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Sandfire Resources share price rises on 1H20 earnings release

mineral, sands, mining

The Sandfire Resources Ltd (ASX: SFR) share price is moving higher today after the ASX miner released its half-year earnings to the market this morning.

The results showed solid revenue and profitability growth, driven by strong performance from Sandfire’s DeGrussa operations in Western Australia.

Sandfire shares are currently trading 1.16% higher at the time of writing at $5.22 apiece.

What did Sandfire announce?

For the six months to 31 December 2019, Sandfire reported total revenue of $313.1 million. This result comes in 15% higher compared to the $272.3 million of revenue recorded in the prior corresponding period (pcp).

Underpinning this strong growth result was payable metal sales totalling 33,616 tonnes of contained copper and 18,252 ounces of contained gold.

Production from the new satellite Monty Copper-Gold Mine was included in the current set of half-year results. This resulted in an additional amortisation expense of $34.2 million, which was driven by the amortisation of the Monty Copper-Gold Mine purchase price. This occurred after the acquisition of Talisman Mining’s 30% interest in the project in 2018.

In terms of shareholder returns, Sandfire declared an interim fully franked dividend of 5 cents per share, down from 7 cents in the pcp.

The company noted increased investment in exploration and evaluation expenditure during the period which came to $6.2 million. This increase included exploration at the newly acquired Tshukudu Project in Botswana following its acquisition from MOD Resources in October 2019.

The company commented that it managed to achieve this strong financial performance despite significant weakness in the US dollar copper price during the six-month period. This was offset by a fall in the USD/AUD exchange rate as well as a significantly stronger gold price.

DeGrussa operation performing strongly

Sandfire’s DeGrussa Operations performed strongly during the six-month period, achieving production of 34,988 tonnes of contained copper and 19,370 ounces of contained gold.

As a result of this solid performance, the DeGrussa Operations segment generated earnings before net finance and income tax expense of $91.4 million. This result included depreciation and amortisation charges which totaled $90.1 million.

Strong cash position

Cash flow from operating activities came in at $109.1 million, up from $97.5 million in the pcp, while Sandfire’s cash position at 31 December 2019 was $201.7 million. The company highlighted that this figure was achieved after making significant investments in long-term growth and diversification projects.

One of these investments was the $44.6 million cash component of the acquisition of MOD Resources. This acquisition gave Sandfire full ownership of the T3 Copper-Silver Project as well as adding a new growth platform in Botswana.

FY20 guidance on track

Sandfire commented that it is on track to achieve its FY20 guidance of 70-72 kilo tonnes of contained copper and 38-40 kilo ounces of contained gold.

According to the company’s half-year presentation, Sandfire is well-placed to meet the predicted medium-term shortfall in copper supply from new mid-tier copper mines with low capital intensity.

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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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