Australia’s second biggest gold miner, Northern Star (NST) is maintaining interim dividend at 3 cents a share despite reporting an impressive looking 61% jump in net profit for the December half year.
The company said yesterday net profit rose to $104.6 million for the half, thanks to a 12% lift in the average gold price to $A1,683 a ounce for the period, and the $A15 million profit on the sale of its Plutonic mine in Western Australia.
But as dramatic as the 61% looked, the nitty gritty of the result was that of a now mature explorer with producing assets, overlain with a bit of financial engineering via a float in Canada, and half a billion in cash and other credit to do a possible deal.
Executive chairman Bill Beament said in yesterday’s announcement, “We are retaining a robust cash balance and maintaining our dividend track record while funding the growth projects that will take our production to 600,000 ounces per annum”.
The group has provided full-year production guidance of between 485,000 ounces and 515,000 ounces .
Management has also flagged capital expenditure of $130 million in relation to drilling programs and bringing projects on line.
Beament expects exploration and development initiatives will result in production increasing to a run rate of 600,000 ounces per annum by 2018.
Northern Star sold the Plutonic mine in WA for a total of $66 million to a company called Superior Gold, which is due to list in Canada this week, with Northern Star as a 21%. That’s after selling down its original 33% stake and raising $10 million in cash from the float.
After receiving an initial $12.5 million from last year’s sale, Northern Star says it has set up a series of milestone payments related to the float, exploration milestones and royalty streams that keep it exposed to the ageing mine it bought from Newmont in 2013 for $25 million.
Northern Star now has $525 million in cash and credit, including an undrawn $100 million debt facility.
Included in the $160 million of capex is the cost of finishing 50,000 ounce a year Millenium deposit mine in WA, and expanding the Jundee mill in WA and Kanowna Belle processing plant, also in WA.
Revenue edged up to $381.7 million for the half year up from $375.3 million in the same period of 2015, largely attributable to increased revenue from its Kalgoorlie-based Kundana and Kanowna Belle operations.
Northern Star shares ended flat at $4.48.
