There’s nothing like fear to keep the gold price on the front foot! Our gold miners are benefiting from the growing risk aversion with the sector outperforming the rest of the market. But if you are wondering which gold stock to pick for your collection, Macquarie Group Ltd (ASX: MQG) has a suggestion – it’s Northern Star Resources Ltd (ASX: NST). The broker upgraded the stock to “outperform” from “neutral” today and that is probably supporting Northern Star’s share price. The NST share price gained 0.4% to $8.36 while the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index dropped 0.6%. Northern Star…
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There’s nothing like fear to keep the gold price on the front foot! Our gold miners are benefiting from the growing risk aversion with the sector outperforming the rest of the market.
The broker upgraded the stock to “outperform” from “neutral” today and that is probably supporting Northern Star’s share price.
The NST share price gained 0.4% to $8.36 while the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index dropped 0.6%.
Northern Star isn’t the only gold stock that’s holding up better than the broader market. Newcrest Mining Limited (ASX: NCM) and Evolution Mining Ltd (ASX: EVN) dipped modestly while the St Barbara Ltd (ASX: SBM) share price jumped 1.5% to $4.30 in the last hour of trade.
Northern Star earned the upgrade from Macquarie after the miner made a $150 million offer to buy out its partners in the East Kundana joint venture (JV). The other miners involved in the JV are Rand Mining Ltd (ASX: RND) and Tribune Resources Ltd (ASX: TBR).
“We view the offer as a discount to our A$256m valuation of NST’s 51% share of the project and therefore believe the offer compelling value for NST,” said the broker.
“However, we believe the offer to be a premium to companies’ who share the 49% stake, Rand Mining and Tribune Resources, indicative combined EV of ~$105m (excluding cross-ownership between the two companies).”
Northern Star has the right of first refusal over the JV and the illiquid nature of Rand and Tribune combined with the upfront premium offered by Northern Star mean the offer is likely to be accepted.
Shares in Northern Star have rallied 44% over the past year while Newcrest is down 12% and Evolution Mining is up 26%.
In contrast, the S&P/ASX 200 index has shed nearly 6% of its value over the same period.
Despite Northern Star’s strong gains, Macquarie believes there’s more upside to the stock and has a price target of $9.80 per share on the stock.
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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. 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.