JOHANNESBURG (miningweekly.com) - Low-cost production and a rising copper price have driven Sandfire Resources' sales to a record and enabled the ASX-listed miner to increase its dividend and strengthen its balance sheet to fund growth opportunities.
High grades and strong operating margins at DeGrussa, combined with Sandfire's debt-free balance sheet, have enabled the company to take full advantage of the rising copper price environment, posting a 66% year-on-year increase in net profit after income tax to A$59.5-million, the owner of the DeGrussa copper/gold mine, in Western Australia, reported on Tuesday.
The bottom line result, which equates to earnings of 37.3c a share, was struck on record sales revenue of A$296.2-million in the first half of the 2018 financial year, which compares with A$259.9-million in the first half of the 2017 financial year.
The record sales revenue was achieved despite lower metal volumes being sold. Sandfire reported copper sales of 30 222 t, compared with 32 893 t in the corresponding period, and gold sales of 18 504 oz, compared with 19 790 oz a year earlier.
The DeGrussa operation delivered a strong and consistent operational performance for the first-half, with production of 31 521 t of copper and 18 799 oz of gold at a C1 cash operating cost of $1/lb.
The DeGrussa mine generated earnings before net finance and tax income of A$105.4-million, compared with A$76.4-million in the first half of the previous financial year, after depreciation and amortisation charges of A$65.7-million.
Sandfire MD Karl Simich said that the strong first-half financial performance reflected the company's ability to maximise its leverage to the rising copper price, thanks to the consistency and strength of its operations, which was underpinned by a debt-free balance sheet.
"This was a very positive result for Sandfire, with continued strong concentrate production from DeGrussa and increased US-dollar copper prices delivering record sales revenue for the half-year and a 66% increase in bottom line earnings - a tremendous outcome for shareholders."
In addition, Simich explained that the outlook for copper remained strong, indicating the potential for the robust cash generation for Sandfire to continue over the coming years.
Meanwhile, he reported that the company was preparing to bring its new high-grade Monty satellite mine on stream this year.
"The exceptional grade of the Monty deposit will have a material impact on our average throughput grades as we begin to blend ore from this new operation from early next financial year. This will help to drive a rising copper production profile over the next three years - at what is shaping up to be the perfect time in the copper price cycle," he commented.
However, Simich added that with mined copper grades continuing to decline globally and supply remaining vulnerable to disruptions, the company expected the copper market to remain "extremely tight" over the coming years as the world economy continued to enjoy strong, synchronised growth for the first time in a decade.
"This is an exciting time to be bringing a new high-grade mine on stream at Monty. It's also a great time to see our key offshore asset - the high-grade Black Butte copper project in Montana - now well into the final state of permitting and on track to be completed later this year," he stated.
He further enthused about the company's opportunity to become a supplier of high-grade copper concentrate from a state-of-the-art mining operation in Montana at a time of "unprecendented economic expansion and development in the United States."
"Our strong, and growing, cash balance of A$164.4-million will also enable Sandfire to continue to maintain our commitment to aggressive exploration, both at Doolgunna and across our East Coast portfolio. It will also enable us to take advantage of the high-quality acquisition and business development opportunities, as well as maintain returns to shareholders in the form of dividend payments."
Sandfire has increased its interim dividend to 8c a share in the period under review, compared with 5c a share in the previous corresponding period.