We are initiating coverage on SFR with a HOLD rating and set an A$7.20 price target. SFR has successfully completed the construction of the Motheo copper project in Botswana, and combined with MATSA in Spain, should see group copper production rise from 84kt in FY23 to ~120kt by FY26. The shift from construction to production should see SFR start to generate free cash flow, and we believe net debt peaked at US$476m at the end of December. However, we believe the shift to positive cash flow has been largely captured by the recent strength in SFR’s share price, with the stock up ~12% since mid-December, outpacing the ~1% rise in the copper price over the same period.
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