Pogo Bounce Helps Northern Star Revive Dividend

By Glenn Dyer | More Articles by Glenn Dyer

Shares in Northern Star Resources jumped 6.4% yesterday off the back of the overnight surge in gold prices to around $US1,808 an ounce, a near eight-year high, and an encouraging update for the 2020 financial year, including good news for shareholders on the delayed interim dividend.

The shares closed at $14.84.

The company told the ASX its financial position had strengthened considerably and it had cash, bullion, and investments of $769.5 million at June 30, up from $551.4 million at March 31 and in excess of its June 30 $700 million debt.

As part of its COVID-19 measures, Northern Star also drew down an additional $200 million in debt in the March quarter.

The Company said yesterday it had repaid that $200 million on July 6, reducing its corporate bank debt to $500 million.

The gold miner said that as a result, it will now pay its interim dividend of 7.5 cents a share next week – on July 16 – which was postponed earlier this year as the COVID-19 pandemic loomed.

The dividend will cost $55 million and Northern Star said it now expects to resume normal dividends. It did not make any comment on whether a final dividend would be declared for the June 30 financial year.

Northern Star said it generated underlying free cash flow of $217.9 million in the June quarter from the sale of 262,717 ozs of gold.

This took total sales for the 2020 financial year to 900,388oz while gold produced totaled 905,177oz. This was around 1.6% below the lower end of the FY20 guidance, which was withdrawn on March 26 due to uncertainties stemming from COVID-19

Northern Star indicated it wants more exposure to the spot gold price by reducing its hedge book to 536,426oz at $2,085/oz (170,080oz, or 34% of ounces sold, in the June half, came from hedged positions).

“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 in yesterday’s statement.

He also 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 productivity, and restricted production.

“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 cash flow 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,” he said.

The company will release its full-year, results on August 31.

Glenn Dyer

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.

View more articles by Glenn Dyer →