For the ASX-listed gold sector, the end of the reporting season this week could not have come quick enough.
It has been a bruising few weeks as underwhelming full-year financial results – irrespective of how well telegraphed weak profits, missed guidance, modest free cash flows and asset impairments were – coincided with a lack of investor buying interest in gold equities.
As one senior executive quipped during the week, a decent buy order for scrip in many of the ASX gold cohort could have quite a dramatic, positive impact on the share price – such is the lack of trading interest at the moment.
It is certainly a sentiment the $8.7 billion Northern Star Resources (ASX: NST) will be hoping translates into reality when, in a couple of weeks, it can kick off the on-market share buy-back it announced alongside its full-year profit on Monday.
The buy-back, for up to $300 million of Northern Star stock, is a first for the second-largest ASX gold producer and owner of the Super Pit.
Northern Star was one of the few gold sector players to meet its FY22 production and cost guidance – 1.56 million ounces at all-in sustaining costs of $1633/oz – and not impair the book value of any of its assets.
That is not to say it has been an easy year for the company, which posted full-year cash earnings of $1 billion – used by investors to estimate the likely dividend – and a statutory net profit of $430 million. Northern Star also reiterated its FY23 guidance of 1.56-1.68moz at AISC of $1630-1690/oz.
The 11.5¢ fully franked final dividend, payable on September 29, will bring to $1 billion the cash returned to Northern Star shareholders over the past 10 years.
Gold stocks are not renowned for their dividend payment history – in fact, better known for talking about dividends – so Northern Star is a nice exception.
And smaller peer Gold Road Resources (ASX: GOR) is fast joining the league of walking the shareholder cash returns talk.
Gold Road, which discovered the massive Gruyere deposit in WA’s northern Goldfields which it and 50-50 partner Gold Fields have turned into a Tier 1 mine, reported a strong half-year profit on Tuesday.
Of most joy for investors was that Gold Road reiterated its 2022 calendar year guidance – Gruyere to produce 300,000-340,000oz with Gold Road tipping its half-share of production to incur AISC of $1270-1470/oz – while the interim fully franked dividend of 1¢ a share was better than expected.
Gold Road’s shares closed at $1.225 last night to give the company a $1.3 billion market capitalisation.
The sell-side clearly sees a lot of upside for Gold Road, based on analysts’ 12-month price targets.
Jefferies says buy with a 12-month price target of $1.70 per Gold Road share, Macquarie says outperform and tips $1.60, Canaccord Genuity says buy and tips $1.85, Bell Potter says buy and tips $1.75, Barrenjoey says overweight and $1.55 and Ord Minnett says buy and $1.75.
Given the lack of interest in gold equities generally, Gold Road has its fans.
As does Northern Star, whose shares closed at $7.38 yesterday, with Ord Minnett (12-month price target $11.10), Barrenjoey ($11) and UBS ($9.60) among the supporters.
There is a growing view that Northern Star is the preferred large-cap gold pick.
At some stage, one would expect the buyers’ interest to pick up again.