This is a note from a broker today. You can see why NST will eat EAR. The expected cost per ounce range fits right into NST's. Its a nice fit for many reasons and they will need to add ounces when you produce over 500k ounces pa. EAR basically have near 2m ounces now and the drilling will keep driving that. I assume NST will want to buy this and crank production up. dyor
NST (Northern Star, +1.5% to $6.23, m.cap A$3700m, Gold: Producer): Mike Millikan
NST has reported lower quarterly production for the DecQ but appears on track for production and cost guidance.
DecQ gold production and sales of 8koz (down from 138.4koz) at AISC of A$1,067/oz (up slightly from A$1,021/oz) – 1H gold sales of 267.3koz @ AISC A$1,043/oz – FY18 guidance for 525k-575koz @ AISC A$1,000-1,050/oz – so tracking within both production and cost guidance.
FCF (underlying) generation of A$35M, with cash lower qoq after paying FY17 tax and A$4M to acquire Western Tanami.
Jundee – 61.9koz sold @ A$946/oz (v 75.1koz sold @ A$794/oz SepQ) – still tracking above guidance – guidance of 245k-265koz @ AISC A$950-1,000/oz
Kal Ops – 54.9koz sold @ AISC A$1,195/oz (v 52.0koz sold @ AISC A$1,184/oz SepQ) – tracking below guidance but better 2H anticipated – guidance of 245k-265koz @ AISC A$1000-1,050/oz
Paulsens – 11.9koz sold @ AISC A$1,170/oz (v 11.3koz sold @ AISC A$1,818/oz SepQ) – better production at improved cost - guidance of 35k-45koz @ AISC A$1,300-1,400/oz
Roughly in-line of our expectations at a Group production level, with Jundee exceeding our forecast, but both Kal Ops and Paulsens slightly below
Stockpiles and gold in circuit to ~95koz similar to SepQ
Average gold sales price of A$1,693/oz for the quarter – hedge in place for 270.5koz @ A$1,750/oz thru to Dec-19 half.
Cash, bullion, and investments of A$433M (down from ~A$443M) - debt free, but retains a Corporate Facility for A$100m (undrawn).
We have an Accumulate recommendation.
EAR Price at posting:
36.5¢ Sentiment: Buy Disclosure: Held
