Where next for Northern Star shares after strong half-year results?

Northern Star (ASX: NST) shares have risen by 6.9% year-to-date, buoyed both by a strong operational performance in the last half, but also by the elevated gold price which continues to flirt with record highs.

While the ASX gold stock fell to as low as below $7 in mid-2022, it nevertheless remains up by nearly 70% over the past five years to $14.67 — and expansion plans mean further increases may be incoming over the medium term.

For context, gold is currently trading for a record circa US$2,280 per oz, and may rise even higher if global interest rates start to fall as widely anticipated later in 2024.

Northern Star share price: half-year results

All figures are in Australian dollars unless otherwise stated.

The gold miner reported record cash earnings and paid out a record dividend after selling 781koz of gold at an all-in sustaining cost of $1,878. Cash earnings rose by 50% compared to the previous corresponding period to $702 million, while underlying EBITDA increased by 41% to $889 million, ‘driven by higher realized prices.’

Northern Star retains a strong balance sheet with net cash of $229 million and bullion of nearly $1.1 billion. The miner also paid out an unfranked dividend, which rose by 36% to $0.15 per share, and highlighted its $300 million on-market share buyback program.

Managing Director Stuart Tonkin enthuses that ‘Consistent operational delivery combined with record cash generation are a testament to the simplicity and scale of our business – three production centres in two tier-1 jurisdictions (Western Australia and Alaska) producing one commodity, gold.’

Where next for Northern Star shares?

The business continues to maintain its FY24 guidance, which remains weighted to the second half the of the year. However, it notes that ‘cost pressures remain prevalent,’ including higher gold royalties, higher fuel costs and a weaker Australian dollar.

Operationally, the company is delivering multiple growth projects as part of its five-year strategy. At Kalgoorlie, the company successfully commenced mining in Golden Pike North ahead of schedule. At Yandal, Thunderbox optimisation continues with commencement of the Wonder underground mine. And at Pogo, Northern Star achieved record mining and mill performance at 1.4Mtpa rate during Q2.

Total capital expenditure was 23% higher on the prior corresponding period at $673 million, with investing cashflows also including $48 million for acquiring the Millrose gold project from Strickland Metals alongside some smaller purchases.

Tonkin notes that ‘This interim result is a glimpse of the cash-generating potential that our business is positioned for on a sustainable basis… the highlight of our strong half was the performance of the Kalgoorlie Production Centre, which contributed more than half of the Group’s EBITDA and record EBITDA margins of 44% as our largest asset - KCGM - began a new era of mining high-grade Golden r5Pike North material.’

Northern Star is well-known as the owner of Western Australia’s largest open-pit gold mine, the Super Pit — one of four assets within its Kalgoorlie Consolidated Gold Mines operations. The business is now seeking approval for an expansion which would extend the Super Pit’s productive life by seven years through to 2034.

For context, in 2023 Northern Star allocated $1.5 billion to more than double processing capacity at its Kalgoorlie operations to roughly 27 million tonnes of ore per year by 2029.

In the midst of this hive of activity, the miner remains firmly within a heated gold miner mergers and acquisition space. In the past few months alone, ASX investors have watched Newmont take over Newcrest to create the largest gold miner in the world, Evolution buy an 80% stake in the Northparkes copper-gold mine, Red 5 plan to acquire Silver Lake Resources, and Perseus Mining pursue Orecorp.

As gold continues to dominate headlines, Northern Star may continue its ascent.
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