Northern Star Resources Ltd (ASX: NST) released strong first-quarter results for the 2016 financial year that appear to have met the market's expectations with shares trading around yesterday's closing price of $3.13.
Australia's second-largest gold miner reported September quarterly sales of 141,500 ounces (oz) which puts it on track to achieve the upper end of FY16 guidance of 535,000oz to 570,000oz.
All-in sustaining costs (AISC) came in at A$1,083/oz for the quarter, a 10% increase compared to the prior corresponding quarter but in line with FY16 guidance.
Northern Star reported A$46 million of normalised free cash flow for the quarter that saw its cash, bullion and investments on hand swell to A$196 million despite spending A$11 million on the Central Tanami Project acquisition.
Australian gold miners including Northern Star and Evolution FPO (ASX: EVN) are minting cash at current gold prices and they have cheaply acquired additional assets at a time when most resources companies are selling non-core assets or reducing spending to strengthen their balance sheets.
The one blemish on Northern Star's history of successful acquisitions is the Plutonic gold mine where AISC's hit an alarming A$1,832/oz for the September quarter despite the 18% reduction in underground mine development metres.
Considering several key management staff have prior operational experience at this mine it will be the focus for future improvement. The high AISC of the Plutonic mine is affecting group profitability and investors should monitor it carefully in the future.
Northern Star has budgeted A$74 million this year on targeted exploration and expansionary capital that underpins their strategy to grow production to 700,000oz per annum in FY18. Northern Star's exploration activities have been very successful and Managing Director Bill Beament noted that "we recently added 2.7 million ounces to our Resource base at a cost of just A$19/oz."
Following a string of acquisitions, Northern Star is concentrating on organic growth at its existing mines that should see its AISC's fall, while free cash flow and dividends will grow.
Carrying no debt, a hoard of cash and a favourable growth pipeline, Northern Star is still one of the best resources companies available on the ASX.
