Why the Northern Star (ASX:NST) share price is charging higher

The Northern Star Resources Ltd (ASX:NST) share price is charging higher on Thursday following the release of its second quarter update…

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The Northern Star Resources Ltd (ASX: NST) share price is charging higher today following the release of its quarterly update.

At the time of writing the Northern Star share price is up 2.5% to $13.75.

How is Northern Star performing?

Northern Star had a strong three months in what could be its last full quarter as a standalone company ahead of its proposed merger with Saracen Mineral Holdings Limited (ASX: SAR).

According to the release, the company reported an 11% increase in gold sold to 252,899 ounces during the second quarter. This was at the high end of its guidance range of 226,000 ounces to 254,000 ounces.

Underpinning this was its strong operational performance. Its Australian operations (including its 50% KCGM) sold 198,701 ounces at an all-in sustaining cost (AISC) of A$1,526 per ounce (US$1,115 per ounce). Whereas its Pogo operations sold 54,198 ounces at an AISC of US$1,365 per ounce.

This brought its first half gold sold to a total of 480,431 ounces, which is comfortably in line with its FY 2021 guidance of 940,000 ounces to 1.06 million ounces.

What about costs?

Northern Star’s all-in costs were A$1,825 per ounce (US$1,333 per ounce) including the A$63 million (which equates to approximately A$250 per ounce of gold sold) invested in growth capital and exploration during the period.

This expenditure saw the amount of material moved at KCGM increase by 22% from the previous quarter and included significant progress on Pogo’s mill expansion to 1.3 million tonnes per annum, including the Jameson cell installation which helped increase gold recoveries to 91%.

Despite these investments, Northern Star’s free underlying cashflow still totalled A$93 million and its unaudited net profit after tax came in at A$100 million for the period.

Management commentary

Northern Star’s Executive Chair, Bill Beament, commented: “It was a very robust performance with strong production and margins generating significant cashflow and enabling us to invest in further growth while strengthening our balance sheet in the process.”

“Our Australian operations, including KCGM, performed very well. The results at the Yandal Operations were again exceptional and further progress was made in our push to increase production and lower costs at our Kalgoorlie Operations.”

Mr Beament also spoke about its merger with Saracen.

He said: “I am very confident that the combined group is on track to meet the production and financial targets we have outlined. The potential productivity gains and growth opportunities are immense and are particularly valuable to investors given the lack of growth in so much of the global gold industry.”

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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