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#Trading Update
Last edited 7 days ago

8-July-2020:  June Quarter Trading Update

This time last year, the massive Kalgoorlie Super Pit, which used to be the largest OP (open pit) gold mine in Australia (recently overtaken by Newmont's Boddington Gold Mine) was owned by the two largest gold mining companies in the world - Barrick and Newmont - via their JV company known as Kalgoorlie Consolidated Gold Mines - or KCGM.  However those two giants of the industry have now sold their respective shares of KCGM to Northern Star (NST) and Saracen (SAR), Australia's 2nd and 4th largest gold producers (70%+ in gold).  Both companies have updated the market this morning.  I have already posted a straw about Saracen's update, and briefly mentioned the further positive gold price movement overnight. 

This straw is about NST's update, which the market seems to be more excited about so far, mainly because Bill Beament seemed very cautious and worried about the impacts of COVID-19 when he last provided a comprehensive update (and deferred their interim dividend payment).  This wasn't as obvious in their announcement at the time, but was very clear during the associated conference call with analysts and shareholders which I (as an NST shareholder) participated in. 

My view at the time was that Bill was being very conservative and was positioning the company to be able to get through COVID was as little damage as possible, and that his position and attitude was an excellent response to a very fluid and uncertain situation.  NST got sold down to close to $10/share (during that first week of April), almost re-testing their March low.  I took the opportunity at that time to top up my NST positions (I hold them in all of my portfolios, including my super).  

Today we will likely see a decent relief rally in NST, because things weren't nearly as bad as Bill thought they might be, and he's brought forward that interim dividend payment now to next week.  I would expect NST to finish the day somewhere between $14.50 and $15.  I love it when a plan comes together.

NST:  June Quarter Trading Update

UNDERLYING FREE CASHFLOW OF A$217.9M FROM SALE OF 262,717 OUNCES

Postponed FY20 interim dividend of A7.5¢ to be paid on July 16, 2020

Northern Star Resources (ASX: NST) advises that its cash, bullion and investments rose by 40% to A$769.5 million at June 30, 2020, up from A$551.4 million at March 31, 2020.

As a result, the Company’s balance sheet was net cash positive at June 30, 2020, with corporate bank debt of A$700 million.

Northern Star generated underlying free cashflow of A$217.9 million in the June quarter from the sale of 262,717oz. This took total sales for the 2020 financial year to 900,388oz while gold produced totalled 905,177oz. This was ~1.6% below the lower end of the FY20 guidance, which was withdrawn due to uncertainties stemming from COVID-19 (see ASX release dated March 26, 2020).

In light of this solid result, Northern Star will pay its FY20 fully-franked interim dividend of A7.5¢ a share on July 16. Payment of this dividend, which totals A$55 million, was postponed when the Company withdrew its guidance.

The Company expects to resume dividend payments in the ordinary course of business.

As part of its COVID-19 measures, Northern Star also drew down an additional A$200 million in debt in the March quarter. The Company has repaid that A$200 million on July 6, reducing its corporate bank debt to A$500 million.

In the June quarter, Northern Star reduced its hedge book to 536,426oz at A$2,085/oz (170,080oz, or 34% of ounces sold, in the June half came from hedged positions) as part of the Company’s strategy to increase its exposure to the spot price. Pushed-out hedged positions are being brought back and deliveries will continue to be accelerated in FY21. The Company has one of the smallest hedge books as a percentage of annualised production in the Australian gold industry, with just 15% of the next three years production committed.

Northern Star Executive Chair Bill Beament said the Company’s staff and business partners had done an outstanding job in very difficult circumstances. This enabled Northern Star to maintain the full employment of the Company’s workforce and business continuity for all stakeholders.

“The health and safety of our people and the communities in which we operate is always our first objective and the measures we adopted in response to COVID-19 reflected that,” Mr Beament said.

“As we foreshadowed at the time, these measures incurred additional costs, reduced productivities and restricted production.

“We also adopted a prudent approach to managing our balance sheet, as reflected in the decision to postpone the interim dividend and drawdown the additional debt.”

Mr Beament said that as well as protecting its people, these measures were aimed at maximising the Company’s ability to continue operating at all its sites throughout the pandemic.

“To generate quarterly free cashflow of A$217.9 million in these circumstances is an outstanding result which reflects the performance of our staff and business partners, our success in being able to operate continuously throughout the pandemic and the underlying strength of our assets,” he said.

“The results at our Pogo mine in Alaska were particularly pleasing given the challenging circumstances emanating from COVID-19 where we effectively managed safe operations with 36 confirmed cases through the quarter.

“Despite the considerable impacts of COVID-19 at Pogo, the underlying trend of rising production and productivity continued. This further demonstrates the huge potential of this asset in more conventional circumstances.

“The teams at our Jundee and Kalgoorlie Operations excelled and we made strong progress towards our goal of unlocking the significant upside at KCGM.”

--- click on the link at the top of this straw for the rest of this announcement ---   

[I hold NST shares]

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#Ashburton Divestment
Added 3 weeks ago

22-June-2020:  Northern Star Divests Ashburton Project

Northern Star Resources Limited (ASX: NST) advises that it has agreed to divest the Mt Olympus Project comprising most of the Ashburton Project in Western Australia to Kalamazoo Resources Limited (ASX: KZR) for a deferred contingent cash consideration of A$17.5 million.

The deferred cash consideration is as follows:

  • A$5 million on mining of the first 250,000 tonnes of Ore; and
  • a 2% Net Smelter Royalty (NSR) on the first 250,000oz of gold produced (worth an estimated A$12.5 million using the current spot gold price of A$2,500/oz), with a 0.75% NSR on any subsequent gold produced from the tenements; and
  • the same NSR’s will also apply on any other metals produced from the tenements.

Northern Star Executive Chair Bill Beament said: “The Ashburton Project no longer fits in Northern Star’s portfolio but still has strong potential on both the exploration and production fronts.  The royalty structure also enables Northern Star to retain an exposure to the project.”

Completion of the divestment is conditional on Ministerial approval and third party rights being observed.

--- ends ---

Disclosure:  I hold NST shares, but not KZR shares.

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#Company Reports
Last edited 3 months ago

28-Apr-2020:  March 2020 Quarterly Activities Report

  • Gold sold in the March quarter of 239,031oz at an AISC of A$1,590/oz (US$1,047/oz) 
    • Australian operations (including KCGM) sold 190,258oz at an AISC of A$1,505/oz (US$991/oz) 
    • Pogo operations sold 48,773oz at an AISC of US$1,254/oz
  • Underlying free cash flow of A$89M for the quarter after investing ~A$66M in growth capital and exploration 
  • Cash, bullion and investments of A$551M at 31 March 2020 after completion of the KCGM acquisition and drawing A$200M from the corporate credit revolver facility; Corporate debt stands at A$700M 
  • Payment of A$55M interim dividend deferred to 27 October; The full-year dividend is expected to be paid as normal (same timeframe and equal to 6% of group revenue) 
  • March quarter production:
    • Jundee Gold Operations:
      • 75,099oz mined and 52,629oz sold at an AISC A$1,389/oz (US$915/oz)
    • KCGM Gold Operations (50%):
      • 41,662 oz mined and 60,204 oz sold at an AISC A$1,453/oz (US$957/oz) (NST’s half-share)
    • Kalgoorlie Gold Operations:
      • 77,067oz mined and 77,425oz sold at an AISC A$1,619/oz (US$1,066/oz)
    • Pogo Gold Operations:
      • 56,571oz mined and 48,773oz sold at an AISC A$1,904/oz (US$1,254/oz)
  • Strict COVID-19 related measures implemented early to protect the health and safety of our staff and local communities, and ensure that operations could continue and remain profitable in the short and medium term 
  • Some of the COVID-19 related measures resulted in temporary reductions in production and resulting increases in unit costs in the March quarter but paved the way for an expected improved performance in June quarter 
  • At Pogo, further progress made on underlying transition despite implementing stringent COVID-19 measures, with quarter-on-quarter improvements in both gold production and costs per ounce. This trend is expected to continue in the June quarter
  • At KCGM, strong operational progress is being made, with multiple open-pit mining fronts now being established, including the start of Brownhill Stage 1
  • At Jundee, the A$22M mill expansion to 2.7Mtpa is on track for commissioning in the June quarter
  • At Kalgoorlie Operations, the Moonbeam deposit starts production in the June quarter
  • Community COVID-19 fund established with committed funds of up to A$10M to assist local health services, communities and businesses
  • Northern Star will host a quarterly conference call today, 28 April 2020 at 9:30am AEST (7:30am AWST). The call can be accessed by clicking here: https://webcasting.boardroom.media/broadcast/5e8ac7b306242c47d80df317

--- click on link above for more ---

[Disclosure:  I hold NST shares in all of my portfolios]

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#Jan 2020 SPP Results
Last edited 5 months ago

03-Feb-2020:  Northern Star's SPP shares are being allocated today.  They haven't officially released an announcement regarding how they have scaled back applications, they've just said that the SPP was seriously oversubscribed.  I've just got off the phone with their SPP info line however and one of my accounts - that had just 50 NST shares in it (a marketable parcel, but not much more than that) received only 7 (yep, seven) new NST shares in this SPP.  Apparently they've gone with a pro-rata scale back to avoid unnecessary dilution with those who have larger shareholdings.  In other words, the smaller your NST holding was on the record date (December 16, 2019), the smaller your allocation will be.  Luckilly I have a larger holding in another account.  Unluckilly, that other account is an industry super fund and they don't allow you to participate in SPPs - they only allow you to participate in rights issues - when the rights can be traded on the ASX.  I'm a little bit pissed off - $9 SPP price, and NST trading at around $13 now, but they are free to scale their SPP back any way they want to, and they're clearly looking after those with decent shareholdings before those with much smaller ones here.  I still have reasonable exposure to the company via my CBUS SMSF, but I would still have liked to have received more than seven shares in my other (main trading) account!!

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#Company Reports
Added 6 months ago

29-Jan-2020:  December 2019 Quarterly Activities Report

and Pogo Q2 Operational Update

Also, NST's SPP to raise approximately A$50 million- that was part of the funding arrangements for their purchase of Newmont GoldCorp's 50% of KCGM (Kalgoorlie Consolidated Gold Mines - whose main asset is the Kalgoorlie Super Pit on the edge of the town of Kalgoorlie) - closed on Friday Jan 24, and I expect it was seriously oversubscribed since the offer price was $9 and NST's SP increased during the offer period from $10.33 to $12.59, closing at $12.59 on Friday.  They then closed at $13 yesterday (Jan 28).  I eagerly await details of how much they are going to scale back the applications because I applied for my full entitlement ($30K) and obviously the more I am allocated the better - seeing as they closed yesterday at 44.4% above the $9 offer price.

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#Pogo employee has COVID-19
Added 3 months ago
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#Company Presentations
Last edited 4 months ago

24-Sep-2018:  Northern Star have today released a copy of their presentation at the Denver Gold Forum - see here.

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#COVID-19 Response/Update
Added 4 months ago

26-Mar-2020:  COVID-19, Guidance and Dividend Update

Northern Star, Australia's second largest listed gold producer, has withdrawn their previous production guidance admitting there have been disruptions to production at some of their mines and that there could well be further discruptions.  They have also deferred payment of their interim dividend until October.  That's something I've seen a number of companies do over recent days.  In this case however, it would appear that this was NOT priced in already, as NST are off over 11% so far today, while most of their peers (the larger ASX-listed gold miners) are up or down around 1% to 2% today.

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#Company Presentations
Last edited 4 months ago

25-Sep-2018:  Article in MiningNews.Net - see here - "Upside at Pogo Immense: Beament"

More of the same.  "We're not doing anything different here guys," said Bill Beament, pointing at Northern Star's track record of deals - 10 in eight years which created A$5.3 billion of value in the process.

Beament said Pogo's status as a tier one underground operation in a tier one jurisdiction fit within Northern Star's DNA.

"No offence, but you're not going to see Northern Star rush off to places like Africa," he said.

"We like Australia, the US and Canada.

"[Pogo] gives us great exposure to a prolific mineral belt.

"There are many global majors fighting to get into this jurisdiction as we speak."

What excites Northern Star is the potential at Pogo - it was once a 300,000oz per annum producer and could well be again in the not-too-distant future.

The company sees similarities between Pogo and its world-class Jundee mine.

"The reserve cut-off grade is 8.3 grams per tonne gold, which is nearly four times the cut-off grade of Jundee," Beament said.

Jundee's break-even cut-off grade is 6.5gpt gold, which Beament said highlighted the huge potential at Pogo.

Current owner Sumitomo had set an US$18 million exploration budget for this calendar year.

The results are due shortly and Northern Star will announce an updated JORC-compliant resource for Pogo when it takes ownership next month.

Beament pointed out Pogo had one tenth of the drilling completed at Jundee.

"This is a spectacular orebody," he said.

Unlike some of the company's other assets, Beament said Pogo wasn't a requiring a full renovation.

"This ain't broken," he said.

"We don't have to invest nearly as much as we've had to with our other assets."

Northern Star already has 16 members of its team onsite ahead of the acquisition close next month.

"It's called planning and preparation, and we're well advanced," Beament said.


I hold NST shares.

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#Results
Last edited 5 months ago

13-Feb-2019:  NST H1FY19 Results - see here.  For their results presentation, see here.

Market Reaction:  NST closed up +7.47%.

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#Company Presentations
Last edited 5 months ago
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#Company Reports
Last edited 5 months ago

01-Aug-2019:  Resource and Reserve Update - 1 August 2019

"NORTHERN STAR SET FOR FURTHER PRODUCTION GROWTH AS RESERVES AND RESOURCES JUMP +30%"

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#Company Presentations
Last edited 5 months ago
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#Company Reports
Last edited 6 months ago
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#Company Presentations
Last edited 7 months ago

18 June 2019:  Company Presentation - London Roadshow

"An Australian gold miner - for global investors" - London Roadshow - June 2019

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#Company Reports
Last edited 9 months ago

24-Apr-19:  March 2019 Quarterly Activities Report - which is subtitled, "Pogo hits inflexion point, paving way for record fourth quarter."

HIGHLIGHTS

  • Gold sold in the March quarter of 185,296oz at an AISC of A$1,369/oz (US$975/oz)
    • Australian operations sold 149,069oz at an AISC of A$1,200/oz (US$855/oz)
    • US operations sold 36,227oz at an AISC of A$2,062/oz (US$1,468/oz)
  • Pogo’s results reflect impact of significant changeover-related activity, including the late delivery of the new mobile underground mining fleet and the introduction of a new mining method, which limited production temporarily; This reduced production drove up the AISC per ounce
  • In the March quarter, monthly expenditure at Pogo fell ~20% to US$18.5M from an average of US$22.5M per month in the previous two quarters. Further cost reductions are anticipated  
  • Pogo is forecast to produce ~50,000oz in the June quarter  
  • Turnaround at Pogo and ongoing strong performance at Australian operations expected to deliver record group quarterly production in the June quarter; Rising trend demonstrated by the sale of 82,000oz of gold in the month of March
  • Operating cash flow of A$63M for the quarter; This is set to rise significantly in the June quarter
  • Cash and equivalents at 31 March of A$288M (A$292M at December 31) after investing A$44M in exploration and expansionary capex in the quarter; Northern Star has no bank debt
  • March quarter production:
    • Jundee Gold Operations: - 81,089oz mined and 67,420oz sold at an AISC A$1,021/oz (US$727/oz)
    • Kalgoorlie Gold Operations: - 84,492oz mined and 81,649oz sold at an AISC A$1,347/oz (US$959/oz)
    • Pogo Gold Operations: - 39,750oz mined and 36,227oz sold at an AISC A$2,062/oz (US$1,468/oz)
  • At Pogo, the new mining method of long-hole stoping commenced late in the quarter and represented only 11% of the quarter’s processed tonnes.  The April month to date figure has increased to 27% and the processed head grade has risen to over 8gpt; This is forecast to increase to a ~60/40% stoping to development ratio in the coming quarters
  • Five of the sixteen new pieces of underground mobile plant arrived on site in the March quarter; The balance is scheduled for delivery in the June quarter
  • Pogo is on track for a maiden JORC Reserve mid-year; Eight rigs are now operating underground and a further four rigs are operating on the surface
  • Outstanding results from Pogo Central Zone discovery, incl 1.5m at 48.6gpt, 1.3m at 33.2gpt, 5m at 13.9gpt; In-mine extensional drilling results incl 2.4m at 82.5gpt, 1.8m at 80.2gpt and 4.5m at 30gpt
  • Australian operations on track to meet the top end of FY2019 production guidance of 600,000640,000oz
  • At Jundee, open pit mining at Ramone commenced in February with ore to be processed this quarter; Regional exploration at Ramone has resulted in further discoveries at the nearby Ziggy and Marley prospects with results including 17m at 4.1gpt and 9m at 6.2gpt
  • Surface diamond drilling continues to confirm the underground potential of the Ramone system
  • Significant regional exploration success in the projected Zuleika Shear geological setting at South Kalgoorlie Operation with results including 1m at 246gpt and 1m at 28.6gpt.

 

Disclosure:  I hold NST shares.

 

 

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#ASX Announcements
Last edited 9 months ago

16-Oct-2018:  Northern Star has released this announcement today titled, "Pogo Resource Update" in which they have increased the Pogo Resource estimate by 24% (or around 0.8 million ounces of gold).  

Highlights of the announcement:

  • Northern Star, in conjunction with independent mining consultants CSA Global, has completed a comprehensive re-estimation of the Pogo in-mine Resource; This estimate is JORC-2012 compliant
  • The JORC-compliant Resource estimate is now 8.8Mt at 14.7gpt for 4.15Moz, utilising a cut-off grade of 6.2gpt. This new estimate is in line with the non-JORC estimate stated in Northern Star’s ASX release of August 30, 2018 re the Pogo acquisition
  • The previously reported non-JORC estimate of 4.1Moz at 12.2gpt included 765,000oz in satellite deposits external to the main Pogo mine; These deposits have not been included in this new estimate
  • The new Resource estimate in the Pogo mine area of 4.15Moz has increased by 24% or by ~0.8Moz, predominantly through interpretation and remodelling of known mineralisation
  • This new Resource estimate will underpin mine planning and operational optimisation at Pogo
  • Northern Star assumed management control of the Pogo operation on 28 September 2018
  • A$15-20 million budgeted for exploration and drilling at Pogo for FY2019
  • Central Tanami Project: As announced on 19 September 2018, Northern Star has increased equity ownership of the Central Tanami Project (CTP) to 40% via a $20M option exercise.  Equity Resources in the CTP now total 12.3Mt @ 2.8gpt for 1.1Moz
  • Following the Pogo Resource and the increased CTP ownership, Northern Star’s Group Resources stand at 188Mt @ 3.4gpt for 20.5Moz
  • A revised JORC-compliant Ore Reserve estimate will be published following closure of FY2019 in line with Northern Star’s policy

NST also released another Investor Presentation on October 3rd - see here

NST also released a Pogo Site Visit Presentation Pack on September 28th (the site visit by analysts was on the 27th September) - see here

They also announced on October 1 that they had completed the Pogo acquisition - see here


Disclosure:  I hold NST shares.

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