Results from the latest round of drilling at Black Butte have returned some impressive results including 3.19m @ 19.46% Cu from 472m and 2.79m @ 11.82% Cu from 365m. The drilling results are part of a larger program designed at extending the resource for the Johnny Lee Lower Zone. The Black Butte project is owned by Sandfire Americas (SFR TSXV, Not Rated), which SFR has an 87% interest. Post the completion of the current drill program, Sandfire America will move Black Butte into a feasibility study page. This will require US$20m in additional funding. If SFR fully underwrote the US$20m placement, its interest in Sandfire America rise to ~88%. Advancing Black Butte towards production presents upside risk to our base case for SFR, with our valuation attributing only US$130m to the project. We reiterate our BUY rating and A$12.30 price target on SFR.
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