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Northern Star keeps Outperform rating, stock target on acquisition

EditorNatashya Angelica
Published 12/03/2024, 11:32 PM
NESRF
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On Tuesday, BMO Capital maintained its Outperform rating and AUD20.00 stock price target for Northern Star Resources (ASX:NST:AU) (OTC: NESRF), a gold producer with a market capitalization of $11.87 billion. According to InvestingPro data, the company has demonstrated strong financial health with a "GREAT" overall score and has maintained dividend payments for 13 consecutive years.

The firm highlighted Northern Star's recent announcement of acquiring De Grey Mining (DEG-ASX) through an all-share deal. This acquisition reflects a 37% premium over the closing price on Friday and is poised to boost Northern Star's annual gold production capacity.

Northern Star's strategic move to purchase De Grey Mining is set to increase its gold production from approximately 2 million ounces per annum to around 2.5 million ounces by the fiscal year 2029.

With impressive revenue growth of 19.13% and a healthy current ratio of 2.57, InvestingPro analysis suggests the company is well-positioned for this expansion. The acquisition is not only expected to enhance Northern Star's growth trajectory but also to keep its production costs in the lower half of the global production spectrum.

The Hemi Project, which is part of this acquisition, is considered world-class and offers substantial underground and regional exploration potential. BMO Capital's analysis, based on the firm's metal price estimates and conservative projections for the Hemi Project, indicates that the transaction should be neutral to Northern Star shareholders. However, at the current spot pricing, the acquisition could be slightly accretive.

BMO Capital's reiteration of the Outperform rating and price target reflects confidence in Northern Star's operational and financial outlook post-acquisition. The transaction is seen as a step towards solidifying the company's position in the gold mining industry while potentially delivering value to shareholders in the long term.

In other recent news, Northern Star Resources, a prominent mining company, witnessed a revision in its stock outlook by BMO Capital, which lowered its price target from AUD21.00 to AUD20.00, while maintaining an Outperform rating.

The adjustment was prompted by the company's first-quarter production results for the fiscal year 2025, which fell short of expectations due to a halt in operations at the KCGM mine. Despite this, Northern Star managed to surpass BMO Capital's projections for gold sales, thanks to an effective drawdown of gold in circuit inventory.

The company also reported a solid quarter during its recent earnings call, with a robust net cash position of $148 million and a net mine cash flow of $122 million. CEO Stuart Tonkin announced a target of 2 million ounces of production by FY '26 and an increase in free cash as production rises.

Northern Star is progressing with strategic projects, including the KCGM expansion, which is on track and within budget, and underground development at Jundee.

Despite some underperformance in areas like Thunderbox, Northern Star remains optimistic about its operational efficiency and long-term strategy, as evidenced by an exploration budget of $180 million and plans to begin paying corporate tax on Australian operations in Q3.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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