Northern Star share price lower despite bumper half year profit result

The Northern Star Resources Ltd (ASX:NST) share price is trading lower on Tuesday despite delivering a very strong profit result in the first half…

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The Northern Star Resources Ltd (ASX: NST) share price is edging lower on Tuesday morning.

At the time of writing the gold producer's shares are down 0.5% to $13.55 following the release of its half year results.

How did Northern Star perform in the first half?

Northern Star took full advantage of the sky-high gold price and delivered a bumper profit result in the first half of FY 2020.

According to the release, the company sold 398,640 ounces of gold during the half for an average of A$2,046 an ounce. This led to total sales of A$827 million during the period, up 31% from the same time last year.

And despite a 12% rise in its all-in sustaining costs (AISC) to A$1,454 an ounce, the company's profits grew at an even quicker rate.

Northern Star's EBITDA grew 45% to A$322.3 million and its underlying net profit after tax jumped 53% to A$139.4 million. Underlying earnings per share grew 49% to 21.5 cents.

Mine operating cashflow was solid at A$344.5 million, leaving Northern Star with A$274 million in cash, bullion and investments at the end of December. This is after removing the purchase consideration on hand for the acquisition of the KCGM Super Pit in Kalgoorlie.

This allowed the Northern Star board to declare a fully franked interim dividend of 7.5 cents per share, up 25% on last year.

Outlook.

Management appears confident that its strong form can continue in the second half.

It revealed that it is on track to meet its FY 2020 guidance of 920,000 to 1,040,000 ounces at an AISC of A$1,240 an ounce to A$1,340 an ounce.

Executive Chairman Bill Beament spoke positively about the future and particularly the KCGM operation it now co-owns with  Saracen Mineral Holdings Limited (ASX: SAR).

He said: "We are looking forward to reaping the benefits of the KCGM acquisition, which we believe will drive more substantial growth in our net cashflow while maintaining strong overall financial returns."

"We are delighted with the outlook for KCGM and we are making rapid progress on the review in partnership with Saracen. This is one of the best gold systems in the world and between us, we have some of the best open pit and underground mining specialists in the world assessing the operation and its potential."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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