Northern Star’s Growth Hinges on De Grey Deal and KCGM Expansion Risks

Strong Financial Performance

Northern Star Resources Limited (ASX: NST) has reported a robust set of results for the half year ended 31 December 2024, underpinned by a 58% increase in underlying EBITDA to A$1.4 billion and cash earnings of A$1.1 billion. The company’s operational excellence across its three production centres, Kalgoorlie, Yandal, and Pogo, has driven these gains, with gold sold reaching 804,000 ounces at an all-in sustaining cost (AISC) of A$2,105 per ounce.

This strong cash generation has enabled Northern Star to declare an interim dividend of 25 cents per share, up from 15 cents in the prior corresponding period, and continue its disciplined capital return program with an ongoing A$300 million share buy-back, 86% complete.

Operational Highlights and Growth Projects

The company remains on track to meet its FY25 guidance of 1.65 to 1.80 million ounces of gold sold, with production weighted towards the second half of the year. The Kalgoorlie region, in particular, is expected to benefit from an increasing proportion of high-grade mill feed at the KCGM operation, where a significant mill expansion project is underway. This A$1.5 billion investment aims to increase throughput from 13 million tonnes per annum (Mtpa) to 27 Mtpa by FY29, with major construction milestones progressing on schedule.

Exploration continues to underpin Northern Star’s organic growth strategy, with a mineral resource base of 61.3 million ounces and ore reserves of 20.9 million ounces as at 31 March 2024. The company’s disciplined approach to capital allocation and operational efficiency has driven a more than threefold increase in return on capital employed (ROCE) since the 2021 merger with Saracen Mineral Holdings.

Strategic Acquisition of De Grey Mining

In a move that signals Northern Star’s ambition to expand its footprint, the company has agreed to acquire De Grey Mining (ASX: DEG) via an all-scrip scheme of arrangement. De Grey shareholders will receive 0.119 Northern Star shares per De Grey share, valuing De Grey at approximately A$2.08 per share. The transaction, unanimously recommended by De Grey’s board, is subject to court and shareholder approvals and is targeted for completion in May 2025.

This acquisition is expected to complement Northern Star’s existing portfolio, providing additional growth optionality and reinforcing its position as a global gold leader. Post-transaction, Northern Star shareholders will own approximately 80% of the combined entity, with De Grey shareholders holding the remaining 20%.

Balance Sheet Strength and Financial Discipline

Northern Star maintains a strong balance sheet with a net cash position of A$265 million and liquidity of A$2.7 billion, supported by undrawn revolving bank facilities and US$600 million of senior notes. The company’s investment-grade credit ratings from Moody’s, S&P, and Fitch underpin its financial flexibility to fund growth projects and shareholder returns.

Looking ahead, Northern Star expects to sustain its disciplined capital allocation framework, balancing growth capital expenditure, projected at A$555–595 million including the KCGM expansion, with exploration and shareholder distributions.