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Our best ASX-listed gold mining company, and possibly the best run gold miner in the world. A core holding in my SMSF, as well as in most of my other portfolios, including my Strawman.com virtual portfolio.

02-Feb-20: Reviewed my ("stale") valuation for NST. Looks fine to me. I'm maintaining my $14 PT for Northern Star Resources. Still the best run gold miner in Australia and still a core holding in my SMSF.

04-Aug-20: Reviewed my ("stale") valuation again. Need to raise. Going up another 20% from $14 to $16.80. NST are already above $15, so it's not a particularly bold prediction. However, with the gold price still rising, there's every reason to think that Australia's second largest (and best run) gold miner will continue to rise as well.

02-Feb-2021: I still think NST are going back to $16.80 and beyond, and I'm going to leave my valuation at $16.80. In the shorter term, like in the next 12 months, I think they will reach $16, which is what I've based my SAR valuation (of $6.06) on. SAR are about to be absorbed into NST as the two companies merge this month. I've discussed that in much more detail in various straws and in my SAR valuation. My $16.80 valuation for NST is a 24 month price target, so by Feb, 2023. I hold NST and SAR.

28-July-2021: Update: So - here we are, my price target for NST has been $16.80, and their regularly trading at below $10/share nowadays, mostly I suspect due to Bill Beament leaving to head up Venturex Resources (VXR), something that not too many people saw coming. That announcement came shortly after the successful merger of NST and Saracen (SAR) who were the 2nd and 4th largest Australian-HQ'd, ASX-listed, pure-play gold producers. The merged group, which is still called Northern Star Resources (NST) is still our 2nd largest, still behind Newcrest Mining (NCM), but NST have now joined NCM as being one of the 10 largest gold producers globally, both in terms of ounces of gold produced annually, and in terms of market capitalisation.

I believe that NST's new "Global top 10 gold producer" status will cause a positive re-rating at some point in the future when gold is rising again at a good clip, but for now it's all about Bill leaving, which is understandable, because it was his company. He was the visionary leader behind NST without doubt. However, while he had the vision, and the position of executive Chairman, his CEO Stuart Tonkin was executing Bill's vision during those years, and Stuart remains with NST, and has become their Managing Director (MD) now in addition to remaining their CEO. They also have the Saracen guys there who are no dummies; they did an outstanding job building Saracen up to become Australia's 4th largest gold producer prior to the merger. More recently NST have appointed Michael Chaney (Chairman of Wesfarmers and previously the Chairman of Woodside Petroleum) as Northern Star's new Chairman.

I still hold NST in 3 of my 4 real life portfolios and they are also one of my largest positions in my Strawman.com virtual portfolio, a decision that has certainly negatively impacted my performance in recent months, however they are worth a LOT more than $10/share IMHO, and there is a positive re-rating coming once the market realises that the company still has a bright future WITHOUT Bill Beament.

Of course, as with any commodity producer, the price of the commodity that they produce (gold in this case) will be the most important factor in determining their future prospects.

Another thing that is weighing on sentiment with both SBM and NST is their higher costs (AISC) this year. I think that is temporary, and that their costs will reduce over the coming years, however it is also important to remember that despite higher costs at this point in time, due to a variety of factors, these gold producers are still highly profitable; they are still producing gold at a far lower cost than what they are selling it for. The gold price would have to come down a very long way for them to become unprofitable, and in my opinion the gold price is much more likely to rise than to fall over time. I am therefore very comfortable to hold NST and other gold producers during these periods of negative sentiment around the sector, and wait for that tide to turn. However I am lowering my PT (price target) for NST to $14.50 because I believe they deserved to trade at a quality premium due to Bill Beament running the company, and now that he is not there any longer, I'm taking that premium out of my valuation. If the gold price rises substantially from here though, NST will take out my new PT quite quickly I would expect.

27-Jan-2022: Update: This valuation has been marked as stale, so I'm reviewing it and updating it, however I am not changing the price target (PT) (a.k.a. Target Price or TP) which I'm leaving at $14.50, because I still feel that if gold takes off, which it well could, Northern Star will be among the leaders in terms of share price appreciation. They recently released their December 2021 Quarterly Activities Report  on 20-Jan-2022 and their SP rose +98 cps (+11.2%) on the day, closing at $9.73. Along with 99% of the market however, probably more, NST has been sold off over the past few trading days and they closed yesterday (25-Jan-2022) at $9.28.

These market moves haven't changed the intrinsic valuation of NST, which as their Dec Qtr Activity Report showed, is greater than what the market has been attributing to the company. Because they are Australia's second largest listed gold mining company, AND because they one of the top 10 global gold miners in terms of production (ounces of gold produced per annum), they are going to be firmly in the frame when gold goes for another positive run.

I won't go on. I've drunk too much alcohol tonight to elaborate too much without going way off topic and probably wouldn't make much sense anyway, but suffice to say that $14.50 looks fine to me for a 25 month PT, i.e. by Feb 2024 (the month I I turn 58). And two years is really just around the corner. And $14.50 is +56% above the current price, so that explains why they are one of my largest positions both in real life and here on Strawman.com.

They are not likely to multibag - they're not one of those types of stocks, but they certainly have the potential to do very well in a sector that may well outperform when most of the rest of the market goes decidedly pear-shaped. That hasn't proved to be the case yet - in this sell-down, but in the past few market crashes gold stocks headed south initially, then gold rose sharply and gold producers did very well.

Call it a hedge. Call it what you like, but I'm holding plenty of NST. They look cheap here to me, and they are run as a business first and as a gold miner second. The way they should be.

Highly profitable. Outstanding total shareholder returns over decent periods of time. Lots to like. I'm a big fan of this company and a happy holder.

Above - Stuart Tonkin, CEO & MD of NST. Below, Stuart with Bill Beament who was NST's founder and Executive Chairman up until when he left in 2021 to head up Venturex, which is now called Develop Global (ASX: DVP). Stuart has been CEO of NST since 2016, so he knows the company VERY well.

07-Sep-2022: This one was marked as stale, so I'm updating it and reducing the price target for NST down to $10.75, something a bit more achievable now that Bill Beament has left the company and nobody seems to like them anymore. They are still my #1 pick in the gold sector, in terms of clear upside, quality, and scale. When the gold price goes for another run, NST won't get left behind. They are one of the globe's largest 10 gold mining companies now, and Australia's second largest, and they will get plenty of investor attention from around the world when gold miners are in demand again. In the meantime, I believe Stuey and his team will keep doing what they do best which is to run the company as a profitable company first, and as a miner second.

19-Jan-2023: Update: The following is from NST's December-2022-Quarterly-Activities-Report.PDF (released today):

"Our purpose to deliver superior shareholder returns is underpinned by responsibly executing the Company’s profitable growth strategy. Over the past 12 months, Northern Star has been the best-performing senior global gold stock on a total shareholder return (TSR) basis, delivering a TSR of 20% compared with the S&P/TSX Global Gold Sector Index TSR of -1% and VanEck Gold Miners ETF TSR of -7%. Further, Northern Star ranks as the 8th best TSR performer across the ASX 50 Index (Australian 50 Leaders) in calendar 2022."

"Northern Star’s disciplined capital allocation priorities remain returning cash to shareholders, investing in organic profitable growth and maintaining a strong balance sheet. During the quarter, the Company continued its A$300 million buy-back program, which is 42% complete (A$127 million or 15.5 million shares)."

--- end of excerpt ---

I have explained during the past week over in the "Gold as an investment" forum that NST has thrashed the other two ASX-listed large-cap pure-play gold miners over the past six months, 12 months, and 10 years (Northern Star have 10-bagged over 10 years) while NCM actually went backwards. NST is one of the few gold producers that has strong positive returns over all three of those time periods, and they're so far above the other big producers that they're really in a league of their own.

As they point out in today's announcement, they've not only outperformed the global gold sector (so all of the world's larger gold miners) over the last year, they've also provided the 8th best TSR (total shareholder return, which adds capital gains to dividends) of the ASX's largest 50 companies (the ASX50 index) in calendar 2022 (i.e. the twelve months ended 31-Dec-2022). And they're 42% of the way through an active $300 million share buyback, which is yet another way of rewarding their shareholders. Obviously, the more shares they buy back and cancel, the less shares are left outstanding, therefore the value of each remaining share increases.

Up until September last year I had a $14.50 valuation (actually a price target in my case rather than a valuation) on NST, but I lowered that to $10.75 because NST had been trading below $8 and a 80%+ rise to $14.50 seemed a few years away at that point. Well they are now trading back above $12/share and I think $14.75 is quite achievable from here if sentiment remains positive for a year or two.

I maintain my position that NST is the best gold producer (by a country mile) that we have listed on the ASX. They're shareholder focused, they're profitable, they're diversified by number of mines and also by geographical location of those mines (Australia and Alaska), and they are very disciplined when it comes to cost control and with M&A activity.

They remain one of the largest positions in all of my major real life portfolios and the largest position in my SMSF - and also the largest position in my Strawman virtual portfolio.

The S&P/ASX50 Accumulation (Total Return) Index (ASX: XFL) returned +45% over the 10 years. I've left it off that chart above because the result (of XFL inclusion) ended up over the top of the +52% result of the XJO (S&P/ASX200 Total Return Index) and the XJO (largest 200 ASX-listed companies) would be more applicable to most people here than the XFL (largest 50 companies), and the XJO outperformed the XFL anyway.

That chart was created by me this afternoon (using Commsec) after the market had closed, so the prices are current as of today (Wednesday 19th Jan 2023). NST has still 10-bagged (over +1,000% return) while the larger Newcrest Mining (NCM) has lost 5% in share price terms. This chart is only showing the share price performance of NST, EVN & NCM, but is showing the total return (with dividends reinvested) for the XJO (ASX200). Obviously the dividends that have been paid over the past 10 years changes the results of the three gold producers, and would drag NCM into positive territory (but not by much) and increase the positive results of both EVN and NST.

Not only has NST clearly outperformed by a huge margin, it is my firm belief that they are very well positioned to continue to outperform from here.

19-Nov-2023: Update: This one was marked as stale, so I've reviewed it. And raised my price target again. The NST SP came close to my previous $14.75 price target ("valuation") when they closed at $14.40/share on 14th April this year (2023). They've moved around a bit since then, and are currently back below $12, but their SP rose +44 cents (+3.89%) on Friday, so they can move up and down fairly rapidly when sentiment is strong (either way).

They held their AGM on Thursday (16th Nov 2023) and their AGM Presentation was short (6 pages) and to the point. Here's slides 3 to 6:

Source: NST-FY2023-Annual-Report-Chairman's-AGM-Address-and-Managing-Director's-Presentation.PDF

Newcrest Mining has now been acquired by US-based Newmont Gold Corp, so Northern Star Resources (NST) is now Australia's largest ASX-listed and Australian-headquartered Gold Mining Company, and one of the top 10 largest gold miners in the world in terms of both market capitalization and volume of gold produced annually.

They have net cash of A$362 million, they announced a share buy-back of up to A$300 million in August last year and they have bought back A$169 million worth of their own shares so far, as well as increasing their dividends, demonstrating their strong focus on achieving superior shareholder returns.

NST have now achieved investment-grade credit ratings from Moody’s, S&P and Fitch, and in April they issued US$600 million of ten-year senior guaranteed notes at an interest rate of 6.125% pa. Their superior credit ratings allow them to borrow money at very competitive rates, which gives them the flexibility to participate in M&A if they wish to, or to upgrade their existing assets.

NST have now completed the mill expansion at Thunderbox and the plant has commenced ramping up to its full 6Mtpa capacity. In June, the Board approved the final investment decision on the expansion of the Fimiston ("Super Pit") processing plant which will see the milling capacity increase from 13Mtpa to 27Mtpa by FY27, with throughput expected to reach nameplate capacity from FY29. This A$1.5 billion investment will strengthen their portfolio, lower their costs (which are relatively high at this point) and materially increase their free cash flow.

They also now have Marnie Finlayson on their Board. Marnie is the brother of Raleigh Finlayson who built up Saracen Minerals to become Australia's 4th largest gold producer at the time that they merged with (or were acquired by) NST a couple of years ago. Raleigh then left NST to start up Genesis Minerals, which he has already built up to today being one of Australia's ten largest "pure-play" gold producing companies (by "pure-play" I mean NOT including companies like Sandfire or BHP who produce gold as a byproduct of other production).

Marnie is also Managing Director, Battery Minerals, at Rio Tinto (RIO).

Raleigh Finlayson (GMD) with sister Marnie Finlayson (RIO, NST) near the WA School of Mines in Kalgoorlie. Chuck Thomas

Source: Marnie and Raleigh Finlayson: Rio’s lithium star and her Genesis CEO brother (afr.com) [25 Aug 2023]

Excerpt:

Marnie Finlayson is the battery minerals boss leading Rio Tinto into the decarbonisation era. Raleigh Finlayson is a precious metal stayer chasing more success in gold, where his sights are set on a 126-year-old mine.

The sister and brother grew up tormenting one another on a dusty sheep station in Western Australia. They embody the old-meets-new reshaping of WA’s resources industry in their vast childhood backyard, the Goldfields.

Marnie and Raleigh were raised in the Goldfields, a region as rich in the precious metal as anywhere in the world, a major source of nickel for more than 50 years, and now, a lithium hot spot.

Their entrepreneurial uncles – Peter and Chris Lalor – once controlled a string of gold mines and produced tantalum from assets that are now regarded as world-class lithium discoveries.

Those mines – including Greenbushes in WA’s south-west and Wodgina in the Pilbara – are valued at tens of billions of dollars. The Lalor brothers were about 30 years too early to capture any of that value.

There is mutual respect between Marnie and Raleigh, who are graduates of the WA School of Mines in Kalgoorlie. There is also plenty of sledging and stirring. Raleigh, who is younger, took years to grow into his oversized ears and was “spoiled rotten” as the baby of the family.

Marnie hates being reminded that he taught her to drive.

If you believe Raleigh, their jaunts in an old ute sometimes took them onto the highway – aged four and seven. Marnie declares he’s a notorious teller of tall tales.

Marnie, Rio’s managing director of battery minerals, is keeping a close eye on the lithium projects springing up in the wider Goldfields region. Raleigh, as boss of Genesis Minerals, is digging into family history after Genesis’ $628 million acquisition of the Gwalia gold mine once controlled by their maternal uncles.

The familial ties go further: Genesis also has gold projects, including Ulysses, on land once part of their paternal grandfather’s Melita sheep station.

Marnie and Raleigh are both excited by the emergence of lithium in the Goldfields, where Lynas Rare Earths is building a downstream processing plant at Kalgoorlie.

“I think it’s brilliant,” Raleigh says.

“When gold has had its really low days, nickel has supported it and vice versa. All of a sudden we’ve got another commodity [lithium] or commodities when you think about rare earths, that help support the region. You don’t have that sort of feast or famine, and it’s more sustainable.

“I remember not that long ago you couldn’t sell a house in Kalgoorlie and now suddenly, you can’t get one.”

Marnie, Raleigh and their older brother, Daniel, grew up on Jeedamya Station near Leonora.

All three spent school holidays working at the Gwalia gold mine, about 40 kilometres from their home, when their uncles were directors of Sons Of Gwalia. The mine’s long history includes a chapter late in the 19th century when it was run by Herbert Hoover, later the 31st president of the United States.

The 46th president, Joe Biden, has fired up lithium interest in the wider Goldfields region through his Inflation Reduction Act.

Marnie was hooked on mining from the start. Raleigh grew to love it. Daniel has his own successful business on the WA coast making cray pots, the traps used to catch lobster that fetched huge prices on the Chinese market before Beijing’s trade war in 2020.

No childhood on the Goldfields where sheep eventually gave way to cattle can be described as idyllic.

“We grew up in quite a difficult environment. We loved it and hated it at the same time, growing up on the station and working hard,” Marnie says.

Raleigh says: “It was tough just about every year, but a drought would make it even harder. But every year was a good year as far as how tight the family was and continues to be. So for us, there was no better childhood to be blunt, as hard as it was.”

Pocket money

Even shovelling rocks at Gwalia for $5 an hour could not dissuade Marnie from mining.

“I shovelled rock for 12 hours a day. It was my first experience in the industry and I absolutely loved it. From the first moment I started, I knew that the mining industry was absolutely the one for me,” she says.

Marnie presented a battery minerals strategy she developed to the Rio board at the end of 2021. She has lived in Serbia, where she was in charge of Rio’s Jadar lithium project and also ran Rio’s borates operations in California.

The Rio board was sufficiently impressed to back it and make her head of battery minerals.

Why a passion for battery minerals for someone who grew up in the Goldfields, and agreed to join the board of another gold miner, Northern Star, last year?

“I’m passionate about ensuring that mining delivers the materials that are required for the energy transition because I believe that’s critical for ensuring there’s a good future for my children and their children,” she says.

“I see myself in a perfect position to be able to mobilise that, not just through the materials that are produced through the battery materials strategy, but more importantly – and this is Rio’s objective – how they are produced. We’ve got an overall societal challenge about ensuring that mining is done in a sustainable manner.”

Marnie joined Northern Star’s board after Raleigh’s departure as its managing director.

Will they ever work together? “You never say never,” Marnie says. Chuck Thomas

Superpit

It was around August 2021 when Raleigh started to think about his next big challenge after deals that included Saracen’s $1.1 billion acquisition of a half share in the Superpit mine on Kalgoorlie’s doorstep, and a $16 billion merger with Northern Star. His gold industry contemporaries Bill Beament and Jake Klein were lamenting the investor focus on decarbonisation and related minerals.

Asked by The Australian Financial Review in March last year about why he stuck with gold and set about consolidating Leonora, Raleigh replied: “It would have been the easy and obvious option to flip out of gold and into the new fancy metals.”

Today, his response is more even-handed.

“It’s what I know,” he says.

“I could very comfortably go to those [Genesis] shareholders and articulate the strategy and articulate that we’ve got good knowledge of the area and that we have operated lots of mines to be able to get that type of equity over the line at zero premium or zero discount.

“If it had been a green metal and I’m sitting there trying to convince myself – let alone my shareholders – that I’ve got experience and knowledge in that space, it is probably a different conversation.”

Raleigh acknowledges that lithium has “gone beautifully” since he opted to stick with gold. He also points out the gold price is hovering at about $3000 an ounce compared to about $900 an ounce when he started out at Saracen.

Peter and Chris Lalor founded the third and final iteration of Sons of Gwalia in the early 1980s, and turned the listed company into one of Australia’s biggest gold producers at its peak. Things went badly in the mid-2000s.

Early bets

In its heyday, Sons of Gwalia was the world’s biggest supplier of tantalum to the electronics industry. Most of it came from Greenbushes, whose abundant lithium was largely ignored.

Greenbushes is now considered the world’s best hard rock lithium mine and is owned by New York-listed battery chemical giant Albemarle, China’s Tianqi and its partner, IGO Limited.

In 2002, the late Peter Lalor said there was no magic in “new metals” after having his fingers burnt on a mistimed lithium venture once.

Hype around lithium and its use in ceramics, glass, speciality steels and even treating bipolar disorder in the 1990s had compelled Sons of Gwalia to build a lithium plant next to the Greenbushes tantalum plant.

Lalor described how a rival producer out of Chile ruined his plans to dominate what was then a small global market in lithium.

“They had a much lower cost of production and, basically, we were not competitive,” he recalled. “It was essentially a better ore body in the form of a brine deposit, which meant the lithium was recovered in an evaporative process. A hard-rock ore body can never compete with that.”

The brine versus hard rock debate rages today, but these days the big players Albemarle, SQM, and future partners Livent and Allkem, keep a foot in both camps.

Rio too; it acquired the Rincon brine project in Argentina for $US825 million last year and hasn’t given up hope on the Jadar lithium-borates project despite Serbia revoking its licences and approvals in January last year.

Living in Serbia opened Marnie’s eyes to the pace of electrification in Europe. “I really got to understand the importance of batteries for the energy transition and became very passionate about it,” she says.

“We as an industry have a role to play to show how mining can be done well, and how we minimise the impacts and how important it is to the future.”

Small world

Raleigh bumped into old mate and Northern Star chief executive Stuart Tonkin, another WA School of Mines alum, on the streets of Kalgoorlie.

“Stu goes, ‘I always suspected Marnie was better and smarter than you, and now it’s been confirmed’,” he recalls. “I said, ‘Mate, I didn’t have to suspect it. I’ve always known it’.”

Raleigh, who turns 45 in November, says their professional paths are likely to cross in either an executive or non-executive capacity somewhere down the track after the near-miss at Northern Star.

“We do talk a lot about what she is seeing and thinking and ditto for me. We sort of mentor each other in lots of ways, provide support and spitball different ideas,” he says.

Marnie says Raleigh didn’t apply himself in the classroom but had a lot of fun. His boarding school encouraged him to get an apprenticeship, and their father suggested the army.

His second job, after Gwalia, was working part-time at the Superpit.

“One thing Ral and I absolutely share is a passion for people, and we’ve got very similar leadership styles. We just apply them in different types of companies,” Marnie says. “We do talk a lot about leadership.”

Will they ever work together? “You never say never,” Marnie says. “If you’d told me five years ago, ‘You’ll be managing director of battery minerals for Rio Tinto and sitting on the Northern Star board’, I would have laughed.”

--- end of excerpt ---

See Also: Appointment-of-Non-Executive-Director-Marnie-Finlayson-to-NST-Board-13-09-2022.pdf

In summary: NST has very good and highly-competent Management and a very experienced Board, Chaired by ex-Wesfarmers' Michael Chaney, who are focussed on superior shareholder returns and have a superb capital allocation record compared to most of their peers in the industry.

To quote Chaney in his Chairman's address at their AGM last week: "The company has many attractive features: high quality assets which generate strong cash flows, with realistic growth opportunities and long mine lives; a strong balance sheet; skilled operational and entrepreneurial management and a highly skilled workforce."

I agree with that assesment by Michael.

Disclosure: I hold NST and GMD shares. (Not RIO, sorry Marnie!).

Stuart Tonkin, NST's MD & CEO with Michael Chaney, their Board Chairman.

Directors & KMP | Northern Star (nsrltd.com)

https://www.nsrltd.com/about

10-June-2024: Update:

Marked as stale again - raising the TP by 50 cps to $15.75. They recently tagged my previous target price of $15.25 and then dropped back a little. NST are now Australia's largest listed pure-play (so NOT producing gold only as a byproduct of other production) gold producer that is HQ'd here in Australia.

Newmont GoldCorp (NYSE: NEM and NEM.asx CDI) is the largest constituent of the Australian Gold index, but it shouldn't be, as it's a US company, not an Australian company, but it still has a fair whack of Aussie holders because they received NEM shares in exchange for their Newcrest Mining (was NCM.asx) shares last year when Newmont acquired Newcrest last year.

So NST is the second largest constituent of the Aussie gold index, the largest Australian gold producer, and is one of the top 10 gold producers in the world now, and they expect to be in the top 5 once the KCGM (super pit) expansion is complete in a couple of years.

The next largest Australian gold producer is Evolution Mining (EVN) who also produce a lot of copper now, so they are really a gold/copper producer particularly as two of their mines produce far more copper than gold. If you're bullish on copper AND gold, then EVN could be a good way to play that, but I'm cautious on copper in the near term and bullish on copper longer term, so I'm not in EVN now, but likely will be when I get more bullish on copper - I'm always bullish on gold.

I'm always in NST however, in my SMSF, in my largest real life portfolio and of course here on SM as well. The management premium came out of the NST share price when Bill Beament left to head up Venturex, now called Develop Global, however Stuey Tonkin was there as CEO for years when Bill was the Executive Chairman and Stuey is running NST now pretty much as it was run under Bill Beament, so there hasn't been a noticable change in management style, to me at least. And they've got a steady hand as Board Chairman in Michael Chaney.

The bull case for NST is that they are still the best run gold producer in the world, they have some of the best longer term TSRs of ANY company listed on the ASX, they now have scale (being a global top 10 player and getting bigger), the management have skin in the game and run NST as a business first, and a miner second, so they look after their shareholders, and they have the tailwind of a rising gold price as well.

That's the US$ gold price on the left, and the A$ gold price on the right, obviously the changes in the exchange rate between the U$ and A$ makes a difference, but not a huge difference over the long term, the overall trajectory is north east for both. Not in a straight line, but north east nonetheless.

Gold isn't for everyone, and even if you want some gold exposure in your investment portfolios, you can always go with physical gold either through actual gold bullion, or a gold bullion backed ETF (I recommend PMGOLD, backed by gold bullion at the Perth Mint) - although those are really ETPs - exchange traded products - rather than pure ETFs - exchange traded funds. Or you can go for leverage through a higher quality gold producer. It doesn't always work this way, but the idea is that because the gold producers own SO much gold - the majority of it still being underground and unmined - their share price CAN rise more in percentage terms than the gold price when the gold price rises, and they can certainly fall more in percentage terms than the gold price when the gold price falls. The share prices of Australian gold producers HAS been rising along with the gold price, but in percentage terms they have mostly underperformed, so more than a few commentators are now saying that the gold producers' share prices still have some catching up to do.

One of the reasons I've heard lately why the gold producers are not trading higher than where they are is that rising interest rates are generally expected to present a headwind for the gold price so people were sceptical that the gold price rise was sustainable in a rising interest rate environment. However, most commentators also now agree that we are closer to the end of the rising rates cycle than the beginning, so falling interest rates are not too far away, and falling interest rates SHOULD present a TAILWIND for an already very high gold price - i.e. it should actually go higher still.

Of course there are plenty of other factors that play into the gold price and as we have mentioned here recently, trying to predict gold price movements is generally a waste of time because it's almost a coin flip in terms of whether you will be right or wrong, so in that light I suggest just backing the best management teams in the space, because really good management plays a VERY important role in the performance of all mining companies, particularly gold mining companies. And that's because gold mining is really a series of capital allocation decisions, and as a management team, if you get those right, you'll probably do well, but if you get those wrong, you'll lose money, and so will your shareholders if they stick with you.

Of course grades, location, infrastructure, regulatory environments, macro factors, ore consistency, geology, plant chemistry, plant reliability, breakdowns, weather events, natural disasters, consumables and employee availability, contractor performance and reliability, the gold price, etc. all play their part as well, but do NOT underestimate the importance of management.

The thing is, we can't accurately predict most of the other stuff, but we can get a fair idea of management competency based on past performance. And while past performance may not be an accurate indicator of future performance, it's absolutely worth considering, in my opinion.

And NST has good management. They had great management when Bill B was there, but they still have good management. Possibly great, but good at the very least. In terms of Australia's larger gold miners, NST is right at the top in terms of quality and performance, and that's why I hold them.

27-Oct-2024: Update:

Nothing has changed with NST except the gold price, which has just broken through A$4,000/ounce (last week) with continued momentum. I am therefore raising my price target for NST to just under $20, because they are worth more with a higher gold price, and especially when their KCGM (Super Pit) expansion is complete because it's their biggest mine and mill (processing plant) and they are doubling its annual production capacity, which they believe will propel them from their current status as a top 10 global gold producer to being a top 5 global gold producer.

That means top 5 in terms of both market cap and annual gold production. Now the gold production part is on-track - that relies simply on their succesful completion of the Super Pit / Fimiston Mill upgrade and then succesful ramp-up to its new nameplate capacity, which is due in CY 2026.

The other part is of course the market cap, and that doesn't depend on a multiple expansion so much as the market recognising that a company that produces more gold, profitably, is worth more, so the significantly higher gold production that NST is going to achieve within 2 years from now most likely - is going to mean they are going to produce significantly higher cashflow and profits, so they will get priced accordingly - and we're seeing that start to happen now.

On Friday (25-Oct-2024) NST made a new all-time high of $18.32 before closing at $18.29, the highest closing share price in their history. And that SP rise is due to three main factors:

1. The gold price making new record all-time highs;
2. NST being Australia's largest gold producing company; and
3. NST being in the middle of a significant growth project, being the doubling of annual production capacity at their largest gold mill, which they believe will see them land within the top 5 largest gold producers on the planet when it is completed and the mill is running at nameplate capacity, being top 5 in terms of gold produced p.a. AND in terms of market capitalisation.

So, yeah, I hold NST shares, both here and in my SMSF.

27th April 2025: Update:

NST closed this past week @ $20.84, after hitting an all-time high of $23.30 intraday on Tuesday (22nd April 2025; they closed a little lower at $23.01 that day).

They've blown through $20/share on the back of the sharply rising gold price and Trump's tariffs and other policies causing multiple negative sentiment shifts, including declining sentiment around the stability of the US$ as the world's reserve currency in future years, declining sentiment around US and global growth in the near to mid term, and declining sentiment around how dependable US Treasuries are likely to be under Trump 2.0.

US Treasuries are government debt securities issued by the US Department of the Treasury to finance government spending, so they represent loans from investors to the US government, and come in different forms like Treasury bills, notes, and bonds, each with varying maturities. Treasuries have generally been considered a safe investment due to the US government's ability to tax and raise money by other means, making them popular among investors.

What's changed is that while Trump's Rebublican party, a.k.a. the Grand Old Party (or GOP) clearly want to reduce the enormous US deficit, they are mostly trying to do that by spending less rather than raising more money, in particular they do not want to raise taxes, particularly for the richest people in America; in fact they are still intending to pass tax cuts that include cutting tax for those on the highest incomes. Additionally, Trump and a couple of his advisers seemed hell bent on getting other countries to pay more to America through tariffs, despite the obvious fact that those very tariffs are paid by those who import goods, within America, and are usually passed through to the consumers who buy those products - the end users - they are not paid by the exporters. The people selling goods into America from overseas don't pay these tariffs, they just lose sales because the tariffs that are added to the goods and services as they enter America simply make those goods and service more expensive so arguably less competitive with alternatives.

That's a long paragraph. Not trying to get political here, but the reality is that even if the whole tariff saga was really about trying to strengthen the US position in relation to trade negotiations with other countries, i.e. to force countries to agree to more of what Trump wants from them in exchange for reduced tariffs or no tariffs, the fallout from this so far has been serious loss of faith in the USA as a reliable trading partner with almost everybody else, serious erosion of faith and trust in global trade agreements and norms that had previously been accepted and relied upon, and nothing short of a changing world order where old alliances have fallen apart and new ones either have been or are being formed.

The loss of trust and faith goes beyond Trump, and the USA, and global trade; it extends to global markets, global financial systems, and changing expectations around who and what is going to influence the world order in future years.

If it's all been about negotiating tactics, it's backfired spectacularly and the damage done will either taken many years to repair, where repair is a possibility, and some of it clearly now being permanent.

In terms of what Trump and Musk have achieved in their first 100 days, this MSNBC report sums it up very well: Musk demoted again! Elon retreats as he loses $1 billion PER DAY under Trump [yesterday, 26th April 2025].

So central banks have been buying a lot of gold over recent months, particularly China. I won't get into exactly what the Chinese motivations are likely to be behind significantly increasing their physical gold bullion holdings, but the fact that they have been buying is just that, a fact, and that's been a major driver of the gold price, which has been on a tear. It's down -6% from it's recent peak, but that's likely a small pause in a longer uptrend:

The gold price in both A$ (left side) and US$ (right side, above) is down over the past day and the past week, it's still up for the past 30 days, and all timeframes beyond that. It hasn't broken that uptrend yet.

And despite NST's SP being up +38% over the past 12 months, thrashing the All Ords Accumulation Index (XAO, up by just under 5%) and the ASX200 Total Return (TR) Index (XJO, up just over 5%), NST has only been the 6th best performer out of Australia's 7 largest gold companies (the seven largest constituents of the Aussie Gold Index), as shown below:

Even after the pullpack we've seen in all of the larger gold companies' share price over the past week, the 12 month performance number for the share prices of those 7 goldies are impressive:

1. Genesis Minerals (GMD), up +121.65%
2. Evolution Mining (EVN, gold/copper miner), up +97.28%
3. De Grey Mining (DEG, has just been acquired by NST), up +92.03%
4. Capricorn Metals (CMM), up +85.98%
5. Perseus Mining (PRU, best of the West African focused gold miners), up +43.10%
6. Northern Star Resources (NST), up +38.01%
7. Newmont (NEM, CDIs here for US shares; they are listed on the NYSE and are the world's largest gold mining company), up +29.68%.

Newmont is the largest of those, but they are a US-listed and US-HQ'd company with only CDIs here on the ASX for their US shares, despite being one of the largest 3 constituents of the Australian Gold Index.

Northern Star (NST, $24B m/cap) is the largest Aussie Gold company, with Evolution (EVN, $16B m/cap) second and the others a fair way behind in terms of market cap (m/cap).

De Grey (DEG) is the closest at just under $6B, however the federal court last week approved the scheme of arrangement under which NST will acquire all of the issued shares in DEG, so DEG will be absorbed into NST and the DEG ticker code and De Grey as a company will be removed from the ASX list on Tuesday May 6th, in just over one week's time.

The NST offer for DEG back on 2nd December valued DEG at $5 Billion, which seemed like a lot at the time, but De Grey's Hemi is the largest gold development project in Australia (i.e. a project that is not already a producing mine). It's now closer to $6 Billion because it's an all-scrip takeover, meaning De Grey shareholders will receive NST shares in exchange for their DEG shares, and NST shares have gone up +25.6% (over $4 per share) since 2nd December when that offer was made.

Good outcome for DEG shareholders, but arguably also a good outcome for NST shareholders as long as NST don't stumble while taking Hemi through to a producing gold mine.

Raising my PT for NST to $27.30 based on recent upward momentum and the higher gold price.

Disclosure: Of those gold companies discussed above in this update, I hold NST, EVN, GMD, and I did hold CMM but sold all of my CMM last week when they announced their CEO was taking leave after being charged with assault.

I am most bullish on NST and GMD out of those, with EVN in third place.