This isn’t because the copper miner as tumbled more than its peers. If anything, the Sandfire share is outperforming the iron ore miners as it’s sitting on around a 7% gain over the past six months.
In contrast, the Fortescue Metals Group Limited (ASX: FMG) share price crashed 24%. The BHP Group Ltd (ASX: BHP) share price and Rio Tinto Limited (ASX: RIO) share price lost 16% and 10%, respectively.
Merger news makes this ASX 200 miner a better buy
The excitement around Sandfire comes off its $2.6 billion takeover of Minas de Aguas Teñidas (MATSA) copper mine in Spain.
The transaction will transform Sandfire into a major global copper producer.
The analysts at Morgan Stanely reckons the takeover price is attractive at 4.8 times earnings before interest, tax, depreciation and amortisation (EBITDA).
What experts think of the MATSA acquisition
“Plus, the transaction would address near-term production reduction from Degrussa with Motheo (Botswana) ramping up from FY24 onwards,” said the broker who reiterated its “overweight” recommendation on the Sandfire share price.
“We find the current 6-year Reserve life shows extension potential.”
One of the best ASX 200 value buys in mining
But even before the MATSA deal, Macquarie Group Ltd (ASX: MQG) was already tipping a circa 70% total return on the Sandfire share price.
Its optimism is due to Sandfire’s Motheo project. Motheo prompted the broker to significantly upgrade its earnings forecast for the miner on Wednesday, ahead of the MATSA news.
“SFR expects the addition of the A4 deposit to lift peak production at Motheo to ~60ktpa of copper in concentrate for FY27 and FY28,” said Macquarie.
“This was 25% above our forecast peak production of 48ktpa for FY27-FY29.
“We lift our FY23 copper production forecast by 21%, while our FY24 and FY25 forecasts rise 58% and 37%, respectively. We also lift FY26-FY28 copper production by ~25%.”
What is the Sandfire share price worth
Even before considering the big near-term production uplift from MATSA or the $1.2 billion capital raise, Macquarie 12-month price target on the Sandfire share price is $10.60 a share.
Further, given that many experts have a bullish outlook for copper over the next year or so, the Sandfire share price could play catch up with its bigger peer, the OZ Minerals Limited (ASX: OZL) share price.
The Sandfire share price is currently in a trading halt but has rallied 49% over the past year. In contrast, the OZ Minerals share price has advanced 64%.