Sandfire Resources Limited

Good morning everyone and welcome to our March quarterly call. Our executive team is here with me today for the Q&A and they're looking forward to the discussion. But before we start, I'd like to acknowledge the traditional custodians of the land on which we stand, the Whadjuk people of the Noongar Nation, as well as the First Nations peoples on the land of which SAMFIRE conducts its broader business. We pay our respects to their elders and leaders past, present and emerging. Starting with safety, our group risk decreased to 1.4 in the last quarter as we remain focused on eliminating high potential incidents and continue to embed our new way of working, the SAMFIRE way, which, as I've said before, will further strengthen our system of risk management and internal control. Despite unprecedented rainfall at both Matts and Mateo, we delivered robust production results during the quarter. And the impressive effort of our team has established the platform for a strong fourth quarter, ensuring we are well-placed to achieve group copper equivalent production guidance of 154,000 tonnes in FY25. If you've been monitoring the weather in southern Spain and Botswana and seen some of the images, I'm sure you'll agree this is a great outcome. At MATSA, given the modest 4% reduction in our milling rate in the March quarter, the delayed extraction of high-grade ore and the progressive loss of productivity that resulted from the persistent heavy rainfall, we now expect contained metal volumes to be strongly weighted towards the final quarter of FY25 for copper equivalent production of 95,000 tonnes, consistent with the target we set at the start of the year. We also expect a particularly strong increase in copper equivalent production at Mateo in the fourth quarter. As is the case for MATSA, our confidence is predicated on the knowledge that we have high-grade material either already on the ROMPAD or exposed for imminent extraction and with fully restored access to the A4 open pit and expect to have access to Stage 1, the T3 open pit, in the coming weeks. Our life of mine planning process has also indicated that copper equivalent production at Mateo should increase to 60,000 tonnes in FY26, with a smoother production profile in the medium term, bringing forward valuable cash flow and maximising NPD. Detailed FY26 guidance will be provided when we report our full year results in August. More broadly, we continue to focus on the things we can control. and we're still working hard to mitigate the broader impacts of inflation at our operations. At NAPSA, a marginally lower projected throughput rate for FY25 and unexpected strength in the Euro to US dollar rate has necessitated a modest 4% increase in our underlying operating cost guidance to $78 per tonne of ore processed, with the level of underlying expenditure increasing by a more modest $8 million, or 2%, to $355 million. Conversely, those underlying operating costs remain below guidance at $38 per tonne of all process, despite the level of disruption caused by the floods, and we've retained annual guidance at $39 per tonne. While I can assure you that we're not becoming complacent and are always looking for ways to safely and sustainably squeeze out every penny, the cumulative 1% increase in our forecast underlying costs relative to initial guidance for FY25 will be more than a respectable outcome given the myriad of challenges faced by our teams. I should also note that we've reduced guidance for total capital expenditure by $11 million, primarily to reflect timing differences at Mateo, and increased planned expenditure at Black Butte by $6 million to $18 million to reflect the expanded scope of the successful drilling program that is now nearing completion. So bringing this together, the proven resilience of our business and strong pricing for our metals delivered an unaudited group sales revenue of $283 million and underlying EBITDA of $126 million for a further $45 million reduction in net debt in the quarter to $243 million, bringing the cumulative reduction in net debt over the past 12 months to $238 million, equivalent to a run rate of around $60 million per quarter. Suffice to say, while we're being challenged and will continue to be, our talented team, high-quality operations and increasingly strong balance sheet leaves us well-placed to navigate and prosper in the currently volatile macroeconomic environment. And finally, before I go to questions, I did want to provide a quick update on the power outage that impacted Spain, Portugal and France just after 12.30pm local time yesterday. While the cause of the outage that temporarily shut down our operations is as yet unknown, I can confirm that power has been restored to Andalusia and we expect to commence a full restart of operations at the start of day shift today. Again, our team has managed the situation well, drawing on emergency generators to provide power to ancillary services as they safely evacuated our mines, which of course was the number one priority in the circumstances. With that, can we please go to questions? Thank you.

Thank you. If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ben Moyens with Jarden. Please go ahead.

Thank you. Good morning, Brendan and Sam. I might just start with the retention of the fiscal 25 production guidance metrics please and I appreciate the courageous decision to keep them unchanged despite the numerous challenges that the business has faced at both assets year to date. So maybe just sort of teasing out some of the numbers there, it looks like you require about 17,000 tonnes of copper equivalent in bots and about 26 at MATSA for the final quarter. So firstly, Mateo, just back calculating, it looks like you need a grade of about 1.2% to 1.25% copper, which would be a material step up, and retention of those recoveries about 94%. Note in your introductory comments about having a lot of high-grade ore on the ROM pad or open for imminent extraction, but maybe we can just explore just some of those metrics a little bit further and your confidence in those numbers, please.

Yeah, look, thanks, Ben, and I'll hand to Jason. Look, the reality is what you've seen, and I think we've seen in our numbers relative to market expectations, is we talked a lot about the floods when we last spoke. That was sort of a breaking story, and we talked about the degree of risk in the production estimates. We've actually stepped away from that as we sit here today because we've actually de-watered successfully A4, we're back in there and obviously we've been operating within Stage 2 of T3 consistently and we are expecting to get access back to Stage 1 in the coming weeks. Now, of course, you're right. There's not a lot of wiggle room in those numbers, but they're our plans. And I think one of the critical things, I know Dave's been talking to people like yourselves this morning, is you'll see they're not predicated on a material and unprecedented uplifting throughput. it really is around the grade profile and it's what we know we have in front of the if you like in front of our our excavators uh on the on the shop floor so to speak and so uh you know those plans are robust um those plans obviously also capture the fact that we lost some incremental tons at the start of the quarter with the the power outage in Botswana which impacted temporarily a degree of our throughput. So, again, we wouldn't have obtained guidance if we didn't have confidence in our belief that this could be delivered. And, of course, again, it's not predicated on running at a rate that's significantly in excess from a throughput perspective relative to what we've achieved previously. But maybe, Jason, if you can dig into some of that detail a bit more. And I can assure you, Ben, you can imagine these numbers have been heavily scrutinised internally. As I've mentioned, a lot of work to do, but that's what the plan tells us today.

And look, if we focus on Mateo, and if you like, there's a lot of parallels in between that are really significant for both of our sites. And if you look at Q4, it's all about grade and grade delivery to the mill. And particularly if I look at Mateo, Processing rate, year to date, we've been running at about a 5.53 million tonne per annum rate. So that's as at the end of the March quarter. During Q3, that was lower, given the situation we were dealing with in terms of the extreme rainfall. That was at about 5.48. So that leaves us about 1.35 million tonnes to process in Q4, which equates to a 5.4 million tonne per annum rate. So certainly nothing big or heroic about those numbers. We do note that we do have a planned major shut, which we've already been through. So that occurred during April. So we're through that at the moment and we're back up processing at full rate. And then on the back of that, if we look at recoveries there as well, we believe they're achievable and they're about in line with what we've achieved there with Q3, so about 94%. So that kind of leaves us with grade. And on our numbers, it's kind of in that 1.1, to 1.2 range. So once again, and that is based on our mine plan and the ore that we have sitting in front of us, as Brendan said.

And as you know, Ben, when you go to Mateo, you move into these areas which are more boronite prone, and it is part of just the natural sequence of the ore body, which is where you get that temporary grade kicker. And we've always known that high grade has been there. Of course, getting into A4 incremental tonnes will be positive, but we're not really getting grade out of there this year. That'll come more next year. And then, of course, as we get back into stage one, there is some high grade material sitting there as well. And as we mentioned, we expect to be back in there in the coming weeks.

Okay, that's all very helpful. Thank you, Jason. Thank you, Brendan. Second question, we'll just stay in Botswana. I appreciate the power situation in Spain is still sort of emerging, but the power situation in Botswana, I guess, is more established and not a great development to see some load-shedding events creeping across the border from South Africa. And presumably it's largely due to the poor performance of the Maurepole power station for the domestic generation. All of that said, it was a perfect wet season in the region. So hopefully Kariba has recharged. Just wondering if the country has managed to secure any additional power imports from the likes of Zambia, etc.

Yeah, look, so at this stage, what I think you'll find is that, yes, obviously the balance of hydro is important for the region broadly. but the additional short-term, call it stock gap measure, has really been vis-à-vis South Africa. I think the critical thing to recognise here in respect of the load shedding that we experienced, which at its peak impacted 3 foot by about 25% of capacity, uh and that was across just a number of days a couple of things the first one is power costs for our business overall i think megan are about five percent of our total cost of matteo so they're not they're not significant and so we do expect some cost pressure coming through on those incremental additional um electrons if you like that are coming through across from south africa but again it's not not expected to be significant and we've got more than enough capacity sitting in our cost guidance The second point is one thing the team has done on the back of this, which I think is particularly important from a risk mitigation perspective as we look forward, is they've also looked at all of the installed additional emergency capacity that we have. These are the generators that we have on site to run the camp facilities but also the generators that exist on site that have been used through the project construction phase and they're continuing to work through a process which will enable us to have access to those which would broadly mitigate the sort of risk that we've seen in the start of this quarter. The combination of those things, and as you said, if we continue to see good hydro out of Zambia, that's positive for the region. But again, I think the team is responding well and building a bit of risk mitigation into this. The critical thing, of course, and I know the Botswana government is very focused on it, is getting the maintenance back in train and I guess getting them back in a good position at their own domestic generators.

Okay. Thanks very much, Brendan. Thank you.

Thank you. Your next question comes from Mitch Ryan with Jefferies. Please go ahead.

Good morning, team. I'm just interested to get some of the colour around the CAPEX profile, specifically Mateo and some of the deferral of the plant seed model bottlenecking activities. How should we be thinking about that revised timeframe going forward?

Yeah, look, I'll pass to Megan. The big one we've talked about a number of times is actually the tank capacity at the back end of the plant, which is really insurance. It's a low cost insurance policy for the ability to continue to overtime incrementally at three foot capacity. That's the item that we would expect, the main item that we expect to pull into the next year. I mean, we still, to be honest with you, we'll continue to monitor that and inform the viewers you know how critical it is and whether or not indeed it is the insurance that we need but that is likely to carry across in the budget but Megan that's over to you I think there's also some things related to timing of uplifts of the terms facilities yeah sure look there's approximately 11 million which we've moved from financial year 25 which I think it's reasonable to expect that will move into financial year 26

Brendan touched on one of the major components within that and that's the thickening capacity and the tank capacity and the other component is the tailoring storage facility and it's the stage three works which you know based on latest estimates and in terms of prioritising our projects to the end of the year we're comfortable moving that into FY26 so you should see that 11 million come into the next year The last quarter for Mateo will be a heavier quarter for capital, and you can see that in the run rate. It's a number we're closely monitoring, but I do expect it is going to be a strong finish to the year and that there's potentially a few million of upside that's sitting in that number. But the team is forecasting a step up, particularly with mining activity and deferred stripping in the last quarter at A4. So you'll see that come through in Q4.

and the other component is the step up in our sustaining projects that we're currently moving forward with I hope that provides a bit more colour yeah and I think Mitch if I can what we've tried to do particularly in the back data tables is to provide you the best estimate of how we think we'll be placed by the end of the year so we've actually updated incrementally quite a lot of the the data points and as I mentioned to Ben just a moment ago we don't We don't expect to have a lot of wiggle room in those production numbers. You know, we need a strong quarter, but we're well-placed because of the grade profile. If there's anywhere where I think there's, you know, there is potential that we can do a little better, it is, as Mention mentioned, on the COF side and capital side of Mateo. So I think if you look at our numbers, The skew of risk is probably to see costs slightly lower than what we've flagged, but not materially so and potentially capital. But given the way things can move around, the potential movements in working capital, you can see an impact on costs with less things as they are for now.

That's it for me. Thank you.

Thank you. Once again, if you wish to ask a question, please press star one. Your next question comes from Daniel Morgan with Baron Joey. Please go ahead.

hi brennan and tim uh just probably an expansion on the questions um earlier just on the guidance um clearly what weather impacts um have been well telegraphed and you felt them just wondering if you've uh consumed some of your flexibility and that might travel into fy26 i.e you might start next year you know without a lot of flexibility or have you Have you robbed anything from FY26 to FY25 at all in terms of flexibility and risk of delivery? Thank you.

Yeah, I don't know if it's even politically correct to talk about the phrase, rob Peter to pay Paul, but it is something that we talk a lot about here. What we don't want to be doing is making short-term decisions. And it's one of the reasons, if you look at the quarterly, We're really careful to make sure we did update you on the outlook for Mateo for next year. The fact that we felt the 60,000 tonnes we're increasingly confident in versus the 59 this year and that smoother production profile. Jason's continued to remind me that the risk year for Mateo was this year because of the staging of the pit shells. And then we've obviously faced the floods in addition to that. Next year is set up. in a very good way, where we actually have more flexibility and we have a high degree of confidence. Still got to do the work. MATS is quite similar. We're into Olivo, we're into San Pedro. We're continuing to invest in the underground. As we look to next year, we feel that the plans that we've just gone through mean that we're well placed to maintain similar type levels of production that we're targeting this year. So we'll provide much more detail on that as we head towards obviously our August results and we've got to go through the finalisation of our budget processes etc. But an excellent question. It's one we ask ourselves a lot. We don't want to be short term decision makers and none of the things that we're talking about today in any respect actually are a function of trying to chase and outcome vis-a-vis guidance. The numbers are what they are, and the plans continue on after this year. Jason, anything that you want to add to that?

No, I think you've covered it well. Look, Brendan's captured it right. This was the high-risk year for Mateo. If you look at it, all we had was Stage 1. We were transitioning to Stage 2 and T3 open pit, and at A4, we didn't have access to the ore, and we were just getting there in terms of the plan towards the end of FY25. You fast-forward to FY26, We're in day four, all body, we're right in the middle of T3 stage two, and we're starting to transition over to T3 stage three as well. So, you know, we're well positioned, particularly over the next sort of 12 to 18 months at Mateo. And if I look at MATSA, we expected high grade to kick in in half two of FY25, and in effect what we've done is almost defer high grade from Q3 out into Q4. So it's really pushed it out and it's compressed that into Q4 rather than bringing forward high-grade ore from FY26.

And maybe at risk of too much detail, and Jason, you can correct me if I'm wrong, but one of the reasons that high-grade deferral is some of that high-grade is coming out of stoves which have a high propensity for paste to, if you like, make their way into the wrong stocks because we're mining either crown pillars or, you know, tertiary stoves. When it's wet, if you've got ore with paste on the ROM pad, it makes it really hard from a crushing perspective. It somewhat turns like clear glue. So those decisions, it's hard from an underground perspective probably for everyone to immediately reconcile why does it make it hard. You don't have the open pits that have a propensity to turn into swimming pools. But there are issues that you face with the way that your wrong stock presents through to your crusher and then through to your mill. So that's part of the thinking around that. So hopefully that provides a little of extra colour.

100% correct. And particularly with Magdalena, we are working under fill with the mining method that we had. So it makes us particularly sensitive to the high-grade polyol and the ability to put that through the plant, given that this stuff was, you know, Brendan said clad glue. Some people describe it as mud. And once it gets on the belts after being crushed, it just rolls back down and makes it very, very difficult to maintain throughput rates and keep stability in the plant.

Thank you for that additional comment. Maybe just pivoting to Black Butte, maybe you could just expand on the exploration program that's been underway, the success you've seen to date, what's the next gateway and plan for monetization in some form or the other via project or via sale?

Thank you. Obviously Sandfire America has carriage of the project which is particularly important from the government's perspective but from our side as obviously the majority owner and also the funder of the project we're really pleased with the progress they've been making on the drilling program. There are literally weeks left in that schedule and we should see that complete. we would expect somewhere at the conclusion of that process or shortly thereafter that Samphire America will release the outstanding assay results, which we hope will confirm the continued extension of the lateral extent of that ore body. I've mentioned it many times before in the current cost environment, the higher grade lower zone is increasingly the driver of the economics, which is obviously the critical piece from our perspective. What I do anticipate coming off the back of that is Sandfire America will make it clear in terms of what the next steps are. I would expect them to move towards either an update of their feasibility study or, given the changes we've seen, to go back into an accelerated pre-feasibility study. It would be one of the two. And that would put them, I think, in a good position to provide a detailed update to the market, I think, through the middle part of the second half of this calendar year. Obviously from our side, I've said all along, we're supporting the project, the funding, and clearly we provide critical technical support because we continue to see the project is compelling. The real question that we as a company and clearly with our board we need to work through is whether the project meets various materiality thresholds. One of the other elements that we're certainly suggested is particularly important for that project is to fully assess the ability for those copper concentrates to be processed in country and to look at all alternatives and certainly potential domestic demand which historically we've known has been there so that work is also happening in parallel because of course in the world where potentially we see COMEX running at a premium to LME being able to process in country will be also very important from an economics perspective So all of that said, Dan, no change to what was said before. I think the critical thing for us is we believe this is an attractive project. We think the work will confirm, it's our belief the work will confirm that the economics are compelling, the project will get built. The critical thing is from our side determining who is the best party to support the ultimate development of the project. For us, it's how do we maximise net present value and also consider it in the context of the complexity adds to the business relative to the materiality to NPV.

Okay, thank you so much, Brendan and Tim.

Thank you. Your next question comes from Ben Wood with Wilson's Advisory. Please go ahead.

Hi, Brendan and team. and congratulations on executing the controllables. I know there were many things out of your control this quarter but I had just two questions if you don't mind. With the new debt facility I know that you've released the obligation repayments. Is there any possible repayments that can be made before that bullet maturity or is that fully defined as there will be absolutely no repayments until that time or is there sort of an optional clause there for early payout if that's how you want to proceed?

Great question Dan and from our side we think about it as a liquidity facility as much as anything but maybe Megan?

Yeah thanks Ben and the structure of the facilities is important to note so it's a full revolving structure and so with that structure it has a number of benefits. One of the key ones being that you can make repayments and draw upon it at any time during the four-year period of that facility and so to the extent there's excess cash in the business You can pay that down off the drawn amount under the revolver and when you need it in future, if you need it in future, you can draw down upon it at the same time. So it's quite different from the previous project debt facilities we had in place that had the set debt repayment schedules in that way. So hopefully that gives you a little bit of flavour. We continue to be geared during the quarter just gone. And I think, you know, broadly, we on average be gearing $60 million per quarter. We've spoken about that consistently as something we're going to continue to focus on. And the benefit of this structure is that it enables us to continue to pay down the debt, but you've got liquidity available there over the term of the facility in the event that you ever need it.

I appreciate the extra colour there, guys. And my last sort of question was just about, you know, looking at sort of byproducts. I know that there was the copper equivalent, you know, 60 kilotons of sort of guidance at Mateo next year, but there sort of wasn't anything from MATSA. Just thinking at sort of byproducts and going into next year, noting that we saw the decrease and fall in the lead this quarter. Is there anything we should... sort of, I guess, carrying on from Dan's point before, be carrying into our FY26 forecast just at this stage about any of the byproducts to expect?

Yeah, look, I think, so firstly, just going back to the debt question, as I said, food question, the thing I would just stress from our side is, I know there's some people focusing on a cash balance. I would steer people away from that because if we're building cash, we'll pay down debts. and therefore the best number, I always said the one first theorem for mining companies is the net deadline. That is where you can really see whether people are generating cash or not. Everything else is, pardon me, Megan, but accounting. So then, going back to the other question around the 60,000 tonnes in the tail, we don't expect a significant differential in the ratio of copper to silver, and maps are, I think, similar. The thing I would stress, you'll notice that we're running Sotiel at a slightly lower clip, and we're running, obviously, the combination of Acrostonetus and Magdalena at a slightly higher clip. That is the sort of strategy that you should expect from us in the medium term, barring something I'm just saying. Sodio continues to provide us with a great backup, but the NSR and the economic rent equation dictates that outcome. And so, again, if we're extracting in that similar ratio, then you'd expect, on average, the similar sort of ratio of by-products that we've seen in the past. Jason, anything?

Really just add to your point on lead, which is a good pick-up. If we look at that Q3 or March quarter was a bit of an anomaly. So we were mining some older areas in Aguas Cadetes where we saw we had very high grade polyol coming out. So it was anomalous in terms of it was both high grade copper as well as very elevated levels of lead. So from an NSR point of view, what we continually do, particularly at all sites, but particularly at MATSA, is maximize NSR. So in this case, Given the high levels of copper we had in that ore, our goal or our strategy was to actually suppress lead and send that out to the tail and maximise copper recoveries. And that delivered us the better outcome. Now, certainly looking forward, I don't expect that to be a big part of our mine plan going forward, but we will be at time to time mining some of that material, but typically small tonnages.

Excellent. Thanks, Dan. Appreciate it.

thanks then thank you there are no further questions at this time I'll now hand back to Mr Harris for closing remarks again I know today's a really busy day for you all with obviously the Anzac holiday and Easter sort of coalescing a lot of quarterly has been pushed into this week so we do really appreciate your interest we appreciate your time I did want to just take the opportunity again to thank Our broader team, and particularly at operations, it's been very challenging. It continues to be, as we saw in Spain overnight. But under Jason's duties, the teams are responding incredibly well. Most importantly, they're keeping our people safe and delivering on our commitments. And as I've said, we've got a very, very big quarter ahead of us. We've started well, but there's a lot of work to do. So we look forward to an update when we discuss the fourth quarterly in July. So thanks again for your time.