Northern Star’s underlying free cashflow climbs to impressive A$217.9 million
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This was ~1.6% below the lower end of the FY20 guidance, which was withdrawn due to uncertainties stemming from COVID-19 (see ASX release dated March 26, 2020).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.
Gold output in June quarter (see a table below) hits impressive 267,361 ounces, a 18% increase over the corresponding period of 2019 year (226,028 ounces).
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
“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.”