Northern Star Resources (ASX:NST) is an Australian gold producer with projects located in the regions of Australia and North America. Northern Star operates three concentrated centres – Jundee, Kalgoorlie (including Kanowna Belle, Kundana (the East Kundana Joint Venture – Northern Star’s interest: 51 per cent), South Kalgoorlie and Pogo Operations. Northern Star has a market capitalisation of A$7.8 billion.

What are the results from Northern Star FY19?

Today (Friday 30 August 2019) Northern Star released its FY19 annual results. The main points are as follows:

  • Net mine cash flow for FY19 is A$358.8 million, up 12 per cent from FY18.
  • Underlying net profit after tax for FY19 is A$179.2 million, down 15 per cent from FY18.
  • Basic earnings per share for FY19 is A24.4 cents, down 24 per cent from FY18.
  • Final dividend for FY19 is 7.5 cents per share (fully franked), up 50 per cent from FY18.

Specific results on company operations are as follows:

  • During FY19, Northern Star three producing assets combined to sell 840,580koz at an AISC of A$1,296/oz.
  • Jundee operations for FY19 produced 295,053oz.
  • Kalgoorlie operations for FY19 produced 340,007oz

What were the drivers of this result?

Revenue increased 45 per cent to $1,401 million driven by the average realised gold price per ounce being 4 per cent higher (FY19: A$1,764; FY18: A$1,704) and a 37 per cent increase in gold sold (FY19: 781,013oz; FY18: 570,110oz) driven by the acquisition of Pogo in September 2018.

Throughout FY19 Northern Star invested heavily into in its growth strategy, namely through the A$350 million acquisition of the Pogo gold mine in Alaska. It subsequently invested a further A$50 million in Pogo, developing and opening up new mining areas, acquiring a new mining fleet and undertaking an initial exploration program which was successful. 

Additionally, Northern Star management notes, “The Pogo acquisition, which was included in Northern Star’s accounts from September 28, 2018, contributed to a 45 per cent increase in revenue to A$1.4 billion”. However, the Pogo operations reported a loss after tax of $20.0 million.

Investors could closely monitor the progression of the Northern Star Pogo operation. This project could underpin future growth of Northern Star.

What is the outlook for Northern Star?

Northern Star management notes that FY20 production guidance is as follows:

  • Jundee production for FY20 is in the range of 260,000 – 280,000 at ASIC of A$1,115 – 1,195
  • Kalgoorlie production for FY20 is in the range of 340,000 – 380,000 at ASIC of A$1,260 – 1,370
  • Pogo production for FY20 is in the range of 200,000 – 240,000 at ASIC of A$1,210 – 1,320.
  • Net total production for FY19 is in the range of 800,000 – 900,000 at ASIC of A$1,200 – 1,300

Total production of FY19 and guidance for FY20 is similar.

Northern star management also notes that the Company will also invest a record A$76 million in exploration at Pogo, Jundee and South Kalgoorlie Operations.

Northern Star announced today a takeover of Echo Resources Ltd (EAR). The offer values Echo at A$242.6 million and Northern Star will pay A$193.0 million for the share it does not already own.

What is the market reaction?

The initial market reaction to Northern Star FY19 is slightly negative. Northern Star’s share price is down around 3 per cent and is currently trading at around A$11.83 (1.30pm, 30 August). Gold stocks are generally down today by 1-3 per cent so the movement in Northern Star’s share price is not out of line with the movement of other gold stocks. Northern Star trades at a P/E ratio in the mid-forties and a dividend yield of around 1 per cent (fully franked).

 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

August 30, 2019