Northern Star Resources Ltd

NST’s Share Tumbled Over 4% Post Gold Price Decline:Northern Star Resources Ltd (ASX: NST) recently announced a change in its director’s interest where Executive Chairman Bill Beament has reduced his holding in the Company by 3,141,795 shares. Mr. Beament retains 3,141,793 Northern Star shares and 3,000,000 Performance Rights. In a previous update, the company announced that Echo Resources successfully raised $15 Mn through Two-Tranche Placement at A$0.13 per share. The placement received attraction from several high quality new and existing, domestic and international institutional investors. Northern Star is the largest shareholder in Echo Resources, and has subscribed for approximately $3.4 million in the Placement, on a pro-rata basis according to its current shareholding in Tranche 1, and in Tranche 2 subject to shareholder approval.

March’19 Quarter Key Highlights:Revenue for the period was reported at $329.7 Mn as compared to $362.6 Mn in the previous quarter. The cash at bank at the end of March’19 quarter was reported at $218.8 Mn as compared to $229.8 million in December’18 quarter.


March’19 Quarter Key Metrics (Source: Company Reports)

What to expect:Group’s FY2019 production guidance has been maintained at 850,000-900,000 ounce and All-In Sustaining cost (AISC) guidance increased from $1,125-$1,225/oz to $1,225-$1,275/oz.Its June quarter production and AISC guidance have been estimated at 235,000-260,000oz and $1,075-$1,175/oz, respectively. At Pogo, significant progress has been achieved in the March quarter, and the production is set to rise over the coming quarters as long-hole stoping is ramped up. This is expected to result in a 60/40 split of stopping to development ore in the coming quarters.

Stock Recommendation:It recently made its 52 weeks high at $10.280, and on the weekly timeframe it made weekly doji candle, which indicates good probability for correction. Its EBITDA margin for H1FY19 stands at 35.8% which is better than the industry median of 34.6%, and its net margin for H1FY19 is in-line with the industry median of 13.0%, implying decent fundamentals for the company. Currently, the stock is trading slightly towards its 52-week high price of $10.280 with high PE multiple of 31.13x. Hence, considering the aforesaid facts and current trading level, we recommend an “Expensive” rating on the stock at the current market price of $9.540 per share (down 4.217% on June 11, 2019). The decline was due to the fall in gold prices over improvement in investors sentiments in the global market, where investments shifted from safe heaven assets to those assets with better return-risk dynamics.
 

Saracen Minerals Holdings Limited

Decent Top-Line And Bottom-Line Performance in H1FY19:Saracen Minerals Holdings Limited (ASX: SAR) recently acknowledged announcement by Hawthorn Resources Limited (ASX: HAW) about the completion under the Asset Sale and Purchase agreement with SAR and its subsidiary Saracen Gold Mines Pty Ltd. The sale includes Hawthorn’s interests in Box Well and Deep South mining leases along with exploration tenements totalling 18 tenements and leases for a consideration of $13.5 Mn.

March’19 Quarter Key Highlights:SAR reported record quarterly gold production of 89,208oz at All-In Sustaining cost (AISC) of $1,035/oz. Its cash and cash equivalents at the end of quarter was reported at $153.3 Mn. It sold 89,002 oz gold in the period at an average sale price of $1,766 per oz, generating revenue of $157.2 Mn.


Cash, Bullion & Investments Metrics (Source: Company Reports)

What To Expect:Group’s production outlook for FY19 has been kept unchanged at 345-365,000 oz at an AISC of $1,050 - $1,100 per oz. This can be primarily attributed to the expansion of Carosue Dam mill to ~3.2 Mtpa and exploration success along the Carosue Dam Corridor.


Production Guidance (Source: Company Reports)

Stock Recommendation:Its EBITDA margin and net margin for H1FY19 stand at 37.1%, and 15.2%, which are better than the industry median of 34.6% and 13% respectively, implying decent fundamentals of the company than its peer group.

Its ROE for H1FY19 stands at 10.6%, which is better than the industry median of 6.5%, showing that the company has generated a better return for its equity-holders than its peer group. Its current ratio for H1FY19 stands at 2.64x, which is better than the industry median of 1.87x, which implies the company is in a better position to address its short-term obligations.

Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $3.260 per share (down 3.55% on June 11, 2019).

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