Why is the Northern Star share price sinking on Tuesday?

This gold miner's shares aren't glittering on Tuesday. But why?

| More on:
A woman holds a gold bar in one hand and puts her other hand to her forehead with an apprehensive and concerned expression on her face after watching the Ramelius share price fall today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Northern Star Resources Ltd (ASX: NST) share price is under pressure on Tuesday.

In early trade, the gold miner's shares are down 4% to $14.65.

Why is the Northern Star share price sinking?

Investors have been hitting the sell button today in response to a sharp decline from the gold price overnight and the release of the miner's third-quarter update.

In respect to the latter, Northern Star sold a total of 401,000 ounces of gold at an all-in sustaining cost (AISC) of A$1,844 (US$1,213) per ounce.

This was short of expectations, with the consensus estimate of 424,000 ounces for the three months.

In addition, the market was forecasting an AISC of A$1,768 an ounce for the quarter. This means that its costs were 4.3% higher than expectations for the period. This explains why the Northern Star share price is trading lower today.

Nevertheless, a strong gold price means that Northern Star generated plenty of free cash flow during the quarter. It realised an average gold price of A$3,024 per ounce, leading to sales revenue of A$1,212 million and free cash flow of A$143 million. The latter was up from A$102 million in the second quarter.

Another positive is that the company has reaffirmed its recently revised guidance. This appears to be a sign that things have not worsened for the company during the current quarter.

Northern Star's FY 2024 guidance remains 1,600,000 to 1,750,000 ounces of gold sold at an AISC of A$1,810 to A$1,860 per ounce.

'Challenging' quarter

Northern Star's managing director, Stuart Tonkin, notes that the third quarter was a challenging one for the miner due to adverse weather. He said:

The March quarter was challenging but also demonstrated the resilience of our teams at our three production centres. Adverse weather had a significant impact and contributed to the Company revising our cost guidance for the year, though I am pleased to confirm that we remain on track to deliver our FY24 production guidance into a strong gold price environment.

At KCGM, our largest and lowest cost asset, the team achieved an exceptional operational and financial performance, with the Kalgoorlie Production Centre generating the Group's highest free cash flow per ounce. Strong milling performance was achieved at Jundee while Pogo remains positioned for a stronger June quarter with throughput expected to lift. We are focused on maintaining the strong operational momentum so far seen in the June quarter, which will enable us to safely generate significant free cash flow and, in turn, superior shareholder returns.

Motley Fool contributor James Mickleboro 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 Scott Phillips.

More on Gold

rising gold share price represented by a green arrow on piles of gold block
Share Gainers

Guess which ASX gold stock just rocketed 92% on this 'outstanding' new discovery

Investor are snapping up the ASX gold stock as excitement over its gold and silver project surges.

Read more »

ETF written in yellow gold.
Gold

Should you buy ASX gold ETFs right now?

Is gold a 2024 fad or still a good long-term investment?

Read more »

rising gold share price represented by a green arrow on piles of gold block
Gold

Guess which ASX 200 gold stock is marching higher on a 'significant resource upgrade'

ASX 200 investors are bidding up the Aussie gold miner following a sizeable estimated resource increase.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Gold

2 under-the-radar ASX gold shares shining 11% brighter on Friday

These shares are having a golden finish to the week. But why?

Read more »

St Barbara share price Minder underground looks excited a he holds a nugget of gold he has discovered.
Gold

2 ASX gold shares making big news today (one up 300%!)

How is this ASX gold share up more than 300% right now?

Read more »

Calculator and gold bars on Australian dollars, symbolising dividends.
Gold

This ASX 200 gold stock can rise 30% and could be a takeover target

Bell Potter thinks investors should be snapping up this gold miner before it's too late.

Read more »

A woman's hair blows wildly as she sticks her head out the train window travelling through the desert.
Gold

Top ASX gold shares to buy in May 2024

Looking to add some investment exposure to the yellow metal this month?

Read more »

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

Are Newmont shares at a stretched valuation right now?

Here's my take on the current Newmont share price.

Read more »