Why has the Northern Star (ASX:NST) share price been heading south over the past month?

Northern Star shares have been seeing some lows this month.

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A man standing in a red rock mine is covered by a sheet of gold blowing in the wind.

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During December 2021, The Northern Star Resources Ltd (ASX: NST) share price has been under $9. It has actually dropped more than 10% since the middle of November 2021.

Northern Star is one of the biggest gold miners on the ASX, with a market capitalisation of around $11 billion according to the ASX.

Is the gold price affecting the Northern Star share price?

Resource company profits are highly impacted by the price of that commodity. It costs a mining company almost the same to extract the resource month to month, but how much money it can potentially make for the resource can change quite a bit.

If the commodity price rises, then a lot of it can turn straight into profit. However, the same can also be possible in the reverse when prices fall.

The gold price can move with just as much volatility as the iron ore price, lithium price or any other resource.

On 15 November 2021, the gold price was US$1,862 per ounce according to Goldprice.org. However, by 2 December 2021 it had fallen 5% to US$1,769 per ounce. That’s the time that the Northern Star share price fell to the lowest point this month.

Both the Northern Star share price and gold price have been rising since 2 December 2021 – the ASX miner has gone up 8%.

What next?

Northern Star has made a few different announcements recently.

At the start of the month, it announced it had agreed to convertible funding with Osisko Mining, including the exclusive right to negotiate a 50:50 joint venture at the Windfall gold project in Quebec, Canada. The C$154 million (A$169 million) loan can be converted into project equity.

This Canadian project is reportedly well advanced regarding studies, drilling and underground development. It’s expected to commence production in 2024. Northern Star said this partnership provides a de-risked entry to a high-quality gold province.

In November, Northern Star also announced it was buying Newmont Corporation’s Australian power business for US$95 million. The 110MW Parkeston Power Station and associated infrastructure primarily provides electricity to Kalgoorlie Consolidated Gold Mines (KCGM). Northern Star has bought half of KCGM. Parkeston also supplies electricity to the Kalgoorlie area through its connection to the South-West Interconnected System.

There were three areas that the company sees synergies and value. The first was infrastructure and power security and control to support the requirements of KCGM. Next, is lower power costs at KCGM. Finally, it provides further options for Northern Star to implement renewable energy.

Is the Northern Star share price good value?

UBS currently rates Northern Star as a buy, with a price target of $11.20. The broker is expecting the gold price to fall back to US$1,600 per ounce over the next 12 months.

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

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

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

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