Firstly, this is a high quality stock. In 2017 Return on Equity was 40% and Return on Invested Capital was 30%. These returns would be the envy of most companies in the ASX 100 Index.
Secondly, Northern Star Resources Ltd (ASX: NST) continues to meet all its operational targets. First quarter production of 139,000 oz was well within its guidance of 525,000-575,000oz, while all in sustaining costs (AISCs) were at the lower end of its A$1,000-$1,050 guidance range.
Thirdly, the company is not exactly standing still either. Around $65m of expansionary capital is being committed this year to take production of its Jundee and Kalgoorlie operations to 300,000oz p.a within the next two years.
Fourthly, I consider it highly likely that Northern Star will comfortably beat the production guidance given to the market of 600,000oz.
Fifthly, Northern Star ended Q1 2017/8 with net cash of $443m. This financial strength gives it a great opportunity to make cheap bolt on acquisitions from those less well capitalised. The highly regarded West Tanami Project is one recent example, being picked up for just $4m.
Lastly, global stock markets are, of course, at an all time high, and the world’s attention has largely been focused on Harvey Weinstein. However, global instability has not gone away. Once it returns into focus, gold will be the natural safe haven.
It’s rare to find a stock that ticks all the key boxes, especially in the resources sector. But Northern Star fits that profile, both on value and quality grounds.
You might not know this market leader, but it’s making waves in Asia and already boasts a term-deposit-crushing dividend of almost 5%. A debt free balance sheet and dominant market position at home and abroad mean this company offers investors income and some real-deal growth potential.
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Motley Fool contributor James Middleweek has no financial interest in any company mentioned. 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.