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Why Northern Star Resources Ltd (ASX:NST) shares jumped 15% to an all-time high today

The Northern Star Resources Ltd (ASX: NST) share price has had a stunning start to the week and has stormed higher in morning trade.

At the time of writing the gold miner’s shares are up 15.5% to an all-time high of $8.05.

Why are Northern Star Resources’ shares storming higher?

This morning investors have been fighting to get hold of the miner’s shares after they returned from a trading halt.

That trading halt was requested on Friday so the company could raise A$175 million to partly fund its US$260 million acquisition of the high-grade 4.1Moz Pogo underground gold mine in Alaska.

According to the release, Pogo is a world-class ~8Moz gold endowment which has produced 3.8Moz at an average mine grade of 13.6gpt over the past 12 years. The average annual production is currently ~300,000oz.

Due to the terms of the deal, Northern Star will receive the full financial benefit of Pogo from July 1 2018, putting the company on track to add 250,000-260,000oz to its FY 2019 production at an all-in sustaining cost (AISC) of ~A$1,175/oz (US$880/oz).

While this is a slightly higher AISC than what the company as a whole operated with in FY 2018 (A$1,029), the market still appears to believe that it will be significantly accretive to earnings. This has led to its A$175 million placement being heavily oversubscribed.

According to this morning’s release, Northern Star has successfully completed its placement to institutional investors through the issue of 26.1 million new shares at an average price of $6.70 per share.

Should you invest?

While I think that Northern Star has got a good deal with Pogo, I’m not bullish on the gold price due to rising rates so I won’t be investing any time soon.

But if you’re a gold bug and bullish on the price of the precious metal then Northern Star could be worth a look. I would choose it ahead of Newcrest Mining Limited (ASX: NCM) and Resolute Mining Limited (ASX: RSG) after this latest deal.

Where to invest $1,000 right now

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*Returns as of February 15th 2021

Motley Fool contributor James Mickleboro 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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