Please feel free to submit your questions throughout today's webinar using the Q&A function located at the bottom of your screen. At the end of Paul's presentation, time permitting, he will address as many of your questions as possible, and where appropriate, we will group similar questions together. Before we get things started, I would like to remind you that today's webinar is being recorded. Paul, over to you.
Thanks very much, Sam, and thank you everyone for logging into the webinar this morning. In going through the quarter and the full year, I really want to get across the message that the operation and its ultimate growth is moving in the direction that we expect it to move in. We're still in the early phases of our operations. The production has been slightly lower than we expected in this past year, however, our growth program is proceeding extremely well. First of all, we've maintained a very strong balance sheet, that cash and gold is down slightly over the last quarter, and that's primarily because of the investment that we made in Mega Resources and also the share buyback which has been active throughout the quarter.
In terms of our production, it was below what we expected during the quarter, and we have documented the primary reasons for that. Primarily impacted by labor, particularly in the underground mining space. We also had some other incidents that I'll go through during the presentation. Saying that, very importantly, the production at Scotia has increased fairly significantly quarter-on-quarter, and we expect to see that growth continuing. The OK Mine, which was an impact in this quarter because of the change over to Redpath as the principal contractor, is now progressing as we expect and the ramp up by Redpath has shown that that move has been a good move for the operation overall. The Gladstone open pit is progressing well, but we have announced that we'll be starting a second open pit during August, so during the next month.
That will see us really bolster the ore supply during FY 2027. I think from an exploration point of view, as I said, that growth program is going extremely well and we announced the new discovery of the Racetrack deposit just 600 m north of OK Decline during the period, as well as some very good progress in the Main field. Finally, we have released our production guidance for next year. We've got it at 90,000 oz - 105,000 oz during the financial year. We need to be very clear that we see that weighted in the back half of the year. The front half of the year, we have those additional open pits commencing. We have flexibility at Scotia continuing to improve and those labor rates, sorry, the number of underground operators substantially increasing as we speak.
All of those things will come to bear over the first half of the year, that second half of the year should be substantially stronger. The quarter just gone, 18,000 oz of production. Slightly above last quarter, but certainly not where we expect the operation to be in the longer term. Again, that was primarily impacted by the levels of labor at the Scotia mine and the changeover at the OK Mine. The all-in sustaining cost at just over AUD 4,000 / oz was heavily impacted by that change at OK during May. We saw the all-in sustaining cost sitting at AUD 3,540/oz for the other two months. You can see that we still have strong cash flow at AUD 44 million of EBITDA.
As I covered, we effectively held our own with that cash and gold despite those challenges when you exclude the investment in Mega Resources and in our share buyback. Moving on to the operations now. I think very importantly, we have seen a strong effort in the safety arena. We are now 12 months LTI-free across Norseman, which for such a large site with multiple operating mines is certainly an excellent achievement that should be celebrated. We've continued with strong community initiatives throughout the period. As always, very focused on education and bringing additional people into the industry and in multiple areas within that industry. I think the last dot point there in the community issues is also extremely important.
That positive relationship that we've had for a long time now with the Ngadju People has seen us clear over 90% of the work areas that we want to be exploring on over the next couple of years. When the climate changed a little with the change in legislation in Western Australia, a number of areas that weren't previously required to have native title agreements in place were affected by the need to go and do full heritage clearances. We've proactively gone about that with the traditional owners, both within the town and the wider Ngadju group, and that's been an excellent outcome that now sees us aircore drilling on Lake Cowan, which has been a target of ours since we recommenced this growth program. Looking at the operations summary, we've covered most of these numbers already.
You can see that we have reported the all-in sustaining cost, excluding the ore purchase agreement. The ore purchase from Mega saw an additional expense of AUD 10 million. We did see positive cash flow of roughly AUD 2 million out of that first small parcel. I'll cover the status of the Mega open pit and how we see that moving forward for the remainder of the year later in the presentation. Looking at the operational guidance for FY 2027, I've already covered the production expectations. We expect that exploration spend to be around where it has been for this year at AUD 45 million, and that's going to entail five underground drill rigs and three surface drill rigs. All of those drill rigs are on site and turning now, and we expect them to be for the entire year.
We do have that lake-based aircore drilling underway that I mentioned. The increase in major project capital to AUD 100 million is reflective of our commencement of both additional open pits and getting into the Main field as our third underground mine, really establishing multiple production areas within that mine so that we see the production grow substantially over the coming two, three, four years and well beyond that. The operational flexibility that I've talked about, I think Green Lantern in particular introduces an additional roughly 700,000 tons of combined ore and low grade, that's split roughly 50/50 between high-grade ore and lower-grade ore. It will see us building stockpiles between Green Lantern and Gladstone-Everlasting of approximately 600,000 tons throughout the year. That will ensure that we have good fresh ore feed for the processing plant at all times.
We have been impacted significantly over the past six months with particularly wet weather in Norseman, we haven't talked about it a lot. It's a climatic condition that we need to manage, but oxide ore, which we have a lot of in lower-grade stockpiles, becomes very difficult to process during those wet weather times. The Green Lantern open pit is completely fresh and will allow us to really ramp that processing rate up to back well beyond that 1.2 million tons per annum. The partnership with Mega Resources is also a shorter-term stopgap during this first six months of the financial year, where we expect approximately 16,000 oz of ore to be delivered at plus 4 g/ ton to assist with that overall mill feed and maximizing our productivity through the plant ahead of having large stocks of our own ore.
Moving into the operating mines, Scotia produced 9,500 oz this quarter. Like I say, that is a 46% improvement on the previous quarter, and we expect to see that continuing to improve substantially over the coming quarters. You can see now that we've been talking about developing ore in the northern sides of the mine for some time now. We have commenced that stoping in the northern side of the mine and in the lower extension areas of the historical workings. We are currently on our third ore level. As far as development goes, we're currently cross-cutting into our fourth level in that Scotia Deep area. That area has approximately 2/3 of our reserve at Scotia and really opens up the opportunities for the mine.
In addition to that, you can see we've added the additional four levels into the Scotia Central area that will see Scotia Central being developed and mined for the majority of the coming year. Scotia South has those additional stoping blocks and development drives coming into them as well. We're now in a position with all of that, we have in excess of 20 development headings available at all times throughout the year that will assist greatly in the contractor's ability to deliver the development advance that they need to. We've also transitioned to slightly larger loaders for all of our remote loading at Scotia to improve productivity, and we are continuing to replace equipment with new equipment. You can see we have a brand new jumbo as of this month down at Scotia. We have multiple new loaders coming in.
We have a completely new fleet at OK, which is progressively mobilizing as the manufacturers deliver. The OK Mine, you can see production in the OK Mine was well down during the quarter, and that was really impacted by, first of all, a poor performance with the outgoing contractor in their final months. Then that transitional month was particularly difficult, as we predicted it may have been, when we put our previous guidance out. That 800 oz during May out of OK was a big impact on our costs overall at a time that we had expanded costs associated with the previous contractor leaving site and the new contractor mobilizing in.
We have seen a rapid improvement in that over the couple of months post-May from Redpath, and I think that it's demonstrating already that it was certainly the right move to roll into having Redpath covering all of our assets. We've also referenced some geotechnical conditions at OK, and we've been referencing those for a little while. Those that have been following the story will know that we've transitioned our accesses from a central access in the deeper O2 lode out to end-on accesses in the deeper levels, a nd that's really all about being able to remove what we call shrinking pillars as we're stoping the ore. Those shrinking pillars are the primary source of increased stress levels and subsequent seismicity. We have a couple of those levels left to fully extract. We're managing them very closely. We have a full seismic system in place.
We have multiple industry experts working and ensuring that we only take the blocks of ore that are going to maintain that as manageable. We expect that as we go into the period in the second half of the year where we only have levels that have removed those shrinking pillars, that we will have largely addressed the issues that we've seen with some of those geotechnical conditions during this year. On an exciting front at OK, the Racetrack discovery, which was announced earlier in the quarter, is certainly providing a lot of encouragement for our exploration teams and has been at a level that we're already planning how we access that deposit. For reference, the Racetrack deposit sits approximately 600 m to the north of the Star of Erin ore body that you can see in the diagram on the right-hand side there.
The initial wide-space drilling, you can see we've had very strong widths and very strong grades. We're currently drilling that down to 80-meter centers, where we expect over the coming weeks to be in a position to announce another round of drilling through that area. We're certainly seeing quite a bit of visible gold coming out of the drilling that is advancing at the moment. Looking very, very positive. That subject to that program being very positive, we are ready to develop a 400-meter exploration drive off of the OK Decline. Right up at the top of the OK Decline on the fourth stockpile, we have an access to go directly to that area and to be able to complete that grade control drill out from underground ahead of getting in and developing that ore.
We're aiming to have that in a position to be developing in towards your, within 12 months. We see real potential here for Racetrack to add 20,000oz-30,000 oz of production to our base level of production as we go forward. Obviously, subject to our ongoing results, but very positive at this stage. Similarly, in the Main field, we've got the Main field now to a position where we are finalizing the dewatering and rehabilitation of the Bullen Decline and ready to start developing towards the O'Brien's Reef. In the meantime, we do have additional areas that we will be setting up for development through this year. The first of those is what we've called the Phoenix Pillar. This pillar is roughly 300 m long by 90 m high. It has very high grades in the levels above and below.
We've done a small amount of drilling ahead of ourselves to understand that that reef is still very, very strong through the area. You can see that the initial development, we've done a total of five cuts into this ore so far. The veining has been very strong with very strong grades. We don't have a lot of production planned out of the Main field for this year, but we certainly have development of that quite large area to go in at the same time as O'Brien's Reef. We're also establishing ourselves to do something similar over from the Butterfly Decline in the Butterfly ore body that we've reported previously. While it'll be a small production out of the Main field in this coming year, we expect that to ramp up to 30,000 oz, 50,000 oz and beyond over the coming years.
That is delivering exactly what we expected it to deliver when we started all of this work. The Gladstone open pit, we have now fully approved that Stage 3. Stage 1 that you see in green there is effectively complete. Again, part of that guidance being lower in the first half of this year is we have a couple of months now where we're processing stockpiles primarily of what we've already mined out of Gladstone. We do have a little bit of ore coming out as we fully get into that Stage 2. Come September, Stage 2 provides us a very strong ore feed for the remainder of the year. Similarly, Stage 3, which will progress in line, will see us out, combined with Daisy South, mining in this area out until August 2028 at this stage.
We are also drilling for Stage 4 that you can see at the north end of the page there which could very well see this pit having another year of life as we're ramping those additional undergrounds up. We've talked about the Green Lantern open pit. I've just included a plan there to show exactly where Green Lantern sits. It's down in the Scotia mining area. We've already cleared the next cut for that open pit, as you can see, and we've pretty extensively grade-controlled now. This picture is from a couple of weeks ago. We expect the mining here to commence late in August. From September, this open pit will be contributing ore to the plan overall.
We'll have stockpiles approaching 200,000 tons by the end of December which, as I said, really allows us to ensure that we maintain those maximum processing rates right throughout the period. The partnership with Mega Resources has not been without its hiccups either in this first quarter. We provided the finance to Mega. They delivered one parcel of ore, which processed very well. It recovered very well at over 96% recovery. Unfortunately, Mega, despite all of their hydrological studies, hit a perched water table within the open pit that they were mining. That saw the open pit fill up. The inflows in terms of managing those weren't so much of a problem, except that they didn't have those discharge permits for removing that water. They've been able to move very quickly. They have agreements in place with a neighbor to discharge that water into other open pits.
They've had some open pits of their own that they've been able to dewater the majority of what they have in place. Expecting over the coming couple of weeks, full permits to discharge the water that they see in the open pits. But they've been able to manage it with the immediate sources that they have, whereby drilling in the open pit has restarted. We expect mining in the open pit to start by the end of this week, effectively from August to be mining there again. That should see us having ore delivered from the end of August, early September, right throughout this first half of the year, before we go 100% back onto our material. Finally, in terms of greenfields exploration, we've talked about this a little bit.
I think it's been an area that investors and geologists generally have been very excited about getting onto, and that is Lake Cowan. Lake Cowan was explored by Western Mining from 1990 to 1992. They did quite a bit of aircore drilling themselves, which led to multiple advanced targets with hits of + 10 g/ ton. They drilled an especially good recovery hole at Harlequin, which is right on the edge of the lake. In 1992, that resulted in them stoping all other work on those lakes, and they produced 800,000 oz of gold at 10 g/ ton over the coming decade from Harlequin. The total resource there is well over 1 million ounces. There's still a few hundred thousand ounces in the resource there today as we speak. This area is, in terms of modern exploration, effectively untouched. In fact, all exploration effectively untouched.
Western Mining did that very short program. They had some older coarse magnetics across it. We have been able to fly very detailed drone-based magnetics over the past six months. We have amazing resolution on the structures that we see on that lake now. We have an 80,000-meter aircore program, which is well underway now. It's been underway for the last month. About 50,000 m of that drilling is on Lake Cowan itself, and you can see the rig working on Lake Cowan in that picture. Also on the Polar Bear Peninsula, which sits in the northern parts of our tenement areas, where Western Mining left with some very large exploration targets, just as they did on these lakes. Really exciting time to be able to get onto these greenfield areas.
I think now gives us that very true pipeline of exploration where we have existing mines that are being extended at Scotia and OK and the Mainfield. We have multiple other deposits that are effectively infill drilling to bring into reserve and keep producing. We now have this, not quite greenfields, but near greenfields pipeline in front of us as well. I think the generative work that our exploration team, based on these more greenfield areas, is doing has really shown the value at the Racetrack deposit. I'm confident we're going to see similar results as we come into these other areas. In summary, I think we've covered the majority of what people hopefully will want to talk about today. We have a very strong balance sheet, and we expect that to continue.
We will pause the buyback until we have that sort of cash and gold balance sitting at AUD 250 million again over the next quarter. That's been our stated position for a long time. We want to ensure that we keep that strong balance sheet that is enabling us to fund all of this exploration and new mine development. The guidance for the next year at 90,000 oz- 105,000 oz, I think, reflects appropriate conservatism in our planning overall. Some of the challenges that we have faced in this year have certainly been taken into account in our planning for the coming year. All in sustaining costs, I think you've seen the majority of the industry with a substantial increase and up around those levels that we're quoting there as well.
Everything's in a good spot for us to deliver excellent cash flow throughout this year and to continue building on that extensive growth that has really been the cornerstone of our strategy here at Norseman over the last couple of years since we got the operation into profitable production. Thank you very much. Very happy to answer some questions.
Thanks, Paul. First question is, can you move quicker with underground development with the cash balance you have so that you don't need to toll treat and can see the full value of ounces through the mill?
The pretty simple answer to that is no. As you can see, we've got a huge amount going on in the three areas. We have nine jumbos operating across the site now. We have four at Scotia, three at OK. That for the number of headings that we have available, that is the sort of optimal number of jumbos in those major mining areas. You've also seen that operator levels and experience have been a consistent problem, not just for us, but right across the industry. Those two additional jumbos that we have now in the Main field obviously create some additional requirements there. As we do have capacity to put some more jumbos into that area. Really our focus is to get the workforce by September, as we've stated, up to full levels.
In fact, in conjunction with Redpath, we're recruiting to get to sort of 10% above our original contracted levels so that we can maintain and manage the training requirements and turnover requirements. When that is all working and fully delivering what we expect it to deliver, we can certainly look at putting some more jumbos into the Main field and we'll do that. At the moment, I think we are focused on the best possible deployment of all of the resources that we have and that we're able to put together in the near term.
The next one's on fuel security. Does PNR have long-term contracts in place for the supply of diesel fuel?
Yeah. We have long-term contracts with Viva Energy, who is one of the major suppliers throughout the mining industry, both to smaller companies and very large companies. In fact, the biggest companies in Australia. We have had an ongoing dialogue with Viva. They are comfortable that they can continue to supply our fuel requirements at 100% right throughout this period, and we haven't seen any restriction at all. We, as all operators are exposed to the price fluctuations that we see within diesel. Another impact in the costs during this last quarter have been that diesel in April and May went right up to AUD 1.90/ L. For reference, before the war started, we were sitting at about AUD 1.00/L. We are budgeted for this coming year at AUD 1.30/L. We're currently sitting at about AUD 1.25/L. That diesel price has come back a long way.
There's no doubt there'll be some fluctuations through the year, but we think that that supply, based on the information that we have at the moment, should remain steady.
Thanks, Paul. A question here just on the seismicity at the OK underground. Can you expand on this a bit more? Have you reentered the levels where the seismicity was recorded? Are you expecting to increase your ground support at lower levels? Has this manifested in FY 2027 cost guidance?
First of all, it's certainly in the cost guidance. Yes, we have reentered all of the levels that have been affected by those areas. There's only actually two levels left with stoping on them, with those central accesses that have been affected by the seismicity. One of those has completed the rehabilitation. There's another one being rehabilitated as we speak. We have increased the ground support regimes in those areas and other stress areas. Those costs are certainly part of that cost guidance going forward and also the production rates. You can see that in our guidance for the year, we do have OK doing a little bit less than we have in the last couple of years. That's really, again, around being a little bit conservative on what could happen with these conditions. Again, we've installed a full seismic system at OK.
We have the very best professionals assisting us with all of that stress modeling and management. We're quite confident that our changed mining sequences, which we did change before this seismicity started, by the way. It's just, unfortunately, it started earlier than we expected. We're quite confident that as we get into that position, that it is very manageable. It's a pretty common thing across most mines in the Goldfields that go to that sort of 600-meter, 700-meter, 800-meter depth and beyond. We see most of them being managed to well over 1,000 meters deep.
Thanks, Paul. That takes us up to the half-hour mark. I'll just throw it back to you for some closing comments.
Sure. Thank you, Sam. Hopefully, we've covered most of what people want to see here. I really want to get across to all of our investors that this is a long-term growth story that we see continuing to provide good returns over the coming decades. There will be some ups and downs in that production profile. The more of that high-grade underground mining and additional open-pit material that we have in front of us, the more we'll iron those bumps out. We've been pretty conservative in our forecasting for the coming year. Hopefully, we achieve those levels quite easily. I think that the future, in terms of that overall growth to 200,000 oz, is in good standing. I think probably the last thing I should say on that is that we will have updated resources and reserves out in September.
At the same time, we expect to put out a revised five-year plan, which will show our intended ramp-up to those higher levels. Thank you.