The Northern Star Resources Ltd (ASX: NST) share price was out of form on Wednesday despite announcing a record full year profit.
The gold miner’s shares ended the day 3.5% lower at $14.45.
How did Northern Star perform in FY 2020?
For the 12 months ended 30 June 2020, Northern Star delivered a record underlying net profit after tax of $291 million, which was an impressive 69% year on year increase.
Also growing exceptionally strongly was its underlying free cashflow. It lifted 190% or $277.3 million to $423.1 million during the year.
This led to the miner ending the period with $769.5 million in cash, bullion and investments. This is despite the company investing $1.3 billion in acquisition and growth opportunities in FY 2020.
In light of this, the company declared a final fully franked dividend of 9.5 cents per share. This was up 27% on the prior corresponding period and brings its full year dividend to 17 cents per share. The board has also decided to reward shareholders with a special fully franked dividend of 10 cents per share.
What were the drivers of Northern Star’s strong result?
Northern Star’s strong result was driven by a 7% increase in gold sold to 900,388 ounces and a 25% lift in average gold price per ounce to $2,208. The latter more than offset a 15% lift in its all-in sustaining cost (AISC) to $1,496 an ounce.
The good news is that the spot gold price is currently trading notably higher than FY 2020’s average gold price. As a result, management is confident that FY 2021 will be another year of bumper free cashflows. Especially given its production guidance over the 12 months.
It is forecasting production of 760,000 to 840,000 ounces from its Australian operations and 180,000 to 220,000 ounces from its US-based Pogo operation. The means total production in the range of 940,000 to 1,060,000 ounces in FY 2021. This compares to 984,675 ounces in FY 2020.
Northern Star’s Executive Chair, Bill Beament, commented: “We are on track to generate further significant increases in cashflow thanks to our substantial leverage to the gold price, our growing production profile and having one of the lowest capital intensity in the industry.”
“We also have a pipeline of future growth opportunities in and around our other assets and infrastructure, which will help us drive ongoing increases in cashflow while maintaining our superior financial returns,” he added.
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