Sandfire Resources Ltd
ASX:SFR
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Sandfire Resources Ltd
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Thank you for standing by and welcome to the Sandfire Resources March 2022 Quarterly Update. [Operator Instructions] I would now like to hand the conference over to Mr. Ben Crowley, Head of Investor Relations, please go ahead.
Good morning, good afternoon, everyone. Thank you for joining us for Sandfire's quarterly call for the March quarter. My name is Ben Crowley. I'm Head of Investor Relations for Sandfire, and it's my pleasure to introduce the presenters for today's call. We have Karl Simich, our CEO and Managing Director; Matt Fitzgerald, our Chief Financial Officer; and Jason Grace, our Chief Operating Officer. Karl will take us through the highlights of the quarter, and then Matt and Jason will step through some of the details.
As you will appreciate, with this being the first quarterly report for the MATSA operations, there is a lot of new information in this presentation. In the interest of time and to leave as much time as possible for questions and answers, we will move through some sections more rapidly than we might normally. Please feel free to contact me if you have any questions which are not addressed in today's presentation or in the Q&A. With that, over to you, Karl.
Thanks very much, Ben, and thanks, everyone, for joining us today. It's a great pleasure to present our March quarterly results and to reflect on what's been genuinely a transformational period for Sandfire. I don't use the words lightly because with the completion of the MATSA acquisition and the strong progress we're making in Botswana, Sandfire is now substantially a different company to what we were just a few months ago. Underpinned by diversified international portfolio of operating assets and a strong development and exploration pipeline, we have well and truly embarked on the next chapter of the Sandfire story.
There's one key message I'd like to get across you this morning is that the overarching theme of this next chapter is of growth, delivering growth in production, revenue, cash flow, profits and returns to shareholders and ultimately, growth in the depth and the quality of our business. The group production profile is set to increase from a historical range, averaging between 65,000 and 70,000 tonnes of copper per annum over the last decade, rising up to around 100,000 to 110,000 tonnes of copper equivalent basis in the financial '22 and '23 year. But as Motheo comes online next year, group production will steadily increase towards around 160,000 tonnes of copper per annum on a copper equivalent basis from financial '24 onwards. And with the continued optimization, expansion and exploration success across our portfolio and a strong platform to consider future M&A opportunities, our ambition is to drive this towards greater than 200,000 tonnes of copper production as we move into the second half of this decade.
Importantly, this rising production profile is being delivered into one of the most attractive markets that we've seen for copper, zinc and other future-facing metals for over the past decade.
Just on our strategy, we've spent considerable time and effort over the past few years preparing our business for this transformational new era. I've talked before about the 5 key pillars of our strategy. And it is important to reiterate them here as they form the core of our approach, and they are: Execute delivery on what we've got; build and sustain and grow our production pipeline; accelerate discovery; align and empower our people; and optimize our capital structure and stakeholder engagement. These 5 pillars are supported by our core values as a business: Honesty, respect, collaboration, accountability and performance, which collectively are our very positive culture, and we are very proud of that.
Executing on strategy, if there is another key theme this quarter that I'd like to emphasize this morning is that we are executing efficiently and diligently on our strategy across all key areas of our business. I'll leave it for you to read the slide in greater detail, but it provides a good summary of how we have performed in each of these key strategic areas during the quarter.
And just to quickly turn now to the March quarterly highlights. As I said at the opening, the March quarter marks the start of an exciting new chapter for Sandfire and gives investors their first glimpse into the depth, capability and trajectory of our expanded group. Before handing over to the team, I'd like to briefly run through a few of the key highlights from my perspective.
First, Sandfire strongly leveraged to a very strong and rising metal prices. Despite the cost inflation we're seeing across the world, we are generating strong revenues and healthy greater operating margins. And ultimately, in any business, it's about the margin. This is evidenced by strong financial results we published today with quarterly sales revenue of in excess of USD 340 million and a very strong EBITDA at a group and operating level of circa USD 200 million. This reflects not just the strong commodity prices we've experienced during the quarter, but also the fact that our high-quality operations are all set in the bottom of the global cost curve.
Our operating EBITDA margin order of magnitude is 63%, and quite honestly, it's an exceptional result. To put it in some perspective, this is nearly USD 3.50 a pound of copper produced, or alternatively nearly $7,500 a tonne of copper produced.
One of the other key highlights for the quarter is undoubtedly the successful completion of the MATSA acquisition, and also the speed and the professionalism with which the MATSA operation has been seamlessly integrated into the Sandfire global business. In the 2 months or so since we've got the keys, MATSA has performed well and in line with expectations, if not slightly better than the guidance numbers we issued in February. And Jason and Matt will shortly run you through the detail on this. As a result, we've been able to strengthen our production guidance for financial '23 to between 90,000 and 95,000 kilotons of copper and also 38,000 tonnes of zinc. And together with other ancillary production of commodities, our copper equivalent production order of magnitude for financial '22 would be around 115,000 tonnes of copper equivalent.
We've seen a slight increase in OpEx cost guidance to USD 1.19 per pound, and this reflects the inflationary environment that is impacting most businesses around the world at the moment and is, I think, still a very credible result.
Fourthly, we have some of the best metal exploration ground available to us anywhere in the world. And with a very attractive global exploration program, we have some incredible opportunities for near-mine extensions and new discoveries. We will have a substantial spend. We control 2 of the world-class copper belts in the Iberian Pyrite Belt and also in the Kalahari Copper Belt.
Fifth, our team in Botswana is doing an incredible job. The Motheo copper mine is already approximately 58% complete and progressing on time and on budget towards first production in quarter 4 or the June quarter of financial '23. That, in itself, is a phenomenal result in an environment where people skills and material are scarce, and almost everything is subject to cost inflation.
And finally, in summary, we've had an incredible -- of this incredible growth platform and runway ahead of us, we also have a very strong cash holding of just under USD 400 million and a net debt position of around USD 400 million. So we are well placed to continue to execute our strategy.
And before I hand over, I would just like to -- it would be remiss of me not to mention the value proposition for Sandfire. And given -- as we're looking down the pipeline of 2 long-life assets with significant and exceptional exploration potential and based on the last quarter's results and the current economic environment and commodity prices, the EBITDA margin of our business is probably in order of magnitude between USD 600 million and USD 800 million. And if one was to take USD 700 million as a number and multiply that by peer comparisons in the range of between 4 to 8 as a multiplier on EBITDA, it would give you a value proposition range for this company today of between $8 and $16 and a midpoint of $12. And as I've said numerous times before, we're almost half price. As I see this morning, we're trading at somewhere around the $6 mark. So I think from a value proposition, Sandfire is in an excellent position for its current shareholders and potential future shareholders to participate in that value growth of our business.
And on that note, I would like to now pass over to Jason Grace, our Chief Operating Officer; and then Matt Fitzgerald, our Chief Financial Officer, to give you some greater detail.
Thank you, Karl, and welcome to everybody on the call today. Starting with HSEC. Across the company, we saw an overall improvement in our TRIFR, which was 5.1 as at the end of the quarter. This was largely driven by a lower number of injuries across the whole company at the same time that our number of employee numbers and associated worked hours increased with the MATSA acquisition and increasing activity at Motheo.
Our COVID-19 response remained a major focus during the quarter, and we are pleased to have been able to continue to operate safely and continuously throughout the period. In Western Australia, we continue to work with the rising COVID-19 infection rates and close contact rules within the state. In Spain, the peak of the Omicron wave occurred in December and January, with infection rates falling ever since. In Botswana and the U.S.A., infection rates have also continued to fall throughout the quarter, noting that it's now been several months since our last positive case at Motheo.
As a highlight for the quarter, Sandfire was also very proud to introduce the Youth Development Program in Botswana. This program is designed to provide training and employment opportunities to young people within our local communities in the Ghanzi region and ultimately put in place an enduring legacy for all people in the area.
Now moving on to operations highlights across the company. Q3 was a strong quarter for Sandfire, particularly given that completion of the MATSA acquisition occurred on the 1st of February, with Sandfire immediately exercising operational control and instantly becoming a major copper and base metals producer in Spain. Group consolidated Q3 production totaled 27,774 tonnes of copper, just over 16,000 tonnes of zinc and slightly under 7,000 ounces of gold, with both MATSA and DeGrussa contributing according to expectations. This performance has supported the company to strengthen full year guidance slightly to 91,000 to 95,000 tonnes of copper, approximately 38,000 tonnes of zinc and 30,000 to 34,000 ounces of gold. Even with the inclusion of MATSA production for the 2 months for the quarter, copper remains the dominant contributor to revenue.
Building on this theme and with reference to the production graph shown, the acquisition of MATSA delivered a significant step-up in copper and zinc production for Sandfire at a time when prices have continued to move higher. This is driven by global economic growth and the accelerating transition to a lower carbon future. This also allows the company to maintain and build operating margins despite global inflationary cost pressures.
If we now look at progress on key growth initiatives for the March quarter. In Botswana, the Motheo copper mine construction continues to proceed according to schedule with first production expected in the June quarter of 2023. Construction activities there have continued to ramp up with over 1,250 personnel now on site. And during the quarter, we achieved a very important milestone with pre-strip mining at the T3 open pit commencing on schedule. A 5.2 million tonne per annum expansion feasibility study is also progressing well and remains on track for completion in the June quarter.
In the U.S.A., the Lowry Deposit Resource Definition Drilling Program is now well advanced and work continues on optimization of the Johnny Lee feasibility study. Our global exploration group also continued to be very active across Australia, Botswana, the U.S.A. and with the acquisition of MATSA now also in Spain.
Looking across the financial year 2022 group guidance, in addition to production and the strength in production guidance, as both Karl and Jason have mentioned, we also have the slightly increased FY 2022 C1 unit cost guidance, which has now been reset for $1.19 a pound across the group, across DeGrussa and MATSA. CapEx for the year is expected to be around $62 million. There's $24 million remaining for the June quarter, an estimated $24 million remaining for the June quarter, and $20 million of that is related to mine development activities at the MATSA mine in Spain. Motheo, for the year, Motheo' s project development is expected to be around $142 million for the financial year, and we'll have some more detail with the update in that section shortly. And also $12 million of sustaining CapEx, which is also predominantly at the MATSA mine in Spain.
Exploration and evaluation studies for the year increased to $65 million, now including some additional exploration plans in -- again, in MATSA, for $65 million for the year. Corporate cost is expected to be around 28%, 17 corporate and around 11 of business development activities within that number. And as we've previously flagged, we expect around $17 million of MATSA acquisition costs -- the MATSA's acquisition cost to hit the P&L in this financial year. Of the total transaction costs of around $50 million, we expect 1/3 to end up in the P&L, 1/3 go against the equity on the balance sheet and a 1/3 also go offset against the MATSA debt in the balance sheet.
Also, for the first time, we are just giving some indicative numbers. We have not completed as yet the price allocation accounting process for the MATSA acquisition, but we're giving you some indicative numbers at this stage, which will firm up for the next -- a couple of months around $200 million per annum of D&A on an indicative basis for MATSA. That includes, as we note there, both the acquisition and the scheduled ongoing mine development CapEx that we'll see each year. And as a rough split at this stage, the $300 million would be around $150 million of the acquisition cost amortizing and around $50 million of ongoing mine development capitalization amortizing as well for a total of $200 million, and DeGrussa $130 million $140 million.
I'll just move quite quickly through the headline financial results. A number of them have been mentioned previously. So sales revenue for the quarter, $343 million. That obviously props up for very strong revenue number for $650 million year-to-date. As Karl mentioned, strong EBITDA margins on those, and we're adding around USD 90 million a month in terms of operating EBITDA Operating -- group EBITDA, that's after corporate, after BD, after those other costs, come in still well and truly above 50%, so 54% and 53%, respectively, for group EBITDA margin.
Cash flow generation is also strong, as you'd expect. And pleasingly, as we know, these operations have a very relatively minor CapEx schedule, particularly in terms of MATSA, really has its underground mine development activities and plus some sustaining CapEx, but no major capital programs, but also cut out cash flow. So on day 1 of taking the reins at MATSA, we have obviously generated significant cash flows, and we'll see that a little bit more in some of the EBITDA graphs to follow. And CapEx, Q3 $60 million; and year-to-date, $119 million.
Moving across that segment EBITDA contributions, we're just breaking out in terms of operations, EBITDA $115 million for DeGrussa for the 3 months, the March quarter, and approaching USD 100 million EBITDA for MATSA, which is the 2 months of February and March of our ownership. And then moving across the page, Black Butte, Motheo going through the P&L, and also Australian costs, corporate exploration and other take us through group of a very healthy USD 187 million at a group level.
To add to the waterfall that we put out with our half year results at December, we just rolled that forward. You can see the first 3 bars there are clearly part of the holding cash from the equity raising in September, October last year and also the debt drawdown from MATSA and the MATSA acquisition itself, which is the funds on top of the $300 million deposit that we had paid during the calendar year 2021. The operating cash flows and growth has shown the $172 million between DeGrussa and MATSA for cash flows from operations and then $172 million of growth, which includes mine development and then a few other parts, income tax dividends gets to our closing -- very strong closing cash position of $390 million. And as Karl mentioned, puts us in a net debt position of about $410 million.
Moving to financial position. The cash numbers restated there around $300 million of total assets on balance sheet. We have -- we are well placed to make our debt repayments during the course of this year. We have a corporate facility of USD 150 million. It is an Australian-denominated facility, so it's AUD 300 million. Those were payable in September, which were well placed and have the cash clearly to repay that. And there we also have some first repayments coming up for MATSA, which clearly that operation is running well, and we'll be able to well and truly service its obligations. And then probably a current sort of project for us at the moment is, of course, finalizing the target USD 160 million Motheo project finance facility, and that agreement is well advanced with the short list of banks. That will be initially based on the T3 project. And then later on, we'll look at any options about expanding that in terms of A4 development, following the outcomes of the feasibility study.
All right. If we now move on to an update on MATSA operations. As mentioned earlier, the acquisition of MATSA was completed on the 1st of February, utilizing a combination of equity, project-level debt, corporate facilities and cash. The financing facility is now fully drawn, and the 3-year hedging program is also now in place.
We now look at MATSA integration and operation optimization. Operational integration is now well advanced with work extending across the areas of operational excellence, alignment of policies and standards and reporting systems and governance.
Near-term key projects have focused on the period -- initially focused on the period to June 2022 and are now extending out beyond this time line and will support issuing of guidance for FY '23 in July this year. The key projects in these areas have included: The confirmation of near-term operational plans and budgets; review and update of mineral resources, which are now well advanced, which will, in turn, support updates of the life of mine plan and ore reserves; ongoing work on plant readiness, recovery and content product optimization is well advanced as well. And mining production and delivery is already delivering benefits and results for the operations.
Looking out longer term, we also continue to establish a strong base at MATSA for a multi-decade operations, which is underpinned by a strong safety culture at MATSA, alignment with Sandfire's values, an in-depth understanding of the key drivers of value and a commitment to operational excellence to lift and stabilize mine production, a focus on the ongoing growth of many resources and ore reserves, and in line with Sandfire's DNA as an explorer, a commitment to a long-term investment in exploration across the Iberian Pyrite Belts.
Circling back to the March quarter. MATSA production for the 2 months to March was very strong and met all expectations. Copper production exceeded 12,500 tonnes with zinc production at just over 16,000 tonnes for the period. Metal sales were slightly lower than production due simply to the timing of sales, and this delivered operations EBITDA slightly below USD 100 million with a very healthy EBITDA margin of 63%. Underpinning these results over recent months, the MATSA team has delivered a consistent improvement in underground mine production with performance in March exceeding the mine plan and achieving an annualized mining rate of 4.9 million tonnes per annum. The improved performance is primarily due to improved short-term planning approaches and particularly a strong performance in production stoping. And pleasingly, for Sandfire, all 3 mines contribute to this higher output.
Moving on to MATSA base metal concentrate production. MATSA produces 4 concentrate products that includes cupriferous copper concentrate, a polymetallic copper concentrate, a zinc concentrate and a lead concentrate. You will note the breakdown of Q3 concentrate production, recovery and grades for each of these products with a total of 102,569 tonnes of concentrate produced for the period.
Looking out to the 5 months to June 2022, we are very pleased to maintain and slightly strengthen key production guidance for the period at approximately 27,000 tonnes of copper, approximately 38,000 tonnes of zinc, approximately 3,000 tonnes of lead and approximately 1 million ounces of silver. Please note that we've also included guidance on the payable percentages for all elements.
Finally, noting the complexity associated with the production of both copper ore and polymetallic ores across the mining operation, we have included a breakdown of production tonnes and grade for each of the 3 underground mines. When combined, this guidance is copper ore production of approximately 500,000 tonnes at a grade of 1.8% copper, polymetallic ore production of approximately 1.45 million tonnes at a grade of 1.9% copper and 3.8% zinc, with total production expected to be approximately 1.95 million tonnes for the period.
Moving now to base metals concentrate production guidance for the 5 months to June 2022. The expected total concentrate production guidance is also strengthened to total between 220,000 tonnes and 230,000 tonnes for the period.
Looking at operating costs for MATSA for the 2 months to March, a very pleasing C1 copper margin of $3.91. That does include some QP adjustments in a period with a rising copper price. But even with that taken out, it would just still be $3.60. So on either measure, very, very strong generation in terms of margins at MATSA.
Write on guidance in terms of cost guidance at $0.94 a pound for the Q3 C1. And as we've mentioned previously, and we'll talk about a little bit more in a couple of slides, we have marginally increased our headline C1 guidance for MATSA for the financial year to 5 months up to $0.98 for 5 months to $0.98 per pound, which was previously $0.94 per pound.
These strong margins are, as we've said previously, offsetting in part higher energy costs and global inflationary pressures, which we'll go into a bit more detail in the following slides.
So moving to operating costs, this is at a gross level. So it's primary product and also byproduct in euro, which is a major measure of cost, for the MATSA mine and the mining operations. We have, of course, seen as we're all aware, a spike in European energy prices, and we certainly reflected that in our expectations of guidance shortly after we acquired MATSA. We have seen energy prices around 27% higher than the budgeted levels. However, we do have some relief in sight with the EU looking to put some measures in place that do correct, in some ways, some of the market movements that we have seen. I'll talk about that a little bit more in a minute. And clearly, we are also exposed to global inflationary pressures and pressures across as most of the economies, of course, and the global economy is across labor, cements, part services costs increasing in those areas.
The graph on the right shows you what that looks like in terms of mining and processing. The mining area had some additional OpEx in the March quarter. So that's why it does spike up a little bit in there. But as you can see, the areas that you would expect to be probably more impacted certainly by the energy prices or things like the processing plant, which is around 50%; energy-based in terms of its processing costs and also across into some areas like transport and, to some extent, treatment refining as well.
So right across to the right-hand side of the page, when you look in total, there has been a step up clearly between the September and December quarter. So that's back into last calendar year of 2021, a step-up of around $20 million -- EUR 20 million per quarter into these 3 quarters, March, and then into our guidance in June. Some more detail around that in the back of the pack as well.
Focusing on MATSA energy costs. As we talked about, that spike in terms of energy costs, we're just showing you what that spike looks like in the graph on the right for some relativity to spot at the moment is around 220. As I said, we did hear some measures -- some suggested measures coming out of the European Union yesterday -- the day before, talking about whether so there could potentially be some caps. The reason for having to do some of those things is, of course, some domestic pressure in terms of domestic energy users but also the spot pricing for energy in Spain is based on the marginal cost of generation from imported gas. So that can, of course, make this market go a little bit, as it has in this case, do some strange things.
We have looked at some of that, if those measures do come in, we would expect at this stage to see the second half of the June quarter potentially drop from what we've been assuming is around EUR 250 per megawatt hour to reduce by around EUR 100 per megawatt hour, if those measures do come in. And then, of course, post June, we'll then, of course, look at in terms of guidance and see where the energy market, hopefully, settles with some of these -- from the power strike that was -- spike that we've seen.
We also, of course, have Sandfire's medium and longer-term renewable energy initiatives, and we expect those to -- we are studying those at the moment and going out to some economic assessments on those, and that will, of course, take into account some of the power generation that we will require as well.
All right. If we look at MATSA exploration, MATSA exploration is currently focused on resource to reserve conversion at the existing mines to extend mine life and enhance operational planning as well as step-out drilling, targeting near-mine resource extensions. During the quarter, 5 drill rigs were active, testing near-mine targets and expanding or infilling known deposits. Five holes were completed at the Concepion project to define the eastern edge of known mineralization. Drilling was also completed at the Poderosa project to test extension of mineralization at depth and to find the southern boundary of mineralization. Mineral resource estimates for both the Concepion and Poderosa deposits are expected to be completed in the June quarter.
Drilling at the Angelita East prospect, which is approximately 2 kilometers northeast of Magdalena, intersected low-grade pyretic master sulfides up to 9 meters in thickness. [indiscernible] drilling is planned for the June quarter to test the strike extensions and possible increases in grade. Two holes were also drilled and completed at the 100% owned Aldeia dos Elvas project in Portugal. Both holes intersected black shales and disseminated prior op, which are interpreted to be the local copper-bearing horizon. Further geophysical surveys will be undertaken to determine the extent of the prospective stratigraphy.
If we now move on to an update on DeGrussa copper operations. Against the backdrop of mining industry labor shortages and rising COVID-19 cases in Western Australia, DeGrussa operations continue to deliver safe and reliable production throughout the March quarter. While there has been no material impact on DeGrussa operations to date from this, we acknowledge that risk remains around potential production impacts during the June quarter, which have not been factored into the midpoint of production guidance.
On the other hand, and as Matt mentioned, operating cost pressures relating to global inflation, and particularly impacting labor, diesel, consumables and transport costs in Western Australia have impacted DeGrussa's C1 costs in the March quarter and are forecast to continue into the June quarter. Also, as we approach the end of mine life at DeGrussa, expense mining operating costs are forecast to increase quarter-on-quarter as capitalized development activity reduces.
If we now look at DeGrussa production for the March quarter. As mentioned before, the site team again delivered strong results in line with the mine plan and in line with expectations. Copper production exceeded 16,200 tonnes, and gold production was just under 7,000 ounces for the period. Metal sales and volumes were higher than production as a result of timing of shipments, and this delivered an operations EBITDA slightly below USD 115 million with a very strong EBITDA margin of 62%.
Moving on to DeGrussa copper concentrate production. A total of 69,000 tonnes of concentrate was produced for the quarter at a grade of 23.5% copper, 3.1 grams per tonne gold and 31 grams per tonne silver. It is also worth noting and giving the team a wrap here the excellent copper recovery of 94.4% for the quarter, which is outstanding performance.
Looking out for the full -- out to the full financial year, we are very pleased to maintain and slightly strengthen key production guidance at 65,000 to 68,000 tonnes of copper, 30,000 to 34,000 ounces of gold and approximately 300,000 ounces of silver.
Moving on now to copper concentrate production guidance for the full financial year. The expected total concentrate production guidance is also slightly strengthened to approximately 280,000 tonnes for the period.
Looking at margins and costs. So DeGrussa also achieved a C1 margin of above $3 per pound. Just a reminder, when we have -- at the time of the MATSA transaction, we did put some copper hedging in place the back end of DeGrussa's copper production, and that is reflected in that $4.29, as you can see, copper price in the graph on the right. Even with that, a strong margin of $3 -- over $3 a pound in terms of payable copper.
Costs, as Jason mentioned, we do have cost pressures as many others do in the West Australian industry and globally. And we have upped our full year cost guidance to $1.24. As Jason also mentioned, we are expecting higher C1 costs to be reported from DeGrussa in the June quarter, upwards of around $1.40, $1.50 a pound for that quarter, and that will bring us into a full year, we believe, around the number that we have guided there. Gold is also hedged in terms of the by-product credit at around $1,800 an ounce on the right. So for the quarter 3, $0.35 offset got us to a quarterly result of C1 $1.24 a pound.
Looking now at DeGrussa exploration. Approximately 3,200 meters of reverse circulation and diamond drilling was completed during the quarter. The company also commenced drilling beat targets, which were generated from the 2021 exploration strategic review. The first of these targets at the Homestead prospect was drilled to a depth of 866 meters and intersected the mine sequence. While no economic mineralization was identified, the intersection displayed encouraging characteristics, which included chloride-altered zones, magnetite-rich exhalite [indiscernible] and disseminated sulfides. Follow-up downhole geophysical surveys will be completed in the June quarter.
At the McLean well prospect, which is part of the Auris joint venture, native copper was intersected in several holes. Further work is required to determine the significance of this occurrence.
And finally, during the quarter, exploration in regional New South Wales was significantly limited due to high rainfall and COVID-19 restrictions on travel. Sandfire also has withdrawn from the Endeavour joint venture as the project failed to meet the required technical hurdles.
If we now move on to the Kalahari region and in particular, development of the Motheo copper mine. With reference to our recent pictorial update released to the market on the 5th of April, we are very pleased to advise that Motheo construction and development continues to proceed on schedule and on budget with first production expected in the June quarter of 2023. As part of this, Sandfire intends to fund the development of the Motheo copper mine through a combination of cash and project debt and selection of the syndicate of international banks for a USD 160 million debt facility has now been completed, and finalization of terms is also well advanced. This facility will be based on the initial 3.2 million tonne per annum base case development. And review of the 5.2 million tonne per annum feasibility study will occur during the June quarter. A 5.2 million tonne per annum expansion feasibility study is also tracking well and remains on target for completion in the June quarter.
Looking now at the Motheo development time line. Work throughout the March quarter has continued to proceed according to the project plan. Another very important milestone was achieved during the quarter with the commencement of pre-strip mining at the T3 open pit occurring in late March. This occurred approximately 1 week ahead of schedule, and mining is currently making excellent progress.
Looking out to the remainder of the financial year. The only remaining key milestone to be achieved is the completion of construction of the permanent accommodation village.
And now drilling down to key progress for the March quarter. In addition to the commencement of pre-strip mining, some of the key recent developments include: The construction office building has been now completed and is occupied and operational; the A3 Junction road construction is now nearing completion; earthworks for the process plant is now at 98% complete; plant civil works are approaching 50% completion with foundations progressed for the primary crusher, SAG mill, tailspin and [indiscernible] tunnel vault. Construction of the 750-room mine village, accommodation village is advancing with 160 rooms now occupied. Construction of the 132 kV transmission power line is advancing with tower construction and assembly well underway. The structural, mechanical and piping installation contract has also been awarded. And the SAG mill components are now in transit to Botswana.
Given the substantial ramp-up in activity in recent months and with mining pre-strip operations now beginning, we have entered the phase of the project where we will be executing across all areas. And as a consequence, we will also be entering the peak spend phase of the project, which is forecast to extend over the next 4 quarters. The graph shown provides a breakdown of spend in all key areas of the project for each quarterly period. And it should be noted that costs shown relate to the 3.2 million tonne per annum T3-only base case which totals USD 319 million. And as touched on before, we are continuing to move forward with the 5.2 million tonne per annum expansion feasibility study, which is expected to add approximately USD 47 million in capital costs and substantially increase the overall value of the project.
We look at exploration in the region. The Sandfire team in Botswana continue to explore the company's significant landholding in the Kalahari Copper Belt with 7 drill rigs active during the quarter. Work around the Motheo copper mine project targeted high-grade copper silver mineralization with 2 drill rigs focused on the A1 Dome and the T2 prospect west of the Motheo mine. Well wide exploration also continued with 5 drill rigs drilling a diverse range of targets. Drilling at the T4 project continued throughout the quarter, stepping out in both East and West directions along a broad zone of copper anomalism and following up on structural positions in the Lower D'Kar Formation. Results continue to show the presence of anomalous disseminated copper and vein-hosted mineralization.
Exploration also commenced for nickel and copper magmatic sulfides in the Okwa magnetic complex, which is approximately 100 kilometers south of Ghanzi. During the quarter, a helicopter borne magnetic radiometric and gravity survey was completed over the northern portion of our tenements.
And finally, moving on to the Black Butte project in Montana. Our key areas of focus have been to, firstly, continue to deal with the legal challenges associated with regulatory approvals, but more importantly, we've been undertaking additional work to add value to the project. In line with this, the Sandfire America team continued to work on enhancing the Johnny Lee feasibility study outcomes throughout the quarter. And during the quarter, a 14,000-meter resource definition diamond drilling program at the Lowry deposit, which is 100 -- sorry, 1.5 kilometers east of the Johnny Lee deposit, continued throughout the quarter. This work will support an update of the Lowry mineral resource estimate and a pre-feasibility study on the deposit.
Subsequent to the end of the March quarter, Sandfire Resources America announced the results of the State District Court legal challenge related to its mine operating permit. The District Court Judge has granted the plaintiff's motion for a summary judgment stating that the Montana Department of Environmental Quality violated the Montana Metal Mines Reclamation Act and Montana Environmental Policy Act in its analysis of the project. Sandfire America notes that both parties have 45 days to propose remedial measures to the judge. After which, she will hand down the remedial actions, and at which point, we will have a clearer picture of the impact, if any, on the project development time line. Sandfire America is reviewing the legal decision, and we'll be in a position to provide further updates once it has evaluated the latest information.
Thanks very much, Jason. And just in summary, once again, thanks, everyone, for listening. It certainly has been a transformational quarter for Sandfire Resources. And from our perspective, we will lift from this platform looking forward to building, optimizing and growing from where we are at the moment. We have the great growth platform. We do have a global vision. We have these production hubs that are long-life production hubs, either on stream or coming on stream with significant strong pipeline in terms of opportunity growth for further development optimization and exploration organic potential.
In terms of the team has refreshed the team is focused, and we've got an excellent hub-and-spoke strategy with very, very good team members across the globe and well and truly aligned with our objectives now the growth we are seeking. And we do have significant support structures in many of our stakeholders and the balance sheet to execute on our strategy. And as I mentioned earlier on, the value proposition for the business is significantly different in our minds from where the market is at the moment on any sensible multipliers would have a range of between $8 and $16 a share. And as I said, the midpoint of $12.
And on that note, I will just call the conference to close and open the floor now to questions. But once again, thank you very much for your attention today in what has been a transformational quarter. There is a lot of information, as Ben mentioned earlier. To the extent we don't get through those questions please approach Ben offline, and we're more than happy to run you through the very, very detailed and comprehensive information that we've supplied you with today. Thank you very much for listening.
[Operator Instructions] Your first question comes from Rahul Anand from Morgan Stanley.
Karl, perhaps I wanted to touch on MATSA. For the month of March, you did mention that the mine was able to produce at 4.9 million tonnes per annum. And you have mentioned previously that debottlenecking to take the mill to 4.7 million tonnes is pretty easy and requires next to no CapEx. Could you update us on that? I mean, how should we think about that 4.7 million tonne rate in the near term? When do you expect you can get there? And then how should we think about further expansions perhaps to [ 5 ] is there a significant amount of CapEx required for that? And what are some of the key limiting factors to get you there?
Thanks, Rahul. It's Jason here. And look, firstly, we're really pleased with how things are going over at MATSA at the moment. The team has responded very well to the changes over there. And we have some key people from Sandfire embedded into the org structure. And that's working really well.
In terms of mine production, look, we've seen a steady increase probably over the last 4 months. So even dating back slightly before us taking ownership of the project. And we're confident we can get up and maintain a 4.7 million tonne per annum rate going forward. Given where we're at, at the moment, we are preparing for potentially some volatility around that or a bit of variation. So a lot of our efforts at the moment are really focused on lifting that mine production to 4.7 million and stabilizing that there.
If we look at moving beyond that, that's work that we are undertaking as part of our life of mine plan update at the moment, and we'll be in a better position to be able to provide full guidance on that probably in July when we issued guidance for FY '23. But overall, I think during the [ BD ], we had identified that there was scope to increase that plant capacity up to approximately 5 million tonne per annum rate. And Dave, what was roughly the CapEx required for that?
Yes, Dave Wilson here, Head of Tech Services. Look, to get to the 5 million tonnes, there is some minor modifications even in the plant, the biggest thing being [indiscernible] of the power line in which the MATSA team started to look at permitting for that, and then there's some grades to crushing, grinding, et cetera, and a few other bits and pieces, but capital was in the order of EUR 15 million to EUR 20 million, but that was at a very, very early stage of study, and we'll need to dig into that a bit more. But we'll also need the modification of our approvals from the government, which we believe will be relatively straightforward, but it is a process we need to work through.
Got you. Okay. That's very helpful. And I guess a follow-up, I guess, on the cost side of things. That energy information is really helpful, so thanks to that.
In terms of the other parts of the guidance, just wanted to understand in terms of incorporating higher levels of TCs in the zinc market currently. Are those already part of guidance? And then also, what zinc price are you incorporating in terms of your guidance for the copper production cost at MATSA?
Yes. Thanks, Rahul. Matt here. So probably the second question first. We've got some details back into the appendices at the back of the pack, which show price achieved and also C1 guidance assumptions across the group and also for the individual operations. So I'll probably steer you in that direction, just to make sure you pick up the right thing for the right quarter.
TCs.
Oh, sorry, yes, TCRCs yes, we have reflected some increases into our full year guidance numbers, some adjustments, I guess, for what we expect across the zinc treatment and refining charges. And to some extent, we have to obviously estimate some of those. And also there's some estimate even at the back end of the March quarter itself. So we expect all of that to settle by the time we get to the middle of June.
Perfect. Okay. Final question from me around DeGrussa. Just noticed obviously that great drop-off quarter-on-quarter. And that's fine, there could be variability. I just wanted to understand perhaps the drivers there? Was it Monty? Was it DeGrussa? And then also, how are you thinking about that variability going forward now that you have developed the mine basically to end of mine life?
Rahul, Jason here again. Look, you're absolutely right. Given the nature of these high-grade ore bodies, there is a variable grade. And given high metal content, particularly in places like Monty, it does have an impact on the short-term schedule. So yes, the grade is varying at the moment. It's all according to plan. According to our reconciliations at the moment, generally very positive right across both of the deposits. And the level of knowledge that we have going out to the end of mine life is very good given that we've developed virtually everything, and we have gray controlled all of our remaining resources and reserves as well.
Your next question comes from Paul Young from Goldman Sachs.
Another question on MATSA, the performance in March. It's a great result. You're mining it at 4.8 million tonne run rate or thereabouts. I'm just maybe a question for you, Jason. Just curious about that rapid increase in the space of 3 months. It seems almost too good to be true, to be honest, considering that Trafigura had the same sort of opportunity to increase by 20% near term. So I'm just curious about sustainability. You said there's variability going forward. But what's really driven this? Has it been, I don't want to use the term, but maybe cherry picking sort of larger stopes near surface? And/or how much of it is just the fact that the labor force is more productive and working more hours per day. Just trying to get an understanding of how do you achieve that so quickly?
Look, Paul, thanks for the question. And look, firstly, I kind of touched on it before. We have seen a steady increase over recent months. And it did start with the previous owners and particularly the team over there. They have been very focused on making sure that they were lifting mine production up to 4.7 million tonne per annum rate. So what we've done really since we came in, and I'll give you an assurance. We're not high-grading the place, and we're not taking easy tonnes out, right? So we're now the owner of this asset, right, for, let's say, for decades, at least. So we're not going to do anything stupid, especially in the first couple of months of production.
So what we're seeing at the moment is particularly with -- we have continued a lot of those initiatives. We're bringing in, if you like, some of our expertise and our skills, particularly in Australian operators mindset into the mine, mining operations as well. And we're starting to see these things really start to have some benefit.
I touched on it before. It's still very early days with us in terms of operating the mine, which is why I'm a little bit -- I do caution and say that we may see some variability, but a lot of our efforts will be stabilizing at that 4.7 million tonnes per annum rate. And at this stage, we're confident we can maintain that going forward.
Yes. Okay. That's great. Again, well done. So to turn around that quickly. Just a second question on the zinc grades, particularly in Magdalena. How sustainable is that is that high zinc rate? I presume not, considering that you guided supplies a drop in the June quarter.
Yes. So look, during this quarter, we did get a positive reconciliation on zinc grades, particularly out of the Magdalena stope work zone. So we have definitely got the benefit from that as well. So -- but if you look at guidance and the guidance that we've issued, it's basically in line with our original budget and mine plan for the year. So we haven't banked on that going forward.
Okay. And then moving over to Botswana, project 60% complete, less labor pressures in Southern Africa with the workforce out of Africa and Botswana.
Yes. So look, firstly, that 60 -- or the 58%, that's committed. So just to clarify on that one. What we're seeing over there, particularly around labor -- access to labor over there is good in Botswana and Southern Africa. What we are seeing is like everywhere else, there is inflationary pressure. So I think Botswana basically the last 12 months or recent times, inflation over there is running at about 10%. So there are pressures on labor. Fortunately, we have well advanced on a lot of our commitments and contracts. And we continue to monitor that and try and manage that going forward. But at this stage, as we said, everything is on schedule and on budget.
Your next question comes from Kaan Peker from Royal Bank of Canada.
Congrats on the good quarter from MATSA. Just wanted to ask 2 questions on MATSA on the cost to build on Rahul's question. I think $0.94 per pound for this quarter. However you cost guidance implies a higher cost in 4Q. Given the polymetallic as number of moving parts, can you maybe talk through some of those reasons why the 4Q costs are expected to be higher? I'll circle back with the second one.
There's a few elements to it, a challenging one for unpack a bit, but I'll do my best. So the Q4 quarter, as Jason touched on, at MATSA will have the grade variability, we expect and we're currently planning to. So if you have the lower, particularly on the copper side, the zinc is relatively in line, I think on the copper side, certainly lower. So that is a headline basis would take C1 up in the first case. We're also, as I talked about before, expecting still planning and/or budgeting and planning and forecasting energy costs around that $2.50 per megawatt hour level. So that's obviously a high level of energy cost, which impacts various parts of the business.
Where we do have that zinc benefit though, of course, on the production side, particularly on the zinc price side. So that sort of brings it back as well. So it's a real offsetting between a little bit higher and a little bit lower in a production sense a little bit higher in an actual gross cost sense then a little bit lower in terms of zinc price. So you come back to a very similar number, as we said at the start, $0.98 for the year. So that fourth quarter, as you rightly said, we're expecting that to be above $1. And there is some further guidance in terms of the tables at the back in terms of both those production numbers and also C1 guidance for the June quarter. So for MATSA, as we said at the moment, we're expecting [indiscernible] about $1 per pound for MATSA for the June quarter.
And just quickly on TC/RCs. I just wanted to confirm that that's priced mainly on benchmark, not spot?
Yes. Based on that through negotiation with benchmark, yes.
Sure. And just finally, if I may, just maybe in terms of options around power. I think previously, there was talk about to new solar farms being constructed. Is there anything beyond this that can add to the conversation?
Yes, I'll say take the -- there is 2 solar farms under consideration. One is pretty well advanced. So it's going through permitting at the moment, and it's a 20-megawatt solar power station that would physically be located down the Sotiel operation, but would connect into the whole network for MATSA , that where I think the latest estimate of that is to be online in the second half of calendar year '23. And then the second solar farm, which we expect would be a similar size, possibly that's still to be determined. It's in early stage of study. We're looking at the process of identifying and locking in locations. We would put that one up around the [indiscernible] Magdalena mine area. So that one's a little bit further off, and we probably don't have a firm date on that one yet.
Anything beyond Phase 2 being considered?
At this stage, no, that's what we're doing. But clearly, one of the things we will be working through over the next number of months is just exactly what our longer-term strategy is on electricity supply and electrification generally. So that's it at the moment.
Your next question comes from Levi Spry from UBS.
Thank you very much for the extra detail. Questions around MATSA throughput, I think have been answered and also cost. Can you just talk us through grades for FY '23? Is there any reason why we wouldn't expect reserve grades in mind? Jason, I guess?
Yes. So thanks, Levi. Look, I said, we are working through at the moment. So we're actually well advanced on mineral resource updates. We expect to release those really in the June quarter, so prior to the end of the year they are forming the basis for us at the moment to update our full life of mine and ore reserves. So short answer is we'll have much better information coming out early in the new financial year as part of guidance. Until then, basically, the existing reserves are the best way to project forward.
Okay. And just understanding other options, medium term like this Concepcion target. So realistically, given there's a cross-section there [indiscernible] realistically, how soon could that come to the mine plan? What are the grades in there? Could that displace some of the low-grade Sotiel material in time?
Look, we're actually just compiling our maiden inferred resource for both Concepcion and Poderosa. We'll have a look at that in terms of concept studies fairly soon after that, and we'll be in a better position to be able to answer those questions. But that's why we are trying to fast track and bring forward these projects so we can look at the optionality that we have around them and where they fit in the life of mine plan.
Your next question comes from Lyndon Fagan from JPMorgan.
So just looking at next quarter's guidance, which is about 16% higher overall on a unit basis. Obviously, that's being driven by lower copper output, to some extent. But when I sort of trace it back, it looks like your mining costs fall from over $40 a tonne into the high 30s. And I'm just wondering why that's coming down.
Yes, Lyndon, mining is probably the one that's the most variable in terms of what we're looking at in terms of growth. So not all of those mining costs directly impact or touch ore, if that makes sense. So there is ground support work that the guys are doing in the March quarter. There's other work in terms of in the operations, planning for future projects, planning for future heating and things that aren't really ore driven. So as you said, and you can see in the cost slides that we put up, minings remain relatively stable, whereas, of course, we've been also increasing in terms of a tonnage rate. So really as those that March quarter did take some of those extra underground working.
Okay. And then just back on the copper grade. So guidance next quarter, 1.7%, down from 2.2%. Is this the sort of volatility that we should come to expect going forward? Sort of back on Levi's question about should we just plug in the reserve grade? Or is there something else that we need to think about? Or I realize you're coming out with any statements soon, but any more help on that would be great?
Yes, Lyndon, it's Jason here again. Look, it is the nature of these deposits, so VMS that they are particularly variable in nature. And particularly if you look at, say, even Aguas Teñidas as an example, we've got the main ore body itself, which is almost -- it's almost about 30% or 40% higher grade and places like stockwork, [indiscernible] -- so it really does depend on the mining sequence and where we were able to access ore during that period, that does have a big impact in terms of grade variability. So look, short answer on that one. Yes, it's likely to be variable going forward. We should have a better handle on that as we start to go through and start to do more detail into our mine plans. But overall, that's pretty much it.
And just a final cost question on MATSA. Just transport costs, relatively high in the quarter. Is that a sustainable level to go forward with? Obviously, oil prices and diesel are up. But was there anything else in there that we need to think about in terms of stripping out? Or is that a pretty kind of business as usual type rate?
Yes. I think you're pretty safe at this stage until we have the new guidance, Lyndon, to take that June quarter as a presold indication, I think.
Your next question comes from Hayden Bairstow from Macquarie.
Just a question on costs at MATSA. I mean, if you go back to, obviously, when you did all the data and then sort of go in the last sort of year, aside from energy prices, which is sort of beyond your control, I mean what's been the variability on what you expected, particularly around sort of the cost per meter and sort of development rates of the various 3 mines versus what you thought when you bought it?
I'll probably start maybe, Hayden. I don't think obviously, a global inflationary environment is not lost on people. And some of the times, those inflationary rates are also very generalized around countries. Some of these more remote mines probably have a higher effective inflation rate than what the country would be. So we have seen various things change from labor to goods to services between probably 5% and 25%.
Now it all summarizes down to 10s and 15s and those sorts of things. But clearly, the -- there's an inflationary environment, that's as I mentioned before, that's why we're seeing, on a quarterly basis, about EUR 20 million increase. But it is hard to put your finger on these things. Remote mining operations, of course, almost everything touches a truck to get in there. So you're always touching energy in some form. It is tricky to trace that back necessarily to the driver. It's very easy when you know how much power you're using from a line and you can measure it. But as we know everything that moves around the world, touches power and energy at some point. So really, all of those inflationary impacts come into both labor and services and goods at MATSA at the moment.
Yes. I mean the only thing really to add. So Hayden, Jason here. If you look at it, labor over there is significant. There's been a 6% increase there that we had to live with there basically from the start of this financial year, and that was in line with the collective union agreements over there, which are basically indexed to inflation. So inflation has been running at about 6% over there. So that's had an impact. And as Matt said before the impact of diesel, consumables, a whole lot sort of penetrates into every piece and everything we do in every part of the operation down there as well.
Okay. Great. And then just on the ore bodies. I mean, you're obviously doing all this resource work at the moment. But work you've done around particularly Sotiel, which had a lot of resources at work in the sort of mining inventory assumption. I mean what -- how is that project looking given what you're finding regionally? Is it starting to stack up as something that will be added into the mine life? Or is it still more the regional stuff is where the upside is?
Yes. No, look, Sotiel, we expect that we'll bring in more tonnage. And this is -- we're doing the work at the moment. But my expectation is that we will bring in additional reserve tonnages over there and particularly in the Elvira portion of the ore body, which is a more copper-dominated section of the ore body and also probably a higher NSR or higher value part of the ore body as well. So I would expect that's one of the things that we are looking at in particular with Sotiel about how that could add value and potentially looking at optimizing that production rate out of Sotiel as well right across the 3 operations.
Your next question comes from Daniel Morgan from Barrenjoey.
Karl and Tim, I'd also like to just reiterate the transparency is very much appreciated by the market. Just on DeGrussa. Can you just run through what does the end of the mine life look like in terms of when is lost production, how much metal is left? Is there anything in stockpiles? Just touch on the cost inflation we're seeing towards the end of the mine life.
Yes. So Daniel, Jason here again. So if we look at it at the moment, we're expecting to finish mining operation, underground mining in September. Processing is likely to either finish late that month or carry over slightly into October. And in terms of costs, so we actually just finalized our contract agreement going out to the end in terms of details, including Horizon 4 estimates as they currently sit. So we do have a good handle on the estimated cost going out right until the end of mine life.
And also as we have a staff retention scheme at DeGrussa as well just to maintain that quality of numbers and quality of operators right up until the last day because DeGrussa will clearly make money right up until the last day. So we're sharing some of that risk and reward with our people as well, which is also factored into all of our numbers and our guidance as well.
And just following up on -- circling back to that zinc treatment charge discussion. Is there anything you can help us with regarding price participation on this sort of was a level at which that kicks in and the rates and things? Just want an understanding for what happens if zinc prices go up or down and the impact on the cost.
Thank you Yes, the zinc TC is likely set to benchmark, which we've -- which is going to be at 230 basis [ price ] with a 5% inflate or above 38 -- or $3,800 a tonne zinc price. I think it's pretty consistent with what we're seeing with other producers.
And can I just clarify that I think you were indicating just at MATSA that you're going to have a July update certainly to guidance, but is that also going to coincide whether reserve update life of mine, et cetera? Or is that something that might come slightly later?
Look, we're working towards a July update on all of that. We will have to see how that goes because there is a lot of work to be done between now and then. But certainly, we'll provide an update sometime in that first quarter of next year on everything.
Your next question comes from Kate McCutcheon from Citi.
Can I have some context on MATSA, please? How many phases are you operating currently? And where do you want to get to or perhaps what are the key operational levers to work on?
Yes, Kate, given that there's 3 operating mines, all at different, slightly different mining methods and also different production rates. We have multiple phases operation over different ore bodies as well to make sure that we're getting the blend. I couldn't tell you offhand exactly how many we have at the moment, but it is there. It is designed to basically sustain that 4.7 million tonne per annum rate.
Okay. Yes. And can I just talk about June quarter copper grades at MATSA? What is driving those sub-2% copper grade expectations at the 2 mines? Is any of that different dilution or recovery assumptions? Or is that grade control, the straight grade pose?
It's -- I kind of touched on that before. We have very different ore bodies, even within the individual underground mines. And depending on where we're accessing ore from, particularly in any sequence, we'll deliver those variable outcomes. So particularly, I mentioned before, stock work at Magdalena. It's typically -- we generally typically forecast that to be lower zinc. And as I touched on before, we've actually had a positive reconciliation in the March quarter, which has delivered us better-than-expected results partially.
If you look at it over at Aguas Teñidas, portions of the ore body like [indiscernible] is much lower copper grade. And I believe that we have some higher tonnage coming out of that portion of the ore body, which will drive lower grades for the quarter.
Okay. But to be clear, there's no change to the mining assumptions since you've had the case, per se, it's just the sequence?
Yes.
[Operator Instructions] Your next question comes from Paul Young from Goldman Sachs.
I cut out there a while ago. So I'm not just sure if this question has been asked. But switching over to Botswana. Just curious about how the -- from a capital expenditure perspective, how -- I know you're tracking to budget and you're 60% complete. But want to know what percentage of CapEx is committed? Have you used any contingency at all? And I presume that one of the reasons you're on budget is you ordered long lead items early and labor inflation and Southern Africa is certainly tracking well below what we're seeing in Australia.
Paul, Jason here again. So firstly, I'll start at the back end of your question there. Yes, one of the reasons that we are tracking well is that we were very organized in terms of ordering long lead items upfront. And that was -- that's one of the reasons as well that we are able to maintain our current schedule going out.
Questions there?
Yes. Just the contingency.
Contingency remains, as you can see on Page 39, contingency remains over the next 4 quarters. So we still have allowances of contingency around -- I think it's around 10 million per quarter. And so certainly still within that. Yes.
And if you look at it as well, in terms of that 60%, I did clarify that before, I'm not sure if you did hear. But that 60% relates to commitment, not completion.
Yes, got it. All right. That's good to know. And as far as the committee to the remaining CapEx, like what items are we talking about just to get an idea of [indiscernible]?
I mean being very open. Across the board, in terms of construction, I think we're looking really good. There is pressure on the mining pre-strip. Particularly, what we're seeing over there, I touched on it before. Inflation over in Botswana is running at about 10%. So there is pressure on labor there. And particularly a lot of mining consumables, i.e., diesel, explosives, we are seeing escalation in those costs which may come in at a point in time and rise and fall under the contract. So at this stage, we are looking okay. We will review that and monitor it very closely as we go forward, and we'll provide any further information if this situation does change going forward.
Yes, that's great. I'd say that's in line, if not below, what other companies are reporting. So yes, okay.
There are no further questions in the queue at this time. I'll now hand back to Karl Simich for closing remarks.
Thank you everyone for listening today to this very transformational quarter March 2022 for Sandfire. We look forward to updating you again soon with the June quarter and then ultimately the full year results. And as we sign off, I would like to just thank everyone that's been involved with various stakeholders from the Board, the executive leadership team, for all of our expanding group of wonderful people, employees and permanent contractors, service providers and other suppliers that we utilize. It has been, over the last number of months and quarters, a very busy period for us, and I would like to thank them for their effort, their unison, their harmony and how they have worked in full and utter alignment in our business to achieve and to be at the platform that we are at. Also as well, our banks, our investment banks, our debt providers and our shareholders and a number of supporters.
So thank all of you very, very much for being aligned with us, supporting us, and we look to look forward to a wonderful future from this company off the base that we are just establishing as we speak at the moment, and we'll be delighted to present you with further information going forward. Thanks very much and have a wonderful day.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.