'Impressive and consistent': Sandfire Resources (ASX:SFR) share price gains on half-year earnings

Here's what's driving the copper and gold producer's stock on Monday.

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Key points

  • The Sandfire Resources share price opened flat before increasing 2% this morning 
  • The gain followed the release of the company's first half earnings 
  • Over the 6 months ended 31 December, Sandfire's revenue and NPAT increased 21% and 24% respectively, as the company underwent a transformational acquisition 

The Sandfire Resources Ltd (ASX: SFR) share price is gaining after the company released its earnings for the first half of financial year 2022.

At the time of writing, the Sandfire share price is $7.14, 2% higher than its previous close.

Sandfire Resources share price rises on strong half

Over the first half, Sandfire's EPS was impacted by the issuing of equity due to the company's acquisition of the MATSA Mining Complex in Spain.

Though, a strong copper price and production at its DeGrussa operations delivered the company record half-year revenue.

It sold 34,946 tonnes of contained copper and 16,161 ounces of contained gold last half.

For comparison, those figures came to 35,790 and 21,343 respectively in the prior comparable period.

The copper price was consistently between US$9,000 and US$10,600 in the first half.

Sandfire recorded cash flow from operating activities of US$101.1 million – up from US$89.2 million.

At the end of the period, the company boasted US$321.4 million of cash.

What else happened in the half?

Sandfire announced its US$1.86 billion acquisition of the MATSA Mining Complex in September, undergoing a $1.248 billion capital raise to fund it.

The Sandfire share price plummeted 6.8% when it returned to trade following the announcement of the acquisition and capital raise.

The following month, Sandfire announced the sale of its holding in Adriatic Metals Plc (ASX: ADT).

Sandfire's 16% holding in Adriatic Metals brought it a $97 million payday.

What did management say?

Sandfire's managing director, Karl Simich commented on the company's first half results, saying:

With the completion of [the MATSA acquisition] in February, Sandfire is on the way to completing our transition from a single-mine company into a diversified and sustainable international miner – and we are doing so against the backdrop of one of the best commodity market environments seen in over a decade.

The combination of surging demand from the renewable energy and EV sectors, together with declining metal stockpiles and supply side tightness exacerbated by global supply chain instability, has seen the copper price surge to new highs – with further upside expected.

As well as expanding through acquisition, Sandfire also grew organically during the first half of [financial year 2022], with construction of our new Motheo Copper Mine in Botswana really stepping up a gear.

Our strong financial results for the first half reflected another impressive and consistent performance by the DeGrussa Operations in Australia. This led to record sales revenue, strong operational cashflows and a 24% increase in NPAT.

What's next?

According to Simich, Sandfire's first half production is in line with its financial year 2022 guidance.

It's expecting to produce between 64 kilotons and 68 kilotons of contained copper for the period.

Additionally, the company is predicting contained gold production of between 30 kilotons and 34 kilotons.

Its full year results will also include 5 months of contribution from the MATSA operation.

Over that time, Sandfire expects it will produce around 26,000 tonnes of copper, 37,000 tonnes of zinc, 1,000 tonnes of palladium, and 820,000 ounces of silver.

 Delving deeper into the company's outlook, Simich commented:

[Financial year 2022] and [financial year 2023] will be transitional years for Sandfire, underpinned by a strong and growing production base at MATSA. DeGrussa production will phase out post the first quarter of [financial year 2023], to be replaced towards the end of [financial year 2023] by new production from the Motheo Copper Mine in Botswana, where we expect to scale up in [financial year 2024] with the development of the satellite A4 Deposit.

We are also looking to progress the development of our Black Butte Copper Project in the US, and with further organic growth opportunities, support our aspirational vision to more than double production towards 300,000 tonnes of copper equivalent by the end of this decade.

Sandfire Resources share price snapshot

The Sandfire share price has been outperforming the market in 2022.

It has gained 5% since the start of this year. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has slipped 7%.

Additionally, Sandfire's stock has gained 23% since this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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