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Sandfire Resources share price drops despite strong quarterly production

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The Sandfire Resources Ltd (ASX: SFR) share price has been on the move over the past 2 days, after the mining and exploration company released its December 2019 quarterly report to the market yesterday.

Sandfire Resources shares closed at $5.60 yesterday, up by 1.25%, but have since fallen in today’s trade. At the time of writing the Sandfire share price is down by 4.06% to be trading at $5.44.

What does Sandfire Resources do?

Sandfire Resources is a mid-tier ASX 200 Australian mining and exploration company that operates the DeGrussa Copper-Gold Mine, located 900km north of Perth in Western Australia. It is a high-margin mine that produces high-quality copper-in-concentrate with significant gold credits. Sandfire also holds a portfolio of projects in base metals, iron ore, manganese and gold.

Sandfire Resources has developed a strong operational base and has in place a strategy to evolve to become an international diversified mining company. The cash flows generated from the DeGrussa Operations underpin an exploration and business development program, delivering a global project development pipeline that spans Asia-Pacific, Europe, Middle-East and Africa, and the Americas.

What did Sandfire Resources announce yesterday?

Sandfire Resources announced that the DeGrussa mine delivered strong quarterly production, with continued strong mine production and milling rates maintained for the quarter.

During the quarter, 18,258 tonnes of contained copper and 10,723 oz of contained gold were produced, which is a 9.1% and 24.0% increase, respectively, on the previous quarters.

During 1H2020 it produced 34,988 tonnes of contained copper and 19,370 oz of contained gold produced. 

Total ore production for the quarter for both DeGrussa and Monty mines was 407,904 tonnes with a grading of 4.9% Cu compared to 3.9% in Q1FY2020.

Sandfire’s FY20 guidance is 70 to 72 kt of contained copper and 38 to 40 koz of contained gold.

DeGrussa sales operations reported half year revenue of A$313 million (subject to auditor review), and 7 shipments were completed during the most recent quarter.

Sandfire reported group cash on hand at 31 December 2019 of $201.7 million, following a $46 million payment to complete the acquisition of MOD Resources Ltd and payment of a $28 million interim dividend to shareholders.

Update on projects underway

Sandfire Resources gave an update on several of its development projects. Highlights include:

  • The optimisation of the feasibility study for the T3 Copper-Silver Project in Botswana which is currently underway focusing on open pit optimisation, plant scale and operating costs. ESIA approval and grant of Mining License for the T3 project is expected in the March 2020 Quarter. An Updated Feasibility Study and Ore Reserve is scheduled for June 2020 Quarter, with project funding and a decision on whether to mine to follow after that.
  • Final Environmental Impact Statement (EIS) and Record of Decision (ROD) for the Black Butte Copper Project in Montana is expected in the near-term, with a Feasibility Study to follow.
  • An updated NI 43-101 Mineral Resource estimate was completed for the Johnny Lee deposit at Black Butte.

Update on exploration activities

Exploration programs have been continuing across Sandfire’s Greater Doolgunna Project.

Also, an expanded exploration program at the Tshukudu Exploration Project in the Kalahari Copper Belt has so far delivered strong early results with a significant new zone of copper mineralisation, 8km west of the T3 Project.

In addition, drilling continues at the Temora project in New South Wales for the discovery of higher-grade porphyry style deposits at the Monza prospect.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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