Copper miner Sandfire Resources has recently completed the US$1.86 billion acquisition of the MATSA mining complex in Spain, transforming the company into a major player in the red metal scene.
MATSA is a substantial polymetallic mining complex in the Iberian Pyrite Belt, comprising three underground mines and a 4.7 million tonne per annum central processing facility, with cutting-edge technology and infrastructure and an extensive resource base with significant growth potential.
The complex produces about 100,000-120,000 tonnes of copper equivalent per annum at low C1 costs of just 40-50c per pound of copper due to zinc, lead and silver credits.
Completion of the acquisition was well-timed, coming just as the copper price returned to above $10,000 per tonne.
Macquarie analysts described the acquisition as a "game-changer" and said it had transformed the outlook for Sandfire.
"From current levels, we expect Sandfire to deliver a five-year copper equivalent production compound annual growth rate of 7%," the bank said.
"The five-year CAGR from the FY21 base prior to the MATSA acquisition is an impressive 16%."
Combined with the Motheo project, which is under construction in Botswana, Macquarie expects Sandfire's annual production to peak at around 146,000t in FY29.
The acquisition included 2450sq.km of ground in Spain and Portugal that has seen very little exploration in the past decade.
"We believe there is significant potential to extend the mine life and increase the production rates through exploration success," Macquarie said.
Motheo could produce as much as 60,000tpa of copper from FY24 and Macquarie sees material upside to the project's 11-year life.
Up until the acquisition of MATSA, Sandfire's sole operation was DeGrussa in Western Australia, which is expected to run out of ore later this year, but could continue as a gold operation, subject to studies.
By the time DeGrussa ends, Macquarie estimates the operation would have generated A$1.8 billion in net cash flow after capital expenditure, generating an internal rate of return of about 50%.
"Our vision for Sandfire is to become an international diversified and sustainable mining company, and the completion of this transaction represents a major step closer to realising this aspiration," Sandfire managing director Karl Simich said.
"With the acquisition of MATSA, Sandfire immediately becomes one of the largest copper-focused producers on the ASX, with high-quality operations in Spain and Australia and an impressive growth pipeline and exploration portfolio that we believe will continue to drive our growth for many years to come."
The transaction has already seen Sandfire readmitted to the S&P/ASX 200 and its market capitalisation reach more than $3 billion for the first time.
Macquarie has an outperform rating for Sandfire and a price target of $9.50.
