The gold price hit a new high in the first half of FY21, boosting the bottom line for ASX gold shares.
This month ASX gold miners have been reporting their results, demonstrating the impact of the record gold price on profits.
Northern Star Resources Ltd (ASX: NST) reported record profits and dividends, as did Evolution Mining Ltd (ASX: EVN). Australia's largest gold miner, Newcrest Mining Ltd (ASX: NCM), doubled its dividend as statutory profit lifted by 134%. St Barbara Ltd (ASX: SBM) reported encouraging results for the half despite operational disappointments in the first quarter.
But the gold price has been on a downward trend recently and fell to an 8-month low of US$1781.20 last week. The rollout of the COVID-19 vaccine has seen a shift away from the safe haven assets. Rising treasury yields mixed with a stronger US dollar have also put downward pressure on the gold price.
The decline in the gold price has been reflected in ASX gold miners' share prices. The Newcrest Mining share price is down 33% from its August high.
The Evolution Mining share price is also down 33%, while the Northern Star Resources share price is down 35%. St Barbara has seen its share price decline nearly 45% over the same period.
So how did these ASX gold miners perform in the first half of FY21?
Newcrest Mining
Newcrest reported a profit of $534 million in 1H FY21, with earnings per share (EPS) rising 121%.
"The strong financial results for the half year show how much the increase in the gold price has translated into improved profitability," said CEO Sandeep Biswas.
The miner produced 1,038,566 ounces of gold during the half, securing a gold price of US$1,826 an ounce. The half's gold price was 26% higher than the prior corresponding period, swelling revenues to $2,172 million. An interim dividend of 15 cents per share was declared, 100% up on the previous year.
The Newcrest board has implemented a new dividend policy going forward. The policy retains the minimum dividend of 15 cents per share per annum but doubles the target free cash flow to be paid in dividends to 30%–60%. This is intended to allow shareholders to benefit from the stronger free cash flows resulting from higher gold prices.
Newcrest investors were certainly benefiting in 1H FY21 thanks to the doubling of dividends. The company's FY21 gold and copper production guidance remained unchanged at the end of the half-year, although Newcrest noted that gold production is expected to be towards the upper end of the range.
Northern Star Resources
Northern Star Resources reported record profits for the first half. Underlying net profit after tax was $194.4 million, up 63% from the prior corresponding period.
Earnings per share increased by 27% to 25 cents a share.
Northern Star executive chair Bill Bearment said the record performance showed the company's growth strategy was proceeding to plan. The greater size of the company meant it was primed for more grown at all levels, which should further increase returns for shareholders.
Earlier this month, Northern Star implemented a merger with Saracen Mineral Holdings Limited (ASX: SAR), which gives a clear pathway to an annual production of 2 million ounces for the combined operations.
Northern Star Resources sold 480,341 ounces of gold in 1H FY21 at an average price of A$2,386 an ounce. The company says it is on track to meet FY21 production guidance of 940,00–1,060,000 ounces. An interim dividend of 9.5 cents a share was declared, up 27% from the prior corresponding period. This was based on a dividend payout policy of 6% of revenue.
The gold miner ended the half-year with cash, bullion, and investments of A$372 million and bank debt of $375 million.
Evolution Mining
Evolution was another gold miner reporting record profits for the half-year, with underlying net profit after tax increasing 57% to $234 million. The gold miner declared a dividend of 7 cents per share based on its target policy of 50% of free cash flow.
"These record financial results continue to demonstrate the quality of Evolution's asset portfolio," said executive chair Jake Klein. "The fully franked dividend is our 16th consecutive dividend and reflects the priority we place on ensuring our shareholders benefit from our high cash generation."
Evolution produced 350,326 ounces of gold during the half-year at an all-in sustaining cost of $1,182 per ounce. EBITDA increased 17% to $514.6 million, up from $441.2 million in 1H FY20.
Importantly, Evolution achieved success in growing mineral resources and ore reserves at key assets, reflecting the sustainability of its strong cash generation. The gold miner's cash position increased to $438.1 million compared to $170.3 million at 31 December 2019. This reduced net bank debt to $86.9 million.
St Barbara
St Barbara reported encouraging results for the first half of FY21. Despite operational disappointments in the first quarter, St Barbara produced 162,660 ounces of gold at an all-in sustaining cost of $1,605 an ounce. The miner has previously provided guidance for full-year production of 370,000 to 410,000 ounces of gold.
Improving contributions from all three of the miner's operations contributed to profits of $37 million for the half year. Earnings per share were 5 cents (down from 6 cents in 1H FY20). St Barbara ended the first half with $119 million cash at the bank and $101 million debt.
Gold miners profit
Gold miner's results were boosted by the last half's high gold prices. This resulted in high revenues and profits, allowing the payment of increased dividends.
The gold price has shifted downward, however, as confidence in the COVID-19 vaccine sees investors move away from safe haven assets.
Gold has traditionally been negatively correlated with share markets, making the commodity a good hedge. But the gold price has also shown steady growth in value over the longer term. That's why some analysts have predicted the current pullback in gold prices could be short-lived, estimating the gold price could reach somewhere between US$2000 and US$3000 an ounce in the next five years.
ASX gold miners will no doubt be hoping these predictions are on the money.
