Northern Star Resources (ASX: NST) is an Australian gold producer with projects located in the regions of Australia and North America. Northern Star has four Tier-1 assets that includes Jundee operations, Kalgoorlie operations (including Kanowna Belle, Kundana (the East Kundana Joint Venture – Northern Star’s interest: 51 per cent), Kalgoorlie Consolidated Gold Mines (KCGM) also known as the super pit) and Pogo operations. Northern Star has a market capitalisation of A$10 billion.

 

What are the key features of Northern Star’s June quarter report?

Gold sold for the June quarter is 262,717 ounces. Regarding Northern Star’s individual mines, Jundee gold sold is 77,788 ounces, Pogo gold sold is 50,251 ounces, Kalgoorlie gold sold is 79,057 ounces and KCGM (50% interest) gold sold is 79,057 ounces. Northern Star’s total sales for FY20 is 900,388 ounces, this is at the lower end of Northern Star’s FY20 sales guidance.

Northern Star announced that the postponed FY20 interim dividend of A7.5 cents will now be paid on July 2020.

On a positive side, Northern Star has reduced its hedge book to 536,426oz at A$2,085/oz, with 170,080 ounces, or 34% of ounces sold in the June half came from hedged positions. This is part of the Company’s strategy to increase its exposure to the spot price.

What is the outlook?

The short-term and long-term outlook for Northern Star is positive. Northern Star is benefiting from a weak A$ and a rising gold price. This could increase revenue in the short-term for Saracen.

The long-term outlook for Northern Star is positive. Currently, Northern Star has an interest in four Tier-1 assets in Tier-1 locations delivering well over a million ounces a year (subject to change for FY20 due to impacts from COVID-19).

The main driver of the positive outlook for Northern Star is its 50% acquisition of the KCGM, which took financial effect from 1 January 2020. KCGM is one of the largest gold mines in Australia with total gold production of 490koz in FY19 and 730koz in FY18. The production was down significantly in FY19 due to a rock fall. It is estimated to take approximately three years for production to fully recover from the rock fall.

Northern Star also has a strong balance sheet. Northern Star has A$769.5 million in cash, bullion and investments, up 40% compared with the end of March quarter. Northern Star has corporate bank debt of A$700 million, which means that Northern Star is net cash balance.

What is the market reaction to Norther Star’s June quarter report?

The market reaction to Northern Star’s June quarter report is positive. Norther Star’s share price is up 6.5% and is currently trading at A$14.84. This is a positive reaction as the Australian market is down around 0.3% today. Northern Star has a forward P/E ratio in the mid-twenties and has an annual dividend yield of 0.9%.


 

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July 8, 2020