Gold miner Northern Star Resources Ltd (ASX: NST) was the best performer in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), rising 36%.
Following behind Northern Star were; Veda Group Ltd (ASX: VED) with a 30% gain, TPG Telecom Ltd (ASX: TPM) up 22% and Pet products retailer Greencross Limited (ASX: GXL) which saw its share price rise 21%.
Compare that to the index, which fell 4.3% over the month.
Northern Star rose thanks to gains in the gold price and has more than doubled its share price in the past 12 months. A spate of cheap acquisitions near the bottom of the gold price last year saw Northern Star grow into Australia’s second-largest listed gold miner.
Once the company had just one mine – which was expected to have a very short mine life – now Northern Star boasts 5 projects and is on track to produce between 535,000 and 570,000 ounces of gold at an all-in sustaining cost of between $1,050 to $1,100 an ounce in the 2016 financial year.
Given the current US dollar gold price of around US$1,114 an ounce and the lower Australian dollar exchange rate of around US70 cents (equating to A$1,591 an ounce), Northern Star should generate some handsome profits at least in the year ahead of nearly $500 per ounce.
That suggests revenues of $850 million and a cash profit of around $267 million. Last financial year, Northern Star saw sales of $845 million and a net profit of $108.8 million, along with underlying free cashflow of $186 million.
In the 2015 financial year, Northern Star even managed to pay a dividend of 5 cents per share. That’s fairly small – giving the company a yield of just 1.9%. What’s even better, is that Northern Star had zero debt and $178 million cash in the bank at the end of June 2015.
But investors should be aware that the gold miner plans to spend $74 million to expand its resources and reserves of gold this year. On the positive side, that could lead to the company producing 700,000 ounces of gold a year from the 2018 financial year if successful. If not, then Northern Star just spent $74 million for no return.
Northern Star is a shining (excuse the pun) example of how a gold miner should operate. Picking up cheap assets when prices are low, and making a return of at least something in the form of dividends to shareholders. Very few have managed to do that.