this business that will take this business forward for the benefit of all our stakeholders. And we will be disciplined in terms of managing and optimizing and understanding deeply the markets in which we operate so that we can optimize the capital structure of this business and ultimately returns to our shareholders and other stakeholders. So for us, in terms of the new era, the future, the 3 key projects for us in areas of Endeavor, DeGrussa, Tshukudu, Black Butte. DeGrussa, as we know, strong cash flows. We're going to have a fantastic year again. Last year, our 2020 financial was a record, and 2021 will be an extraordinary solid year again. We have significant near-mine potential, and we are busy exploring, as I've mentioned. And we are looking at a transition into gold, which will continue to provide sufficient cash flow, hopefully to obviously pay for those operations but to continue with accreting cash to enable us to continue to explore and obviously defer any large closure costs. The new growth platform, Tshukudu, for us, it certainly is an emerging global copper province. We'll talk more about it. We have a dominant position. The focus for us initially is to look at the 5.2 million tonne Motheo Hub copper-silver production. The initial starting of that will be the development of specifically the T3 mine at a scale of 3.2 million tonnes. That has been approved by the Board of Directors yesterday, and we will quickly move into construction in the early new year. This is approximately a 12.5-year mine life as it sits on the table today, but we have no doubt that it has great potential to be extended both in scale and also longevity. Our focus in the immediate environment is to look at higher-grade satellite feeds as in A4, which is a copper grade of approximately 50% higher than T3, but then also look at volumetric increases by a wonderful array of opportunities in and around that T3 expansion area, and we'll hear also more on that today. An absolute, extraordinary development in the last little while was also not seen before in that copper belt, the tenor of some of these grades in the intersections from drilling what is presently outside the A4 resource but up to grades including 16% copper, quite extraordinary, never been seen before in that belt. And once again, just to highlight, it is a belt that had been barely explored, and we control the dominant positioning of some 26,000 square kilometers. So I think there is exceptional exploration upside, and it is a belt that is accelerating -- it has an accelerating rate of discovery, and we look forward to bringing more of that to bear. And Black Butte in the U.S.A. It's a high-grade project somewhere in the order of a 3% resource grade, 2.6% reserve grades at the Johnny Lee Deposit. And what's important here for us, now that we've been able to achieve a mining permit, we can now get on with the business of making that project work. We've completed permitting. It's the first in -- permit in that state in 26 years. The first feasibility study has been completed. We do have a maiden ore reserve. We've now got additional resources outside the Johnny Lee Deposit in the Lowry Deposit, very close by. We've got a number of activities on foot, early works on a critical path to move that project forward, and we know that it takes time to move these projects forward. They're all different, and we must be able to accommodate each project and its nuances to move them forward to create value from them. And we certainly are moving sensibly with respect to that project, and there will be a number of key milestones that we deal with during the course of calendar '21, essentially looking to leverage off the base that we've now developed and to make that project better. We look at the copper market and our view on it and the collection of theories and thoughts from many experts in the industry. I'm not going to spend too much time on that -- you can all read the presentation, other than to say we know the importance of the metal. We know the depth of the market. We know the demand that will come from multiple industries. We know its conductive abilities. And we know that there are challenges with declining grades globally with respect to delivering the demand that society will place on this wonderful metal. The expectation through decarbonization, EV demand policy stimulus coming out of China and future supply, that's what could provide a deficit on what we know today of some 6 million tonnes by 2030. And so to be in a position where we can take these pipeline assets forward in this particular commodity, we're absolutely delighted and very excited about the future for our business. We continue to go forward collecting these wonderful assets that will give us truly an opportunity to create value going forward. Thank you very much.

All right. Thank you, Karl. We might move straight into Tshukudu and Botswana projects. As context, the Kalahari Copper Belt is a major zone of strata-bound copper-silver deposits extending for 1,000 kilometers along with northern margin of the Kalahari Craton. This zone extends in the northeast, southwesterly direction from Namibia down into -- sorry, from Botswana down into Namibia, and the belt holds approximately 7 million tonnes of contained copper, with resources grading from 0.9% to 2.2% copper at an average grade of 1.4% overall. As Karl mentioned before, Sandfire holds a dominant position in the belt, holding 26,650 square kilometers, extending along over 400 kilometers along the strike of the belt and particularly in a highly prospective and largely unexplored area of the belt. The T3 and A4 resources sit towards the northern eastern end of tenements and are surrounded by several high-priority exploration targets, including A1, T1, T2 East and West, and A13, which we collectively call the T3 Expansion Project. Given this context and before we move into more detail on the T3 feasibility study, I do want to reinforce Karl's comments from earlier that as a company, we are not limiting our thinking to just T3. Given the enormous potential not just of the belt and our significant holding in the belt, the potential of the T3 Expansion Project area is very, very significant. And during -- as we've gone through the feasibility study or the process of the feasibility study, we have completed -- already completed the engineering to identify a pathway for a rapid and low-cost expansion to a 5.2 million tonne processing rate, which could be supported by future discoveries and potentially the A4 resource. And as part of that, the company is committing, on an up-front basis, USD 20 million to support that rapid expansion. If we now focus on the T3 definitive feasibility study and in particular the 3.2 million tonnes per annum base case. The key elements of that are an updated mineral resource of 53.3 million tonnes at 0.9% copper and 12.7 grams per tonne silver, an updated ore reserve at just under 40 million tonnes at 0.9% copper and 12.2 grams per tonne in silver for contained 360,000 tonnes of copper and over 15.5 million ounces of silver. The key elements there will be an open pit mine, including a 3.2 million tonne per annum concentrator and delivering a 12.5-year mine life. The forecast life-of-mine production totals over 100,000 dry metric tonnes of copper concentrate for a total or an average total of about 30,000 tonnes of copper and 1.2 million ounces of silver per annum. The development capital for the project is estimated to be USD 259 million. The T3 open pit mine will consist of a 4-stage open pit design, with total material movements over the life of mine at 280 million tonnes and delivering, as we said, with the ore reserve just under 40 million tonnes of ore. The final pit dimensions will extend for -- at about 1.5 kilometers in length, 640 meters wide and about 245 meters deep. Mining will be carried out by a mining contractor, and the tender process is well advanced for full selection of that contractor. The life of mine schedule is comprised of 2 key parts. The first of those being from the start of mining through to 2029. And during this period, we'll see high material movement rates, averaging around about 34 million tonnes per annum, and [ as well at time ] maintaining a 3.2 million tonne per annum ore feed rate and progressively stockpiling low grade for processing later in mine life. The second part goes from 2030 through to 2034, where material movement rates step down to about 5 million tonne per annum rate. Now this represents the period of time that we get towards the base of the Stage 3 pit design, and that we have very limited waste material movement there to maintain production through to the end of -- at the end of Stage 4 in this period. Beyond 2034 and in -- particularly a little bit out into 2035, we'll move into stockpile, reclaim and processing. Over the life of mine, recoveries will average 92% for copper and 87% for silver at a coarse and forgiving grind size of 212 microns. This will produce a high-quality, high-grade concentrate at an average rate of 100,000 tonnes per annum. And as I mentioned before, this produces about 30,000 tonnes of copper and about 1.2 million ounces of silver. Now if we look at the key elements of the layer of the Motheo processing plant and particularly at the base case of a 3.2 million tonne per annum, the key elements consist of a primary crusher going through to a coarse-ore stockpile. We have a stacker and reclaimer feeders, a single-stage SAG mill, and then with oversized going through to a recycled pebble crusher, and then undersized going into a simple rougher flotation circuit and a 2-stage cleaning circuit. We also have concentrate and tails thickeners and overall concentrate filtration prior to transport offsite. To facilitate the ability to scale up the plant capacity of 5.2 million tonnes per annum, the additional $20 million of investment that I mentioned before will upgrade the primary crusher to a gyratory crusher capable of doing around about a 6 million tonne per annum rate. We'll increase the size of the reclaimer feeders, increase the flotation capacity of the roughers and the cleaners, and increase tailings and concentrate thickening capacity. All of this will require no additional equipment. It just requires scaling up and upsizing of all of these key elements. And this represents a very efficient use of capital. Once we're able to bring on additional ore reserves, the only additional plant that will be required is a 4-megawatt ball mill and expansion of the concentrate storage on site. Now when we pair this with basic construction of a haul road potentially out to the A4 site and associated pit dewatering that we're likely to have, we estimate the additional capital over and above the $20 million is in the range of about $30 million to $35 million. In addition to the T3 processing plant and the open pit area, our site infrastructure also includes a 50 million tonne tailings storage facility that will be built to the highest standards, including a double-lining of HDPE to make sure that there is no infiltration of water into the groundwater in the area. There'll be a power network connected to the Botswana national grid, a 15-kilometer access road that will link the A3 main highway in Botswana through to the site, and a 750-bed-accommodation facility located in close proximity to the mine.

Looking now at delivery and getting that 100,000 tonnes of concentrate through to market. It will be by truck from -- as you can see on the slide here, from -- through the major center in Botswana or Ghanzi through -- into Namibia, through Windhoek, the capital, and up through -- into Walvis Bay to ship out of there, 2 to 4 shipments per month, and that will be bagged into those shipping containers; so 1,000-kilometer route from the mine site through to Walvis Bay. Looking at capital costs. As Karl and Jason had mentioned, the headline, $259 million. We've given some detail there. In terms of the breakup, importantly, USD 73 million of capital relates to mining costs up to first ore. And included in those totals, and as Jason mentioned as well, that course grind size assists us in terms of capital costs and capital efficiency, production efficiency in terms of the plant, and EPCM construction contract and importantly as well include the tailings dam storage footprint at that expanded rate -- preparing for that expanded rate at eventual 5.2 million tonnes per annum. Looking at C1 costs. That drives very competitive C1 costs, $1.65 per pound. After that, 1.2 million ounces per annum of byproduct credit that comes from those silver credits. And we would expect, of course, as we expand this project -- look to expand this project with the addition of A4 and other sources, we'd expect to have an even sharper C1 unit costs as well into the future. Just a breakup in terms of C1 shows, as you would expect, dominated by the mining costs with the pit, and then a stripping that's ongoing through that and then probably an expected breakup between processing administration and the logistics through to sales and ports and in the treatment and refining charges for those sales.

In terms of the development time line, as we stand today, the next milestones to achieve -- to be achieved will be submission of the mining license and approval, securing of land titles, submission of the EMP for approval by the Botswana government as well. The process plant engineering and preconstruction works are currently in progress. The accommodation facility construction will commence in early 2021, process plant construction to commence in the middle of 2021, mining prestrip to commence in early 2022, and process plant production and overall copper production in early 2023, which is notably only 1 quarter after the forecast end of production at DeGrussa.

The Botswana exploration strategy at the top of the page here really highlights the 3 main elements of that. The first priority is really targeting high-grade satellite discoveries around T3 to really support and expand production potentially through that Motheo Production Hub. We're also focused on additional mine life as well, and that's the second component here. It's drilling out extensions potentially at T3 and A4. And the third part of it is looking for major, new regional discoveries on Sandfire's huge and really very prospective holdings along the belt. And I think we're starting to really understand the geology of this region not just in the immediate area of the resources that have been defined to date but further appeal as well. So it's giving us great confidence in the potential for future discoveries. However, that said, the first priority is still the area around T3. And if you look at the map on the right-hand side, colored in the crosshatch, you'll see an area around about 1,000 square kilometers. Within that, we have numerous targets. And outside of T3 and A4, which is shown there with -- and they've really dominated our activities in the past 12 months. But we have 6 other targets lined up for drilling. They are very high-priority targets that are supported by geophysical and geochemical reasons as to why we should drill there, and a very rapidly growing geological understanding of the potential of this area around T3 and the Motheo Production Hub. But the targets are all shown there, A1, A27, A13, T2, T1. And then underlying much of this area, we are confident now that the very prospective NPF contact is intact over a huge area on that map on the right-hand side. The NPF contact is critical for all discoveries at the eastern end of the belt occur on that geological contact in different structural settings. And apart from T3 and A4, which are different styles of deposits, we think there is great potential on that NPF contact. And we've resumed drilling, as we announced yesterday, testing that and given it its own project status. We're pushing ahead with the NPF contact because we think it will deliver in the long term in addition to these other targets. I think what we'll do there -- what I'd do -- so what I'd like to do is just move on to the A4 resource. And as announced yesterday, the maiden resource, 6.5 million tonnes of 1.5% copper, 24 grams silver. In addition to that, some extremely high-grade veins have been intersected post resource at the -- towards the eastern end of this deposit. We're currently drilling there. We have 6 rigs currently drilling at A4. And the objective of this, what we're calling Phase 2 drilling program, is to shift the inferred resource into indicated and test for extensions to this resource as soon as possible. We look to complete that resource drill-out probably early in the new year. And that still doesn't cover the extensions to the along strike and the potential that exists down-dip. But just within the pit shell outlined on this plan, what you see there is the 99 drill holes that were used to inform the resource for the inferred resource, the maiden resource, but we do anticipate this will change. The Phase 2 resource infill drilling, once that's complete, that then freezes up, and our focus can start shifting to those other targets in the surrounding area in the T3 Expansion Project. If we can move to the next slide here, please. This is a cross-section across A4, just showing the geological interpretation, the 2 styles of mineralization that we see there. The top, paler color is a shear-hosted mineralization related to a regional thrust along the top of the A4 Dome. And those purple areas to the south -- shapes to the south, sorry, underlying the shear zone there are very high-grade extensional veins, very distinctive, very well mineralized and having quite an impact. The pit shell here is the pit shell used to drive the perimeter resource. So that seems to capture a lot of this high-grade mineralization, but we do anticipate some changes as well. I should say, too, that these high-grade veins, we do see them in T3 but not nearly as well developed as we've seen them in A4. And it gives us great confidence in the potential for other high-grade veins elsewhere in the -- in this T3 expansion area. Just to give an indication of some of the bonanza-grade intersections that were reported yesterday, 22 meters at 6%, 98 silver, including 9.5 meters at 11.7%. The silver numbers are pretty impressive. The -- in addition to the copper, the 13.15 at 10.2%, 7.15 at 16% copper and 222 gram silver. Those were just an upper zone and a lower zone within one haul, which is 122 deep. 50 meters east of that, we see the same sort of mineralization here, at 35.7 meters, 7.1% copper, 116 grams silver. So these are very unusually high grade. We've probably never -- we have never seen these grades or these intersection wins of these types of grades on our project to date, but -- and we don't believe that these have been identified elsewhere in the basin at this stage. So it just gives us great confidence in the potential for these high-level veins that we see. Also, for geologists that may be tuned in, we're also seeing an association of very high molybdenum values up to 9% in these extensional veins. And of course, that -- of course, that calls to question the style of mineralization we're looking at, slightly different to what other people have been looking at and developing at the eastern end of the belt. Finally, last slide here is, I think, a very important slide. Since A4 was discovered in early 2018, this -- it was discovered through using airborne EM. It was a very distinctive, dome-like feature that was defined from an airborne EM survey, very similar in shape to the T3 Dome. And as you can see, the mineralization sits near the top of the dome on a dislocation in the conductor, that main conductive unit that you can see folded around the top of the dome here. The limit of drilling is what you see currently on that section. And within this slide, I think it just demonstrates that there's almost the structural opportunities here within this dome and other domes that we've identified from electromagnetics to date. But also, there's a lower level of mineralization, the NPF mineralization, in the core of that dome. So we've commenced that drilling program for that deeper contact. I think too that this has proved to be such a breakthrough in discovery of A4 and has identified A1 Dome, which is 20 kilometers along strike from this particular dome. When we say dome, we mean doubly plunging anticline for geologists in the room, but we've simplified that word to dome. These are big features. They're complex features, and there's many parts of this A4 Dome that still require drilling. It's a very well-mineralized structure. But there's another one, A1 Dome, which is one of our highest priority targets 20 kilometers to the east. There's another one south of that called A27. There's another one to the southwest of that called A13. So they're lining up in priority. And of course, because of the airborne EM and because of COVID, we have been -- had to postpone an airborne EM survey to cover all -- the majority of our prospective core of our license holdings that, as we announced yesterday, is now underway. That program is underway. The pilots, the helicopter were able to get into Botswana. We commenced this program 10 days ago, and it's a major regional airborne EM survey, I think, on a scale that hasn't been conducted in this copper belt before. We're looking to cover about 13,450 square kilometers, starting from the Namibian border and working east to the eastern extent of our licenses. So we are looking forward to that. The program is working very well. The data is starting to flow. The initial processing will get underway soon, and we look forward to seeing what that generates. But I think we are very optimistic that this will generate new targets for us in the future.

All right. If we look at the next steps for the project and our presence in Botswana. First priority there is to submit the T3 DFS to the government. The government has a right to assess the DFS and potentially acquire 15% -- or up to 15% of the project. And at the same time, we'll submit an application for a final mining license for the T3 project. We're already well advanced with the recruitment of the in-country team. We'll finish that off, finalizing land access and land ownership in the direct mine area. We are progressing with project debt funding. And as Julian touched on there before, we expect to finish the A4 drill-out early in the new year. And on the back of that, we'll be well advanced into a feasibility study for the A4 deposit. And hopefully, that project will catch up rapidly to the engineering works that have already been done in the processing plant. We'll advance with exploration on the whole belt as well as the T3 expansion area, and we're already very active in ordering long lead items and securing contracts. We move on to DeGrussa in the Australian region before I hand over to Shannan to cover Australian exploration. Operationally, we continue to deliver strong performance at DeGrussa. And in line with our September quarterly report, we remain on track for the upper end of our FY '21 guidance on 67,000 to 70,000 tonnes of copper production and 36,000 to 40,000 ounces of gold production at a C1 cost of USD 0.85 to USD 0.90 a pound. Looking longer term, DeGrussa and Monty mines will continue to combine at a 1.6 million tonne per annum production rate throughout FY '21, throughout FY '22 and then ramping down in the quarter there, in the first quarter of FY '23 to the forecast end of production around about September 2022.

Okay. Resource drilling at Old Highway has progressed well over the last few months, and the scoping study for the project has now commenced. Having additional gold resources in close trucking distance to DeGrussa could provide significant synergies to the tailings retreatment process that is currently being evaluated. Pleasingly, we have developed a robust understanding of the controls on mineralization at Old Highway, where shearing has opened up fluid pathways, resulting in quartz-carbonate veins with gold mineralization intimately associated with these veins. And on occasion, we also have seen fine, visible gold in these veins. This knowledge will allow us to optimize our exploration to future gold targets in the vicinity of Old Highway and further afield. At present, we have 4 focused project areas in the exploration pipeline at Doolgunna, targeting gold. Over the last 6 years, we have developed strong relationships with our exploration neighbors in the Doolgunna region. On the back of this, we have been able to form a number of alliances, allowing us to deploy our knowledge and technology onto highly prospective geology throughout the basin. We have been actively exploring across our joint ventures and are currently in the process of planning work programs to further define total basin scale architecture, allowing us to refine our exploration targeting for VMS deposits like DeGrussa and Monty. Many of the areas we are exploring continue to be untouched by VMS-focused exploration. And with DeGrussa and Monty being 2 of the highest-grade copper discoveries globally in the last decade, we're better to explore for high-grade copper. Furthermore, with the potential we see at Old Highway, we are also casting more vigilant eye over our greater land position for gold mineralization. As released on the 30th of October, Sandfire has now earned an 85% interest in and is the manager of the Red Bore joint venture with our partner, Ora Gold. Red Bore is literally situated in the shadow of the headframe, as we can see from the diagram, and with some of the deepest mineralization that's been mined at DeGrussa just in the order of 250 meters from the tenement boundary. Whilst there has been exploration completed on the tenement historically, we believe being able to explore the project, in light of the detailed knowledge we have developed over the time we've been mining at DeGrussa and in particular the C5 land, opens up a unique opportunity. Of note is that a majority of the exploration work, including geophysical surveys completed historically, was suboptimal due to being artificially constrained by the tenement boundaries. This is no longer the case, and we look forward to progressing exploration on the project rapidly. We are currently reviewing historical work, and we'll commence moving with electromagnetic surveys in the very near future. In Eastern Australia, Sandfire has been able to assemble a highly enviable exploration portfolio with greenfield through to near-mine exploration exposure. We have remained focused and executed to the exploration strategy of targeting Tier 1 deposits, like Broken Hill type deposits, Cobar-style deposits, large IOCGs and porphyries being prime in our vision. We are currently focused on exploring on our New South Wales projects with field crews working in Cobar at the current time. In the new year, when crops have been harvested in the Temora district, we will focus on exploration for porphyries with innovative geochemical processing in the off-season zoning us in to the priority target at fields Monza and Donnington. We will be commencing with IP surveys, shortly followed up by air core and diamond drilling. Other more mature projects within the portfolio have been selectively joint ventured out to quality exploration partners. In late October, we were also able to announce that we have signed a deal with CBH Resources, who were the operators of the recently mothballed Endeavor mine in Cobar, one of the iconic mines in a famous mining district, having commenced mining in 1983 and with mining reaching to depths of over a kilometer below surface. Under the terms of the deal, Sandfire can earn 100% interest in the tenement for a total payment of $30 million, with preliminary stages allowing earnings of 51% and 75% while with spending of $10 million and $20 million, respectively, on exploration. The deal gives us the opportunity to explore at depth around the mine where only minimal work was completed historically. We currently have 2 diamond rigs drilling deep, plus kilometer diamond holes along strike to the north of the mine and to the south to be used as downhole electromagnetic platforms looking for conductive mineralization in the favorable stratigraphy. Also, in the significant land holdings, we will be reviewing the geochemistry and geophysical data sets and evaluating the prospects with fresh eyes and leveraging off industry experts.

All right. If we move on to Black Butte project. So if we look at our Black Butte project in Montana, our key areas of focus have been to firstly continue to deal with the legal challenges associated with third parties that have challenged certain aspects of project permits and licenses. But more importantly, during this time, we've undertaken additional work to add value to the project. And in line with that, we have completed early surface earthworks on the site to establish the site as part of the critical path items for project development and to use for a springboard for future construction of the project. We're doing work on enhancing the outcomes of the feasibility study. And for the first time since Sandfire has been involved with the project, we are commencing exploration, targeting potential extensions on near-mine opportunities. As we progress through this phase, we will continue to make further key decisions on the project. On the 28th of October, the company announced the results of the Johnny Lee feasibility study. This includes a maiden ore reserve of 8.8 million tonnes at 2.6% copper for about 226,000 tonnes of contained copper, a mine life of 8 years at a 1.2 million tonne per annum mine and processing rates. And this provides an average annual production of about 23,000 tonnes of copper at a C1 unit cost of $1.51 per pound, pretax NPVs of 5% of $178 million, and overall construction capital cost of $274.7 million. Separate from the Johnny Lee feasibility study, the company has completed an update of the Lowry inferred mineral resource. The Lowry Deposit is 3 kilometers away from Johnny Lee and also represents another potential value-add opportunity for the project. It is planned that mining studies will be commenced later this year on Lowry and also potentially depending on our results of exploration in the area as well. As I touched on earlier, near-mine exploration targeting potential extensions of high-grade mineralization is one of the key areas to potentially add value to the project. And in early January, the company will undertake a diamond drilling program targeting potential extensions to the Johnny Lee lower zone to the east and the west, extensions to the Lowry lower and middle zones, and potential mineralization between the Johnny Lee and Lowry Deposits, and this is in an area that's virtually unexplored. Prior to the commencement of the drilling program in January, a 2-dimensional seismic survey will be conducted over the area. And in fact, just this week, we've completed the fieldwork to gather the data for this survey and analysis. The purpose of this work is to identify the location of key faults and structures associated with copper mineralization, and this will be used to enhance the geological interpretation and maximize the effectiveness of the exploration drilling program early in the new year.

As part of Sandfire's quest to create value through opportunity, we'll also look at incubating projects through Sandfire Ventures within our business. And just to round out this part of our business, we really are looking at -- for strategic investments that might come across our desk that give us, in one form or another, exposure to high-quality base metals and potential development assets. And as we sit at the moment, we are the largest shareholder in Adriatic Metals for our investments there over a long period of time, essentially between 14.2% rising soon to 16.2%. And also, as a consequence of an asset that was sitting in our portfolio post the acquisition of MOD, we ended up with essentially an 85% interest in Sams Creek Gold Project in New Zealand, which we were not doing much work on. We are in the process of divesting that asset into Auris Minerals. And ultimately, at the completion of that transaction, we will own almost 20% of that company and be a supporter of the work that they're doing in their quest to develop that Sams Creek Gold Project into a mining proposition. Our investments to date have cost somewhere in the order of $24 million and a current value of somewhere -- close to $70 million. So even this approach to our business is one of a disciplined -- commercial and disciplined approach, and we are looking to incubate opportunities that potentially can also grow into something bigger, depending on how that investment goes.

Optimizing capital structure is one of our key strategic focus areas. We, of course, will be building off the cash that we have on balance sheet at the moment, our holdings ended September, $304 million, and continuing to build that cash through DeGrussa's cash flows particularly at the current spot price. We have no debt. We are looking for the Tshukudu development to around 50% of development working capital numbers. So around USD 150 million is our current target. That was started -- that process, in terms of funding, was started with MOD and then picked up by Sandfire. And we expect to progress that quite strongly over the next 6 or 7 months leading into the middle of next calendar year. There will, of course, be some scope during that process as we look to develop -- continue to develop the A4 model and Motheo Hub concept and looking at a 5.2 million tonne expansion case as well. And we'll keep that in mind, of course, as we look to optimize that capital structure.

And as we roll to the completion of the presentation before we open the floor to your questions, which we look forward to, we are working very hard and have been working very hard over the last period of time and certainly during the last 12 months. We are very focused on the projects that we have in front of us and very focused on securing and achieving our strategic objectives in our business. We are looking to leverage off our strengths and the opportunities that we have, and we're looking forward to the future, the pipelines that we have -- pipeline of assets -- or appearing in our pipeline, the systems and the frameworks that we have built, leveraging off the relationships that we've got with a wonderful array of stakeholders in our business, including our financiers, our bankers, the equity markets, our shareholders, our customers and then utilizing the team that we have of some very focused women and men to actually take this company forward and to deliver value for our shareholders and leverage off the very strong platforms that we have put in place over the last little while. We are looking forward to the future, and we'd like you to be part of that journey with us. We're now going to open the floor to questions. So we look forward to answering those. It might help us if you state your name, and then we can take it from there. Thank you very much for listening to the presentation part of this webcast.

[Operator Instructions] Our first question comes through from Sophie.

I just wanted to get some clarity around the government being able to acquire up to 15%. Can you just go through what triggers that? Is there a drop-dead date which that decision has to be done by? And also, is it based on some capital at the time?

Sophie, it's Jason here. So to respond to your question, the government can review each project once and once only, and that is prior to the granting of the mining license. So as part of the process, Sandfire needs to submit a copy of the definitive feasibility study to the government. They will conduct a review of that. And then prior to the granting of the mining license, they'll advise us about whether they will take a stake in the project. Now that can be from -- anywhere from 0 up to 15% of the project. And then apart from that, once -- if they do take a stake in the project, they will have to carry their portion of any capital spend going forward.

Okay. And then can you also highlight what the tax rate is and whether you get any special tax concessions or -- and also the royalties, please?

Yes. Sophie, Matt. So the copper royalty is 3%. When it comes to tax, Botswana has a very, very attractive tax system. So over the life of the project, we expect it to probably land around 30% to 35%. But the attractive part of the tax system is that it's effectively, from a modeling perspective, cash-based. So you get upfront deductions for your capital works. That will be particularly important as we develop mines and T3 and potentially into A4 as well. That will assist that. But -- so over time, you end up with a low tax rate early because you've got the capital upfront and a higher tax rate, of course, on the back end. So that does assist us greatly with valuation and cash flow as well.

And Sophie, just to point out, the initial -- if the government was to make an investment -- a decision to make an investment, they also are required to refund the business 15% of its fund costs relating to each investment if they choose to make it. So that needs to be determined. There's a process to determine the sunk costs up to the point of making a decision to invest or not buy them. And if they choose to invest, they must repay the organization 15% but up to -- whatever the number is, their percentage interest in what they are seeking to acquire, to a maximum of 15% and post that point then contribute in cash the 15% of the capital expenditure from that point forward or whatever that percentage they determine is an appropriate investment if they choose to do that. Just to note that the mining license granted to our neighbor, Cupric, for the Zone 5 mine some time ago, the government chose not to invest in that project, just to give you a sense of what the most recent thing they decided.

Thank you, Sophie Spartalis from the Bank of America. Our next is from Daniel Morgan from UBS.

I just wanted to clarify one of the remarks you made earlier regarding the T3 and A4 project. I think you mentioned, if I heard correctly, that you're spending $20 million extra capital, which will enable the option of expanding the mill to -- I think it was 5 million to 5.2 million tonnes per annum upfront. And then there's a further amount, which was -- I think it was $30 million after that, $30 million to $35 million. Is -- that $20 million expansion capital, is that in the $259 million capital number or not?

Daniel, Jason here again. The $259 million doesn't include the $20 million. So the $20 million is over and above that. And you're right in what you articulated there. It's that we'll be basically scaling up a number of key components of the mill so they are able to cope with a 5.2 million tonne per annum processing rate, and then the $30 million to $35 million will be us putting in basically a 4-megawatt ball mill right beside our existing single-stage SAG mill. And all we -- the only other item that we need in addition is basically expansion of concentrate storage on site. Now having said that, we will also need to build about an 8-kilometer haul road out to the A4 site, and we've got dewatering and some satellite infrastructure that's required out there. Now all of those additional items are included in that estimate there, range from about $30 million to $35 million.

Yes. And holistically, with COVID still a big issue and impacting the movement of skilled people and slowing decision-making and things, can you just talk about how you're going to be able to get this project going with COVID still a problem?

So firstly, the Botswana government is very, very supportive of this project, and they've made -- they've given us a lot of communication that they will make every effort to assist us in terms of moving forward as rapidly as possible with the development of the project. The other point I'll make as well is that the Botswana borders until recently have been closed to manage COVID infection rates in the region. They've recently opened up their borders, and it is quite easy and we are able to get people in and out of Botswana on a regular basis as we currently stand with the COVID situation. As part of the DFS as well, we've taken into account that we'll be building this mine in a COVID environment. So we've made provision there particularly in the timing and the duration of the project to be able to account for that as well as coverage of our fixed costs associated with the project as an extended time over and above what it would normally take. And we've got provision and contingency there as well to take account of that.

I think the other important thing, Daniel, is there will be a larger element of in-country residential expats that will be moved from people seeking good jobs that we need to the extent we need them to go to a residential base rather than a fly-in, fly-out type of construction situation. It's not possible to do that. It is also worthy to note there are projects being built around the world as we speak. And I think good management teams and systems are amending the way within which they execute projects to ensure construction still occurs. And clearly, what Jason has just said but also in addition to that, a change in the style of a residential-based group that will be undertaking construction will cater for that.

Just a small follow-up. Where do you anticipate getting expat, non-Botswanan citizens that we'll need to help with this project? Where do you anticipate getting those people from?

So firstly, we expect particularly our operational workforce will be about 95% Botswanan citizens with a very small expat contingent there. As Karl said, the majority of those, we expect to have as residential. Now we can draw really on a number of areas. There's an established mining industry in Botswana, South Africa and West Africa that we believe we'll draw on. We can recruit out of Europe, and we can also recruit out of Australia as well.

Okay. And the last question, just the siting of the camp with regard to the A4 opportunity, was that because A4 has given you a lot more exciting exploration results than perhaps you've got elsewhere in the region? Or was that in mind when you started that camp versus some of the other regional opportunities?

It's really about we see Motheo as a processing hub, so having it in close proximity particularly to the process plant and the initial T3, A4 footprint. The other advantage to that location is it sits right next to the A3 Highway, which is -- if you like, it's the major highway for the country, and it pretty much runs along the belt for the bulk of our extent along the -- in that region.

Thank you, Daniel Morgan from UBS. Our next question comes through from Al Harvey from JPMorgan.

Just having a look, comparing side by side your DFS with MOD from March in 2019, I can see that the T3 resource has actually dropped down a fair bit. It looks like it's offset largely by the upgrade in A4. But just wanting to understand what sort of level of resources and reserves that you guys want to be seeing on the books before locking in a 5.2 million tonne per annum expansion?

For us, we believe A4 will get us over the line on the 5.2 million.

Right. And just another minor one, just with the next steps, you've got to do some land acquisitions or site infrastructure and whatnot. Is there any community sort of living around there? Is it all kind of just moose pasture there? Or are you going to have any issues moving on communities or anything like that?

So first, we don't need to relocate any communities, any villages, anything like that. The areas on the -- around the mine is all cattle-grazing areas, and we've actually bought key parts of farms in that area to cover the full footprint of the mine and the infrastructure -- or we're in the process of buying that. So it's just going through an approval process in Botswana currently.

Paul Young.

First question is on CapEx and again comparing the capital estimate versus the feasibility study that MOD completed. There's been about $100 million increase in the CapEx. The size of the plants increased a touch. But can you maybe just step through what drove that? Was it contingency? Has there been a little bit of escalation? And also, I'm interested in the owner's project costs of about USD 36 million. If you could just sort of step through what's within that.

All right. So I've got Ian Kerr, who's our project director here with me as well, and he might be able to provide a bit more detail once I finish. If we compare the 2 projects overall, there's 3 key areas that -- where we've seen an increase in the overall capital. So firstly is the corporate and owner's costs, and I'll ask Ian to drill down on that a bit more after I finish. Contingency, we've increased from about $12 million to $24.5 million. And the overall mining establishment and the prestrip has gone up significantly as well. So in particular, the improvements that we've made since the MOD one in -- particularly in that mining establishment and prestrip, we've used fully tendered mining rates to estimate our prestrip costs for the project. And we've also redesigned our pit staging and the overall pit design there to make sure that we've got a very robust mine plan that we're confident we'll continue to deliver ore feed through every stage in the mine life. So we've invested in reliability in that respect. Ian?

Just on the owner's costs, the owner's cost is a traditional buildup of space, the owner's team, the owner's project management team both here in Perth and in Botswana. It includes the operations team buildup. And one of the key costs here is we're running a mining operation for 12 months during the construction period. So there's a significant operations team there to manage that process. We've also added in, which was not previously there -- it's a fully-fledged office in Gaborone, in the capital. We're setting up Motheo as -- to be a long-term business. We need a fully fledged office that can communicate with government and manage the business setting in Gaborone. So all of those costs have increased the numbers.

Okay. That's useful. And then also on the waste stripping, ongoing waste stripping in that early 5 years where it's above sort of the average life of mine strip ratio, is that all included in operating costs? Because I know MOD included that as -- included a capital or capitalized part of that waste stripping. Is that all in OpEx?

It's all in OpEx. Yes, yes.

Okay. That explains it. That's great. Second question is on the reserve and recoveries. There's been a slight decrease in the reserve grade. It's only slight. I acknowledge that. Can you just maybe step through what drove that? Is it just simply just lowering the cutoff grade? And also -- and obviously driven by higher copper prices. But also just on recoveries, I do know the average is 90%. But in the early years, you do have that sort of native copper zone on the top there. Have you sort of excluded part of that? Or are you expecting lower recoveries through that top part of the ore body?

Let me -- it's Ian here. Let me talk to the issue on the reserve. We've increased the amount of dilution, which has reduced that, along with a slightly lower resource grade. So we've seen a marginally lower overall reserve grade. Plus our operating costs with a higher copper price have allowed us to go with a lower cutoff grade. But they're all in a very small percentage movement relative to what was there before.

And in terms of metallurgical recoveries as well, so we've factored that into our estimates. Per se, there's not a native copper zone sitting on the top of this ore body. But we have factored in and we've done a lot of work particularly on ore body characterization, and we've factored those into our estimates as we go through the life of mine schedule.

Okay. Great. That's great. One final question from me and maybe it's for Julian actually on exploration at A4. I think it's on Slide 37 or thereabouts where you disclosed or showed some high-grade intercepts at A4. And you say that it's within the optimized pit shell but it's actually -- you actually got the assays post the maiden mineral resource. Have you actually seen grades as high as this in the drilling that forms part of the mineral resource? Or is this like -- can you maybe just step through that and, I guess, what the significance of it is?

Sure. Paul, it's -- these really are sort of standout grades that we're seeing, and what we see in the core is quartz vein hosted mineralization but also massive chalcocite and bornite veins, which is really a first for this project. So we do see the quartz vein hosted mineralization elsewhere in the A4 resource but not at these levels of grade. So at the moment, as we said, we've got infill drilling going in around these holes and deeper holes. I'm just trying to scope out the scale of this sort of high-grade vein system that we're seeing at the eastern end of the deposit. It is -- as you correctly say, it's not included in the resource. So clearly, we want to find out the significant and the potential impact on that resource grade if we capture these high-grade holes into that. So I don't know if that answers it exactly. We do see this style of veining in T3, as I mentioned, but generally speaking not at this level of grade and without these levels of silver as well. We're up to -- I think we're nudging 1,000 grams of silver in 1 intersection and 9% moly. That's unheard of. So it's forcing us to reevaluate the deposit style, the geology -- geological controls of these deposits but also the potential for these high-grade veins.

Yes. And what can you -- just step through again the time frame on the drilling at A4 and getting to a potential reserve and wrapping a mine plan around that and actually making a decision on A4 concurrently with, I guess, the plant expansion.

Well, I guess I'll start off if you like. What we're looking at is wrapping up the drilling as fast as we can, but it will be early in the new year to wrap. And we could keep drilling and teasing out extensions here, but we need to put a line in the sand [ to the sink ] and move ahead.

Look, we'll also be -- as soon as we've got all those drilling results, we'll be moving forward into resource estimation and then look at reserve modeling for that as well and underpinning with pre-feasibility studies. So that will be in the first half of next calendar year.

Thank you for your question, Paul Young from Goldman Sachs. And our next question comes through from Peter O'Connor from Shaw and Partners.

Congratulations on a very comprehensive presentation. Just a few clarifications from me. Firstly, the royalty rates, Matt, you mentioned 3% for copper. Silver and moly, is there any applicable rate? And what are they?

Yes. It's 5% for silver.

And I don't know the...

I don't know the moly rate. Moly is fairly new to us, and we'll have to look it up.

Okay. Got it. And tax rate, you mentioned obviously 30% to 35%. That's the average over the life of the project, 12.5 years. Just to be clear, so all development CapEx accelerated depreciation upfront dollar for dollar? So 0 tax over the first couple of years?

Yes.

And what is the [indiscernible] rate in Botswana at the back end?

It varies. It's on a scale. It's profit-based.

It's on a scale. So it's profit-based. So that's why we give this sort of 30% to 35% range over the project.

Okay. The WACC you used at 7% in Botswana -- and I note the one from the U.S. is 5%. Just talk me through your development of WACC for these projects. It intuitively seems low. I'm just wondering why you landed on those numbers.

Yes. We looked through it. There's obviously different opinions on what it should be in terms of cost of capital expectations. We thought maybe in the sort of 7% to 8% range was reasonable, and we went with that. Obviously, others will have -- can have different views and will model them differently.

Okay. Got it. And on financing the project facilities you're looking at, what sort of rates are out there at the moment? Firstly, how constrained would they be in your access to cash in the early years? Are they more onerous or less onerous now than project facilities were in the past? And what are you seeing out there at the moment?

Yes. They're still very competitive, and we've been pleasantly surprised at the attention -- the continued attention from banks. And particularly this project has gone into feasibility and then, of course, with things like A4 coming in. But we were out to a process now with the feasibility study with term sheets and sharpening up pricing. So I wouldn't like to comment on those other than to say that they remain -- from what -- the indications we've seen so far, they remain competitive, and there's certainly enough potential on this project that we think we'll get some pretty sharp rates. So that's what leads us to that. They target USD 150 million for construction and working capital facility, and we would -- as a secondary target, we would like to see that in-country, in terms of security in-country through -- into African and into European banks.

Just back to the government stake at 15%, it relates to a mining license. How extensive is the mining license you're applying for? Does that cover T3, A4 and anything else? So if you go back with another part to the Motheo Hub, does that mean the government has another in for 15%?

No. The government has made it very clear that it's an upfront decision. And so if they elect to come in upfront, then anything else that gets rolled through T3 or rolled through Motheo, they would be involved with. But if they elect to not participate, then they don't get another go at it.

So have you cast the net of your mining license to be broad enough to pick up all your likely targets to cover that?

No. The mining license covers the T3 area. There will be a second mining license application for A4. But because it's being processed through the same plant and is effectively part of the same project, it wouldn't have an opportunity for the government to come in again.

Okay. Got it. And Matt, can you give us a CapEx profile quarter-by-quarter or half-by-half, what the spend would be like for that, the capital, over the '21, '22, '23 period? Do you have that handy? Or can you give it to us at some stage?

Yes. We can provide that.

Yes.

But like most projects, you'll spend -- you'll make a lot more commitments upfront and most of your cash spend is at the back end. So it's probably 1/3 of the expenditure in the first year and 2/3 in the second year.

Okay. And Karl, can I segue to Red Bore. How do I think about Red Bore? Is that because of the dispute between the current or the prior owners, that's precluded them from developing knowledge of the resource or understanding the resource, so it's more prospective than it seems? Because looking at the numbers that have been published on the resource base, it doesn't look that big a deal, but clearly it is. So I'm just wondering what has clouded that time to date.

Yes. It's Shannan here. The real interest at Red Bore is the depth. Some of the deepest mineralization that we mine out of DeGrussa, the C5 land, some 250 meters from tenement boundary. And there's been very little testing of that horizon at depth under that tenement. A lot of the geophysical surveys as well, they haven't been of a breadth large enough to actually look at this due to the very small nature of the tenement. So now that we've got control of that, we can actually go in and do geophysical surveys with much longer line spacings that will really give us some depth view into it. And plus our geological knowledge of the district around that Red Bore tenement is really quite well developed. And we've also held up -- historically, it's a fairly close-guarded intellectual property of the business, which has led to a little bit of work on that tenement that's led us into still having wonderful opportunities there.

Thank you, Peter O'Connor from Shaw and Partners. Our next question comes through from Nick Herbert from Crédit Suisse.

Just a couple from me, please. Can I just touch again on the timing -- or sort of conceptual timing around the expansion? You mentioned the feasibility study first half next year, the A4 resource, which you think could get you over the line. Can you just sort of bridge sort of what that means for a potential investment decision there, whether that is possible in the second half of next year and then the time frame from investment decision to the commissioning?

The expansion of the plant will be a 12- to 15-month process. That can't take place until we have environmental approval. Environmental approvals, we will be submitting before the end of next year. We may be taking a commercial decision ahead of that. And then prestrip is likely to be about a 12-month process. So we see ore from A4 feeding into a process plant at the beginning of 2024 calendar year.

Okay. Great. And then, Karl, you mentioned the neighboring project, I didn't catch the name, where the government didn't take any equity stake. Are you able to offer any more examples of major projects in the region and what government stakes were taken in those, if any?

I will look around the room to see if other more experienced gentlemen and people who spend a bit more time in Botswana might know. We do know at the time of independence when the Botswana Diamond Act was in place that -- and really, I suppose, the backbone of the country and its independence commercially was founded off the back of a 50-50 joint venture between Botswana, the country, and also De Beers/Anglo American in those 2 major diamond pipes, formed the organization called Debswana and relating to the Jwaneng and Orapa mines. So that was -- there was a particular diamond act in Botswana purely just dealing with diamond mining. The rest of it is the other mining act. As we said, the neighbor to the northeast, it's owned by Cupric Canyon, in turn owned by the GNRI, a private equity out of London. The project is generally called Khoemacau, and they're developing the Zone 5 mine as we speak. So there was no interest taken by the government at the time then. There have been other projects, and I'll just look at Julian and Jason across the table to see if there's any other further updates where the government have done anything in recent times on major projects, not that I'm aware of.

No. The 15% option there, Nick, is really taken up. The government really doesn't -- really only look at projects of national significance -- national importance, really taken up.

Thank you, Nick Herbert from Crédit Suisse. Our next question comes through from David Radclyffe, Global Mining Research.

So maybe just changing gears here. So I've got a question on Black Butte. Maybe could you provide some more color, I guess, on the current legal challenge, how it is today, what the next steps are, and then what limitations, if any, it places on you because it sounds like you can still drill.

David, it's Jason here. So where we currently sit at the moment, we're -- if you like, we're going through the process. So really, over the last few months, there's only really been meetings to arrange, future meetings to go through the process there. We expect the hearing on the legal challenge for the Record of Decision to occur in May next year. So that's the next key milestone for us. Other than that, mostly the DEA in Montana are preparing papers, and they'll be submitted probably later this month that will contribute towards the overall hearing later next year.

And just a point to note is that at the time the Record of Decision was made, there was no -- as much as there is a legal challenge, there was no injunction requested by those groups. So whether that has any indication as to the sensitivities, I don't know. But there was no injunction made. So we have got a valid record of decision. We have got effectively a valid mining license. We have been able to undertake that critical works, and there's actually nothing technically stopping us from doing the work that we're doing. So -- but we do need to deal with the legal challenge when it arises. But it is interesting to see the strategy that has been -- that has evolved, I suppose, to date.

Okay. So then in terms of follow-up, with Botswana now approved, and if we get to May or thereabouts and this is resolved sooner rather than later, how would you look to progress it given the commitments you've now made to Botswana? Would that be something you'd be happy to proceed with at that time? Or do we see this pushback?

I think, David, the -- from our perspective, the other important point for us is to ensure that the project works and works well. There will be some -- there's activity on the ground. And as Jason mentioned earlier, for the first time since Sandfire's investment into what is now called Sandfire America, an independent company listed on the Toronto Venture Exchange with a market capitalization today of some $200 million, is that, that company and its Board will determine its best strategy. Clearly, as an 85% shareholder today, we have a significant impact on maybe the thought processes for that company's Board as a large shareholder. But I think we would want to probably take it forward, but we'd also like to see probably an improvement or betterment of the numbers that have dropped in the maiden feasibility study. So I think there'll be a process of the work that we're doing on the ground, looking at ways in which we can optimize situations and improve maybe timing of things to get a more robust and better approach. That would be a sense -- that would be a positive thing, and that may take some time. And hence, at the beginning, now having a mining permit on -- in hand, it's a sensible time to actually now drive forward and trying to enhance that value. I think the timing as a consequence of trying to do those things, it will take a little bit of time. But clearly, there is an intention for that company's Board to -- now that it's got the basis of some value created from the issue of a permit, it's to enhance that value and make decisions for each timetable. We don't -- we think at the time that, that project could be developed, it will be sensibly developed and taken forward and the Board of that company will decide. And we don't see that it, because of what's happening in Botswana, will inhibit in any way moving that project forward when it makes sense to move it forward with intensity and vigor. But it will take some time to get through what is in front of us there at the moment. There'll be a natural time frame.

Thanks for your question, David Radclyffe from Global Mining Research. That was our final question over the phone. I'd now like to hand back over to Nicholas Read.

Thank you. Before we hand to Karl for closing remarks, we have received an online question. So I'll just put that to the Sandfire team. I think this is possibly one for Julian. Can you please advise or provide an update on Sandfire's activities and progress in Namibia?

Yes. Thank you very much for the question there. Considering we've got over 6,000 square kilometers of licenses covering the copper belt as it extends westwards from Botswana into Namibia, we've been very keen to get on the ground, but COVID -- there's been a bigger impact of COVID in Namibia than Botswana. And only now the borders are starting to open up. So we can start looking at getting people into that country. In the background of that, we've appointed an exploration manager, and we're building a team based in Windhoek so we can start moving things ahead. We've acquired all the regional magnetic data, and we're reinterpreting that and trying to get a structural framework and identify targets as a result of that. We know there are large domal structures very similar to what we see in Botswana under sand cover that are effectively undrilled and some very appealing structural opportunities extending into the country there. I guess the other thing, too, what we're planning in the early part of 2021 is that we're currently flying right up against the Namibia and Botswana border with the airborne EM survey, and we'll see what those results deliver. If we start seeing the same sort of responses that we're seeing in the T3, A4 region extending to the border, then clearly, we're going to extend that airborne EM survey to the west and into Botswana, and we're already being approached by airborne EM contractors to conduct that work. So I think we really regard 2021 as the year that we really start to open up shop and get moving in Namibia. There's minimal outcrop same as Botswana. There's minimal prior drilling same as Botswana. The lessons that have been learned by our team in-country and from the Sandfire team here will carry into Namibia. So we look forward to getting on with it as soon as we can.

Thanks very much, Julian. We'll now hand back to Karl for some closing remarks.

Thanks, Nicholas, and thanks to the team at the table here today. And thank you all of you for listening in to this webcast, strategic update. We look forward to continuing to keep the market abreast as we go forward. It's a very, very exciting time for Sandfire as we go through into a new era and look forward to the future for our business. We will continue to work very hard to execute the delivery of the strategy that we put forward here today to look at other sustainable production opportunities that might fit the criteria, the very key criteria that we've set, disciplined criteria that we have got. We will work hard in our exploration endeavors, and I can see that accelerating. And that acceleration of exploration and the quest for discovery will essentially be driven by success. So as we have more success, we'll work harder to bring forward and create that value through these wonderful opportunities, having secured such significant scale of opportunities, whether it be in Western Australia, New South Wales, Botswana and also opportunities opening up in North America. We'll ensure that our people do have what they need to get the job done, and those people are people -- capable individuals that can deliver, and we look forward to delivering and we will manage our affairs, our finances and have a very good understanding of what it is out there in the marketplaces that we can utilize and leverage off the strengths and the resources and the capacity and the tools that we've got at our disposal, and we look forward to delivering value, and we look [ forward to the ] future. Thank you very much once again for your attention today.

Thank you. And that concludes the Sandfire Resources Investor Update Strategy and Outlook Call. We'd like to thank you all for joining us, and thank you for your interest in Sandfire. You may all disconnect.