Northern Star hit hard by falling production and rising costs – ShareCafe

Shares of gold mining company Northern Star fell more than 5% yesterday as the company missed production forecasts and warned investors of rising production costs.

The miner missed analysts’ expectations for gold production from its flagship Kalgoorlie SuperPit, while its Pogo mine in Alaska suffered a weak quarter and higher costs.

The shares fell 5.4% at one point and ended the day down more than 3% at $9.66.

For the three months to March, Northern Star reported total gold sales of 380,075 ounces. Sales were down 3% from the December quarter, but were up sharply from 368,273 ounces sold in the March 2021 quarter.

Revenue in the quarter jumped more than 20% from a year earlier, a figure local investors surpassed in their initial analysis on Wednesday as they worried about rising costs.

The company’s all-in sustaining cost (AISC) of A$1,656 an ounce in the three months to March was up just 3% from A$1,598 in the same quarter of 2021.

Production for the quarter included 212,820 ounces of gold sold from the SuperPit at Kalgoorlie. That was down from 234,419 ounces sold a year earlier.

The company sold 109,766 ounces of gold sold at Yandal in Washington, up from 91,116 ounces a year earlier and 57,489 ounces of gold sold at Pogo, up sharply from 40,008 ounces in the quarter from March 2021.

While that means its Australian operations, which account for 85% of total production, are on track to meet fiscal 2022 production and cost guidance, that won’t be the case for its Pogo operation. It should be below its production and cost forecasts.

In light of this, management has maintained its June 30, 2022 group production guidance at 1.55 million to 1.65 million ounces, but raised its AISC guidance to A$1,600 to A$1,640. per ounce. The latter is up from its previous forecast of A$1,475 to A$1,575 an ounce.

Nevertheless, thanks to an average realized price of A$2,468 per ounce, Northern Star reported sales of A$937 million for the quarter.

This was broadly in line with what was recorded in the December quarter, but up sharply (A$165 million or 21%) from the A$772 million reported for the March quarter a year ago.

Northern Star CEO Stuart Tonkin acknowledged the company had a difficult quarter saying in the ASX statement that “During the quarter Kalgoorlie was impacted by unplanned outage events in the plant while Yandal performed as expected. As announced, a higher mining inventory in Pogo produces a better machining result, but we still have some work to do to exploit the potential of Pogo.

“Across the group and in a challenging operating environment, we continue to safely advance the foundations of our five-year plan for profitable growth. A year later, we have significantly increased material movement volumes at KCGM, working through the OBH reduction, nearing completion of the Thunderbox plant expansion, and successfully commissioning the expanded Pogo plant,” he said in yesterday’s statement.