Northern Star (ASX:NST) share price up after reporting 300% profit surge

Despite a volatile gold price, Northern Star has posted a massive jump in profits.

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The Northern Star Resources Ltd (ASX: NST) share price has opened only slightly higher on Wednesday after the company released its FY21 full-year results.

At the time of writing, shares in the gold miner are up 0.2% to $9.78.

Northern Star share price higher on record financial result

Northern Star delivered a record financial result, following the incorporation of Saracen Mineral Holdings Ltd (ASX: SAR) from 12 February 2021. Key highlights for FY21 include:

  • Revenue up 40% to $2,761 million.
  • Earnings before interest, taxes, depreciation, and amortisation (EBITDA) lifting 216% to $2,268 million.
  • Net profit after tax (NPAT) rallying 300% to $1,032 million.
  • Final dividend of 9.5 cents per share
  • Annualised gold price realised up 3% to A$2,227/oz
  • Annualised all-in sustaining cost (AISC) increased 10% to A$1,483/oz

What happened to Northern Star in FY21?

The Northern Star share price has struggled to perform in FY21, down 22% year-to-date.

Despite the struggling share price, the company has continued to perform well from a financial and operational perspective.

Following the acquisition and incorporation of Saracen, Northern Star became the sole owner of the iconic Super Pit and Mt Charlotte underground mine in Kalgoorlie. It also welcomed two new operations into its portfolio, Thunderbox and Carosue Damn in Western Australia.

Northern Star said that the delivery of synergies from the merger in 2H FY21 resulted in "both savings and improved productivity at numerous levels".

In addition, the company highlighted that FY21 delivered "exceptional exploration results", with Group resources increasing 15% to 56Moz and Group reserves increasing 8% to 21Moz over the 9 month period to 31 March 2021.

"This expanded inventory will underpin the Company's announced strategy to grow production to 2Moz per annum by FY26," the company added.

Northern Star declared a new dividend policy, targeting a total annual dividend payment of 20-30% of cash earnings.

The company will be paying a final fully franked dividend of 9.5 cents per share, bringing its full-year payout to 19 cents per share.

Management commentary

Northern Star managing director Stuart Tonkin commented on the results of the enlarged company, saying:

With the completion of the merger, we have established a simple, effective strategy based on our three production centres in world class locations.

We have a clear five-year pathway to annual production of 2Moz a year with a strong emphasis on ensuring it is profitable growth.

This strategy involves investing capital in those projects which will generate the strongest returns and actively managing our asset portfolio to maximise this outcome.

We have an enviable asset base and world-class inventory with significant scope for further organic growth. And as these result show, we have the balance sheet and cash strength to unlock the full value of these opportunities in a way which will drive strong financial returns.

What's next for Northern Star?

Northern Star forecasts FY22 production of 1.55-1.65Moz at an AISC between A$1,475 to A$1,575.

Its long term goal is to achieve profitable production of 2Moz per annum by FY26.

The Northern Star share price will go ex-dividend on Monday, 6 September, with the 9.5 cents per share dividend paid out on Wednesday, 29 September.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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