Northern Star Resources is undertaking an on-market share buy-back for the first time in the company’s history, with up to $300 million of shares in play as part of the initiative.
The buy-back is set to commence on or about September 15 and will be completed within 12 months.
The gold miner said the buy-back aligns with its capital allocation priorities, which include returning cash to shareholders, investing in organic profitable growth and maintaining a strong balance sheet.
The buy-back will not intervene with Northern Star’s dividend policy to pay out between 20–30 per cent of cash earnings.
“The decision to launch the first share buy-back in Northern Star’s history presents compelling value, confirms the board’s confidence in our strong balance sheet and cash generation outlook and aligns with our fiscal discipline and returns focus,” Northern Star managing director Stuart Tonkin said.
“We believe an on-market buy-back is an effective method of returning surplus capital to shareholders while also being immediately earnings and value accretive.”
Tonkin said the launch of the buy-back reflected the maturing of Northern Star as a company as it looks to balance reinvestment in the business with cash returns to shareholders.
He said the company was moving in a strong direction, economically and operationally.
“Our clearly defined, multi-year organic growth strategy to deliver higher-margin ounces remains on track, with the past year laying the foundation for enhanced strong cash generation,” Tonkin said.
The announcement coincides with the release of Northern Star’s 2021–22 financial year (FY22) results, where the gold miner reported a steep increase in cash earnings in FY22, despite other metrics falling across the 12-month period.
The gold miner’s cash earnings* rose from $648 million in FY21 to $1.02 billion in FY22, which it said was a demonstration of the quality of its assets to adapt to all operating environments.
Northern Star also enjoyed a 35 per cent year-on-year climb in its FY22 revenue from $2.76 billion to $3.74 billion, while underlying EBITDA (earnings before interest, taxes, depreciation, and amortisation) increased from $1.16 billion to $1.52 billion.
This came as the company’s statutory after-tax profit fell from $1.03 billion in FY21 to $430 million in the year just gone.
Tonkin said there were plenty of positives to take away from FY22.
“These results, which include for the first time Saracen and 100 per cent of the Super Pit, clearly demonstrate Northern Star’s cash earnings potential,” he said.
“The fully franked final dividend of $0.115ps (per share), within our dividend policy target and payable next month, will mean we have returned $1 billion cash to shareholders since FY12.”
Under Northern Star’s dividend policy of returning 20–30 per cent of cash earnings to shareholders, the FY22 final dividend of $0.115 corresponded to 23 per cent of cash earnings.
Northern Star’s total fully franked dividend for FY22 was $0.215, which represents 25 per cent of cash earnings.
The gold miner completed its merger with Saracen Mineral Holdings in February 2021, which gave it full ownership of Kalgoorlie Consolidated Gold Mines (KCGM).
* Cash earnings are defined as underlying EBITDA minus net interest, tax and sustaining capital, which Northern Star believes is a better reflection of its ongoing earnings.