Northern Star Shares Good Quarterly Results, But… (ASX:NST)

Northern Star Resources Ltd [ASX:NST] released its September 2020 quarterly update today.

Northern Star is an Australian gold producer with an $11.5 billion market cap. The company has assets in both Australia and Alaska.

Earlier this month, Northern Star announced it was looking to merge with Saracen Mineral Holdings Ltd [ASX:SAR] early next year, with the new company to become one of the top 10 global gold miners. You can read more on that here.

Northern Star meets guidance, takes advantage of higher gold prices

During the quarter, the company sold 227,532 ounces of gold — well within the top range of its guidance, which was set at 207,000–233,000 ounces.

All-in costs for the group were at $1,752 per ounce, with the average realised gold price at $2,493 per ounce.

The company generated $132 million in free cash flow, even after investing $42 million in growth and capital exploration.

As of 30 September 2020, the company had $470 million in cash, bullion and investments. This is after repaying $200 million of its corporate debt and another $200 million in fully franked dividends during the quarter.

What could happen next?

Northern Star is looking to increase production to 1.25 million ounces (moz) in the next three years. This translates to a 40% increase, while reducing costs by 10%, which the company has confirmed it is on track to achieve.

Executive chair Bill Beament said on this:

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 [the] 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.

Even though Northern Star released some good results, the NST share price at time of writing were trading at $15.35, 2% lower from yesterday’s close.

Still, with gold prices pushing closer to US$2,000 an ounce, Northern Star’s share price has seen a 35% increase year to date.

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Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

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