West Australian gold miners have reported more than $1 billion in gross profits this week as they delivered on promises to shareholders of growth and productivity improvements at a time of sustained high Aussie gold prices.
While there were few surprises contained within the results delivered by Gwalia miner St Barbara, Northern Star Resources, Ramelius Resources, Saracen Mineral Holdings, Resolute Mining and Silver Lake Resources, the combined earnings power speaks volumes for the emergence of Australia’s gold sector following a period of unprecedented repositioning and turnarounds.
The $1.2 billion in combined earnings before interest, tax, depreciation and amortisation delivered this week does not include last week’s big earners including Evolution Mining’s EBITDA of $714 million and $US1.4 billion ($1.78 billion) from Newcrest Mining.
What this week’s tally also does not include is the contributions from Regis Resources (ASX: RRL) and Westgold Resources (ASX: WGX), which are yet to report their fiscal 2017 results.
This week’s gold results were based on production of 1.8 million ounces, the vast majority from mines across WA – the exceptions being Resolute’s Syama and Ravenswood and St Barbara’s Simberi operations.
In a nutshell:
- Saracen (ASX: SAR) reported revenue up 53% to $423.1 million for EBITDA of $113.4 million, up 54%, based on 272,807 ounces produced at AISC of $1348 each (up 23%).
- Northern Star (ASX: NST) reported revenue of $883.8 million (flat) for EBITDA of $461.3 million (up 16%) based on 567,578oz produced at AISC of $1032 each.
- St Barbara (ASX: SBM) reported revenue up 5% to $643.7 million for EBITDA of $293 million (down 2%) based on 318,101oz produced at AISC of $907 each.
- Resolute (ASX: RSG) reported revenue down 2% to $541.2 million for a gross profit (before depreciation, amortisation and other operating costs) of $231.8 million, up 1%, based on 329,834oz produced at AISC of $1132 each.
- Ramelius (ASX: RSG) reported revenue up 14% to $197.4 million for EBITDA of $84.6 million, up 12%, based on 125,488 ounces produced at AISC of $1169 each.
- Silver Lake (ASX: SLR) reported revenue up 32% to $277.5 million for EBITDA of $70 million, up 23%, based on 137,000oz produced at AISC of $1359 each.
Dividends, falling debt levels and returns on equity were the big themes, which reflects where gold stocks are in the cycle of their emergence – the big-picture growth strategies have been or are being bedded down, the large improvements in all-in sustaining costs are largely achieved, so now it’s about focusing on driving marginal improvement, enhancing cash flow and paying down debt, and returning absolute value to shareholders.
In some ways the gold sector mirrors what the top three WA iron players – Rio Tinto, BHP Billiton and Fortescue Metals Group – have been doing for the past three years since calling time on their big-ticket capital growth and expansion programs.
With the gold stocks, of course, this now begs the question where and when the next step-change in earnings will come from.
Corporate marriages have long been talked about, and then there is the emergence of up-and-coming gold producers such as Dacian Gold (ASX: DCN) and Gold Road Resources (ASX: GOR) who will start pouring bars from next year.
Investors in the big diversified miners have made it abundantly clear that they want returns over long-dated growth, and by and large do not trust miners to invest shareholder funds smartly.
It is a lesson the gold stocks say they understand, which helps explain why the much-mooted consolidated among Australia’s mid-tier gold plays is yet to eventuate.