Pogo mine in Alaska disappoints with lower production volume and substantially higher costs
Australian operations tracking to plan to meet FY22 production and cost guidance
Group FY22 production guidance is unchanged at 1.55 -1.65 million oz
Group FY22 cost guidance is now A$1600 – A$1640/oz, up from A$1475 – A$1575/oz.
Cash and bullion on hand A$533 million, net cash of A$433 million at 31 March 2022
Comprehensive exploration and Resource & Reserve update to be released in the June quarter
Target of 2 million oz of production by 2026 remains.
Northern Star Resources Limited (‘Northern Star‘ or the ‘Group’) owns and operates three world class gold production centres, two of which are located in Western Australia and a third site in Alaska. Northern Star merged with Saracen Mineral Holdings in February 2021, to form the world’s sixth-largest gold miner, adding $6.7 billion value to the newly merged entity. The merger delivered sole ownership of the iconic Super Pit, located just outside of Kalgoorlie, to Northern Star.
March 2022 Quarterly Report
Northern Star reported gold sold of 380,075 oz at an All-in Sustaining Cost (AISC) of A$1656/oz for the March quarter. The production volume is 11,915oz lower and the AISC is A$25/oz higher than the December quarter, when 392,665 oz of gold was sold at an All-In Sustaining Cost of A$1631/oz.
The slightly disappointing numbers at the Group level can be attributed to higher production costs and now lower production forecasts coming out the Pogo mine in Alaska, Canada. Pogo was acquired in 2018 and since that date Northern has spent US$55 million on expanding resources and reserves and upgrades that include upgrading the mill throughput capacity to 1.3 million metric tons per year.
Pogo gold production for FY22 has been revised down to the range of 205,000 to 220,000 oz from 220,000 to 250,000 oz. Pogo produced 209,647 oz of gold during FY21. Costs of production have also been revised substantially higher. Estimated AISC has been revised from A$1700 – A$1800/oz to A$$2150 – A$2230/oz. The Pogo mine accounts for about 15 percent of Group operations.
The Australian operations are tracking to meet FY22 production and cost guidance. Taking into account the sub-optimal operating performance of the Pogo mine, Group FY22 production guidance remains unchanged at 1.55 -1.65 million oz. However, Group FY22 AISC guidance is now higher and is forecasted to rise to A$1600 – A$1640/oz, up from A$1475 – A$1575/oz.
The March quarter average realised gold price was A$2,468/oz, delivering sales revenue of A$937 million. Cash and bullion on hand at 31 March 2022 was A$533 million. Corporate bank debt stood at $100 million, leaving net cash of A$433 million at the end of the March quarter.
Outlook
A$26 million was invested in exploration bringing the total year-to-date expenditure to A$85 million, compared to FY22 exploration expenditure guidance of A$140 million. The exploration focus currently is on extending the mine life at the Group’s three production centres – Kalgoorlie, Yandal and Pogo.
The Kalgoorlie Super Pit and Yandal site look set to continue to perform in line with expectations, however the Pogo site performed below expectations with lower production volume at a higher cost. Northern Star must improve mine productivity at Pogo to optimise future cost performance and management have indicated that the current elevated cost structure is temporary.
The Group commenced a five-year profitable growth program one year ago. Progress with this initiative and the comprehensive exploration and Resource & Reserve update scheduled for release in the June quarter, will be closely watched by the market. The Group continues to giveevery indication that it is tracking to 2 million oz of production by 2026.
This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.
"Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world."
In Short:
– U.S. stocks rose to record highs on Friday due to lower inflation and strong corporate earnings.
– Key earnings reports from major companies are expected next week, influencing market trends.
U.S. stocks rose to record highs on Friday due to lower-than-expected inflation data and positive corporate earnings.The S&P 500 and Nasdaq achieved their largest weekly gains since August. The Dow saw its biggest jump from Friday to Friday since June.
The Labor Department reported that the Consumer Price Index was slightly cooler than analysts’ predictions, easing concerns about inflation impacts from tariffs. This development suggests a likely interest rate cut by the Federal Reserve at its upcoming meeting.
Ryan Detrick from Carson Group noted the positive inflation news may facilitate forthcoming Fed rate cuts. Despite the ongoing government shutdown affecting data releases, this CPI report provided much-needed clarity.
Earnings reports are continuing, with 143 S&P 500 companies having reported results. Growth expectations for third-quarter earnings have risen to 10.4%. Detrick indicated a strong opening to the earnings season with a significant percentage of companies exceeding expectations.
This coming week, key earnings will be reported from Meta Platforms, Microsoft, Alphabet, Amazon, and Apple, alongside industrial companies like Caterpillar and Boeing.
The Dow rose 472.51 points to 47,207.12. The S&P 500 increased by 53.25 points to 6,791.69, while the Nasdaq gained 263.07 points, reaching 23,204.87.
Alphabet gained 2.7% following a deal expansion with Anthropic. Coinbase saw a 9.8% increase from a JPMorgan upgrade. In contrast, Deckers Outdoor’s shares fell 15.2% after lowering sales forecasts.
Market Trends
Advancing stocks on the NYSE outnumbered decliners by 2.18 to 1. The S&P 500 had 34 new highs, with the Nasdaq recording 124.
Trading volume was 19.04 billion shares, lower than the average of the past 20 days.
In Short:
– Earnings reports from Tesla and Netflix might affect U.S. stock performance next week amid high inflation concerns.
– Increased market volatility arises from U.S.-China trade tensions and fewer S&P 500 stocks in an uptrend.
This coming week, earnings reports from companies including Tesla and Netflix are anticipated to impact U.S. stock performance.
Investors are also awaiting delayed U.S. inflation data, which could test market stability as it remains near record highs.Recent trading activity has shown increased volatility, influenced by ongoing U.S.-China trade tensions and concerns regarding regional bank credit risks. The CBOE volatility index has seen a rise, indicating increased market uncertainty.
The S&P 500 entered its fourth year of growth amidst these fluctuations, having previously experienced a period of calm. Experts suggest market risks are intensifying as valuations reach peak levels.
Market Volatility
Concerns regarding U.S.-China trade relations escalated last week when the U.S. threatened to raise tariffs by November 1 over China’s rare-earth export policies. President Donald Trump is scheduled to meet with President Xi Jinping in two weeks to discuss these issues.
Despite these challenges, major stock indexes gained ground over the week, with the S&P 500 up 13.3% year-to-date. However, a noticeable decline in the number of S&P 500 stocks in an uptrend raises caution among investors about underlying market weaknesses.
The upcoming third-quarter earnings will be closely monitored, especially as the government shutdown halts economic data releases. Companies like Procter & Gamble, Coca-Cola, RTX, and IBM are due to report. The delayed U.S. consumer price index is also expected to provide crucial insights ahead of the Federal Reserve’s monetary policy meeting on October 28-29.
In Short:
– Australia’s unemployment rate rose to 4.5% in September, the highest since November 2021.
– Economists note a cooling labour market, with fewer job ads and increased participation rate amid rising living costs.
Australia’s unemployment rate increased to 4.5 per cent in September, up from 4.3 per cent in August.It marks the highest seasonally adjusted unemployment rate since November 2021.
Economists suggest that the Reserve Bank should consider another interest rate cut next month. BetaShares chief economist David Bassanese noted a slowdown in employment demand as the labour market struggles to accommodate job seekers.
The number of officially unemployed rose by 33,900 in September, while the employment count increased by 14,900. The labour force expanded by 48,800 people, resulting in a participation rate rise of 0.1 percentage points to 67 per cent, returning to July levels.
In trend terms, the unemployment rate remained steady at 4.3 per cent.
Labour Market
BDO chief economist Anders Magnusson stated that while the unemployment rate has increased, the labour market is cooling, not collapsing.
He pointed out that the 14,900 jobs added in September were slightly below the average for the past year.
A growing participation rate indicates that rising living costs are prompting more individuals to seek employment. Magnusson said the release confirms a gradual cooling of the labour market that keeps the Reserve Bank on track without necessitating immediate action.
He added that hiring activity is slowing, signalled by a 3.3 per cent drop in job advertisements in September, the largest monthly decrease since February 2024.
Despite this, he does not foresee a rate cut in November.