Northern Star Resources’ Share Price Shaky as Gold Ticks Up (ASX:NST)

Northern Star Resources’ Share Price Shaky as Gold Ticks Up (ASX:NST)

The Northern Star Resources Ltd [ASX:NST] share price could be in for a third day of consecutive losses, even as the price of gold ticks upwards again.

NST shares had been performing well since the March crash tacking on nearly 80%.

That is despite the withdrawal of production guidance due to COVID-19 induced operating issues.

Today, the share price appears shaky as the gold miner released its guidance for financial year 2021.

At time of writing, NST shares are down 9 cents or 0.62% to trade at $14.41 per share.

The opening share price was lower at $14.32 before briefly climbing to $14.63.

ASX NST Share Price Chart

Source: Tradingview

Can you trust the guidance?

The factor potentially playing the biggest part in the share price uncertainty today is NST’s production guidance.

While there are some positives sprinkled in the announcement, the elephant in the room is guidance for the current financial year.

FY2021 guidance is given at 720,000 to 820,000 ounces of gold.

NST also said it expects production to increase by 30% over the next three years and costs to shrink by 10%.

Meaning NST might be a 1Moz producer by FY2023.

How can that be a bad thing?

It isn’t.

However, some investors are notoriously short-term focused.

Which might explain today’s share price action.

Guidance for FY2020 was given at 800,000–900,000oz, with all-in-sustaining-costs (AISC) of AU$1,200–1,300 per ounce.

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That guidance was pulled in March due to the impacts of the coronavirus.

For some investors, it might feel like the company has taken a step backwards.

AISC appears to have missed the mark too.

For Australian operations, FY2021 AISC guidance is set at AU$1,425–1,525/oz.

Though, this also needs to be considered with the current lofty gold prices.

One million ounces around the corner for NST

There is good news too in the NST announcement today.

Total group resources grew by 3.2Moz to 22.3Moz.

Even after depletion of 912,000oz.

Measured and indicated resources increased 29% to 13.8Moz, meaning there’s plenty more life in their mines.

NST believe they can maintain 1Moz per annum for at least seven years given their current reserves and resources.

They also believe 1Moz may be achieved in FY2022 with an additional capital injection of $175 million.

Does this then make NST an attractive buy given its medium-term potential?

Management are planning to combine operations at the Jundee and Bronzewing sites, which could create fruitful synergies.

Potentially dropping the AISC to just under US$1,000/oz.

Which could help improve margins further.

Another factor to consider is the growing intensity in Aussie gold mining and exploring. Our resident gold expert Shae Russell has tipped Australia to become the next ‘gold epicentre’, meaning there could be big spikes in Aussie gold stocks. If you want to learn more, download your free report here.

Kind regards,

Lachlann Tierney

For The Daily Reckoning Australia