The Sandfire Resources Ltd (ASX: SFR) share price is rising this morning after the company bested its full-year production guidance with 4Q FY22 output rising strongly.
Shares in the copper and zinc miner are currently up 1.19% to $4.25 apiece, while the S&P/ASX 200 Index (ASX: XJO) is climbing by 0.53%.
Investors cheered Sandfire's latest quarterly production update even though rising costs are crimping its margins.
Sandfire share price jumps on production increase
The Sandfire share price is in the green today after the company reported an increase in production of all its minerals in the June quarter of FY22.
What's more, the miner has exceeded its full-year production guidance for copper, zinc, lead, and silver.
Sandfire produced 34,974 tonnes of copper in the last quarter of the financial year, which is 21.5% above the previous quarter.
This takes the group's total copper output to 98,367 tonnes for FY22. This is better than the 92k to 95k tonne forecast by management.
Other minerals provide tailwind
Zinc production also increased by 42.8% in the June quarter compared to the March quarter to 22,880 tonnes. Full-year Zinc output stood at 38,907 tonnes – nearly 1,000 tonnes above Sandfire's FY22 guidance.
The quarterly output of lead and silver came in at 2,201 tonnes and 0.8 million ounces, respectively. The full-year lead output is 4,102 tonnes and silver is 1.5 million ounces. This compares with management's full-year guidance of 3,000 tonnes of lead and around 1.4 million ounces of silver.
MATSA lifting Sandfire's production numbers
The growth in output is largely thanks to Sandfire's acquisition of MATSA. And MATSA is a gift that keeps on giving as Sandfire issued a reserve upgrade for the Spanish asset at the same time as its quarterly report.
Sandfire noted that the proved ore reserve estimate increased by 41% to 26.2Mt at 1.7% copper and 2.7% zinc. Management added:
Contained ore tonnes have increased by 3% with an 8% decrease in contained copper and a 5% increase in contained zinc since the previous Ore Reserve estimate stated as at 31 July 2020. This replaces mining depletion over the intervening two years.
Rising costs casting a shadow
But it isn't all good news for the company and potentially the Sandfire share price. Just as with other miners, rampant inflation is driving up costs for Sandfire at a time when commodity prices are coming under pressure.
The group's C1 cash cost surged more than 34% quarter-on-quarter to US$1.57 a pound. This pushed Sandfire's full-year C1 cost to US$1.27 a pound.
The cost pressure isn't expected to ease either. Management believes the high cost will stick around for the rest of this financial year as it warned that FY23 C1 cost will reach US$1.57 a pound.
Sandfire FY23 production guidance
Meanwhile, detractors will also point out that Sandfire's copper production may have already peaked. The miner issued a wide production range for FY23 of between 81k and 89k tonnes. That's below the 98,367 tonnes it delivered in FY22.
But the takeover of MATSA will give its zinc output a big boost to 78k-83k for FY23, while lead should increase to between 6k and 10k for the year.
