Operator: Thank you for standing by, and welcome to the Sandfire Resources September 2026 quarterly report. All participants are in a listen-only mode. If you wish to ask a question, you will 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.
Brendan Harris: Good morning, everyone, and welcome to our quarterly call. Look, I plan to keep my opening remarks very brief, given we are only three months into the new fiscal year and we are tracking very much to plan. As you would expect, our executive team is here with me today, and we are looking forward to answering your questions. Before we start, I would 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 of the lands on which we conduct our business. We pay our respects to their elders and leaders, past, present, and emerging. As always, we will start with safety. We finished the period with a group TRIFR of 1.8 compared to 1.6 at 30 June, having reported seven high-potential incidents in the quarter.
Brendan Harris: We do have an extensive and connected program of work underway across the organization, led right at the top by Jason Grace. It is designed to further enhance our system of risk management while creating an environment where all of our people feel safe to speak up and stop work when something does not look or feel right, irrespective of their title or level in our organization. Of course, that is because nothing will ever be more important than the health and wellbeing of our people. More broadly, I am sure you have seen we have made a very, very solid start to the financial year, with group production tracking bang in line with full-year guidance and our strong commitment to exploration delivering very exciting results. During the quarter, we achieved copper equivalent production of 38,900 tonnes, including 22,700 tonnes at MATSA and 16,100 tonnes at Motheo.
Brendan Harris: I note with the A4 pit now contributing around 15% of ore feed to the crusher. You have also seen that we have maintained group production cost and capital expenditure guidance, with volumes still expected to be evenly weighted across H1 and H2. While our operations have also retained a very competitive position on the global cost curve, of course, we are watching energy markets closely, given the potential to further exacerbate inflationary pressures. We are looking forward to taking your questions. As you might imagine, there are many moving parts, which will be good to work through with you. Suffice to say, our cost guidance looks good. At Kalkaroo, we have completed the first 8.7 kilometers of our planned 130-kilometer infill and extension drilling program, despite losing around 3 weeks of site access because of wet weather.
Brendan Harris: We are in the process of adding drilling capacity and remain on track to complete the PFS in the second half of FY28, which we expect to identify a low-cost and long-life copper-gold development opportunity with an optimal scale of at least 10 million tonnes per annum, and likely more. At MATSA, follow-up drilling has confirmed the potential of the prior La Juliana discovery hole, with further high-grade polymetallic massive sulfide mineralization identified on both sides of the initial intercept, extending the mineralized horizon across some 160 meters of strike. What is more, downhole EM indicates that the massive sulfide horizon may extend across a strike of at least 350 meters within a prospective geological horizon, which has an interpreted strike length of up to 2 kilometers.
Brendan Harris: Consider in the first 4 and a half short years since we have acquired MATSA, our team has now discovered San Pedro, Olivo, and La Juliana, which really only serves to highlight the incredible prospectivity of both the Iberian Pyrite Belt, and more broadly, within it, the corridor that extends from Aguas Teñidas through to Concepción and Poderosa. As we like to say, the identification of new high-grade reserves within close proximity of our modern processing hubs is likely to deliver the best economic return to our shareholders. It is also why we are mobilizing additional resources and plan to allocate additional funds, some $10 to $20 million, to accelerate drilling at both La Juliana and our A4 underground project. With that, commence concept-level studies to help us better understand the scale and economic potential of these exciting opportunities.
Brendan Harris: Finally, at the other end of the spectrum, we continue to view the Black Butte project as a compelling development opportunity, given its relatively high ore grade, environmentally sustainable design, and minimal surface footprint. We have confirmed our ongoing financial support for Sandfire America as their board undertakes a review of their strategic alternatives, including, but not limited to, a sale of the company. When we bring this together, as I have said before, we are set up well operationally, and we have put early runs on the scoreboard, having generated group sales revenue of $480 million for underlying EBITDA of $272 million and an operating margin of 57%. To finish the quarter with unaudited net cash balance of $342 million after returning $117 million to shareholders in the form of a fully franked final dividend that was effectively funded out of quarterly free cash flow.
Brendan Harris: We believe we have the right strategy and the right team. We have a strong balance sheet, and we are investing in opportunities that have the potential to unlock significant long-term value for our shareholders. You can be sure that we will keep working hard to do what we say we will do. With that, let us go to questions. Thank you.
Operator: 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 are on a speakerphone, please pick up the handset to ask your question. Your first question comes from James Redfern with RBC Capital Markets. Please go ahead.
James Redfern: Hi, Brendan and team. James here. Thank you. I just want to ask about the MATSA unit cost, please. $95 a tonne in the quarter compared to guides of 90. I am just wondering if you could please run through your exchange rate assumptions that are in the guidance and also at Motheo in terms of the diesel cost there, just in terms of what your guidance assumes for Motheo cost as well, please. Thank you.
Brendan Harris: Look, thanks, James. We might take a chance to explore some of the costs in a bit more detail, given I am sure that is where a number of the questions will go. Our guidance for the euro across the year is 115, and it is really a shape of a curve, as you might imagine. We do not forecast.
Brendan Harris: We take it at 30 June, and we look at a 30-day moving average, as we do with the commodities and other uncontrollables. Again, you will hear us talk in a moment. The euro today is sitting under 112. It is in the 111. Of course, with 90% of MATSA's cost base exposed to the euro, that is a really important driver as we look to the second quarter and obviously the remainder of the year, depending on how that continues to play out. What I might do is then just quickly turn to Motheo. I will come back to MATSA, and I want to talk about power. Motheo, in terms of diesel, it is the right question to ask.
Brendan Harris: It is around 15% of our cost base. I will pass to Megan to give you a bit of a sense as to how that can flow through into our numbers, but also to talk about some of the offsets that we are seeing, which, again, as I mentioned earlier, when you take everything into account and you look at our unit cost guidance on a spot basis, we actually think that the current guidance holds for both Motheo and MATSA within materiality. In fact, MATSA, if we run a spot scenario, is probably running slightly below our guidance. Motheo is fractionally above, but nothing material. Megan?
Megan Jansen: Yeah. Thank you, Brendan, and hi, James. Maybe just to start off with Motheo. Overall, costs are tracking well relative to plan. So across the quarter, just at a headline level, Motheo ran at in excess of a 70% EBITDA margin. So we are still very much seeing margin expansion at that macro level, which is great. Nonetheless, as an open pit operation, there is exposure to diesel prices. In terms of diesel as a sort of percentage of our total cost, it is about 15%, as Brendan touched on. Effectively, our guidance for FY27 does assume that the price of fuel steps down about 25% in the H2 of the year relative to the H1 of the year.
Megan Jansen: If we sort of flow through current prices that we are experiencing at Motheo, important to note that the prices of fuel in Botswana are set by the regulator, by BERA. So there is typically a lag with what you see in terms of the global oil prices then flowing through into refined product and BERA then passing those prices on to us. But if we take the sort of current prices we are experiencing and sort of play that out for the remainder of the year, there is a sort of we are talking a 2% to 3% of our operating cost base that is an exposure, but so relatively insignificant is how we think about it, James. So in dollar million terms, around $8 million effectively, potentially higher fuel costs in the H2 if current prices remain for the balance of the year.
Megan Jansen: Now, as Brendan touched on, there are some, I guess, benefits going the other way that we are also seeing. One of them is TCRCs, which are really helping. We are maintaining our position on the cost curve, and we are seeing that play through into our margin expansion. What we have seen in the Q1 is strong TCRC performance, around -$90 per tonne. We are expecting that to improve yet again in the Q2.
Megan Jansen: We have a number of spot sales that we have locked in at very favorable market terms, and I am expecting that we will see, on average, TCRCs increasing to in excess of -$200 a tonne in the Q2. So they are some of the things coming through on the other side of the ledger that are really helping to take off some pressure that we are seeing coming through across the fuel base. The other one is probably just freight rates.
Megan Jansen: We have been securing some favorable freight rates over the first quarter, really benefiting from our cargoes are 10,000 dry metric tons or thereabouts. With that size, we can really opportunistically secure what we call stranded vessels that have excess idle capacity that are going past Walvis Bay. That is providing some relief on the other side.
Brendan Harris: Yeah, and I think, James, hopefully what helps there is if you look at unit cost, but then right through to C1 and you take all of that into account, as we have said from Motheo's perspective, things are playing out broadly as we would hope with some, as we said, offsetting factors. If I go to MATSA, and I just want to touch on this because while we are on costs. You would have seen that European power prices have gone almost somewhat vertical in the last literally number of weeks given what is going on in energy markets globally and obviously what is going on in the Middle East and obviously Ukraine.
Brendan Harris: Just to give you a sense, and I am hoping this is not a surprise to many of you, we have around 70% to 75% of our electricity prices very much locked away across three PPAs at the moment, and that is what you have seen flow into the recent quarter. We have a relatively limited level of exposure to the spot market. That persists out into the end of H1. Ironically, as we move into H2, we end up in a very similar position with slightly less coverage in Q1 and even more in Q2. We run around an open position in Q1 of around 35%. That is of the calendar year, 2027.
Brendan Harris: That then goes back closer to just over 20% because our solar facility starts to ramp up, and we get actually some of the cheapest electrons available to us. What that means, suffice to say, is again, if you look at power has historically been around 10% of the cost base. In fact, that is roughly what is built into our budget and guidance. If you then look at that sort of level of exposure, it is plus or minus 2% of our costs that we think, the sort of level of increase we could see if current spot rates persist, and that is around EUR 200 a megawatt hour. Just to be really clear, on the flip side, 90% of our cost base is euro-denominated. The euro is trading, as I mentioned earlier, below 112. It is in the 111s as we sit here.
Brendan Harris: In fact, that more than offsets the impact of power. Again, lots of moving parts, and I just encourage you to think through all of them and not look at things in isolation. We are regularly running spot scenarios to understand where we are at as a business. You can see in our margins, as Megan mentioned, continue to see margin expansion. But hopefully across the two business in terms of some of the factors that we do not have a lot of control over, it gives you a real sense of what is going on in the cost within the business, James.
James Redfern: Yeah, it does. Okay, Brendan, Megan, thank you very much. Can I ask one more question, please, or hand over?
Brendan Harris: Yeah, go for it.
James Redfern: Thank you for that. Just want to ask about the zinc production from MATSA. Zinc was around about 19% of guidance, and the recovery was below plan as well. Just wanting, in terms of achieving the zinc guidance at MATSA, is that a function of grade recovery or ore sequencing? Thank you.
Brendan Harris: Yeah, look, I will throw to Jason. Look, I have mentioned other assets historically, other polymetallic open stope paste fill operations and talked to the level of volatility that they see. One reported only recently where I think we saw 20%, 30% plus variability quarter on quarter. We have always said there is a lot of variability in these operations, depending on the stopes that we are actually extracting. Most importantly, as I pass to Jason, from my perspective, we continue to see our guidance being met across the business, and we are just seeing that usual variability. In fact, relative to what we have seen historically and relative to what others often see, this is a really low level of volatility, if I can stress that. Jason?
Jason Grace: Absolutely. Thanks, James. If I look specifically at zinc for the quarter, then we can talk about the full year. We saw an average head grade there of 3.4%. If I look at, and with reference to appendix A as well, if I look at basically the next three quarters, I expect to see that zinc grade increase. So up to around about that 3.7% that we have in our FY27 estimates, and in some quarters, even sneaking up close to 3.8%. If I touch on recoveries and just looking at zinc specifically there as well, we had 66% metallurgical recoveries there for Q1. We do expect that to increase over the year to around about 77% on average. If you look at the impact that we have, particularly in Q1, it is simply a combination of lower grades.
Jason Grace: Lower grades, inherently, we do get lower recoveries, and that is a consistent theme at MATSA and most other ore bodies that I have worked with. We also have the other factor there as well is that we have quite a reasonable amount of complexity there in our metallurgical domains. Particularly what we saw in Q1 was we had a higher proportion of Castillejos ore and Sotiel ore, which we know is metallurgically less favorable, and we do get lower recoveries and lower NSRs from those ore sources. I expect we will see significantly lower volumes of that material come into the blend in the next three quarters.
Brendan Harris: Thanks, James.
James Redfern: Okay, Jason. Thank you very much. Thank you.
Operator: Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will now pause a moment to allow any final questions to register. Apologies. We have another question. This is from Stefan Hansen with Macquarie. Please go ahead.
Stefan Hansen: Yeah. Hi, Brendan and team. Just a quick one while I got the opportunity. Just on Black Butte. I know it is only a small part of the business, but could you just sort of outline what you see is the delay in coming to a resolution in this one? I think previously you talked about last quarter, the strategic review would be done. Just, yeah, talk us through that.
Brendan Harris: Look, and thanks, Stefan. We were feeling a little unloved for a second there, so really appreciate you coming up with the addition question. Look, no, really good one. And again, I will be intentionally careful because we are talking about a publicly listed company.
Stefan Hansen: Yeah
Brendan Harris: of which one of our executives is the Chair. We are very mindful of that. I would suggest you read their announcement as well as ours, and do not try and read too much nuance into it. It is intentionally plain and direct. What I think it makes very clear is that the board of Sandfire America is looking at its alternatives, including selling the company. You can imagine in a public announcement, you do not say you are looking at selling your company unless you have clear intent to test the market.
Stefan Hansen: Yeah.
Brendan Harris: We know the work they have been doing has given them a level of encouragement that there is a lot of interest in this project. What I would say, because I have seen a few notes where people have said, and I know Dave Wilson, the Head of IR here with Tom, has spoken to a number of people this morning. I think fair to say that people had possibly expected that things might have moved a bit more quickly. I just encourage you to look at the markets. If you look around global equity markets today, they are not as open as they were to new equity issuance, capital raisings. There have been some high-profile examples of that in recent weeks.
Brendan Harris: Even though we are in copper, and copper clearly having just returned from LME week, is still a commodity that people are, on average, I think, looking to get exposure to, rather than the other way around. I think it is still difficult to raise capital in these markets. Black Butte, as we have said in our announcement, in my quotes and other areas, and I have just mentioned it in my introductory remarks, we think it is a compelling development opportunity. The type of company that I expect to be looking at that, it is not BHP, right? It is most likely going to be someone at the smaller end, which sees it as a foundational asset that can fit within a broader strategic appeal.
Brendan Harris: It is likely, therefore, that those sorts of companies, I would envisage, this is not certain by any way, but those sorts of players are likely going to require the support of their own equity holders and potentially new holders. I think, therefore, part of this gets back to the market dynamics. Just to be really clear, we have a valuation on this asset as an 87% shareholder. The valuation is in the market on a set of assumptions from the recent PFS. You can run spot scenarios. Our balance sheet is strong. We are patient. We have said we are going to support Sandfire America. It is a difficult process to work through. We are supporting the team. They are obviously doing the right thing and being very mindful of the rate of spend that they incur whilst they work through this process.
Brendan Harris: But it is really important that both the equity markets understand, their shareholders understand that their major shareholder, the 87% shareholder who has historically been the sole financier for that business, is standing behind them while they work through this process. Does that help, Stefan?
Stefan Hansen: Absolutely. It does. While I have got the opportunity, can I ask a couple more?
Brendan Harris: Please.
Stefan Hansen: Just on La Juliana. There are some good drill hits. Can you just sort of outline just a broad timeline that you are thinking about to bring this to resource into the mine plan?
Brendan Harris: Yeah, look, I am glad. I will pass to Jason because he really-
Stefan Hansen: Cool
Brendan Harris: should have the right to shout from the rooftops about this one. I will just say in an introductory way, that as an old geologist, I have often said the worst thing you can do into prospects is often drill them, because we have seen many a dream shattered. The good thing here is the polar opposite is true. This has come out over the last 3 months since we last spoke to you after the discovery hole, almost as well as we could have ever imagined. Not only are we seeing the drill holes extend the strike extent substantially, but the grade profile, albeit more zinciferous, is almost remarkable. If you look at the photos, I think that we have got in one of the releases, it is effectively a block of sphalerite. For those geologists out there, it is like a block of metal.
Brendan Harris: Now, of course, you will also see that as we are moving across that strike extent, we are starting to see more copper. So we are seeing upwards of 1% copper, which is not uncommon for these redox boundaries. Look, I will stop there because otherwise I will say everything Jason probably wants to say. Suffice to say, there is a lot of excitement in the organization about this. There is still a lot of work to do. It is very close to existing infrastructure, so it is something that really can change the landscape for MATSA very quickly. Jason?
Jason Grace: Well, absolutely. Your statement about excitement, particularly in the exploration and the geology teams at MATSA, is certainly a very fair statement. We are very encouraged and very excited about these drilling results. I might take a step out. We have been talking about this for a while. That whole northern corridor that goes from Aguas Teñidas out to the east towards Concepción and Poderosa. We think the prospectivity of that whole zone or that, I will not call it a region because it is not that big, it is around about 15 kilometers in strike length. Brendan touched on it earlier about our approach to systematic exploration on there, is that the prospectivity of that area is just astounding. There is historic mining in there, if you have walked it like I have, is just amazing.
Jason Grace: So we continue to be excited, not just about La Juliana but also the broader potential in that whole corridor, which we will continue to focus on, with our exploration strategy throughout FY27 and beyond. Coming back to La Juliana, and particularly if we look at our approach to the drilling program there, we truly are testing the extent of this as we move out. So if I link towards our drilling strategy, we have had one drill rig on there, surface drill rig operating. We will be mobilizing a second drill rig very soon. Following basically approval from the regulator of our drill pads, we expect that we will do a progressive step out program on this, looking at around about 160 to 200-meter centers, which, based on our knowledge of Aguas Teñidas, that would support an inferred resource estimate.
Jason Grace: I would think as we start to step out and we start to build up a bit of knowledge, or more knowledge about the geology, I would expect that we are able to progressively provide the market updates through inferred resources. That will be a big part of our thinking and doing that progressively as we move through the drilling program. Moving beyond that and looking at how it can come into a mine plan, its proximity to both Castillejos and also Aguas Teñidas gives us a lot of flexibility in terms of how we would access it from an underground point of view. If you look at our existing program, we will be testing extension of this mineralization to within 200 meters of surface.
Jason Grace: We probably have three options in how we could access this ore body, either from Castillejos, Aguas Teñidas, or if it gets close enough to surface, a complete new decline. One of the things we do want to do is understand the geometry, the extent of this zone of mineralization. Then be in a position to look at underground access in an optimal way that allows us to potentially ramp up to production very quickly. At this stage, these are all conceptual, not ideas, but conceptual plans. The key thing for us is step-out drilling and defining the extent of this high-grade massive sulfide zone.
Brendan Harris: Yeah, and I think maybe if I can just add one thing, Jason. Well, actually two things. I think it is strike extent, but one of the really interesting things is depth extent as well. What are we seeing down deep? Because, we know how the likes of Magdalena were discovered, where you had very high grades, but you drill at depth and these things pinch and swell. What we do know is the geophysics actually points upwards much better than it looks down. One of the plans in the drilling program is actually to drill some deep holes so we can really get a good sense of the geophysics.
Brendan Harris: I think that leads to a key part of it is getting the geometry, the drill pads and Jason sort of alluded to this, but you have heard us talk about the demasías, which effectively is the approval process for these postage stamp areas of tenure, legacy areas of tenure that were open. We were the only party that could successfully apply. The Spanish processes, call it arduous and lengthy. All of those postage stamps were granted in the recent quarter. Now not only have we had these hits, but we are actually able to move forward and apply for approvals into these areas, which enables us really to drill geometrically into this, what is steeply dipping target zone much more effectively. It is very interesting. I think that is, again, just to round out what Jason said, it just should not be underestimated.
Brendan Harris: Not only has there been limited exploration in this prospective belt across decades, but there really hasn't been the application of modern geophysics. These new EM tools that we're using are incredibly good. As we drill systematically down towards fences, down towards Poderosa, Concepción, not only is it about learning of where we're in the stratigraphic column, but it's actually using the geophysics to look out and around to understand where the conductors are, and then we can chase them. It's certainly exciting. Again, given the grades we're seeing at something like La Juliana, don't underestimate. To substantially extend the life of MATSA, you don't need one for one. It's not like you've got a 4.6 or 7 million ton per annum processing plant, and you need to identify 4.7 million tons of La Juliana ore to add a year.
Brendan Harris: You can add roughly a quarter or much less than that, and that adds a year because it really increases the NSR of your blending operation. That's why we look at something like La Juliana as a potential game changer for that aspirational objective of getting 15 years of reserve life in front of the face. Hopefully that helps, Stefan.
Stefan Hansen: Absolutely. It does. Look, just one more, quickly. You gave a lot of detail on diesel. You probably addressed this question back in March, April, when the Middle East conflict began. Could you remind us, how much fuel, not really price, but more fuel security at Motheo, how much diesel you've got on site in days, in the country, and sort of readily available?
Brendan Harris: Yeah. Look, so maybe I'll pass to Jason, but just so we avoid any doubt, I'm going to just reiterate the Spanish situation. We see Spain as being a very low-risk destination relative to Botswana, but also relative to a place like Australia, given they have a very large integrated refining industry. It's also low risk for things like plastics and so on. So Spain's actually a really good place, plus the fact that MATSA's got very low diesel intensity. Botswana, there's a couple of things. Ships are loving passing Botswana at the moment, more over Namibia. Actually, that's one of the reasons freight rates are lower. We're actually finding that, again, the country, our major provider, has been very successful in keeping us well-informed with real visibility, months ahead in terms of fuel supplies, diesel supplies, et cetera. So that's worked very well.
Brendan Harris: We talked historically of well over 20 days of coverage, but visibility out months. Jason, maybe just for a quick update.
Jason Grace: Yeah. Brendan, building on the 20 days there, we have the capacity to hold approximately 20 days on site. At the start of the Middle Eastern conflict, we actually were able to store mobile tankers on site to increase that and make sure that we were mitigating any potential risk of supply. What we are seeing is we actually use a Botswana-owned company called Kwa Nokeng Oil, and they supply our diesel, and particularly for that part of Botswana out of Namibia. As Brendan touched on, supplies and nominations going into Namibia, particularly through Walvis Bay, have been particularly strong throughout this whole period. We do get regular updates from Kwa Nokeng Oil, and the outlook for those nominations and confirmations is very strong, at least for the next month, going out to the second month as well, which is about as far as they look going forward.
Jason Grace: In short, at this point in time, we have no concerns whatsoever about ongoing diesel supply.
Stefan Hansen: Great. Okay. Thanks very much, everyone. Cheers.
Brendan Harris: Thank you.
Operator: There are no further questions at this time. I will now hand back to Mr. Harris for closing remarks.
Brendan Harris: Thank you very much, and thanks for your interest. Look, as I mentioned, the operations are set up as well as they have been in at least my four years of tenure. The assets as we sit here today are both tracking over 1,000 tonnes ahead of our internal plan. So we have a little bit of fuel in the tank, so to speak. The team is hard at it. We are going to stay very focused on the basics and again, with the main intent of doing what we say we will do. So have a good day, appreciate the interest, and look forward to seeing you all again before the end of the year. Cheers.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
