Company Reports

Commodity prices diverged in the quarter. Despite solid China steel production, iron ore and metallurgical coal prices are down, while copper rose on supply issues and hopes of faster global growth. However, prices are elevated compared with history and cost-curve support.

Iron ore prices are lower on concerns over China steel demand due to its struggling property market and weak infrastructure spending. However, gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 51. It remains the cheapest miner we cover, trading 27% below fair value.

Northern Star is a midtier global gold miner with mines in Western Australia and Alaska. Its portfolio is a result of significant corporate activity, including 13 acquisitions and four asset sales since 2010. Notable transactions include the purchase of Pogo in Alaska in 2018 and half of the Kalgoorlie Super Pit mine, or Super Pit, in Western Australia, from Newmont in 2020. Northern Star subsequently merged with Saracen in 2021, adding the other half of the Super Pit, as well as the Carosue Dam and Thunderbox assets in Western Australia.

Demand growth from China has been the main driver of rising commodity prices in the past two decades. More recently, though, most commodity prices have fallen from highs set with Russia’s invasion of Ukraine, the subsequent sanctions on Russia, and the rerouting of supply chains. Prices, nevertheless, are generally elevated versus the 20-year average, as well as relative to cost support.

No-moat Northern Star’s first-half fiscal 2024 adjusted net profit after tax nearly quadrupled against the same period last year to AUD 211 million or AUD 0.19 per share. Adjusted EBITDA improved by roughly 40% to AUD 889 million, primarily driven by higher gold prices. Gold sales volumes of about 780,000 ounces were similar to last year and broadly met our expectations. However, the all-in-sustaining cost, or AISC, of about AUD 1,880 per ounce was 6% higher and higher than our unchanged forecast for fiscal 2024 of roughly AUD 1,790 per ounce at the top end of guidance. We think higher sales in the second half of fiscal 2024 due to typical seasonality in the business will drive lower unit costs. The interim unfranked dividend of AUD 0.15 per share was a third higher than last year due to stronger earnings. We forecast total unfranked dividends for fiscal 2024 of AUD 0.31, representing a 2.4% yield at the current share price.

Northern Star is a midtier global gold miner with mines in Western Australia and Alaska. Its portfolio is a result of significant corporate activity, including 13 acquisitions and four asset sales since 2010. Notable transactions include the purchase of Pogo in Alaska in 2018 and half of the Kalgoorlie Super Pit mine, or Super Pit, in Western Australia, from Newmont in 2020. Northern Star subsequently merged with Saracen in 2021, adding the other half of the Super Pit, as well as the Carosue Dam and Thunderbox assets in Western Australia.

Near-term iron ore prices are higher on strong China steel production. Gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 54. It is the cheapest we cover, trading 30% below fair value.

Commodity prices diverged in the quarter with strong China steel production driving iron ore and metallurgical coal prices up, while base metals prices dropped on worries of a Western recession. Even so, prices are elevated versus history and cost-curve support.

We commence coverage of Australia-based gold miners Northern Star, Evolution Mining, and Perseus Mining with fair value estimates of AUD 11.30, AUD 3.00, and AUD 2.00 per share, respectively. We initiate with no-moat and High Morningstar Uncertainty Ratings for all of these stocks. We think the shares of Northern Star and Evolution are overvalued, trading at premiums of 8% and 17%, respectively, while Perseus shares currently trade close to fair value.

Northern Star is a midtier global gold miner with mines in Western Australia and Alaska. Its portfolio is a result of significant corporate activity, including 13 acquisitions and four asset sales since 2010. Notable transactions include the purchase of Pogo in Alaska in 2018 and half of the Kalgoorlie Super Pit mine, or Super Pit, in Western Australia, from Newmont in 2020. Northern Star subsequently merged with Saracen in 2021, adding the other half of the Super Pit, as well as the Carosue Dam and Thunderbox assets in Western Australia.