Northern Star Resources Limited (NST) Earnings Call Transcript

Thank you for standing by, and welcome to the Northern Star September 2026 Quarterly Results. [Operator Instructions] I'd now like to hand the conference over to Mr. Suresh Vadnagra, Managing Director and CEO. Please go ahead.

Thank you. Good morning, everyone, and thanks for your time this morning and for joining the call. I started as CEO on the 5th of October, just a little bit over 2 weeks ago, and I'm very pleased to be speaking with you today, just a little bit of feedback. Okay. I've spent the majority of my time over the last 2 weeks visiting our sites. My immediate priority has always been to establish a clear view of the business by visiting our sites. And by talking to as many of our people as possible and getting their perspectives on the business, including what's going well and what are some of the opportunities for us to improve. Over the last couple of weeks, I've visited our sites in Calgary, including KCGM and Inyanda. If I look back at what attracted me to Northern Star, it is absolutely the quality of our assets and the strong foundations on which we can build. My early observations after 2 weeks on site reinforce the quality of Star assets and importantly, the quality of our people. They also reinforce the opportunity for us to improve consistency of delivery, strengthen accountability, strength and capability, adopt better capital discipline and translate all of that into sustainable cash flows and shareholder returns. If we now turn to the September quarter. For the September quarter, Northern Star sold 364,000 ounces at an AISC of 3,217 per ounce, that's Asian dollars per ounce. We've had a solid start to FY '27 with all of our sites delivering in line with plan. As I mentioned earlier, consistent delivery will be fundamental to our success going forward with a focus on sustainable cash flows and attractive returns for our shareholders. At KCGM, we completed another important milestone through the quarter. with the time of the mill expansion into the existing plant. The focus now is on progressing commissioning and establishing stable, reliable operations that deliver the intended benefits of the investment. I mentioned earlier that my focus and my immediate priority was about getting to know the business. In parallel to -- sorry, excuse me, in parallel with getting to know the business, my immediate focus is also on ensuring we're set up to deliver and meet our commitments right across the portfolio. It's important to note that this extends well beyond just case AGM and is relevant to all of our sites and all of our projects and the business more generally. At KCGM, specifically, this is also more than just delivering the current stage of commissioning. The focus is also on safely and efficiently delivering Stage 2 and are making sure we're ready to ramp up the plant and operate it consistently at design levels. From my perspective, in the short term, the focus has to be on delivery. This requires us to drive strong operating discipline, make sure we have the right capabilities right across the business, the right accountabilities, and to have a clear and relentless focus on execution. From my 5 site list so far, it's clear that we have a lot of opportunity and optionality right across the portfolio and across each and every 1 of our operations. Each operation has resource growth options to unlock value from that asset. Making share we're pursuing the right options and optionality to deliver shareholder value will be critical. Capital discipline is an important aspect of making the right decisions. Investment decisions have to be supported by robust business cases, attractive returns, and with a clear view of their impact on the business as a whole. I have mentioned [indiscernible] so far, but that remains an important growth opportunity for Northern Star. Engineering and design work is progressing towards a final investment decision in late FY '27, subject to various approvals. As with all major investments, we need to maintain discipline around capital risk and expected returns. Unlocking Hemi, and setting us up to deliver it efficiently and effectively will absolutely be a priority. Over the coming weeks, I'll continue to assess our priorities and our direction. I'm acutely aware of the importance of providing the market with clarity on our forward plan, and I intend to do so in due course. I want to complete the work of getting to understand the business and assessing our priorities before drawing any conclusions. In the meantime, our focus must remain on delivery and on running the business as well as we can and delivering on our commitments. I'll now hand over to the team, who will provide you with an update on the KCGM commissioning, our operating performance or outlook for FY '27 and on the financial results. Steve, over to you.

Thanks, Suresh. Good morning, everyone. During the quarter, we completed the tie-in of the existing circuit to the expanded plan. That was on 28th of September. -- about 2 weeks later than anticipated due to minor commissioning-related issues associated with the thicker and ball mill. These issues have since been addressed. The plant has been handed over from the project team to operations and the commissioning and ramp-up are continuing. The priority now is to resolve issues as they arise, establish stable, reliable operations. Achieving the nameplate capacity is important, but sustained performance is what will ultimately deliver the benefits of the investment. Looking ahead, Stage 2 construction is expected to be completed shortly after the end of the first half, with commissioning scheduled to commence in early second half FY '27. It will simplify the processing circuit deliver an expected 1% to 2% recovery uplift and eliminate concentrate haulage between KCGM and GIC. The KCGM mill expansion and readiness capital expenditure, was $221 million in the September quarter. Our FY '27 forecast spend remains within the stated guidance range of AUD 350 million to AUD 470 million. I'll hand over to Simon, who will take you through operating performance across the portfolio, including the mining and processing at KCGM and our outlook for the remainder of FY '27.

Thank you, Steve, and good morning. At KCGM, the focus is now on operational ramp-up following completion of the mill time. It was very pleasing to see the processing team successfully operate the old milling circuit of Fimiston and Mount Shale with parts of the new process circuit in parallel for a large portion of the quarter. The on circuit of 4 mills and associated flotation areas has now been turned off with the KCGM processing team focusing only on the new flow sheet. We are continuing to clean our mill material from the old circuit as we capture all remaining gold in the circuit. The old redundant parts of the plant will be fenced off at that particular time. From an open pit mining perspective, we mined 23 million tonnes for the quarter, which was on plan. This was despite enduring a very wet quarter with 125 miles of rain in Kampo. Golden Pike North continues to provide a source of high-margin ore while waste stripping and FersenSouth continued as planned. Underground mine development achieved a record of 10.3 kilometers in the quarter across the Fimiston and Mt Charlotte mines. This is a very important lead indicator for increasing the stope ore supply at a higher grade, which will lift the average mine grade from the underground mines in the future. Underground mine grade at KCGM was 1.7 grams per tonne. KCGM, together with Carosue Dam and Calgary operations, which make up Kalgoorlie Production Center generated mine operating cash flow of 433 million and a net mine cash flow of $15 million after $418 million of growth capital investment, primarily associated with the KCGM mill expansion. Gold sales were 194,000 ounces at an all-in sustaining cost of 2,919 an ounce, reflecting planned shutdowns and the impact of the KCGM commissioning on grade and recovery. I would like to touch on power across the gold fields. During the quarter, we experienced 1 major Western Power fault in late August. However, at that time, we had 2 of our Parkeston generators online. The interruption did cause the KCGM milling circuit or trip However, a restart occurred quickly, and we were reconnected to the grid in the following 2 hours. Historically, the power outage issues increase over the summer months and associated downtime, not over the winter months. At Yandal, the production center generated mine operating cash flow of $160 million and a net mine cash flow of $138 million after $22 million of growth capital investment. Gold sales were 118,000 ounces at an all-in sustaining cost of $3,687 an ounce, with planned shutdowns at Jundee and Thunderbox affecting the quarter. At Jundee, a key highlight included improved delivery consistency following the operational review. Mine grade of 2.5 grams per tonne was in line with the plan and is expected to increase in the second half, reflecting a higher contribution from Gripen, Cook and the Marda ore sources. Bawal Thunderbox delivered record quarterly gold sales supported by improved feed grades largely from Aelia and a drawdown of gold in circuit post plant at the Wonder underground mine was commissioned during the quarter, supporting ore body recovery and future mining productivity. At Pogo, our mine operating cash flow was USD 63 million and a net mine cash flow of USD 39 million after $24 million of growth capital investment. Gold sales were 53,000 ounces and an all-in sustaining cost of USD 2,307 an ounce, reflecting the planned processing plant shutdown, infrastructure rehabilitation of the underground ore bin and lower grade and recovery. Mine grades of 5.9 grams per tonne below the reserve grade at 6.8 grams per tonne were in line with expectations, reflecting the mine and stope sequencing and are expected to remain variable as we saw in FY '26. Across the portfolio, our focus remains on reliable operating performance cost control and delivery against FY '27 guidance. At Casey Jim, the priority is to establish sustained processing performance as commissioning progresses on the new circuit. At Pogo, the return of the underground ore in handling infrastructure is expected to support improved mining rates throughout the December quarter. I'll now hand over to Ryan to cover the financial results, cash flow and capital position.

Thanks, Simon, and good morning, everyone. As Suresh highlighted, we've had a great start to the year. Turning to the financial results. I'll focus on the group's cost base, cash flow, capital investment and balance sheet position. Total group cash operating costs reduced 3% quarter-on-quarter to $893 million, while total group all-in sustaining costs were broadly unchanged at $1.17 billion. Total group all-in costs which includes growth capital and exploration, reduced 5% from the prior quarter. Importantly, all 3 production centers generated positive net mine cash flow despite the planned shutdowns, commissioning activity and infrastructure works undertaken during the quarter. After $113 million of corporate tax payments, $51 million in exploration and $76 million in equipment finance and lease payments and underlying free cash flow was an outflow of AUD 31 million. The company remains in a strong financial position with cash and bullion of $1.2 billion at 30 September and substantial available liquidity to support the business and growth pipeline. Looking through the balance of FY '27, we expect operating and cash flow performance to strengthen consistent with the second half weighting embedded within our guidance. This is expected to be supported by the progressive ramp-up of the expanded KCGM plant, a reduction in KCGM mill expansion expenditure, completion of the key underground infrastructure works at Pogo and greater exposure to spot gold prices as the hedge book continues to unwind. Turning to capital investment. Sustaining capital was $220 million for the quarter, with the increase from the June quarter primarily reflecting higher investment at Thunderbox Pogo and at Jundee. Our Thunder box, this included deferred stripping and Bannockburn together with tailings Capital and tank refurbishment works. At Pogo, expenditure focused on key infrastructure projects including remediation of the underground ore bin, which is scheduled to return to service later this month. At Jundee, mine development progressed in line with plan, with development activities continuing to open up future mining areas that support the operation through the second half of FY '27. Growth capital investment across the operating centers totaled $473 million for the quarter. At KCGM, investment continued across the Fimiston South cutback and underground development at Mount Charlotte and Fimiston, while KCGM mill expansion and readiness expenditure totaled $221 million. We expect expenditure associated with the mill expansion to reduce materially during the December quarter with Stage 2 commissioning scheduled to commence early in the second half of FY '27. As commissioning progresses, the main focus remains on establishing stable and sustained operating performance from the expanded plant. At Hemi engineering design, permitting activities continue to progress with final investment decision remaining on track for late FY '27. Turning now to the balance sheet. Subsequent to quarter end, we added a new AUD 500 million change to our revolving credit facilities on similar terms maturing in October 2029. This increases total bank facilities to $2.25 billion. During October, we utilized $500 million of those facilities ahead of the FY '26 final dividend payment. This was a prudent liquidity management measure that maintains our financial flexibility while retaining substantial cash on hand to support our investment program. No shares were acquired under the buyback program during the quarter. The program remains open and available as part of the company's capital management framework and, of course, is subject to the company's security trading policy. Our capital allocation priorities remain unchanged with a continued focus on balance sheet strength, disciplined investment in growth and delivering returns to shareholders. Depreciation and amortization for the quarter was just over $1,050 per ounce within our FY '27 guidance range of $1,000 to $1,200 per ounce. The group also recorded a noncash inventory credit of $37 million, principally reflecting stockpile movements at KCGM and Thunderbox operations. From a tax perspective, we maintain FY '27 cash tax guidance of $450 million to $550 million, with $130 million paid during the September quarter. There's been no change to our current estimates for landholder duty associated with the grade and Saracen transactions. And a reminder, the company will pay a semiannual coupon payment and annual insurance premiums during Q2. Finally, we continue to unwind the hedge book during the quarter. At 30 September, remaining commitments totaled 648,000 ounces at an average price of $3,423 per ounce. I'll now hand back to Darcy for Q&A. Thanks very much.

[Operator Instructions] Your first question today comes from Kate McCutcheon from Bank of America.

You've outlined your priorities today in the release we've got. But I guess how do we think about the timing of some of those things and that list -- if I think about it, I guess you've got gold fields in the background there your endorsement of the FY '27 guidance and the market is expecting a multiyear outlook. Can you just kind of step through that maybe these priorities again some of the key challenges and how we should think about the timing now.

Thanks, Kate. And yes, it's good to connect again after quite a while. That's fairly all-encompassing question, so I'm going to try and sort of tackle it a bit by bit, right. I'll just sort of reemphasize the point that this is just -- just into of my tenure as the MD and CEO of Norton Star and my immediate focus and immediate priority has been to get out to the sites and start getting made around the business, right? There's a lot of aspects to the business that I still need to understand better. to really calibrate our priorities and make sure that we're in a position to deliver against those priorities, right? As I mentioned at the beginning of our call today, -- the immediate focus is on delivery, right? We've made a series of commitments, the production commitments or timing commitments that are attached to the KCGM mill expansion attached to production, attached to growth projects. And my focus is very much on working with the team to make sure we are positioned to deliver on those commitments. And that's the focus, right? We've made a commitment. We need to consistently deliver against those commitments. In terms of FY '27 guidance, I'll probably firstly touch on the performance by taking into account that Q1 was a transition month for -- sorry, transition quarter for the business, especially with the time of the mill expansion. And we were able to deliver in line with our plan and in line with good guidance for Q1. All of our forecasts and projections demonstrate that we will deliver in line with our plan for FY '27 and in line with guidance for FY '27. There's nothing that I've seen working with the team that would suggest differently, right? What I will say though, as we work our way through these things, if there are any emerging risks that cause us to rethink guidance, then we will transparently and openly communicate that to the market appropriately. And for whatever reason, we need to revise guidance, we will do that equally transparently and openly. On Goldfields, yes, that's in the background. I think there's nothing much more to add to our position, both in terms of management and the Board and what's already been reported in the media and elsewhere. Our priority is absolutely to work in the best interest of our shareholders. And right here and right now, delivering on our commitments is the biggest lever of delivering in the best interests of our shareholders. I think I've covered most of the topics, if I've forgotten anything, Kate, please jump in.

Okay. That's good. We hear you in the deep end there. Just on give me a call it -- just on the suit compared to where the team thought you would be invested when you came or not but the team came with guidance -- have we had any changes to the time line there? And then just the grade and recovery with voters metrics in line with the plan of the commissioning? If you can just help me tie it together with the update today versus where you thought you'd be.

Look, I might just throw to Simon to answer the question in detail, and he'll probably rely on Steve to add a little bit more color to a couple of items. But then I'll make some just overarching comments at the end.

Yes. Thanks, Kate, Simon. So look, to start with, I'd just like to really highlight how much of a high-quality build the new process plant is. And certainly, for the team there at site, it's a major step up from the 37-year-old plant, which we turned off on the 20th, 21st of September. So really great to have the old plant behind us and have the full team just focused on the new plant. In terms of details around the plan, look, the crushing circuit is certainly performing very well. There's mine areas to tidy up there. But fundamentally, the crushing circuit is fully commissioned and performing extremely well. So very, very happy with that. In terms of the rest of the process plant, the new plant, it's really now running it as an integrated circuit. So that's the key. We've commissioned Steve and his team have commissioned the various elements of it. And we've run up the ball mill, the float circuit, the gravity, all the different elements of it. And it's really only on the 28th when we tied in the Fimiston the old Fimiston SAG into the new circuit. It's now working through screens densities, mill ways, all those sorts of elements and really ramping it up, focusing on Runte and commissioning all those various elements as an integrated process plan. Look, in terms of the mining. Mining had a very good quarter. The open pit delivered despite a lot of rain, which was fantastic to see. Golden Pike performed to plan. The stripping in the southern end of the pit was on plan. And the underground had a great start to the financial year. So really, really happy with the mining inputs and the ounces that we put on to stock buy. It's now really focused, all hands on deck, on the new process plant, which we started on the I think that answers I must I might just go to Steve, if there's any more color on the commission Q1?

Yes. Thanks, Simon. Okay. I think the things that we're seeing today are just a small but annoying disruptions. It's always a way and $1 billion plus plants, it's a couple of hundred dollar items that take things down or things you just need to tune and rectify. So when we look at things like the ball mill, mergers and stuff like that. We had to basically get the temperature within the oil. We've had to do installation. We've had to make the pumps continuously run on stuff. It's just taking time to get those sort of books out -- but we are very pleased. We haven't got perpetual problems or we haven't had any fatal floors or anything like that. So very, very pleased. And as Simon said, a lot of time and effort has gone into the design of the plant. His team was heavily involved in trying to get most of the bugs out in the design phase. And now we handed them over and it's great to see the 4 team focused on delivering the 1 future.

Maybe if I could add just a couple of observations from my part. KCGM was the first site that I visited and going to have a look at the plant expansion was 1 of the priorities while I was on site. For those of you who know me is I've got a lot of operational experience, we've also got quite a bit of experience in building and commissioning greenfield and brownfield major projects, and I can list some of those right at another time. But what I saw in terms of the quality of the engineering the quality of the construction and the quality of the plant that was built is as good as anything else that I've seen in my career. We are in the very early stages of commissioning. And it's only normal for things to be quite variable at this stage. We get some good days, we get some not so good days. But nothing that we're seeing at the moment just to reinforce Simon's or Steve's comments, is suggesting that there's any fundamental issues with the quality of the engineering, the design or the quality of the construction, right, the sorts of issues that we're facing what you expect at this early stage of commissioning.

Your next question comes from Daniel Morgan from Barrenjoey.

Suresh and Tim, I just wanted to chase or follow on from Kate's question regarding the plan from here. What is the latest view of introducing higher grades to the processing plant over time? I imagine you would expect you put low grade in right now and you slowly bring that up when you have stability. I imagine you haven't got recoveries and stability where you'd like it yet. So putting all that together, I would imagine you would expect the December quarter to be the low for ounce production is all of that accurate? Or could you help me calibrate what December looks like? .

Simon?

Dan, so in terms of the recoveries, what we saw in Q1 was very, very promising in terms of the float circuit performance on not a lot of data set in terms of an integrated process flow sheet. So you can see that recovery was 76% for the quarter. But early on, we are seeing very good float recovery grade mass pool. So it's really around just stabilizing gravity circuit, running as an integrated circuit and getting the ground right, but ultimately, we are seeing good recoveries. We have got a lot of high-grade material there. So sometime during the quarter, we will start to increase the blend of some of the high-grade open pit dirt and underground feed back into the process plant. So we've got the luxury of this big stockpile. Mining is going extremely well. So it's when we built the confidence on the flotation and the gravity circuits really then it's start to increase that high growth back into the blend. So it's going to be progressive over the quarter.

Okay. And then just a little bit of detail on Carosue Dam. You call out Qunar as a new ore source as an underground mine. Can you give us an idea of the scale of this contribution in terms of tonnes growth and duration to the group?

Yes, sure. In terms of [indiscernible] itself, so as we've mentioned in the quarterly, we're dealing the box cut at the moment, Fucina expect to finish that over the remainder of this quarter. And then sometime in H2, we hope to cut a portal there and start that particular mine. In terms of future ore sources at Carosue. It won't feature in FY '27. So it is in future years. But look, at a high level, reserves wise is sort of a couple of million tons and higher grade. So around that 3 to 3.5 grams per tonne for Kena as a starting reserve.

Your next question comes from Hugo Nicolaci from Goldman Sachs.

Look, firstly, just to pick up on Catan's question, I'm sorry, labor the point on the CGM ramp-up. But -- if I look at the timber quarter, probably 1 than an outperformance driven by the 2.5 weeks of continuing to run that old plant, which probably added maybe 20,000 ounces to the quarter on the back of the envelope. Can you just maybe talk through a little bit more sort of where you expect utilization on the new plant to be sort of in the orders? Do we just sort of shift to right that sort of timing of ramp where utilization is probably maybe 70% to 80% in the December quarter and then continues to improve through the rest of FY '27. And then just on that grade piece, is it gram sort of too low as you process that mineralized waste and ramp up through the December quarter? Or should we be thinking that you get the quarter closer to your feed grades that you had in the September quarter?

Yes. Thanks, Hugo. So in terms of utilization, really, it's building up on what we've talked about previously, which is a ramp-up curve for a process plant at this size. So we're trying to aim at sort of 60% and then it ramps up progressively as we start to iron out those small things that Steve was talking about that just take us down. So that's going to be journey over the rest of FY '27. Q2, we'll get some good momentum in terms of ramping up the process plant. And really H2 is where we've had a decent amount of time running the integrated process plan. And like I said before, it's just getting mill weight, densities, commissioning those screens, so we get the run time that we expect out of those elements of the plan. So you are going to see it ramp up from the 2.5 million tonnes we did last quarter. The recovery will just increase from where we're going. And once we get good confidence around those elements, the circuit, the float and the gravity, then we will introduce the fee. So on a quarterly basis, you're going to see the fee probably go the graph. The head grade will go down from this quarter because we ran most of the quarter sort of business as usual on the old plant while we're waiting for the tie-in. So the feed grade will come down. The volume of tonnes will go up. and then it will stabilize and it's just more tonnes going forward.

Hugo, perhaps I'll just reinforce that in terms of what we're seeing right now, and noting that it's still quite early in the time process, right Yes, there's good days, yes, there's bad days, but it's consistent with what we would expect for the stage of commissioning and that our view is that where we're at right now puts us in a good position to deliver on full year guidance and therefore, you know whatever people would considered quarterly results to be as well in order to deliver on that full year guidance.

Yes. Got it. That's helpful color. And then maybe just 1 on Jundee. It looks like your mining rates were pretty flat quarter-on-quarter, as Jundee ahead of plan, but your mining costs actually came down materially in the quarter. Just wondering if you can talk to what drove that -- and if the $105 a tonne is sustainable from here or whether you expect that to then revert back to more like that $120, $150 a ton going forward?

Yes, there's obviously quite a bit of change. We enacted over the last quarter of financial year '26 and during the quarter, we did see some of those mining costs start coming down and stabilizing. You see the quarterly average. But I'm very happy with the Jundee operation in terms of that transition. So what we see at the moment as the game plan for the Jundee asset. But we made some pretty significant changes there in Q4, leading into Q1. So it was around 20, 22 bits of major equipment came out of Jundee and around 190 personnel were pulled out of that asset to reset the cost base to where we see it is today. So there are absolutely 0 redundancies for all of that and everyone was dispersed contractors and ourselves across the rest of our business. So that was a great result, well executed by the team. mining costs will stabilize around where they are at the moment. And we'll focus on the drilling and execution of the plan.

Your next question comes from Matthew Frydman from MST Financial.

I firstly ask at Pogo, the ore bin and outage infrastructure works that conducting there. What will they enable specifically? Do they deliver any potential productivity improvements? Do they unlock any new stockpiling area or buffers in the system? Or is that purely, I guess, your maintenance or kind of staying business rehabilitation work and also, I guess, was the lower grade in the quarter a function of those works and constraints? Or was it purely down to the mining sequence?

Yes. Thanks, Matt. Look, the Pogo bins had 20 years of material go through that. So at the end of the day, it's worn out to much larger than its original size. So we had to -- so we've refurbished and bolted and matched that with fiber create all the way to the bottom, which talk most of the quarter. And really, that's to put another 20 years of life, probably 30 years of life back into that bin. So it's more risk mitigation for large slabs or things falling off the bin, the team's worked on that for 2 years and really, really -- they've executed extremely well. I saw a few weeks ago, when I was at Pogo, just the last part of the refurbishment, and that's finished and behind us now. And by the end of this month, we'll be back on the ore bin, which will be fantastic. So that is my quarter 1 as planned, difficult to execute because all of the material has been going outside the portals, getting crushed, and then sent up to the mill in trucks and put through the e feeder. So the blue cube that people have seen on various pictures of Pogo has been out of action while being finishing the bin. So that's put pressure on the mining sequence as planned. We did plan this for a long, long time. So Q1, really happy with Pogo and the team and how they've delivered it and getting back on the ore beam will reduce trucking hours, TechM's speed up cycle and get back into higher-grade areas. As you saw in FY '26, grade was quite variable between 5.5 grams through to 7.8 grams and we averaged 6.7 for the year against the reserve of 6.8%. So expect to see that same variability but it will be easier for us going forward as we're back on to business as usual for winter.

Got it. Simon. Maybe secondly, looking across the portfolio more broadly, obviously, we had an operational review at Jundee earlier in the year, which the market didn't really get any kind of visibility on the specific outcomes from, apart from the additional commentary that you just gave to an earlier question, Simon. So I appreciate that. I'm wondering, is there any asset level operational reviews that are still ongoing? And could these result in any asset sales or kind of rethinking of the portfolio? Are there any active processes that might result in a potential asset divestment?