Gold Shorts: Pogo Deal Lifts Northern Star, Evolution Loses Shine

Two contrasting results from two of the country’s major medium level gold miners – Northern Star Resources and Evolution Mining.

The latter saw a sharp fall in profit in the six months to December because of a series of one-off items but is looking for a second-half upturn.

Northern Star meanwhile revealed a big rise in revenue and profits due to the purchase of the Pogo gold miner in Alaska, which promises more later this year with what is shaping up to be a major upgrade in gold reserves following more drilling over the break.

The Pogo mine only made one quarter’s impact on Northern Star’s accounts, but it was substantial.

Pogo was included in Northern Star’s accounts from September 28, 2018, helped produce the 43% increase in revenue from the previous corresponding period to $A633.5 million.

Underlying net profit was up 11% at A$89.1 million and statutory net profit was 4% higher at A$82.1 million.

This saw interim dividend lifted 33% to 6 cents a share fully franked (which is in keeping with the Company’s policy of paying dividends equal to 6% of revenue).

Northern Star Executive Chairman Bill Beament said it was a solid result which was driven by the strong performance of the Australian operations and the upfront investment made in Pogo where the company this week unveiled a series of major new gold intersections at the mine which should boost reserves.

“We generated an industry-leading return on equity of 20 percent excluding the Pogo acquisition, which is particularly exceptional when compared with the Van Eck GDX index 5-year average of negative 2.9 percent,” Mr. Beament said in a statement with the interim results.

“At the same time, we invested a record A$83 million in exploration and expansionary capital, A$10 million of which was at Pogo,” he said.

As announced in January Northern Star sold 423,243oz gold in the six months at an average price of $A1,700/oz and says it is on track to meet FY2019 guidance of 850,000-900,000oz at an all in cost of $A1,125-$A1,225/oz.

The company says it had $A292 million in cash, bullion, and investments on hand at December 31 despite outlaying $A196 million on acquisitions during the half. The company says it has no debt.

Northern Star shares were up 7.5% at $9.64.

Evolution Mining has reported a 25.6% fall in interim statutory profit after tax to $91.1 million, thanks mainly to the impact of non-cash related items.

Investors weren’t too fussed with the result – the shares eased around 1% to $3.80.

Evolution said non-cash related items reduced it’s before income tax profit by $35.3 million, while cash related items lowered its profit by $11.3 million.

Evolution’s statutory profit before tax was down $43 million compared to the prior corresponding period.

The miner left its full-year production and cost guidance unchanged, saying it is expecting an “improved operational performance” for the second half of 2018-19.

Revenue for the half fell 3% to $756.2 million.

Evolution said current gold prices would give it a lift in the second half.

“In addition, the gold price is currently $A155 per ounce higher than the achieved price for the half-year to December 2018 of $A1,695 per ounce,” it said.

“Evolution continued investing for extensions of mine life and production growth, including the approval of major development projects and exploration drilling at Cowal, and an underground mine development and plant upgrade at Mt Carlton,” directors said yesterday.

The interim dividend was unchanged at 3.5 cents a share, fully franked. The dividend payout is based on the Company’s policy of, whenever possible, paying a half-yearly dividend equivalent to 50% of the Group’s after-tax earnings.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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