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Northern Star share price falls after Echo takeover update

The Northern Star Resources Ltd (ASX: NST) share price is under pressure after an announcement regarding Echo Resources Limited (ASX: EAR).

What did Northern Star announce?

The Aussie gold miner said its 33 cents per share (cps) offer for Echo Resources share is the last and final offer.

This means that Northern Star will not be increasing the Offer Price for the remaining Echo shares.

Northern Star currently holds a 59.66% stake in Echo and is looking to takeover the smaller gold miner.

On 20 August, Northern Star put in an offer that represented a 39.4% premium on Echo’s Volume-Weighted Average Price (VWAP).

The Aussie miner intends to take Echo Resources off the ASX if it is successful in its takeover of 75% or more Echo shares.

Why is the Northern Star share price falling?

While this morning’s announcement may have played a part, Northern Star also delivered a lacklustre quarterly update yesterday.

During the quarter, Northern Star reported 184,005 ounces of gold sales at an all-in sustaining cost (AISC) of US$1,024 (A$1,493) per ounce.

What disappointed investors more was the higher AISC recorded by the company in its Pogo operations, selling 28,962 ounces at US$1,919 (A$2,811) per ounce.

Northern Star’s Australian sales came in at 155,043 ounces with an AISC of US$858 (A$1,250) per ounce,

Northern Star did post strong underlying cash flow of A$28 million for the quarter in a mixed result for the group.

Is the Northern Star share price a buy?

While Echo shareholders are encouraged to accept the offer, it’s not always that easy with takeovers.

The Northern Star share price has opened lower this morning but is still up ~10% since the start of January.

Given the S&P/ASX 200 Index (INDEXASX: XJO) has climbed 19.92% in the same time, shareholders would be disappointed.

This is particularly the case given gold has had generally a good year in terms of spot prices.

I’d expect Northern Star shares to climb higher in 2020 if we see continued concerns around Brexit and the US–China trade war.

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Motley Fool contributor Kenneth Hall 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.