Sandfire share price shoots 12% higher on ‘transformational’ quarter

Sandfire’s transformation is delivering results…

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Key points

  • Sandfire had a transformational quarter thanks to the acquisition of MATSA
  • This has already had a significant impact on its production, sales, and earnings
  • Management expects to achieve its production guidance in FY 2022 but has lifted its cost guidance

The Sandfire Resources Ltd (ASX: SFR) share price has been among the best performers on the ASX 200 on Thursday.

In afternoon trade, the copper producer’s shares are up 12% to $5.84 following the release of its quarterly update.

Sandfire share price jumps on strong quarterly update

  • Copper production of 28,774 tonnes
  • Zinc production of 16,027 tonnes
  • Gold production of 6,956 ounces
  • C1 cost of US$1.17 per pound
  • Quarterly sales revenue of US$343.1 million
  • Quarterly earnings before interest, tax, depreciation and amortisation (EBITDA) of US$186.9 million

What happened during the quarter?

For the three months ended 31 March, Sandfire reported sales revenue of US$343.1 million and EBITDA of US$186.9 million. This was underpinned by a significant jump in copper production thanks to the transformational acquisition of MATSA, which it took control of on 1 February. This acquisition contributed operating EBITDA of US$98.6 million during the quarter.

This means the company is on track to achieve its production guidance of 92,000 to 95,000 tonnes of copper.

One slight negative, though not unexpected, was that Sandfire has increased its full year cost guidance. Driven by global inflationary cost pressures, the company has updated its full year C1 costs guidance to US$1.19 per pound. This compares to its previous guidance, which was also increased, of US$1.10 to US$1.20 per pound.

‘Transformational period

Sandfire’s Managing Director and CEO, Karl Simich, was very pleased with the quarter. He commented:

“The March Quarter was a transformational period for Sandfire. The completion of the MATSA acquisition, its successful and rapid integration into our business, and the excellent progress we are making with construction at Motheo, signal the start of an exciting new era of growth for our business.”

We are pleased to confirm the ongoing successful integration of the MATSA Operation, after receiving the keys on 1 February.

MATSA has made a strong initial contribution to the Group’s production, which is in-line with expectations and, combined with another robust performance at DeGrussa, puts us on track to achieve our updated Group production guidance for FY2022.”

And while Simich acknowledges that costs are rising, he highlights that prices are also been driven higher and offsetting this. He explained:

“The pressures of global cost inflation combined with the ongoing consequential impacts of COVID19 transmission, remain significant challenges for the resource sector globally. Sandfire is not immune from these challenges and, as a result, we have increased our C1 unit cost guidance for FY2022.

While cost inflation and rising energy costs in Europe are undeniable challenges, it’s important to remember that these same cost pressures are helping to drive up the prices for the metals we produce – many of which are at multi-year or all-time highs. This means that we are generating very healthy EBITDA cash-flow margins across the expanded business – as reflected in the strong sales revenue, EBITDA and operating cash-flows reported for the Quarter.”

Motley Fool contributor James Mickleboro 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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