Northern Star (ASX: NST) shares are down almost 20% after it again downgraded fiscal 2026 volume guidance. Gold sales volumes of 220,000 ounces for January and February 2026 were lower than expected, with the lost ounces unlikely to be recovered over the rest of the fiscal year.

Why it matters: Management’s best estimate is that fiscal 2026 production will now be above 1.5 million ounces. This compares with previous guidance for between 1.6 million ounces and 1.7 million ounces.

  • We reduce our EPS forecast for fiscal 2026-28 by 13%, 8%, and 3%, respectively, driven by lower production projections largely due to its aging mill at its KCGM operations in Kalgoorlie.
  • We think the new, larger replacement KCGM mill currently being built will resolve most production issues. But we now assume a slower ramp-up to full capacity after it begins production in first-half fiscal 2027. Our long-term estimates are broadly unchanged.

The bottom line: We retain our $15 fair value estimate for no-moat Northern Star. Despite the March 13 fall, shares remain materially overvalued as the spot gold price remains elevated at about USD 5,100 per ounce, much higher than our midcycle assumption of about USD 2,050.

  • Our midcycle forecast is based on our estimate of the long-run marginal cost of production. The current share price is likely factoring in a much higher midcycle price than our estimate.

Big picture: Management’s focus on getting the firm to “achieve its full potential” rather than “on the achievement of short-term guidance above all else” is sensible to us.

  • We still forecast production from its existing mines to rise to about 2 million ounces midcycle by fiscal 2030, from 1.6 million last year.
  • We also expect the likely development of its De Grey Mining project to add another 500,000 ounces by fiscal 2030. Higher volumes will likely lead to some improvement in its position on the gold industry all-in sustaining cost curve, from about the middle of the second quartile in fiscal 2025.

Northern Star’s sales volumes likely to rise over the long-term, driven by its Kalgoorlie operations and Hemi project

Northern Star is a midtier global gold miner with mines in Western Australia and Alaska. Its portfolio is a result of significant corporate activity, including 14 acquisitions and four asset sales since 2010. Notable transactions include the purchase of Pogo in Alaska in 2018 and half of the Kalgoorlie Super Pit mine, or Super Pit, in Western Australia, from Newmont in 2020. Northern Star subsequently merged with Saracen in 2021, adding the other half of the Super Pit, as well as the Carosue Dam and Thunderbox assets in Western Australia.

We forecast Northern Star to increase gold sales from its existing mines to about 2 million ounces in fiscal 2030, up from 1.6 million ounces in fiscal 2025, driven by increased production at its Kalgoorlie operations in Western Australia. Roughly 60% of the company’s midcycle sales in fiscal 2030 come from its Kalgoorlie operations. At the end of fiscal 2025, the company had around a decade of reserves.

It bought developer De Grey Mining, owner of the attractive Hemi gold project in Western Australia, in May 2025. The development of Hemi, which we think likely, will add a further 500,000 ounces by around 2030, making Northern Star one of the largest gold miners in the world by production.

The company’s average all-in sustaining cost of about AUD 2,160—around USD 1,400—per ounce for fiscal 2025 places it around the middle of the second quartile on the gold industry cost curve.

Northern Star focuses on buying and owning assets that have been undermanaged by their previous owners, whether due to strategic reasons or because they were relatively immaterial compared with the vendors’ other, larger assets. The company then aims to improve operations and grow production, as well as to increase reserves and mine lives through exploration and/or by acquiring nearby assets that can use the company’s existing processing facilities.

Bulls say

  • The likely expansion in gold sales over our forecast period should keep Northern Star within the bottom half of the industry cost curve.
  • With its gold mines located in Australia and Alaska, Northern Star has relatively low sovereign risk.
  • Gold companies tend not to follow general economic cycles. They can also provide a hedge to inflation risk.

Bears say

  • Future production is highly dependent on its Kalgoorlie production center, which represents around three-quarters of reserves at the end of fiscal 2025.
  • The company sits in the middle of the second quartile of the gold cost curve, but is still meaningfully leveraged to changes in the gold price.
  • Gold is subject to the whims of investors’ sentiment, who can move as a herd and affect the gold price.

Get Morningstar insights in your inbox