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Alberto Abaterusso
Alberto Abaterusso
Articles (1342) 

Northern Star Resources Soars on 2nd-Half Results

Australian miner posts increases in earnings, revenue

February 13, 2019 | About:

Shares of Northern Star Resources Ltd. (ASX:NST) soared 7.5% to 9.64 Australian dollars ($6.83) on the Australian Stock Exchange on Wednesday after posting financial results for the second half of 2018, which ended Dec. 31.

In addition to strong performance recorded at its Australian operations, the $260 million acquisition of Alaska's Pogo underground gold mine in August boosted Northern Star Resources' results.

On a year-over-year basis, total revenue increased 43% to AU$633.5 million, the underlying net profit grew 11% to AU$89.1 million and the statutory net profit jumped 4% to AU$82.1 million. Net earnings per share decreased 1% to AU$13 from the same period of 2017.

The Australian company mined 453,883 ounces of gold at an all-in sustaining cost of AU$1,295 and sold 423,243 ounces of gold at an average price of AU$1,700 per ounce. Production increased 54%, sales volumes grew 58% and the average gold price rose 1%. Due to the sustainment of higher exploration costs, the AISC was 24% higher than in 2017.

Besides Alaska, the company is producing the precious metal from the Paulsens, the Jundee, the Kanowna Belle and the East Kundana underground mines in Western Australia.

Northern Star Resources also recorded a 10% increase in earnings before interest, taxes, depreciation and amortization to AU$221.8 million. As a result, the trailing 12-month EBITDA margin is 40.3%, above the industry median of 24%. The company is also topping the industry in terms of a higher return on equity ratio, which is almost 20%. The industry median stands at 9.6%.

Despite 33% growth in operating cash flow to AU$169.1 million, the company recorded cash outflows of almost AU$349 million because Northern Star Resources made massive investments in new businesses and assets during the period. The amount of cash on hand and securities also decreased 38% to AU$230 million.

The company also boosted the interim dividend by 33% to 6 cents per ordinary share. The amount is based on the company’s policy to distribute cash to its shareholders at a rate of 6% of total revenues. The next payment will be made on April 4 to shareholders of record as of March 14. The forward dividend yield is 1.24%.

The stock has climbed 61.5% for the 52 weeks through Wednesday to a market capitalization of roughly AU$6.2 billion. Northern Star Resources has outperformed the Van Eck Vectors Gold Miners (GDX) exchange-traded fund by 61.2% over the same period. The closing share price on Wednesday was above the 200, 100 and 50-day simple moving average lines. The 52-week range is AU$5.97 to AU$9.80.

The price-book ratio is 6 versus an industry median of 1.7 and the EV-to-EBITDA ratio is 10.6 versus an industry median of 9.3.

Wall Street has issued a hold recommendation rating with an average target price of AU$8.5 per share of Northern Star Resources.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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