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]
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:
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.
28-Apr-2020: March 2020 Quarterly Activities Report
--- click on link above for more ---
[Disclosure: I hold NST shares in all of my portfolios]
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!!
29-Jan-2020: December 2019 Quarterly Activities Report
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.
24-Sep-2018: Northern Star have today released a copy of their presentation at the Denver Gold Forum - see here.
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.
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.
01 August 2019: Resource and Reserve Update - 1 August 2019
01-Aug-2019: Resource and Reserve Update - 1 August 2019
"NORTHERN STAR SET FOR FURTHER PRODUCTION GROWTH AS RESERVES AND RESOURCES JUMP +30%"
02-Aug-2019: Annual Strategy Day - August 2019 Presentation
30 July 2019: Pogo Operational Update June Quarter
18 June 2019: Company Presentation - London Roadshow
"An Australian gold miner - for global investors" - London Roadshow - June 2019
24-Apr-19: March 2019 Quarterly Activities Report - which is subtitled, "Pogo hits inflexion point, paving way for record fourth quarter."
Disclosure: I hold NST shares.
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:
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.