Summary
- Sandfire exported 93% of its products to China for processing in the FY20. The rest of the products were exported to the Philippines (3.5%) and Japan (3.5%) for processing.
- Media reports say that China is considering a ban on imports of copper ore and concentrate from Australia.
- However, Sandfire is confident of increasing its sales contract with existing customers, along with new customers in the non-Chinese market.
The ASX-listed copper miner Sandfire Resources Ltd (ASX:SFR) has commented on a media report on restrictions or ban on imports of copper products by China.
According to some reports in the Australian and international media, China may be mulling a ban on imports of copper ore and concentrate from Australia. However, Sandfire has clearly stated that it is not aware of any reason behind such reports, adding that it was not even sure if the report regarding China was authentic.
Sandfire generates most of its revenue from exports to Asia. In FY20, it exported 93% of its products to China for processing and the remainder to Japan (3.5%) and the Philippines (3.5%). The dependency on China was 81% for revenues during FY19, and the rest 19% was generated from the Philippines.
However, the company is confident of increasing its sales contract with existing customers, along with new customers in the non-Chinese market.
Sandfire believes that copper’s global market is mature and robust. The market is highly competitive for clean and high-grade concentrate like the ones it extracts from its Degrussa project.
The Covid-19 carnage in the global economy created havoc on the prices of most of the commodities and copper fell to US$ 4,617.5 per tonne in March at London Metal Exchange (LME), during the lockdown in many countries.
Despite the doldrums in the global economy, the price of copper soared to US$ 6,953 per tonne at the LME in October, 50% high from the levels of March. The reasons behind the bull run were the speedy recovery of the Chinese economy and partial supply disruption from major producers like Chile and Peru.
The average price for copper is forecasted to be US$ 5,980 per tonne for 2020 and is expected to increase to an average price of US$ 6,620 per tonne in 2022 as per the data available in Resource and Energy Quarterly September edition of Department of Industry, Science, Energy and Resources.
Sandfire produced 19400 tonnes of contained copper during the September quarter from its Degrussa Project in Western Australia. It reported a strong cash balance of A$398 million with no debt. The company has given production guidance for FY21 for copper production in the range of 67,000-70,000 tonnes.
SFR was trading at A$4.14 at 1:53 PM AEST on 3 November 2020 with a loss of 8.33% from its previous day close.
