Northern Star Resources Ltd (ASX: NST) shares are under pressure on Wednesday.
The ASX 200 gold stock is down 2.5% to $14.52 at the time of writing.
This follows a broad market selloff after a tough session on Wall Street overnight.
Time to buy this ASX 200 gold stock?
Analysts at Bell Potter are likely to see this pullback as a compelling buying opportunity for investors.
That's because the broker has just initiated coverage on the ASX 200 gold stock with a buy rating and $17.50 price target.
Based on its current share price, this implies potential upside of 20% for investors over the next 12 months.
In addition, the broker is forecasting a 37.2 cents per share dividend in FY 2025. This represents a 2.6% dividend yield, which stretches the total potential return to almost 23%.
Why buy Northern Star shares?
Bell Potter notes that Northern Star is now the largest gold miner with a sole listing on the Australian share market following the takeover of Newcrest by Newmont Corporation (ASX: NEM). It said:
NST is the largest solely ASX listed gold mining company. Gold is produced from three productions centres, with six different operations. […] FY25 group gold production is guided to be 1,650koz-1,800koz at $1,850/oz-$2,100/oz.
The broker also highlights that the ASX 200 gold stock has a very positive production growth outlook. It adds:
NST's flagship operation is KCGM (Kalgoorlie Production Centre) located adjacent to Kalgoorlie in Western Australia (the Super Pit). The operation accounts for 52% of group Mineral Resources (31.6Moz), 65% of group Ore Reserves (13.2Moz), and 65% of our valuation and Target Price. KCGM's processing capacity is currently being expanded from 13Mtpa to 27Mtpa (FY27: construction completion, FY29: nameplate throughput ramp-up complete). NST guides that the expansion will lift KCGM gold production to 900kozpa from FY29 (FY24a: 437koz), resulting in All-in-Sustaining Costs of A$1,425/oz.
In light of the above and due to its attractive valuation, Bell Potter believes that Northern Star would be a great option for investors looking for exposure to gold. It concludes:
Our investment view is based on: (1) Our NPV based valuation for the Group's Ore Reserves, plus an exploration valuation applying $100/oz for unutilised Mineral Resources. (2) Total Resource to Reserve conversion is a modest ~35%, highlighting the opportunity to extend / enhance current mine lives. (3) NST has a large market capitalisation relative to other ASX listed gold companies, growing production and BP forecast earnings, and a low debt position, and therefore a sector leading M&A capability for assets that fit its target criteria. (4) NST compares well to comparable international companies, particularly following the expansion of KCGM. We see upside to the current share price from the very large Group Mineral Resource base, gold price leverage and inorganic growth.
