Gold Digger: Riches rain for gold miners, but value is in the eye of the beholder

• Gold miners have been out and about for reporting season
• Market reactions are heavily dependent on investor expectations, even with the sector printing serious cash
• Newmont ran hard on Friday after a stellar June quarter

Market reactions during reporting period are often a gauge of feelings as much as facts and figures.

What’s important is not necessarily the number that’s reported, but how it correlates to the mood and expectations of the investors punting on a stock.

Fortescue’s (ASX:FMG) quarterly this week, for instance, was well received because of its record iron ore output and falling costs.

But a decision to halt two green energy projects and reduce spending on the troubled division was as much a signal for investors worried about cash burn and dividends to buy in as any of the hard numbers.

For the gold scene, the cash generation has been predictably strong.

Northern Star Resources (ASX:NST), for instance, reported record underlying free cash flow of $536 million for FY25 on Thursday, after selling 1.634Moz at an all in sustaining cost of $2163/oz.

It has a whopping $1.914bn cash on the balance sheet with net cash of $1.013bn after its deal to acquire De Grey Mining, which brought a cash pile with it alongside its world-class Hemi gold project.

Cash earnings are expected to clock in at $2.8-2.95bn, with Northern Star also winding down hedging commitments to reflect its balance sheet strength.

Yet, NST shares have shed close to 5% over the past week and over 18% in the last month.

Despite gold prices climbing 28% YTD, NST shares have barely budged.

Dilution from the DEG deal is one thing, but there are also concerns that future earnings will be chewed up by increased capex, especially around its critical Kalgoorlie hub and Super Pit gold mine.

Citi downgraded its price target this week from $18 to $21 and reduced EBITDA estimates going forward between 3-7%.

Analysts are also questioning the timeliness of numbers on a project to expand the KCGM business and processing plant.

MD Stuart Tonkin admitted on an earnings call the operating cost of $1425/oz could be old given the run up in gold prices since the decision was taken. But he maintains it will still be one of the top cash spinners globally.

“That $1425 (an ounce) is perhaps a stale number, albeit this asset will be a top 5 global gold mine, and it will be setting inside the third lowest quartile global cost curve, and that’s been the investment case,” Tonkin said.

“So relative it will generate as much cash flow as anything globally.”

Some more takeaways

Capricorn Metals (ASX:CMM) is yet to give its final numbers for the June quarter.

But its shares have been in limbo as investors digest some relatively noteworthy M&A activity from the mid-tier gold miner.

CMM announced the $189m scheme deal to acquire Warriedar Resources (ASX:WA8).

There’ll be some dilution – the 1 for 62 share offer will see WA8 shareholders own ~4.36% of the company, equivalent to 15.5c per WA8 share and a 29% premium over Warriedar’s July 23 closing price.

It’s a potential satellite development for CMM’s Mt Gibson project, the next cab off the rank for the miner beyond its operating Karlawinda mine, with Warriedar’s Golden Range containing a resource of 1.38Moz of gold and 60,000t of antimony.

Capricorn has shed over 3% on Friday and more than 4% in the past five days.

Pantoro (ASX:PNR) has been a big winner, declaring ~$196m of EBITDA for FY25 including $80.4m for the fourth quarter alone.

With a cash build of ~$43m, the more than 25,000oz delivered by the Norseman gold mine came in at the upper half of guidance.

PNR set guidance of 100-110,000oz at AISC of $1950-2250/oz. Its shares crumbled 5% on Friday amid a sector wide gold and mining sell off.

But they were still ~22% higher on the week, propelling the miner’s valuation to almost $1.5bn.

At the very big end of the spectrum, Newmont Corporation (ASX:NEM) broke the mould with a 3.8% lift after nearly doubling net income for the three months to June 30 YoY to US$1.595bn.

The world’s largest gold producer by volume, NEM announced a US25c cash dividend for the quarter after selling 1.38Moz of gold at an average price of US$3320/oz and gold equivalent cost of US$1203/oz when copper, silver, lead and zinc by-products are taken into account.

NEM finished the quarter with some US$6.2bn in consolidated cash, US$10.2bn in total liqudity and net debt of US$1.4bn

Canaccord’s Carey MacRury said free cash generation of US$1.71bn and all in sustaining cost margins of US$1738/oz clocked in well above the broker’s US$1538/oz estimate, representing a lift of 34% QoQ and doubling over the past year.

“Overall, the quarter highlights improving operating performance, with three solid quarters in a row and tracking well to achieve its 2025 guidance,” MacRury said.

“Newmont remains one of our Best Ideas among the senior producers with improving production, strong FCF, capital return program, and attractive valuation.”

Winners and losers

Here’s how ASX-listed precious metals stocks are performing:

Peregrine Gold (ASX:PGD) was among the top movers in the junior gold space, though the Mark Creasy-backed owner of the Newman gold project was largely running on the discovery of a high grade channel iron deposit on its ground.

The project sits just 2km from BHP’s Western Ridge and 13km from its Mt Whaleback deposit.

First Au (ASX:FAU) lifted after starting a 3000m diamond drill program following mapping at its Nimba gold project in Liberia.

At Stockhead, we tell it like it is. While Peregrine Gold is a Stockhead advertiser, it did not sponsor this article.