The Northern Star Resources Ltd (ASX: NST) share price has soared 32% since the start of 2017, but much of that is a recovery, after the share price plunged in November-December 2016 from above $4.50 to as low as $2.97. The share price closed at $4.81 overnight.
That came as the gold price sank, with sharemarkets surging around the world towards the end of 2016. Investors clearly abandoned gold and jumped back into shares, pushing the gold price down. But it’s been a different story so far in 2017, with gold rising from around US$1,150 an ounce to as high as US$1,293 an ounce – as the chart below shows.
At its half year results, Northern Star reported a 2% fall in revenue, but net profit still managed to rise 61% to $104.6 million, with all-in sustaining costs at just $1,076 an ounce. That’s roughly US$831 an ounce, giving the miner a huge operating margin compared to the gold price.
Production is also expected to increase to 600,000 ounces in the year ahead.
One of the best, if not the best run gold miner on the ASX, Northern Star could see its share price continue to outperform the market – as long as the gold price remains at these levels and doesn’t fall much. That’s not a risk I’d be taking given the volatility of the gleaming metal.
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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.