Northern Star Resources Ltd announces growth plans

Shares in mid-weight gold producer Northern Star Resources Ltd (ASX: NST) are down slightly today to $6.54 at the time of writing – just days after the company announced it would buy Westgold Resources Ltd’s (ASX: WGX) South Kalgoorlie Operations for $80 million.

Investors had a measured reaction to the move, which is said to be a good deal for both parties and will see Northern Star add much-needed mill capacity to its operations at below-replacement cost.

UBS brokers have labelled the deal as integral to Northern Star meeting its production goals, with the acquisition providing the company with exploration leverage as the stock trades at “a premium valuation with little risk of losing its eminent position.”

Northern Star handed down strong half-year results in February, with a 50% increase in dividend declared at a fully-franked 4.5c per share and a 14% revenue jump.

The Millennium Mine project is pitched to boost NPAT in the second-half and investors will watch what the Northern Star share price does as the acquisition comes into play, with broker consensus putting share price targets between $4.45 (Morgan Stanley) and $6.60 (Citi).

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Motley Fool contributor Carin Pickworth has no position in any of the stocks 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 Scott Phillips.

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