How much upside does Macquarie tip for Northern Star shares following its acquisition of De Grey Mining?

Is the broker tipping this gold miner's shares to keep rising? Let's find out.

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Northern Star Resources Ltd (ASX: NST) shares have been in focus this week for a couple of reasons.

One is volatility in the gold sector following a shift out of safe haven assets. The other is news that the acquisition of De Grey Mining Ltd (ASX: DEG) is now complete.

In light of the latter, let's take a look and see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the gold miner following this addition.

Are Northern Star shares a buy?

Macquarie is a fan of the transaction and believes that the Hemi project will be a great addition to Northern Star's portfolio. It said:

Hemi is the prize: DEG's key asset is the Hemi Gold Project (Hemi) in the Pilbara of Western Australia. Hemi is a large scale open pit project with 11.2Moz of gold resources and 6.0Moz of reserves with forecast (DEG's Sept 2023 DFS) average annual production of 530kozpa over +10- years. Our Hemi outlook is broadly based on the DEG DFS but we also assume an underground (UG) project which could boost production ~8% to ~570kozpa. We also assume pre-produciton capex of A$1.9Bn and an AISC of ~A$1,500/oz which are 38% and 19% higher than the DFS respectively but in line with VA consensus.

Time to buy

In light of this and its positive view on gold, the broker sees a lot of a value in Northern Star shares at current levels and is urging investors to snap them up.

According to the note, the broker has recommenced coverage on the gold miner (after a period of research restriction) with an outperform rating and $27.00 price target.

Based on its current share price of $21.03, this implies potential upside of 28% for investors over the next 12 months.

To put that into context, a $10,000 investment would turn into approximately $12,800 by this time next year if Macquarie is on the money with its recommendation.

It is also worth noting that the broker is forecasting a 50.8 cents per share dividend in FY 2025. This represents an attractive 2.4% dividend yield at current prices.

Commenting on its outperform rating for Northern Star's shares, the broker concludes:

NST's acquisition of DEG makes sense with Hemi accretive on production, reserves and NAV but also enhancing growth and 5-year NPV upgrade momentum. The project also looks set to dovetail nicely with the KCGM expansion and should drive NST to +2.5Mozpa by FY29.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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