No regrets for Northern Star's rough day out

Northern Star had a rough day out when it updated the market on the production impact of the unavoidable disruption caused by the COVID-19 pandemic...
3rd April 2020
Barry FitzGerald

Northern Star had a rough day out when it updated the market on the production impact of the unavoidable disruption caused by the COVID-19 pandemic, and how it was protecting itself from the worst-case scenario of prolonged mine closures (reports Barry FitzGerald on MiningNews).

The overriding aim of the update was to demonstrate the company was on top of the critical need to protect its people and its corporate self, and those who live in its host communities in Western Australia and Alaska, from the dangers posed by the pandemic.

It was commendable stuff and demonstrated that unlike much of the industry, NST is not one to dodge the issue of just how the pandemic is impacting the mining sector.

But the scale of the impact of 10-15% lower production than expected in NST's March quarter nevertheless spooked the market, as did NST's moves to bolster an already robust balance sheet for worst case scenarios by deferring the interim dividend, deferring exploration, and deferring its 2020 hedge commitments, as well as drawing on a revolving credit facility as a standby.

NST was a A$13.50 stock ahead of last Thursday's trading update. It took a 15% hit on the day and has drifted lower still to $10.53 at the close on Tuesday, making for a fall of 22% or $2.2 billion in four trading days.

The fall was definitely oversized compared with its Aussie peers.

Newcrest fell 11% in the same period, Evolution was off by 13%, and Regis lost 9%. All of them are down in response to swings in the gold price and broader equity market.

NST has had the added downer of the trading update, a penalty if you like for not dodging the virus issue and for taking the precaution of bolstering its balance sheet in case the worst-case scenario of closed mines eventuates.

Having said that, before the trading update, NST had been comfortably outperforming its peers. So it has essentially been brought back to the field.

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