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Northern Star Resources Plummets After Releasing Full-Year Results


Shares of Northern Star Resources Ltd. (ASX:NST) tumbled 6.62% to 11.57 Australian dollars ($7.82) on Tuesday after posting financial results for full-year 2019, which ended June 30.

In addition to higher gold prices, robust performance at the miner's operations in Australia allowed it to deliver an after-tax profit of AU$154.7 million on AU$1.4 billion in revenue, reflecting a 45% increase year over year.

The company delivered strong operating cash flows of nearly AU$380 million, while earnings before interest, taxes, depreciation and amortization advanced 8% to nearly AU$480 million. The Ebitda margin was 34.2% versus the industry median of 25.6%. The margin is the most meaningful indicator of profitability for gold producers as mining is a capital-intensive industry.

The acquisition of the Pogo operation in Alaska last September also contributed to revenue and operating cash flow growth, as well as the Ebitda margin's improvement.

During the year, Northern Star Resources sold 840,580 ounces of gold, which was up 47% from 2018 as a result of a 48% increase in gold mined to 904,651 ounces. The all-in sustaining cost per ounce produced was AU$1,296, up 26% from the previous year due to the addition of Pogo's operations and an increase in expenses for exploration activities.

Exploration efforts resulted in 31% growth in resources to 20.76 million ounces and 35% growth in reserves to 5.4 million ounces of gold grading 4.4 grams of metal per ton of mineral, up 16% from 2018.

The average realized price per ounce of gold sold increased 4% to AU$1,764.

For full fiscal 2020, the miner guided for 800,000 to 900,000 ounces of produced gold at an AISC of AU$1,200 to AU$1,300 per ounce.

During the year, the company allocated $648.1 million to investing activities and AU$70.34 million to the payment of dividends.

The board of directors has increased the interim dividend per share to 7.5 cents. The dividend will be paid to shareholders on Nov. 20 and generates a forward dividend yield of 1.17% versus the industry median of 2.53% based on Tuesday's closing price.

Northern Star Resources is a debt-free producer of gold. Excluding gold inventories, its balance sheet had AU$561 million in total liquidity as of June 30.

The stock has climbed 42.5% for the 52 weeks through Tuesday, but it underperformed the Van Eck Vectors Gold Miners (GDX) exchange-traded fund by 21.6%. The stock has a market capitalization of AU$7.4 billion.

The closing share price on Tuesday was below the 50-day simple moving average line and above the 200- and 100-day simple moving average lines. The 52-week range is AU$6.90 to AU$14.06.

The enterprise value-to-Ebitda ratio is 15.63 versus the industry median of 8.39.

Wall Street issued an underweight recommendation rating with an average target price of AU$10.67 per share of Northern Star Resources.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.