Northern Star Resources Ltd (ASX: NST) has been one of the best performing ASX listed gold miners of 2014 and as world share markets show more signs of volatility now could be the ideal time to add exposure to gold into your portfolio.
Not all gold miners are created equal however, so here are three things every investor must know before buying Northern Star:
1. Cost and production
Northern Star Resources ranked as the second lowest cost gold miner on an All-In Sustaining Cost (AISC) basis for the most recent June quarter, just behind Newcrest Mining Limited (ASX: NCM). The company reduced costs by 11.5% over the prior March quarter and was aided by a massive 131% increase in production.
This production increase has transformed Northern Star into one of Australia's largest listed gold producers after the smart purchase of discounted mines earlier this year.
2. A perfect storm for gold prices?
Currently sitting at around US$1,307 ($1,409) per ounce the coming six months could be a turning point for the price of gold as a 'safe haven'.
The precious metal historically has a positive correlation with global uncertainty and there has been a recent spike in potentially combustible events. These include violence in Iraq, Russian sanctions and the evolving threat of Ebola.
Combined with volatile share markets and the growing chorus of experienced investment voices singing a warning of overvalued markets, gold's fortunes could be about to take a swing upwards.
3. A starry outlook
With its new mines and ore reserves locked in, Northern Star is now on track to produce around 600,000 ounces of gold per year, up from 100,000 last year. It is also likely that the company will remain one of the lowest cost producers with an All-In Sustaining Cost (AISC) per ounce around $1,050 over its five mines.
In my view Northern Star is likely to be one of the best-performing ASX listed gold miners in FY15, however the recent run-up in share price leaves little margin for safety if gold prices fall.
