The Northern Star Resources Ltd (ASX: NST) share price is up over 8% since last Thursday when it was trading around $8.60. As of yesterday, the share price hit over $9.30 but has since pulled back to around $9.22 at the time of writing.
Shares of this mid-cap gold miner have been yo-yo-ing between $8 and $10 over the last 6 months after a stellar rise over the past decade (lucky investors who bought Northern Star shares in 2009 would have paid a single cent for the shares – a 93,000% return on today's prices!)
Northern Star is a gold miner with operations in Australia and North America, which is fantastic from a sovereign risk point of view. By contrast, rival gold miner Newcrest Mining Limited (ASX: NCM) has vast operations in Papua New Guinea, Indonesia, and the Ivory Coast – which seems very exotic by comparison to say the least.
Northern Star has ramped production from 100,000oz of gold per annum from a single mine in 2010 to over 850,000oz per annum across three mines today. The company acquired a fourth site in late 2018 – the Pogo mine in Alaska, which the company hopes will add substantially to production numbers going forward.
Northern Star currently has a cost base of A$1,175/oz on average, which looks pretty good considering an ounce of gold is currently trading for around A$1,827. Being an international commodity, gold is universally traded in US dollars. Since Northern Star has mines in Australia and trades on the ASX, currency fluctuations between the US dollar and the Aussie dollar directly impact the profitability of the miner, as well as movements in the gold price. As the gold price in Australian dollars is up almost $30 in the past week, this no doubt has helped lift the Northern Star share price over the same period.
Foolish Takeaway
The ongoing Brexit debacle, the US Federal Reserve's new-found dovish tone and continued discussion surrounding the yield curve inversion are issues that continue to simmer away. Nervous investors are keeping gold close at hand as a result and I believe this is translating into gold miners as well. Speculating on fear is a dangerous business and investors should be wary about playing this emotion when it comes to a stock like Northern Star, which is trading on a P/E ratio of nearly 30.
