Disclosure: I hold SFR. Things are humming at DeGrussa (copper & gold). It looks like they are going to beat their own guidance once again - particularly in terms of coming in with lower costs than previous guidance had suggested. Also, their Tshukudu Project (Botswana) drilling results continue to be very positive for both copper and silver.
17-Apr-2020: Sandfire March 2020 Quarterly Report
Disclosure: I hold SFR shares. They are my preferred copper exposure. When the outlook for global growth improves, copper will lead the way. They don't call it Doctor Copper for nothing. Copper prices are very often a good proxy for the health of the global economy, or the market's view of the near-to-mid-term health of the global economy. In other words, the copper price is often a leading indicator. When sentiment turns positive, copper prices will improve, probably before other base metals like nickel, zinc, tin, alumina/aluminium, lead, etc. The rest will follow. For that reason, I prefer to lock in my copper exposure early, and feel that I can increase my exposure to producers of those other base metals once copper starts to rebound.
Key takeaway: "Corporate and organisational changes reflect Sandfire’s transition into an international, multi-asset base and precious metals producer"
Importantly, while they have a new director and a couple of the exisiting non-executive directors are leaving, the key management team are still in place, and Karl is still there at the top. The management structure has just been streamlined.
In their words: "A refined senior executive management structure has been implemented, which has seen the establishment of a streamlined Executive Committee (EXCO) consisting of Karl Simich (Chief Executive Officer and Managing Director), Jason Grace (Chief Operating Officer) and Matthew Fitzgerald (Chief Financial Officer and Company Secretary). All senior managers now report directly to either Mr Grace or Mr Fitzgerald, who have overall oversight of their respective divisions.
Mr Karl Simich, Chief Executive Officer and Managing Director of the Company, was a founding shareholder and director of Sandfire and has led its strategy and execution both in Australia, with DeGrussa, and international project expansion into Botswana and North America. Mr Simich is responsible for strategic execution of the business plan, leadership and engagement with key business stakeholders at a global level.
Mr Grace is an internationally experienced mining engineer and geologist who heads up Sandfire’s mining and exploration operations, both existing and emerging, as well as managing the continued development of the Company’s project pipeline and environmental and social governance areas.
Mr Fitzgerald, an experienced mining executive and accountant, heads up Sandfire’s key corporate business areas and support functions encompassing finance and forecasting, sales and marketing, legal and procurement, technology, human resources, investor relations and corporate governance."
--- continues ---
Plenty of detail in the announcement for those who are interested (just click on the link above). I hold SFR shares.
The last chart there shows the live copper price over 24 hours. As of this morning, that is looking very positive. However, one good day does not make a rally.
I have been tipping that I think copper will likely move first, and nickel could follow. I hold SFR for Copper/Gold, and S32 for nickel, alumina/aluminium, silver, lead, zinc, manganese and met coal, plus RVR for zinc - and gold soon as well, plus plenty of pure-gold-plays, but back to base metals. While the near-term outlook is very challenging, the market will start bidding up copper when there's the possibility of a glint or flash of light at the end of the tunnel, i.e. they will look through the current situation once they can see a plausible way through and a believable timeline. When they're not in the grip of panic, the market has the ability to price in future expectations. In other words, I believe copper will turn back up ahead of a decent global economic recovery. Copper could be a leading indicator, as it has been in the past.
So, is today's small positive uptick (i.e. the overnight northern hemisphere price movements) the start of something bigger? Probably not, but I'm keeping an eye on it nonetheless.
Because I reckon copper will move first.
01-May-2020: KMT: Sale of Namibian assets to Sandfire Resources
Sandfire continues to pick up assets at bargain prices during this period of lower base metal prices.
[Disclosure: I hold SFR shares, their SP rose +36.7% in April, one of my best performers for the month!]
27-May-2020: Sandfire RRS Investor Forum Presentation
20-Feb-2020: I've posted links and a results summary (for SFR's FY2020 H1 Results) in a separate straw. The following is their outlook statement (that accompanied their report):
Management Comment and Outlook
Sandfire’s Managing Director, Mr Karl Simich, said the first-half of the 2020 financial year marked the beginning of an exciting new growth chapter as the Company began its transformation from a single-mine company into a diversified and sustainable global metals company operating across multiple jurisdictions.
“Underpinned by another solid operational and financial performance at DeGrussa, we took some important long-term growth steps during this period with the completion of the MOD acquisition, continued progress with the permitting and Feasibility Study for the Black Butte Copper Project in Montana, USA and the commencement of a major new exploration campaign in Botswana.
“At the operational level, the DeGrussa Operation posted another strong set of numbers despite what continues to be a relatively muted global environment for base metals. Another impressive production performance once again drove strong sales revenue, low unit operating costs, robust operating cash flows and strong bottom line earnings – helping us to maintain a period-end cash position of $201.7 million.
“It is important to note that this was after making significant investments in our long-term growth pipeline, including $44.6 million on the cash component of the MOD acquisition and $23.1 million on further investments in high-quality base metal opportunities, while also paying out $28.5 million in dividends and $40.0 million in income tax.
“With a debt-free balance sheet we remain in an excellent position to fund the next stage of our growth and diversification. The key focus in the short term is completing the optimisation of the Feasibility Study and permitting for the T3 development project in Botswana, which we expect to be our first new base metal operation outside of DeGrussa. Project funding discussions are underway and we remain on track to make a decision to mine by mid calendar year 2020.
“Meanwhile, our expanded exploration campaign in Botswana has also paid early dividends, with an exciting new copper discovery at the A4 Dome, located just 8km from T3, rapidly taking shape and five diamond rigs currently focused on delineating this zone.
“The delineation of additional resources within close proximity of our proposed first production hub in Botswana would stand us in excellent stead as we begin to unlock the potential of this belt-scale exploration opportunity. I am optimistic about the outlook for this project given that we effectively control the 200km long centre of an emerging sediment-hosted copper province.
“Turning to the macro picture, there is no doubt that 2020 has seen a number of new challenges emerge in commodity markets due to the impact of the coronavirus and potential impact on metals demand and global logistics and trade. Notwithstanding the short-term impacts, which will continue to play out over the next few weeks and months, we remain positive about the medium-term outlook for copper, which remains fundamental as an essential ingredient for a sustainable, low-carbon future.
“Sandfire is getting on with the job of advancing our new mid-tier projects in Botswana and the USA towards development, exploring vigorously for new deposits in Botswana and Australia, and increasing our exposure to high-quality assets around the world.
“I am pleased to say that the second half of the financial year is off to a strong start and we are on track to achieve FY2020 guidance of 70-72kt of contained copper and 38-40koz of contained gold with C1 costs of ~US$0.90/lb.”
Disclosure: I hold SFR shares.
DECEMBER 2019 HALF YEAR FINANCIAL RESULTS
Increasing copper-gold production drives solid interim profit, enabling further investment in long-term growth projects
Sandfire Resources Ltd (ASX: SFR; “Sandfire” or “the Company”) is pleased to report its financial results for the six month period ended 31 December 2019. The Company delivered another strong operational and financial performance underpinned by robust production and cost management at its DeGrussa Operations in Western Australia.
This allowed the Company to maintain strong revenues and operating cash flows, to post a net profit after income tax of $33.3 million (1HFY18: $48.3 million). The interim profit translates to earnings per share of 20.6 cents (basic and diluted).
Total revenue of $313.1 million (1HFY18: $272.3 million) was underpinned by payable metal sales totalling 33,616 tonnes of contained copper (1HFY18: 32,715t) and 18,252 ounces of contained gold (1HFY18: 20,721oz).
The half-year results included production from the new satellite Monty Copper-Gold Mine, resulting in an additional amortisation expense of $34.2 million driven by the amortisation of the Monty CopperGold Mine purchase price, following the acquisition of Talisman Mining’s 30% interest in the project in 2018, as well as amortisation of the decline and mine development. There was also increased investment in exploration and evaluation expenditure of $6.2 million during the period, including exploration at the newly acquired Tshukudu Project in Botswana following its acquisition from MOD Resources Ltd (MOD) in October 2019.
The strong financial performance was achieved despite weakness in the US Dollar copper price during the reporting period, offset by a fall in the USD: AUD exchange rate and a stronger gold price.
The DeGrussa Operations delivered another strong operational performance for the period, with production of 34,988 tonnes of contained copper (1HFY18: 34,813t) and 19,370 ounces of contained gold (1HFY18: 21,567oz), towards FY2020 guidance of 70-72kt of contained copper and 38-40koz of contained gold.
As a result, the DeGrussa Operations segment generated earnings before net finance and income tax expense of $91.4 million (1HFY18: $101.7 million), which included depreciation and amortisation charges of $90.1 million (1HFY18: $61.6 million).
Cash flow from operating activities was $109.1 million (1HFY18: $97.5 million) and $140.3 million prior to payments for exploration and evaluation expenses (1HFY18: $121.9 million).
The Company maintained its strong commitment to shareholder returns during the half-year, declaring an interim fully-franked dividend of 5 cents per share.
The Group cash position at 31 December 2019 was $201.7 million after making significant investments in long-term growth and diversification projects. This included $44.6 million for the cash component of the acquisition of MOD (giving Sandfire 100% ownership of the T3 Copper-Silver Project and adding a new growth platform for the Company in Botswana, southern Africa) and $23.1 million on further investments in early stage, high-quality base metals exploration and development assets through the Company’s Sandfire Ventures program. The Company also paid $40.0 million in income tax payments and $28.5 million in dividend payments during the reporting period.
This information should be read in conjunction with Sandfire’s December 2019 Half-Year Financial Report and accompanying notes.
[See separate straw for outlook statement.]
July 2018: Sandfire are growing via exploration in surrounding tenements (to DeGrussa) via farm-in agreements where SFR do the drilling (spend the money) in exchange for earning a share of the tenement if something is found. This worked well with TLM (Talisman Mining) when they found the Monty deposit. It worked out really well for TLM who have now agreed to sell their minority 30% stake in Springfield (the tenements that host Monty) to SFR for $72m plus a 1% NSR royalty on any future discoveries at Springfield. Sandfire are currently exploration drilling through tenements belonging to Auris Minerals (AUR), FE Ltd (FEL), Enterprise Metals (ENT), and have plans to also drill out areas of the Great Western Exploration (WTE) tenements to the east of the ENT tenements. Any of these tenements could host another commercial deposit such as DeGrussa or Monty. Sandfire are also developing the high-grade Black Butte Copper Project, located in central Montana in the United States.
January 2019: The SFR/TLM transaction completed in October 2018, TLM declared and paid a special dividend in December, and are expected to also pay a capital return to their shareholders early this year (2019).
Since the Monty discovery - which was on TLM (Talisman Mining) land, now bought and owned by SFR, the various JVs that SFR are involved in have not yielded any further commercial metal/mineral discoveries to date, but they're still drilling.
Disclosure: I hold SFR and TLM shares.
08-Jul-19: Update. I no longer hold TLM shares. Still hold SFR. Still think SFR is a decent copper play, if you're bullish on copper.
SANDFIRE RESOURCES NL ((SFR)) Upgrade to Hold from Reduce by Morgans and Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 3/4/1
Sandfire Resources has agreed to buy MOD Resources ((MOD)) for a cash and scrip equivalent of $167m. The cash component is $42m and the scrip component is 45c per share.
Morgans says, at first glance, the deal offers exploration upside and strategic value given the provincial tenure. Morgans increases its target price to $6.96 from $6.84, primarily to reflect lower $A forecasts.
The broker upgrades to Hold from Reduce to reflect the share-price retreat following the announcement.
Ord Minnett has upgraded to Accumulate from Hold on the news Sandfire Resources intends to acquire MOD Resources ((MOD)), noting the proposed deal will increase the company's share count by about 12%.
Clearly, the broker likes the deal, citing net addition to Net Present Value of potentially up to $1 per share, an internal rate of return of 15% post acquisition costs and upside from further exploration.
The analysts do acknowledge there now is additional geopolitical risk along with added development risk associated with a project based in Africa (Botswana). Target price unchanged at $8.
--- ends ---
Disclosure: I hold SFR shares.