Northern Star Resources Limited announced that its highly successful organic growth strategy is about to culminate in a surge in free cashflow as the Company hits its 600,000ozpa production target.
The Company expects to produce more than 150,000 ounces in the June quarter as the benefits of its investment in exploration and development flow though to its production and financial results.
In light of this strong forecast, Northern Star has narrowed its FY2018 guidance to 540,000oz – 560,000oz, which is well within its previous range of 525,000oz – 575,000oz. The forecast for all-in sustaining costs is unchanged at A$1,000 – A$1,050/oz.
With Northern Star now having completed the capital investments associated with the 600,000ozpa growth strategy, this production increase is expected to result in a significant surge in free cashflow from the June quarter onwards.
Gold sold in the March quarter totalled 119,976oz at an AISC of A$1,075/oz, taking the total for the nine months to 31 March to 387,254oz at an AISC of A$1,053/oz.
During the quarter, Northern Star continued to accelerate the implementation of its organic growth strategy, investing ~A$33 million in expansionary capital, including exploration, to grow the group’s production and mineral inventory.
After allowing for this expansionary capital, Northern Star generated underlying free cash flow of A$32 million in the March quarter, leaving it with cash and equivalents of A$439.1 million and no debt at 31 March 2018.
Northern Star Executive Chairman Bill Beament said Shareholders were about to reap the rewards of the organic growth strategy initiated by the Company over two years ago.
“This strategy began with the acquisition of Tier-1 assets at an opportune time in the cycle,” Mr Beament said.
“We then invested prudently in exploration at and around these centres. This resulted in the Company establishing mine life visibility of ten-plus years.
“In the latest quarter, we completed the expansionary capital expenditure program stemming from this exploration success, paving the way for us to hit the 600,000ozpa production target in the current quarter.
“The combination of this increased production, low operating costs and completion of the capital investment program will drive free cashflow significantly higher.
“This means our organic growth strategy will have met the ultimate objective of everything we do – maximising financial returns. In the process, it will help ensure we maintain the highest rate of return on equity in our industry and one of, if not the, highest rates of return on the Australian stock exchange.”
Mr Beament said the strategy was also continuing to deliver highly significant exploration results, such as those contained in the ASX announcement dated 20 February 2018, which were yet to be included in the Resource and Reserve inventory.
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