In today’s daily we have covered stock research on Northern Star Resources (Expensive). To view Top 20 Dividend Stocks click here

S&P 500 was up 3.64 points or 0.19% on Wednesday and closed at 1927.88. The S&P 500 ended at a record for the fourth time in five sessions on Wednesday, led by gains in the technology sector, as investors brushed off weaker-than-expected labor market data and focused on an acceleration in services-sector growth. The CBOE Vix volatility index was up 1.6% and back above 12 for the first time in a fortnight, although still extremely low by historical standards.

According to private payrolls processor ADP, 179,000 jobs were created in the U.S last month fewer than expected and down from a revised 215,000 increase in April. Eurozone GDP growth in the first three months of the tear was confirmed at 0.2% quarter on quarter. Gold continued to struggle after a sharp decline over the past week, with the metal down another $1 at $1243 an ounce, near a four month low. Copper fell 1.2% to $6,785 a tonne.


S&P 500 Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was down by 34.9 points or 0.64% on Wednesday and closed at 5444.8 points. Oil Search has increased its 2015 production forecast by about 16% thanks to the $19 billion Papua New Guinea liquefied natural gas venture. CBA has announced that it is now a substantial shareholder of James Hardie (JHX) with a voting power of 5.06%. Iluka resources has announced that it has signed a joint development agreement with Vale S.A. for staged evaluation and potential development of the major titanium mineral bearing deposit located at Tapira, Brazil. David Jones shares fell as speculation grew that retail magnate Solomon Lew might be in a position to block the deal.


S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 


Stock of the Day – Northern Star Resources (NST)
 
Northern Star Resources is a gold production company which owns and operates the Paulsens, Plutonic and East Kundana gold mines in Western Australia. The combined operations for the group produce +300kozpa at all in sustaining cost of A$1,050/oz. Northern Star Resources (NST) has continued it acquisition rampage with the binding agreement to purchase Newmont’s Jundee goldmine in Western Australia for A$82.5m. On the face of it this acquisition appears to be good value, though we believe the timing of acquisition only exacerbates the markets concern as to whether NST will integrate its new assets without any issues.


NST operation areas (Source – Company Reports)

NST is to acquire its fourth mine in six months with the A$82.5m purchase of Jundee. The purchase will be funded from NST’s currernt cash reserves (A$67m at Mar 31) and an extended A$100m debt facility with Investec. The transaction is expected to settle in early July 2014. NST is guiding production from Jundee to be 200kozpa at AISC of A$1050/oz. Given management’s background and good track record, we would back them to integrate Jundee asset into NST successfully.


NST regional location plan (Source – Company Reports)

In the short term we see increased operational risk with addition of Jundee while the Plutonic, Kanowna Belle and EKJV projects are still being integrated. The Jundee mine has been in operation for 19 years and produced 5.5Moz Au. The challenge for NST to realize strong value uplift from Jundee will be to increase the mine life. Along with the recent Barrick acquisitions, NST will look to strip out all of the big miner costs from Jundee. 


NST daily chart (Source – Thomson Reuters)

While we would expect to see some improvements it won’t be as material as the cost reductions to be gained from Plutonic and EKJV. NST will keep the incumbent mining contractor (Byrnecut) on site which will limit its ability to bring in wholesale change to the site. We believe the stock is expensive at its current price and would review the stock at a later date.

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