The Sandfire Resources Ltd. (ASX:SFR) The stock price is up this morning after the company beat its full-year production guidance with a strong increase in 4T FY22 production.

Shares of the copper and zinc miner are currently up 1.19% at $4.25 each, while the S&P/ASX 200 Index (ASX:XJO) climbed 0.53%.

Investors cheered Sandfire’s latest quarterly production update, even as rising costs squeeze its margins.

Sandfire stock price jumps on increased production

Sandfire stock price is in the green today after the company announced increased production of all of its minerals in the June quarter of FY22.

Additionally, the miner exceeded its full-year production forecast for copper, zinc, lead and silver.

Sandfire produced 34,974 tonnes of copper in the last quarter of the fiscal year, 21.5% more than the previous quarter.

This brings the group’s total copper production to 98,367 tonnes for FY22. This is better than the 92,000 to 95,000 tonnes forecast by management.

Other minerals provide tailwind

Zinc production also increased 42.8% in the June quarter compared to the March quarter to 22,880 tonnes. Annual zinc production was 38,907 tonnes, nearly 1,000 tonnes above Sandfire’s forecast for FY22.

Quarterly lead and silver production were 2,201 tonnes and 0.8 million ounces, respectively. Full-year lead production is 4,102 tonnes and silver 1.5 million ounces. This compares to management’s full year forecast of 3,000 tonnes of lead and approximately 1.4 million ounces of silver.

MATSA raises Sandfire production figures

The production growth is largely due to the acquisition of MATSA by Sandfire. And MATSA is a gift that keeps on giving as Sandfire released a reserves upgrade for the Spanish asset alongside its quarterly report.

Sandfire noted that the estimate of proven ore reserves increased by 41% to 26.2 Mt at 1.7% copper and 2.7% zinc. Management added:

Tonnes of contained ore increased by 3% with an 8% decrease in contained copper and a 5% increase in contained zinc since the previous stated ore reserve estimate as of July 31, 2020. This replaces mining depletion at during the two intervening years.

Rising costs cast a shadow

But it’s not all good news for the company and potentially for Sandfire’s stock price. Much like other miners, rampant inflation is driving up Sandfire’s costs at a time when commodity prices are under pressure.

The group’s C1 cash cost jumped more than 34% quarter-on-quarter to $1.57 a pound. This pushed Sandfire’s annual C1 cost to US$1.27 per pound.

Cost pressure is also not expected to ease. Management believes the high cost will persist for the remainder of this fiscal year, as it warned that the cost for fiscal year 23 C1 would hit $1.57 per pound.

Sandfire FY23 Production Guide

Meanwhile, critics will also point out that Sandfire copper production may have already peaked. The miner issued a wide production range for FY23 of between 81k and 89k tons. This is below the 98,367 tonnes delivered in FY22.

But the takeover of MATSA will give its zinc production a big boost to 78k-83k for FY23, while lead is expected to rise between 6k and 10k for the year.