Northern Star Resources holds guidance despite labour shortage risk

WA’s labour shortages are making it harder for companies to give the go-ahead to new projects, Northern Star Resources boss Stuart Tonkin says.

Northern Star Resources managing director Stuart Tonkin. Picture: Sharon Smith

Northern Star Resources says it is still on track to meet annual production guidance despite the impact of the West Australian skills and labour crisis, with the company paying a 10c-a-share interim dividend on the back of booking a $261m half-year net profit.

Managing director Stuart Tonkin told analysts on Thursday the labour market situation in WA was still a major problem for the mining industry, but welcomed moves by Premier Mark McGowan this week to halve the mandatory isolation period for people who test positive for Covid-19.

Mr McGowan faces increasing pressure from the WA business community to set a date to open the state’s borders, and Mr Tonkin said the compromise on isolation periods would make a “major structural difference” to the sector as it plans for the inevitable spread of the virus through its workforce.

“We’ve already seen compromise on the isolation period from 14 days to seven, which makes a major structural difference to us in our planning,” Mr Tonkin said.

“There’s the actual health risk and sickness downtime, but then there’s the structural downtime created by these isolation periods. And that was what was really penalising Western Australia.”

Mr Tonkin said he hoped to see WA move to open its borders within a “month or two”.

Northern Star maintained its annual cost and output guidance despite the critical skills shortages in the state, which have been exacerbated by the state government’s hard-line stance on borders.

But Mr Tonkin said labour costs were already forcing company boards to consider the deferral of construction and expansion projects within the WA mining ­industry. “Building anything in WA at the moment would come under either labour pressure or cost pressure, or face execution risks,” he said.

The half-year report is the first issued since Northern Star completed its $16bn merger with Saracen Mineral Holdings, and the company’s costs, output and revenue all lifted compared to the first half of the previous financial year.

Mr Tonkin said the merger had so far yielded about $40m in cost savings across the business due to operational synergies between the two company’s mines.

Excluding the $402m sale of its Kundana mines to Evolution Mining, Northern Star booked underlying earnings of $108m for the half, and Mr Tonkin said its mines had delivered cash earnings of $430m for the ­period.

The gold miner recorded $1.8bn in revenue for the half and operating cashflows of $622m.

“We delivered strong half-year cash earnings of $430m and invested in our growth initiatives,” Mr Tonkin said. “The board declared a fully franked interim dividend of 10c per share, a return to shareholders of 27 per cent of cash earnings.”

RBC Capital Markets analyst Alexander Barkley said the company’s half-year results came in broadly in line with expectations.

“Northern Star has reiterated its expectations of meeting group financial year guidance including all-in-sustaining costs (AISC), despite labour and cost headwinds,” he said. “We forecast at the top end of AISC guidance (of $1475-$1575 per ounce),” he said.

Northern Star reported AISC of $1613 an ounce for the first half of the year. It finished December with $588m in cash and bullion on hand, putting its balance sheet in a $288m net cash position. Its shares fell 4c to $8.64 on Thursday.

Originally published as Northern Star Resources holds guidance despite labour shortage risk