Cashed-up Northern Star Resources (ASX:NST) plans to deploy up to $1 billion in growth capital in FY25, plus the $500 million to $530 million KCGM Mill Expansion capex, which is in the second year of its build phase.
In releasing its financial results for the year ending 30 June 2024 today (22 August 2024), Northern Star says its financial position remains strong with net cash of $358 million and liquidity of $2.75 billion.
Moody’s Ratings analyst Mariano Ferreyra anticipates this sizable capital expenditure, including the KCGM Mill expansion, over the next few years will limit Northern Star’s free cash flow.
“However, we expect NST to maintain a strong financial and liquidity profile throughout its current growth phase, operating comfortably within its publicly stated financial policy targets and our rating thresholds,” the analyst adds.
Meanwhile, Northern Star says it’s on track to deliver between 1,650 and 1,800 ounces of gold sold at an all-in sustaining cost (AISC) of $1,850 to $2,100/oz in FY25.
Gold sold will be weighted towards 2H 2024 as a result of increased production from higher grades at KCGM and improved mill availability at Thunderbox and Pogo. For the September quarter, planned major shutdowns will be carried out across all the three production centres.
Commenting on the results, Northern Star Managing Director Stuart Tonkin says FY24 has been a strong year as the company maintained a focus on delivering its organic growth strategy.
“Record cash earnings of $1,805 million enabled the board to declare a final dividend of 25 cents per share, at the midpoint of our policy, for a FY24 total dividend of 40 cents per share,” Tonkin says.
“In line with our proactive approach to capital management to deliver superior shareholder returns, we have also extended the buy-back program for a further 12 months.”
The company’s gold sales and a strong gold price contributed to underlying group earnings before interest, taxes, depreciation and amotization (EBITDA) of $2.192 billion – the highest EBITDA margins since FY22.
“Our group underlying free cash flow for the year was $462 million. Our balance sheet is in very good shape and in a net cash position of $358 million with liquidity of $2,748 million. We remain committed to maintaining a disciplined approach to investing shareholder funds,” he adds.
Ferreyra concedes the results are better than the ratings agency’s expectations.
“The company delivered strong earnings growth on the back of higher-than-anticipated gold prices and increased gold production despite cost inflation pressures,” the Moody’s Ratings analyst says.
“While cost pressures will remain elevated over the next 12 months, NST’s earnings will continue to benefit from expanded production volumes and high gold prices that will remain supported by central bank’s purchases and increased investor appetite.
“We expect NST’s unit costs to improve as its overall annual gold production rises to around 2 million ounces by fiscal 2026.”
Write to Adam Orlando at Mining.com.au
Images: Northern Star
