The Northern Star Resources Ltd (ASX: NST) share price is up more than 16% since the start of May, when it was trading around $8.11. At the time of writing, the share price is trading around $9.47 so speculative investors and swing traders would have done well over the last three weeks.
Shares of this mid-cap gold miner have been yo-yoing between $8 and $10 over the past 8 months – making this stock a swing traders' dream.
Northern Star is one of my favourite ASX success stories – any investor who bought Northern Star shares in 2009 would have paid a single cent for the shares and would now be sitting on a share market lotto win of more than 94,000% return on today's prices!
How has Northern Star shined over the last decade?
Northern Star has rapidly scaled gold production from a single mine of 100,000oz of gold per annum in 2010 to more than 850,000oz per annum across three mines today across Australia and North America. During this scaling period for the company, gold was reaching all-time highs – almost hitting US$2,000/oz. This would have been a perfect storm for a growing gold miner and helps explain its rapid rise. The company acquired a fourth mining site late last year – the Pogo mine in Alaska, which Northern Star hopes will add substantially to production numbers going forward.
How is Northern Star looking today?
Northern Star currently has an average cost base of A$1,175/oz of gold mined. Considering an ounce of gold is currently trading for around A$1,865, the profit margins are looking pretty good. It also pays to remember that gold (like most commodities), is priced in US dollars. Therefore, any depreciation in our local Aussie dollar provides an instant boost to the bottom line for any Australian-based gold miner. With the Aussie dollars' dramatic fall under 70 US cents over the last few weeks (it now seems to be holding under 69 US cents), things are certainly looking up for Northern Star's bottom line.
Although the tensions surround the US–China trade war seem to have abated for now, conditions for a further rise in the gold price are ripe. With the ongoing mess that is Brexit, jittery global markets and a highly unpredictable White House (to say the least), the medium-term outlook for gold miners looks sunny in my opinion. Northern Star is currently trading on a price-to-earnings (P/E) ratio of just under 30 – which looks a lot cheaper than its larger brother Newcrest Mining Limited (ASX: NCM), which is sitting on a P/E ratio of more than 70.
Foolish Takeaway
If you are looking for exposure to gold, Northern Star might be a good option to examine. It looks cheaper than other gold miners at current prices and has less sovereign risk than Newcrest, which owns mines in places like Indonesia, Ivory Coast and Papua New Guinea. Although it has a paltry dividend yield of 0.92% on current prices, if the gold price continues to climb, there's little doubt the Northern Star share price will follow.
