Here’s why the Northern Star Resources (ASX:NST) share price has jumped 16.7 per cent higher

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The Northern Star Resources Ltd (ASX:NSR) share price has hit a record high on its return to trade after the gold miner raised the cash to buy the $347 million Pogo underground gold mine in Alaska.

Northern Star shares surged 16.67 per cent on Monday to a record $8.12 after the end of a two-day trading halt, as investors reacted warmly to a deal that will make Northern Star the second largest gold producer on the ASX.

As a result of the deal to buy Pogo from Japan’s Sumitomo, Northern Star increased its FY19 guidance from between 600,000 and 640,000 ounces, to between 850,000 and 900,000 ounces.

Royal Bank of Canada mining analyst Paul Hissey said, while questions remained over the deal, even a partial reproduction of its previous acquisition and exploration success could make Northern Star a genuine global mid-tier player.

“Instinctively, if you told us that NST were buying an asset for $357 million, which produces 250,000 ounces annually at $A1,200 an ounce, with exploration upside, we would be inclined to be supportive,” Mr Hissey said.

“The company deserves credit for the growth it has delivered over the last few years.”

Northern Star issued 26.1 million new shares at a share price of $6.70 in a bid to raise $175 million.

The company said the placement was heavily oversubscribed, with BlackRock Investment Management snapping up $57 million of new shares.

In March, Northern Star also agreed to buy the South Kalgoorlie gold mine from Westgold Resources for $80 million.

With AAP

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au