Now what happened to the Sandfire Resources share price on Tuesday after the company released its first results to include a contribution from its big Spanish copper mine acquisition?
It fell – 3.6% to $4.55, off the back of what appeared to be a mixed message from Sandfire but which was logical if you thought about how it was explained.
The shares fell nearly 9% at one stage after the company reported record sales and also released positive news of its Matheo Copper Project’s (in Botswana) planned expansion.
The company’s decision to drop its final dividend didn’t help matters.
The explanation from the company was ignored initially – Sandfire said it had taken the decision to drop the dividend to concentrate on paying down debt taken on for its $US1.86 billion move into Spanish copper mining and processing in February and to help finance other explanation programs, especially growth at its big copper mine in Botswana.
The ditching of the final leaves shareholders with just 3 cents a share from the interim and no repeat of the 26 cents a share final from 2020-21.
But with interest costs rising as rates rise generally, and inflation in mining development and operating costs also on the rise, it makes sense for a company like Sandfire to contain cash outflow and redirect it to cutting debt (which is a cost), pay for expansion and have enough on hand to help relieve any cost pressures, especially in Spain.
While Sandfire lifted EBITDA 33% to $447.3 million in the year to June, statutory after-tax profit fell 13% to $114 million.
Sandfire also reported a record $922.7 million of sales revenue, up 52% thanks to the purchase of the MATSA business in the year.
The move into Spain and expansion in Botswana comes as the company’s foundation DeGrussa mine in WA approaches the end of its life in a month or so.
A positive definitive feasibility study for the Matheo project has been completed for the project’s expansion. That’s expected to up its annual production to 5.2 million tonnes and will likely cost just on $US400 million.
The combined total ore reserve for the project’s A4 and T3 deposits now sits at 49.6 million tonnes at 1% copper and 14 grams to the tonne of gold for 474,000 tonnes of contained copper and 122.3 million ounces of contained gold.
The company sold 93,827 tonnes of copper, 32,328 tonnes of zinc, 28,618 ounces of gold, 3,312 tonnes of lead, and 952,000 ounces of silver in the period. Its average realised copper price ended up at $US8,985 per tonne while that of zinc was $US3,249 a tonne.
Sandfire will pay $US118 million of its $US650 debt facility taken on its MATSA acquisition in September (it closed in February of this year). Another $US80 million will go to the facility next January.
As well, work on the Motheo expansion (to cost almost $US400 million) is expected to begin in the March quarter of 2023 with increased plant throughput expected 12 months later. Initial production at the project is expected in the June quarter.
The company is also working to optimise operations at MATSA.
After processing finishes at DeGrussa in October, Sandfire will proceed to a ramp-down and mine closure operation over the next couple of months.
No wonder Sandfire dropped the final dividend and, at this stage, this year’s interim looks in doubt as well.
