Northern Star share price backtracks despite revenue lifting 35% to $3.7b

We dig in to see how Northern Star performed in FY2022.

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Key points

  • Northern Star shares shed 1.45% to $7.47 following the company's FY2022 results
  • Northern Star achieved a strong financial performance despite external challenges
  • The board declared a final dividend of 11.5 cents per share

The Northern Star Resources Ltd (ASX: NST) share price is heading south on Monday.

This comes after the company released its FY2022 full-year results.

At market open, the gold miner's shares dumped nearly 3%, but have since recovered some of those losses. However, the downturn is in line with a broader slump across the ASX today.

Currently, Northern Star shares are down 1.45% to $7.47.

Northern Star share price retraces despite 'strong performance'

What happened in FY2022?

For the 12 months ended 30 June, Northern Star achieved gold production of 1,561koz at an all-in sustaining cost (AISC) of $1,633/oz.

Despite a challenging environment, this was in line with its guidance of 1,550koz to 1,650koz at an AISC of $1,600/oz to 1,640/oz.

The performance of the Western Australian production centres of Kalgoorlie and Yandal delivered FY2022 production and cost guidance. Production performance at the Pogo Operation substantially improved, with a milestone run rate of 250koz per annum achieved in the second half.

As a result of the strong production and gold price realised, the company generated record underlying EBITDA of $1.5 billion. This was underpinned by a 29% increase in gold sold and a 7% increase in the average realised gold price.

Similarly, operating cash flow was up 49% from the prior year to a record $1.6 billion. This compared to $1.1 billion in FY2021.

At 30 June, cash and bullion totalled $628 million. The company had drawn corporate bank debt totalling $100 million and has no scheduled repayments in the next 12 months.

The board declared a fully-franked final dividend of 11.5 cents per share, corresponding to 23% of cash earnings. This brings the full-year dividend to 21.5 cents per share, representing a 13% improvement over the prior comparable year.

In addition, Northern Star elected to return funds to shareholders via an on-market share buyback of up to $300 million.

What did management say?

Commenting on the results, Northern Star managing director Stuart Tonkin said:

These results, which include for the first time Saracen and 100% of the Super Pit, clearly demonstrate Northern Star's cash earnings potential. Our strong performance in FY22 generated $1 billion in cash earnings, which underscores the sustainability of the cash flow from our high-quality assets located in tier-1 jurisdictions.

The fully franked final dividend of 11.5cps, within our dividend policy target and payable next month, will mean we have returned $1 billion cash to shareholders since FY12.

The announcement today of the first buy-back in Northern Star's history presents compelling value and confirms the Board's confidence in our strong balance sheet and cash generation outlook and aligns with our fiscal discipline and returns focus.

What's the outlook?

Looking ahead, Northern Star provided the following guidance for FY2023:

  • Gold sales between 1,560 and 1,680 ounces, weighted towards the second half due to the scheduled ramp-up of the Thunderbox mill expansion and Pogo stoping schedule
  • AISC in the range of $1,630 to $1,690 per ounce (based on assumed average exchange rate of AUD: USD 0.70)
  • Growth capital expenditure similar to FY2022 levels with $650 million forecasted (including $13 million corporate investment)
  • Exploration expenditure of $125 million

Tonkin touched on Northern Star's outlook:

We have made a solid start to FY23 and continue to progress the KCGM cutback with our new cost-efficient mining equipment. The SKO processing plant is now on care and maintenance, at Thunderbox we commence commissioning the expanded mill in Q1, while at Pogo we have removed surplus equipment, reflecting increased development rates across the fleet.

The Northern Star share price is 20% in 2022 after recording heavy falls from April onwards.

Motley Fool contributor Aaron Teboneras has positions in Northern Star Resources 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 Scott Phillips.

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