It's not profit or revenue growth you should be watching for when it comes to Independence Group NL (ASX: IGO).
The nickel and copper miner didn't have any to tout in its half year profit results today but that hasn't stopped the IGO share price from jumping 2.5% to $4.86 in morning trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is 0.8% in the green.
The thing that got investors excited is cash and Independence Group is producing more of it even though its interim revenue and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was largely flat at $356 million and $131 million, respectively.
In contrast, the miner posted sales of $355 million and EBITDA of $133 million in the previous corresponding period.
It's not profit growth, stoopid
However, operating cash flows surged 46% to $163 million as its cash balance swelled by $69 million to $208 million in 1HFY19.
Higher sales and production from its Nova and Tropicana mines offset the loss of income from its divested assets (Jaguar and Long).
Independence Group also reiterated its production guidance for Nova and Tropicana.
What's more, nickel production from Nova hit a record while gold production at Tropicana also improved. Cash costs from both mines were lower.
Management declared an interim dividend of 2 cents a share, or twice what it paid at the same time last year, and shareholders are likely to see the miner return more cash to them this year as it has formalised a policy to return 15% to 25% of its free cash flow to shareholders through franked or unfranked dividends, special dividends and share buybacks.
More happy capital returns
Just to give you a sense of what the miner could potentially return, its cash and franking balance at the end of the 2018 calendar year would allow the miner to pay around 10 cents of fully frankable dividends.
The result will help cement the mining sector as the leaders for capital returns in 2019. There are other miners with balance sheets that are also flushed with cash.
This includes BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and South32 Ltd (ASX: S32).
I remain overweight on the sector and I think it's too early to be taking profit. This could change in a few months though but that's a debate for another time.
