CAPITAL MARKETS

Northern Star maintains guidance despite challenges

Gold miner gets some relief after WA relaxes rules

 Northern Star managing director Stuart Tonkin. Image: Sharon Smith

Northern Star managing director Stuart Tonkin. Image: Sharon Smith

It represented the first full reporting period since the company merged with Saracen Mineral Holdings a year ago.

Revenue was up 63% to A$1.8 billion due to higher gold sales.

Underlying EBITDA was up 47% to $699 million at a margin of 39%.

Cash earnings were $430 million.

Underlying net profit after tax was $108 million, excluding significant items of $153 million.

Reported NPAT rose 43% to $261 million.

The company declared a fully franked interim dividend of 10c per share, up 5% on the December half of 2020 and representing a payout ratio of 27% of cash earnings.

Northern Star closed the half with cash and bullion of $588 million and net cash of $288 million.

Full-year guidance of 1.55-1.65 million ounces at all-in sustaining costs of $1475-1575 an ounce was maintained.

Northern Star managing director Stuart Tonkin said the guidance incorporated the current border restrictions in Western Australia and the associated labour and cost impacts.

RBC Capital Markets is forecasting full-year production of 1.57Moz at AISC of $1577/oz.

"Meeting FY22 AISC guidance given industry cost pressures and after a higher cost H1 would be a positive outcome for Northern Star," analyst Alexander Barkley said.

Tonkin welcomed the partial relaxation of WA's hard border and the halving of the COVID-19 isolation period to seven days.

"It makes a major structural difference to us in our planning," he said.

"There's the actual health risk and sickness downtime but then there's the structural downtime created by these isolation periods and that was what was really penalising WA, so the fact that that has changed is really key."

Meanwhile, Northern Star invested C$154 million in Canadian developer Osisko Mining during the December half and has an exclusive right to negotiate a 50:50 joint venture over the high-grade Windfall project in Quebec.

Due diligence is continuing and Tonkin will visit Windfall later this month during a trip to North America to spend time at the Pogo mine.

Shares in Northern Star were up 0.6% to $8.73. RBC maintained an outperform rating and $12.50 price target.

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