Commodities | Oct 29 2025
This story features SANDFIRE RESOURCES LIMITED.
For more info SHARE ANALYSIS: SFR
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS
Shares in Sandfire Resources hold their ground following first quarter results showing progress at Motheo and Matsa, while a further growth option awaits.
-Sandfire Resources’ FY26 guidance retained for production, costs, and opex post September quarterly
-Growth option via the Black Butte Copper Project in the US
-Prospects for a dividend as Jarden forecasts year-end net cash
-Analysts debate valuation 'premium'
By Mark Woodruff
Since reaching a low of $8.05 in April, shares in leading ASX-listed pure play copper exposure Sandfire Resources ((SFR)) have rallied strongly to around $16.00, though valuation concerns persist in the broking community.
Until now, the company has benefited from higher copper prices across its operating hubs in Spain and Botswana, with additional upside potential from a prospective deposit in Montana, USA.
Management this week announced group copper equivalent production of 35.5kt for the September quarter, almost 5% ahead of management’s plan. Sandfire remains on track to achieve the mid-point of unchanged FY26 guidance of 157kt. FY26 cost and capex guidance were also retained.
Those stronger realised copper prices, 2% above the consensus estimate, together with higher-than-expected Motheo shipments drove a 9% revenue beat to US$328m, explains Macquarie, which in turn translated into earnings outperformance.
The Matsa operation in Spain delivered 21.8kt of copper equivalent production, while Motheo in Botswana produced 13.6kt.
The midpoint of copper production guidance at Matsa of 96kt remains unchanged with the mine plan continuing to project stronger contained metal production in the second quarter.
Motheo in Botswana contributed 12.1kt, -1.5% below the consensus forecast, with volumes also anticipated to lift as access to higher-grade ore increases, notes Morgan Stanley.
Management expects contained metal volumes at Motheo to ramp-up across the remainder of the year as access has been recently re-established in Stage 1 of the higher-grade A4 pit after de-watering.
Remembering copper equivalent production converts the value of by-product metals, such as gold and zinc, into an equivalent amount of copper, actual group copper production of 24.6kt missed the consensus estimate by -3.5%.
Morgan Stanley explains this shortfall was primarily due to lower output at Matsa, where copper production of 12.5kt was -4.5% below expectations, reflecting the mining of lower-grade, more complex ore, with production expected to improve in the second quarter.
Costs
UBS observes an elevated cost base at Matsa, driven by the start-up of the new tailings facility as well as the strengthening of the euro against the US dollar, both of which continue to pressure unit costs.
With no material adjustments to the analysts’ production or cost assumptions, UBS forecast around 54kt of copper at underlying operating costs of roughly -US$90/t processed (versus guidance of -US$86/t) and capital expenditure of -US$150m.
These cost headwinds are being offset by strong operational performance at Motheo, which is expected to incur higher non-cash costs associated with the A4 ramp-up and deferred stripping, explains UBS.
Motheo continues to deliver the lowest underlying operating unit costs across the group at -$42/t, compared with -$85/t at Matsa.
Quarterly costs at Motheo were further supported by negative treatment and refining charges, underscoring the persistent tightness in global copper concentrate markets. With smelting capacity exceeding available feed due to upstream supply disruptions, Jarden explains Sandfire effectively captured more than 100% of the metal value from production rather than incurring typical smelting and refining costs.
Management expects costs to rise modestly at Motheo to reflect full year guidance of -$44/t as A4 ramps-up, given longer haulage and additional handling requirements.
Revenue of US$328m came in 8% higher than Jarden’s estimate and was a 9% beat versus consensus as five Motheo concentrate shipments departed Walvis Bay.
Group earnings (EBITDA) of US$137m came in -4% below the consensus estimate, notes the broker.
Upcoming dividends?
Net debt declined by -$61m to finish the September quarter at $62m for a cumulative reduction in net debt across the past year of $283m. Jarden continues to forecast a net cash position by end 2025.
Ord Minnett expects Sandfire to prioritise a dividend as its initial form of capital return, supported by its substantial $262m franking credit balance.
Key positive and negative in September quarter
During the quarter, Sandfire received the final regulatory approval for the new tailings storage facility (TSF) at Matsa. Early-stage construction activity commenced this month.
Regarding Motheo, Macquarie highlights regulatory changes in Botswana add some uncertainty, with new rules allowing the government to increase its project stake to 24% from 15%.
Potential new project
On the earnings call, just after the September quarter results release, Macquarie observed management indicated the Black Butte Reserve and Resource update and preliminary feasibility study (PFS) are expected during mid-to-late December.
Sandfire’s Black Butte Copper Project is an underground copper development located near White Sulphur Springs, in central Montana, USA. The company’s interest in the project is held via an 87% equity stake in Canadian-listed Sandfire Resources America Inc, which owns 100% of the project.
A key growth option for the company, it is considered one of the highest-grade undeveloped copper projects in the world and forms part of Sandfire’s strategy to build a diversified global copper portfolio alongside its operations at Matsa and Motheo.
Initial plans have targeted 30-35 kt per year of copper in concentrate over a mine life of roughly 10-12 years.
The updated Black Butte PFS is a key catalyst for strategy, suggests Macquarie.
Outlook
Morgans believes Sandfire trades at a premium due to its high-quality, dependable operations and the scarcity of comparable copper producers on the ASX.
However, the Hold-rated broker views the stock as fully valued at current levels and would look for further exploration success across the portfolio to strengthen long-term conviction.
Also alluding to the “scarcity premium”, UBS struggles to identify valuation support at current levels and retains a Sell rating.
Elsewhere, Ord Minnett views Sandfire as the most dependable and lowest-risk pure-play copper exposure within its research coverage.
There are six daily monitored brokers in the FNArena database researching Sandfire Resources. Ord Minnett has an Accumulate rating (midway between Buy and Hold), while three others are on Hold (including Citi which is yet to update its research for the quarterly result), and two brokers have Sell (or equivalent) ratings.
The average target of the six brokers rose to $14.50 from $13.68 following the September quarter release, implying around -9% downside to the $15.96 share price at the time of writing.
Outside of daily coverage, Jarden’s earnings forecasts have risen after incorporating higher medium-term copper and zinc price forecasts, the key driver of an increase in the broker’s target to $11.80 from $11.00.
Jarden’s rating for Sandfire is, however, downgraded to Sell from Neutral as valuation is now seen as stretched.
Jarden analysts will remain watchful for more compelling entry points. Developments that could improve their outlook include additional copper supply disruptions or potentially value-accretive corporate activity.
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