Why is the Northern Star share price sinking on Tuesday?

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

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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.

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