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Northern Star share price crashes lower on weak update

The Northern Star Resources Ltd (ASX: NST) share price has come under pressure on Thursday.

In morning trade the gold miner’s shares are down almost 7% to $10.38

Why is the Northern Star share price sinking lower?

This morning Northern Star released a first quarter update which fell short of expectations.

During the quarter, group gold sold came to 184,005 ounces at an all-in sustaining cost (AISC) of A$1,493 an ounce (US$1,024 an ounce).

This comprised Australian sales of 155,043 ounces at an AISC of A$1,250 an ounce (US$858 an ounce) and Pogo sales of 28,962 ounces at an AISC of US$1,919 an ounce. Considering the spot gold price is hovering around the US$1,500 an ounce mark, the latter was very disappointing.

However, it was due to very low grades, which management insists are not reflective of Life of Mine grades. They were a result of mining sequence and are expected to improve greatly as “development accesses new mining zones in higher grade areas and stoping contribution rises to 60% of feed.”

Despite the Pogo weakness, Northern Star was still able to generate underlying free cashflow of A$28 million in the September quarter. This led to its cash, bullion and investments rising A$11 million to A$372 million over the quarter.

Northern Star’s Executive Chairman, Bill Beament, was pleased with the performance of its Australian operations.

He said: “The Australian operations, underpinned by Jundee, were comfortably in line with our production guidance and ensured we generated strong cashflow as a group for the quarter.”

The chairman remains very positive on the Pogo operation despite the weak quarter.

Beament added: “At Pogo, we made more significant progress with our growth strategy. This is demonstrated by further increases in the mine development rates, which are now on the cusp of hitting the increased monthly target of 1,500 metres.”

“We have no doubt that the grade will improve as we access new mining zones and increase the stoping tonnes. This mine development will also end the need for us to utilise lower-grade feed as a supplement.”

“We believe Pogo is well on the way to being the number one asset in our portfolio,” the chairman concluded.

Elsewhere in the industry, the Newcrest Mining Limited (ASX: NCM) share price and the Saracen Mineral Holdings Limited (ASX: SAR) share price are trading flat in late morning trade.

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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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