I'd now like to hand the conference over to Stuart Tonkin, Managing Director and CEO. Please go ahead.
Good morning, and thanks for joining us on the call. With me today is our Chief Financial Officer, Ryan Gurner, and Chief Operating Officer, Simon Jessop. On Friday, we provided an operational update on the back of a soft December quarter, and subsequently, we have revised down our annual production guidance to now 1.6-1.7 million ounces, from 1.7-1.85 million ounces. The full-year reduction has been necessary due to a number of isolated operational events late in the December quarter, which have largely now been rectified, and Simon will talk to these shortly. This positions the group to deliver second-half production of 871,000-971,000 ounces. We will be providing December quarter costs with the quarterly results published on Thursday, 22nd of January, as well as any outlook for the full-year cost guidance.
I'd like to reinforce our confidence in the underlying asset portfolio and thank our teams who worked to address the recent operational impacts promptly and safely. Our long-term value creation strategy is sound, and we're excited at the prospects of commissioning the new Fimiston plant in six months' time, which will deliver a step change in production and costs for the business. I appreciate investors' understanding of the near-term volatility of a growing business, and we will continue to prudently manage risks and liberate opportunities for the company. We remain in a strong financial position currently with net cash and are comfortably delivering into our reducing hedge commitments. We continue investing capital for the long term to increase production whilst improving cost profile to generate superior returns from our assets. I'd now like to hand to Simon to cover the operations. Thank you.
Thank you, Stuart. The Kalgoorlie Production Centre delivered a lower-than-expected quarter driven by two main issues. The first issue was the previously announced partial suspension of mining at our South Kalgoorlie Operations. Post a significant rainfall event in October, a pit wall slip occurred, impeding the escape way into the mine. A new escape way was mined and installed over nine weeks, with normal mining resuming around mid-December. SKO has since returned back to normal operations, with a total sales impact of 10,000 ounces, as previously disclosed. The second major issue was a lower-than-expected processing outcome at KCGM. The mill underperformed all quarter on throughput volume, both run rate and time. The lack of throughput was primarily due to the Fimiston primary crusher faults impacting plant stability. This resulted in a shortfall of around 650,000 tonnes of throughput over Q2.
Due to the ongoing impacts from the crusher not performing, a major Q3 shutdown was brought forward into Q2, with multiple elements changed. This shutdown took over a week, and unfortunately, the crusher failed 12 hours later, resulting in another two weeks of downtime over the Christmas period up until Monday, the 5th of January, when recommissioning has started. The primary crusher replacement, similar to current works, last occurred in February 2021, with a previous failure in August 2017. Due to the Christmas break, sourcing specialist labor to rebuild the unplanned crusher failure took longer than expected. This crusher is required as part of the expanded mill circuit. KCGM mining performance was similar to that achieved in the first quarter.
Open pit total material movement was 22 million tonnes for the December quarter and 45 million tonnes for the first half, at the top of the 80-90 million-ton annual guidance range. The open pit mined in Q2 alone unreconciled approximately 150,000 ounces, with Golden Pike's contribution 110,000 ounces. The KCGM underground operation developed 8.6 km for the quarter and mined 780,000 tonnes ore, at an annualized run rate of 3 million tonnes per annum for unreconciled approximately 42,000 ounces in the quarter. KCGM total mining achieved approximately 190,000 ounces mined for Q2, and due to processing throughput issues, finished the quarter end with 1.1 million tonnes at 1.9 grams per ton for approximately 70,000 ounces on the ROM pad. CDO performed in line with expectations for the quarter and the half.
Let me close on the Kalgoorlie Production Centre by sharing that the KCGM mill expansion continued well over the Christmas period, with a workforce of around 300 people working on the project. The project will ramp back up to 800-plus personnel working on the mill in January, and it remains on time for an early FY27 ramp-up. Turning to our Yandal Production Centre, both Jundee and Thunderbox experienced a challenging quarter and first half. At Jundee, the previously announced localised structural failure of the crushing circuit works have progressed well, but it has taken longer than anticipated. The coarse ore stockpile tunnel has been excavated with all materials on site to finalise the repairs. The impact to the quarter was around 170,000 tonnes of processing at 40-50 ton per hour throughput or around 15,000 ounces. The crushing circuit is set to be restored to normal operations around mid-February.
The Jundee team has actioned these works safely and professionally for an extremely large job. The Jundee Airstrip was also being upgraded over Q2, which had already commenced before the crushing circuit failure occurred, compounding the Jundee results with reduced operational time. The Airstrip project will be completed in late January, with flight savings and less rain interruptions for the site going forward. At Thunderbox, two issues prevailed for the quarter. One, reduced throughput due to tank issues, which also impacted recovery by 5%. Secondly, less mine grade from Orelia and the haulage of the high-grade ore to the mill. On the processing impacts, all tanks were back in operation at quarter end, with rectifications planned for H2, which will cycle through seven tanks. Secondly, on Orelia, the resource is not performing as modeled and mined in the high-grade areas of the ore body.
We've already reduced the mining fleet from 17 trucks to 11 trucks in order to manage the required mining practice changes, improve mining and cost efficiencies, and the fact that the strip ratio reduces from here on in. Orelia has an estimated life of around 21 months and will generate 215,000 ounces at 1.4 grams per tonne on the current forecast. Meanwhile, open pit mining at Bannockburn ramped up significantly, with first ore being stockpiled ahead of milling in H2, providing another ore source closer to the Thunderbox mill. Finally, turning our attention to Pogo. At Pogo, the lower gold sales was impacted by lower head grade of approximately 0.5-1 gram per tonne due to a combination of stope dilution and ore loss.
Volume of ore was also approximately 30,000 tonnes less due to some East Deeps fan constraints on scheduled high-grade ore and about three days lost in December due to extreme cold temperatures below minus 40 degrees Celsius. Processing performance was very good at Pogo, with availability averaging 92% year to date. Recovery was also 85.8% during the quarter, 5% higher than expected. Development continued to improve at Pogo, with 5.2 km achieved for the quarter, corresponding to an average monthly run rate of 1,733 metres per month, above the 1,500-meter target. The quarterly performance on gold sales was impacted by a number of significant events across the portfolio, which has resulted in lowering our annual guidance between 1.6 and 1.7 million ounces. We are in a stronger position as we enter the second half of the year. KCGM and SKO have returned to normal operations.
Jundee has some outstanding issues that are expected to be resolved during the quarter. Thunderbox is in improved shape, and we continue to work through the various factors that may be contributing to the lower-than-expected grade of Pogo. I would now like to pass on to Ryan, our Chief Financial Officer, to discuss the financials.
Thanks, Simon. Notwithstanding the challenging operational quarter, the company remains in a great financial position entering the second half of financial year 2026. At 31 December, the company's preliminary cash and bullion holdings are expected to be approximately AUD 1.17 billion, and with the company's AUD 1.5 billion credit facilities undrawn, total liquidity is approximately AUD 2.7 billion. Q2, we'll realise a negative free cash flow result driven primarily by the softer production outcome and a AUD 250 million tax balancing payment for the FY 2025 year, which was made during the December quarter, as previously guided. Other cash outflows include annual insurance premiums and the semi-annual coupon payment on the notes. Despite the lower-than-planned sales during the quarter, the company comfortably delivered its hedging commitments as planned. For the second half of FY 2026, there are 330,000 ounces committed, which is comfortably within the forecast production outcome.
Finally, as outlined in the operational update, cost guidance at the Group and Production Centre level will be revised at the results call later this month, following finalization of the quarterly results. Q2 all-in sustaining cost per ounce will be higher than Q1 due to lower production and higher sustaining capital invested during the quarter. Year-to-date, sustaining capital spend is tracking to plan. I'll now hand pass back to Ashley for the Q&A session. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Daniel Morgan with Barrenjoey. Please go ahead.
Hi, Stuart and team. First question is just, what is embedded in guidance for the remainder of the year for the Super Pit mill throughput, and what are your thoughts about the risks around achieving that? Thank you.
Yeah, thanks, Dan. Look, we'll give the detailed asset-by-asset breakdowns, particularly for the second half of the quarterly, so that'll be full transparency on the breakdown of each of those. I think the risk really on KCGM, it's that mill throughput. Simon's spoken to, the crushing circuit is now commissioned and rerunning from that shutdown. There's obviously a lag of a couple of weeks of crushing circuit through there, but pleasingly, the open pit and underground mining volumes have been maintained and at high levels such that that material is stockpiled adjacent to the existing mill. So for half two, the risk of mining is reduced because the stockpile's there. It comes back to throughput through the existing plant that we are obviously persevering with until the middle of this calendar year when we commission the new plant. So it's really the six months remaining to get that going.
That crushing circuit is part of the expanded plant circuit, so that's why it got extra attention, investment, and a bit of a to get that upgraded, so yeah, that's the risk, but we'll give asset-by-asset breakdown on that in the quarterly.
It sounds like, if I got this accurate, you've built, I mean, the mining productivity has been fine during the quarter, and so you built a stockpile. If I got the numbers right, 1.1 million tonnes, 1.9 grams for 70,000 ounces on the ROM pad. I imagine that you'll shuffle that through during the March quarter.
Yeah, not necessarily, Dan. We'll make sure we keep it blending because you don't want to give a spike of gold and have it dip on recovery. So we just want to make sure that we are blending accurately and get the best outcome for long term. So yeah, confident it'll come through in the second half. Don't necessarily need to flood it in this quarter, and that's why we talk about the full year guidance, not quarter by quarter.
Yeah, sure. That makes sense. And just the Pogo dilution, is there any reason to be for any longer-term concern, or is this a short-term issue? Pogo's obviously been operating very well for quite a period of time, and just wondering how far this dilution travels, do you think?
Yeah, thanks, Daniel, Simon. Look, we did have a challenging quarter on dilution, mainly in the first two months of the quarter. December, we certainly saw grade come back to six grams in that particular month, and really late in December is when we saw much better results from Pogo. So we've still got more work to do around stoping. It is ongoing at that particular operation, but we don't see that as a long-term impact. It was certainly lower than we'd planned. The reserve grade's about 7.2 grams. We were sort of planning on about six and a half grams for the quarter, with a better second half in front of us from just what the schedule shows. But we certainly copped more dilution than we normally plan for Pogo during Q2.
Thank you. And just last question, Jundee, the materials handling system, did you outline when you expect that to be fixed in the quarter? Is that January this quarter, or is there still some outstanding items that have risks to that timeline?
Yeah, Daniel, the coarse ore stockpile fix is well progressed. We've got all the materials on site. We've excavated the whole area, and we're starting to form up some concrete plinths now, and it should be rectified by mid-February at the latest, and we cut back when we do the mill shutdown. So certainly well in hand, understood. We're past the worst of it. Now it's just rebuilding it, and it's back to normal materials handling for that asset.
So the other part of that, Dan, is the current format is a bit of rehandle and rejigging to use the E-feeder. So the throughput has been managed, but getting back to that normal, efficient flow through the feeders, through that coarse ore stockpile , which has currently been bypassed, is where we'd like to be by absolutely midway through this quarter.
Okay. Thank you for your perspectives. I'll pass it on.
Your next question comes from David Radclyffe with Global Mining Research. Please go ahead.
Hi, good morning, Stuart and team, and happy New Year. My question's a little bit more high level. So given a number of the outages reported are maintenance-related, could you perhaps give us some more color, I guess, on your approach to proactive maintenance if this has changed, and whether these events point to maybe an increased focus is required across the group, or would you just characterize this as just a period where all the unplanned events just happen to come at one time?
Yeah, thanks, David. And it's an interesting approach. I guess we're always trying to manage the sustaining capital balance to capital investment and return. So if you kind of appreciate mines like Fimiston, multi-decades in operation, Jundee's just turned 30, Kanowna Belle's just turned 30. If you were driving a 30-year-old vehicle around the roads, there's a balance here between breakdown maintenance and sustaining maintenance. This is the eternal balance. You can see the hundreds of millions of dollars we're spending in sustaining capital. We're not underdoing it, but we're equally trying to not overdo expenditure in this regard. So it is a balance. With the knowledge of Fimiston upgraded plant imminently coming into commissioning, it was always a risk and a concern around the overall Fimiston plant, which motivated us two and a half years ago to commit to the expansion, fundamentally.
So the crushing circuit is part of the new circuit, hence why we do a great job on that. But they're just examples. All the other elements are probably at twice their designed life. Obviously, built this for factors of safety at the time, and we've often done audits, assessed, and upgraded as we've gone annually. It's just around balancing that because the alternative is things shut down and you spend hundreds of millions of dollars on a brand new piece of capital kit. We have not done that at these assets over a decade. We have looked at resources, reserves, mine lives, and appropriately invested in capital into the assets to match the tenure of the assets. And they're all different. There's not a standard across everything. There's no point putting 10 years investment into an asset that has two-year mine life.
Equally, something like Fimiston, it's worth doing it right up front because you know you've got multi-decades in front of us.
Okay, thank you. That's very clear. I'll pass it on.
Your next question comes from Levi Spry with UBS. Please go ahead.
Yeah, good day, Stuart and team. Thanks for your time. Just a question on the second half guidance. Can you just talk us through the assumptions behind the high end there? Maybe it's a process question, or how would you get to nearly a million ounces in the second half?
Look, we're going to give you an asset-by-asset breakdown in the quarterly. It's only two and a half weeks away, Levi, so I'll leave that today as really just events to discuss the quarter that's been. All I'd say is we've adequately modeled and see the outlook on the assets ahead. The mining risk has been reduced and the mining volumes are done. It's really around this throughput, and that's probably been the primary issue across the quarter, has been around throughput and/or the recovery's grade through those elements, and we believe we've got really good confidence in the outlook for half two, so the biggest lever really is KCGM, and hence why Simon highlights it in his spiel around the mining volumes, Golden Pike volumes, stockpiles, the underground progress on development and stope tonnes at 3 million tonne per year rate.
It means that the ounces are being moved up the chain, and then it's really around that throughput to deliver that.
Yep. Okay. Thank you. And then obviously, Stuart, we talk about FY27, but the big value driver here is the plant. So can you just expand a little bit more on the commissioning in the first quarter?
Yeah. So we've said, and things are progressing, the quality of the build is excellent. Simon spoke about there's still people working through Christmas, 300-odd, back to a full team of nearly 800 people over that plant this month. So we're very impressed with the progress to be able to start that commissioning. We said early in FY27, so talking July 27th, not risk any impacts in June in this financial year. And we'll provide guidance as we would mid-year, usually at the quarterly in July. So yeah, FY27 has to be with the comfort around the mining, the processing throughput, which was already tapered. It's 23 million tonnes for the FY27 through that new plant. And that's already designed around lower uptime. So it's still a 27 million ton per annum plant, but there's designed planned downtime to commission. And that's probably the biggest lever.
All the rest of the assets, we've already talked to Thunderbox being a bit lighter, but the rest of the assets are pretty steady state throughout FY27.
Yeah. Thanks for the extra color. And maybe just one quick last one for Ryan. So you mentioned the cash tax catch-up payment. What else is outstanding there? Is it just the gray stamp duty, and when does that fall?
Yeah, that's right, Levi. When does it fall? Hard question. Could be this financial year. Might tip into early next financial year, but yeah, it's a hard one to give absolute timing. I'm forecasting it that it'll probably fall in this financial year, but we'll have to wait and see.
Okay. Yep. Thanks, mate. Thank you. Thanks, everyone.
Your next question comes from Adam Baker with Macquarie. Please go ahead.
Hi, Stuart and team. Happy New Year. Hope you managed to get some rest. Just firstly on costs, I know you're still working on optimizing the cost guidance on the 22nd of January, but do you have a general sense as to where the new all-in sustaining cost guidance will be sitting versus the current 2,300-2,700? Just trying to think this one through, just given the first quarter was around 2,522. You've indicated the second quarter is going to be significantly higher, but I'm just wondering if the second half of FY26 will really be that bad given the strong projected uplift in production.
Yeah. Thanks, Adam. I think Ryan's comments you talked with would be revising. I think we're reviewing that now, so we'll report the quarter results in two and a half weeks, and we're modeling and considering what the second half looks like. It's one thing we're pleased with that is there's multiple things we're pleased with, but it is something we're pleased with in the cost control, even on a low-ounce quarter, the ability to remove discretionary spend and manage those dollar millions closely. And then obviously the weight of a second half, like the denominator of the second half, has probably got the most lever on what that AISC could be. But we have ability perhaps to even stand at those current cost guide rails. We need to do the modeling. We need to do the work.
We'll update the market accordingly in two and a half weeks, and it'll be based on that modeling, the outlook, and those assumptions. But it doesn't necessarily mean it needs to change, but we will have it gets more challenging given the first half has to live.
Makes sense. Thanks. And KCGM, mill grade's 1.6 grams, slight uplift there versus the year to date, around 1.3-1.4. Just wondering, was there any preference to higher grade material this quarter to offset the crusher failure, or was that just a natural grade variation coming through this quarter?
Yeah, Adam, Simon here. The grade was always going to lift Q2 on, and we've seen the start of that lifting. With the stockpile ending, with that sort of 1.1 million tonnes at high 1.9-ish grams per tonne, we finished with a huge stockpile of very high grade. But that will continue to flow through. So Golden Pike mining is going extremely well ahead of plan. So very happy with that piece, and you'll see better grades going forward because, A, we've got the stockpile, and secondly, the volumes keep coming out of Golden Pike North. So really happy with position where mining is sitting at the moment, and both the underground and the open pit are bang-on volumes of where we need to be, or if not above, at the halfway point of the year. So it was really just the grade coming late in the quarter.
We put the best grade we could through, but when we had the crusher go down, it's a bit of juggling around material movement and grade available to be fed through for the back of December.
Thanks, team.
Your next question comes from Mitch Ryan with Jefferies. Please go ahead.
Morning, guys. Good afternoon. Just want to have you elaborate, please, on just the grade dilution at Pogo, just trying to understand the factors that led to that. Was it ground conditions? Was it blasting practices? Can you help us understand what it was?
Yeah. Mitch, it's a combination of different areas that we're mining in, plus the variability that we get between some stopes. We might get 25% dilution. Other stopes, we might get 70%-80% dilution. We plan on 50%, and we're pretty close to that on average. We had a couple of areas in the first two months, as I mentioned, in quarter two, where we got excessive dilution, more than we had planned for in those particular areas. So really, that's what dragged down the average grade for the quarter. The other impact is some volume variance for quarter for Pogo, sorry. And that was really down to December. It's very, very cold over there at the moment. We had to close up the mine on and off for about three days lost production during the quarter, just when grade was starting to kick in.
That didn't help our final situation there.
Okay. That's it for me. Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Hugo Nicolaci with Goldman Sachs. Please go ahead.
Hi, Stuart, Ryan, Simon. Happy New Year. Look, first one on the production outlook, and apologies to belabor the point. I know you said you'll give that split of guidance in a few weeks, but given that you already put out the updated guidance for the rest of the year at the group level to market, is there a way maybe we can talk through that, getting the specifics, just what gives you confidence in achieving that range for the second half in terms of what have you factored into further operational disruptions? We've seen a lot of weather impacts previously in March quarters. There was a disruption for that and sort of the scope of the variability at KCGM. If you could give us some more color there, please.
Thanks, Hugo. I think it's the omission of these events that are finite, discrete, one-off, and rectified. So on normal go-forward business, the performance in that half two guidance and the way that the assets are performing, we're confident with. That's not outside of the plan. We're calling out the anomaly of quarter two. I mean, quarter one was largely on plan, was building out through quarter two, three, four. We've had a setback in quarter two, and that is due to the descriptions we've given, and they are largely rectified behind us and finite and not continuing. And that's, if anything, gives us the confidence of the outlook on half two. So we'll give that asset breakdown, as we said, at the quarterly. It is still largely hinged on throughput at KCGM.
Why we have greater confidence is what Simon speaks about is the large stockpile of high-grade material sitting on the ROM because Golden Pike is performing and the volumes are there, plus the underground grade that's being delivered and stockpiled. Then the backup of the overall stockpile when the Fimiston mill turns on and surge capacity increases there, that asset really hinges the group. Yeah, the culmination of multiple sort of smaller setbacks at every asset could all be managed, all occurring at once, means that the quarter we delivered is what we delivered. The absence of those, the omission of those is really what gives us the outlook going forward and how we've managed those risks.
Great. Stuart, so just to clarify that, so that's how many further throughput issues at KCGM? That should still be 500,000 ounces plus for the full year then.
But that's the view. And look, that crusher, fundamentally, that's the main crusher for the main cone, for the main feed. So it will be part of we're building a new one, but the two of them will be there for the new expanded plant. But the work's to not just limp that along, bringing that shut down earlier and refurbishing every element of the wear packages and the motor and pinions and things on that is to make sure that is not a setback on the new expanded plant. So that's not an overall element, an ongoing element of the current plant over the next six months. And Simon spoke to, it's been years since that thing has had issues, and I think it was 2017 and then 2021. So it's rare. It just happened to happen to be in our quarter two, very unfortunately.
Got it. That's helpful. And then just coming back to the cost piece as well, and obviously moving some of these costs around and these sorts of works, and I appreciate again, you'll give the cost guidance in a couple of weeks, but I guess if I think about it from a dollar millions perspective, have these disruptions meant that you will be spending more on aggregate in terms of sustaining capital this year? And so maybe there's a bit of upside risk to that 750 million for the year number that you previously talked to?
No, we think that dollar millions would be pretty close. There's a couple, obviously, we're saying fives and tens related to things like the Jundee stockpile or some of these things that have just been the one-offs to get this quick, rapid response and uptime, same as the crusher works. But overall, ability to knock on and defer or delay other expenditure within that, we think the full dollar millions is still well in hand. Now, does that mean we're at the higher end of the current cost band or slightly over? We'll provide that with assessment and modeling with quarterly.
Got it. So yeah, just to confirm then, so basically, it's really more denominator impact with a little bit here and there on the spending piece.
We think so, yep.
Fantastic. Thanks, guys. I'll pass it on.
Thank you. There are no further questions at this time. I'll now hand back to Stuart Tonkin for closing remarks.
Okay. Thank you so much for joining us on the call today. We will speak again quarterly in a couple of weeks' time, and we're still buoyed by the outlook of 2026 and a reset, and we're pleased with where we're positioned today, so thanks again. We'll speak to you in a couple of.