Sandfire Resources Ltd. (OTCPK:SFRRF) Q4 2022 Earnings Conference Call July 27, 2022 10:00 PM ET
Company Participants
Ben Crowley – Head, IR
Karl Simich – MD, CEO & Executive Director
Jason Grace – COO
Matthew Fitzgerald – CFO & Company Secretary
David Wilson – Head, Business Development & Technical Services
Richard Holmes – Head of Exploration, APAC and AMER
Conference Call Participants
Matt Greene – Credit Suisse
Hayden Bairstow – Macquarie
Kaan Peker – Royal Bank of Canada
Levi Spry – UBS
Daniel Morgan – Barrenjoey
Kate McCutcheon – Citi
Lyndon Fagan – JPMorgan
Peter O’Connor – Shaw and Partners
Ben Crowley
Some introductory comments and then we’ll pass over to Matt and Jason, who will take us through some of the details.
With that over to you Karl.
Karl Simich
Thanks very much, Ben, and welcome, everyone this morning to our Fourth Quarter and Year End Results Announcements with respect to the four quarters of the last financial year. And can I say at the outset, it has been probably the most significant year for the business of Sandfire through the financial 2022 year.
There have been two significant things that have occurred in this company’s life that are transformational, clearly, number one was the discovery of DeGrussa and the excellent execution of taking that mining to production, and then operating that at the professionalism and level that it has been operated at.
And the second one is, as I’ve said, the year of financial 2022, we’re in that year, the two key things that have occurred, the acquisition of the MATSA mining complex in Spain, an extraordinary transaction on many fronts, and also the ability for us to press the button and commence construction at the Motheo project in Botswana.
So this is the year that we’ve had and we’re looking to build on that as we move into financial 2023. We are precisely and particularly executing our strategy as we have articulated many times over. And we are on course on that strategy and executing delivery, building our production pipeline in terms of endowment growth, continuing but sensibly adjusting accordingly during these interesting oscillations in the market, but sensibly adjusting, but still had very much a strong organic focus and particularly, on a focus on the closest opportunities to deliver the greatest possible success in our exploration and in our organic programs.
We continue to work very, very hard in ensuring that our most valuable resources, our people are aligned and they are empowered and they have all the tools and resources that they need to execute their wonderful programs of work in their relevant jurisdictions with our hub-and-spoke model that we’re applying. And what I would say, the transition that this business is going through, has been done eloquently and smoothly and I thank the extraordinary work from the people in our team.
We are developing into a global mining company without missing a beat and that is wonderful to see, but lots of work to be done, but the effort has been huge. We continue to make sure that we are in commerce and we understand our balance sheet, our capital structures, the strategy, and the engagement with our very critical stakeholders globally, governments, suppliers, people on the ground, and ensuring that cultures and many elements of our HSCC [ph] and staff and well-being well and truly considered in the relative environment.
Our values, our values, and our values together and the work that we do and the daily activities that have shone through now, values are her culture of our business, and it’s a very positive and strong culture, through the executive and through the entire organization, just highlighting that we’ve developed a wonderful culture and we want to keep that wonderful culture.
As we roll forward, just to give you a sense of where is it we are scaled future facing growth and exploration we span the globe. We are one of the largest ASX cost-focused companies and we’ve had a tremendous last quarter, the fourth quarter that we are in Southern Africa, Botswana, where we have a — the most dominant ground holding in the Kalahari Copper Belt, I dare say we have 8% of what is perceived to be the Kalahari Copper Belt.
So, a wonderful opportunity to be a first mover effectively and to be in such a commanding position is outstanding. That is in both Botswana and through into Namibia and we’re doing reception work that you’ll hear through that through the course of this presentation. We have also have got a commanding and the best laying footprint and holding and also the best operating facility in the Iberian Pyrite Belt with the MATSA complex which we acquired and settled on the 1st of February this year.
And there’s been excellent work done by the team since that acquisition of integrating and also we’re seeing the beginning — the early stages of some of those improvements that we very strongly believe we can make, but also it will take time, it’s a work-in-progress, as you can imagine, but the opportunities continued to come through when we see the ability over a longer period of time of enhanced performance from those operations.
As well as our operations running down in Western Australia here at DeGrussa, but still performing exceptionally well from the DeGrussa operations, exploration in the eastern seaboard as well. And also we have our operations in America in terms of our Black Butte Project, which we are slowly but surely, moving through the permitting and dealing with a legal challenge.
We won’t talk about that too much today, it is not a massive update. But we’ve got the footprint around the world and we are in — we are the solution, we are the future pricing metals, we have a predominance of copper, and we do believe, irrespective of what some of the gyrations we’re seeing in the market, we are in a marathon as we do know being in the resources sector, we have said there are only two primary industries and extraction is one of them.
And the only way that globe — the mankind will have anything like a reasonable future going forward is if it is to have quality extraction industry and it is to have a sufficient supply of copper mineralization. Otherwise, we’re going back to the cave, right?
So, we are in the right place, we are the future and we’re very proud and very happy to be in that. And once again, we will continue when we’ll talk about some things today that were said very much that the DNA and flavor of organic growth and standing accordingly and adjusting accordingly through tougher times, but nonetheless, looking for organic success around where we will have substantial operations and where we have the absolute ability to critically leverage off wonderful robust mining infrastructure. So, we will be focusing on where great opportunities can create great value.
So, that’s what we are. In terms of delivering growth through the course of the last quarter — for 12 months and once again, exceptional performance. We’re reporting in U.S. dollars, these are unaudited, but our gross total revenue before people start to nibble away was in excess of $1 billion before we had some costs of sales put into that, that translates into effectively — I talk about accounting reported net profit of around $922 million sales revenue, but the margins that were able to be produced and the business that we are in, whilst we need to appreciate cost and cost movements, and they’ve been dramatic.
For many people in the industry recently, we’d have been able to produce expanding margins through this period, with good commodity prices, certainly pretty much up until the end of financial 2022 and demonstrated by operating margins from our two operating mines, DeGrussa for 12 months and MATSA for five months of 500 — close to $550 million for that period in time. That’s exceptional performance and as you will know, we are relatively conservative in our presentation of financials.
And we do write lots of things off. So, from operations EBITDA — the group EBITDA it’s dropped down to about mid-$400, but an outstanding performance from an operating results irrespective of marginal increases in costs through the year, marginal profitability of the business was even so much greater and I think that needs to be understood and it needs to be recognized.
Delivering growth, the biggest single thing I said transformational, we acquired massively — quite massive $1.05 billion through the year through a combination of debt equity and utilization of some internal cash and that transaction effectively to give you some perspective, the enterprise value, our market capitalization at the time was AUD900 million or about $650 million, $700 million and our enterprise value of the business was probably some $200 million and we bought an asset for just a little bit shy of $2 billion. We undertook and completed the transaction that shouldn’t have occurred, was unreasonable, and was about 10 times the scale of our business on an enterprise value basis.
It would be like BHP buying Apple, which will be an extraordinary ridiculous transaction that most of us on the end of the line actually couldn’t fathom could happen. So, that’s the nature of the scale of the transaction that was undertaken.
I’ll pause at this point of thank the many wonderful women and men in the organization and also people that assisted in this business to enable us to secure and complete that transaction with a pun, with the grace that it was done. And also thank all the relevant people that assisted in terms of stakeholders, whether they be banks, lawyers, financial advisors, the accounting firms, and I can’t thank them enough for the extraordinary effort and energy put in and the outcome was quite sensational.
This asset will be the backbone of our business for two to three to four decades to come. So, I would say, keep an eye on the space, you’ll start to see that evolve over the next few years.
Production, excellent production for the year on a copper equivalent basis, that production was somewhere in the order of 123,000 equivalent tonnes of copper, on a copper equivalent basis for financial 2022. When we look at the copper and the zinc, and quite frankly, reasonably pleasing C1 operating cost guidance was 1.19 for the group, we came in at 1.27 and in the market that we saw, towards the back end of quarter four, I think we’ve come in with an exceptionally pleasing position.
Global opportunities, we talk about new extensions and discoveries across the world. And leading into obviously, the significant capital stories of this business at the moment, the very seamless and professionally run development of the Motheo Construction project, which is clearly seen a doing a wonderful job there in Botswana. Absolutely blown away from what is happening there, Jason will mention more about it, clearly lined with precious in the world there are some increases in those input costs going into the CapEx of that operation, but fundamentally relate to the price of energy and some other consumables, and certainly something that is well and truly beyond our control know the rest of the industry is experiencing.
Cash at the end of this year — financial year was about $460 odd million and our net debt, as we sit at the moment is sub was just over $300 million. So, when I think about what’s happened to the equation, it’s been exceptional to say the least.
If we just have a look at group production, as I said, fourth quarter copper equivalent, the numbers are on the page, but fourth quarter copper equivalent almost 48,000 tonnes of copper.
And for the quarter and for year-to-date, effectively 123,000 tonnes of copper equivalent in the year. And that, in a sense effectively was well and truly just over the guidance that we had put out.
And on a combined basis, about 82% copper dominated, so we’re very much working hard trying to keep this business as a copper-dominated focused business, it will clearly have other attendant minerals that will be involved. But nonetheless, copper is where we want to be.
On a MATSA — certainly MATSA production for financial 2022, we had very strong performance in our base metals — metal production and guidance for the quarter. Very strong performance in the last quarter of the year. Jason will touch on that a little bit later, due to better grade performance, but what that might mean and then go into financial 2022, 2023. I think fundamentally what we will see is that overall mineral endowment at MATSA is what we believe it is. It is what we bought, what we will see is volatility and oscillations between the cause of the complexity of three mineral, three mines, multiple ore bodies, multiple different styles of geology, two different types of — strains between Cooper infers [ph] or clean copper material, and that will cause this fluctuation and volatility. So, we will need to just have our minds around that to not get too laser-focused on any quarter or on any year and take that as a given.
We need to have the ability to stretch our minds over a number of quarters and years and look at the smoothing effect because it will have volatility. We’ve explained before, we’ll explain again, that the C1 cost for example in MATSA will have everything to do with the zinc 1 grade or the zinc 1 price as opposed to actual real costs. So, we need to get our mind around that, have people that are looking into this. So, — and zinc will be a meaningful part of the MATSA production. Jason will give you a bit more detail on that.
DeGrussa production, once again, stand out fourth quarter, very, very, very pleasing results almost approaching our stretch top end of guidance. We’ve got to the highest 67s and dare I say, 23% above what would have been our stretch target, which I think should have been recognized as well, but essentially hit that stretched target, which was wonderful.
Pleasing costs in a challenging environment and when we think about that mine having been a number of months to run down, the lack of flexibility that those operators had had to deliver and delivering some of the best returns, best metallurgy recovery that they could have, it’s been an outstanding result. And once again, I think I would like to congratulate the wonderful women and men at the DeGrussa side in what they have achieved.
I’d now like to hand over to Matt Fitzgerald to go through the subsequent slides.
Matthew Fitzgerald
Thanks Karl. Just looking at Q4 cash flow presenting a waterfall here. In total, over the quarter cash increased in the group $73 million, you can see on the slide there for the quarter, cash generation from DeGrussa and also from MATSA. There are often working capital and QP adjustments moving through those numbers are probably best to look in terms of year-to-date and talk through on the next slide in terms of operating cash flow.
But in terms of growth, just over $8 million invested into growth in the quarter of Q4. Motheo about $53 million of that of its capital development as Karl talks about Master 17, DeGrussa 7.
Probably more importantly, on the next slide, as you put — we put the year together and we deal with — and look at DeGrussa over 12 months and MATSA over five months of its cash flow generation. We have put all of the — just that you’d notice in the second point here, we just put all of the MATSA acquisition related cash flows into the one bar of cash impacts of minus $149 million just to really highlight and be able to highlight the operating cash flows more than the transaction itself.
So, over the course of the year as a group increased cash $32 million, as you can see, for the 12 months, DeGrussa, $402 million of operating cash flow. For five months of MATSA $218 million of operating cash flow, we will see some return in terms of QP adjustments post the end of the quarter.
In terms of growth $258 million, just dealing with a bit of a breakup of that. Motheo $150 million, MATSA $36 million, DeGrussa $58 million, and Black Butte $14 million.
There was — also of course the sale of Adriatic shares during the period, which assisted with our cash flows and Treasury around also around the time of the MATSA transaction.
Income tax $134 million during the year, MATSA of $28 million of that, DeGrussa current year $66 million, and also paying the remaining tax from financial 2021, which we did in December of last year. So, total $13 million.
So, over the year, as I said $32 million increase in cash clearly a lot coming in and out in terms of the MATSA acquisition. So, but very pleasingly across both DeGrussa and MATSA in terms of operating cash flow. We’ll have some more information. These rollout all to the cost today, we’ll learn some more information when we do the June 2022 financial year call towards the end of August in a few weeks’ time.
Cost to debt facilities and hedging, so we have a total of $788 million of debt facilities, as we know $650 million of that related to the MATSA acquisition, and we will start to make the first repayments against that in September this year of $118 million and also into the first part of the calendar 2023 with another $80 million. So just shy of $200 million to be repaid against MATSA and when that will quickly deleverage the acquisition portion, particularly of that facility. Also the corporate level and also MATSA-related, we borrowed $200 million, which at current exchange rates is around $138 million and that is due for repayment at the end of September.
As we said we have a strong cash position and that will if the repayments on those is designed to quite quickly deleverage the balance sheet as we know we didn’t leverage the balance sheet in terms of the acquisition of MATSA talked about. So, $463 million of cash, $788 of debt to net debt. $324 million.
As Motheo proceeds and we concentrate at this stage and the T three 3.2 million SanFran a base case and we’re also working through the financing facilities of those and they will go to some final credit considerations and approvals in the coming weeks. And we look forward to presenting the 5.2 million tonne expansion case which will bring together T3 and A4 and will also form an important part of that banking syndicate understanding of whether to give and will progress to over the next couple of years in terms of production and getting up into the as we’ve talked about before that sort of 50,000 or 60,000 tonnes of copper production per annum, which will be important — very important of course that second of expansion to that project.
Our hedge book is important, particularly these times, as we’ve seen in recent times, with both copper and zinc moving down to just presented some numbers here for the financial year coming up, 43% of midpoint or payable production guidance we’ve hedged in copper, at a rate around 25% above the current spot price.
In terms of zinc, we’re at 44% of the midpoint of guidance is hedged at around current spot prices. As were presented before, we have a three year we put in place a three year hedging programs when we bought and purchased matter. And that includes some 62,000 tonnes of copper that matter and some 73,000 tonnes of zinc, as well over that period of time, which takes us all the way into calendar 2025.
So that is assisting our operating margins, assisting our cash flow, assisting on all of those levels exactly as it was designed to do as we leveraged the balance sheet for the acquisition of MATSA.
Jason Grace
All right, if we now look at operations review and outlook, and starting with health and safety. Across the company and pleasingly we saw weekends or an overall improvement in CRI, IFR, achieving 3.8 as at the end of the quarter. This was largely driven by strong safety performance across the group and driven program early but a low number of injuries across the whole company.
At the same time that our employee numbers and associated work hours continue to increase with increasing activity of 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 and Botswana, we continue to work with rising COVID-19 infection rates associated with the latest wave of Omicron variants. At Spain and Montana have been moving into the Northern hemisphere summer months, infection rates have come off their winter peaks and have remained relatively stable throughout the quarter.
And from an environment and community perspective, Sandfire continues to be very active in all regions with some highlights from the quarter being, our sponsorship and support of underprivileged children in the Ghanzi region of Botswana. Our ongoing involvement in getting into resources with NNWA and the beginning of the Mining Water Living Lab Project in Spain, which has the aim of researching and developing innovative water treatment solutions to promote the recovery and reuse of water in the mining industry.
If we now look forward to financial year 2023. At a group level, we are issuing guidance of group production of 81,000 to 89,000 tonnes of copper; 78,000 to 83,000 tonnes of zinc; 6,000 to 10,000 tonnes of lead; 10,000 to 12,000 tonnes — ounces of gold; and 2.2 million to 3.2 million ounces of silver.
Group C1 guidance is that $1.57 per pound for the year. Capital, we’re guiding mine development which is predominantly MATSA of $80 million to $95 million; Motheo Development capital $180 million to $190 million; and sustaining and strategic CapEx of $40 million to $50 million.
Exploration and studies expenditure is forecast to be $35 million to $40 million, with corporate costs approximately $30 million for the year. And finally, MATSA and DeGrussa D+A are forecast to be $225 million and $16 million respectively. And on a combined basis, D+A was $250 million for FY 2022.
Drilling down into the production guidance at an asset level and please note that I won’t go through all of the numbers here as it will be covered in more detail later in the presentation. You will know that the copper, zinc, lead, and silver, MATSA is either the main of the 12 contributor with FY 2023 being the first full year of production under Sandfire’s ownership.
DeGrussa continues to be a significant contributor copper and gold production, despite only having four months of forecasts production remaining as the operation moves to the end of mine life in October this year. And finally, Motheo is also forecasted to commence copper and silver production late in the financial year.
Looking now at group production through our financial year 2023, we are also providing a quarter-by-quarter outlook for metal production. You will know from this slide that copper production peaked in the first quarter then is reasonably steady for the remainder of the year. This trend is driven by production at DeGrussa only occurring as the first four months of the year and seating around the end of October as we reach the end of mine life.
Gold production throughout the year follows the same path and also for the same reasons.
Zinc production and to a lesser extent lead and silver production has the opposite trend, with lower production expected in Q1, then stepping up over the following three quarters. The main reason for this is the progression of the mine plan at MATSA and in particular, the transition of ore sources at [indiscernible] throughout the year. Please note that as mentioned before, I will cover this in more detail later in the presentation.
Finally, at a group level, during 2023, Sandfire will continue to actively invest in growth and the long-term future of the company with the key areas being the continued development and construction of Motheo mine in Botswana.
Construction of Motheo remains on schedule with over 1,700 people on site and the pre-strip mining at the T3 open pit remains on target. Like the rest of the mining industry, Sandfire has been subjected to global cost inflation pressures for the biggest impacts in Motheo developments being increased mining costs from diesel, labor, and consumable costs.
As a result of this, we are forecasting an increase of approximately $30 million for the development of the project. We’re also in the process of putting the final touches on the definitive feasibility study for the 5.2 million tonne per annum Motheo expansion with final completion expected in the current quarter.
And exploration, Richard will cover this further, but we remain committed to building a long-term pipeline of projects across our dominant position in multiple world-class.
Moving on to MATSA operations. We performed integration of MATSA into Sandfire now completed, we’re now moving into the next stage which is optimization to get the best out of MATSA and ultimately, establish a solid base for multi-decade operations in the area.
To deliver this we’ll continue to improve safety performance through the development of great culture and fit for purpose systems. Continue the recent improvements made in mine productivity to stabilize and reliably deliver a 4.7 million tonne per annuum production rate. We’ll use our technical knowledge and skills to extend mine life through execution of an expanded twin and near mine resource extension drilling program and undertake technical studies to convert mineral resources to ore reserve.
And also establish a pipeline of new ore through investment in regional exploration. Underpinning all of this and as Karl touched on before, we’ll be the embedding of Sandfire’s values and close alignment of strategy for all.
If we now look back at the June quarter, MATSA production for the period was very strong and exceeded expectations. Copper production was over 18,000 tonnes with zinc production at just under 23,000 tonnes for the period. Metal sales was slightly lower than production due simply to timing of sales and this delivered operations EBITDA slightly below — sorry at $51.6 million and a very good EBITDA margin of 37%.
Before moving on, I would like to briefly paused to unpack production for the June quarter. Since the acquisition, MATSA has delivered a significant improvement in mine production, with performance in the June quarter, achieving an annualized rate of over 4.5 million tonne per annum across all three mines.
The improved performance is primarily due to key improvement initiatives focusing on short-term planning, optimization of service design, and better management of production processes and start turnaround.
During the June quarter, some of the improvements that we saw particularly at the end of the March quarter was partially impacted by lower layer availability at Aguas Teñidas and slightly lower back filling rates at Magdalena.
Mine grades for the June quarter were also about plan as Aguas Teñidas and Magdalena and this has been driven by three key areas. So, firstly, we are seeing consistent positive copper grade reconciliation from Aguas Teñidas ore time which made up approximately 80% of the mine ore from Aguas Teñidas during the period.
Secondly, the improvement in stud design, blasting and management that I just mentioned previously, has also delivered a reduction in dilution of grade at both Aguas Teñidas and Magdalena. And finally, changes to the short-term mine sequence at Magdalena which is responding to changes in operational condition delivered slightly higher grades into the quarter.
When these higher mine grades were paired with operational performance in ore processing that was in line with expectations, this resulted in copper and zinc metal production slightly exceeding target and guidance for the quarter.
Now stepping out to production over the full five months from February to June, these very same things for the June quarter resulted in very strong production results and exceeded expectations with copper production over 30,600 tonnes and with zinc production as just over 38,900 tonnes for the period. Lead production was almost right on 4,100 tonnes and silver at 1.2 million ounces.
With reference to Sandfire’s market release dated the 30th of June this year, Sandfire reported an updated global mineral resource estimate for MATSA totaling 147 million tonnes at 1.4% copper, 3% zinc, 1% lead, and 39.6 grams per tonne silver. This mineral resource update included in [indiscernible] mineral resource estimates for [indiscernible] deposits and includes in both these new resources in ore tonnes increased by 21% with an 11% increase in contain copper and a 10% increase in contain zinc when compared to the previous mineral resource as reported as at 31 December 2019. This more than replaces mining depletion over the intervening two-year period and confirms Sandfire’s due diligence assessment of MATSA’s significant geological potential.
Since this time, Sandfire has also been working on updating the MATSA ore reserve and earlier today and overall proved and probable ore reserve for MATSA was reported as at the 30th of April this year.
Now, this was 37.1 million tonnes at 1.6% copper, 2.6% zinc, 0.8% lead, and 36.1 grams per tonne silver. This delivers an increase of 3% and overall contained ore tonnes with an 8% decrease in contained copper and a 5% increase in contained zinc since the previous ore reserve estimate reported as at 31 July, 2021. This also replaces mining depletion over the intervening two-year period.
If we now look at the financial year 2023, we are providing production guidance for MATSA of 60,000 to 65,000 tonnes of copper 78,000 to 83,000 tonnes of zinc, 6,000 to 10,000 tonnes of lead, and 2 million to 3 million ounces of silver. Please note that we’ve also included guidance on the table percentages for all elements.
Finally noting the complexity associated with production of both copper ore and polymetallic ore across the mining operation, we have also included a breakdown of production tonnes and grades for each of the mine of the three underground mines, and when combined discrepancies copper ore production of approximately 1.58 million tonnes at a grade of 1.7% copper and polymetallic ore production of approximately 3.15 million tonnes at a grade of 1.7% copper and 3.4% zinc. The total production expected to be approximately 4.7 million tonnes from underground mining and 4.6 million times from the ore processing for the period.
Looking at the production throughout the year, is expected that overall copper production will be reasonably consistent with slightly elevated production in quarters one and three and slightly lower grades scheduled in quarters two and four delivering slightly lower production in those periods.
Zine is a very different story, where we will start the year at a lower production rate then step up in the December quarter to maintain an annualized zinc production rate of approximately 85,000 tonnes per annum. This trend in zinc is again driven by mine grade and in particular, mine production at Aguas Teñidas transitioning from a high to low tonnage grade from the ore body early in the year, which is a loading grade part of the ore body and this ramp down and stop ore production is progressively replaced by increasing production from the message sulfide ore from the Downside Western extension of the main Aguas Teñidas ore body.
If we now look at longer term forecasts as part of the ore reserve process, we have been also doing significant updates on the life of mine plan. And if we look at now some of the output of the longer term mine planning at MATSA were completed today indicates that copper production over the next three years should be reasonably consistent with FY 2023 and maintain around the 60,000 tonnes per annum mark.
Zinc production is expected to rise significantly over the same period, due initially to the increase in the proportion of polymetallic ore to the mine, then an overall increase in polymetallic ore grade, which moves closer to the life of mine average of polymetallic ore reserve grade at Aguas Teñidas and to a lesser extent at Magdalena.
Matthew Fitzgerald
Moving across now to operating costs and we’ve presented again as we did in the last quarter, the four historical quarters of last — of the financial year 2022 and also presented some of the same information for our guidance numbers in terms of the financial year 2023.
Just to talk through these — really operating costs and again, our gross bases are driven by accessing new areas and we’ll see that in the mining area, the first part of the graph, and also getting to that annualized mining rate of 4.7 million tonnes per annum.
The other increases that we’re looking at past of course — of course, past recent inflationary pressures are really related to predominantly zinc production, as Jason talked about increasing zinc volumes, increasing zinc concentrate volumes. So, the first half of the year, our quarterly concentrate production is around 110,000 to 115,000 tonnes per quarter and it rises to a range of 120,000 to 140,000 in the last two quarters. So that — those are the drivers of what we’re expecting in terms of gross operating costs.
We’re looking back, also the June quarter for a minute, our guidance across mining processing and G&A cost as MATSA was a total of $83 million and the actions for the June quarter came in at a pleasing $79 million. We are guiding around 4% lower costs on a gross operating basis in terms of guidance into MATSA into next year, which is a combination not only of course of cost control measures, but also of course, in terms of we are getting some more cost efficiencies in terms of increased production through mining quantities, and also through concentrate, as Jason talked about also, as those zinc production numbers rise.
So, for the June quarter, as we — any additional costs that we’ve seen have really been across the areas of transport, treatment, and refining as I say they’ve been predominantly driven by that higher production volumes.
As a business, this is where we concentrate. We look at gross operating costs and also the efficiency of those in terms of per tonnes, mining — per tonne mine, per tonne processed, and per tonne of concentrate movements. We don’t generally tend to focus on unit costs in terms of C1, I’ll talk about that a little bit more in a minute.
In terms of energy costs, as we as we know and we’ve talked about before, the energy costs is our big driver of MATSA’s costs and we do know of course, through global pressures and uncertainties, we had a spike — we did have a spike in terms of energy costs into Spain and into the broader Europe. We then had an impact, of course and are operating — on our gross operating costs and we’ve seen some settling of those rates in recent months through into the June quarter.
We are projecting around 200 — a base of around €200 per megawatt hour into 2023 and we’ve also got of course, a number of responses which were mentioned in the March quarter and will add it to as well around solar farms. Some work in progress in the solar farms, but first solar farm particular and next one at Aguas Teñidas. We’re also looking at our electricity contracts and how we are supplied with energy from various sources. And also the options under how we price those with fixed or hybrid pricing structures.
We’re very, very conscious, of course, in terms of power prices. This is really — this is around pricing rather than energy security. But we are very conscious one that that rates have settled off those highs, but still down to quite an elevated level and we’re clearly watching that overtime and doing what we can to protect our operating margins in terms of OpEx driven by energy costs.
Looking at C1 and I did touch on this before, C1 as a measure, you looked across to the right, any movement in C1 is across both the two quarters that we’ve just finished in terms of the backend of quarter financial 2022 and looking into financial year 2023 is really driven by zine results. So, quarter-on-quarter year-on-year, it moves with zinc mined areas, zinc grades, zin production, and zinc price a lot more than that moves in terms of headline costs.
As I’ve mentioned on the operating costs slide, we are focused on gross operating costs and how they and the efficiency of those gross operating costs. C1 is not a great measure in terms of what we use internally, but we present it here, as people also probably want to see it.
C1 one is a very good quick measure of copper EBITDA margins on mining operations, and on polymetallic mines like this one, not a great measure past that — better measure for us is gross operating costs and efficiency of those costs in terms of tonnage and metal production.
We of course, have seen your European inflationary and global inflationary cost pressures to some extent, our reported U.S. currency is assisted by some weakening of the euro against the U.S. and in recent times, reached around parity, I think it’s around $1 to 102 at the moment, so that is assisting in terms of reported costs in that measure.
Zinc looking forward, we proposed a guidance, we are basing our zinc price for 2023 on 31.50, which is no more sign of particular picking pinion spot at the end of the financial year, just as a guide for anyone else who wants to run any other C1 numbers looking forward in terms of zinc price.
David Wilson
Thanks Matt. So, leaving matter into the mining operation really through the year coming up with just over 100 [technical difficulty] at the three operations. Probably there is two-thirds of this will be in totally. So, working on this thing, the confidence in the resource catalog and then driving through that resource to reserve conversion, but more exciting for the team on the ground there’s the mine exploration 36,000 meter looking at extensions to know mineralization and altering deposits. So, down long strike looking at looking at offset.
Probably the key takeaways there would be the permit around the [indiscernible] and looking at higher grade utilization to really help drive that operation. I think one of the points I’d like to make we’re still constrained for the mine exploration, the development and drilling platforms that we’ve got access to probably means that it’s going to take time to really test them for high priority targets and that’s going to take a year or two to work through in conjunction with the mine plan.
Stepping onto exploration, the focus here is going to be really building that pipeline as targets and maintaining a balanced portfolio. So, for exactly for the 30,000 meters on sort of exploration that was putting builds, drilling, spilt roughly [indiscernible] on the northern portion of the terminal holding working along strike from a Western Extension at Magdalena, and 40% around Soltiel, some really exciting undercover targets that were really pushing the technical work to build out new 3D basin models because we want to take exploration to the next step and drive that targeting so if you start looking at a think of mineralization or whether it’s a deeper for this part of the world, we’re only looking at holes to testing below 400 or 500 bases and leaving that mine set to build in these conceptual models and target. And hopefully, coming through with some discoveries that will support the development of the operations going forward.
If we move on to the DeGrussa operations and we start by looking at the June quarter of financial year 2022. Against the backdrop of mining industry, labor shortages, rising COVID-19 cases in WA and the rapidly approaching mine life, the growth or operations to continue to deliver safe and reliable production throughout the period.
While there’s been no material impact from — on DeGrussa operations today, we do acknowledge that risk remains around potential production impacts in the financial year 2023, which has not been factored into the midpoint production guidance.
On the other hand, operating cost pressures related to global inflation and particularly impacting labor, diesel consumables, and transport costs in Western Australia have impacted DeGrussa C1 costs in the June quarter and are forecast to continue. Also as we approach the end of mine life at DeGrussa, expense mining operations, operating costs increase as capitalized development activity reduces in the last year of operations.
Looking now at DeGrussa production for the June quarter, and as mentioned before, the team has again delivered strong results in line with mine plan and exceeding expectation.
Copper production was slightly below 16,900 tonnes and gold production was just over 9,000 ounces for the period. Metal sales volumes were lower than production as a result of timing of shipments and is delivered and operations EBITDA $75 million with a strong EBITDA margin of 59%.
Turning now to production over the full year and once again, as Karl mentioned earlier, the team has closed another year, delivering copper production of 67,740 tonnes of copper and gold production of just over 32,200 ounces for the period.
Metal sales volumes were slightly lower than production at just over 65,000 tonnes of copper and again as a result of timing of shipments. This delivered an operations EBITDA of $394 million and a very healthy EBITDA margin of 63%.
Now looking forward to financial year 2023, we’re providing guidance of 17,000 to 19,000 tonnes of copper; 10,000 to 12,000 ounces of gold, and approximately 100,000 ounces of silver. Consistent with MATSA guidance, we’ve also included guidance on the payable percentages for all elements.
As further context for guidance, metal production at DeGrussa is expected to occur from July to October 2023, which is the forecast end of mine life for DeGrussa and MATSA mines.
After this, we will undertake decommissioning of underground mines and place the surface infrastructure into care and maintenance while, we continue to execute our exploration strategy in the region.
Work is also ongoing on the DeGrussa project and expansion study. This study is based on utilizing the existing DeGrussa floatation plan with minimal circuit changes and adopting a simplistic approach to trade existing stockpiles with oxide reagents.
Today, extensive laboratory scale test work has been completed, which has delivered encouraging results. The final step in study is to undertake full scale planned trial in the September quarter. The first planned trials scheduled for July will focus on mineralized waste and heavily transitional stockpiles, with the second scheduled for August to cover oxide processing. Following the assessment of these time trials, final decision will be made on the future of this work.
Matthew Fitzgerald
Looking at costs for DeGrussa across the period $1.25 to C1 in terms of Q4 and maybe two — which results in a $1.18 per pound for financial 2022. Financial 2023 is expected to report higher around the $1.39 on [indiscernible] and as you can see here, C1 is a lot more representative of actual OpEx levels in terms of gold being a much more — a much smaller impact in terms of byproducts at around 10% to 15% of gross revenue. So, other formats, as Jason mentioned, July to October expecting around $1.39 per pound of copper. We also have some gold hedging rolling off at the back end of DeGrussa as well around $1,800 per ounce.
Karl Simich
The exploration team continues to work at DeGrussa interesting, conceptual targets for roughly 70% of the way through the program. It’s pleasing to say we’ve certainly got proof of concept, we hit the right rocks, we have minor occurrences of copper mineralization.
Unfortunately, at this point in time, no significant normalization has been discovered. This point it is time to sit with the end of mine life. The team is working hard to push those last few holes through wrapping up this year.
Matthew Fitzgerald
And finally moving on to the Motheo project. With reference to our recent tutorial update released to the market on the 21st of June, we’re very pleased to advise Motheo construction and development continues to proceed on schedule, with first production expected in the June quarter of 2023.
Also the 5.2 million tonne per annum expansion definitive feasibility study is now in its very final stages and will be completed in the current quarter. As touched on earlier in the presentation like the rest of the mining industry, Sandfire has been subjected to global cost inflation pressures, with the biggest impacts from Motheo development being increased mining costs from diesel labor considerable cost increases.
As a result of this we are forecasting an increase of $29.5 million for the development of the project and this includes a diesel price increase by 40% or equating to $12 million; mining contract rise and fall increases of 23%, equating to $6.7 million; government import and project charges, totaling around about 17% or $5 million; and the balance of other mine items contributing about 20% of this difference, totaling $6 million. It should also be noted that included in the remaining costs forecast, a total of $14.5 million of contingency has also been retained for the project.
And finally, Sandfire intends to fund the development of Motheo copper mine through a combination of cash and project debt. Selection of the syndicate of international banks is now being completed and final credit committee approvals due in the September.
This facility will be based on the initial 3.2 million tonne per annum base case development and integration of the potential definitive feasibility study as the 5.2 expansion project is expected to follow the grounding of April mining license.
Looking now the development of the Motheo development timeline, work throughout the June quarter has continued to proceed according to the project plan. Another very important milestone was also achieved during the period with the permanent accommodation village now fully available to use.
With the commencement of pre-strip mining T3 open pit in late March, progress has also gone according to plan and mine production rates will continue to increase over the coming months.
Looking forward into the new financial year, we are approaching key milestones of the completion of the process plant construction, and completion of power infrastructure construction by the end of the calendar year.
Given the substantial ramp up in activity in recent months and with mining pre-strip operations commencing in March, we’re firmly in the phase of the project where we will be executing across all areas and as a consequence, this peak spend phase of the project is forecast to extend over the next four quarters. The graph shown includes the additional $29.5 million of additional costs covered earlier and provide the breakdown of spending all key areas of the project for each quarterly period.
It should be noted that the cost shown relates to the 3.2 million tonne per annum T3 only base case, which now totals $349.5 million and as you touched on earlier, as we close out the 5.2 million tonne per annum expansion feasibility study, it is expected to add approximately $47 million in capital costs and substantially increase the overall value of the project.
Richard Holmes
Onto the Motheo exploration, so obviously, its dominant position in emerging power with significant landholding There currently are five drill rigs working, taking scientists on the window. So, we’ve been following up chargeability anomalies that have been identified from recent ID survey and that continues to attract some interest, regionally, pre-rig testing a variety of target model work on T23, which is continuing to return a large, large, large zones of low tenor copper mineralizations that the team is really focused on trying to find a bit of a focus for the mineralization and people can live a great profile there and then we really can’t hold in the awkward complex, which is a 100 case out of Ghanzi perspective, nickel, copper sulfide mineralization, we’re certainly pleased with the geological results or models holding true and working.
Karl Simich
Thanks Richard and thanks, everyone for listening today. And just in summary, before we go to the for the questions, it has been the best year that Sandfire has ever had financial 2022.
We have had the biggest transition for our business. We have brought some solid foundations in what is occurring in Spain and Iberia in MATSA. And we will look to continue to optimize many points of leverage there for multiple decades to come.
Clearly, having a dominant position in the Kalahari Belt, we will look to get that into production to expand that to get into stable operations. And then as a business, we will continue to execute our strategic plan and we will continue to look to leverage of our significant and wonderful dominant positions in the Iberian Pyrite Belt and the Kalahari Copper Belt. And I think in this market our plan is totally sound, and the market as it stands in the short-term, which is unbelievable and will not continue and it can — it cannot continue, given what the demands of the future will require for mankind and we think there are going to be some fascinating opportunities over these next 12 to 18 months.
I’ll leave with that. Open the floor to questions. But once again, thank you for your attendance for a long presentation.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]
Your first question comes from Matt Greene with Credit Suisse. Please go ahead.
Matt Greene
Hi, good morning gents. That was quite a comprehensive review. So, I’ll keep this pretty short. I guess just on Motheo the project finance there, the — your December results, you highlighted that the credit committee approved the $160 facility, which is about 45% CapEx requirements on the base case. So, now that you’ve selected the bank syndicate, I see on slide 40 that you’re only expecting the final approvals to come in the June quarter next year.
I would have thought you would have been able to draw this if you’ve committed your 55% equity shares to the CapEx. So, — but based on their profile is imminent. So, I’m just I’m just a bit confused as to why it’s taking so long to get this project financed through the door?
Karl Simich
Yes, hi Matt. Apologies, it is the September quarter in terms of the credit approvals. There are a number of credit approval stages that go through and these banks that are preliminary approval brings them into the syndicate gets them — gets us talking about more complex terms and full facility agreements. And as a final credit approval that then brings them into the actual facility into the process.
So we expect those process to happen in the September quarter. As you say, we have selected the syndicate banks and we are talking to them through that detail. What is probably more likely to happen later on in terms of the financial year into the back end of this calendar year here and probably into the second half of the financial year is as we start to work a four and into T3 and as relates to DFS. And we released — and we work with those banks into integrating really the what is T3and A4 together.
So in their minds, it’s a two-step process. In our minds, it’s really one project. So we’ll just be working through some of those details with those banks between the September quarter and the June quarter. But in $0.23, we expect that the next stage of credit approval, the final stage of credit for what happened in the in the quarter we’re currently in.
Matt Greene
Okay. Thanks. So just be clear, then you expect that you could receive that 160, this quarter, and then any sort of incremental project finance on top of that to fund a April, would likely come towards the end of the financial year?
Karl Simich
Yeah, so that’ll be — that’ll be the bid to work out in this period of time, Correct. Around T3, and then into April, we may move to have higher leverage levels in terms of the combined projects rather than T3. But we’ll work that out over the over the coming months.
Matt Greene
Okay. That’s great. I’ll leave it there. Thanks.
Operator
Your next question is from Hayden Bairstow with Macquarie. Please go ahead. Hayden Bairstow, your line is live. Please go ahead.
Hayden Bairstow
Yeah. Just on the MATSA, just came to understand the cost outlook. I mean, there’s obviously power prices, at the moment a key driver and pushing inflation for pretty much everything. I mean, how long do you think that settles before that starts to settle down or we just don’t really have any clarity on it, we should just be assuming much higher prices, were able to look back over car and the prices were 50% or less of what they are now and just came to understand, is it just power prices? It’s driving these much higher costs than what was originally envisaged? Or is there some other stuff about mind development and increased metered rates and crowd support things like that have been hardly thought?
Karl Simich
There’s a little bit hide in terms of accessing all areas. So we know that in the mining side, in terms of gross OPEX numbers, there’s some money to be spent. And some of that, of course, go to capital on the balance sheet, but some money to be spent terms of accessing or your areas. Otherwise, we probably know as much as you do in terms of what inflationary pressures have been. The business has certainly adjusted to those as much as we can. As we project forward. We are looking at probably line ball if not slightly under in terms of Sandfire budget period as well understand Sandfire full ownership. We’re projecting that those costs, those inflationary pressures remain but certainly don’t run at the speed that we are. We have seen over the last six months we’re more seeing it as a bit of a now a bit of a plateauing in terms of European courts, as I also said before
In terms of new ways, it’s also a call on what the currency is doing. But certainly, Euro US has come down from 120, down to a 102. So that’s assisting us in a US sense in OpEx as well. So but otherwise, you know, to the future, of course, the whole everyone’s asking the same question around numerous industries and numerous businesses, but we’re, we’re controlling what we certainly want, we can, and we’re seeing some positive signs on the energy, European energy cost side, some, some positive government initiatives, and some hopefully, some settling in terms of, of Russia, Ukraine, and some of those issues as well.
Hayden Bairstow
And just from the exploration, that maxim is, you’ve started putting a few holes in now as, as the confidence levels from what you’ve had so far, is it sort of as you’d expected, or we’re looking for some sort of better results than what you’ve had so far?
Karl Simich
Given the work that would be done exposure that we’ve been getting, we’re probably more confident going forward. And we work with due diligence. So I’m very pleased with what we’re seeing.
Hayden Bairstow
Perfect. I’ll leave it there. Thanks.
Operator
Your next question comes from Kaan Peker with Royal Bank of Canada. Please go ahead.
Kaan Peker
Thanks, Karl and team. Two questions for me. First one on cost or second one on costs as well. Just looking at slide 27, the cost guidance material in Euro millions looks relatively flat, especially on processing and mining. Looks like cost control on site, with cost peaking this quarter. The key variability comes from state and PCR team — seems like, to decrease — can you please expand on that site component? Is it based on a standard freight rates delivered in into China? Now settled back on. The second one.
Karl Simich
It’s based — they are based on market rates and robot making is that the main thing that really hits it in terms of gross objects as are presented this slide is more driven by the concentrate volumes. So in the first couple of quarters were in the same 110 to 115 — 1,000 tonnes of concentrate per quarter, then jumping up to more like one 140, 120 for them for the next two years, so really the gross, the gross even on the right hand side, when you add it all up, most of those cost increases as you can see period on period, quarter on quarter are mining, transport and treatment related. Mining is delivered in terms of delivering simply more and transport treatment or refining is simply delivering more concentrate as the zinc production increases.
Kaan Peker
Sure, okay. And also just on the C1 wanted to clarify the QP adjustments flowing through to C1 for matter. So, given that we’ve seen the significant commodity price movements that disproportionately impact and so on.
Karl Simich
So short answer is yes. So when as a QP adjustment asset is particularly all that instead of say what is only relevant, of course, for the byproduct, and the predominant byproduct is linked. So anything up QP will lead an upward or downward movement in terms of the C1 credit, and as I pointed out on that slide 29. When you look at the line of C1and then you look at the line in terms of these in credit, it’s clear that the link is clearly driving the majority of that movement around saying Well
Kaan Peker
Sure. Thank you. And follow on for — maybe if you can talk through around what you’re expecting or what you’re hearing on the ground with regard to the natural death campaign. Something people were talking about people sort of talking up as a possible reduction in energy prices in Southern Spain? And the expectation is FY 2022?
David Wilson
Hey, Kaan, David Wilson here. Basically, the Spanish and Portuguese government have to deal with the EU where they can get a cap gas prices in Spain. So that came into effect in May this year, and it’s approved to run through till May 2023. And how that’s working is that it is keeping I guess the headline power price at that kind of closer to the 150 to 180 euro per megawatt hour, but there is as part of the mechanism to fund that compensation payment that all parties pay. So that’s why we met earlier said that it’s going forward we’re forecasting closer to 200 to 220 megawatts — euro per megawatt hour. That’s our current forecast. That gives us some certainty. I guess that makes it all the way down to main. As we also said, beyond that we’re looking at with toying with market looking at other As by options instruction contracts function beyond that
Kaan Peker
Sure. Thank you. I will pass it on.
Operator
Your next question comes from Levi Spry with UBS. Please go ahead.
Levi Spry
Good morning, guys. Thanks for the call. Nice quarter. Maybe question for Jason, just to help us model the increase in production that at as metric , can you maybe give me a couple more numbers calibrated, maybe the St. Joseph’s ore, versus copper ore, I think you said, we shouldn’t have copper production placed flat. And first is about the blend but then it’s about grade, can you just maybe give them a couple more numbers there to help us think about what might happen after 25?
Karl Simich
Look, in terms of that overall percentage at the moment, we will start to see if you like gradual climb up of for that percentage of polio. I don’t have phone numbers with me at the moment. But what we will start to do is pretty much move after this year towards that long term grade that we’re seeing from the reserve cut in fairly consistently over the coming years.
So I think from our point of view, if I look at — if I look at broader trends, like I mentioned earlier, we expect copper production to sit around that 60,000 tonne per annum mark. And particularly with zinc production, you can see that that year three that were put in there about around about 100,000 tonnes, I think longer term even beyond that and start to move in that 90,000 to 100,000 tonnes per annum mark is where we’re looking at.
Levi Spry
Right, yeah, yep. Thanks. That’s great. Thank you. My
Operator
Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.
Daniel Morgan
Thank you. Just on your reserve update you put out today, do you factor in the positive copper grade reconciliation or the spoke design changes that you alluded to, in your presentation today? Just talk through some of the factors you’ve changed since the last update. Thank you.
Karl Simich
Thanks for that, the short answer is yes. So we have factored in improvement in dilution on the back of the improvements that we’ve already made, and if our plans go, if everything goes to plan, we’ll be factoring and further, further improvements going forward over the coming years as well. So the other one is, if you’re looking at positive corporate reconciliations that’s restricted to one single part or smaller part of the western areas ore body which is the stockwork zone.
So it sits on the periphery of the main message sulfide ore body itself and actually has a limited extent, we actually complete mining all of that area, pretty much in the second quarter of FY 2023. So overall, from an auditor’s point of view, we have factored in part of that improvement, both in the organizers and also in our minds, I’m looking for
Daniel Morgan
Thank you. And just on your Euro cost base. Now, this thing kind of rough guide, you know, looking through what is your Euro exposure, like what percentage and that is true Euro cost versus US dollars, so that we could think about how things move around. Thank you
Karl Simich
To understand the tricky ones to get an exact number on certainly in terms of sight operating costs dominantly Euro base, particularly across three mines, processing facility and other infrastructure. The labor force, of course, is in terms of Euro moving into things like these all predominantly us around the world.
I would meet our Dave to see what his sort of thoughts are on a makeup that we’ll probably all come up with a slightly different number to be honest. But certainly in my mind was probably talking about probably two thirds euro and maybe a third us that Dave might have
David Wilson
Cost categories in finding obviously in the US transport cost the inland costs in Euro optics pay someone to do pass but the rollback mechanism is in the offtake agreements in US.
Daniel Morgan
Thank you. And then just lastly, you’ve lost some grade from the launch reserve update correct on the copper and the poly ore, can you just talk through what are the key factors underpinning that? And then what is the outlook for, your expiration? Like, what are you trying to do obviously, increase tonnes but what do you think the grade pieces going to look like on your targets? Thank you.
Karl Simich
Yeah, if you look at it, this is this is a typical of an issue like a maturing mining operation. So every good miner optimizes the mined plan, bringing forward the highest value material as soon as possible in the mined plan. So there’s an element of depletion of some slightly higher grade stuff over the, basically the last two years since the last reserve update, and then if you look at it as well, we have done work in terms of bringing more ore extensions into the ore reserves. So you know, to me, that’s just typical of any mining operation as it starts to mature.
In terms of extensions, if you look at the ore reserves, that we’ve just reported, the bulk of the drilling that was done to update that was infield drilling, which was to lift the confidence of oil reserves and firm up the mine plan over the over the next few years. Now, we’ll continue to do that, because that’s good practice. And it gives us certainty in terms of future production as we look out. But as Richard mentioned, there’ll be four as well, there’s a large percentage for next year, which is targeting resilience extensions.
Now, we believe that were sort of very high likelihood of success, given the targets that were drilling. And, you know, we expect that we will get additional terms and grade coming into resources and ultimately reserves from that approach. Now, the grades that we expect, it’s a bit hard given that we haven’t drilled them as yet. But I would expect that, you know, the tenor of the ore body is retained. And particularly when we look at downside extensions to say I was [indiscernible] Magdalena and probably literally, there’s been no drilling down there whatsoever. So continuity of these high grade massive sulfide zones, in my mind should be expected as we move out.
Daniel Morgan
Thank you very much.
Operator
The next question comes from Kate McCutcheon with Citi. Please go ahead.
Kate McCutcheon
Hi, good morning, Karl and team. Just on your reserve update, at MATSA pushed up your corporate debt just to — just over $8,000 a ton. Some of your peers are using $6,000 that was spot today $7,500-ish. Can you provide some color on that assumption? And do you have any idea of how to do that pricing is NSR to the power grid? And then can I just sneak in, we still going to get an updated Motheo mine plans in September?
Karl Simich
So firstly, and Dave, might kick in to reserve as well at some points in time. So we actually — we benchmark our peers, as well as we do look at long-term consensus forecasts for copper price.
We understand that there’s been a lot of movement downwards on copper price, keeping in the recent in the last couple of months. The price that we set was a little bit earlier in the year. As you can see, we’ve reported that $38 at the end of April earlier as well. So at the time, we didn’t believe that that $8,000 mark was consistent with the majority of our teams and a prudent way to do it.
Second part of your question there around, does is it a big driver of NSR? Yes, it is. Zinc, if you look at the remaining grades on ore reserve is significant. But of course it is, it is a driver of NSR value.
And the third one which was…
Kate McCutcheon
The Motheo mine, are you going to disclose updated Motheo mine plans in upturn in September?
Karl Simich
So we will be providing more information as when we do the site, when we host a site visit in September. That’s certainly been intend.
Kate McCutcheon
Yes. Okay. Perfect.
Karl Simich
Yes.
Kate McCutcheon
Okay. And Karl, this when you wrap up your comments, you said you were excited about more opportunities to come, just to clarify content for your current portfolio or was that comments meant to mean something else?
Karl Simich
No, I think that there’s nothing other than being — having been in this industry for the last 36 years case is the same opportunity as great volatility is has always been an opportunity for anyone in this industry to keep their eyes and ears open for opportunities.
We’re extraordinarily intend for portfolio that we have presently got and we are very much focused on optimizing the value of this portfolio and all the things that we could do to optimize operations, enhance performance, find higher updated NSR material closer to the planned site or the head frame, so to speak, and also to work on a prioritized organic program that provides for success close to where we can create value in a shorter period of time from what we have got.
So there is nothing on any particular things often though looking at something or doing anything. It’s a general market industry comment that after three and a half decades of looking at it, and seeing the ebbs and flows of adjustments for a recent crash of 87. I wasn’t around for the 1930s a great depression, but not long after. But nonetheless, when you get these massive volatile markets, it always creates opportunity one way or another.
So I think generally speaking for the industry, there will be some opportunities for things to happen that we might not have expected would happen, will now happen in this market, people will not be able to close on transactions, other people will be going broke assets that we’re going to be developed in the market developed, people are looking for finance for a whole raft of projects and commodity prices that are no longer existent. Certainly right here right now. We have different impacts with equity providers or their bank providers, or their streaming providers or g guidance overall, and you’ll see a very different landscape.
So when those things happen, that’s when there is opportunity. So and you can think you can think laterally. So, it’s just the general market comment.
Kate McCutcheon
Got it. Okay. Understood. Thank you, Karl. I’ll see you in the next call.
Karl Simich
Yes. Thanks.
Operator
Your next question comes from Lyndon Fagan with JPMorgan. Please go ahead.
Lyndon Fagan
Thanks very much. Just on the CapEx guidance on slide 55. I noticed Motheo is 120 million to 140 million, which is a bit higher than what I was thinking, Is that sort of indicative of what we should expect over the coming year?
Karl Simich
Hi, Lyndon. Look, short answer, no. We are actually pushing capital development quite hard in the next financial year. And that is to make sure that we’re getting access to if you like I mentioned before these down plunge, master sulfide ore bodies to bring forward higher grade material, and particularly the zinc materials earlier into the mine plan.
So before and previously, we’ve said that we expect CapEx to be sort of maintained around that 100 million mark. And we do see that, I think going beyond this year.
Matthew Fitzgerald
And so Lyndon, 100 to 110 that and then we’ll see a couple of more strategic projects and probably more likely ones often improvement projects to do in 2023, including things like timing stands with and more ones-off things like that.
Lyndon Fagan
Sorry, it’s about $100 million sustaining CapEx, but then we’ve got to add a tailings dam list starting next year as well. Any sense of what that done?
Karl Simich
In this year that we’re looking towards now about 20 million to 30 million of additional projects for the special for this 2023 including balance.
Lyndon Fagan
Okay, great. And a related question. With the graph that winding up have you — and general equation? Is there sort of a rehab number that we need to think about? I can see that then there’s not really material for FY 2023. But from memory, it was about 30 million, has that gone up March or when should that be incurred as well?
Karl Simich
Lyndon, it also has the provision as you normally do for accounting in the balance sheet, which is the entire closure. And we’ll give some more guidance in terms of where that how that time we’ll start some immediate rehabilitation as we go into care and maintenance, but the rest of it will be likely later. And care and maintenance we expect to be at about $6 million to $7 million per annum in terms of a burn rate, post what is currently assumed to be closure from November onwards.
Lyndon Fagan
Okay. Thanks for that.
Operator
Your next question comes from Peter O’Connor with Shaw and Partners. Please go ahead.
Peter O’Connor
Hi. Karl, just talking about the Kate question, you said you talk about the near term focus about the locking brownfields opportunities and then swung back to that more bigger picture sectoral opportunities. You’re referring to your northern neighbor in Motheo, is that the substance of your opportunities comment?
Karl Simich
You know what not — I’m not referring to anything say that at all, what I’m referring to is the concept that you would be crazy not to always look to leverage off where you have a strategic and a meaningful position. So I think you can then once you recall think about that. But essentially, from our perspective, we have an extraordinary solid and wonderful footprint in the Kalahari Copper Belt, which we’re developing and being production very soon now. We’ll be expanding that T3 with a fall.
As you know, we’ve been talking about that you’ll get the full of details of that in the next quarter, or this quarter that we’re in, that’s imminent, we’re just putting the final touches on that. And clearly what’s happening, that wherever we’re going, stable long-term operations, decades, we will continue not only within our ground, but with another office operations, concentric circle or an area of interest, to look to see whether we could potentially further enhance that value. And I suppose that’s where I draw my line. What you then to want to want to extrapolate past that is up to you.
Peter O’Connor
Karl, you guys have been really busy for quite a while and you met fit, so you’re good at during the M&A transactions and building, et cetera. What capacity do you have now that met fits relate to you’ve got a lot of up your sleeve in terms of doing more deals? Or are you flat out to the chase and roll his eyes or metal was it was easy to have contact with as well and then another one?
Karl Simich
No, no, no, no, we always say the word is — there is a word of but what had happened before we get to the word is that there has been a lot of work that’s been happening behind the scenes in this business, the organization of Sandfire in terms of building that talent pool, to making sure that we can attract that we can secure, that we can motivate, that we are still working on appropriately incentivizing a quality group of women and men that are here, and a part of this culture.
And it’s a wonderful culture and a business that we are building. And they are from jurisdictions under the hub and spoke that have people all over the world working within is in this Sandfire. But it is a model that is a concept of one Sandfire policy. And we’re working very hard.
So what I’m saying is the architecture in this business, what you don’t see in Sandfire on a day-to-day basis on this piece of paper, and the quarterly is probably its greatest asset. It’s the engineering, it’s the fabric, it’s the framework, and it’s the architecture in the business, that business is in a strong position, those components are in a strong position, we continue to lift the talent pool, we continue to lift our capabilities.
And what I would like to say is that whilst we’ve completed, for example, the MATSA transaction, we have integrated that MATSA transaction, it is done with — and everyone has put in an extraordinary amount of effort and everyone is smiling, and everyone is happy on both sides of that transaction.
That to me is the sign of a very well completed and conducted level of work. The same thing is happening in Botswana, with our team of 1,700 people on the ground at the moment, I’ve been there numerous times we’re investing heavily in making sure the machinery here, and this organism works and it will work globally.
So, that means to me, if we have a good plan — a good strategic plan, we had — we do our homework, as we did, for example with MATSA and the plan makes sense, then we put an execution strategy together and then we will execute. And when we say we’re going to have a plan and talk about a plan and execute a plan, I will tell you now we will execute that plan, right. So, we will continue to work on the situation.
So, at the moment, the most important thing is to clearly MATSA and Motheo and developing situations. But I do think as a business and also leveraging off the extraordinary quality relationships that we have with our various stakeholders, our internal people, of course, our advisors, our bankers, our investment bankers, our transactional bankers, our hedging bankers, our government officials, as stakeholders on the ground, our customers, the people who buy our product, their on-site partners, our creditors, all of those people, we continue to build great relationships. So, I think going forward as a business over the next three to five, 10 years, if there are sensible things that we could do that make sense in our strategic plan, we would have no qualms and no issue with them, executing them.
And we could bring to the table the right resources to execute it. And at the end of the day, if it makes sense, and we can do the homework and we will do the homework, and prior preparation will prevent performance, I think anything is possible.
And therefore to close off, Peter, our imagination is our limitation. That is my view on Sandfire and what we can do. So, there’s nothing specific we’re doing right now. But I think anything is possible, if we set our mind to it, and that we set our mind to it, and it makes sense, then we will be able to execute. And I suppose close off it just reiterating the MATSA transaction had a 1.1 million piece — why it was constructive, it was executed — well executed and I have not seen a transaction done [technical difficulty] relative basis ever before in my life in this — in the resources sector. So, I’ll leave at that point. I think that probably covered it.
Peter O’Connor
Thanks Karl.
Operator
Here, no further questions at this time. I’ll now hand back to Mr. Simich for closing remarks.
Karl Simich
Thanks once again everyone for listening to us on what has been a very long presentation of the March quarterly report and year end results release financial 2022 off the back of what was a previously extensive report, of course, the — the third quarter of the year. But I hope what it has given you is some greater granularity of detail of what is now the business of Sandfire. And we really try to provide you that information so that you can build up your knowledge base to get a proper understanding on what is a much better business that — clearly a much more complicated business.
But thanks very much for listening. An outstanding quarter and 12 months and a very solid prognosis for the business going forward in what is even still a challenging market.
So, thanks once again. We’ll continue to update with the next presentation will be our full year results. Wish you all good day. Thank you.
Operator
That does conclude our conference for today. Thank you for participating. You may now disconnect.
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