Northern Star Resources (ASX:NST) explores and develops mineral resources in the highly prospective Kimberley region.

NST is an emerging gold producer and explorer with a market capitalisation of around $180 million.

Its main project is the Paulsens gold mine which it purchased for $40 million.

The miner expects to release a resource upgrade later this month and a new mine plan for Paulsens this year.

NST recently acquired the 668,000 ounce (oz) Ashburton Gold Project which is close to the Paulsens mine.

Precious metal speed hump

We saw gold and silver futures slide recently as investors reacted to hikes in margin requirements for the contracts.

The CME Group raised margin requirements for both initial and existing positions in gold, copper and silver.

Margins are money investors must put up to be able to trade and hold futures contracts.

Gold lost more than US$100/oz on the announcement, printing a low of around US$1533/oz.

However, gold prices have since recovered from that low and are currently hanging at around US$1665/oz.

The fact of the matter is, the underlying fundamentals behind the gold price rally over the past year are still intact and we are likely to see gold continue to rise.

Ashburton acquisition

NST agreed to purchase the Ashburton Gold Project from Sipa Resources which will be paid for via a royalty on future production.

The deal includes 668,000oz resource and the Mt Olympus Gold Mine, which has previously produced 340,000oz.

This puts NST in a prime position to increase production rates, project life and create shareholder wealth through exploration.

Ashburton is a strategic asset for Northern Star Resources as it provides an immediate resource boost to the miner’s resource base.

High grade drilling results from Ashburton announced last week show NST is on track to grow production to 200,000ozpa.

Results

NST recently posted FY11 profit before tax of $20 million. This profit came after deducting $22 million for the acquisition of Paulsens gold mine and $24 million in depreciation and amortisation expenditure.

The result was aided by record production at Paulsens of 87,069oz at $588/oz cash cost.

NST has $30 million in cash on hand as at 27 September 2011 and is on track to exceed calendar 2011 forecast of $40 million surplus cash, 75,000oz production.

A resource upgrade is set for early 2012 with increases in mine life, production and cashflow expected.

The miner repaid the $40 million acquisition of Paulsens in just seven months.

Being unhedged, NST has maximum exposure to the strong gold prices and as a result it was one of the hot stocks over the course of 2011.

With strong cashflow and a robust balance sheet, NST is in a good position to grow.

Outlook

Gold is set to recover after recently suffering a setback from the CME’s decision to raise margin requirements.

NST’s strong financial position leaves it well placed for further acquisitions in line with its objective of building a major mining house.

With the potential for further acquisitions and strong gold prices backing the unhedged miner, we feel NST will be one of the stocks to watch in coming months.

Recent weakness presents an excellent opportunity for fresh entries.

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Regis Resources Limited (ASX:RRL) is an emerging Australian gold production and exploration company.

Its management team has a successful track record of developing mid sized gold operations within Australia and Africa.

It has been one of the hot shares in the past year, having more than tripled in price since July 2010.

Today, RRL reported a maiden FY12 net profit of $36.3 million.  The result compares to a net loss of $18.3 million in FY11.

The group posted gold sales of $107.9 million as it successfully transitioned from explorer to producer.

RRL said the development of the Garden Well Gold Project will take its output to around 350,000 ounces in FY12/13.

Therefore it will be one of the shares to watch.

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Regis Resources Limited (RRL) is an emerging Australian gold production and exploration company.

Its management team has a successful track record of developing mid sized gold operations within Australia and Africa.

RRL’s flagship is the 100% owned Duketon Gold Project, 130km north of Laverton in WA.

Operations commenced in August 2010 following the construction of the Moolart Well Gold Mine and the mine boasts a JORC reserve of 603,000 ounces (oz).

Average production is expected to be 90,000oz over a six year mine life.

RRL is confident that Moolart Well offers further reserve and resource growth potential from continued exploration programmes.

RRL also has the Garden Well project which is located 30km south of Moolart.

A maiden ore reserve at the Garden Well deposit highlights the potential of the region.

Quarterly results

For the December quarter, RRL produced 23,851 oz from Moolart at a cash cost of $450 per oz (prior to royalties).

Total costs for gold produced came in at $10.73 million prior to royalties.

Gold sales totalled 20,921 oz at an average price of $1387 per oz.

This brought in revenue of $29.02 million. Cash and gold bullion on hand at 31 December 2010 was $21.5 million.

Gross profit for the quarter was approximately $18.29 million.

Gold production for the half year ended June 2011 is forecast at between 45,000 – 50,000 oz at cash cost before royalties of $500 – $550 per oz.

This will result in a gross profit in the range $40.5 – $42.5 million assuming all gold produced is sold and an average gold price of $1400.

Resource update

RRL announced a resource increase at Garden Well to 2.14 million ounces (moz) contained gold.

A new reserve estimate following the resource upgrade will be completed this month.

Results from a diamond drilling program which commenced in January 2011 are scheduled for release in June 2011.

Regis Resources Limited believes the updated 2.14 moz resource at Garden Well confirms the likelihood of further reserve upgrades at the project.

The miner expects Garden Well to produce approximately 180,000oz of gold per annum.

Successful development of the Garden Well deposit should lift RRL’s gold production to around 270,000 oz per annum commencing FY13.

Should it achieve that production rate, RRL would be a well established mid tier gold miner.

Gold boom and outlook

Gold has gained over 30% this year, reaching fresh record highs last week as tension in North Africa and the Middle East pushes investors towards the safety of the shiny metal.

The metal printed highs of around US$1440 last week and continues to hold its ground well above US$1400.

Inflation continues to be an issue and is likely to contribute to the gold price rally.

With plenty in the reserve growth pipeline and rising gold prices, RRL will be one of the gold stocks to watch in coming months.

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