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Why the Northern Star share price could sink lower today

The Northern Star Resources Ltd (ASX: NST) share price will be one to watch on Wednesday after the gold miner released a disappointing quarterly update.

What happened in the third quarter?

During the third quarter the company achieved total production of 205,331 ounces and sold 185,296 ounces at an all-in sustaining cost (AISC) of A$1,369 or US$975 an ounce.

The Jundee Gold operation produced 81,089 ounces, the Kalgoorlie Gold operation produced 84,492 ounces, and the company’s Pogo operation produced just 39,750 ounces.

As a comparison, a note out of Goldman Sachs reveals that it was expecting production of 75,000 ounces, 89,000 ounces, and 66,000 ounces, respectively, totalling 230,000 ounces. The broker also forecast an AISC of A$1,103 an ounce.

Management explained that Pogo’s results reflect the impact of significant changeover-related activity, including the late delivery of the new mobile underground mining fleet and the introduction of a new mining method. This limited production temporarily and drove up its AISC.

Pleasingly, management believes production at Pogo has reached an inflection point and expects a massive improvement in the fourth quarter.

In light of this, it expects the company to deliver record group quarterly production in the June quarter and has maintained its full year guidance of between 850,000-900,000 ounces. It expects to hit the high end of this guidance range.

It has, however, increased its full year AISC guidance from between A$1,125 and A$1,225 an ounce to between A$1,225 and A$1,275 an ounce.

Should you invest?

Overall, I felt this was a disappointing quarter for Northern Star and wouldn’t be surprised to see its shares come under pressure today. Especially after the gold price tumbled lower overnight once again.

I would suggest investors looking for exposure to the precious metal look elsewhere at miners such as Newcrest Mining Limited (ASX: NCM) or St Barbara Ltd (ASX: SBM).

But if you're not bullish on gold, I think you would be better off looking at these blue chip shares which have been tipped as potential market beaters.

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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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