Northern Star Resources Ltd. (NST) has reported a stellar performance for the June quarter of fiscal year 2024, with record gold sales and net mine cash flow. The company achieved a 32% increase in underlying free cash flow for the quarter, amounting to AUD $189 million, and a 29% rise in full-year underlying free cash flow, reaching AUD $462 million.
Northern Star's financial resilience is underscored by its net cash position of AUD $359 million. Looking ahead, the company has set a production target of 1.65 to 1.8 million ounces of gold for FY'25 at an all-in sustaining cost of AUD $1,850 to $2,100 per ounce. Growth strategies are in motion to hit the 2 million ounce mark by FY'26, with significant capital investments planned for the upcoming fiscal year.
Key Takeaways
- Record gold sales of 439,000 ounces in the June quarter.
- Underlying free cash flow up 32% quarter-on-quarter at AUD $189 million.
- Full-year underlying free cash flow rose by 29% to AUD $462 million.
- Net cash position strengthened to AUD $359 million.
- FY'25 gold production forecasted between 1.65 and 1.8 million ounces.
- All-in sustaining cost projected at AUD $1,850 to $2,100 per ounce for FY'25.
- Major capital expenditures anticipated between AUD $950 million and AUD $1,020 million for FY'25.
Company Outlook
- Northern Star aims for a production target of 2 million ounces by FY'26.
- The KCGM mill expansion project is expected to double throughput by FY'29.
- Sustaining capital expenditure forecasted to remain within AUD $200 to $250 per ounce sold.
- Growth capital expenditure guided at a midpoint of AUD $985 million for FY'25.
Bearish Highlights
- Increased all-in sustaining cost base due to factors like labor costs and energy consumables.
- Higher cost feed sources needed to achieve production targets, potentially leading to increased sustaining costs.
- Cost increases expected from renewed contracts, traditional owner royalties, and higher energy input costs.
Bullish Highlights
- Pogo mine in Alaska reported a record gold sold of 91,000 ounces and a record mine operating cash flow of USD $107 million.
- Kalgoorlie production center sold 221,000 ounces of gold, contributing AUD $335 million to mine operating cash flow.
- Thunderbox mine achieved record mill throughput, with a 40% increase in gold sold from the previous quarter.
- Full-year cash earnings reached approximately AUD $1.8 billion.
Misses
- Lower performance at the Yandal mine primarily due to flooding in the gold fields.
- The gold room thermal event at the Jundee mine, although quickly contained and rectified.
Q&A Highlights
- CEO Stuart Tonkin discussed CapEx plans for Yandal and other mining areas, focusing on de-risking and bringing projects online as budget allows.
- CFO Ryan Gurner addressed the company's buyback program and the strong performance of the Pogo asset.
- Tonkin and Gurner explained cost guidance for FY'25, including potential cost reductions through repriced contracts.
- Tonkin provided updates on the Jundee Renewable Project and the labor market's impact on the company's operations.
Northern Star Resources Ltd. has demonstrated robust financial health and strategic growth initiatives in its recent earnings call. With significant investment in expansion projects and a strong outlook for gold production, the company is well-positioned to continue its upward trajectory in the coming fiscal year.
InvestingPro Insights
Northern Star Resources Ltd. (NST) has not only shown strong performance in its recent earnings but also exhibits a stable financial outlook according to InvestingPro data. With a market capitalization of 10.39 billion USD and a trailing twelve months price-to-earnings (P/E) ratio of 21.41, the company stands on solid ground. The P/E ratio suggests that investors are willing to pay a premium for Northern Star's earnings, reflecting optimism about the company's future prospects.
An InvestingPro Tip highlights that Northern Star Resources has maintained dividend payments for 13 consecutive years, which is a testament to its commitment to returning value to shareholders and its financial stability. Additionally, the company's liquid assets exceed its short-term obligations, indicating a strong liquidity position that can support ongoing operations and growth strategies.
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Full transcript - Northern Star Resources Ltd (NESRF) Q4 2024:
Operator: Thank you for standing by. Welcome to the Northern Star June 2024 quarterly results. All participants are in a listen only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr Stuart Tonkin, Managing Director and CEO. Please go ahead.
Stuart Tonkin: Good morning and thanks for joining us. With me today is our Chief Operating Officer Simon Jessop and Chief Financial Officer Ryan Gurner. I'm pleased to present an exceptional June quarter performance to close out FY’24. With Thunderbox and Pogo we are both highlights, achieving record performances complemented by continued strong performance from the portfolio. In FY’24 our team delivered record gold sold and record net mine cash flow. This demonstrates the quality of the asset portfolio across our three production centers and also the value our investment is making to unlock future low cost high margin announcers. I'm particularly proud of our people who safely delivered on our FY’24 commitments. Thank you for all your efforts which are continuing in FY’25 as we advance our profitable growth strategy. For the June quarter, we sold 439,000 ounces at an all in sustaining cost of AUD $1,815 an ounce, generating underlying free cash flow of AUD $189 million which is up 32% from the March quarter and for the year we generated underlying free cash flow of AUD $462 million, up 29% from last year. As you can see in our results Thunderbox and Pogo stand out this quarter for record mill throughput and in turn gold ounces. Each of our production centers remain in a positive net mine cash flow position ensuring they are self-funding the growth. As a group we remain financially resilient in a net cash position of AUD $359 million. This financial strength allows us to fund all our growth investments, exploration activities and capital management initiatives including dividends and share buybacks as demonstrated during FY’24. For the KCGM mill expansion on-site construction is advancing to budget and schedule. It is exciting to see this activity underway at KCGM which will double the plant's throughput to 27 million tons per annum and lift production to 900,000 ounces per annum by FY’29. Investors and analysts will have the opportunity next Sunday to visit KCGM and see firsthand the significant progress made prior to the Dickinson Dealers Conference. We have today also provided FY’25 guidance. We expect to produce 1.65 to 1.8 million ounces of gold at an all-in sustaining cost of AUD$1,850 to $2,100 an ounce into a very healthy gold price environment currently around AUD$3,500 an ounce. As per previous years planned major shutdowns will be carried out across all three production centers in the September quarter, so FY’25 delivery is second half weighted. We are a majority of the way through our five-year profitable growth strategy which sees our production grow to 2 million ounces by FY’26 and more importantly enables the delivery of higher free cash flow levels. Three years into our growth investment we have delivered $1.3 billion of free cash flow which confirms our rationale for the value creating strategy. We forecast FY’25 capital expenditure to be in the range of AUD$950 million to AUD$1,020 million plus the KCGM expansion capex of AUD$500 million to AUD$530 million which is in the second year of its build phase. Before I hand over to Simon for the Australian operations, Pogo in Alaska delivered an exceptional quarter. A record of gold sold at 91,000 ounces at an all-in sustaining cost of USD$1,091 an ounce which delivered record mine operating cash flow of USD$107 million and record net mine cash flow since being under Northern Stars ownership. This is a testament to the team and the asset strength also delivering a record annual gold sold of 278,000 ounces at top of guidance range. I remind listeners that Pogo boasts a gold resource of nearly 7 million ounces at above 10 grams per ton highlighting that we will be generating strong USD cash flow for the next decade plus. A fantastic achievement and well done to team Pogo. Simon will now speak to the Australian operations.
Simon Jessop: Thank you Stuart. For the Kalgoorlie production center including KCGM, Carosue Dam, Kanowna Belle and South Kalgoorlie, we sold 221,000 ounces of gold down 2% at an Australian all-in sustaining cost of AUD$1,712 an ounce. This production delivered a mine operating cash flow of AUD$335 million up 10% quarter-on-quarter. The region also spent AUD$264 million on significant growth capital projects. This included AUD$101 million on the KCGM mill expansion, AUD$52 million on the KCGM open pit mine development and AUD$24 million on underground mine development. We also have successfully started to commission the new tail storage cells of E & F [ph] at KCGM which have a $147 million ton total capacity. At the KCGM open pit material movement was 16.6 million tons as we prioritized the partial access mining of Golden Pike North with a further 43,000 ounces mined in the quarter. The East Wall cutback works continued along with Oroya Brownhill and Fimiston South. For the full year, we mined 72 million tons of ore and waste as the open pit team continued to manage competing priorities. We remain on track to regain full access to Golden Pike North in the quarter 2 of FY’25. Underground mining volumes for the Kalgoorlie region increased 3% to 1.55 million tons with grade up 12% to 2.8 grams and delivered 143,000 ounces. The higher grade was driven from Kalgoorlie operations South Kalgoorlie mine and Carosue dam mine sequence. KCGM's underground operations increased development a further 11% quarter-on-quarter to 4.2 kilometers. The development meters will continue to ramp up quarter-on-quarter going forward with the arrival of two new jumbo fleets at the end of the financial year. The Carosue dam underground mines all perform well with 54,000 ounces mined in the quarter. Open pit movements increased 16% to 1.3 million BCMs despite consistent rain impacting these positive results. The Kalgoorlie operation underground mines increased mined ore volumes and grade which increased 36% driven by South Kalgoorlie's mine averaging 5.4 grams a ton over 37,000 ounces for the quarter. Processing volumes in the Kalgoorlie production center increased 13% quarter-on-quarter as KCGM had a smaller planned shutdown along with good milling performance at Carosue dam. KCGM's head grade reduced with less high grade ore available from Golden Pike North which was offset with lower grade stockpile ore. KCGM recovery was impacted due to a float circuit and gigi [ph] losses with both being addressed in the first quarter shutdown of FY’25. Carosue dam processing finished with a new annual record of 3.9 million tons processed in the year which is a major credit to the team. The KCGM mill expansion spent 101 million over the quarter with total engineering progress at 44% and the major equipment package also at 42% complete. The concrete poured at the end of June was 9% while as of today as we're sitting here it's 18% poured with the largest single pour of 1600 cubes completed early in July for the ball raft. We are very pleased with the on-ground construction activities and we look forward to showing the progress of the KCGM mill expansion project as part of our upcoming KCGM site tour. The project remains on time and tracking to plan. At our Yandal production center including Jundee and Thunderbox, we sold 127,000 ounces of gold at an Australian all-in sustaining cost of $2,109 an ounce. This production delivered a mine operating cash flow of AUD$155 million while we spent AUD$81 million on growth capital projects primarily at the Aurelia open pit and Wanda underground. At our Jundee operation development advance was 7.6 kilometers up 10% quarter-on-quarter with 796,000 ton of ore mined and 88,000 ounces up 20% quarter-on-quarter. Processing was lower than nameplate due to a fixed plant fire which impacted the gold room and back of the processing plant requiring a large amount of electrical rectification works. By quarter end, the impacts of the May fire were rectified with a large build-up in gold in circuit with lower gold sales due to the reduced mill tons. Jundee's renewable project of a 16 megawatt solar farm and 12 megawatt battery system is currently in its final commissioning phases with partial renewable power now being successfully exported into the grid. We also have one of the four wind turbines erected as the crane moves through the program before commissioning of that stage begins. The Thunderbox underground mines including Thunderbox and Wanda achieved 613,000 ton of ore for 35,000 ounces at a head grade of 1.8 grams per ton. The Wanda underground mine continued to ramp up ahead of plan with 1,508 meters developed with one jumbo over the quarter. It's a credit to the Northern Star mining services team who are building this mine with the Thunderbox technical team ahead of plan below cost which ultimately brings high grade ore feed earlier to the Thunderbox mill. For the quarter, the underground and open pit operations successfully mined 1.5 million tons of ore which is at the expanded mill's quarterly nameplate. At the Thunderbox process plant we achieved nameplate on a quarterly average of 1.5 million tons milled and sold 63,000 ounces of gold up 40 percent quarter-on-quarter. The mill throughput averaged an impressive 795 tons per hour for the quarter. Availability was also a new quarterly record of 85% with a significant shutdown occurring in April in those numbers. For the first full financial year processing we achieved 87% of the nameplate throughput. We are continuing to work on availability in the crushing circuit and milling stability by rectifying known wear points. The last quarter is a great result for the Thunderbox team who continue to unlock the full value of this major plant expansion. I would now like to pass over to Ryan, our Chief Financial Officer to discuss the financials.
Ryan Gurner: Thanks Simon, good morning everyone. As demonstrated in today's results the company is in a strong financial position. After an excellent quarter we've increased our net cash position to AUD$359 million and increased our cash and bullion to AUD$1.25 billion. The company has generated record full year cash earnings of approximately AUD$1.8 billion and as forecasted we've delivered a material uplift in the second half driven by higher production, lower unit costs across the business and higher gold prices. A reminder that the company's policy is to pay 20% to 30% of cash earnings in dividends. Figure 9 on page 11 presents the cash, bullion and investments movement for the quarter. Key highlights being operating cash flow of AUD$688 million, a 31% lift on the prior quarter and underlying free cash generation of AUD$189 million bringing FY’24 underlying free cash flow to AUD$462 million up 29% for a prior year. Importantly, all production centers are delivering strong net mine cash flows which totaled AUD$686 million for the full year. As Stuart mentioned, Pogo an absolute standout delivering a record contribution of AUD$238 million for FY’24. Growth capital investment during the quarter related to key growth projects including at KCGM, Fimiston South Cutback and East Wall Mediation Works, development at Porphyry Underground and Wallbrook Open Pit at CDO, development of Orelia Open Pit, Wonder Underground and Remediation Works at Thunderbox Processing Plant and approximately AUD$100 million for the KCGM plan expansion was incurred during the quarter. Total spend for FY’24 on the project was approximately AUD$350 million. The reduced spend related to the timing of some procurement packages being finalized but importantly this is not expected to impact critical milestones, schedule or budget. On other financial matters, full year depreciation and amortization of AUD$703 per ounce is in line with guidance of AUD$650 per ounce to $750 per ounce and non-cash inventory charges total AUD$34 million with the majority of these charges relating to the stockpiles at KCGM. As part of the company's ongoing capital management program, the on-market share buyback continued during the quarter. 305,000 shares totaling AUD$4 million was bought back and cancelled. Since the program started, 19.5 million shares have been purchased at an average price of $8.85 per share. AUD$128 million remains outstanding with the program open until September this year, a reminder that blackout for our supplies until our FY’24 results are released in August. Following the delivery of a strong Q4, the company is well placed to deliver FY’25 production and cost guidance. Sustaining capital expenditure is forecast to remain within our current range of AUD$200 per ounce to $250 per ounce sold. FY’25 growth capital excluding the KCGM expansion project is guided at a midpoint of AUD$985 million. This investment is centered on our returns focused organic growth options. At the Kalgoorlie Production Hub, the majority of the investment is allocated to projects which will deliver the new freight and infrastructure for the KCGM plant expansion. These projects include development and ramp up of Mount Charlotte and Fimiston underground mines, Open Pit material movement and infrastructure requirements. At Yandal, the majority of the capital investment includes advancing the existing Thunderbox mill feed sources at the high-grade Wonder underground, Orelia and development of the Bannockburn open pit. At Jundee, mine development will commence at Cook-Griffin, a recent exploration success, and continue at the main Jundee orebody with additional infrastructure planned. And at Pogo, mine development and resource drilling are an ongoing capital requirement to open new mining areas and increase the number of available headings. In early FY’25, major infrastructure works will be undertaken to maximize utilization and availability of the plant, including rebuilding the ball mill motor and replacing the trunnion. The milestones in FY’25 for the KCGM expansion project include delivery and installation of major equipment, as well as commissioning of service infrastructure. We are guiding FY’25 spend to be AUD$500 million to AUD$530 million for the project. FY’25 exploration is to be AUD$180 million, with investment focused on KCGM and Jundee in mine exploration. At Pogo, additional drilling at the Star Discovery (NASDAQ:WBD) is planned. Importantly, with the company's strong liquidity position of $2.7 billion, our profitable organic pipeline and exploration activity is fully funded. Finally, in respect of hedging, Table 5, page 11 sets out the company's committed hedge position at 30 June. The overall hedge book stands at 1.8 million ounces at an average price of $3,122 per ounce. I'll pass back now to the moderator for Q&A. Thanks very much.
Operator: Thank you. [Operator Instructions] Your first question comes from Mitch Ryan with Jefferies. Please go ahead.
Mitch Ryan: Morning, Stuart and team. My first question just relates to you've reiterated 2 million ounces of production in FY’26. How should we think about this? Is that sort of the lower band of a guidance range or is this more of a midpoint or is it a stretched target for your FY’26?
Stuart Tonkin: Thanks, Mitch. Yes, look, I guess what we've published today is the FY’25 guidance outlook. And I'd reiterate that's a checkpoint on our growth pathway to 2 million ounces by FY’26. And then that is followed by the expanded Fimiston plant, adding 250,000 ounces per annum through FY’27 to FY’29. So yes, it's another growth year, FY’25. And the commitment, as we've held in our five-year strategy, is to grow to that profitable 2 million ounces in FY’26. And we're a majority way through that plan and a lot of those actions have been delivered. So you're very pleased with how we're tracking. It's not a straight line. I'll remind people about our planned shutdowns. We occur in quarter one. So it's second half weighted and quarter one will be the softer quarter of the year. So yes, it's not a straight line, but we're still on our growth trajectory and it's working well in cash generation.
Mitch Ryan: Okay. So 2 million ounces is the target of...
Stuart Tonkin: That's FY’26 pitch. FY’26, I haven't given guidance for FY’26, but that is our five-year strategic plan to deliver 2 million ounces from the three assets in FY’26. So what we've got today is the checkpoint in FY’25, which is 1.65 to 1.8 million ounces.
Mitch Ryan: Yes. Okay. So it's not an exit rate. It is a production number for the full FY’26.
Stuart Tonkin: Yes. And the final last piece really for that to be delivered is the grade coming from the Golden Pike to lift KCGM from 450,000 ounces to 650,000 ounces per annum, complemented by the other assets being at a steady state. So Pogo at 300, Yandal at 600, and obviously the balance being Kalgoorlie, but KCGM is the major step change in that last year. And [Indiscernible] updated on the progress of access of the East World remediation, plus the access to that high grade and de-stacking those benches in the better grade at Golden Pike.
Mitch Ryan: Okay. Perfect. Thank you very much. Appreciate that clarification. My second question just relates around, again, you've called out that September quarter, the shots, and that'll be the weakest quarter. The quantum sort of sometime as it's down around sort of somewhere between 7% to 15% on the June quarter, is that sort of a fair range or can you give us any quantum of the quantum of those shots?
Stuart Tonkin: Yes, metal maths is good. That's about right. So if you look at our quarter one last year that was their lightest quarter. That was sub 400. I think what we'll call out in this is Pogo's mill essentially is off for five weeks at a de-rated throughput, and that's to do substantial project work, which has commenced and is tracking well at Pogo presently. So Pogo is probably the lightest site's performance coming off a strong 91,000 ounces. It steps right back down with five weeks out of the quarter. And then those other planned major shots across Yandal and Kal occur as well. So the full year, the run rate over the last three quarters is a very good indication to give us confidence as how we pull into FY’26. And most of that, expectations step back is around the impacts of quarter three. It is planned work, well run work. We always ask to be designed differently, but this is how the overall plan has played out each year. And the strong quarter four was delivered. We're not falling off a cliff in quarter three. It is planned work in this first quarter, but it's just the work that has to be done that secures these assets over the years ahead.
Mitch Ryan: Perfect. I appreciate it. I'll pass it on. Thank you.
Stuart Tonkin: Thanks, Mitch.
Operator: The next question comes from Kate McCutcheon with Citi. Please go ahead.
Kate McCutcheon: Hi, good morning, Stuart. Just at the super pit, you've given some material movement guidance previously, and I think 2024 was supposed to be that peak of 85 million tons to 95 million tons. But it looks like that came in short. Can you just talk to what the stripping looks like this year and next year? And then what portion of the stripping is that guidance chunk for KCGM this year?
Stuart Tonkin: Yes, thanks. I'll let Simon answer.
Simon Jessop: Yes, thanks, Kate. We'll have a look to give a good update on the KCGM movements and where we are at the site visit in a couple of weeks' time. So we'll look to, as we've guided previously on strip ratios and things like that, we'll look at that on the site visit just before Diggers. But in terms of the overall year, quarter three was particularly hard with rain, significant rain throughout the quarter. So what we did was just prioritize where we worked during the pit during that quarter. So we dropped away some material movement, which we can catch back up in the Thames and South area and really prioritize on the high value OVH areas and the east wall remediation, because that's the biggest driver of value. And you also saw us, accessing Golden Pike North, partial access to it, slightly ahead of plan. So we brought some of that forward, which is obviously longer haul distances for the trucking fleet. So not concerned at all. We still guide to 80 million ton to 90 million ton and that's where we'll consistently sit moving forward.
Kate McCutcheon: Okay, got it. And then staying on CapEx. So I guess it's hard on our end, visibility on modelling this continued CapEx to open up some of these ore sources at Yandal, for example. So I think there's an extra 50 millimeters here, opening up some of those pits and you've given us some color for Thunderbox in your slide decks. How do we think about this CapEx going forward? Does it, I know we've just got 2025 guidance today, but does it step back next year or what sort of color can you give around when additional pits need to come in? I mean, opening up Cook Griffin, for example, unless I missed it, wasn't really on my radar as CapEx that had to be spent this year. So just sort of, if you can talk through some of those mining areas that come in.
Stuart Tonkin: Yes, thanks, Kate. And I'd agree that it doesn't have to happen. We are trying to always build contingency into the plan such that we can deliver consistent guidance over the forward outlook. So when we can bring it, through approvals and accelerate and we have the cash flow to do that, we do bring those projects online so that we've got those diversification of production centers, etcetera. So we can manage through weather events or approval timeline slipping or other things. So yes, Cook Griffin, great opportunity. We're starting that underground with our normal start mining services. We did a very similar thing last year, obviously with Wanda, starting it early, I guess out of the timing. And then probably the other CapEx lift is the TSF down at Kalgoorlie coming in early because of the expanded mill plant. These things are in our life of asset plan. They're all scheduled and sequenced. But ideally, what we want to do is de-risk. So when the cash flow is there, the budget's there, we've got sequence of priorities, but we will bring these things in early. We're happy to, it's not an oversupply, but certainly de-risk it, develop it, build stockpiles near to our mills so that on any given day, we have that blend of ore that we can send in. So I acknowledge that the CapEx has stepped up from consensus in FY’25. I also believe directionally, gets over this hump and we've de-risked and built golden stockpiles and golden circuits. I think it sits now over 3.5 million ounces, which is a good thing for investors, is security of forward earnings, of security of material close to our plants, and we always try to stay ahead of that investment. It is also, I want to say discretionary, if things change in the environment, we can actually dial back some of this investment. But in this environment, we're going as hard as fast as we can to build that contingency in. So I know you're looking for the returns on the back of it. I'd be confident that we're looking at it through a returns lens and we're seeing multi-digit IRRs and our decisions around these things is improving our margins and improving our overall returns. That's the lens we look at these organic investments through. And that's versus a question that will probably come up on the call around M&A, our organic opportunities trump every other thing we've been looking at, that, this is our business, this is our work, this is what complements shareholder returns.
Kate McCutcheon: Okay, that's helpful. Thank you, Stuart and Simon.
Stuart Tonkin: Thanks, Kate.
Operator: The next question comes from Levi Spry with UBS. Please go ahead.
Levi Spry: Good day, Stuart and team. Two questions, please. Firstly, just on Thunderbox, sorry, I'm catching up here with a few callers all at once. Can you just sort of run us through why it was so good? Seems like things are back on track. Maybe just a bit of detail around that, please, Simon.
Simon Jessop: Yes, thanks, Levi. During the quarter, really, we just focused on that availability and really lifting the crushing circuit availability to get stability into the process plant and the milling. And you saw that with the 795 ton per hour average for the quarter. So nameplate 750 ton per hour. So we saw even in June sprint capacity of the whole June average 820 ton per hour. So we're continuing to work on the availability. We still believe there's 5% or 6% more availability to eke out of that infrastructure. And we know what the areas of focus are. So it's known where points, but really pleased with the team in terms of just constantly working through areas that fail and then putting long-term rectification pieces in place. So there's a big year for the team, but really pleased to get 1.5 million tons for Quarter four and start FY’25 in a strong position from a process plant perspective.
Levi Spry: Yes, nice one. Thank you. Thanks, Simon. And maybe just on the capital question, just extending some of those good questions there previously. How can you help us in sort of three to five year time frame, Stuart?
Stuart Tonkin: Oh, look, we don't guide out that far. But what I'll say is, growth CapEx gets you growth. So, FY’26, that 2 million ounces, you've got visibility of the capital to deliver Fimiston. So we're in the second year, this year, 535 million being spent this year. So you've got the tail of that CapEx going into 2026 and then a slight pace in 2027 on Fimiston. So another 500 million, 2026 there. But the remainder of the, to keep that 2 million ounce profile across those assets, is sort of one of an open pit or an underground being turned on each year. And then, TSF lifts that a multi-year lifts. So whether it's dollars in a year that get, amortized over the future life asset types of things. So I would also say we're seeing a huge amount of opportunity. So like we're going to up our exploration expenditure, 180 million to 200 million this year. If that liberates things like, the Hercules discovery, just less than 20Ks from Fimiston plant, you'll get capital in a hurry to develop that into a mine and get those gold, get that gold into the mill. So there's still, I guess for analysts, investors, it's hard to say, well, you haven't got visibility out five years and talking about things we never heard about. We're still discovering things like Hercules this year that I will prioritize and fast track and it will attract capital, but it will attract superior returns because of the success of the exploration team. So to bear with us a bit that, there is a sustaining capital to maintain at 2 million ounces per annum. And typically it's, we're a year ahead, our capital is a year ahead of when the production comes in. We'll build a stockpile, develop a mine, build a stockpile next to a mill and then the ounces will come the year after. And that's the thing. But yes, this is still a very heavy lifting capital year FY’25 as we acknowledge.
Levi Spry: Yes. Thank you. Thanks Stuart. And maybe just to sneak one in on ASX. So how do we think about that in the context of the volume growth?
Stuart Tonkin: Yes. So look, again, we've given ASX at 1850 to 2100 and that's considering where the gold price is and the cost that it attracts and the behaviors that it drives. I'm also thinking with the backdrop of the nickel reduction, lithium reduction, even some gas out of iron, there's potentially some costs plateauing or even potentially some retraction savings, you know, across energy, across labor. So we haven't baked that into anything across our costs on dollar millions. And then as you pointed out, economies of scale or denominator of gold sold, just as a see-through on Pogo, it delivered in the quarter ASX at 1090, U.S. dollars an ounce. So you've got, over 100% to ASX margin of the U.S. price to ASX and then on a dollar millions are still seeing a 30, over 30 million per month U.S. And I sort of spoke about, still got the new trucking fleet to be brought in to take from to the 10 trucks to six trucks and drop labor and drop maintenance costs around that fleet. So there's some improvements we are seeing to make true step down changes. And then as we've, reduced stripping ratios across the business and get into the primary or these pits, we're also seeing some benefit there. But we've maybe been conservative in dragging costs right. When we look across the consensus peer group, we're probably seeing the same trend and expecting, staying still is a good thing in this environment. We'll still migrate down the cost curve, but we get to see most people's reporting on ASX.
Levi Spry: Okay, thank you. Appreciate your time. Thank you.
Stuart Tonkin: Thanks, Levi.
Operator: Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.
Daniel Morgan: Hi, Stuart and Tim. My question just relates to the Pogo, the outage or the mill maintenance period that you're doing and well, I guess, as we speak, what impact does that have on accommodation? I'm just thinking through, once you get it complete, will accommodation constraints mean that development rates and mining rates, suffer a little bit as a hangover or consequence? Thank you.
Stuart Tonkin: Oh, thanks, Dan. So there's a few things that happen throughout the year to be able to disconnect activities because we're very hand to mouth there. So a lot of the great work team's done to be able to when the mill's off to not, stop mining where it used to sort of back up within a day or two. So obviously the ore passes in this season, surface temporary stockpiles can be built, prioritizing of waste development and grade. But, last quarter we averaged over 1600 meters a month. So we're ahead on the development rates and a lot of good work's going into doing that. So I don't see any mining impacts throughout the five weeks. That means that we're behind the game. In fact, we'll build contingency up to be ready to turn it on well. And we're also running the, on a SAG only case, we're at about 30%, 35% of the general throughput, which is good for gold production, but it's better that you're keeping all the rest of the plant running so that it's not sitting idle. And yes, so just keeping it all moving and keep the team applied in that period. So that's all useful. And then the major project that's underway right now, future-proof the asset. So that motor that failed back in February last year, we have obviously put a full rewind goes into that motor and have a replicate spare. Then a lot of work on the ball mill and all of the project waste around course ore bins, final bins to make sure that these things don't trip us up throughout the year for the remain part. So yes, combination analysis stuff, the construction crew, they're all there. They'll all be closed out and done and gone in four weeks and then back on, going back on. So yes, pretty impressive outcome. I just can't highlight enough. 91,000 ounces at 1090 base U.S. an ounce, USD$107 million reminding people we paid USD$260 million for this asset five years ago. And we're sitting there with multi-decade outlook. So it's a fantastic asset. So it's worth investing in.
Daniel Morgan: No, thank you very much for your perspectives.
Operator: The next question comes from Matthew Frydman with MST Financial. Please go ahead.
Matthew Frydman: Sure. Thanks. Morning, Stuart and team. Can I just carry on from Levi's (NYSE:LEVI) questions on the all in sustaining cost base of the business? And I guess really, really thinking about things more in dollar million terms, you spent about $3 billion on all in sustaining costs in FY’24. Your guidance implies that's going to lift to about 3.4 billion in FY’25. So about a 15% increase. Can you just talk through what I guess the kind of high level drivers across the business are that are driving that increase? Stuart, you mentioned labor costs, energy consumables, all of those things have gone up and potentially there's some conservatism in your guidance around those. But to my mind, that doesn't really drive a 15% increase to the sustaining cost base. My interpretation is that it's more driven by, I guess, increased material movements across the business, bringing on new feed sources, maybe a larger proportion of high cost underground tons as well. Is that a fair assessment of what FY’25 looks like? And then looking beyond that, should we expect that your sustaining cost base is going to continue to grow ahead of, I guess, what we would consider to be industry cost inflation in order to deliver that 2 million ounce target? Is it a case of continuing to, needing to bring on some higher cost feed sources in order to achieve those numbers? Or is that increase something that's a little unique to FY’25? Are there factors to call out there that are somewhat unique? Thanks.
Stuart Tonkin: Thanks, Matt. A lot packed into that question, but I'll address it. So our exit rate, obviously, for the year, the 1621 or 1.621 million ounces delivered at mid 1850 ASX. And then when you look forward, we say, well, the book ends at 1.65 to 1.8 and the ASX being 1850 to 2100. I get the point saying it appears that there's a big step up if you're taking midpoint midpoints, etcetera, from what we've just delivered. There's a couple of things in that we have. We have visibility of renewed contracts with escalation. So there are some known costs that we have negotiated long-term contracts with major suppliers who are doing a fantastic job and with valid costs in post, they we've repriced those contracts. So we've got that. We also see the elevation of what Gold price is doing to flow through costs around royalties and other things that it attracts. We'll also see the introduction of things like traditional owner royalties that start to come in more earnestly this year. So they're impacted in there. We've got a higher escalation of view of where some energy input costs are for the year. We may not see those and we may enjoy a reduction of those, but yet to plan, I'd rather be a little bit conservative on what we've historically seen there. There is still some grade driven things in the interim to get to that full thing. So you pointed out saying, you know, it's higher cost tons, higher cost undergrounds. I guess it's not. It's that lower grade material is now materially profitable. And I'm not going to say mind the margin, but I'm going to say that grade denominates that. So when you drop it by decimal points, your ASX will go up. But when the Goldprice is $3,500 an ounce and you're doing your reserves a bit over $2,000 and your resources around $2,500, there is a lot of headroom for profitable material that's in and around the activities that we're mining. It can change strip ratios. If you've got mill capacity, it can change cash flows, all those things. So we're also conscious about those grades and the incremental material that can be milled albeit at a higher ASX, but generating significant cash flow from those tons. So some of that incremental material sits in that plan. And then, yes, look, this is a checkpoint on the way to the sustaining long-term part. So, Simon talked about Thunderbox getting stability, but we've still got five plus percent availability to get out of that. We've saturated it with maintenance labor. We'll get it up, get it stable, then we'll start pulling away some of those resources. So, there's some expensive ounces at the moment just because we're building and putting in contingency. But, if you look across the sector, I think we're still pretty healthy compared to the average of increases that you're starting to see. So I'm not saying we're the best of the worst bunch. I'm just saying it is what happens when the gold price goes up. It drags the costs up as well. So, yes midpoint is still sub 2000. And when you start looking at the margins to that, it's very strong. So hopefully, comprehensive answer to your comprehensive question, mate.
Matthew Frydman: No, I appreciate that. Thanks. Obviously multifaceted. So I appreciate the additional detail. Maybe just quickly, can I ask on the buyback, and I know Ryan touched on this in his remarks, but obviously you guys have been quite judicious in exercising that. You've obviously been constrained by blackout periods as well. Can you just remind us, I guess, how you think about when you choose to enter into the market in the buyback? Obviously, you're sort of recutting your view on the value of the business based on gold price movements, etcetera. But I mean, broadly, in a gold price environment, all else being equal, should we expect that you would re-enter into the buyback at similar levels if you weren't constrained by blackouts?
Ryan Gurner: Yes, Matt, look, it's opportunistic, mate. I mean, I sort of mentioned, we're sort of nearly 20 million units purchase at average price of under $9. So I guess we're not just saying, pin back these, just buy the rest of it. We're trying to be opportunistic. Obviously, there's volatility in our own price. So and there's also competing capital. So I think the best way to put it going forward is, it's a board decision on whether we extend the buyback, increase it or completely walk away from it from here. But that'll be wrapped up in the context of the next few years, the outlook and all these things. So I guess in a nutshell, we're opportunistic on it. And I think it's worked well so far.
Matthew Frydman: Thanks, Ryan. Thanks, Stuart.
Ryan Gurner: Thank you.
Operator: [Operator Instructions] The next question comes from Hugo Nicolaci with Goldman Sachs (NYSE:GS). Please go ahead.
Hugo Nicolaci: Hi, good morning to Stuart and team. Thanks for the update this morning. My first one, just sticking into Pogo a bit more, I was wondering if you brought any extra color around the strong performance in the quarter. How much of that do you think was running the mill hard into the major shot versus, maybe some optimizations you've been able to get out of the plant that maybe you can carry forward from here? And I'll come back with a second. Thanks.
Ryan Gurner: Yes, so look, to deliver that strong quarter, I guess everything was working really well. So the mining physicals were performing above the plan. The mill throughput performed above nameplate and very consistent throughout the quarter. Grade obviously was achieved throughout the quarter pretty consistently. So all of those things, controls and stability delivered that exceptional outcome. You can see our dollar millions costs are still elevated whilst we're transitioning fleet and also getting change management settled and stability into things. So there's still opportunity to be able to reduce overall input costs. But we're also working hard to, all the planning and preparation to manage this plan shutdown and refurb on the plant in this quarter. So a lot of the thinking went into that. So yes, I wouldn't shout out and say there's only one single thing. I think the whole team across each department absolutely nailed what they did. And they've done it before, just not for 90 days in a row. So I'd give the credit is we've always seen the highlight of a week, a month, two months. And then there'd be something either due to age of fleet or some other hand to mouth issue, which sort of eroded, impacted a week or two, or the mill motor failure, those sort of things, which when you zoom out, looks like a low average. We always saw the highlights of mine development, stoke grades, milled grades, mill throughput, run rates. So we're pleased to see it very consistently, which is obviously delivered, plus 360,000 ounce per annum run rate. That's what I think people need to look at it with this asset is we're trying to get it to a stable 300. It just delivered a 363 run rate in the quarter. So we're not asking it to do that.
Hugo Nicolaci: Ryan, thanks for that extra color. And then my second one is just, kind of to the FY’25 cost piece. Could you provide any extra clarity just around how much of the all-inclusive cost guidance might get impacted by inventory adjustments, through things maybe like shuts and then any extra color on the point you touched on around royalties increasing on some of the assets from things like native title and that sort of thing this year?
Stuart Tonkin: Yes. So some of those things around gold price impacts, it'd be less than 50 bucks an ounce. I'd put to that and I'm not going to ever disclose what they are, but between state and third party contributions, it'll go through in that sort of magnitude. But when you look at inventory adjustments, there's no smoke and mirrors or silly games on Pace or growth CapEx or whatever. You just look through to our cash flow and see where money's been spent. Ryan, do you want to just talk to the treatment of the five weeks of Pogo?
Ryan Gurner: I guess, yes. So I mean, Pogo will carry, yes, its cost will be higher because it will be carrying the cost while the mill shut. But I think on the inventory adjustments here, I think, over the year we will likely build more stockpile than, well, build more stockpile because we'll be mining more than we will. And really what that does is it does carry a little bit more cost, I guess you could say in ASX, because the operating costs, whilst they're backed out, the capital obviously that goes through each month and we spend on the business isn't. So when you're denominating, less gold sold, you've still got your capital spend there. So that's a bit of it. I think I'd just say on cost, just the macro landscape obviously is, we're still seeing cost increases, as Stuart mentioned. I think if you look at the midpoint to where we landed this year, it's 3% in all and sustaining cost land. So yes, there's still challenges out there. Yes, I guess we're hopeful that, as Stuart sort of alluded to, we're hopeful that as some other, unfortunately, sectors are winding off, that maybe there's some opportunities there for us. But we can't bank them until we see them occur.
Hugo Nicolaci: Thanks, Ryan. And just another one on cost is around the repriced contracts. I'm just confirming there's probably still rise and falls in those. So if cost across the sector do start to come off, you can benefit from that to a large extent?
Ryan Gurner: Yes, there's rise and fall mechanisms in them. I don't know if we've ever experienced a fall. I call them rise and rise. It could be ASX driven.
Stuart Tonkin: And Hugo, just on that, I mean, I think what I'd say is we are very fortunate that we have Northern South Mining Service in our business because we are not experiencing the same, I guess, cost increase that we are getting from our third party contractors.
Hugo Nicolaci: Yes, that's a great point.
Stuart Tonkin: And that's something at least that we're really wrapped with. And they're growing, I guess, they're growing the activity in our business. So it's really helpful there.
Ryan Gurner: Yes, so we do well over a billion, so we're nearly probably $1.5 billion of underground activity across our business. And over half of that is done by any house or the Star mining services. And they do stellar results like Simon highlighted, go 500 meters a month, the Jumbo, Wanda. We're getting a huge unit cost savings and, getting to all bodies quicker. We've got the two best contractors in the land in our Northern Star Mining Services in Byrnecut doing the primary work for us.
Hugo Nicolaci: Thanks guys.
Operator: The next question comes from Neil Watkinson with Kalgoorlie Miner. Please go ahead.
Neil Watkinson: Good morning, gentlemen here from Kalgoorlie. Thanks for your time. I just want to focus first on the FY’24 guidance where Kalgoorlie has hit, Pogo has hit, the overall has hit, but Yandal just down a bit. Was that mainly due to the fire at Jundee or were there a series of factors that just slightly constrained Yandal in the FY’24?
Stuart Tonkin: Yes, thanks Neil. We kind of recall being flooded in on an island there in Kalgoorlie during the first part of the year.
Neil Watkinson: Yes, it was a bit wet, yes.
Stuart Tonkin: Yes, so I don't know if you've got a tinny, but you would have needed it. All the gold fields were flooded for a large part of that year. So a lot of the haulage of open pit material to mills was substantially impacted across the gold sector. We utilized stockpiles that were close to our mills throughout that period, which were obviously at different grades to our primary plan, but we were able to keep going through that. That was obviously Kalgoorlie, but also Carosue, including the northern Yandal, mines of Jundee, pulling a really material down to a Thunderbox, etcetera, plus one that had been trucked up. So that was probably the primary impact. The secondary was this throughput, run rate of TBO, which has now been delivered at 6 million ton nameplate for quarter four. I'm very pleased with that. There was certainly impacts related to the gold room thermal event at Jundee, and the team did a fantastic job getting that back online. But in that process, we were able to utilize other infrastructure that we had to continue to produce gold from that carbon, loaded carbon. So yes, it certainly had impact, but the team got that contained and rectified in great order. So yes, northern Yandal had a lighter year on that overall guidance. That is the strength and beauty of having diversification of production centers, flex in the business plan, contingency of production sources that we do, ducks on the water. We're kicking pretty hard and we're able to restore and deliver into that guidance as a group. And it's great that sometimes those cylinders, all fly together. Sometimes they're firing different times. But, we've seen Pogo really shine in this quarter. And that's, that subsidized some of the setbacks that we got with the seasons here as well. So I think it's just pleasing to see the portfolio as all is contribution and no passengers across the group.
Neil Watkinson: What caused the fire?
Stuart Tonkin: Pardon?
Neil Watkinson: How did the fire start? What was the cause of it?
Simon Jessop: Yes, Neil Simon here. It was a scrubber unit on the back of the gold room. So you look at it, it's a very small piece of infrastructure and, the team did a great job containing that within about an hour and a half. But it was just that part of the plant, there's a lot of electrical cables, so it took some time to rectify.
Neil Watkinson: And just a second question on KCGM. Just gold sales down during the quarter. What's that expected? And also how confident are you that you can wind up to $650,000 across the next financial year? 650,000 ounces, sorry?
Simon Jessop: Yes, so I think your point is good on timing. If you're going to look at gold produced versus sold, there's obviously, more overproduction of gold there. So timing's everything. You've usually got a, two to three week lead time on a refractory plant to get gold through concentrates and then through ultrafine grinds back into gold rooms and gold bars, etcetera. So unless the grade goes through three or four weeks before the end of quarter, you're not seeing that in a gold bar sold at the back end. And that was some of the impacts we've had with power, etcetera, across the gold fields and time is everything. So there are events. What was the other question?
Neil Watkinson: You just, looks like KCGM is key - 650,000 -- for getting up to your guidance this financial year, winding up to 650,000 ounces. How confident are you feeling that you're going to be able to achieve that in the coming financial year?
Simon Jessop: I'm always confident, Neil. The, it likely used to be the plan that's there, we have clarity of the mine sequence. It's obviously driven by the material from the gold pike, the grade from the bottom of the pit, as well as growth out of Mount Charlotte and Fimiston Underground being brought into the feed stock. So the backstop is always the low-grade stockpile. If you go and look at the group, we have 3.5 million ounces in stockpile in and around our processing facilities. And the majority of that is sitting at KCGM. So we've got years and years and years ahead of security of supply, and therefore it's the rate at which we get that milled and produced. The 650,000 ounces is fundamentally, we've taken it from a 450 up to midpoint around 550, and then 650 is the last piece of getting into that grade. That is still only a checkpoint when the expanded mill turns on at 27 million tons per annum, gets ramped up 24 and a half up to 27 over two years, and that'll take KCGM to 900,000 ounces per annum. So that's the ultimate game. 650 is a checkpoint, and by FY’29 to be knocking out over 900,000 ounces per annum from KCGM, which includes the Open Pit contribution, a large undergrounds continuing in Mount Charlotte and new undergrounds at Fimiston, as well as the supplemented low-grade stockpile to deliver, that major, top five global gold mine.
Neil Watkinson: Excellent gentlemen. Thank you very much.
Simon Jessop: Thanks, Neil.
Operator: Your next question comes from Jarrod Lucas with ABC News. Please go ahead.
Jarrod Lucas: Good morning, guys. Looking forward to the Digger's site trip. I just wanted to expand on, you slightly mentioned just how the nickel environment's changing, the labor markets. Have you seen that with the closures we've had so far this year in nickel, has that reflected the labor markets yet, or are we yet to see that flow into the market?
Stuart Tonkin: Absolutely. We've seen, we've already seen our vacancy rate reduced, so the ability to get staff in. We've seen turnover reduce, because obviously there's not jobs to go to. And we expect to see again September, October, a flood of labor that's, available. It doesn't necessarily mean it relates through to the changes in costs or, labor reductions, unit rates, all those sorts of things, but it just takes away some of that pressure. It's sad to say, like, we're beneficiaries of that retraction, but it also was unique that all the cycles peaked at once when we had, with two years of border locked, that we had iron firing, lithium firing, nickel firing and gold firing, all at the same time with inability to get imported labor. And, the state was short 25,000 resource workers. That's why you got cost escalation. So this is the opposite side of that hill. Again, we've reached out to those proactively to say, be interested in our growth trajectory and gold's cleaner and greener and nicer place to work in the gold fields, as you know, Jarrod, than the Pilbara. So we're encouraging people to look at our business and multi-decade outlook and secure their residential homes, Kalgoorlie, and move there.
Jarrod Lucas: Thanks for that, Stuart. And I can attest it was an island for a while. And just one more, if it's alright, on the Jundee Renewable Project, if you could expand on how, if that's progressing, I see the first of the four wind turbines is up. And once that's operational, is that going to have a material impact on your cost base at Jundee with electricity, obviously?
Stuart Tonkin: Yes, so the overall mix of the solar wind battery will displace about 55% of the power inputs for Jundee. And ultimately, it's a similar or an improved unit cost, given we amortize the project and have a power agreement. But it's important, it'll be the solar's all up and running and connected, the wind tower, one of four will be, is done and by December, we'll have, you know, those four erected and commissioned and contributing. So yes, pretty pleased with what's the progress has been made. And ultimately, this is about our commitment of, 35% reduction by 2030. This is a major contributor to that. So we've already got the big solar field at Carosue. This is now the big solar in and the wind coming and we're obviously evaluating the broader Goldfields project that'll feed KCGM as well as Thunderbox.
Jarrod Lucas: Thanks, guys. Appreciate it. Look forward to seeing you at Diggers.
Stuart Tonkin: Thanks, Jarrod.
Operator: Thank you. There are no further questions at this time. I'll now hand it back to Mr. Tonkin for closing remarks.
Stuart Tonkin: Okay, thanks. Thanks all for joining us on the call and I appreciate, obviously it's a very busy morning. Look forward to updating you all as we continue to advance our profitable growth strategy. Thank you and good morning.
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