The Northern Star Resources Ltd (ASX: NST) share price will be on watch today after the ASX gold miner released its half-year results. These results relate only to Northern Star, as the merger with Saracen Mineral Holdings Limited (ASX: SAR) will take effect on 12 February 2021.
Key figures
Northern Star reported a 34% jump in half-year revenue on the back of increased gold sold and higher realised gold prices. The miner sold 480,432 ounces of gold during the half at an average price of $2,386, an improvement from 398,640 ounces and an average price of $2,046 in the prior corresponding period (pcp).
This led to record earnings, with EBITDA rising 47% to $472 million and net profit after tax coming in at $184.5 million, up 46% compared to the pcp. Management highlighted that this result came despite investing $108 million in exploration and expansionary capital, and directing 39% of its gold sales into hedges, which meant revenue was more than $100 million lower than spot prices.
The company said it is well-positioned to take advantage of the favourable gold price environment with only ~10% of annualised production hedged over the next three years.
Turning to the balance sheet, Northern Star had cash, bullion and investments of $372 million at the end of 2020 and $375 million of corporate bank debt. Combined with an undrawn revolving facility of $300 million, the miner had total funding capacity of $672 million at the end of the period.
Northern Star dividend
In line with its policy of paying out the equivalent of 6% of revenue as dividends, Northern Star declared a fully-franked interim dividend of 9.5 cents per share, up 27% from 7.5 cents in HY20.
With the Northern Star share price closing at $11.90 yesterday, this puts shares on an annualised dividend yield of 1.6%, or 2.3% including franking credits.
Now what?
Northern Star noted it is on track to meet its FY21 production guidance of 940,000 to 1,060,000 ounces of gold. And after the Saracen merger is implemented on Friday, Chair Bill Beament said the combined operations have a clear pathway to an annual production rate of 2 million ounces.
“This growth will be driven by organic sources and incur one of the lowest capital intensities in the industry, ensuring that it is not just strong growth but is also financially-rewarding growth. It will also mean that Northern Star is growing at a time when so many of our global peers have flat or declining production and inventories,” Mr Beament concluded.
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