Why the Northern Star (ASX:NST) share price is sinking 6% today

The Australian-based gold miner’s shares is on the slide today…

| More on:
Man in mining or construction uniform sits on the floor with worried look on face

Image source: Getty Images

The Northern Star Resources Ltd (ASX: NST) share price is firmly in the red today. This comes after two leading brokers provided an update following yesterday’s quarterly report and a major asset sale.

At the time of writing, the Australian gold miner’s shares are down 5.86%, trading at $10.13.

What’s did Northern Star report?

The Northern Star share price is faltering in early afternoon trade despite revealing it has divested its Kundana assets to Evolution Mining Ltd (ASX: EVN) on Thursday. The price tag for Kundana’s operations is listed for $400 million.

In addition, the company also announced yesterday that it hit its FY21 guidance.

According to its release, Northern Star achieved a strong operational and financial result for the 2021 June quarter.

Gold sales during the three months totalled 444, 012 ounces at an all-in sustaining cost (AISC) of $1,459 per ounce. This brings gold sold for the full-year (FY21) to 1.6 million ounces at an ASIC of $1,483 per ounce.

Northern Star highlighted that this was in-line with its FY21 guidance of 1.5 million ounces to 1.7 million ounces. AISC also came within the guidance range of $1,390 to A$1,520 per ounce.

Net mine cash flow for the quarter came to $182 million. The miner attributed this to investments of $176 million in growth capital and $39 million in exploration activities.

Northern Star declared a healthy balance sheet with a liquidity of $1.14 billion, including $338 million in undrawn revolving facilities. Cash and bullion stood at $803 million, along with $662 million in corporate bank debt.

The company’s hedge book (total outstanding contracts and transactions) is at 801,570 ounces at an AISC of $2,286 per ounce.

Reserves lifted 8% to 21 million ounces and resources grew by 15% to 56 million ounces over 9-month period. Closing ore stockpiles are currently sitting at 3.2 million ounces.

Words from the managing director

Northern Star managing director Stuart Tonkin welcomed the company’s result, saying:

It was a strong operational performance from our recently-merged team with production and costs comfortably in line with the undertakings we provided to the market.

This flowed through to our financial results, with cash flow rising significantly from the previous quarter, leaving us with cash and bullion of more than A$800M at the end of the financial year.

Mr Tonkin also commented on its merger with Saracen Mineral Holdings, adding:

As we bed down the merger, the savings and the productivities are coming through at numerous levels. And the scale of our business, now underpinned by Reserves of 21Moz exclusively in tier-one locations, is exceptional.

Broker update

The most recent broker note came from Goldman Sachs today which raised its price target by 3% to $13.10.

Citi followed suit by providing its 12-month outlook for Northern Star, initiating a price of $12.90.

The latest reports from both brokers imply an upside to the current Northern Star share price of around 25%.

About the Northern Star share price

Northern Star shares have failed to take off over the last 12 months, dropping more than 36% since this time last year. In 2021 alone, the company’s shares are down around 23%.

Based on valuation grounds, Northern Star is the ASX’s 40th largest company with a market capitalisation of approximately $11.8 billion.

Should you invest $1,000 in Northern Star right now?

Before you consider Northern Star, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Northern Star wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Aaron Teboneras owns shares of Northern Star Resources Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

More on Gold