Northern Star (ASX:NST) Up 64% in 2025: Buy the Dip at $25.50 or Wait for Better Entry?

Northern Star Resources (ASX: NST) has been one of the standout performers on the ASX in 2025, riding a powerful gold rally to deliver a 64% year-to-date surge. But after touching levels near its all-time high, the stock’s sharp 4% drop on heavy volume last Friday has investors questioning whether momentum is faltering. With gold prices still holding above US$4,050 per ounce, the selloff raises the possibility that profit-taking and institutional repositioning, not fundamentals, are driving the correction.

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Cost Inflation Squeezing Margins Despite Record Gold Prices

The most significant development investors need to understand is the sharp increase in Northern Star’s all-in sustaining costs, AISC, which measures the total cost per ounce to produce gold, including mining, processing, and sustaining capital. AISC jumped from A$2,163 per ounce in FY25 to A$2,522 per ounce in the September quarter, a 16.6% increase that caught many by surprise.
This suggests the cost pressure isn’t temporary. Management’s FY26 guidance of A$2,300–2,700 per ounce signals this is a structural shift driven by rising labour, energy, and regulatory costs across the Australian gold sector. The implication here is clear: while gold at US$4,050+ sounds bullish, margin compression tells a different story.

We believe this matters more than many investors realise. If costs continue climbing while gold consolidates or pulls back from record levels, Northern Star’s profitability could compress quickly. The company posted a strong $536 million in free cash flow for FY25, but the trajectory is what concerns us:

• Margin buffer shrinking: With costs at $2,522/oz and gold at $4,050, the profit margin per ounce is still healthy, but any gold pullback to $3,800-3,900 would compress margins significantly

• Sector-wide issue: Australian producers facing similar pressures (not NST-specific)

• Valuation sensitivity: At elevated multiples, margin disappointments get punished harder

Quality Business Meets Stretched Valuation at $25.50

Setting aside cost concerns, Northern Star’s underlying business remains formidable. The company produces approximately 1.5 million ounces annually from world-class operations in Western Australia and Alaska, maintains a net cash position, and holds a decade of reserves. The recent completion of the $5 billion De Grey Mining acquisition adds the high-grade Hemi project, positioning the company as a top-tier global producer.
Analysts remain constructive, with Macquarie setting a $27.41 price target (7% upside) and Simply Wall St’s consensus at $27.26. The bull case rests on gold’s structural tailwinds: central bank buying, geopolitical uncertainty, and inflation hedging demand show no signs of weakening.
However, at current levels, much of the easy money has been made. In our view, the stock is increasingly “priced for delivery”, meaning expectations are high and execution must be flawless. The 64% year-to-date gain reflects both gold’s rally and operational delivery, but any stumble on costs or production could trigger a sharp correction.

The Investor’s Takeaway

For current holders: Northern Star remains a quality hold with strong fundamentals and a supportive gold backdrop. We’d maintain positions and use further weakness to add rather than trim into strength.

For new investors, patience may be rewarded. Here’s what we’re watching:

• Support level: $24.50 (20% pullback from $27.02 high) as potential entry
Resistance: $27 all-time high needs a decisive break to resume rally

• Key metrics for Q2 FY26 (due February): Watch if AISC trends towards the lower end of guidance ($2,300/oz) or stays elevated above $2,500/oz

Our view: Wait for confirmation that cost pressures are stabilising. If Q2 results show AISC above $2,500/oz while gold weakens, margin compression becomes more serious. The stock’s 64% run is impressive, but rising costs in a consolidating gold market warrant caution for new buyers. A pullback to $24-24.50 offers better risk/reward.