SFR - Sandfire Resources

[Sean K]

could this news any thing to do for the rise https://cdn-api.markitdigital.com/a...pdf?access_token=0007uGJPs1HWxUUyMA69rJ6BI2b4

Another $97m to put in the bank. These guys are cashed up to the hilt!

 

[mullokintyre]

I have sorta been watching this recently, like copper, like its story, but the decline of DeGrussa put me off.
In reading the previous coments about the stock, I was a bit surprised to see no mention of the following from Stock Doctor

In late September 2021, SFR acquired the Minas de Aguas Tenidas S.A (MATSA) mining complex in Spain for a total consideration of $2.5bn (supported by a $1.25bn equity raise). MATSA enhances SFR's production profile for copper at >~180kt per annum (FY21 70kt). The acquisition represents ~130% of SFR's market capitalisation, and the dilution in earnings may prompt the company to miss Lincoln's growth hurdles in the near future. We will assess the full impact of the acquisition upon the release of its 1H22 result.

In its quarterly update on 20 Jan 2022, copper and gold production over 2Q22 is on track to achieve full-year production targets. Management is forecasting FY22 copper production of between 64,000-68,000 tons (down 7% on FY21) and gold production of between 30,000-34,000 ounces (down 19% on FY21). While 2Q22 operating costs were steady at US$1.07/lb, management has lifted full-year cost guidance by 10% to US$1.10 - $1.20/lb due to higher power and diesel prices.

Consensus is anticipating earnings to decline as production transitions away from the DeGrussa copper mine towards Motheo (commencing in 2023) and the recently acquired MATSA project, which will be finalised in January 2022. Favourable copper prices should continue to support commodity sales as the world transitions to electric vehicles and other green energy initiatives (GR3).

CEO Karl Simich holds approximately 3% of SFR's outstanding stock (GR7). While Karl has sold down a smallholding of shares in February, he still retains a significant holding in the business.

Its a fairly significant purchase, did it not faze any of you folks?
Just can't get myself to pull the trigger.
yet.
Mick

 

[Sean K]

I have sorta been watching this recently, like copper, like its story, but the decline of DeGrussa put me off.
In reading the previous coments about the stock, I was a bit surprised to see no mention of the following from Stock Doctor

Its a fairly significant purchase, did it not faze any of you folks?
Just can't get myself to pull the trigger.
yet.
Mick

This dropped off my watchlist somehow and haven't been following. Had a good few months. Lots of copper plays have done well, OZL the standout.

 

[peter2]

SFR recently completed their purchase of the Spanish MATSA copper mine. Since then, only a few days, ago the SFR price has tumbled significantly. The primary concerns are rising EU costs of electricity. Apparently MATSA buys their power at market prices which have exploded over the past year and will go higher due to the Russia/Ukraine situation.

I would expect the mgt team will work on reducing these cost pressures immediately. That's one reason for my bullish optimism for SFR. The other is the world wide need for copper. Copper price is very likely to go higher.

This is not a short term position but one of a few I've taken as a medium term position in the outlook for copper.

 

[finicky]

Classic, so called 'inside day' today which is bullish. So tomorrow will be interesting to follow up for confirmation or not. Why I say 'classic' is that the first day of the pair has both the long range and high volume to qualify. The price yesterday came close to meeting the lower rail a rough and ready ascending channel on a +2 year daily chart - my interpretation

Sandfire might find an innovative way to reduce power costs as it did at De Grussa with a very large solar power plant - although that apparently only met 20% of their power needs. Against that I read a dismal comment by an analyst somewhere that the Euopeans are smart operators and would only have let the asset go for a high price.

 

[peter2]

My attempt to catch this falling knife ended quickly as price showed me that I was wrong to buy it then.

Since then, price has traded sideways but is now falling with the falling price of copper. I could see price going much lower (to $3.00 = Covid low) when they next update the market on their financials.

Although I'm waiting for copper to stop falling and go up (it will), SFR is not on my watch list to buy. This is due to their high and will get even higher cost of power for their EU plant.

 

[Dona Ferentes]

Sandfire Resources (ASX: SFR) saw its June quarter and 2021-22 production nicely boosted by its big Spanish copper and zinc purchase, MATSA which delivered a repayment on the more than $A2.7 billion acquisition price

But like so many other resource companies, rising costs (general inflation and especially energy), labour shortages (Covid) and weakening prices (especially for copper and gold) have clouded the outlook for 2022-23.

Thanks to the purchase of the Spanish based miner, MATSA and another solid result from the Degrussa operations in WA Sandfire said it exceeded its full-year guidance for its key minerals, such as copper and zinc

Sandfire produced 34,974 tonnes of copper in the June quarter, 21.5% above the previous quarter. This saw total copper output rise to 98,367 tonnes for the year to June and nicely above the 92,000 to 95,000 tonne forecast from management.

Zinc production jumped 42.8% in the June quarter compared to the March quarter to 22,880 tonnes. Full-year zinc output totalled 38,907 tonnes – nearly 1,000 tonnes above Sandfire’s full year guidance.

Quarterly output of lead and silver came in at 2,201 tonnes and 800,000 ounces, respectively. That saw full-year lead output of 4,102 tonnes and silver, 1.5 million ounces.

This compares well with management’s full-year guidance of 3,000 tonnes of lead and around 1.4 million ounces of silver.

Sandfire’s $US1.87 billion MATSA purchase also delivered in another way – a significant upgrade in its reserves.

Sandfire said the proved ore reserve estimate increased by 41% to 26.2 million tonnes at 1.7% copper and 2.7% zinc.

“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,” Sandfire noted in its report this week.

But as pointed out earlier, rising costs are a big concern for the company (and the entire sector).

The group’s C1 cash costs surged more than 34% quarter-on-quarter to $US1.57 a pound. This pushed Sandfire’s full-year C1 costs to $US1.27 a pound. The company doesn’t see those pressures easing and it warned that 2022-23 C1 costs will reach US$1.57 a pound.

Investors noted the apparent downgrading of copper output in its 2023 guidance.

Sandfire issued a fairly wide production range for the new financial year of between 81,000 and 89,000 tonnes. That’s well below the 98,367 tonnes it delivered in 2021-22 and under the earlier guidance for last year as well.

But the takeover of MATSA will give its zinc output a big boost to 78,000-83,000 tonnes for the coming year, while lead should increase to between 6,000 and 10,000 tonnes for the year.

Sandfire’s CEO, Karl Simich, said in Thursday’s release:

‘We are delighted to report on an outstanding June Quarter, which caps a transformational year for Sandfire and positions our business for long-term growth.” “This should provide investors with a clear insight into the strong cashflow generating capability of our expanded global business, with the MATSA operations generating an EBITDA margin of 51% for FY2022 – a very strong result by any measure.

“The strong margins and cashflows were achieved despite increasing costs. This is a global trend which reflects the impact of rising fuel and energy costs across all the jurisdictions where we operate, as well as significant labour shortages and the impact of COVID-19 in Western Australia. As a result, Group C1 unit costs came in slightly above guidance at US$1.27/lb of payable copper, which we think is still a very creditable result.

“Operationally, we were very pleased with MATSA’s performance during the Quarter, as well as the strong progress with our operational integration, optimisation and excellence programs.

“Elevated energy costs in Spain remain a challenge and were reflected in C1 unit costs for MATSA of US$1.81/lb for the quarter and US$1.45/lb for FY2022. We are progressing a number of responses to this situation, including the planned construction of new solar farms, engaging with electricity suppliers for new contracts and investigation of other pricing structures.

“At the DeGrussa Operations in Western Australia, our team delivered another quarter of safe production despite the challenges of COVID-19 and ongoing cost pressures, with the operation continuing to generate strong margins and make a strong contribution to our Group production.

“This will continue for another four months, with mining expected to be completed in September 2022 and processing to wind up in October. We have developed a detailed care and maintenance and mine closure plan and have implemented high-quality retention and engagement programs with our staff and contractors, to ensure a smooth and seamless transition.

“The strong cashflows generated during the quarter saw us finish the year with cash holdings of US$463.1 million and net debt of US$324.7 million. We remain well placed to make the first repayment due under the MATSA facility of US$118 million at the end of September, together with repayment of our ~US$138M (A$200 million) ANZ corporate facility in Australia.

“Commodity prices experienced significant headwinds towards the end of the quarter, with both copper and zinc prices moving significantly lower. While delivering production into lower commodity markets in the near term will have an impact on our business, we remain extremely positive on the longer-term demand outlook for the metals we produce,” Mr Sumich said.

Another Busy Week in the Local Mining Space – ShareCafe

Even for the ever-dynamic local mining sector, the week just ended was a particularly busy one. Here's the latest from Sandfire, St. Barbara, Regis, Perseus, Galena and Aeris.

www.sharecafe.com.au

 

[rcw1]

Good morning

Sandfire Resources shares are placed in a trading halt ahead of an announcement related to the outcome a proposed capital raising.

The announcement is linked to the institutional component of the raising, with the company requesting the halt remain until a related announcement is made or until the start of normal trading on November 21.

Not holding.

Kind regards
rcw1

 

[mullokintyre]

SFR entered in yearly comp for 2023.
I am very bullish on Copper, with the move away from oil and gas, can only see the use of copper soaring.
No big new mines on the horizon, so expect it t move steadily upwards.
Mick

 

[Smurf1976]

SFR entered in yearly comp for 2023.
I am very bullish on Copper, with the move away from oil and gas, can only see the use of copper soaring.
No big new mines on the horizon, so expect it t move steadily upwards.
Mick

Not a stock I know much about despite actually owning it (with real money) in my short term trading account.

That decision was based purely on price and trading action though, not company fundamentals, but I do note the generally increasing trading volume in this stock over the past 15 months or so.

Short term though, well I just placed a tight stop on it....

 

[rcw1]

@DrBourse would you kindly run your ruler across SFR please?

Kind regards
rcw1

 

[DrBourse]

Hi rcw....

First of all SFR is not on any of my hitlists atm, so I don’t know a lot abt them……

I do know that there will inevitably be some “Dog Eat Dog” in that Region of NSW in the near future…… way too many PD’s trying to operate in the one area…..

But I digress – Back to the SFR Q’…..

The ASF SFR Forum has many great posts both for and against SFR…..

In my following analysis I will just stick to the facts on SFR – no real opinion will be offered by me as I hold a couple of others in the same region.

A few Financial areas that would bother me are :- Current Ratio is just below the acceptable 1.2 mark - Costs have always been a problem for SFR - Very Bad PE relative to NTA - SP is trading well above NTA - a $27.1m LOSS for the Half year is not good - SFR understated their Net Debt as $378.3m in their Half Year Report, that is just Creative Accounting and a WOFTAM, should be a Minimum TOTAL DEBT of $452m (and probably $649m IMO), which does not stack up against their Cash Holding of abt $263.7m - Then what happens if the Copper Price Forecasts are wrong, Big Trouble…..

Certainly NOT A BUFFETT TYPE OF STOCK…..

Looks to be Fully Priced atm - SP has tracked sideways all this year - cannot see any catalist that would cause a price spike atm, apart from the Copper Price argument, which, IMO, is a total guesstimate by the so called Experts...

Good Luck M8....

 

[rcw1]

Hi rcw....

First of all SFR is not on any of my hitlists atm, so I don’t know a lot abt them……

I do know that there will inevitably be some “Dog Eat Dog” in that Region of NSW in the near future…… way too many PD’s trying to operate in the one area…..

But I digress – Back to the SFR Q’…..

The ASF SFR Forum has many great posts both for and against SFR…..

In my following analysis I will just stick to the facts on SFR – no real opinion will be offered by me as I hold a couple of others in the same region.

A few Financial areas that would bother me are :- Current Ratio is just below the acceptable 1.2 mark - Costs have always been a problem for SFR - Very Bad PE relative to NTA - SP is trading well above NTA - a $27.1m LOSS for the Half year is not good - SFR understated their Net Debt as $378.3m in their Half Year Report, that is just Creative Accounting and a WOFTAM, should be a Minimum TOTAL DEBT of $452m (and probably $649m IMO), which does not stack up against their Cash Holding of abt $263.7m - Then what happens if the Copper Price Forecasts are wrong, Big Trouble…..

Certainly NOT A BUFFETT TYPE OF STOCK…..

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Looks to be Fully Priced atm - SP has tracked sideways all this year - cannot see any catalist that would cause a price spike atm, apart from the Copper Price argument, which, IMO, is a total guesstimate by the so called Experts...

Good Luck M8....

Thanks @DrBourse appreciate that. rcw1 still confused with the financials. If could be so bold with a further request as to what the attachment actually means for the financial landscape of SFR. The debt repayment schedule and the copper hedging, does rcw1 head in.

Kind regards
rcw1

 

[DrBourse]

Thanks @DrBourse appreciate that. rcw1 still confused with the financials. If could be so bold with a further request as to what the attachment actually means for the financial landscape of SFR. The debt repayment schedule and the copper hedging, does rcw1 head in.

Kind regards
rcw1

rcw.....Check you Private Messages

 

[DrBourse]

rcw for your perusal....

Why copper's long-term outlook is getting hard to ignore​

Jun 5, 202310:10 GMT+10

229M+2.84%AA1M+3.80%EVN−1.24%SFR+0.33%
KEY POINTS:

• Copper prices are unchanged in the past two years but here's why it's bullish outlook is a matter of when not if
• The subdued macro environment makes it "difficult to fire all your bullets" at the copper trade at once, says Tribeca Investment Partners' Todd Warren
• ASX-listed copper stocks are beginning to pick up the pieces after a prolonged period of inflation, labour market and operational headwinds

Copper has a wall of worries to climb before it can reach a promised land where the market is in a clear-cut deficit, the commodity is priced like a battery metal and miners return to profitability.
It’s the near-term volatility that makes the copper trade so difficult. And things have been even more challenging on the listed front – With names like Sandfire Resources (ASX: SFR), 29Metals (ASX: 29M) and Aeris Resources (ASX: AIS) facing a myriad of operational and financial challenges.
Nobody wants to hold a stock through an ugly drawdown, so how do investors navigate the near-term uncertainty to capitalise on the long-term opportunity?
In this wire and with the help of Tribeca Investment Partners' Todd Warren, I'll be taking a look at the copper story so far, the problem with copper miners and the state of play for ASX-listed names.
The Story So Far: Spot Prices Have Gone Nowhere
The copper we know right now is not exactly the one investors typically associate with monstrous demand from megatrends like decarbonisation and EVs. If it was, prices wouldn’t be unchanged in the past two years and down 15.9% in the past twelve months.

Market Index
Copper price chart (Source: TradingView)
Copper remains the humble Dr Copper, a bellwether of economic activity with an acute sensitivity to the ebbs and flows of industrial demand.
“The market is still heavily dominated by macro events and with that as a backdrop, it’s difficult to fire all your bullets at once,” said Warren.
UBS reiterated similar views on Thursday, saying that the “risk vs. reward for copper is improving and the medium-term outlook is constructive.”
"We now forecast only a modest surplus in 2023, moving to a growing deficit from 2025. In our opinion, this increases the risk of material price upside over the next 2-3 years (potentially copper's 'lithium moment')," the analysts said.
"However, we do not have conviction we have reached the bottom of the cycle and as a result our global recommendations on copper equities generally remain cautious."
But at what point should investors start to take copper seriously?
“Copper is a fairly asymmetric trade,” said Warren, adding that “there are some potential headwinds in the immediate term but a lot of that’s already priced.”
The problem with copper stocks
It ain’t easy being a copper miner – Alongside industry-wide cost inflation, the ore grades at many copper mines are decreasing, which means miners need to extract more to produce the amount of copper.
In 2019, the average copper ore grade at global copper mines was 0.62%, down from 0.71% in 2010, according to the World Copper Factbook.
“Everyone’s looking at copper from that long-term perspective but forgetting about the point that cost curves have all risen dramatically. The third quartile of the cost curve is around US$3.50 a pound,” said Warren.
Let’s look at three examples below:
Oz Minerals was acquired by BHP earlier this year for $9.6 billion. If you look at how Oz Minerals performed in FY22 – Getting bought out might seem like a pretty sweet deal, at least in the short term.
Oz Minerals posted net cash outflows of $78.9 million in FY22. To break things down:

• Operating cash flow: $647.6 million
• Investing cash flow: -$951.0 million
• Financing cash flow: $224.5 million
• Net cash flow: -$78.9 million

The investing outflows reflected:

• Carapatenna plant, equipment and mine development costs: $358.3 million
• Prominent Hill development: $235.5 million
• West Musgrave costs: $165.9 million

So when exactly is BHP going to make its money back?
The narrative is very much the same for Sandfire Resources – which posted cash outflows of $188.4 million in the first-half of FY23.
As well as 29Metals – Its 2023 guidance has costs totalling more than $1 billion. Whereas the company generated $720.7 million in revenue in 2022.
In a world where ‘cash is king’ – Why would investors want to invest in a copper play that can’t even generate positive cash flow?
Copper speculation: Net short
Copper is also a speculative asset where factors such as positioning and sentiment can exacerbate changes in market prices.
“The market was caught short when China made an about-turn on their reopening policies in January this year,” notes Warren.
“And so the market raced into trying to get exposure.”

Market Index
Copper prices (December 2022 - February 2023)
“Could the copper price go lower from here? Of course it could, but a lot of that money’s already positioned for that. So where’s the marginal dollar going to go?”
“That’s where I’d be cautious being excessively bullish right now, but the longer-term thematics are going to be difficult to ignore because there is just not enough money going into new supply.”
ASX-listed picks: A small cap of interest
I asked Warren about his views on the two remaining large cap ASX-listed copper options: Sandfire Resources and 29Metals.
“The removal of Oz Minerals from the market has been somewhat of a blessing for Sandfire and diverted some of the negative attention away from the stock and drawn attention to the growth prospects and the fact that it is the only relatively large and liquid pure play that Australian investors can get,” says Warren.
“They’ve been through a management change and in the throes of turning on their Botswana asset - Motheo. And the jury is out on whether they are through the woods with the MATSA assets in Spain.”
Despite Sandfire's bumpy ride with MATSA and volatile copper prices, the stock is up 3.9% year-to-date and 4.2% higher in the past twelve months.

Market Index
Sandfire Resources 12-month price chart (Source: Market Index)
29Metals has been in deep water and you only need to go as far as its share price performance (down 65% year-to-date) vto understand the magnitude of its problems.
The market is currently concerned about the additional capital required to restart production at its Capricorn Project and unlock growth. The risk of a capital raising is real. Very real.
“Their big shareholder probably doesn’t want to dilute at these levels. But by the same token, I think it’s pretty clear that they will need some extra capital on their balance sheet. I think they will most likely have to come to the equity markets,” he said.
When it comes to the smaller end of town, Warren preferred AIC Mines (ASX: A1M) – A $180m market cap producer that owns the Eloise copper mine in North Queensland.
“It’s run by a very capable management team including Managing Director Aaron Colleran, who’s ex-Evolution (ASX: EVN). Evolution was built through acquiring smaller assets and consolidating that into a greater beast. They’ll do the same for AIC.”
“The market still needs some convincing but we do think they’ve got the right team and a strong balance sheet.”...
Cheers M8...

 

[rcw1]

Good morning
So, Sandfire sniffing around Khoemacau Copper Mining in Botswana again... Reportedly worth US $2 billon plus ...
As if Spain’s MATSA, wasn't enough !!!

Little birdy chirped that S32 had an interest too, not sure how their balance sheet would be looking like after already offloading good coin for a stake in the Sierra Gorda Copper mine.

Maybe just some silly innuendos. Will require some considerable banker weight behind the show, one would assume. Food for thought, reckon. Copper hmmmmmmm

Have a good day, today.

Kind regards
rcw1

 

[peter2]

Solid Jun23 quarterly report from SFR. The market liked it (+9%) and I liked that the market liked it.
Copper production from Matsa (Spain) slightly above guidance, costs $1.99/lb.
Copper production from Motheo (Botswana) ramping up from successful start.
De Grussa being shut down.

 

[peter2]

It's been a tough year for Sandfire, our sole specialist large cap copper producer (ex BHP). Finally showing some love for its holders.
Elsewhere we're seeing that the ASIC costs for gold production have risen quite quickly. I'm assuming that the same will be seen for the copper producers. Looking forward to seeing copper prices going higher in 2024.

 

[Dona Ferentes]

Kerry Sun from Market Index in today's Evening Wrap, with a bit of TA

.
Sandfire deserves a special mention today. A 1.1% gain would be good on any day. It’s absolutely brilliant today.

The pillars of my technical analysis strategy are Trend, Price Action, Candles, Volume and Volatility. Each is discernible from a stock’s chart. The final pillar, Relative Strength Comparative (RSC), considers factors external to the stock’s chart. This is a key advantage of this indicator – it takes into account independent data.

RSC compares the performance of a stock with another security, generally an index relevant to the stock. It’s common to compare a stock’s performance with the performance of the relevant benchmark index. For Sandfire and other ASX stocks, I like to compare their performance to the S&P/ASX 200.

I use a proprietary RSC indicator – you won’t find it in any of your technical analysis platforms. Also, please don’t confuse it with the Relative Strength Index (RSI) – it’s not even close conceptually, and my research suggests the RSI has little value as a technical indicator – but that’s a story for another day.

Basically, when the RSC (which is the bottom-most indicator in the Sandfire chart above) is green and rising, the stock in question is outperforming the benchmark index. This means that it’s better on up days, and like today, its better when most stocks are getting belted. When this occurs, I like to say, “It’s in the basket”.

This means it’s in a basket of securities which are going to be bought by active fund managers (not the tag along with the index passive fund managers) no matter what.

Other than excellent RSC, the Sandfire chart has several other key indicators of strong demand-side control: Short and long term uptrends, higher peaks and troughs (on a closing basis), and predominantly demand-side candles.

8.61 is the nearest point of demand, the short term uptrend remains intact as long as the price continues to close above this level. 9.28 is the nearest point of supply, above there it’s all blue sky.

 

[rcw1]

Good afternoon

Sandfire Resources target cut 11pc to $10: Macquarie

Sandfire Resources raised to Accumulate; $9.65 target: Ord Minnett

Not holding

Kind regards
rcw