Northern Star (ASX:NST) share price wanes as quarterly production falls

The Northern Star Resources Ltd (ASX: NST) share price is falling after its quarterly gold production declined and costs increased.…

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The Northern Star Resources Ltd (ASX: NST) share price is falling after its quarterly gold production declined and costs increased.

The Norther Star share price dipped 0.5% to $9.36 in early trade when the S&P/ASX 200 Index (Index:^AXJO) is hovering just under breakeven.

But Northern Star’s underperformance may have more to do with the weakening gold price than its quarterly. Other ASX gold mining shares are also under pressure.

Northern Star share price weathering weaker production

The gold miner reported a drop in gold production to 386,000 ounces for the three months to end September. This compares to 444,000 ounces it produced in the previous quarter.

A drop in output at all three of its mines (Yandal, Kalgoolie and Pogo) contributed to the weaker results.

Further, Northern Star is battling rising costs. All-in-sustaining cost (AISC) increased by 9.3% quarter-on-quarter to $1,594 an ounce. Group all in cost came in at $1,933 an ounce.

Silver lining for the ASX gold miner

But it isn’t all bad news for the Northern Star share price. Thanks to the still lofty gold price and the weak Australian dollar, Norther Star is still making a profit. The average price it received for its gold in the September quarter was $2,345 an ounce.

However, shareholders shouldn’t be surprised as falling gold production had previously been flagged.

Management also reassured investors that second half FY22 production will be stronger. This is due to higher expected grades at Yandal and increased mining rates at Pogo.

Unfazed by production disruptions

Pogo’s weaker performance in the latest quarter was due to construction disruptions that were necessary to increase mining rates.

“We seized the chance to complete other major works, including replacing the primary conveyor belt that transports ore from underground to the processing plant,” said Northern Star’s Managing Director Stuart Tonkin.

“This resulted in 24 days total downtime, which reduced throughput and gold production, in turn increasing costs per ounce.

“This work is now finished and we expect to see a significant benefit for both production and costs from the December quarter onwards. The mill bottlenecks have been removed and throughput is increasing in line with expectations for FY22 guidance.”

Reassuring guidance

The fact that Northern Star is sticking to its full year guidance should also reassure shareholders. The miner is expecting to products between 1.55 million and 1.65 million ounces of gold.

Another piece of good news is that costs are expected to decline. Management stuck to its previous ASIC forecast of $1,475 to $1,575 an ounce.

Other details in Northern Star’s quarterly update

Northern Star reported a cash earnings of $165 million to $175 million and had cash and bullion holdings of $756 million at the end of September.

This is after it paid $110 million in dividends and invested $123 million in net growth capital and exploration.

Norther Star share price lagging behind

The Northern Star share price crashed over 40% in the past year and is the worst performer among the major gold producers.

The Newcrest Mining Ltd (ASX: NCM) share price lost around 20% and the Evolution Mining Ltd (ASX: EVN) share price declined around 37%.

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Motley Fool contributor Brendon Lau owns shares of Newcrest Mining Limited. 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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