Shares in two leading WA mining groups fell yesterday as investors showed their unhappiness with the picture both results painted, with neither convincing enough for jumpy traders in the wake of Friday’s stark warning on US monetary policy from Federal Reserve chair Jay Powell.
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While Northern Star Resources (ASX: NST) achieved a strong financial performance in the year to June and, despite external challenges declared a final dividend of 11.5 cents a share as well as a $300 million buyback, the shares still eased on the day, falling 1.5% to $7.46.
The result covered the first 12-month period since the Saracen merger and Super Pit ownership consolidation.
Gold production was on guidance of 1.561 million ounces at All in Sustaining Cost (AISC) of $A1,633 an ounce.
Revenue for the year totalled $A3.735 billion, underlying EBITDA was $A1.517 billion and statutory after-tax net profit was $$430 million.
“Cash Earnings of $A1.0 billion reflecting strong operational and financial performance,” directors said.
With the 11.5 cents a share final (up from 9.5 cents previously), total payout for the full year is 21.5 cents, up from 19 cents paid for 2020-21.
Northern Star also announced on-market share buy-back of up to $A300 million “as part of proactive capital management strategy.”
CEO Stuart Tonkin said in Monday’s statement that the results, which include for the first time Saracen and 100% of the Super Pit, clearly demonstrate Northern Star’s cash earnings potential.
“Our strong performance in FY22 generated $1 billion in cash earnings, which underscores the sustainability of the cash flow from our high-quality assets located in tier-1 jurisdictions.
“The fully franked final dividend of 11.5cps, within our dividend policy target and payable next month, will mean we have returned $1 billion cash to shareholders since FY12.
“The announcement today of the first buy-back in Northern Star’s history presents compelling value and confirms the Board’s confidence in our strong balance sheet and cash generation outlook and aligns with our fiscal discipline and returns focus.
“We have made a solid start to FY23 and continue to progress the KCGM cutback with our new cost-efficient mining equipment. The SKO processing plant is now on care and maintenance, at Thunderbox we commence commissioning the expanded mill in Q1, while at Pogo we have removed surplus equipment, reflecting increased development rates across the fleet,” he said.
Looking to 2022-23 Northern Star confirmed earlier guidance for gold production of between 1.560 million ounces and 1.680 million (meaning a small rise from 2021-22).
“Gold sold is expected to be weighted towards 2H as a result of the scheduled ramp up of the Thunderbox mill expansion and Pogo (in Alaska) stopping schedule.”
The company said its AISC will be in the range of $A1,630 to $A1,690 per ounce (based on assumed average exchange rate of AUD: USD 0.70) – slightly higher than 2022’s $A1.633 an ounce
“Growth capital expenditure similar to FY2022 levels with $650 million forecasted (including $13 million corporate investment) and exploration expenditure of $125 million.”
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Meanwhile, shares in Mineral Resources (ASX: MIN) were down sharply at the opening – more than 7% at one stage – but retraced to recover to be down less than 2% at the end as investors looked again at the result and found parts of it to their liking.
Due to the weak iron ore prices and the now usual widening of discounts from the index price that Mineral Resources gets for its iron ore at times of market stress, the company revealed a 72% slide in statutory net earnings to $351 million.
That was struck on an 8% drop in revenue for the year to $2.4 billion.
The company’s underlying net after tax profit slumped 64% to $400 million – which spooked the market first up.
The weak iron ore prices, and lower grade iron ore shipments, were partly offset by surging lithium prices for spodumene ore and for the company’s first output of hydroxide.
MinRes declared a final dividend of $1.00 a share, down from $1.75 a share a year ago. That was the only dividend paid in 2020-21.
In lithium, MinRes and JV partner Ganfeng of China have approved the next stage of expansion of Mt Marion, to 900,000 tonnes a year of spodumene, while MinRes reported its maiden earnings from lithium hydroxide production –at its Kemerton plant in WA
MinRes said the coming year will see the expansion of lithium’s contribution its business the miner expands the Mt Marion mine, restarts Train 3 at the Wodgina mine and commences hydroxide production at the Kemerton plant.
And yesterday MinRes management took the opportunity to confirm the worst kept secret in the WA mining industry – that it and Chinese steel giant, Baowu will start work on a new iron ore mine in the West Pilbara.
The new $3 billion Onslow iron ore project will proceed through the JV vehicle Red Hill is expected to open a major new iron ore province and associated port in WA’s West Pilbara.
MinRes says the JV is aiming to ship 30 million tonnes of iron ore annually during first stage of the project. It will be a low-grade operation with ore in the range of 56% Fe to just over 57% compared to the 62% fe fines standard product from the likes of Rio Tinto and the 61% product from BHP.
“I’m delighted that our flagship Onslow Iron Project has reached this significant milestone,” MinRes CEO Chris Ellison said in Monday’s statement.
“Onslow Iron introduces a low-cost, long-life and low-risk operation to MinRes’ iron ore portfolio, along with the largest mining services contract in Australia.”
