Thank you for standing by, and welcome to the Northern Star December twenty twenty Quarter Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Bill Bemont, Executive Chair.
Please go ahead.
Thanks, and Happy New Year, everyone. Good morning, and welcome to Northern Star's December quarterly results and my last delivery of quarter results as an executive of Northern Star. And I wish to thank my employees, management team, Board, business partners, all stakeholders and long standing shareholders for your huge and enormous support backing myself and the company over the last eleven so years. Joining me on the call today are our Chief Executive Officer, Stuart Tonkin our Chief Financial Officer, Ryan Gurner and our Chief Geological Officer, Mike Maroney. Today's results from Northern Star and those you have already seen this morning from Saracen are more proof of the world class company that we are about to establish.
Northern Star's December quarterly performance shows our assets are performing great and are well within our group guidance. At the operational level, the financial level and the corporate level, our plan is coming together just as we had outlined. In simple terms, we are delivering on every element of the script we gave to the market when we unveiled the merger strategy last October. This means we're on track to seize one of the greatest opportunities ever seen in the Australian gold sector. In fact, I'll go as far as to say that it's one of the greatest opportunities currently on offer in our industry globally.
Today's results further support what we have been saying since October, which is that we are creating a gold mining company that will be growing at a time when most of our peers are staying still or shrinking. But growth at a time when your peers have none of it, that's the sort of growth that's special. And it is particularly special when it is organic growth because, as we've shown over the years, that sort of growth which delivers strong financial returns. And I can assure you that the Merge Group will retain our commitment to maximize returns for all stakeholders. Our strategy to deliver our sort of growth will be assisted by the vast synergies which will flow from this merger, the flexibility which comes from having multiple production hubs around Western Australia, and the firepower to unlock the enormous exploration upside at our assets.
I'm excited to show more on this exploration opportunity, which will be released in the June. With the merger with Saracen now just awaiting final court approval, we are very well advanced on getting into the detail of our strategy for the Merge Group. We're not going to delve into the details today. As you'll appreciate, there is plenty of work to be done to ensure maximize these huge opportunities we have. I will now hand over to Stuart Tonkin, who will provide some insight into the quarter's results.
Thanks, Bill. This morning,
we are pleased to report our December quarter gold sales of over 252,000 ounces at the upper end of our quarterly guidance, which has quarter on quarter growth to a full year production of between nine hundred and forty thousand and one million sixty thousand ounces. We remain on track for group guidance with a strong half two forecast. We also remain well positioned for planned organic growth with capital expenditure underway to deliver a 30% production increase over the coming two years. Our planning for merger integration and delivery of combination synergies is underway for the inclusion of Saracen and Northern Star's outstanding teams and assets. And Ryan will talk shortly to our strong balance sheet to support this growth.
To Pogo operation in Alaska, we continued with an improved performance at 54,000 ounces sold an all in sustaining cost of US1365 dollars an ounce, despite the constraints imposed due to the impact of COVID there. Restricted activity has meant prioritizing development and stoping zones to three main areas of Lisey, South Pogo and Fun Zone. The diamond drilling is continuing with eight rigs underground, including North Zone and East Deeps, with exciting results achieved across the mine. I thank the Pogo team immensely to maintain all control measures to ensure the health of employees and the community whilst maintaining business continuity throughout trying times, with over one hundred COVID cases managed during the quarter. Long haul stoping at Pogo continued and contributed 77% of the ore feed during the quarter, with total ore mined of 202,000 tonnes at nine grams per tonne.
We are mining at about 60% to 80% of capacity due to the disruptions, and we continually reallocate resources to prioritize mining programs. OGAT milling matched mining volumes at 203,000 tonnes at nine grams per tonne produced over 53,000 ounces at the upper end of our guidance range. Our mill expansion activity is continuing to enable the 1,300,000 tonne per annum capacity by mid this year, but mining volumes will be needed to increase to meet this capacity. To our Yandel operations, we continue on track with 868,000 ounces sold at an all in sustaining cost of AUD $12.00 3 per ounce. Underground development is set to increase with an additional development jumbo to make the fleet now six.
We are also continuing significant exploration and definition drilling with 15 underground diamond drill rigs active drilling in mine and near mine targets. At Ramone, the open pit final open pit ore was mined and preparations for a future underground are progressing. Ramone stockpile supplements the Jundee mill feed, which processed 664,000 tonnes in the quarter, which is at 10,700,000 tonne per annum run rate. Future open pit sources from Julius and Orillia progressed with drilling and planning activity continuing. The milling studies will be concluded in the current March to determine the ideal expanded capacity between the Jundee, Bronzing or Thunderbox plants.
At the quarter end, Jundee had 81,000 ounces of gold contained in stockpiles and gold in circuit. To our Kalgoorlie operations, we sold 72,000 ounces, albeit at an elevated all in sustaining cost of $19.68 dollars per ounce. Our Kalgoorlie mines remain our highest cost operations, but do benefit from the synergies realized through the sharing of resources in the gold fields. Financial ARPU will be stronger as we build back stockpiles and run processing plants at optimum throughputs, including increased roasting. We were able to increase concentrate treatment to reduce inventories during the quarter, which closed at 44,000 ounces of gold in Stockton Circuits at the end of this quarter.
We will continue to draw this down throughout the financial year. Kalgoorlie operations continue to generate good cash flows as all in costs are close to the all in sustaining costs. We also had significant leverage to gold price across our resource base there and continue to have exciting prospectivity through in mine and regional exploration activity. Now to KCGM, where with our JV partner, we delivered a strong quarter with our 50% contribution at 58,500 ounces sold at an all in sustaining cost of AUD $13.59 per ounce. The current performance at KCGM and the significant potential in this operation highlights the principal rationale for the merging of two grade companies and single ownership of this asset.
Improvements across the pit activity have seen total material movement increase quarter on quarter by 22% to an annualized rate of movement of 60,000,000 tonnes per annum. With new fleet planned and improved working phases across Morrison, Arroyo Brownhill and Golden Pike zones, this will grow to 80,000,000 tonnes per annum rate over the forward plan. The underground production was maintained from Mt Charlotte and Hidden Secret, and rehabilitation works commenced to access the historic lower mine to enable further exploration extension drilling there. We are looking forward to combining the exciting growth plans established by Northern Star and Saracen on our Tier one assets to deliver a portfolio of 1,600,000 ounces per annum, growing to 2,000,000 ounces per annum whilst realizing the identified synergies that make this merger of equals such a compelling transaction. I would now like to hand to Ryan to discuss the financials for the quarter.
Yes. Thanks, Steve. Good morning, all. I'm pleased to be able to present to you some of the key financial aspects of the company's twenty twenty December quarterly results. And we'll start with the cash flow waterfall chart as we normally do on Page five, which provide an overview of cash, bullion and investment movements for the December and the generation of AUD225 million in operating cash flow and AUD93 million of underlying free cash flow, which adjust for working capital movements and movements in the company's equity investments.
Some of the key one off cash flow items this quarter included a total of NZD45 million paid in stand duty in respect of both the Echo Resource and KCGM transactions. A A A A A A balance and payment for the finalization of the FY 2020 tax year and repayment of A A A A
At 31,
A cash bullion and investment stand at NZD372 A A A million and corporate bank debt at NZD375 million. As illustrated by the top chart, the company invested a total of AUD 105,000,000 in capital during the quarter, which comprises approximately AUD 68,000,000 in sustaining capital and AUD 37,000,000 invested in growth capital. The AUD 37,000,000 of growth capital spend comprises AUD 9,000,000 at KCGM, is which net of the revenues realized from ounces recovered at Morrison's and OBH mining areas. Both of these areas now are in commercial production. Other major components of growth capital investment during the quarter included the Pogo plant expansion and underground development at Jundee.
Approximately AUD 27,000,000 was invested in exploration during the quarter across all operations, with the majority of spend at Kalgoorlie, Jundee and Pogo. Turning to the site operations where during the December, the Australian op sold 199,000 ounces at an all in sustaining cost per ounce of AUD1526, which takes the half year to AUD375000 sold at AUD $15.34 per ounce. The December for Yandelops was broadly consistent with Q1 with 71,000 ounces produced and 68,000 ounces sold at a cash cost per ounce of AUD $8.83 and an all in sustaining cost per ounce of $12.00 3. At the end of the quarter, Jundee had 81,000 ounces stockpiled in GIC. An improved quarter was recorded at Kalgoorlie operations with mine grade across all sites lifting in the December with 72,000 ounces mined and sold at a cash cost per ounce of AUD14.52 and all in sustaining cost per ounce sold of AUD19.68.
Higher non cash stock movement costs were realized with the drawdown of gold inventory held up from the September at Kanowna Bell. All in sustaining costs at Kalgoorlie operations are expected to continue to trend lower for the remainder of the financial year. KCGM had another solid quarter with pre tax free cash flow contribution of AUD 42,000,000 for the December and the operation continues to see cost reductions and productivity across the board. A total of 59,000 ounces were sold at an all in sustaining cost per ounce of $13.59, with the Morrissey and Brownhill mining areas now in commercial production, which means costs from these operations are now reflected in all in sustaining costs. Now to Pogo, where the operations performance continues to excel even with COVID restrictions, with sales of 54,000 ounces at a cash cost of US9.54 dollars per ounce sold and all in sustaining cost of US13.65 dollars recorded for the December.
Prioritized decline in lateral advancement during the quarter resulted in additional capital investments, which sets up future quarters at the operation. Pogo's total site costs, excluding exploration investment, the plant expansion and the corporate allocation averaged US24 million per month over the December. And Pogo is continuing to incur some additional operational costs from COVID-nineteen, mostly relating to personal transport, accommodation, freight and additional cleaning. These costs are reflected in all in sustaining metrics at the operation. And finally, during the quarter, the company delivered 48% of the total sold ounces into hedge contracts.
No additional commitments were added during the quarter. And at December 31, the company's hedge book stands at 350,000 ounces at $2,128 per ounce. This approximates just 10% of our annualized production over the next three years. I'll now hand back to Melanie for questions.
Thank Your first question comes from Nick Herbert from Credit Suisse.
A few questions from me, please. I might start on Mount Charlotte. Just wondering if you could talk to the program of exploration works you've got planned there this year. And also, what are the operating and development rates you're targeting? Noticed the drop off in the December quarter.
Also just a comment there whether that was just purely due to the rehab slowing things down, but really interested in what your expectations for rates going forward.
Yes. Thanks, Nick. It's Stuart. So look, we lifted already the production sort of 1,500,000 tonne per annum from that underground. You're pulling some from primary stopes, but also some from the cave material.
What we're doing across the board, obviously, point five to 1.7 where we're operating at, we've seen instantaneous rate up towards 2,000,000 tonnes, but that's really because of the extra draw on the cave. Where we're targeting really from an exploration and mine life perspective, there's 1,900,000 ounces of resource there able to be reviewed, drilled and potentially converted into reserves. So the exploration drilling will target that large resource. And the beauty is you've got multiple zones in and around the main shallow ore body, so you can actually have multiple production horizons. The work that started at the bottom of the mine is really just rehabilitating declines and accessing the lower levels to get the diamond drills in.
There's a long lead on that, but we see the extension of the main shallow ore body as a good potential. It's really not been looked at for years. But it's also some of these higher, more shallow zones that are parallel to the main ore body. So the extra development is going into the rehabilitation to access the diamond drilling, and those mining rates will be more reflective of around that 1,500,000 tonnes per annum. A couple of things we'll be doing going forward.
We will be to test the synergies part of the treatment of Mt Charlotte ore. We will be moving material between mills between Kanauna, Karasu and Finiston plants. And Simon spoke briefly on the Saracen call earlier. There's huge opportunities there to get benefits out of Charlotte ore body because there is free milling non refractory material underground there. So at this stage, there's new fleet being put into Mount Charlotte, so underground productivity is where we see mine life extending there.
Okay, great. And then on Pogo, just interested if you have any thoughts around sort of the vaccine rollout in The U. S. And when you think that may have, I guess, implications for your workforce, their productivity or whether that's second half of this year? Or you do have any thoughts around that?
Yes. So the rolling vaccines out going to first responders in Alaska, and it has to be really probably focused on Alaskan residents. Look, we're nearly fifty percent of our team over there has at some point had COVID and recovered. And so we look it's a management thing at the moment. Very hard to predict where it's going.
We currently have zero active cases. We've taken that into account in our guidance this year, and it's pleasing that despite those interruptions, we're still tracking at the top end of that guidance. We're absolutely pleased with how the team's coping, managing, dealing with it as well as obviously got the expansion teams on the processing facility. So that will be commissioned as well as slowly increasing the exploration activity. So we've got the 800 gram rigs.
We've also got three rigs on the surface drilling out Wood Pasta. It's difficult to forecast, but what's been proven, they have relentlessly managed this for nearly twelve months now. And you can see the performance processing at nine grams per tonne, albeit at sort of 68% of the volumes that we will forecast over the next couple of years.
Okay. And then final one, just a clarification, Stuart. I think you mentioned, but I didn't quite catch it, the studies around the refurbishment the optimization of the Yandel sort of milling, did you say that, that was due to be completed this quarter?
Yes. So we've completed studies regarding the refurbishment of Bronzebing and or Jundee expansion, and we put the CapEx associated with that in the Northern Star guidance plan. What I've said on the previous quarter was we are now evaluating the expansion of Thunderbox in that equation, and the works in regard to that are underway at the moment. That Saracen already had a sort of Stage two expansion secondary crushing going into take that sort of 3,500,000 tonnes per annum at Thunderbox. We're looking at a much bigger Thunderbox version, and we're still going through the details of that.
So this quarter, we'll have all of those side by side. We'll go through the CapEx and the benefits for longer term, the plan for the Greater Yandell 600,000 ounce setter, and we'll be putting that through approvals through our system. So yes, this quarter's a fair bit of the desktop work. And ideally, quarter, we'll be able to explain which one we're moving forward with.
Your next question comes from Sophie Bartalis from Bank of America.
Good morning, team. Happy New Year. Just a few questions from me. Firstly, just around Kalgoorlie, those costs are still quite high. Understand and appreciate that the production in the second half is expected to be higher.
But can you just talk through the plan to deliver within the all in sustaining cost guidance range of $16.50 dollars to $17.50 dollars just given that at the year to date, you're over $2,000 Is that realistic to still land within the guidance range?
Look, Sophie, thank you. We look, we've got plans to deliver that. There's still risk associated with meeting that top end of the cost guidance. But at the moment, we've plans that's really volume driven. Grades and recoveries have been good at our Kabuli operations.
It's really a drop it's a volume play. So we're milling at that sort of 2,900,000 tonnes per annum between Kanowna and South Cowal, and we really need to be sort of 3,000,000 tonnes, 3,200,000 So it's really a volume play. We have the added option of utilizing third party toll mills as well as the increased merged portfolio, including Karasu Dam. So there's plans there to build in that. I'm confident we will meet the group guidance, whether individual assets move within that.
But what we've put out there is, yes, very confident we're on track as a group to meet the guidance.
Yes, sure. So just in terms of then the fact that you're running at 2.9, you need to be at three, three point two. What's inhibiting that? Or why would
we Yes. Get to it into the So literally mining activity at Kunana. Kundana, you see the sort of wave. That's why we also put back end or weighted guidance throughout the financial year as we're growing things because you need the development at the front end. You've seen development at Kanata Belle be increased to access more of the stoping front.
So it is a front loaded get it developed, get those stopes online, and then you can be very efficient in the production side of that. Yes, that's just how our cycles go in the underground side of VKJB, the Millennium Area as well as Kanauna.
Okay. So were there issues around getting that development far enough ahead? Is that what we're trying to resolve to?
No. Look, we put quarter on quarter guidance showing that growth, and it wasn't we explained right at the start, it wasn't just Pogo related. So it was across our assets, and you saw us end quarter four very strongly last financial year. And when we had our mine plans, you saw that build. So we moved from sort of 22% up to 28% of that guidance weighted from quarter one to quarter four.
But the good thing is we keep that trajectory growing into FY 'twenty two, 'twenty three. So it's absolutely why we put that annualized guidance out there. We're above that guidance in quarter one and in quarter two. So it's to plan above that. And half two is forecast to be much stronger than half one.
Okay. What about in terms of labor cost pressures? Are they starting to bite just given closure of borders around the Kalgoorlie area?
Look, they're not there yet because they will have jobs here and they it's more pressure on nickel, copper, lithium, those sort of things if they start to put pressure on it. At the moment, we've already got, as does Saracen, sort of rewarding sliding scales on productivities and on gold price mechanisms that reward our staff and retain our staff related to that. So that's already embedded in self funding. I do anticipate that in the next couple of years, put some pressure on labor costs. But it's not going to delay.
It's something we've just got to manage and deal with.
Yes. Okay. And then what about consumables? Any issues around getting them into the state? Any offshore stuff that's got to come in?
We've never had issues in relation to COVID, including Alaska. We've never had issues in regard to materials, plant materials. It's really the movement of labor. We're not dependent on FIFO interstate labor. And our Alaskan team as well has managed through all that.
So we haven't seen any pressure on lack of stock or lack of materials. It hasn't been an issue for us.
Okay. No, that's great. Now just in terms of the integration planning, can you maybe just provide some color on how much integration planning has been done and ready to, I guess, put in place and execute once the merger is approved?
Yes. Look, so a lot
of this work was done prior to the announcement of the merger because it was trufed up and proved up to be seen, and the team actually sat together to understand what it could look like. So that work was set prior to announcing back in October. Those plans or that those tangible actions were already mapped out there. So in recent months, both companies are basically running their business. As you've seen the performance Saracen announced earlier today, great quarter, great half, as is Norman Star.
So from that regard, both teams are respectful to the result of the vote last Friday. But in many ways, in a couple of weeks, action will start. And both companies have got great growth plans.
It's really just gluing them together. Yes, Sophie, it's Bill. Just to add to that is something I mentioned earlier in my spiel is we're well advanced on putting the teams together. So yes, we had to be respectful of the vote, but the initial feedback and the feedback until the official vote on Friday last week was very positive. So we didn't sit idle as a combined management team.
Rally put his name on the office next to me pretty quick. And the team have been pretty much working hand in glove consistently because we don't want to lose time on the opportunities that we can create on the merged companies. So I can assure shareholders that we're well advanced on that. And as I said earlier on, is we'll put more color out in the coming quarters on how that looks.
Yes. No, that's great. So just in terms of then the synergies, when can we expect the first sort of rough to come through?
Yes. Look, we're going to catch up as an executive in February together and then a wider management group in March to really develop the future group strategy, which includes all our organic growth, which we're well advanced on both management teams implementing those plans. But it is what the merged entity then goes on beyond that. So we'll put all that together this quarter, and we'll start giving a lot more color midyear this year.
Your next question comes from Stuart McMinnon from The West Australian.
This one's a little bit off topic, and it's probably one for Bill given his affiliations with with Bosom. There was a story in the aus today. I'm not sure if you you noticed, Bill, but staff thirty two c o COO, Jason Economidis, was speaking at the company's Carrington Mine in Queensland. One of the comments he made was that some of the mining course students some of the students who are doing mining courses involved with South32 were being apparently being heckled at by co students at uni because they're doing mining courses. And he was concerned that the sector could be losing the public relations battle with young people coming through and also expressing concerns about, as a consequence of that, there not being enough graduates for the sector going forward.
Were you aware of those comments? And if not, do they sound alarm bells to you? Or are you confident that it won't be an issue in terms of getting graduates and that public relations situation?
Yes. Look, I saw those comments today like you did in the Australian, which is probably an Eastern State based paper. But look, when you look at universities over in Eastern States, mining is a very small proportion of their intake. And you've seen my comments a week or so ago as unfortunately, the economies over there really don't see the connection of the resource industry, even though it's powering the Australian economy right now and obviously keeping the nation afloat during a very interesting and difficult time of COVID. So in Western Australia, I think what's very, very evident is our public understand the importance and the great connection to the resource industry, which 70%, 75% of the resource industry is based in Western Australia.
So I wouldn't expect you to see heckling in Western Australian years. And when you look at some of
the
developing sectors like lithium and the battery metals, like how can anyone heckle on the EV revolution. So we're to need those skill sets to develop those resources to create those products for the futures of societies around the world. So I can't see heckling in Western Australia. I can definitely understand some elements over the East Coast because they're, again, reemphasizing they don't understand the importance of resources. I don't know what they'd live in or what they'd drive around if they didn't have the resources that come out of states like Western Australia and elements of Queensland and New South Wales.
All keep the lights on mind you.
That does conclude your question and answer session. I'll now hand back to Mr. Beament for closing remarks.
Thanks, Melanie. Today's results and those you've seen from Saracen show our two companies are about to embark on a unique journey from positions of great strength. Our enlarged company is set to travel a path which we have no doubt is lined with opportunity opportunities for growth, opportunities to reduce costs, opportunities to unlock further value from our Tier one assets and fantastic opportunities for our employees and business partners to continue with our growth and their own careers. We will also have the opportunity to attract the biggest investment houses in the world to our share register because we will offer them growth in a flat or shrinking industry, and we have genuine scale moving forward. Others can offer one or the other, but both, that's the Northern Star point of difference moving forward.
Thanks for joining us today.
That does conclude your conference for today. Thank you for participating. You may now disconnect.