Why are Northern Star shares jumping 8% today?

Northern Star Resources Ltd (ASX: NST) shares are jumping on Wednesday.

At the time of writing, the gold miner’s shares are up 8% to $22.79.

This is the second day in a row of strong gains, with news of an activist investor taking a position boosting its shares on Tuesday.

Why are Northern Star shares rising today?

The company’s shares are rising today after it released its latest mineral resource and ore reserve estimate.

Investors appear pleased with the scale of the update, which shows a major increase in Northern Star’s resource and reserve base.

According to the release, group mineral resources have increased to 88.9 million ounces. This represents an increase of 18.2 million ounces, or 26%, after mining depletion.

Group ore reserves have also increased strongly, rising by 6.1 million ounces, or 27%, to 28.4 million ounces after mining depletion.

This is important because mineral resources and ore reserves are key indicators of a gold miner’s long-term production potential. A larger reserve base can support longer mine lives, future production growth, and greater confidence in the company’s development plans.

Hemi included for the first time

A key driver of the increase was the first inclusion of the Hemi Project following Northern Star’s acquisition of De Grey Mining.

Hemi contributed mineral resources of 13.2 million ounces and ore reserves of 5.5 million ounces.

Management said the project is expected to become Northern Star’s fourth production centre and a major long-term growth platform.

This appears to be one of the standout parts of the update, given Hemi’s scale and strategic importance to the company’s future.

KCGM and Pogo also grow

There was also positive news from Northern Star’s existing key assets.

At KCGM, mineral resources increased to 42.2 million ounces, up 3.3 million ounces. Ore reserves rose to 15 million ounces, with growth driven largely by the Fimiston Underground.

At Pogo, mineral resources increased by 3.1 million ounces to 9.3 million ounces, while ore reserves increased by 0.3 million ounces to 2.4 million ounces.

Northern Star said the higher tonnes and lower grade at Pogo enhance future development optionality.

Together, KCGM, Pogo and Hemi now account for 65 million ounces, or 73%, of the company’s total resource base.

Low-cost discovery

Another positive was the cost of adding new ounces.

Northern Star revealed that additional resource ounces were added at an average discovery cost of less than $23 per ounce.

For a gold miner, adding ounces cheaply through exploration can be a powerful way to create shareholder value.

Management commentary

Northern Star’s managing director, Stuart Tonkin, was pleased with the results. He said:

The results highlight Northern Star’s commitment to exploration investment, which continues to drive strong organic and inorganic growth across our expanding portfolio year-on-year and deliver long-term returns for shareholders. For the first time, the Hemi Mineral Resources and Ore Reserves have been reported under the Northern Star methodology and economic framework, establishing a consistent, portfolio-wide approach that enhances comparability and underpins future growth opportunities. Technical work continues to optimise ore feed sources to determine the inputs that will be utilised for a final business case assessment.

KCGM, Pogo and Hemi are key strategic assets that are central to positioning the Company within the first half of the global cost curve, reinforcing the strength, quality and resilience of our future portfolio and supporting a compelling long-term growth outlook.

The post Why are Northern Star shares jumping 8% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.