ASX 200 mining shares have started the year well in 2022. They are flourishing while undercurrents of inflation, monetary policy, and interest rates continue to play havoc for equity investors.
The S&P/ASX 300 Metals & Mining Index (XMM) has spiked more than 8% since trading restarted on January 4, well ahead of the benchmark index.
One such share fitting the mould in 2022 is Northern Star Resources Ltd (ASX: NST), the gold miner that reported results last Friday. It declared a record dividend in the process.
As a result, one top broker has tipped Northen Star shares to sprout higher in 2022. Let's take a look.
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Why's this ASX 200 mining share tipped to explode in 2022?
According to analysts at investment bank Jefferies, Northern Star is well-positioned to deliver growth and value to investors this year.
From its most recent results, Northern Star grew profits after tax by 43% to $261 million, after growing revenue by 63% to $1.8 billion for the half.
Importantly, the broker notes, the jump in turnover came about from Northern Star selling more than 60% more gold compared to the same time last year.
It sold 477Koz of gold from its mine at Kalgoorlie, another 212koz from its Yandal site, and 90koz from the Pogo operation.
The jump in sales and carry through to profit and free cash flow enabled the board to declare a record dividend of 10 cents per share on a payout ratio of 27% of earnings.
What do brokers think?
Given this momentum and the broker's own analysis, Jefferies reckons Northern Star has set its guidance conservatively and it sees the potential for further revisions upward later this year.
Northern Star can deliver outsized production due to ongoing improvements at its Kalgoorlie sites, alongside other positive updates from its other sites, Jefferies notes.
As a result, the broker recommends the stock a buy and values Northern Stat at $14 per share, signalling a potential upside of 52% should the thesis play out.
Meanwhile, the team at JP Morgan is also heavily bullish on Northern Star, noting that it "remains our key pick, with the deepest discount to valuation and comparables".
"NST has a strong balance sheet and is generating solid [free cash flow] FCF at current gold prices. The company is focused on three production hubs – Kalgoorlie and Yandal in Australia, and Pogo in Alaska," analysts noted in a recent update.
"The company has a track record of project delivery and strong production growth. We have an Overweight rating, based on valuation."
JP Morgan values Northern Star at $11 per share, slightly behind Jefferies but heavily bullish nonetheless.
Quick summary on Northern Star shares
This ASX 200 share has fallen almost 24% in the last 12 months and is down a further 2.5% this year to date.
In the last week, investors have regained confidence and have sent shares more than 7% higher. The company's share price closely tracks the price of gold because it is a price taker, as shown in the chart below.
