Northern Star Resources' (ASX:NST) acquisition of De Grey Mining (ASX:DEG) departed from the company's growth strategy and is expected to dilute earnings per share (EPS) and cash flow per share (CFPS) by around 20% for the next two-three years, Jarden Research said in a Dec. 2 note.

The gold producer signed a deal to acquire De Grey Mining via a scheme of arrangement, gaining access to De Grey's Hemi gold project.

The company expects the project to potentially become a tier-1, low-cost gold production center.

However, Jarden views the Hemi project as "undeveloped" and notes that it will transfer material development, capital escalation, and permitting risks to Northern Star Resources' shareholders.

Jarden estimates that the first production from the Hemi gold project won't occur until around fiscal 2027, with permitting still a risk to the schedule.

"We estimate the transaction would be about 20% EPS and CFPS dilutive to existing NST shareholders for the next two to three years until Hemi achieves full production and contributes to NST earnings," the investment firm said.

Jarden Research maintained Northern Star Resources' underweight rating and its price target of AU$13.10.

Shares of both Northern Star Resources and De Grey Mining fell 3% at market close.