Australia's Sandfire Resources a Buy: Analysts

Copper prices posted their biggest one-day loss on Monday, hurt by weaker-than-expected U.S. manufacturing data, erasing gains made earlier on a deal to raise the debt ceiling.

Still, analysts say a shortfall in copper supply this year could boost prices, and in turn, the shares of one Australian copper miner Sandfire Resources.

Sandfire Resources mine in Western Australia will begin full production in early 2012.
Sandfire Resources mine in Western Australia will begin full production in early 2012.

The company, which will only begin full production from its DeGrussa open-pit mine in the first-quarter of next year has already seen its shares rise to near record highs.

RBS Morgans' Resources Analyst James Wilson says the company is an "exciting play" and that when its production comes online, shares of Sandfire should surge even further.

Wilson is not alone in his views. Fat Prophets' Wealth Management MD Chris Kimber has long had a "buy" recommendation on the miner. He says Sandfire has some of the best copper available, and it is even more attractive after locking in A$360 milllion of financing from ANZ Bank just last week.

Sandfire's rise over the last 2 years has been rapid, even by the standards of Australia's resources industry, considering the company first discovered copper and gold in April 2009 and mined its first ore on July 1st this year.

The miner is also spending between A$20 million to A$30 million on the exploration of its Doolgunna project over the next 12 months. RBS Morgans' James Wilson told CNBC this will be an important driver for the company.

"If Sandfire makes another find, you'll see its share price instantly double."

There is also continual talk of M&A activity that's been boosting the company's shares. OZ Minerals is an 18.8 percent shareholder in Sandfire, buying its stake for A$100 million last year. There's been speculation OZ Minerals could make a play to buy the rest of Sandfire.