Good morning, and thanks for joining our FY23 H1 results presentation. With me on the call today is Chief Operating Officer, Simon Jessop. Managing Director, Stu Tonkin, is at our Pogo operations on a routine visit ahead of attending a North American global mining conference. I will now step you through the results presentation, which was lodged on the ASX this morning. I'll let you all review the usual disclaimers on slide 2 at your own leisure. I'd like to begin on slide 3. You will see our results, and throughout this presentation, we've continued to generate superior returns for our shareholders. Our focus remains on operational excellence and a disciplined and mature approach to investing shareholder funds. Northern Star continues to build from strength to strength. This is achieved from our simplified portfolio of 3 large-scale production centers in tier 1 jurisdictions, producing 1 commodity, gold.
I'm particularly proud of the people and their commitment to safety and sustainably execute our value creation strategy. Turning to slide 4. Despite the challenges the resource sector currently faces with cost pressures and labor constraints, the strength and resilience of our assets was illustrated with the company delivering a strong underlying EBITDA of AUD 633 million during H1 of FY23. Maintaining capital prudency and the realization of tax synergies from the merger during H1 have resulted in the generation of significant cash earnings, which totaled AUD 467 million. Pleasingly, this was higher than H1 of FY22. A reminder that cash earnings represents the amount of underlying earnings which is available for return to shareholders, profitable growth-related investments, and balance sheet management. A reconciliation is provided at the back of the presentation.
These strong H1 cash earnings has enabled the board to declare a record fully franked interim dividend of AUD 0.11 per share. This represents a 10% increase from the FY22 interim dividend and towards the top end of our dividend payout policy. The company is expecting approximately AUD 32 million in income tax refunds in the H2 of FY23. Following these receipts and the payment of the FY23 interim dividend, the company's available franking credit balance will be approximately AUD 3 million. The company does not expect to generate franking credits for at least 18 months due to the synergies arising on merger temporarily reducing the company's taxable income of its Australian operations. This means we anticipate the company's next few dividends to be unfranked, subject to future profitability.
In respect of the company's AUD 300 million share buyback, good progress has been made on the program during the H1 , it remains open subject to blackout periods until September. We remain well-positioned to deliver our near-term low capital intensity organic growth profile with our strong balance sheet, which includes an AUD 145 million net cash position at December. To our operations on slide 5, which have all continued to deliver in what is a challenging environment. Across our 3 production centers, we remain on track to meet FY23 guidance. During the H1 , as outlined on this slide, we've made great progress across each of the production centers on our low risk, 5-year profitable growth strategy to become a 2 million ounce gold producer by FY26. Turning over the page to slide 6.
As illustrated, all 3 of our production centers continue to generate positive cash earnings. Key growth projects at Pogo and Thunderbox are delivering significant cost improvements. We will maintain our sharp focus in the H2 on costs, which alongside the expected lift in production, should further build cash to maintain the company's strong financial position. Moving on to slide 7. I talked earlier about our focus and disciplined approach to managing shareholder funds. This slide highlights the key elements of our capital management framework and the importance of our balance sheet and risk management to maximize shareholder returns over the long term. We remain in a strong financial position with AUD 1.1 billion in liquidity at 31 December and continue our sensible and consistent approach to mitigate risk in light of external conditions to support the delivery of our strategy. To slide 8.
Before I hand over to Simon to talk to our operations in the next few slides, I'd like to say that as the team we are really pleased with the progress made during the H1 of FY23. We are very proud to be the best performing senior global gold stock on a total shareholder return basis over the past 12 months. Over the Northern Star journey and including our declared interim dividend of AUD 0.11 per share, we've now returned over AUD 1.1 billion to our shareholders.
Thank you, Ryan. On slide 9, at the halfway point of FY23, we have sold 773,000 ounces of gold or 48% of the midpoint of guide. At an Australian all-in sustaining cost of AUD 1,766 an ounce, which is 106% of the midpoint of guidance. We remain on track for the stated yearly guidance of gold sales ranging between 1.56 million and 1.68 million ounces at an Australian all-in sustaining cost of AUD 1,630-AUD 1,690 an ounce. Previously stated, our guidance is H2 -weighted due to the commissioning of the Thunderbox process plant, KCGM's open pit ore sequence timing, and Pogo moving into higher grade stopes.
On slide 10, you can see our profitable 5-year organic growth strategy planned out to FY26. I would like to emphasize that this growth path has low-risk delivery and is executable from within our existing assets. Far this year, we have made significant progress. At KCGM over H1 , we saw a pleasing annualized movement rate of 84 million tons per annum, which is within our stated 80 to 100 million ton per annum strategic goal. The new fleet is operating very well, plus we continue to look for further optimization. The Thunderbox mill is well-positioned to operate at 6 million tons per year nameplate capacity during the H2, and remains a key driver of increased ounces from the Yandal region.
The newly installed process plant expansion will take Thunderbox from 3 million tons per annum to a 6 million ton per annum nameplate capacity. While at Pogo, we have maintained the expanded 1.3 million ton per year run rate through the mill. We continue to focus on optimization initiatives at the mine, particularly higher grade stope ore contribution. We are well on plan to deliver our profitable growth plan to 2 million ounces per year by financial year 2026. Moving on to slide 11. We maintain being in an enviable position with a significant mineral resource base of 56.4 million ounces and reserves of 20.6 million ounces. We have very effective and efficient exploration programs, which is shown on adding ounces to the resource base at AUD 24 an ounce last year.
We have committed AUD 125 million to exploration over FY23 at our high-quality geological systems to replace and profitably grow our mine lives. Turning to slide 12. The chart shows our visibility to improve renewable projects across each of our assets and to reduce our carbon footprint. We have commenced planning and implementation of these projects to enable a 35% reduction in Scope 1 and 2 carbon emissions by 2030 and a net zero target by 2050. On slide 13. At present, we are still in the process of evaluating whether to expand the milling capacity at KCGM due to the large stockpiles stranded on the surface from past mining. While the project has many merits, the current 13 million ton per annum milling capacity does remain an option.
A reminder that the potential expansion is not included in our 5-year strategy to reach 2 million ounces by FY26. Earlier, we spoke about capital management discipline. Given our extensive knowledge and our understanding of the KCGM ore body, we see low technical and geological risk to committing to such a project. We continue to monitor external pressures while working to de-risk the execution elements of any expansion and will come to a decision point during 2023 calendar year. Thank you. I'll now hand back to Ryan.
Thanks, Simon. To summarize just on slide 14 here that, you know, we continue to execute on our clear, clearly defined strategy of generating superior returns. Completion of growth projects at Thunderbox and Pogo are expected to generate increased cash flow and strong investor returns. At KCGM, we are making great progress and are quickly unlocking the significant opportunities that exist at this tier 1 asset. Thanks very much for listening. I'll now hand back to Travis for questions.
Thank you. If you wish to ask a question, please press * 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press * then, 2 . If you're using a speakerphone, please pick up the handset to ask your question. The 1st question today comes from Daniel Morgan from Barrenjoey. Please go ahead.
Hi. I guess just a couple of quick questions on the operations and how they've been going since your last update. Firstly, on Thunderbox mill, how is that ramp up going? You know, are we, as of today, consistently hitting that 6 million ton per annum run rate, or is that still to come later this financial year?
Thanks, Daniel. Simon here. As we stated at the quarterly call, we expect to hit the 6 million ton per annum rate during H2. Continue to work through commissioning of the plant and ramping up with the consistency on all elements of the plant, mainly crushing and milling. Pleasingly, we absolutely see the sprint capacity there for 6 million ton per annum.
It's now just around, bedding in the new SAG mill and the crushing components of the plant.
Okay. Just switching to Pogo, has the productivity of the underground been to your expectations? Are you consistently this quarter exceeding that 1,500 meters per month target? Are you know, is dilution within your expectations? Just wondering how the operation is going year to date.
Thanks, Daniel. Simon again. Pogo is going well in terms of the H2 waiting. We've got the higher grade stopes coming in, it is a major focus for us in terms of that dilution, just trying to take waste out of the stope and sequence and really give the mill the expanded, you know, grade profile that we know when we hit the 1.3 million tons per annum at the right grade, we can deliver our, you know, 300,000 ounces per annum. Stu's over there, just headed over there on the weekend. He's keen to spend a week there with the team on site. You know, he'll come back well informed as to where Pogo is sitting.
Right now we're H2 weighted for Pogo with higher grades in the stope and sequence coming through.
Lastly, the buyback. I think you might have considered yourselves in blackout earlier this year. Will you now be activating the rest of the buyback? Thank you.
Hey, Dan, it's Ryan here. look, we've obviously made pretty good progress. We are handed by blackout. look, we've got another, what is it? 9 months to run. the program's back open.
Just on that, will you be anticipating making purchases with the buyback to measure it with how you're purchasing prior to the end of the December half year? Or, you know, what's your thinking about?
L ook, I mean, the answer is we've got, you know, 9 months to run on this. I think Stu's terminology is right for everything about Northern Star, and that is it's never set and forget. You know, we're always reviewing our positions around even, you know, where we put our money, whether it's capital in the ops or in this case, you know, deploying it here. You know, all I'd say is we're always keen to review all our options. We'll always put the money where the greatest returns are. It's open for another 7 months. L et's see. Let's see how it goes.
Okay. Thank you for your answers.
Thank you once again. To ask a question, please press * 1 on your phone. The next question comes from Danielle Le Messurier from The West Australian. Please go ahead.
Good morning. Thank you for taking my question. I was just, I'm not sure who's best placed to answer this, but I was just curious as to what your outlook is on cost and inflation. How much longer are you expecting some of the inflationary headwinds that we've seen continue to impact Northern Star's operations? I've seen you've said it's gonna be a continued focus in the H2 , just wondering what you're thinking is there. Thanks.
Hey, Danielle. Thanks for the question. It's Ryan here. I mean, it's certainly still challenging. We're not seeing, you know, significant cost reductions albeit, you know, we are seeing some reductions. For instance, we're seeing it on our energy prices, particularly diesel. And also, you know, some of our input costs that are indexed around steel prices. We're seeing some peel back on costs which is helpful and pleasing. Broadly though, you know, the other input costs, you know, obviously labor is a key cost for our sector as it is, you know, the entire mining business. We are seeing those costs still remaining elevated. And then some other sort of commodity linked inputs, you know, our reagents and things like that.
They are absolutely still there. You know, this is where, I guess, having scale and size helps because you can leverage, you know, your supply chains on, you know, with these cost sort of reductions or at least trying to get, you know, competition and, and volume which does help unit costs. I mean, from us, we're, you know, basically looking to do more with less, you know, looking at ways to use less. For instance, in the processing, we're looking to use less reagents and still get the same outcome. It's really about being more efficient, reducing scope of works to actually get costs out of the business. That's what we're sort of placed with, you know, into this H2 . That's our strategy.
Thanks so much for that. If I can just ask a quick follow-up. How much of that cost impact had an effect on net profit falling?
I'm sorry, Danielle, what was that last part of your question? On the-
Oh, sorry. I just saw our net profit was down quite a bit, so I was just wondering how much of.
Oh.
that impact was from buyback.
I think perhaps what I'd point everyone to is if you look at even if you look at our costs 50/50 . If you go back to the quarterlies we put out, which had pretty good information in them. If you look at our cash costs on a per ounce basis, they're about AUD 200 higher. The majority of that sort of increase is from basically increasing in cost, which pretty much hit the sector, I'm going to say this time last year. 50/50 , that's you can sort of see that coming through in our cash costs.
Thank you.
Thank you. The next question comes from Matthew Green from Credit Suisse. Please go ahead.
Hi, good morning, Ryan and Simon. Hope you're well. Simon, just a question for you, if I may, on the KCGM expansion. What do you need to see change from here on the execution side? Just, you know, you've highlighted this as the key risk on remaining discipline. What needs to change here for you to get more comfortable with pressing ahead of this project?
Thanks, Matthew Green. We continue to just look at the elements of execution and, you know, primarily driven around the scope of work and the detailed engineering of the various options. The more work we spend on that, the more accurate we'll get around our around the pricing and also the variance that you potentially get without that engineering phase. That's really our focus as is on that execution elements of the mill expansion. We'll continue to look at, you know, pricing in the market, what we're seeing in terms of steel pricing and build slots and those sorts of things.
Really the bulk of our focus is on get the engineering right, get the design right, and then we've reduced the risk of execution there of, you know, having to change things as you potentially go along. Really that's our core focus for KCGM plant expansion. As I mentioned, we certainly see low geological mining risk due to the stock poles which are in front of us, so the 120 million tons. That's a great position to be in. It really is around the processing side and the engineering to, you know, getting that de-risked element.
That's helpful. Thanks, Simon. It sounds like it's really just getting the scope of this project nailed down, not so much on external factors such as needing to see labor come off or perhaps permitting or anything like that. It's more isolated on a scope basis for the project.
I think that's the best way to think of it, Matt. Look at, you know, if we, if we did nothing and continued with our 13 million ton per annum milling capacity, we do have 21 years of processing in front of ourselves without increasing resources and reserves. It is a very compelling case. We just wanna get the work done upfront and get it right.
That's helpful. Thanks very much, Simon.
Thank you. The next question comes from Alistair Harvey from JP Morgan. Please go ahead.
Morning, morning, all. Just another 1 on the super pit expansion. I guess last week we saw 1 of your peers indicate a fairly long build timeframe for a much smaller expansion in the Kalgoorlie region. You know, you have highlighted that you could continue to run at 13 million tons per annum. Just kinda trying to get a sense if you're seeing some of that tightness in long lead items as well, and potentially how long you could keep the study on the shelf before pulling the trigger.
Thanks, Al. I suppose it is a large-scale project. There's a lot of parties that would like to be involved in a substantial project like this, as well as it will be built over a few years. Having time on 1 project is in some cases better than doing 2 or 3 lots of small projects. We are still seeing a lot of interest from groups who would like to be involved in the KCGM mill expansion. C an't comment on others in the area. We'll just continue to do the engineering work, get the scope right, and then, you know, bring it to a decision point.
We are seeing, you know, changes in sort of steel pricing and things, which is pleasing to see. Really our focus is on the returns the project can deliver and, you know, taking out that execution risk.
Thanks, Simon. Just following that, you guys usually do your mineral resource and reserves update in March. Can we expect a bit of an update on some of those higher grade underground opportunities? And how does that potentially act as a swing factor for the expansion to displace some of those low grade stockpiles?
I think that, you know, we are gonna update the resource and reserves in the June quarter. That's on track as normal business as usual. You know, we saw significant growth from the underground portion of the reserves at KCGM at Mount Charlotte last year to nearly 1.2 million ounces. The more we seem to drill at KCGM, the more gold we're finding. We see that in the exploration costs at AUD 24 an ounce. We see great upside benefit long term, and that's part of the strategic elements we'll continue to look at as part of the KCGM mill expansion. Obviously lower cost per ton milled will absolutely translate to increased margins for whether that's underground or open pit feeds.
You know, last year's reserve, 280 million tons. It's a large reserve base to process at KCGM without drilling any more holes.
Thanks, Simon. Just a final 1 for Ryan, perhaps, just on the capital management. Kind of pretty slim on the franking credits now. Buyback looking somewhat neutral on online and consensus price target numbers. Just wondering how we think about the inorganic options, given we're currently at the lower end of the 3 to 5 -hub target you've outlined in your presentation.
Thanks, Al. I mean, you know, obviously, we've got, you know, good options within our own portfolio. As you know, we're growing to sort of that 20 million ounces. In terms of returns, we think they're really compelling. You know, on top of that, as said a number of questions on, we've got, you know, potentially this then lift with, you know, the expansion at KCGM should it be approved. I guess we've got, you know, coming back to the M&A sort of type question. We sort of see that we've got a, you know, a compelling offering, I guess, in this sector around our own growth and around our own returns that we have within our own business.
You know, we're not, you know, at this stage, we're not really compelled to go and sort of do that. You know, we're always looking, but we really like what we have at the moment and what we can see in the next few years.
Great. Thanks, James.
Thank you. The next question comes from Nick Evans from The Australian. Please go ahead.
G'day, guys. Just returning to the mill, KCGM mill. I think June last year when you released the pre-fees, you were talking about sort of 3 options. A bolt-on to take it up to 17, a complete reserve to 24, and starting again from scratch and building something new. Have you made a decision between those 3 options? Are they all 3 still in the mix? Can I just get some kind of clarity on to when you expect to make a decision? Did the presentation say within 2023 or FY23?
T hanks. Thanks, Simon. Definitely, during calendar year 2023, it all comes down to, you know, just getting those engineering works completed and, you know, priced up accordingly and de-risk those execution elements. That's our focus. We did have the 3 options of, you know, 17 million ton a sort of bolt-on expansion. A 22 million ton per annum full rebuild of which would need some permitting and take longer to get to that, I suppose, outcome versus just the build. You know, our preferred case at the moment is the 24 million ton, which is effectively replacing 70 +% of the existing plant. You know, the existing plant has been bolted on over many years.
It's got 5 mills, it'd be a reduction in processing and less components throughout the process plan, as well as set it up for the next, you know, 2, 3 decades that we sort of see in front of ourselves. I suppose out of all the options, the 24 million ton is our preferred 1 at the moment, and it's just working through that scope and engineering phase.
Just heading back to costs. I know you answered Danielle on sort of labor market stuff, but there's, there seems to be a bit of a, I guess, a bit of a divide appearing between the sort of the more junior single mine companies and I guess the bigger players such as yourselves and the big iron ore guys. You guys seem to be a little bit more comfortable where the labor market is, and the smaller miners seem to still be struggling. Is that sort of a fair assumption in terms of what's happening in the market at the moment?
Hi, Nick. It's Ryan. Look, probably can't speak for the, for the smaller guys. I guess, you know, for us at Northern Star, again, back to the offering, you know, we like to think we can offer our employees, you know, a good career with different pathways just simply because of our, you know, diverse operation. You know, I think it is tough out there getting good people, but, you know, we find that we're able to attract good people because of, you know, the long mine life that we have. We can show them that, you know, the career progression that they can have in our business. That I think helps.
You know, maybe that's the difference between, you know, your majors, around their offering to potential employees and existing ones.
Thanks, guys. I'll pass it along. Thank you.
Thank you once again. To ask a question, please press * 1 on your phone. We'll pause for a moment to allow parties to enter the queue. At this time, we're showing no further questions. I'll hand the conference back to Ryan for any closing remarks.
Thanks, Travis. Thanks very much for joining us today. It is clear our strategy is delivering strong returns as demonstrated in our financials and balance sheet strength. We look forward to updating you on our progress throughout the year. Have a great day.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.