Thank you for standing by, and welcome to the Northern Star twenty twenty one Investor Day Q and A Conference Call. All participants are in a listen only mode. I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director. Please go ahead.
Thank you for participating in
the Northern Star twenty twenty one Investor Day. You will have had the opportunity to virtually meet some of our team presenting our five year strategic plan outlook. On the call today is myself, Stuart Toncord, Managing Director Maryann Drapniacs, Executive Manager of People and Culture Hillary MacDonald, General Counsel and Company Secretary Mike Mulroney, Chief Geological Officer Simon Jessup, Chief Operating Officer Kalgoorlie Luke Cacray, Chief Operating Yandal and Pogo Steve McLare recently joined as Chief Technical Officer and Morgan Ball, Chief Financial Officer and Troy Irvin, Chief Investor Relations Officer. We are available this morning to discuss our exciting outlook for Northern Star's business first approach to deliver profitable growth to 2,000,000 ounces per annum and enhanced financial returns through lowering costs, extending my lives and responsible and sustainable business activity. Our FY 'twenty two guidance midpoint of 1,600,000 ounces per annum at all in sustaining cost of AUD $15.25 an ounce builds to 2,000,000 ounces per annum by FY 'twenty six.
And where it counts most, our high margin long life assets. For clarity, this guidance is exclusive of our Kandana assets, which produced 120,000 ounces in FY 2021, which we recently announced to be divested to Evolution Mining for $400,000,000 So our focus today is to articulate the tangible actions underway to meet this strategic plan and differentiate Northern Star amongst the sector leading peer group. We have adequate time this morning, but please limit initial questions to two to ensure we address all the participants, then rejoin if necessary. Thanks, moderator. Now to questions.
Thank Your first question comes from David Radcliffe of Global Mining Research.
My first question is around growth capital. Provided the three year guidance, which is great, and thanks for that. However, there's really not much information on the $8.00 $5,000,000 for FY 'twenty three and 'twenty four. It's obviously quite a unallocated sum. Could you maybe provide some more color here on what the key projects are?
Yeah. Sure. So look, the fundamental content, obviously, $230,000,000 goes from Kalgoorlie, and that's largely the Pimberson South pre strip. And then Yandal, there's $270,000,000 going up to Yandal, and 190,000,000 of that's going into the mill upgrade, taking Thunderbox Mill from 3,500,000 to 6,000,000 tonnes per annum, and then the additional mining commencement for open pit mining to also complement and feed that mill. Yes, there are lots and lots of things that add into the total sum, But the main chunky pieces of that, multiyear capital going into KCGM for that pre strip that we commenced in the Finisan South.
But within Thunderbox, that plant will be commissioned that will be largely a twelve month expenditure to get that up to 6,000,000 tonnes per annum,
David. To give you a bit
of a guide sort of directionally in twenty twenty three-twenty twenty four, which you asked about as well, approximately 40% to 50% each year relates to the CALOPS. And we do see both Yandal and Pogo easing off a bit in 2023, 2024. Okay.
Then maybe just a follow-up in coming thinking about cash surpluses, capital management. The business is generating solid free cash flow at spot. You've got a conservative balance sheet. You've given some good guidance around. But I guess the current dividend policy is reasonably conservative.
How do you deal with things like the Kandana proceeds and surpluses above target levels?
Dave, it's Morgan. Sorry, should
have introduced myself earlier, but we go way back. As you know, we have a new Chair and
a new Board, and we've implied in the pack that we'll sit down and we will announce the full year 2021 dividend with our full year accounts.
Obviously, we are very proud of the dividend history that Northern Star has and that we intend to continue to always be in a position to return funds to shareholders. The beauty of the conservative balance sheet at
the moment and bearing in mind the purchase price for Kundana isn't in my bank account yet, but that gives us excellent flexibility and optionality to think about these growth projects, both inorganic and organic going forward, and we'll continue to upgrade as we can. We have talked a little bit about the potential for KCGM particularly in relation to processing, but there's still work to be done on that. Your
next question comes from Daniel Morgan of Barron Joey.
Hi, Stuart and Tim. First question is on all in sustaining costs. Basically, this presentation, you're messaging that synergies from the merger are better or ahead, I. E, the nontax synergies. You have also sold yesterday some of your higher cost ounces, in your business to Evolution.
But your cost guidance is relatively flattish at $1,500 an ounce and also, you know, which compares, you know, around about what we've experienced in the most recent history. My question is, is your business facing, you know, massive underlying cost inflation, these drivers are helping to arrest? Or what could you just comment on that?
Yes. Sure. So and look, Morgan can talk specifically to corporate synergies as well. But the operational synergies require that capital to be invested. So I think people need to understand the alignment between that capital expenditure that gets us to that point where we're at a much lower cost base, in all in sustaining costs and particularly all in costs dramatically come off as that the growth CapEx rolls off.
So yes, the two aren't immediate. Absolutely, the industry is facing cost escalations, but we're in a fortunate position that we've got those synergies that will come in once we've got things like Thunderbox. It's all predicated on that mill expansion, but that's still twelve months away from being commissioned. So you won't start to see those lower unit costs until that capital's been spent and that thing's up and running. But it absolutely shows the benefits of having those assets come by.
Okay. And my second question is just on the grade reconciliation So, you know, Page 42, that slide there. When you say that you're starting to model the positive grade reconciliation, that you've got more ore than you had expected going through the stockpiles slower. Just wondering, so you're starting to model this.
To clarify, is this in the reserves, or is this your business modeling where you're modeling it? And also, how localised is this? Is this a particular part of your body, or is this something that maybe is an ongoing benefit?
Daniel, it's Mike Mulroney here. The answer to that is basically that we recognise the over reconciliation in the mine over the last period of time we've owned the asset, and a small portion of that has gone into the reserve, as we announced earlier this year in May. There's still areas that we haven't boarded in at this stage, because we are pushing down through those levels, and we'll see how our modelling technique holds up in the real world. But certainly, all indications to date are we're still getting a positive reconciliation even after allowing for the initial uplift. So it's not fully baked into the reserves at this point.
It's still a work in progress, but we are, as we recognize these things and get a better handle on them, putting them into the reserves as we go year by year.
Thank you very much.
So of the pleased
the the specifically where you're looking at the different processing optionality. Obviously, the status quo is the five mills, and you've outlined you're looking at option one and option two. Can you clarify as to the extent of how much of that would be refurbishing existing infrastructure and how much would be new? Is it just milling? Or is it also sort of the back end of the flow sheet?
You give a bit more color around all of those moving levers, please?
Yes. Thanks, Mitch. It's Song Jessup here. I suppose the way we're looking at it is really trying to simplify the plant. So the five mills to potentially four by dropping a couple of mills out of Mount Charlotte circuit and then simplifying the Pimiston circuit to three is a logical sort of step changes through there.
So this a work in progress we're trying to accelerate, but really it's full steam ahead on a study. And our intention is to update the market in the '2.
Okay. I might be jiggling. This is sort of a subset of that question, though. But what sort of capital parameter I realize it's early days, but I'm just trying to get a grasp on the capital framework that you
may be looking at when with this facility. Yes. So, Stuart and look. This is where
our our eyes go to the the proceeds from the sale of the Kandana assets. Obviously, we bring in 400,000,000 from that. The range to get that plant from 13,000,000 tonnes up to 22,000,000 tonnes, there's a raft of different ways to get there. And obviously, the capital is quite wide. So we want to be careful that one, we haven't banked in any production growth from expanding that plant.
What we're identifying is the 3,000,000 ounces of reserves in stockpile that's underutilized and really doesn't get depleted because they're mine planning forward. So there's capital that could simplify and increase the capacity, lower unit cost of that plant. So it's hundreds of millions, yes, but the feasibility work is to really look at what that is to get that out. So we'll give some framework on that in the '2, but it could be $200,000,000 it could be $300,000,000 Please don't put that into models because there's no answers hanging off the end of it. The banking balance sheet's available to do it, but we see those opportunities business to redeploy capital to get the highest returns.
And some of the cash margins on that stockpile at Sydic KCGM will be some of the strongest cash margins because there's no mining cash costs associated with that material. That was highlighted in the slide.
Thank you very much. And for my second question, I just wanted to with regards to the guidance for KCGM, it appears to be, I guess, quite conservative. If I look at the chart, you're sort of closer to 500,000 ounces, which is similar to less than the exit rate that you did in the last quarter. And I just wanted to understand some of the parameters that you've used in that. Have you assumed a 13,000,000 tonne per annum throughput rate of the mill?
And I guess given the mill has been operating at well north of 14,000,000 tonnes for the last quarter, What why should we not assume that it's going to operate north of 13,000,000 tonnes?
Yes. Thanks, Mitch. Simon again. Look, just in terms of instantaneous or quarterly rates, we do have large shutdowns probably every second quarter. So we're still in that range of around 13,000,000 tonnes.
Think the maximum has been about 13,300,000 tonnes over the history. So in our numbers, we have got that processing throughput continuing on. We haven't got a higher throughput rate. And in terms of ounces going forward, it's really timing of when we get into Golden Pike at the base of the pit. So the cutback is all on track and it's yes, we're moving forward for Golden Pike Golden Pike North and South coming on stream in a few years' time, and that really drives your ounce profile.
Your next question comes from Sophie Spartalis of Bank of America.
I just wanted to explore a little bit more Dan's question around the all in sustaining costs and particularly around the sustaining CapEx. So you referred to the growth CapEx of $570,000,000 for FY 'twenty two. Should we be taking this as a guide to sustaining CapEx of $390,000,000 which is what you did FY 'twenty one?
Yes. So our sustaining capital sort of tracks about $2.50 sort of $275 an ounce. So it's probably fair to maintain that. Look, we're tied to the idea of multi year past three years and planned all in sustaining costs. But to some of the questions as well, to project forward costs at that point, I think, anyone is going to be quite difficult.
We've got a lot of our contracted costs in our suppliers and procurement and all that secured in the near years. And we've got a trajectory of where we're to go in the back years. But yes, that sustaining capital amount, $2.50 odd dollars an ounce, has been fairly consistent across the business, so it probably can be assumed. And that relationship with underground mining, you typically are putting that development in at the same ratio to open up the same amount ounces, so that's pretty fair.
Okay. And then just as a follow-up to that, so the depreciation should be roughly that as well.
Well, you'll also have price in Morgan. You'll also see that increase with the synergies related to the tax shield.
Yes. Good morning, Sophie. It's Morgan here. Just I guess in relation to the all in sustaining, that's Steve's absolutely right. We sort of track it around that $250 an ounce.
What you do see throughout the year is a bit of variability depending on how many pre commercial production ounces we have in a particular quarter. We're relatively high in that area in the first quarter as Sunbox Underground approaches commercial production. So you don't have as many ounces to spread across your sustaining capital. And then but over the course
of the year, that's the number we'll settle at.
And in relation to D and A, I guess we're just finalizing the merger accounting work. The best lead I can give you there is the Q4 D and A per ounce numbers that we've put out yesterday. That sort gives you a pretty good proxy for how we're thinking going forward.
Okay. That's great. And then my second question is look, a key theme I took away from reading the presentation last night is Northern Star still has a number of optionality and flexibility within the portfolio, particularly around Tanami. You put out production guidance to FY 'twenty six and doesn't include that project and still understand that it is in the early stage of exploration. But you've increased your stake back in May to 50%.
So you obviously see some potential there. Can you just talk through when is the right time to start turning your attention to this asset and maybe talk to what are the key stumbling blocks that are needed to be overcome to get into a similar position of your three existing hubs that offer that scale in mine life?
Yes, that's a really good point, Sophie. Look, we I think we started with a couple of 100 slides that we've really got discipline to try and trim it down to materiality for the business going forward. So please don't read that the emission of like Tanami means the significance in there. But when you look at where the growth is coming from, we've really focused on those material things of opening up KCGM, getting the pre strip of the South Southern cutback and the OBH cutback rectifying that slip getting in the grade and the floor, as well as the Thunderbox expansion. But for us, Tanami, we're still going through the process with a joint venture partner there to get that fifty-fifty locked.
I think the shareholders have a vote on that. Absolutely working with them on Mike and the team on the exploration programs to get into ground rush and really look at the size of the prize up in the Tanami. And we still love that district. The geological potential up there is phenomenal, and we're still holding 8,000 square k's or so of tenure. So yes, see that it's not just because it's not a massive slide in the pack.
We're not an exploration company, but it's still meaningful in the pipeline, and it's probably highlighted in Mike's sections about we've got projects throughout the whole elements of pipeline that feed into that future stock, and we just haven't, I guess, put a fuse on it to say when it falls into that program. But you highlighted optionality. Those things exist across the business, and it's really just prioritizing capital.
Okay. I'll leave it there. Thank you. Thanks. Thank you.
Your next question comes from Matthew Friedman of Goldman Sachs.
A couple of questions for me, please. Firstly, on Pogo, a very flat production profile there post FY 'twenty three. You've previously scoped up the potential for a further mill expansion at that asset to 1,500,000 tonnes per annum. Just wondering if you've got an updated view on what that next phase of expansion at Pogo could look like, what it could cost? And is it dependent on further exploration success?
Or is it a matter of bedding down the current mining rates? I would assume that the milling expansion optionality that you've got there at Pogo can be presented in much the same way as what you presented at Kacingsdam.
Yeah. Matthew, it's Luke here. Great question, and it's probably more the latter. This is a massive district, massive potential. We call it camp scale, and we see numerous hits outside the resource.
So what you're really probably seeing is this first near term, get to the 1,300,000 tonne, get the acre homes going, produce 300,000 ounces. I'm heading there tonight to go and have another We're going to deliver on that. We've got huge exploration potential outside of that. We're going to let those results come in over the years. We're in no rush, given what we've got in mind to work with.
And then we'll just really optimise it with just going into just our capital sort of analysis and work out what the best bid is for that region going forward. But I guess
the short answer is you've
got plenty of time. And while it's producing 400,000 ounces, it will be producing a fair
bit of cash along with it. Matt, Stuart, just to add to that, Steve McLeair has joined us as Chief Technical Officer. The long term, he'll be looking more past the CLOs bringing it to these bigger scale operational projects. So when travel permits, obviously, Alaska and the campscale focus, we'll be looking at Goodpaster maiden resource this year and just what that whole district can do. Luke's media focus is to deliver that 300,000 ounces.
But the key is to actually get that longer, more forward dated plan. Sure. Thanks, Stuart. And safe travels to Alaska, Luke. Hope you have a good trip.
No problem. Second question for me, and I
guess a bit of a bigger picture one.
I guess, look looking back at the time that the merger was announced, the prospect at that time was to create a 16,000,000,000 company. You know, currently, your market cap is around 12 and a half billion dollars. Just wondering that, you know, if the merger was compelling at that prior valuation, how does buying back stock today rank in terms of return on capital, in terms of your capital management, you know, metrics? And and do you compare that return on capital up against the optionality from your suite of internal growth projects, which obviously has been the focus of today's release?
Look, it's these things are always options in
the thing, but I think
it just ranks quite low in Mike's showing you how many ounces he can add efficiently. We've looked at this organic growth CapEx that can lift profile and increase margins. As far as market cap, gold prices retreated somewhat. But you've seen us with a really healthy balance sheet in those environments even being an acquirer of gold assets. So all these things are at play.
Share buybacks in the immediate term are probably high on the list.
Got it. Thanks, Jim.
Thank you. Your next question comes from Rahul Anand of Morgan Stanley. Please go ahead.
I just have one question. So if we combine the production guidance for FY 'twenty two, 'twenty three, 'twenty four for Northern Star and Saracen prior to the merger. We're losing in your guidance provided overnight about 160, hundred and forty and hundred and thirty thousand ounces. Now you did mention that the Kandana sale impacted, and some of those ounces can be accounted for from there. Two questions on that.
Firstly, Evolution's presentation gives us ounce numbers that are much smaller than that. How do we bridge that gap? And the second is, obviously, I would have thought that you would have moved to higher margin ounces. However, your all in sustaining costs have still gone higher over this period, was pre guidance. How should we square that circle, please?
Yes. Thanks, Rahul. Look, I won't answer on behalf of Evolution. It's probably directed to them. But look, I'm certain it's around the milling capacity.
You've to get that all through the mill. And I think that's led to the fact of an expansion at Mungari that feeds that. You need to probably ask them on how those answer. But we produced 121,000 ounces on Ascondana assets in FY 'twenty one, so extracting those from the go forward some of the parts planned we'll give you some of that change. But obviously, we've done a massive resource reserve update.
Probably it might sound like chocolates tomorrow, but on a lot of these plans, we've worked for the long term. We've got a decade plus mine lives on some premium assets. We've made sure we haven't done a snatch and grab plan, and some of the expansions or the work that's happening in places like KCGM for the absolute long term to get the best results. So it might defer near term production, but it absolutely drives sustainable levels of production once we get to those levels. We've got that multiyear guidance that's there now on the combined businesses, and obviously the merged companies have been bedded down, and the new plans, new resource reserves have been incorporated into the life of mine plans.
I'll probably just highlight as well that that 2,000,000 ounce per annum target, we arrived at that a couple of years earlier than the previous sum of the parts plan. So I think that's probably a highlight that we need to look at, and it will be at lower all in sustaining costs.
Okay. I have slightly different numbers, but I might take that offline. Thank you. Thank you for that.
Yeah. Look. I I we've been watching consensus numbers as well, and there is a bit of a range at that end. So please follow-up any questions through Troy, Evan, just so we can assist in in clarifying any of that.
Perfect. Thanks for that. Much appreciated.
Thank you. Your next question is from Daniel Morgan of Baron Joey.
I'm back at the top of the batting order. Portfolio question. You've just sold Kandana to Evolution. Is there more potential rationalization of the portfolio, you know, with the Kalgoorlie asset for the non super pit? Or, you know, maybe Paulson's?
Or, what's in and out of what you would consider for the M and A piece? It very much seems like growth is not done on that side either.
Yes, good question. And look, that term, I guess, we've got in there active portfolio management that says we'll do all those things. So it's really the sequencing of it. So ideally, through cash generation from our assets, we're feeding that organic growth. We're dividend paying.
We're building our balance sheet. So when we look at the acquisition side of things, bolt on acquisitions that feed into these concentrated production centers that just make logical sense complement the life of mine plans will always occur. And then we've got the strength bandwidth here to be able to operate sort of three to five meaningful concentrated centers. So the acquisitions of stand alone large scale production hubs exist. Divestment really is this effort for reward.
It's what's the return on invested capital? It better spending your focus on fewer areas. So it comes in that equation. Things like Paulsens, they're not burning a hole in our pocket, but they're also contributing, and we'll absolutely look to divestments of those types of things versus trying to turn back on 100,000 ounce per annum mine that's sitting out in the island. So all I'd say is yes, we're not closing doors on any of those options, and we'll keep portfolio management as part of our DNA.
Okay. Thank you. And second question, a little bit of accounting minutiae, so apologies. But, the CapEx guidance you've given, the growth CapEx guidance, just want to clarify, are these gross numbers? And what I mean by this is, in the past, there's been preproduction sales of gold that have been offset in the past from Saracen guidance, for instance.
And also in the quarterly, there's preproduction that comes in that's offset from gross CapEx numbers. So I just want to clarify the CapEx numbers, is it gross dollars you're spending? Or is it net after some of these preproduction ounces?
Dan, and welcome to your new shop. Morgan here. Yes, those numbers quoted in the presentation are gross. In fact, you and I can have a really enjoyable long term accounting discussion later offline. But as far as preproduction ounces go, FY 'twenty two is the last year of the netting off of those preproduction ounces against capital based on accounting standards.
And then in FY 'twenty three onwards, it will change. But as far as this FY 'twenty two goes, they're all gross, and there will be commercial preproduction ounces in our books during FY 'twenty
Your next question is from David Radcliffe of Global Mining Research.
Hi. Thanks for the follow-up. My question is on the emissions targets. So slide 24. Could you clarify you've put out the zero target by 02/1950, but is there an interim target for 02/1930, which which is reasonably standard these days?
Also, it seems like it's a pretty embryonic sort of policy when you compare it to your senior peers. In terms of the strategy, would you look to make direct investments in power if that's sort of key emission source? Or or is it more you rely on providers to provide solutions for you? And will you actually provide, if you know, budgets in the future?
Yeah, absolutely. So we'll in our sustainability report that we do on a calendar year, we'll publish, so January, February 22. We will give that, and we'll give that near term 2030 target. And really, we're doing all the have been doing all the work and we're holding that, David, on absolute and intensity near term targets. So I guess what we've really tried to demonstrate here, Slide 24, 25, is we understand our emissions profile.
We understand those baselines. We understand the current existing technologies that allow us to give a medium reduction. And it is on our Scope one, power generation, that's pretty much 70% of our emissions. And it's really driven by replacement of gas fired diesel, diesel fired stations with renewable solar, wind, etcetera. So whether we're the owner of that capital, whether other parties are and it's PPA, the beauty is we've got long life assets that we can secure that long term commitments with to deliver that.
And then we've pushed back out given everyone's looking at 02/1950, what are the types of things that allow us to do that final reduction? And there is a lot of technology and innovation required to make those final changes, particularly in underground mines where it's energy intensive, pumping, ventilation. So if you're trying to reduce those things, you're better off making sure that the energy going into your mine is clean before you try to electrify everything. And then ultimately, you'll still also need carbon storage offsets. So that's the first wind down and project for our commitment.
You'll see a lot more content and detail in our sustainability report. Yeah. And appreciate that's the that's the work we're doing to date.
Okay. Brilliant. Thank you.
Thank you. Your next question comes from Peter Kerr of AFR.
A couple of questions on Pogo. Almost three years now since that acquisition. And it looks as though net mine cash flow after CapEx and exploration and everything else you've done there has been roughly neutral over those three years. And I noticed a further 70,000,000 Aussie of CapEx going in there in the year ahead. So I'm I'm interested to know when do you guys expect Pogo to become a significant contributor on a net mine cash flow perspective?
And I guess that ultimately leads us to the question over what payback period do you have in mind for this acquisition? Should investors be thinking that ten years is sort of reasonable from the 2018 acquisition date?
Yes. Thanks, Peter. So FY 'twenty three is the go steady 300,000 ounces run rate, and that's when it will generate significant U. S. Denominated cash flows.
We're already it's already contributing now and covering its cost plus exploration. So really going forward, it's starting to chew into that payback period. So I think if anyone the experience of Pogo, we feel, has been absolutely successful. It was our first foray offshore, and we've put an enormous energy into renovating that asset into driving productivity, extending mine lives, including discovery and resource and reserve update. But it's not lighthearted effort going into a project like that.
So we've got a lot of learnings, but it's a significant asset that's meaningful and will stay in our business for a long time. And it will absolutely contribute from FY 'twenty three major cash flows in U. S. Dollars. Look, the target is to get initially below that US1200 dollars all in sustaining cost and then ultimately below US1000 dollars all in sustaining costs in the first targets.
But it has the potential to go. Given the grade, it has the potential to go much further down. So it will be a low answer profile of $300 against the other assets. It will be a significant cash generator at really low quartile cost base.
And has owning a North American asset had a meaningful impact on the way you are viewed and received in North American capital markets?
We were largely we're over 50% offshore owned UK, US anyhow or North America anyhow. Look, there's a lot of eyes on Australians that embark on that growth. We focus purely on Tier one jurisdictions. We've been really clear on our strategy, Australia and North America. And look, yeah, it's everyone's
been looking
at that asset, understanding it was going to close with a two year mine plan. So three years on, we're sitting there with over 1,500,000 ounces of reserves. And a really good outlook will be putting Matam resource on the Goodpaster discovery. And people's eyes are on that project and particularly our brand, our DNA and our performance, and we're out on a poster for that. So we're very pleased with the current progress.
We were set back, obviously, with a year of, pandemic, but it's a credit to our team to to be persevering, and really delivering now.
Beauty. Thank you.
Thanks, Peter.
Thank you. Your next question comes from Hayden Bairstow of Macquarie.
Just a couple for me. Firstly, Stewie, on Thunderbox versus Jundee, just to understand the different economics of the the two mill expansions and why Thunderbox, you know, looks better than Jundee does. And then just circling back to Kadama, just wanna confirm what you were talking about before about $400,000,000 proceeds being reinvested. So is that to get the return on that, is that the two stockings going out to them is more likely to be lowering the cash costs of KCGM? Is that sort of where the potential return comes from?
Hayden, it's Luke. I'll answer the first question with TBO. For the absolute sort of the detail of it, Sander Box gives a better dollar per tonne saving because you're going from basically just two mills. So we're just putting a big SAG up front and using existing ball mill. Whereas Jundee had two ball mills, so we would have put a sag at the front, but running three mills versus the two mills just increases your cost by about a net average of $1 a tonne across the region.
So that's pointed to Thunderbox as the best mine. Conveniently, the weight of tonnes is to the south as well, so it really is closer. And then all the regional resources around Thunderbox really come into that plan and deliver that of $5 a tonne savings over the year. So $30,000,000 or a $100 an ounce.
What was the second question? Sorry, Hayden, on KCGM?
Just on the 400 from the Kadana sale, you sort of said it's not, you're looking at investing it, but it's not on ounces. So what is it? Is it mill expansion to drive costs lower, or will that actually be used to grow ounces as well?
Look, I think if we could have that feasibility done in a hurry, I think it's really the most efficient onset and plan of that. In the go forward guidance,
we've
got some hatch boxes showing what profile could deliver to restore KCGM to that north of seven hundred seven hundred fifty thousand ounces and beyond. It's around getting like we're doing with TBA, a single eight meg tag and taking that Finiston Charlotte circuit from sort of five mills down to four and down to three. So not only do you move from 13 up to either 17 or 22,000,000 tonnes per annum, you're doing it with fewer moving parts at a much lower unit cost per tonne. So that £400,000,000 of proceeds, Morgan is going to be looking at it on the balance sheet and guarding it and making sure it's not deployed until it's in the best use. And I think we're quite comfortable to sit with that, with the growth profile we've got in the next couple of years.
We've also got the debt pieces that were refinanced out in year four and five. So we just want to maybe we are conservative with leverage, but it's a good problem to have.
Your next question comes from Patrick Collier of Credit Suisse.
I'm just looking at Slide 36 where Kundana offset its equivalent margin. Sure. Okay. This is mainly with a 12 to 25,000,000 annual benefit is unchanged just following yesterday's assessment.
Sorry, Patrick. I missed that question, mate. Could you please repeat it?
Yeah. Sure. I'm just on five thirty six. It's got Kundana ore as being equivalent margin between the CDO mill and Kundana's bowel mill. Just wondering, does that 12,000,000 to £15,000,000 annual benefit from the district milling change at all following yesterday's divestment?
Yes. Thanks, Patrick. Simon here. I suppose with the announcement yesterday, yes, we need to review that. But the simple answer is moving the dirt around.
We managed to get a better recovery from our dirt. That's a Q4 number that we achieved, But we improved the recovery, we get a lower milling cost. And really, what that does is just give us access to high free cash flow per tonne margin lower from KCGM. So the more of that we can process, the higher that number can actually be. So yes, with the divestment of the Kundana assets, we'll review that going forward as the best way to optimize the ore across the process plans we have.
That
slide just highlights what we've done today and that optionality policy optionality. So we've already seen those benefits. It doesn't fall away with that divestment. In fact, we'll free up million tonnes of capacity for that 20 in the region because we don't sell a mill with that with those mines. Yeah.
Okay. Got it. Okay. Thank you.
Thank you. Your next question is a follow-up from Mitch Ryan of Jefferies. Please go ahead.
Thanks, guys. Luke, might be getting into the weeds here, mate. But in the in the quarterly, you called out that at Jundee, the Julius open pit would start to displace lower grade stockpile mill feed in FY 'twenty two. But if you sort of look at the guidance you've given, you've sort of held it flat year on year. Just wondering if you can sort of help square that circle.
Yeah. The simple way to look at it, Mitch, I think is Chum Dee underground produces about two to 2.2, that four grams we're just north of. We've got numerous potential and resources in the region. So we saw that with Ramon. Julius comes in, it knocks out one gram stuff, puts two gram stuff in the mill, so 1.82.
So it builds it back up to that 300,000 odd ounces. And, ultimately, what we're gonna end up with is 300,000 ounces in the North, 300,000 ounces in the South, double the tonnes at half the grade in the South or half the tonnes at twice the grade in the North.
Okay. Great. Thank you.
Thank you. Your next question is a follow-up from Sophie Spartalis of Bank of America.
Thanks. Stu, can you help me understand Slide 58 around the synergies? There's two pie charts there. For example, how much reduction in cost saves have you received by renegotiating, say, your drill and blast contracts? Can you just talk through that slide, please?
Yes. And I'll let Morgan pick it up. But there's obviously average reduction of 6% spend across those contracts. And we're putting obviously the agreements totaling about 30,000,000 already achieved per annum as run rate. So I think people look to these $1.5 to $2,000,000,000 worth of synergies, appreciate that was
an NPV over ten years. So when you actually look
at what's the go forward annual rate, this is to demonstrate how much progress we've made on that.
We do have legacy contracts that still need to
be renegotiated. We believe we've just renegotiated the Jundee underground mining contract, one of our largest mining contracts. And we issued Burn Cut a three plus two year contract, which is valued at $750,000,000 and we've basically locked in that pricing for that period. So their examples, and I'm not going to give commercial confidence, away rates for our suppliers and providers. But this slide, I'll let Morgan just cover the key highlights that we've achieved.
Yes. Sophie, you're exactly right. We do have a little bit of a commercial and competence restriction.
We have
good long term partnerships with a number of these providers. And the combination of economies of scale and the relationship and the outlook has seen a number of them come to the party and want to maintain that relationship. So we've seen some good wins there. Offsetting that, of course, is the macro environment where costs are going up. So the fact we are realizing on average across the contracts we've revisited to date circa 5% is the best we can do with that.
And I've tried to give some categories for you there to give you a bit of a feel, but I'd be like to go any more granular than that. But as you said also, GBP 30,000,000, that's a real number that we've achieved in calendar twenty twenty one already. And I've also tried to show that's only a 30% to 40% of our contestable spend in this company. So we still have work to do. And as contracts come up, we will revisit those throughout the course of
the next two to three years.
Okay. So of the five so you've addressed GBP $540,000,000. So of the $540,000,000 that you're spending, you you've got a savings of 30,000,000 of the out of that $5.40. Is that the way you interpret it?
That's that's the way I think about it, Saad. Yep.
Okay. Okay. That's great. Thank you.
Thank you. Your next question comes from Daniel Morgan of Baron Joey. Please go ahead.
Hi, all. Page 41. So that's the underground potential at the super pit. It's not in the mine plan. I'm just wondering if you could talk through what is the time frame for the drilling contemplation and when might earliest feed occur if it was a mineable proposition?
I'm basically just looking for you to step me through how this opportunity might evolve over time. Yes.
Thanks, Daniel. It's Simon here. I suppose the really exciting thing about this is the first portal in over twenty years at KCGM. And this is our first drill platform of a kilometer to really start targeting and growing the 50,000,000 tonnes of 2.5 gram, 4,000,000 ounces that we've got. The size of the system is massive here.
It's over five kilometers, 900 meters in width. And our average depth is still only 500 meters of mining, yet we've still got hits over 1.5 kilometers. So look, this is going to evolve. We'll obviously keep updating as we drill it. But really, this will fall to Stephen MacLean really to drive this large scale project over time.
So it's a lot of drilling in different areas of the pit, but look, this is our first start. But Steve's experience on large scale mines will really lead this study over the next few years. And it absolutely will be ounces on top of the plan once we develop the way to tackle this enormous system.
Maybe just a follow-up. In your experience, the company this is something the company has done with regenerating assets in the past, like Jundee, etcetera. What's been the experience of putting in these drill drives in terms of timing through to production?
It's a good question. Look, we've just picked one quadrant, obviously, put these western portals in and get this one kilometer drill drive. So we're trying to make sure we don't interrupt the open pit activity with the underground accessing those parts of the ramps and that. And so it is drill it out first to find it. And you can jump straight in there today and get some stope tonnes out, but we want to make sure we understand the full size of the price.
So we've got that runway, and it's important that we do that. So the same as the mill feasibility expansion, we already know a format today that we could spend money and get it up. But then you're gonna be, you know, discovering more ore and and then having to expand it again. So we just wanna make sure that we're we've really worked out what the ultimate endgame is, and then we set it up, you know, almost do it once well and and set that up for the for the long term. So, like, this isn't this isn't the size asset that you rush hard into because you could spend a lot of money and not end up with what the optimum result is.
I think we've really got a solid base load. It's important that we do the prudent feasibility work to make sure that the capital efficiency and you compare us against peers, our capital efficiency all geared, the big numbers in our plan forward here, but you comp us up against peers, our capital efficiency is well ahead of the pack in that regard. Just give us the time to do the work and then put it into the model. The same as that $400,000,000 If it means we haven't got a great use for it, we will return to shareholders a special dividend. We've done that before as well with Plutonic when we did a sale of an asset.
But I absolutely believe we've got options inside our business to get the greatest returns to shareholders for that.
Your
final question comes from Sophie Spartalis of Bank of America.
Just coming back. Two questions from me. Firstly, the synergies. How much of the synergies show up outside of the all in sustaining cost?
So it's Morgan here. I don't have a really quantitative answer for you on that, but certainly, you'll see on the section on tax, which is a large portion of Sydney, synergies, that tax cash saving falls outside the all in sustaining cost. And some of the other synergies we realized are on capital basis, so they also fall out.
Okay. And then Page 16 of the deck, you talk around sustainable twenty plus year mine life. Is that do you believe that, that is the case across all the assets?
On those production centers that we've put there? Yes. Absolutely. The focus on the geological systems while we've got into these suburbs in these Tier one locations is with that focus. So you've seen the track record, and we continue to invest with exploration to extend that resource reserve.
We've got this target of 20,000,000 ounces reserve maintained, and 60,000,000 ounce resource means that the balance with the resource conversion we have on these deposits means that we can keep that pipeline into our life of mine plans. And look, these things aren't finite, so we've got ability to acquire and move from three to four to five of these centers with the bandwidth of the team we have. But that's our DNA, and that's our planning to target that. Yes. Thanks, Doug.
Okay. Awesome. Thanks, Doug.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Tonkin for closing remarks.
Yes. Thanks, moderator. And look, you didn't hear from Mary Anne or Hillary today, who are here in the room. And please assure that they are both very, very active in the team to look after our people and our governance matters and social responsibility. So please follow-up any of those questions and you'll see more of them on the ESG roadshow.
But look, for conclusion today, at Northern Star, we operate as business first with disciplined capital management to deliver superior shareholder returns. We operate a simplified business with scale exclusively in Tier one locations. And we offer profitable growth where accounts at our higher margin, longest life operations, and we actively portfolio manage our assets to ensure our efforts yield the greatest returns for all stakeholders in a responsible and sustainable manner. Thank you for your time today. That
does conclude our conference for today. Thank you for participating. You may now disconnect.