Northern Star (ASX:NST) Drops 8% While Gold Hits Record Highs- Time to Buy the Dip?

Northern Star Faces Setbacks Despite Record Gold Prices

Northern Star Resources (ASX: NST) fell 8.0% to A$26.31 after cutting its FY26 production guidance by 100,000 ounces. The gold miner now expects to produce 1.6-1.7 million ounces, down from 1.7-1.85 million ounces previously. For investors in Australia’s largest gold producer, the key question is whether this pullback is a buying opportunity or a sign of deeper execution problems.

What makes this unusual is the timing. Gold prices are near record highs above US$4,800 per ounce, up roughly 75% over the past year. This should be a golden era for miners, yet Northern Star is heading the other way. The market is clearly telling us that execution matters as much as commodity prices.

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Operational Setbacks Hit All Three Production Centres

The December quarter was hit by what management called “a number of isolated negative events” coinciding at once. The main culprit was a primary crusher failure at KCGM, which was recommissioned on January 5 after a four-week disruption. A structural failure at Jundee has taken longer to recover than expected, while Thunderbox experienced carbon-in-leach issues and lower grades.

December quarter sales were around 348,000 ounces, well below expectations of 396,000-410,000 ounces. First-half FY26 production sits at 729,000 ounces, approximately 44% of the revised guidance midpoint. Management says issues have “largely now been rectified,” positioning the company for second-half production of 871,000-971,000 ounces. The question is whether this represents isolated bad luck or signals systemic execution concerns.

Northern Star also raised cost guidance. FY26 AISC guidance has been raised to A$2,600-A$2,800/oz, after averaging A$2,937/oz in the December quarter. Higher costs reflect lower sales spreading fixed expenses over fewer ounces, plus elevated royalty payments.

Record Gold Prices Provide a Safety Net

Despite operational hiccups, Northern Star benefits from an extremely favourable gold environment. With gold trading around US$4,800 per ounce, margins remain healthy even with higher costs. At A$2,800 AISC, the company would still generate substantial margins by historical standards.

The balance sheet also provides comfort. Northern Star holds approximately A$1.17 billion in cash and bullion, with A$1.5 billion in undrawn credit facilities, giving total liquidity of around A$2.7 billion. This provides flexibility to navigate challenges while funding growth.

Looking ahead, the KCGM mill expansion remains on track for commissioning in early FY27. If executed successfully, this could deliver what CEO Stuart Tonkin described as a “step change” in production capacity, resetting the cost base and restoring confidence.

The Investor’s Takeaway for Northern Star

Northern Star’s pullback is significant, but context matters. The stock has remained up strongly over the past twelve months, so holders are still well ahead. Analyst consensus remains “Buy” with an average price target around A$28-29, suggesting approximately 10% upside from current levels.

We believe the answer depends on your time horizon. The setbacks appear fixable rather than structural, and record gold prices provide a meaningful safety cushion. However, execution risk is real; another disappointing quarter could erode confidence further.

Conservative investors may prefer waiting for Q3 evidence that production is back on track. More aggressive investors might view this as an attractive entry point given the strong balance sheet and upcoming catalysts. Either way, the next quarterly results will be crucial in determining whether Northern Star can turn the page.