The Northern Star Resources Ltd (ASX: NST) share price initially went against the broader ASX market sell-off this morning to move marginally higher. At the time of writing, however, the Northern Star share price has succumbed to wider market doldrums and edged 0.19% lower to $15.56.
This follows the release of the company’s first quarter update for FY21. Let’s take a look at how Northern Star performed over the last three months.
Strong quarter performance
For the period ending 30 September, Northern Star reported a robust result underpinned by its operations at Yandal and Pogo.
Gold sales increased to 227,532 ounces, which was in the upper end of the quarterly production guidance.
All-in costs came to $1,752 per ounce, with the average released selling price comfortably ahead at $2,493 per ounce. The wide margin resulted in free underlying cash flow of $132 million after the miner invested $42 million in growth and exploration activities.
Net profit after tax was estimated to be around $100 million, with a net mine cash flow of $170 million.
Annual production is forecast to increase by 40% to 1.25 million ounces over the next three years. In addition, capital costs are expected to fall by 10%, further generating free cash flow.
Corporate debt stood at $500 million, compared to the $700 million recorded at the end of prior quarter. The $200 million was repaid to reduce bank debt with a further $200 million spent on fully-franked shareholder dividends.
Northern Star closed the quarter with $470 million in cash, bullion and investments.
Management commentary
Northern Star Executive Chair, Mr Bill Beament commented on the outstanding performance at Yandal and Pogo as well as the Saracen Mineral Holdings Limited (ASX: SAR) joint venture. He said:
We are also delighted with the results at Pogo, which continued to improve on every metric as the benefits of the new bulk mining method and other changes we have introduced flow through. Costs for the quarter are 14.5 per cent lower than in FY20 and the project is generating strong free cashflow.
Our changes with Joint Venture partner Saracen at KCGM are also paying dividends, with costs beating guidance.
Mr Beament said the results at the Kalgoorlie operations reflected mine sequencing which resulted in lower grades and reduced overall tonnages. Gold sales were also reduced due to a planned roaster shutdown. However, this increased the inventory of concentrate, which will be poured in the current quarter.
Mr Beament continued:
Overall, we expect to increase production at the Kalgoorlie Operations each quarter this year and ultimately meet our full- year guidance there.
We have one of the strongest growth profiles in the global gold industry and we will achieve this with one of lowest capital intensities in the global gold industry. This combination enables us to deliver strong growth in production and free cashflow while maintaining our superior financial returns.
Mr Beament said Northern Star’s strong quarterly performance, combined with the excellent September quarterly results released by Saracen last week, provided further insight into the significant strengths of the proposed merged group. He lastly added:
Both companies have again demonstrated the tier-1 quality of our assets. Our combined production is growing to 2Moz a year by FY27 while most of our peers have a falling production profile. Our costs will continue to reduce and our combined scope for further organic growth in tier-1 locations is exceptional.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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