Why Newcrest (ASX:NCM) and Northern Star (NST) shares are flying high today

Why Newcrest Mining Ltd (ASX:NCM) and Northern Star Resources Ltd (ASX:NST) shares are storming higher and could keep going…

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The Newcrest Mining Ltd (ASX: NCM) share price and the Northern Star Resources Ltd (ASX: NST) share price have been strong performers on Friday.

At the time of writing, the shares of these gold miners are both up 4%.

Why are Newcrest and Northern Star shares charging higher?

There have been a couple of catalysts for the rise in the Newcrest and Northern Star share prices today.

The first is a rise in the gold price overnight. According to CNBC, the spot gold price rose 1.6% to US$1,764.70 an ounce after bond yields retreated.

This has given the overall sector a lift, leading to the S&P/ASX All Ords Gold index rising 3% this morning.

What else is driving their shares higher?

In addition to the rising gold price, a broker note out of Goldman Sachs this morning has given their shares a boost.

According to the note, the broker has upgraded both Newcrest and Northern Star to buy ratings from neutral.

Newcrest share price is cheap

In respect to Newcrest, Goldman has upgraded its shares to a buy rating with an improved price target of $33.50.

The broker made the move for three key reasons. One is its valuation. Goldman notes that its shares were trading at 0.76x net asset value (NAV) prior to today’s gain. This is the largest discount among ASX 100 gold peers and North American gold majors.

In addition to this, the broker points out that Newcrest’s value-accretive growth pipeline continues to develop, with project catalysts to come.

And thirdly, it believes its earnings will hold up at current levels despite production declines in the coming years.

Northern Star share price trading at a big discount

As for Northern Star, the broker believes the Northern Star share price is trading at an attractive level after recent weakness.

It notes that its shares trade at 0.83x NAV compared to 1.2x by its North American peers.

Outside this, Goldman likes Northern Star due to its organic growth opportunities across all production hubs and potential synergies from its merger with Saracen Mineral.

This could make both gold miners worth considering if you’re looking for exposure to the precious metal.

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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