It replaces an existing contract with Australian Contract Mining and has a three-year term, with Sandfire having an option to extend for a further two years.

It is the single largest operational contract at DeGrussa, employing about 150 people and using some 30 items of underground mining equipment and associated surface support.

The implementation of the contract is expected to reduce gross mining costs at DeGrussa by more than 10%, including reductions in anticipated mining, decline development and underground sustaining capital.

Sandfire said the expected reduction in mining costs was in line with its strategy to improve efficiencies and streamline all aspects of DeGrussa.

“I would like to take this opportunity to thank ACM for their significant contribution to the success of the DeGrussa operation over the past three years during the underground mine development and the successful ramp-up of the operation to a steady-state level of 1.5 million tonnes per annum,” Sandfire managing director and chief executive Karl Simich said.

“We want to build on our excellent track record at DeGrussa to ensure that we remain one of Australia’s most efficient, profitable and safe underground mines for many years to come.”

Sandfire chief operating officer Michael Spreadborough added that the company had established an implementation team to work closely with Byrnecut and ACM to assist in managing a seamless and efficient transition with limited disruption to mining operations and production.

“Once Byrnecut is fully established at site, we will be working with them to further strengthen all aspects of our underground operations including productivity initiatives and safety systems,” he said.

Last month, Sandfire reduced the balance of its $380 million project finance facility for DeGrussa by $10 million to $170 million with an early repayment.

It leaves one repayment of $10 million in the 2014 financial year, which will be made before June 30.

The mine produced 18,098 tonnes of copper and 10,035 ounces of gold in the March quarter.

Shares in Sandfire were last trading 1.6% down at $5.98.