One of the best-performing gold miners on the ASX may be set to run higher as it is likely to enjoy an upgrade.
Northern Star Resources Ltd (ASX: NST) unveiled positive exploration results from its Kalgoorlie operations and the news sent the stock up 0.9% to $2.15 this morning when the sector has gone backwards by 0.1%.
There are eight different areas that have produced promising results including fresh intersections yielding up to 37 grams a tonne of gold from the Millennium deposit and significant results from the Six Mile project that supports an open pit and underground mine potential.
Management is likely to upgrade its gold resource estimates next month on the back of the latest discoveries and these will also likely prompt brokers to lift their valuation on the stock, particularly because the results will extend the life of Northern Star's operation.
What's more, Northern Star didn't have to spend much to uncover the new discoveries and has earmarked $20 million out of its $50 million exploration budget for the Kalgoorlie region.
Northern Star currently makes a margin of around $500 to $600 for every ounce of gold it produces and analysts polled on Reuters are forecasting adjusted earnings per share (EPS) to surge to 22.8 cents in the current financial year, from 8 cents in 2013-14.
While price-earnings (P/E) multiples are not particularly useful in valuing gold miners, it is still telling that Northern Star is trading on a 9.4 times multiple for 2014-15, when Newcrest Mining Limited (ASX: NCM) is trading well over 20 times.
Northern Star could even trade at a bigger discount as consensus estimates have yet to account for the latest drilling results.
But if you are worried that you have missed the boat for Northern Star given that its shares have rallied over 80% in the past six months, sign up below for a free report on standout stock you can buy now.
