Elevated Gold Spot Prices Transcending into Strong Financial Position for Saracen and Northern Star

  • Jul 08, 2020 AEST
  • Team Kalkine
Elevated Gold Spot Prices Transcending into Strong Financial Position for Saracen and Northern Star

Summary

  • Gold prices are under a new rally with spot prices again reaching a new multi-year high of USD 1,797.59 per ounce.
  • In the wake of a strong rally in gold prices, ASX-listed gold mining companies such as Saracen Mineral Holdings Limited (ASX:SAR) and Northern Star Resources Limited (ASX:NST) have witnessed a strong June 2020 quarter, leading to a splash in their share price and boost to the financial position.
  • SAR has now surpassed its FY20 production guidance and with strong sales and the higher realised price is catching investors’ attention with the stock reaching another record high during the trading session on 8 July 2020.
  • Furthermore, in the wake of high sales and gold prices, Norther Star Resources Limited (ASX:NST) has built a strong cash position, leading to the disbursement of the previously deferred dividend of $55 million.

Gold prices are vaulting higher with each passing day over the rise in market fear in the wake of the relentless increase in COVID-19 cases across the United States, Brazil, and India. The gold spot contoured another multi-year of USD 1,797.59 on 7 July 2020 and is currently hovering around the same at USD 1,794.83 (as on 8 July 2020 12:37 PM AEST).

Also Read: Gold Vaults to Highest Levels Since October 2012; Trade Trends and Data Divergence

The continuous surge in gold prices is providing an impetus to ASX-listed gold stocks, and many of them are closely mimicking every uptick in gold with many of ASX-listed gold stocks such as Saracen Mineral Holdings Limited (ASX:SAR) jotting a new record high and many such as Newcrest Mining Limited (ASX:NCM), Northern Star Resources Limited (ASX:NST) exchanging hands near their previous record highs on the exchange.

Saracen Mineral Holdings Limited (ASX:SAR)

After reporting an impeccable quarterly performance for March 2020, the miner reported another quarter of strong performance with year to June 2020 or FY20 gold production reaching ahead of the target of +500,000 ounces.

Also Read: ASX-Listed Gold Miners Reported March 2020 Quarterly Performance- SBM, NST, and SAR

The total gold production for the June quarter stood at 145,830 ounces, in which, the KCGM Joint Venture (50 per cent) accounted for 36.61 per cent with a production of 53,398 ounces of gold.

The key assets of the Company, i.e., Carosue Dam and Thunderbox also witnessed strong gold production of 203,281 ounces and 184,538 ounces.

The FY20 production reached 520,414 ounces, in which, KCMG (50 per cent) accounted for 25.47 per cent with a production of 132,595 ounces while Carosue Dam and Thunderbox contributing the rest with the production of 203,281 ounces and 184,538 ounces, respectively.

SAR managed to sell 148,011 ounces of gold during the June 2020 quarter and realised an average price of $2,280 per ounce, leading to sales receipts of $337.5 million. Furthermore, the Company delivered 72,300 ounces to the hedge book at an average price of $1,938 per ounce.

In the wake of COVID-19, SAR had subdued the plan of milling higher-grade portions of the stockpiles at Carosue Dam and Thunderbox prospect during the June 2020 quarter. However, due to limited impact of the COVID-19 outbreak on the business, the company continued on its long-standing ‘futureproof the business’ strategy.

The cash and bullion at the end of the June 2020 quarter stood at $369.3 million, leading to a strong liquidity stance as compared to the previous quarter with cash and bullion of $338.8 million.

Furthermore, the cash position of the Company remained strong, which could be inferred from the cash and bullion in hand at the end of the June quarter, which remained higher against the previous quarter despite a debt repayment of $38.5 million, tax payment of $15.7 million, and spending of about $89-94 million on growth capital and exploration.

The total debt at the end of the June 2020 quarter stood at $321.5 million, leading to net cash of $48 million, which remained considerably up against the previous quarter net debt position of $21 million.

The strong performance for FY20 further transcended into a splash in share price and return profile with the stock reaching a record high of $6.21 (as on 8 July 2020 2:34 PM AEST) and delivering a strong return.

To Know More, Do Read: Commodity Stocks Making Their Way To The Top

Norther Star Resources Limited (ASX:NST)

NST has declared a fully franked dividend of $7.5 cents a share in the wake of a strong June 2020 quarter.

The Company produced 270,293 ounces of gold during the March quarter, which further increased by ~ 11.59 per cent during the June 2020 quarter, leading to full year (FY20) production of 905,177 ounces of gold, which remained 1.6 per cent down against the FY20 guidance, withdrawn by the miner in the wake of market uncertainties.

NST managed to sell 262,717 ounces of gold during the June 2020 quarter, leading to the generation of a free cashflow of  $217.9 million, which further contributed towards a 40 per cent increase in cash, bullion and investments against the previous quarter, which stood at $769.5 million during the end of the June 2020 quarter.

In the wake of solid quarterly results, NST has now decided to pay the previously deferred dividend of $7.5 cents, which would total $55 million, and further anticipates that the dividend payments would continue in the ordinary course of business.

Furthermore, the Company has paid back $200 million of debt drew down by the miner during the March 2020 quarter, which has now reduced the corporate bank debt to $500 million.

NST reduced its hedge book to 536,426 ounces during the June 2020 quarter as part of the strategy to increase its exposure to the spot price. Also, NST mentioned that the pushed-out hedged positions are being brought back and deliveries will continue to be accelerated in FY21.

NST has maintained one  of the smallest hedge books as a percentage of annualised production in the local gold industry, with just 15 per cent of the production hedge over the next three years, leading to a greater exposure of the business to the gold spot price.

Also Read: Three Miners Hovering Close to 52-Week Highs- PRU, SVM, and NST

The stock of the Company last traded at $14,88 (3:34 PM AEST), up by 6.77 per cent against its previous close on the exchange. Also, the stock witnessed a gap up opening during the trading session today and is giving a close near its day’s high of 15.040 amid the surge in gold spot.

 


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