Northern Star share price falls as half-year earnings decline 12%

The ASX 200 gold miner faced headwinds from industry-wide cost pressures.

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Key points

  • The Northern Star share price is down on Monday
  • The ASX 200 gold miner announced a record interim dividend payment
  • Cost pressures offset higher gold prices resulting in a 12% year on year EBITDA decline

The Northern Star Resources Ltd (ASX: NST) share price is down 1.7% on Monday.

Shares in the S&P/ASX 200 Index (ASX: XJO) gold stock closed on Friday trading for $11.39. Shares are currently swapping hands for $11.20 apiece.

Here's what the miner reported for the six months ending 31 December (1H FY23).

Northern Star share price dips despite record half-year dividend

  • Sold 773,000 ounces of gold at an all in sustaining cost (AISC) of $1,766/oz
  • Revenue of $1.95 billion, up 5% from 1H FY22, spurred by a higher average gold price realised of $2,513 per ounce compared to $2,388 per ounce in 1H FY22
  • Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $633 million were down 12% from the prior corresponding period, with higher costs offsetting higher gold prices
  • Record interim fully franked dividend of 11 cents per share, up 10%

What else happened during the half year?

The Northern Star share price is struggling today amid the higher costs impacting the wider mining sector.

The company said the inflationary pressures that were felt across the mining industry were not "materially experienced" in the first half of the 2022 financial year.

This saw average cash operating costs per ounce increase to $1,475 per ounce in the half year just past, up from $1,256 per ounce in 1H FY22.

However, with higher gold prices and consistent sales, cash earnings increased 3% year on year to $467 million.

During the six-month period, Northern Star completed $127 million of its $300 million on-market share buyback program.

As at 31 December the miner had net cash of $145 million and cash and bullion of $495 million.

What did management say?

Commenting on the results that are moving the Northern Star share price today, managing director Stuart Tonkin said:

The strength and resilience of our world-class gold assets in Western Australia and Alaska were on show in the first half and delivered significant cash earnings despite the industry wide cost pressures…

At the same time we have made further progress with executing our low-risk, profitable growth strategy to become a 2Mozpa gold producer by FY26. Key growth projects Pogo and Thunderbox are delivering significant cost improvements.

A continued focus in the second half on costs across all three operating centres, alongside the expected lift in group production to meet our FY23 guidance, should further build cash to maintain Northern Star's strong financial position. Work is also continuing on finetuning the KCGM mill optimisation project.

Now what?

Looking at what could impact the Northern Star share price in the months ahead, the ASX 200 gold miner retained its full-year guidance.

That includes total gold sales of 1,560 to 1,680 ounces at an AISC of $1,630 to $1,690 per ounce.

The miner said that following the payment of the interim dividend announced today, potential future dividends will be unfranked for at least 18 months. Northern Star cited "tax synergies arising from the merger with Saracen" for the expected pause in franking credits.

Northern Star share price snapshot

Despite today's dip, the Northern Star share price, pictured below, remains up a healthy 15% over the past 12 months.

Motley Fool contributor Bernd Struben 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 Scott Phillips.

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