Northern Star Resources Ltd (ASX: NST) shares have been in focus this week for a couple of reasons.
One is volatility in the gold sector following a shift out of safe haven assets. The other is news that the acquisition of De Grey Mining Ltd (ASX: DEG) is now complete.
In light of the latter, let's take a look and see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the gold miner following this addition.
Are Northern Star shares a buy?
Macquarie is a fan of the transaction and believes that the Hemi project will be a great addition to Northern Star's portfolio. It said:
Hemi is the prize: DEG's key asset is the Hemi Gold Project (Hemi) in the Pilbara of Western Australia. Hemi is a large scale open pit project with 11.2Moz of gold resources and 6.0Moz of reserves with forecast (DEG's Sept 2023 DFS) average annual production of 530kozpa over +10- years. Our Hemi outlook is broadly based on the DEG DFS but we also assume an underground (UG) project which could boost production ~8% to ~570kozpa. We also assume pre-produciton capex of A$1.9Bn and an AISC of ~A$1,500/oz which are 38% and 19% higher than the DFS respectively but in line with VA consensus.
Time to buy
In light of this and its positive view on gold, the broker sees a lot of a value in Northern Star shares at current levels and is urging investors to snap them up.
According to the note, the broker has recommenced coverage on the gold miner (after a period of research restriction) with an outperform rating and $27.00 price target.
Based on its current share price of $21.03, this implies potential upside of 28% for investors over the next 12 months.
To put that into context, a $10,000 investment would turn into approximately $12,800 by this time next year if Macquarie is on the money with its recommendation.
It is also worth noting that the broker is forecasting a 50.8 cents per share dividend in FY 2025. This represents an attractive 2.4% dividend yield at current prices.
Commenting on its outperform rating for Northern Star's shares, the broker concludes:
NST's acquisition of DEG makes sense with Hemi accretive on production, reserves and NAV but also enhancing growth and 5-year NPV upgrade momentum. The project also looks set to dovetail nicely with the KCGM expansion and should drive NST to +2.5Mozpa by FY29.
