Finding Value When There’s None Left: A Case for Northern Star (NST)

Finding genuine value in the current market is becoming increasingly difficult. Stock indices are at or near all-time highs. Ironically, despite this strength, there remains significant uncertainty surrounding international trade and the ongoing stability of the US dollar as the world’s reserve currency. This uncertainty has driven the gold price sharply higher, suggesting there may now be some value to find in gold producers.

Northern Star Resources (NST) is one of Australia’s largest gold producers. As of March 2025, the company reported proven ore reserves of nearly 4.5 million ounces and probable reserves of around 18 million ounces. Total resources across its Australian and Alaskan assets stand at approximately 70.6 million ounces. The company has been expanding aggressively. In May, it completed the acquisition of De Grey Mining, adding the Hemi Gold Project with a further 11.2 million ounces of resources. This was followed in August by the acquisition of Mt Roe Mining. With estimated annual production of around 2 million ounces by 2027, Northern Star is well-positioned to capitalise on the elevated gold price in the coming years.

The company’s fundamentals appear solid. Standout figures include a return on assets of around 45%, and analysts forecast continued earnings per share growth. Given that earnings have grown by roughly 20% per annum over the past five years, this momentum could well continue. Northern Star also maintains strong liquidity, with cash assets of around $1.5 billion—more than its long-term debt—suggesting the company’s acquisition drive may not be over yet.

Gold remains a volatile asset, often viewed as a safe haven in uncertain times. Its recent price surge has been driven largely by central banks increasing their gold reserves—a potentially concerning but revealing signal about confidence in global currencies. The current macroeconomic uncertainty seems to stem from two major factors. Firstly, the actions of the current US administration have introduced volatility into international trade. Whatever one might say about the government, unpredictability appears to be a defining feature—and it is likely to persist. Secondly, the scale of US debt is beginning to undermine faith in the US dollar as the global reserve currency. Some central banks may be considering a partial retreat toward the gold standard to support local currencies.

Given these dynamics, the gold price rise does not appear to be based purely on speculation or sentiment. There are genuine structural factors at play, and this environment places Northern Star in a favourable position. Mine development is inherently capital-intensive and subject to regulatory, environmental, and community challenges. Northern Star’s existing operations are mature, however, and should provide the financial and operational foundation to support the development of the Hemi and Mt Roe projects.

At a current share price of just over $25, Northern Star is not cheap by historical standards. The stock trades on a price-to-earnings ratio of around 21.6 times—suggesting that much of the expected growth may already be priced in. Nevertheless, valuation metrics are backward-looking, and with the gold price having risen more than 25% in the past six months, there may still be upside for investors willing to accept the risks.

As noted at the outset, finding value in the current market is challenging. Holding funds in term deposits or offset accounts may be the prudent short-term strategy. However, for investors with a stronger risk appetite, gold producers such as Northern Star could offer opportunity—particularly if the gold price continues its upward trajectory amid ongoing geopolitical and economic uncertainty.