When Might Northern Star’s Woes End?

Commodities | 1:37 PM

As gold prices hit record highs, Northern Star has delivered yet another downgrade, leading brokers to question management, and the share price to tank.

• Northern Star Resources downgrades FY26 production guidance, again
• Jundee and grade issues at KCGM Mill to blame
• KCGM issues at mill upgrade
• Much faith being placed in FY27
• Rapid share price de-rating leaves Buy ratings mostly intact

By Greg Peel

2026 has been a challenging year to date for gold miner Northern Star Resources ((NST)) despite elevated gold prices.

The company downgraded production guidance on January 2, increased cost guidance on January 20, and increased capex guidance on January 22.

Jarden goes further to point out Northern Star’s FY26 production guidance was set at 2.0Moz in the March quarter last year, falling to 1.70-1.85Moz in the June quarter, then to 1.60-1.70Moz in the December quarter, as gold prices surged throughout the period.

Last week Northern Star reduced FY26 guidance yet again, to a "best estimate above 1.50Moz".

After initial share price weakness in early January, to temporarily below $25, the shares found support from a rising gold price and traded above $31 prior to last week's guidance downgrade. Today's level is closer to $21.

The reasons driving the downgrade primarily stem from Kalgoorlie Consolidated Gold Mines (KCGM) mill throughput challenges with intermittent outages in the float circuit and electrical issues compounding downtime, Bell Potter notes.

Throughput over the remainder of the year is now likely to average circa 9Mtpa versus initial 12Mtpa FY26 guidance. Adding insult to injury, productivity at Jundee continued to disappoint with grades failing to meet expectations and prompting a shift in resources to higher-margin operations.

Management reaffirmed all-in sustaining cost (AISC) guidance of -$2,600-2,800/oz, however, on Bell Potter’s assessment this is likely to be potentially pulled at the March quarter result release. Total group gold sales across January-February were 220koz (December quarter sales were 348koz).

Bell Potter has pared back its estimate for KCGM, adjusting throughput to 7.4Mtpa (annualised) in the March quarter and 10.4Mtpa in the June quarter at an average grade of 1.8g/t.

The broker remains sceptical on the throughput grade required to meet the updated guidance, given mined grades are tracking around 1.6g/t and being delivered for processing through the new mill in FY27.

KCGM

FY26 throughput at KCGM has been revised lower to 10Mtpa (versus a capacity of 13Mtpa). Commissioning of the new 27Mtpa mill is expected to occur in the first quarter of FY27, with management indicating it still expects to achieve circa 23Mtpa in FY27.

Macquarie is taking a more conservative approach to the ramp-up, forecasting a throughput of circa 18Mtpa in FY27, which results in KCGM production of 624koz –- some -15% below a current consensus forecast of 734koz.

The issues at the KCGM plant are mainly in the back end of the circuit, which will be replaced in FY27 with the new circuit. However, Citi expects minimal care and capital to be allocated to the current circuit in its final stages.

The drivers of poor operational performance, initially described by Northern Star as isolated operating issues, appear to be more systemic and less episodic than originally presented, Morgans suggests.

That last week saw the second downgrade in roughly 70 days only reinforces this broker’s view.

Jundee

Northern Star will undertake an operational review at Jundee with a view to reduce costs and redeploy resources elsewhere.

In 2025, Jundee achieved production of 234koz, but following last week's update, Macquarie has reduced its forecast to 190koz per year. Macquarie’s Yandal forecast of circa 425koz is -23% below Northern Star's prior target of 550koz.

Jarden had previously impaired the Jundee asset in its valuation model, “but clearly not enough”.

This broker finds it confusing that Northern Star will now direct labour and equipment away from Jundee and undertake an "operational review".

Intuitively, with gold above A$7,200/oz, Jarden would have expected any marginal ounce of production from this 200-300kozpa asset, over the high fixed cost base, would have been highly earnings accretive.

Clearly, this is no longer the case, Jarden suggests, and the capital cost of extracting the deeper and more metallurgically complex ounces has now eroded much of the operating margin.

This broker reduces its Jundee production forecasts to less than 200kozpa moving forward, increases ASIC to -$3,000/oz, and further impairs the asset.

Reserves

“Why can't Northern Star mine to Reserve grades?” asks Jarden, adding “additional disclosure would help”.

The Jundee underground Reserve grade is 3.9g/t. Mined grade over the past year has declined to 2.5-2.6g/t. Jarden expects much of the high grade is locked up in refractory ore.

Similarly, the Thunderbox open pit Reserve grade is 1.8g/t and underground Reserve grade 2.2g/t. Mined grade over the past two years has averaged 1.0g/t (open pit) and 1.8g/t (underground), well below Reserve grades.

Disclosure of the independent ore sources (Orelia, Bannockburn, etc) is not provided, Jarden notes. Pogo Reserve grade is 7.6g/t, and mined grade dropped to 5.5g/t in the December quarter. Additional disclosure over independent ore sources and metallurgy would assist in reconciling market expectations with asset capability, in Jarden’s view.

Further details around FY26 production and costs will be provided with the March quarterly report to be released on April 22, Canaccord Genuity notes. Northern Star has flagged work is underway on providing more granular detail on the medium-term production, cost and capital outlook for its assets with this information to be presented to the market later this year.