Thank you for standing by, and welcome to the Northern Star March 2023 quarterly results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director. Please go ahead.
Good morning. Thanks for joining us today. With me is Chief Operating Officer Simon Jessop and Chief Financial Officer Ryan Gurner. I'm pleased to present our March quarter results today and reaffirm our group production guidance for FY 2023. During the March quarter, we experienced two key milling challenges at KCGM and at Pogo, which delivered a reduced production result of 363,000 ounces of gold sold at an all-in sustaining cost of AUD 1,813 per ounce. We therefore revised our FY 2023 unit cost guidance to a range of AUD 1,730-1,760 an ounce for all-in sustaining costs. These operational setbacks are now behind us, and we are well-positioned for a strong June quarter, advancing our profitable growth strategy to 2 million ounces per annum.
During the quarter, our teams maintained a sector-leading safety performance with an annual LTIFR of 1. We are seeing some easing in staff turnover and skill shortages, and therefore, with improved retention can stabilize and improve training competency and safety outcomes. Our decarbonization efforts continue with design and supply contracts advanced for Jundee wind, solar, and battery project. Simon will speak to the Australian operations, but first to our Pogo operations in Alaska. At the end of the planned mill shutdown in early March, we discovered damage to the ball mill motor, which tripped during the restart. The Pogo team ran multiple action plans and successfully repaired the motor in situ, and we safely resumed gold production in April.
Despite nearly a third of the quarter interrupted, Pogo produced and sold 47,000 ounces and advanced underground projects, including the new underground remote rock breakup and remote loading from ore bins to the underground grizzly. Multiple new development heading takeoffs were established, ore stockpiles were built, and diamond drilling continued. It is representative of the endurance of the Alaskan culture as during my visit three weeks ago there, the team remained optimistic and confident on the June quarter outlook and the progress being made towards a growth path to 300,000 ounces per annum. To group finance now. Subsequent to the quarter end, we announced the successful closing of a US $600 million senior guaranteed 10-year notes offering. Our investment-grade ratings reflect the strength and resilience of Northern Star's business. Ryan will talk to the financials shortly.
With the March quarter our best cash flow quarter year to date. The U.S. bond proceeds provide further balance sheet flexibility to fund our organic profitable growth to 2 million ounces per annum, including the optional expansion of KCGM processing plant. A decision outcome on the Fimiston mill expansion study remains some time this calendar year. Our technical teams continue to receive processing inputs to the feasibility and assess execution risk mitigations. Now over to Simon for the Australian operations.
Thank you. Thank you, Stuart. For the Kalgoorlie production center, including KCGM, Carosue Dam, Kanowna Belle, and South Kalgoorlie, we sold 191,000 ounces of gold at an Australian all-in sustaining cost of AUD 1,781 an ounce. This production delivered a mine operating cash flow of AUD 169 million, while we spent AUD 112 million on significant growth capital projects. Primarily, AUD 59 million was spent on KCGM open pit mine development. KCGM processing volumes were lower than planned due to an extended mill downtime post the major shut in January, which persisted for the majority of the quarter. These maintenance issues were mechanical in nature, also impacting processing stability, leading to a lower throughput per hour.
Majority of these issues were rectified by the end of the quarter, with a small shut planned in Q4 to rectify outstanding items ready for the planned increase in open pit ore volumes and grades. At KCGM open pit, material movement achieved 19.6 million tons, with shovel availability combined with longer hauls impacting total movement. This is in line with our total annual material movement plan. Grade of the mined ore and volumes were steady quarter-on-quarter, while additional waste was moved in the Fimiston South cutback. The open pit physicals have now delivered 61.1 million tons of total material movement in three quarters, which is delivering into our strategic goal of 80 million tons per annum of annualized movements.
Underground mining volumes for the Kalgoorlie region were steady at 1.6 million tons, while grade increased 13% compared to the December quarter, driven from Kalgoorlie Ops and Carosue Dam to deliver 129,000 ounces. KCGM's underground Mount Charlotte operation lifted volumes a further 12% from December quarter to 527,000 tons. This volume is above our annualized 2 million tons per annum target for FY23 and part of growing this operation to 3.5 million tons by FY26. Carosue Dam increased underground ore grade as Karari achieved improved stope grades due to timing of the mining sequence. The Porphyry underground mine continued development averaging 340 meters a month.
Kalgoorlie operations can now at Vale and South Kalgoorlie increase volumes and grade quarter-on-quarter, while all-in sustaining costs reduced AUD 315 an ounce to AUD 1,666 an ounce due to access of higher-grade mined ore from South Kalgoorlie operations. At our Yandal production center, including Jundee, Thunderbox, and Bronzewing, we sold 125,000 ounces of gold at an Australian all-in sustaining cost of AUD 1,627 an ounce. This production delivered a mine operating cash flow of AUD 137 million, up 22% from the December quarter, while we spent AUD 63 million on growth capital projects. Bronzewing spent AUD 22 million in major capital during the quarter as the Orelia open pit achieved a full quarter of material movement from future ore into the expanded Thunderbox process plant.
Our Jundee operation achieved 682,000 tons of ore, mined at an average grade of 4.1 grams per ton. As a result, mined ounces were an impressive 89,000 ounces for the quarter. Total jumbo development achieved was 7.7 kilometers for the quarter, while Ramone achieved commercial production during the quarter as planned, stroke, increased. Processing throughput was consistent at 742,000 tons, while recovery improved to 92% with an increased head grade. Thunderbox underground operation continued to be the high-grade ore source for the mill with 476,000 tons of ore mined. Ore tons mined, both underground and open pits, was 1.6 million tons, exceeding the process volume by 46%. Open pit volumes again increased another 13% to 5.2 million BCMs compared to the December quarter.
We continue to bring on life of mine ore sources in order to provide high-grade feeds to the 6 million ton per annum process plant. Jundee processing was steady quarter-on-quarter with reduced throughput coming from the Thunderbox mill expansion. The new Thunderbox process plant achieved 1.1 million tons for the quarter, down 10% on quarter two because of unplanned downtime to address design issues that have largely now been resolved. We continue to see short-term capacity at or above the nameplate run rate of 6 million tons per annum, while our focus is on bedding in the new operational processes and stability. The Thunderbox project remains a key focus as increased and consistent mill throughput will drive lower costs and increased gold sales. I would now like to pass on to Ryan Gurner, our Chief Financial Officer, to discuss the financials.
Thanks, Simon, and good morning all. As demonstrated in today's quarterly results, Northern Star remains in a robust financial position. Our balance sheet remains strong as set out in table 4 on page 9, with cash and bullion at AUD 452 million at 31 March. We remain at a net cash position of AUD 102 million, with corporate bank debt of AUD 350 million, which remains unchanged quarter-on-quarter. Figure seven on page nine sets out the company's cash and bullion and investments movements for the quarter, with key elements being quarter-on-quarter total cost reduction at both the all-in sustaining cost and all-in cost level, resulting in the business generating AUD 369 million of cash flow from operations and AUD 114 million of free cash flow.
Kalgoorlie and Yandal production centers continue to generate positive free cash flow with capital expenditure fully funded. Pogo made a small loss this quarter as a result of operational interruption arising from damage to the bore mill motor. Importantly, the downtime was used to set up the operations for a strong Q4. Looking ahead to Q4, operating and free cash flows forecast to rise significantly with processing output at Thunderbox expected to increase, stronger margin from Pogo with increased production and higher-grade stope contribution, and increased ore tons from the open pit areas of Golden Pike and OBO at KCGM. Sustaining capital spend was moderately lower quarter-on-quarter, offset by increased exploration investment, which is forecast to moderate in Q4.
Growth capital investment during the quarter related to key growth projects including material movement at KCGM, Orelia open pit development at Bronzewing, OBO open pit development and development Ramone underground, which is now in commercial production. Figure two on page three highlights that we are guiding group growth CapEx higher for the full year at approximately AUD 700 million from AUD 650 million. This is principally from additional waste movement at the Simpson South cutback at KCGM. The company paid its interim FY 2023 dividend of AUD 0.11 per share, totaling AUD 124 million during the quarter. On other financial matters, depreciation and amortization are in line with company guidance provided, $600-$700 per ounce. Year to date depreciation is at the upper end of the guidance range of approximately $686 per ounce.
For the quarter, non-cash inventory charges for the group is AUD 17 million. As previously mentioned, the majority of these non-cash inventory charges relate to the milling of acquired stockpiles at KCGM and are a component of AISC.
In respect to the company's on-market share buyback, no additional shares were purchased on market following the company's half year results release, and the buyback program remains open until September this year. Notwithstanding the challenges, during the quarter, we're confident of a strong finish to the year in respect of production and lower costs from the delivery of increased volumes at Pogo, with a focus on high grade stope delivery, ramp up in throughput at Thunderbox and increased ore volumes from KCGM. Finally, in respect to hedging, table 5 on page 9 sets out the company's committed hedge position at 31 March. During the quarter, the company delivered 74,000 ounces into contracts and placed 390,000 ounces at an average price of AUD 3,087 per ounce Australian.
The overall hedge book is now 1.6 million ounces at an average price just under AUD 2,800 per ounce. I'll pass now back to Harmony for the Q&A session. Thanks.
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 comes from Matt Greene from Credit Suisse. Please go ahead.
Hi, good morning all. Simon, the first question on Thunderbox, please. Look, we've seen a few quarters of decline in recovery. I appreciate some of this is probably due to ramping the mill, but just the commentary on the change of design of the mill. Can you just elaborate on what has changed, and has this been driven in any way by any metallurgy issues?
Thanks Matt. Simon. No certainly no changes in metallurgy. It's all the same ore sources that we've been processing. Really the lower recovery has been impacted by gravity circuit, I suppose challenges in terms of uptime of that. That's been the main impact. Certainly no change in terms of the ore sources. It's just down to stability of the process plant to be able to get a good consistent residence time through the tanks, et cetera. They've been the key drivers. We see that very short term. As stability comes to the mill expansion, you'll definitely see the recovery bounce back to normal levels.
Okay, that's great. Thanks. Just on KCGM, the pickup in stripping at Fimiston South, has there been any change to the scheduling on that cutback? Or was this perhaps more of an opportunistic decision to reallocate some of the fleet, just given some of the downtime at the mill?
Yeah, it's really, when we get large rain events, which we did have during the quarter, we're sort of quarantined out of the deeper parts of the pit. It really is opportunistic to be able to move the fleet, maximize the fixed costs we've got for all those assets. Therefore we've ended up moving some more waste, which is great for the long term. It gets us closer to the ore in Fimiston South. It's really a timing thing, but due to the multiple work fronts we've got, it's a great position to have versus just one area to mine at the base of the pit.
Got it. That's great. That's all for me. Thanks.
Thank you. Your next question comes from Daniel Morgan, from Barrenjoey. Please go ahead.
Hi, team. Just on your guidance, you didn't say in your release that you're gonna be at the bottom of guidance, which is a choice you could have made. You said you'd maintain production guidance. That must mean you have a very strong performance expected in June. Just wondering if you could go through some of the key drivers of that, 'cause it will be a very strong performance if you're above the bottom of the range.
Thanks, Daniel. If you go to page three of the release, you'll see that updated target table that shows where those movements are, and it'll show that, you know, we indicated that Porphyry impact would be, you know, 20,000-40,000 ounces, we put out in that March 15th release related to the Porphyry downtime. We've recut that asset to be that 225-240 for the full year, but certainly maintained Kalgoorlie, Yandal and the group outcome, which will indicate or infer that both Kalgoorlie and Yandal are performing very well, and we absolutely expect and are set up for a very strong June quarter.
Although some of those planned shuts that we completed last quarter don't exist in quarter four as well. We're set up for a very strong June quarter ahead. That table's the updated view of where that is.
Traditionally, Northern Star has had very strong June quarters, and then there's a little bit of a hangover into the September quarter following. Is that something that we could expect again this time?
It depends how strong June is, Daniel. Look, growing a company from, you know, the 1.5 to 1.6 to 2 million ounces over that five-year strategy, it isn't a straight line. There's step changes as things get commissioned and brought online. There's a bit of sawtooth thing and that's intra-quarter, intra-year, and then, you know, throughout that five-year period. We're still on track with progressing significant growth projects and closing them out and simplifying the business. Yeah, you will see sawtoothing throughout those periods.
Our ultimate game is to get to that, you know, very stable, consistent, you know, throughput and production level. You can really hone in and work on the efficiencies and the cost out. Even across the quarter, our total spend across all-in sustaining costs and all-in costs reduced. If you back in 40,000 ounces, which is really that gap, you know, you're back into that AUD 1,650 on a sustaining cost. It's really not about escalation in unit costs here. We've been making good savings. It's really that denominator of gold sold that's impacted that, and hence why we've had to shift the full year all-in sustaining cost guidance up to that AUD 1,730-AUD 1,760.
At Pogo, good job getting that mill up and running, you know, well within the six weeks that you outlined. Just wondering what should we be thinking about what that outage did to the site and more the mining side of things, like the productivity of, you know, development. Can you talk through that, you know, what you're looking at to set up FY 2024?
When we guided on the up to six weeks, you know, we were unsure on whether that motor needed to be taken off-site or there needed to be full rewinds and all that sort of thing. They were very, we're very pleased with the multiple streams that they participated in. We're able to actually repair the elements to that synchronous motor institute. Then obviously once we'd reestablished it's traveling fine. We've really started with a strong, very strong performance in April. Very pleased with the work that was completed, the high-quality work and the safe nature of how that was delivered. Whilst that was down, the underground mine, you know, you don't have the luxury of that stockpile capacity in Australia.
We did as much waste development and establishing new areas, completed some project work that would have interrupted activity. And we did build some stockpiles, but seasonally it's difficult to get all of the surface and have that real estate, which set us up well for this quarter. Yeah, we did as much as we could do. You can look in the back tables of the quarterly and see where the mining physicals have come off a bit. But grades improved, and continues to improve as we move to the stoping. We did consume some of those stoping stocks during that down period because we couldn't really consume the ore. It's really now just set up for this stronger quarter four and the exit rate into 2024.
It's fair to say that, you know, the, because of a lack of stockpile capacity, which is just, you know, what you live with the mine, the mine sort of got backed up a bit from the, from the mills. Is that fair to say?
Absolutely. Obviously, we can freely move waste out of the mines, so we ensured we kept the fleets busy doing that. We shut down some of the main development, haulage routes to reestablish turnouts on new development headings, which would have been disruptive, you know, in the future. We utilized that ability to do that. We kept all the teams active, in building drill stocks and building broken stocks and filling up those ore bins in every drive near to that ore bin. When the mill cranked up in April, we were able to consistently feed it. Again, we've started with a very strong April, and we're confident in that guidance we've put there.
If we take out this impact, it's probably 20,000-25,000 ounces impacted off Pogo in the quarter. We've got a very strong quarter four outlook.
Okay. Thank you very much.
Thank you. Once again, if you wish to ask the question, please press star one on your telephone. Your next question comes from Matthew Frydman from MST Financial. Please go ahead.
Sure. Thank you. Morning, Stuart and team. I'm interested in, I guess, the context of the corporate bonds that you secured, whether you can remind us about how you think about the limits of the balance sheet and, I suppose your targets around net debt levels, gearing levels, particularly I suppose in the context of the ongoing buyback, which obviously, Ryan, as you noted, you haven't made any additional purchases since the half year results. I'm wondering what's driving that and is it thinking around the balance sheet? Secondly, in the context of, any update you can give on the mill optimization study and, how that's, I guess, playing into your thinking around future capital needs for the company.
Yeah. Maybe I'll start and, yeah, probably Stuart will come in at the end there. Yeah, it's good to have you back, Matt. Hadn't spoken to you for a while. We've got.
Thanks, Ryan. Yeah.
We've, you would have seen and we sort of, I'm gonna say it's probably two years ago, we put out, some guidance around, you know, just some targets financially, where we wanna sort of keep the company. From a leverage perspective, that's, you know, 1.5 times leverage is where we sort of this is net debt to EBITDA is where we sort of wanna play at the moment with the business and then gearing sort of, you know, around that sort of 20% up to 20%.
You know, broadly the concept would be or theory would be that we're okay to go outside those frameworks, you know, for the right opportunity if there's a pathway back that we can see to come back into those metrics. For us, they're those investment-grade metrics that we wanna keep and hold. You know, we've got this long-term funding now. You know, the last few years have been transformational for the business. It's allowed us to go to this market. Obviously, traditionally, we've always relied on, you know, short-dated bank debt. Now the company has the opportunity to look at longer-term funding, which
You know, aligns to our asset base and, you know, our reserves of that ten-year life sort of thing. Stuart, if you wanna talk about.
Again, right, so that tenor, that 10-year tenor and obviously investment grade rating, that 6 and an 8, coupon's, you know, attractive to us with that, with that policy. The Fimiston study is still to be evaluated, presented, and a decision to be made on that. That'll happen this calendar year. In relation to uses of cash and returns for shareholders, you know, the buyback proceeds and the bond proceeds are all things that, you know, we're considering what we'll do with Fimiston before we apply those. You're right in saying we've still got through till September to utilize that buyback. It's been 40% complete.
We wanna get to that understanding of the ultimate CapEx for Fimiston and the financial metrics and a decision on the allocation of that capital.
Okay. Got it. Thanks, Stuart. I guess given that you know, you do now have some pretty long dated debt, you've got a lot of headroom on the balance sheet relative to those metrics that you outlined. It seems like you could maybe push a bit harder on the buyback, but understanding that obviously there's another piece of work going on in the background.
It all just compares to we've got significant options for us. There's lots of organic options within the business and how to generate those superior returns. The buyback to date has been, we've achieved an average unit of about AUD 8.20. You know, we're trading about AUD 13, close to AUD 14. The returns on that acquisition's fantastic. We still look at the returns coming in on the Fimiston feasibility as a very compelling investment, so we're really getting circled up on where that is at. That's what's competing with the application. We obviously just paid out the dividend that's been continuing to grow. These are all great positions and, you know, good signals of what a strong, you know, current business is delivering.
The buyback is there as an instrument, a tool of capital management, but it doesn't have to be utilized. It's there through till September. We'll revisit that. It's the first time we've done that. We'll revisit that. It can be extended or it can be expanded. We've got no issue with utilizing it.
Got it. Very clear. Thanks, Stuart. That's all from me.
Cheers.
Thank you. Your next question comes from Mitch Ryan from Jefferies. Please go ahead.
Good morning, team. Thank you very much for taking my question. Just one simple one. Just the increase in CapEx at KCGM, that's very clearly a pull forward of material movements. Just wondering if you can comment on the inflationary environment that you're seeing around KCGM and if there has been any other pressure on the other component of CapEx?
We haven't seen any inflationary increases albeit we feel we're at an elevated level anyway. We haven't actually seen that continue to push, and then there's been some stabilizations as I said on staffing turnover and skills. That uplift primarily waste volumes. It's all volume related and getting more for the that increased expenditure. And as well around, yeah, new developments up in Yandal, those are the extra things that have been accelerated to be that extra CapEx. It's CapEx that'll come out in future years and get us to more quicker, like Simon indicated in the south of Fimiston.
Thank you.
Thank you. Once again, to ask a question, please press star one. Your next question comes from Kate McCutcheon from Citi. Please go ahead.
Hi. Good morning, Stuart and Ryan. On the hedge book, your total books come up quarter-on-quarter. Some of your peers will be unhedged from next quarter. Does the longer dated debt change anything on your hedging strategy or any comments on the hedge book here and that strategy going forward?
look, we've got a pretty clearly stated hedge policy and we've maintained that. You know, I think it's we can't necessarily compare us to other goldies. We probably do look like a bit of an outlier there, but it's on the ounce profile we have, the growth CapEx forecast we're delivering, it's still quite modest, and it's priced well. 1.6 million ounces at nearly AUD 2,800 an ounce. The additions that we added in the quarter were well under AUD 3,000 an ounce. If you comp our hedge book against every bank's forecast, they've all got gold price coming off and we've got gold price going up. It's something different there.
I, you know, I'm confident that our policy has worked well for us to date, particularly when we either have debt planned or are investing growth capital, we maintain that hedge profile policy. We ensure we keep delivering into it. There's no legacy issues there. We've still got over, you know, 75%-80% of our production delivering into spot. It's, it's working well for us.
Okay. That's good color. Thank you.
Thanks, Kate.
Thank you. Your next question comes from Al Harvey from J.P. Morgan. Please go ahead.
I can't see your name, Al.
Apologies, Al. Your line is now live. You may have yourself muted. Thank you. There are no further questions at this time. I'll now hand back to Stuart Tonkin for closing remarks.
Thanks for joining us on the call today. I have a very busy reporting day. We'll look forward to updating you next quarter on our full year results as we continue to advance our profitable organic growth strategy. Have a great day. Thanks.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.