The Northern Star Resources Ltd (ASX: NST) share price opened flat this morning as the company announced a record profit result for the full year 2017.
Net profit after tax rocketed 42% to $215 million helped by an 8% increase in revenue. Here are some of the other key points:
- Production was down 8% to 514,700 oz
- All-In Sustaining Costs per ounce down 3%
- Cash and equivalents jumped 27%
- Fully Franked dividend up 50%
So what?
Northern Star's improvement was largely thanks to sound cost control and an improving average gold price which has been a consistent theme for gold miners this reporting season.
Behind Newcrest Mining Limited (ASX: NCM) and Evolution Mining Ltd (ASX: EVN), Northern Star is one of the country's largest gold producers. This scale helped it to lower All-In Sustaining Costs (ASIC) per ounce and massively improve operating margins over the prior year.
The positive news for many investors will be the 50% lift in dividend which is a reflection of Northern Star's strong balance sheet and lack of debt.
Outlook
Pleasingly, Northern Star has reaffirmed previous guidance for a growing production profile over the next two years. Full year 2018 gold production is expected to be between 525,000 – 575,000 ounces, rising to up to 600,000 ounces in 2019.
All-In Sustaining Costs are also expected to maintain a similar range in FY18 which suggests the company could be in for a big year if the price of gold rises further.
Should you buy?
I thought it was a solid result from the company which had set the bar high and I like the strong outlook going forward.
Northern Star would be one of my top picks as a quality gold producer ticking key boxes for having a strong balance sheet, low cost operations, and a growing reserve life.
However even with the outlook for growing production I don't see the share price as a bargain at today's price. Given the commodity risk around gold I would prefer to watch for a lower price.
