Northern Star Resources Ltd shares look a good bet on new production plans

Northern Star Resources Ltd  (ASX: NST) has released updates on its Plutonic and Central Tanami development plans that form part of its strategy to hit 700,000 thousand ounces of gold production per year in FY18.

Yesterday, the company announced that a turnaround at its expensive Plutonic gold mine is well underway with annual production set to grow from 75,000oz in FY16 to 100,000oz in FY17.

Although not technically part of the Plutonic mine, the Hermes deposit was recently acquired from Alchemy Resources Limited (ASX: ALY) and is within trucking distance from Plutonic, where the ore will be processed.

Stage one of mining at the Hermes deposit will produce 86,000 ounces per year for two to three years at an all-in sustaining cost (AISC) of A$1,095/oz. With the gold price hovering around A$1,500/oz, the project will deliver a healthy margin that should help reduce overall costs at the Plutonic gold mine.

Plutonic is a blemish on Northern Star’s successful record of acquisitions, with AISC’s hitting A$1,832/oz at the mine during the recent September quarter. The lower cost Hermes deposit should improve the cost profile of Plutonic until four newly discovered underground mining zones — hopefully with lower costs — are developed and brought into production.

Earlier today, Northern Star announced that additional infill drilling at the Central Tanami project increased confidence in the key Groundrush deposit and supports the development plan for a 125,000oz per annum gold mine.

Northern Star is sole-funding a 20,000m diamond core drilling program which, in addition to refurbishing the existing processing plant, will earn it a 60% stake in the project with Tanami Gold NL (ASX: TAM) holding the other 40%

Significant drilling results from the Groundrush program include small hits of up to 30 grams per tonne over 0.6m and 8.7 grams per tonne over 13.0m.

The updates from Northern Star confirm that the company is continuing to develop, improve and expand its recent acquisitions while its existing operations are minting cash. With its AISC forecast to remain around A$1,100/oz, Northern Star may provide shareholders solid returns in the future at current gold prices.

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Motley Fool contributor Mitch Sonogan has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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