Sandfire Resources share price in focus as dividend ditched

The Sandfire Resources Ltd (ASX: SFR) share price could be one to watch today after the copper giant dropped its full-year earnings.

The company also confirmed the planned expansion of its Motheo Copper Mine, located in Botswana, from 3.2 million tonnes per annum to 5.2 million tonnes per annum following a positive definitive feasibility study (DFS).

The S&P/ASX 200 Index (ASX: XJO) materials share last traded at $4.72.

Sandfire Resources share price on watch on FY22 results

Here are the key takeaways from the copper producer’s financial year 2022 (FY22) results:

• Sales revenue of $922.7 million – a 52% increase on that of the prior corresponding period (pcp)
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) lifted 33% to $447.3 million
• Net profit after tax (NPAT) fell 13% to $111.4 million
• Earnings per share (EPS) slumped to 32.05 cents – down from 72.14 cents
• Cash flow from operating activities lifted 12.5% to $391.2 million
• Scrapped its final dividend

Sandfire Resources posted record sales for FY22, underpinned by its shiny new MASTA Copper Operations. The Spanish business brought in $150.6 million of EBITDA over the five months of FY22 in which the company owned it. Meanwhile, its DeGrussa Copper Operations segment provided $392.5 million of EBITDA in FY22 – 5% less than it did in the pcp. Its production for the year came in within guidance.

Sandfire Resources will pause its dividends on account of its rapid international growth program, the development of the Motheo Copper Mine, and the repayment of debt from its MATSA acquisition.

The company sold 93,827 tonnes of copper, 32,328 tonnes of zinc, 28,618 ounces of gold, 3,312 tonnes of lead, and 952,000 ounces of silver in the period. Its average realised copper price ended up at US$8,985 per tonne while that of zinc came in at US$3,249.

What else happened in FY22?

The major news from Sandfire Resources last financial year was, of course, its acquisition of Spain’s Minas De Aguas Tenidas (MATSA). The purchase set the ASX 200 company back US$1.86 billion and transformed it into one of Australia’s largest copper producers.

It also underwent an approximately $1.25 billion capital raise to help fund the acquisition.

The Sandfire Resources share price fell 13% on its return to trade following the news.

What did management say?

Sandfire CEO and managing director Karl Simich commented on the company’s earnings, saying:

The momentous achievements of the past 12 months have fundamentally changed the face of Sandfire and set the scene for our next decade of growth.

The MATSA acquisition has transformed our portfolio and – together with the exceptional progress we made during the year in constructing the new Motheo Copper Mine in Botswana – have provided the elements for what was arguably been our best-ever year as a business.

What’s next?

The company will pay US$118 million of its US$650 debt facility born from its MATSA acquisition in September. Another US$80 million will go to the facility in January.

On top of that, the Motheo expansion is estimated to come at a cost of US$397.4 million. Expansion activities are expected to begin in the March quarter with increased plant throughput expected 12 months later. Initial production at the project is expected in the June quarter.

The company is also working to optimise MATSA.

Finally, processing at DeGrussa is expected to be complete in October, with a plan for ramp-down and mine closure in place.

Sandfire Resources share price snapshot

This year has been rough on the Sandfire Resources share price.

It has slumped 30% since the start of 2022. It’s also currently 22% lower than it was this time last year.

For context, the ASX 200 has fallen 8% year to date and 7% over the last 12 months.

The post Sandfire Resources share price in focus as dividend ditched appeared first on The Motley Fool Australia.

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• ASX copper shares explode by up to 34% following BHP takeover bid
• Why is the Sandfire share price leaping 7% on Monday?

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 Scott Phillips.

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