Northern Star share price drops lower despite record profit and special dividend

The Northern Star Resources Ltd (ASX:NST) share price dropped lower on Wednesday despite announcing a record profit and special dividend…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Northern Star Resources Ltd (ASX: NST) share price was out of form on Wednesday despite announcing a record full year profit.

The gold miner's shares ended the day 3.5% lower at $14.45.

How did Northern Star perform in FY 2020?

For the 12 months ended 30 June 2020, Northern Star delivered a record underlying net profit after tax of $291 million, which was an impressive 69% year on year increase.

Also growing exceptionally strongly was its underlying free cashflow. It lifted 190% or $277.3 million to $423.1 million during the year.

This led to the miner ending the period with $769.5 million in cash, bullion and investments. This is despite the company investing $1.3 billion in acquisition and growth opportunities in FY 2020.

In light of this, the company declared a final fully franked dividend of 9.5 cents per share. This was up 27% on the prior corresponding period and brings its full year dividend to 17 cents per share. The board has also decided to reward shareholders with a special fully franked dividend of 10 cents per share.

What were the drivers of Northern Star's strong result?

Northern Star's strong result was driven by a 7% increase in gold sold to 900,388 ounces and a 25% lift in average gold price per ounce to $2,208. The latter more than offset a 15% lift in its all-in sustaining cost (AISC) to $1,496 an ounce.

The good news is that the spot gold price is currently trading notably higher than FY 2020's average gold price. As a result, management is confident that FY 2021 will be another year of bumper free cashflows. Especially given its production guidance over the 12 months.

It is forecasting production of 760,000 to 840,000 ounces from its Australian operations and 180,000 to 220,000 ounces from its US-based Pogo operation. The means total production in the range of 940,000 to 1,060,000 ounces in FY 2021. This compares to 984,675 ounces in FY 2020.

Northern Star's Executive Chair, Bill Beament, commented: "We are on track to generate further significant increases in cashflow thanks to our substantial leverage to the gold price, our growing production profile and having one of the lowest capital intensity in the industry."

"We also have a pipeline of future growth opportunities in and around our other assets and infrastructure, which will help us drive ongoing increases in cashflow while maintaining our superior financial returns," he added.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A worried man holds his head and look at his computer.
Share Fallers

Why Graincorp, Light & Wonder, Orica, and Wildcat shares are falling today

These shares are having a tough time on Thursday. But why?

Read more »

A man with his back to the camera holds his hands to his head as he looks to a jagged red line trending sharply downward representing the ASX tech share sell-off today
Share Fallers

Why Insignia, Light & Wonder, Mineral Resources, and Nuix shares are sinking today

These shares are having a difficult time on hump day. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Endeavour, Global Data Centre, OFX, and Paladin Energy shares are dropping today

Why are these shares under pressure today? Let's find out.

Read more »

A man sits wide-eyed at a desk with a laptop open and holds one hand to his forehead with an extremely worried look on his face as he reads news of the Bitcoin price falling today on his mobile phone
Share Fallers

ASX 200 uranium stock alert: Paladin Energy shares just crashed 29%!

Paladin Energy shares are under intense selling pressure on Tuesday.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Champion Iron, Endeavour, Infomedia, and Resolute Mining shares are sinking today

These shares are starting the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Arcadium Lithium, Block, Jumbo, and Mineral Resources shares

These shares are ending the week in the red. Why are investors selling them?

Read more »

A woman with short brown hair and wearing a yellow top looks at the camera with a puzzled and shocked look on her face as the Westpac share price goes down for no reason today
Share Fallers

Why Clearview, NAB, Resolute Mining, and Westpac shares are dropping today

These shares are under pressure today. But why?

Read more »

A man looking at his laptop and thinking.
Bank Shares

Why is the Bendigo Bank share price tanking today?

There are a few things that could be driving this bank lower today.

Read more »