Sandfire Resources’ big move into the Spanish base metal sector has produced results straight away with the company now very confident about meeting its updated June 30 estimates – and market noticed and bumped the shares up more than 12%.
Sandire bought the MATSA mining and processing operation last year in Southwest Spain for $US1.865 billion and took control from late February this year and (a bit like Newcrest with the Pretium takeover from March and the Brucejack mine), the impact of the deal emerged in the March quarter report.
For the three months ended March, Sandfire reported sales revenue of $US343.1 million and earnings before interest tax depreciation and amortisation (EBITDA) of $US186.9 million.
This was underpinned by a significant jump in copper production thanks to the purchase of MATSA. This acquisition contributed operating EBITDA of $US98.6 million during the quarter.
Sandfire says is on track to achieve its production guidance of 92,000 to 95,000 tonnes of copper in the year to June which will be higher in 2023 when revenues should easily rise to around $US1.2 billion with the contribution from a full year from the Spanish MATSA assets, depending on world base metal prices.
Investors lapped up the report and surprisingly strong figures and pushed the shares up 12% to $5.82.
Sandfire CEO, Karl Simich said in the release the purchase of MATSA has made a strong initial contribution to the Group’s production, “which is in-line with expectations and, combined with another robust performance at DeGrussa, (In WA) puts us on track to achieve our updated Group production guidance for FY2022.”
‘The pressures of global cost inflation combined with the ongoing consequential impacts of COVID- 19 transmission, remain significant challenges for the resource sector globally. Sandfire is not immune from these challenges and, as a result, we have increased our C1 unit cost guidance for FY2022,” he said.
A small negative – not unexpected- was that Sandfire has increased its full year cost guidance. Driven by global inflationary cost pressures, the company has updated its full year C1 costs guidance to $US1.19 a pound. This compares to its previous guidance, which was also increased, of $US1.10 to $US1.20 a pound.
‘While cost inflation and rising energy costs in Europe are undeniable challenges, it’s important to remember that these same cost pressures are helping to drive up the prices for the metals we produce – many of which are at multi-year or all-time highs,” The CEO wrote in the ASX release.
“This means that we are generating very healthy EBITDA cash-flow margins across the expanded business – as reflected in the strong sales revenue, EBITDA and operating cash-flows reported for the Quarter. This provides investors with some insights into the increased depth and financial capability of the expanded Group moving forward.
‘We also made excellent progress during the Quarter with our key growth project, the Motheo Copper Mine in Botswana. Pleasingly, we have been able to keep the project schedule on track and on budget despite the global labour and supply challenges. A number of important milestones were achieved, culminating in the start of open pit mining towards the end of the Quarter,” he added.
