Sandfire Resources Limited

Welcome to the Sandfire Resources first half FY25 financial results conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Brendan Harris, Chief Executive Officer and Managing Director. Please go ahead.

Thank you and good morning, everyone, and welcome to our half-year results call. We recognise that today is a very busy reporting day and that we had an extensive operating update and Q&A session only three weeks ago. Suffice to say, I will be brief and only focus on the highlight of our first half before handing over to our CFO, Megan Jansen, so she can dig into our financial results. But before doing so, I'd like to acknowledge the traditional custodians of the lands on which we stand, the Whadjuk people of the Noongar Nation, as well as the First Nations people's of the lands on which Sandfire conducts its business. We pay our respects to their elders and leaders, past, present and emerging. I should note, of course, that our entire executive team is here with me in Perth and they look forward to working through your questions. So starting with safety, we have maintained a total recordable injury frequency of 1.6 during the first half of the year. And whilst this is at the lower end of comparable benchmarks, we know there is still much to do before we can be confident that we can sustain an injury-free workplace. The process of instilling our new way of working that we refer to as the SAM Fireway is ongoing and we are actively closing gaps to ensure we are operating in accordance with our new policy standards and procedures wherever we work. As I said back in January, a robust first half at our operation delivered a 16% increase in group copper equivalent production to 75.1,000 tonnes, leaving us on track to achieve annual production guidance at both Matta and Mateo. Whilst this holds true today, we felt it was important to highlight the emerging risk that particularly heavy rainfall presents at both operations if conditions don't ease in the near future. Our teams are managing the situation well whilst providing support to local communities and will provide a further update as required for when we report our next set of quarterly results in late April. Turning to costs, you'd recall that we recently reduced annual guidance from the cost by a material 7% to $39 per tonne of oil processed. And we're also doing relatively well at MATSA, where annual guidance has been retained at $75 per tonne of oil processed, which remains 4% below, that's 4% below the guidance we set for MATSA at the start of FY24. Having a major presence in Spain and Botswana has been good to us, as we've avoided the hyperinflation experienced by the industry, in places like Australia, leaving our operations well positioned on the C1 cost curve. So by doing what we say we will do and focusing on the basics to build resilience and operational consistency, we've increased underlying EBITDA by 87% or $119 million in the half to $255 million for a very healthy EBITDA margin of 45%. And this has meant that we've not only turned profitable, we're throwing the all-important free cash flow onto the balance sheet, and we're rapidly de-gearing toward a net cash position. With that, I'll hand over to Megan to discuss these key financial outcomes and more in greater detail. Welcome, Megan.

Thank you, Brendan. I'm pleased to present our financial results for the first half of FY25. We have delivered a strong financial result for the half, underpinned by robust operating and cost performance across the business, and healthy pricing for our key commodities. At an operational level, the exceptional ramp-up of Mateo, now in its second year of operation, delivered a 16% increase in group production to 75.1,000 tonnes. This, together with consistent production at MATSA and good cost control, underpinned a 37% increase in sales revenue and delivered an 87% increase in underlying EBITDA to $255 million and an underlying profit of $49 million for a statutory profit of $50 million. Pleasingly, net debt declined by 27% during the half to $288 million. Our ongoing reduction in net debt demonstrates the cash-generating capability of our high-quality operations and the progress we are making towards our targeted net cash position. Digging deeper, at Mateo, the underlying operations EBITDA margin increased by 17% to 60% for $159.7 million. This is underpinned by strong operating and cost performance and healthy commodity prices. The exceptional ramp up to 5.6 million tonnes per annum has allowed the operation to realise economies of scale benefit, delivering an operating unit cost of $37 per tonne across the half, 12% below our initial guidance of $42 per tonne, which we since revised down to $39 per tonne in the December quarterly report. At MATSA, the underlying operations EBITDA margin increased by 3% to 44% for $134 million, primarily driven by high commodity prices and lower treatment charges, which more than offset a modest increase in underlying operating costs, primarily associated with a rise in mine backfill and waste volumes in line with the mine plan. We delivered operating unit costs of $76 per tonne across the half, which is within 1% of full-year guidance of $75 per tonne. and we maintain this guidance across the full year as we expect to benefit from recent beneficial exchange rate moves. Below the line, our DNA expense of $153 million continues to reflect the acquisition of MATSA in FY22 and includes a $35 million DNA expense relating to Mateo, which increased by 26% in comparison to the prior corresponding period, in line with the increase in contained copper mined. Our overall underlying net finance expense to $27 million reflects our level of debt and the margin embedded in our various finance facilities, noting that underlying interest expense is expected to reduce in the second half, reflecting our planned reduction of debt and the lower margin associated with our new corporate revolver facility. Our underlying income tax expense increased to $25 million as the group returned to profitability And whilst the group's underlying effective tax rate in FY25 is expected to broadly reflect the statutory income tax rates of the jurisdictions in which we operate, it will be impacted by the limited ability to recognise the benefits associated with tax losses in Australia and the USA. Tax payments totalling $8 million are made across the half, largely in relation to MATSA. We are projecting a step up in tax payments in the second half at MATSA following improved cash generation and a reduction in our interest costs as we pay down our debt. Overall, across the group, capital expenditure remained largely unchanged from the prior corresponding period at 98 million and a half. At Mateo, an increase in waste-dripping costs to $27 million as the A4 development ramped up was largely offset by a decrease in project construction and development expenditure following the completion of plant expansion activities in FY24. At MATSA, capital expenditure of $57 million was consistent with the prior comparative period, as we continue to prioritise underground development. Pleasingly, we have made further progress in optimising the structure of our debt facilities. Just last week, we received credit approval for a new unsecured $650 million corporate revolver facility, which will be used to repay the remaining balance of our existing facilities totaling $440 million. The new facility that is expected to be executed by the end of March 2025 has an attractive four-year tenor to March 2029 with no immediate scheduled repayment requirements and reduces ongoing finance costs. The refinancing of our debt facilities fundamentally de-risks the financial position of the group and further enhances our balance sheet flexibility. The refinancing will trigger a non-cash interest expense of approximately $11 million in the second half of FY25 to de-recognise capitalised costs associated with existing facilities, which will be excluded from underlying earnings. No dividends have been declared in respect of half one FY25, as we continue to prioritise the deleveraging of our balance sheet and ongoing investment in our business. The excellent outcomes across our business continue to give us confidence for the future. With that, I'll hand back to Brendan.