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SFR - SANDFIRE RESOURCES LIMITED


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from 'speccie' to producer

 

It is easy to lose track of the scale of what is happening, in resources development, when things are reduced to 3 letter codes, and abstractions.

 

Sandfire SFR have an announcement out 17 Feb - DeGrussa Project pictorial update . well worth a look; photo on p11 - that's a small town they have built.

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Recent Bloomberg article on copper - http://www.mining.com/web/copper-traders-m...s-future-metal/

 

And, FWIW, a recent upgrade by Credit Suisse

Credit Suisse has upped its outlook on copper prices as the market continues to strengthen.

 

It now forecasts copper to average US$2.65/lb in 2018, up from a prior forecast of US$2.05/lb.

 

Copper prices have firmed from $3.09 per pound to $3.15 over the past few trading sessions.

 

Prices have risen by around 50% over the past year against a strengthening global economic outlook as well as expectations that copper will see rising demand from electric cars.

 

On the supply side, long-term geological scarcity is also a bullish factor for prices.

 

Credit Suisse named Australian miners OZ Minerals and Sandfire Resources as some of the likely beneficiaries of copper`s buoyancy, raising its price target on the two miners.

 

Read more: Credit Suisse raises copper price target | Capital.com

https://capital.com/credit-suisse-raises-copper-price-target

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It is no secret that acquisitions are set to be on the agenda for Sandfire Resources, but there is a growing belief that the most likely targets are Metals X and Panoramic Resources.

 

Sandfireâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s market value is $1.19 billion, but Metals X is worth $251 million and Panoramic $232m so both would easily be within its grasp..............

https://www.theaustralian.com.au/business/d...1e2070550f6f54e
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Sandfire Resources (ASX: SFR) saw its June quarter and 2021-22 production nicely boosted by its big Spanish copper and zinc purchase, MATSA which delivered a repayment on the more than $A2.7 billion acquisition price

But like so many other resource companies, rising costs (general inflation and especially energy), labour shortages (Covid) and weakening prices (especially for copper and gold) have clouded the outlook for 2022/23.

Thanks to the purchase of the Spanish based miner, MATSA and another solid result from the Degrussa operations in WA Sandfire said it exceeded its full-year guidance for its key minerals, such as copper and zinc

Sandfire produced 34,974 tonnes of copper in the June quarter, 21.5% above the previous quarter. This saw total copper output rise to 98,367 tonnes for the year to June and nicely above the 92,000 to 95,000 tonne forecast from management.

Zinc production jumped 42.8% in the June quarter compared to the March quarter to 22,880 tonnes. Full year zinc output totalled 38,907 tonnes, nearly 1,000 tonnes above Sandfire’s full year guidance.

Quarterly output of lead and silver came in at 2,201 tonnes and 800,000 ounces, respectively. That saw full year lead output of 4,102 tonnes and silver, 1.5 million ounces.

This compares well with management’s full-year guidance of 3,000 tonnes of lead and around 1.4 million ounces of silver.

Sandfire’s $US1.87 billion MATSA purchase also delivered in another way; a significant upgrade in its reserves.

Sandfire said the proved ore reserve estimate increased by 41% to 26.2 million tonnes at 1.7% copper and 2.7% zinc.

Contained ore tonnes have increased by 3% with an 8% decrease in contained copper and a 5% increase in contained zinc since the previous Ore Reserve estimate stated as at 31 July 2020. This replaces mining depletion over the intervening two years, Sandfire noted in its report this week.

But as pointed out earlier, rising costs are a big concern for the company (and the entire sector). The group C1 cash costs surged more than 34% quarter on quarter to $US1.57 a pound. This pushed the full year C1 costs to $US1.27 a pound. The company does not see those pressures easing and it warned that 2022-23 C1 costs will reach US$1.57 a pound.

Investors noted the apparent downgrading of copper output in its 2023 guidance.

Sandfire issued a fairly wide production range for the new financial year of between 81,000 and 89,000 tonnes. That’s well below the 98,367 tonnes it delivered in 2021-22 and under the earlier guidance for last year as well.

But the takeover of MATSA will give its zinc output a big boost to 78,000-83,000 tonnes for the coming year, while lead should increase to between 6,000 and 10,000 tonnes for the year.

Sandfire CEO, Karl Simich, said in Thursday’s release:

‘We are delighted to report on an outstanding June Quarter, which caps a transformational year for Sandfire and positions our business for long-term growth. This should provide investors with a clear insight into the strong cashflow generating capability of our expanded global business, with the MATSA operations generating an EBITDA margin of 51% for FY2022 – a very strong result by any measure.
The strong margins and cashflows were achieved despite increasing costs. This is a global trend which reflects the impact of rising fuel and energy costs across all the jurisdictions where we operate, as well as significant labour shortages and the impact of COVID-19 in Western Australia. As a result, Group C1 unit costs came in slightly above guidance at US$1.27/lb of payable copper, which we think is still a very creditable result.
Operationally, we were very pleased with MATSA’s performance during the Quarter, as well as the strong progress with our operational integration, optimisation and excellence programs.
Elevated energy costs in Spain remain a challenge and were reflected in C1 unit costs for MATSA of US$1.81/lb for the quarter and US$1.45/lb for FY2022. We are progressing a number of responses to this situation, including the planned construction of new solar farms, engaging with electricity suppliers for new contracts and investigation of other pricing structures.
At the DeGrussa Operations in Western Australia, our team delivered another quarter of safe production despite the challenges of COVID-19 and ongoing cost pressures, with the operation continuing to generate strong margins and make a strong contribution to our Group production.
This will continue for another four months, with mining expected to be completed in September 2022 and processing to wind up in October. We have developed a detailed care and maintenance and mine closure plan and have implemented high-quality retention and engagement programs with our staff and contractors, to ensure a smooth and seamless transition.
The strong cashflows generated during the quarter saw us finish the year with cash holdings of US$463.1 million and net debt of US$324.7 million. We remain well placed to make the first repayment due under the MATSA facility of US$118 million at the end of September, together with repayment of our ~US$138M (A$200 million) ANZ corporate facility in Australia.
Commodity prices experienced significant headwinds towards the end of the quarter, with both copper and zinc prices moving significantly lower. While delivering production into lower commodity markets in the near term will have an impact on our business, we remain extremely positive on the longer-term demand outlook for the metals we produce, Mr Sumich said.

https://www.sharecafe.com.au/2022/07/29/another-busy-week-in-the-local-mining-space/

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