Saturday night. I am doing great. From Monday, the lockdown in Sydney will be lifted. It looks people are already relaxed. I went to the farmers market today and go to near the mall to get some Asian food. I had a relaxing day as well. I am wondering what to do during Christmas time. For now, we are not allowed to travel beyond Greater Sydney even the lockdown is lifted. So maybe I just want to go staycation or something.
Currently, I am reading a Japanese book written by a former member of the house of representatives, Taizo Sugimura. He is now an investor now. I like him very much. Now, he wrote a book about how to make money. I am very impressed with the book. Honestly, I didn’t expect that book is good. But it was actually good. I believe his experience is unique even among the investors. He suggested using politicians for our sake as a citizen and proposed some of the policies to revitalize the Japanese economy. Also, he is working on a project in Asahikawa, Hokkaido. He is involved as an investor but his scheme is nothing I have heard of. I am curious. I will write a blog post about this book probably in Japanese.
And now I am doing some analysis on ASX companies for this blog. I just did two ASX companies and I can do one more tomorrow. I want to do maybe 10 of the first, then I will think about what to do next. I want to know each company better hopefully I will analyse 100 or 200 even more? Then I want to improve to understand of the business. My portfolio is doing great now but I am thinking of selling one of the companies if the time comes maybe within 3-9 months considering the tax. But I am trying to find out which company to buy next. By keeping analysing the company and writing the blog post, I will be learning to understand business and company.
So what am I focusing on now? I think physics is always in my mind. And the second will be investing for now. And the thirds are running, guitar, reading books and so on. Anyways, just keep learning and writing. Writing is good for me. Maybe I will do more writing, physics, music, books, whatever. What I can do now are share analysis and book reviews. Let’s do some of these, find out what I can do more later.
The Northern Star (NST) is an Australian gold producer. The NST owns three gold production sites Kalgoorlie, Yandal, and Pogo. They are targeting to reach 2Mozpa by 2027 with Kalgoorlie (1.1M), Yandal (600k), and Pogo (300k). And currently, they are mining 1.6MOz in group production.
\A$m
FY17
FY18
FY19
FY20
FY21
Revenue
869
964
1401
1972
2761
EBITDA
426
447
489
798
1138
Net income
189
194
155
258
1033
Share of outstanding(*)
613
615
645
695
904
EPS = NPAT/Share of outstanding
0.31
0.32
0.24
0.37
1.14
Dividend (dollar)
0.12
0.095
0.135
0.27
0.19
The quick views of income statement last 5 years of the company.
In the last five years, the company has gradually increased its revenue and profits. Also, the share of outstanding increases as well because of the M&A of the gold mining company Saracen. 2021 might be an exceptional return we might need to watch. However, if it continues, shares now are about 8.91 so the P/E ratio is 7.82 or so, so I believe is the share is undervalued. But the price has not come back, actually, the share price keeps going down for over a year. So there might be a reason for it. I am thinking that NST bought Saracen in 2020 and 36% of their shares came from Saracen. I have felt Saracen shareholders didn’t like the deal because AISC of Saracen was much better. (*) Diluted shares outstanding, the WSJ website says so it is a slightly larger number than basic shares outstanding
\A$m
FY17
FY18
FY19
FY20
FY21
AISC (A$/oz)
1,013
1029
1296
1,496
1483
Gold sold k oz/year
526
570
841
900
1595
Average gold price realized (A$/oz)
1,673
1704
1764
2208
2277
Operating mine cashflow (A$m)
350
353
379
710
1077
Mineral Resource Moz
10.2
15.9
20.8
31.8
56.5
Last five years of production of gold
The AISC is the company reported All-in Sustain Cost. The gold price is about 1700-1900USD/oz since July 2020 with roughly AUD/USD = 0.73 so I believe roughly 2328 (1700USD), 2465(1800USD), 2602(1900) AUD/oz. I think the current level of gold price and AUD/USD continues so the NST can make money comfortably at the FY21 year level. However, I hope they can do better on the cost down as they could do a few years ago so they can make more money. Hope I can see that progress a few years after they took over the Saracen. The gold sold is going 1.6 Moz level now jumped at FY21 and they are gaming at the production of 2 Moz by 2027. The mineral resources are increasing over the 5 years, and jumped at FY21 because of the merger with Saracen and also their explorations.
They are aiming at 1550-1650koz of Gold production (usually the same level as gold sold ) with 1,475-1,575AUD/tons of AISC. So if they can run it as they promised and averaged gold price realized, it should be 1.6M*(2277-1525) = 1203.2 million. So the gross profit could be the same as FY21. The EPS should be the same level as FY21 which is 1.14. Even if I want P/E = 10, the NST share price is 11.4, comfortably below the share price of 9.06@October 7th 2021. Also, they are trying to reach 2MOz of gold production by 2027, a 25% increase over 5 years. But this needs to carefully add analysis and depends on the gold price and production continues. However, since governments around the world are printing money so much, I believe the gold price should go up in long term. So you might want to either put gold or NST to protect your financial assets.
\A$m
FY17
FY18
FY19
FY20
FY21
Current Assets
486
558
454
1110
1840
Current Liability
175
200
218
638
771
Current ratio
2.78
2.79
2.08
1.73
2.39
Non-current liability
135
195
310
1029
2499
Total assets
924
1220
1640
3810
11250
Total liability
310
395
529
1670
3270
Total equity
614
821
1110
2140
7980
Last five years of debt level
Did I miss something else? The debt of the company. Operational-wise, the company is doing great for manageable liability. I am a bit concerned about the increase in the last two years. On the other hand, total assets also jumped. I am not worried about the operations at the moment.
Currently, the Northern Star is the second largest gold mining and exploration company in ASX after Newcrest Mining (ASX: NCM). The NCM is roughly double the size of NST now. Maybe next time update, I will compare these two companies. Also, I could take a look at their cashflows.
Wednesday is gone now. I thought I can finish the preparation of one presentation today but I failed. By preparing for this, I realized maybe I am not a good person to do this presentation but anyways, I will try my best. I would like to finish this in few days.
The novel price in physics was awarded to scientists who did relate work on climate change. I didn’t look at their research yet so I can’t say much. But I didn’t feel good about Japanese news media reporting only focused on Dr Makabe. They didn’t focus much on the work from these three scientists who are awarded. But they keep reporting about only Dr Makabe. That is OK, not a big deal, this should be nothing to do with me anyways. I don’t think Prof. Makabe did not work for Japan, his research has been for humankind. Who do you think did actually fund the research?
By thinking about my career. I got a PhD in Japan, did a postdoc in the US, came to Australia to study for Taiwanese. Who am I working for? Who is taking a risk for me (this case, by paying my salary and research fund could be in vain)? Are questions I would ask sometimes. I feel I am working for Taiwanese. I am lucky enough to do what I want to do in my life because of them. I am working hard in my ways and the results I did or will deliver might not be beneficial or profitable directly to them. So I wanted Taiwanese to be rewarded if I can bring some results. So I always want to work for them where I can, such as growing scientific communities, helping them do experiments, publishing papers, and so on.
I have not been taught ethics as a scientist so I am thinking wrong. Like everyone thinks, I think my job is unique. Since the job is not required the profit in short term. And the benefit can be for everyone because once we create the papers (= new knowledge), that is for everyone. Why am I working on physics? The immediate answer is because I want to, or I am curious. Not everyone can do it for their job. But I can. So if I am not making money, food, building or whatever, what I am creating? Yes, the paper = new knowledge. I can’t be useful or not useful? actually, I can’t answer. Maybe in the future?
For the investment, this is kind of easy to answer, those who take risks can have returned (not promised). In a science case, someone, usually Government = taxpayers, takes risks but everyone could be rewarded when we write papers. Patents are similar but the company pays research so if they find something, they can have some exclusive right to use it for some time.
So again, I am working for Taiwanese taxpayers. I keep in my mind the reason why I am in such luxury positions is because of them. So I am working for them.