Northern Star Resources Limited (NST) Earnings Call Transcript & Summary

Okay. So Stuart, you mentioned either expand the mill or a new mill. Given that it is quite land constrained, they have actually been there many years ago. How far can you push the current mill configuration given the land constraints there? Can you take it to 2 million?

Inside the current [ shape ], we'd get that to 1.5 million tonnes with some light CapEx with current configuration without having to extend it, but we just got to big -- build your own real estate there. So it's really just about extending those waste pads to create real estate to do that. But it's the usual questions, it's no different to when I was looking at Bronzewing, is that the configuration that you do, just -- like whatever, $20 a tonne, does it use it just more tonnes at that? Or can you actually do something a lot more economic which much bigger scale, much simpler format? The difference is, we do acknowledge that the CapEx in Alaska because you're building it for the climate, is not as simple as just extending off into the desert in Western Australia, you've got to build it. You try to build it compact because you're closing it in and generally heating. So we just want to have a look at that view. So to Luke's point, you'll want a large-scale discovery there to support the CapEx associated with doing that. But at the moment, what we're seeing is there's huge potential there.

Okay. That's great. And then just a final question for me, more to Bill, just around the dividend policy. Can you maybe just talk about your comments at Denver, where you said that you're happy to top-up with a special dividend. I guess, that begs the question, would you be looking to review the underlying 6% of revenue dividend policy going forward given your comments even today that you expect to have significant free cash flow generation going forward?

Yes. It's a good question, like, it's something we will get in due course. But we think 6% at the moment is appropriate. But we did think that a special dividend was in order where our production growth is going, how capital-light it is, and as you said, the free cash flow that we are generating and will continue to expand. So it's a point I'll take a note, Sophie, but it is a discussion point we'll have in the future years.

Our next question is from Daniel Morgan from UBS.

So my first question is just at Pogo. So on Page 43 of the presentation, you gave us a very helpful overview of where the ore is going to come from in the mine over FY '21. And it does strike me that -- I mean, as you've highlighted, Leise zone is providing a lot of that ore. And I just wanted you to expand on your ore sources over time. It is coming from mostly the Leise zone. Is there a congestion problem in the short term, where there's a lot of equipment in that area and you don't have these 5 mining fronts fully running? Is that, at its core, one of the big issues in lifting the mine constraint up to put the constraint back on the plant?

Yes. Daniel, it's Luke. Yes, you've pretty well nailed it. So as we, like, need a big zone, so -- and it's sort of been the backbone for many years. So that's where the infrastructure is. That's where most of the drilling is. So you're going see that form the majority of it. As we expand those other areas, that will contribute more. So the congestion probably more -- as we push out [ drives ] and get more brought online, more levels of operational, more levels into production in the other areas, we'll see that come up. But we are -- like I said, the equipment we've got here will achieve 1.3 million tonnes relatively easily just with average productivity, once we take out sort of the peaks and troughs in the schedule, and that's getting better every day. And you will see the contribution from those other areas withstand. And as we drill more and get out more, like you'll see in the East Liese, it's got 0%. We've got a plan to get out there and do more drilling and expand out and bring that online in the coming years as well. So the optionality is huge. I know the picture looks small. But you've got to remember, only 4 million ounces come out of there. It's north of a 10 million-ounce system just within that footprint. So there's a hell of a lot of ounces in there. And as we get at them, we'll see that grow.

And staying on Pogo, I was wondering if you could also just talk or expand a bit more on the permitting process of the mill expansion. What did you need to do? What was that process like? How long does it take? And the reason for the question is, I just want to understand what the permitting regime is like for some of these future options. So if you do develop out to Goodpaster from underground, what the permitting is like on that or a new mill or -- I just want to understand what the permitting regime is because permitting in Alaska is getting a bit more pressed. It's a little bit more contentious. And I just want to understand your perspectives on, if those things can be a bottleneck?

Yes. Don't believe everything you hear in the press. It would probably be my first thing. That the short answer is they're not a bottleneck. So the permitting, we've got a plan of operations. They last 5 years then you renew them. The upgrades to the plant, 1.3, is more just in a central to the regulators to say, hey, this is what we're doing. It fits well within the footprint and the plan. The extension, if it goes out to Goodpaster, we'd consider it like less than a year to get that type of permitting in, possibly a bit longer but you're certainly not talking a huge switch on that. And then just as we go along and you change in your update with resource reserves, but we'll update our plan of operations to suit the operations. The -- by getting the relationship with regulators, as I mentioned, earlier is really good. So we'll keep them updated with what we're doing, and we've got their good support. So permitting for us, we've actually been really, really surprised about how efficient and how effective it is and how quick we can turn things around.

And Daniel, those regulators, they're on site. They come to site quite regularly. They come and check out the dry stack tails. They come and walk around the plant. They know the team. There's really not a lot of active mines in Alaska. So we kind of get the attention but it's to the benefit. So...

Very pro-development.

Yes. It's pro-development, but just -- they're already up to speed. There's not a lot of explaining to do when we do these modified work plans. So I think they're already up the curve a lot on that. The thing is if you go much further, if you go away from the immediate extension to the mine footprint, the main long lead item is gathering baseline data related to water and the wetlands, and those type of things around the district. So any areas where we anticipate we may be doing something is just going proactively, and doing that baseline readings and which basically supports any development going forward is the comparison against that in the future. So yes, any of those areas that we highlight, we'll basically be putting that work into those zones proactively.

Okay. Another question just on the mill expansion at Pogo. So that seems to be accelerating. I'm just wondering what the tie-in of that would look like? Is there significant downtime? Or is there a recovery impact expected? And also, I mean, I don't think the Pogo site has a lot of storage capacity. So if you do have downtime, is that an issue?

Yes, Daniel, it's Luke. There will be some. But just to highlight, we're still mine-constrained. So the mill has got -- like with the upgrade, the mill will have to spring capacity to cap that out. So the overall impact of the FY be negligible because we're doing it ahead of the game to be in preparation for those mining rates to come up. And you will see, what we are looking at increasing the underground storage on Slide 44, I think it is. We're looking at a 5,000-tonne underground storage location. So we can actually decouple that more and get a lot more underground storage for that as well. And we're also looking at, I think, more surface storage options, which are progressing really well. So we're sort of debottlenecking, decoupling a lot of that. So we don't get any sort of low flow on effective downtime throughout our [ ladders ] of activity. And this year is a really, really key to unlocking a lot of that. So as we come into FY '21, that decoupling, debottlenecking will be done, and we're setting up pretty well to continue that run rate up.

Okay. And last question, switching over to Yandal, which just that, again, that mill choice, those options that you're looking at. Just want to understand how you think of that regional exploration piece and how that fits into that decision? Because I would imagine that given you've had the assets for a lot longer in the north, your geological understanding out there is a lot better than the Echo assets and the southern tenements. And the southern opportunity would be potentially, I guess, less well understood. So how do you think about that piece in the discussion because a lot of their tenements are very quiet to the south of the Jundee mill?

Yes, it's Mike here. Yes, it's a fair question, but a lot of us have a lot of history down in that part of the world. There's many members of our team that have either been down at Bronzewing in previous lives or been around the district. So we've got a pretty strong working knowledge of the whole belt from going back a number of years. So we've already started pushing out beyond Julius and Orelia already. We've got a major drilling program going out at [indiscernible] the moment that we'll no doubt talk about in the not-too-distant future. So while I'd say it's probably not as well-known as what we do at Jundee, there's a lot of us with a long history down there. We know where the hotspots are. We're already starting to focus on those. And where we don't have a good knowledge, we're driving out the air core programs to build the full geological picture. So yes, we certainly hit the ground running really hard down there.

Our next question is from Tim McCormack from Canaccord.

Just to follow-on a little bit from that last question, Mike, speaking about the hotspots down in those Echo assets. If I was in, specifically, the underground, can you remind us where that shaft or the production profile was? Because in my vague memory, that was a good a mine as Jundee in the day? And is that a target that you're going to hit this year with the exploration done?

Yes, Tim, it's Stu here. So I'd tried that with Newmont back in early 2000s. Gold prices were about $500 an ounce, but we did pull down the discovery side as well as the central side, we did basically try and take as much as we could on retreat on that in the last kind of 2 years of that operation was really just that final harvest mode. And the president -- the owners posed that that Newmont experience then has actually put some tails on that down into the discovery pit. So access on that side of the mine is limited. When we look at all the drill results and to Mike's comments before, and the geology team, we've got really good experience in that Mount McClure/Bronzewing district. We probably put our eyes in to get a bit to simpler, easier ounces over at [ Major's ], Mount McClure area, and again, was closed under Newmont -- now was closed by lawyers, not geologists. So it's interesting to note that the -- there was a 7-gram underground there with [indiscernible] up and sample bags on the side of the drive and [indiscernible] flood. So we'll get to these things, but we see where it really extends to the north and south and at depth, it actually to the north, charges up through to that latest corridor. So the previous Echo plan was all open-pit focused. We're going to get into commercial production with that lens. But absolutely, we will be drilling. But I just don't think it will be the Bronzewing underground that's the simplest to go into. I think there's a lot more properly virgin underground areas or undergrounds off existing pits that we'll prioritize and be the quality ore in that. I think, back to one of Sophie's questions was, would you then do both as regards to mill expansions? That's when if you've got the Bronzewing plant there capable of that hard rock capacity that was built there, that's when you can potentially look at that because it's -- that stuff is not currently in the plan. So any underground high-grade feeds can either be trucked north, you can have open pit to the south or you can reverse that. So yes, they're all options. It's just really got to take this year and next year to do all that drill out.

Okay. Cool. And just on the underground, thinking about Mount Charlotte, I guess, it gets a little bit lost because we always get focused on this open pit. Where is that at? And how are you thinking about that in the medium term, I guess, beyond kind of 5 years?

Yes, good question. It's Bill. Look, I was up there last week from the week prior at Mount Charlotte and KCGM. The team there have done an extraordinary job. And you're right, it gets a little bit lost, and we're sort of trying to get away from Mount Charlotte just like KCGM on underground. It's sort of -- it has been, I guess, the quiet at Charlotte over the years, but it's definitely punching above its weight at the moment. So look, they're breaking 4 tonnage records every day at the moment. The production is going well and its contribution to the overall feed is quite high on a mined ounce basis. So look, we just grew the reserves there in the statement. I think, we inherited a 200,000 ounce reserve. We've mined it for a year, and we've added another. And we've got 500,000 current reserve there. And I think our resource is about 1.9 million ounces. So there's a lot of opportunity there. There's a lot of opportunity in virgin and new parts of the orebody. It's historically relied on a mixture of fresh ore bodies and remnant mining and sort of bringing down okay. But I think the reliance moving forward is really good opportunity in all these satellite deposits that we outlined in that statement, like Mount Ferrum and Kal East and Belgravia and Unit 6 and all these other ones. But don't out rule Mount Charlotte main ore bodies, the central, the reward ore bodies and the [indiscernible] ore bodies. They've been historically the life of mine of the -- basically, the 5.5 million ounces that come out of that. There's still really good opportunities at depth on those ore bodies. So we just got to get in there and do a bit of work, probably really have a decline to get access down there and then get some drills in and drill that out. So we're just formulating that plan at the moment. But it's pretty exciting what we see at Mount Charlotte. It's going to go for a lot longer than people think, and it is getting the care and attention, but it's super impressive. The productivities have gone from sort of sub 1 million tonne per annum run rate to 1.5 million, 1.7 million, and we've broken a monthly record in August of all tonnes mined. So yes, I can't compliment the team there enough of how they're responding. And if they're using equipment that's like -- and stuff that we would have been 6, 7, probably 10 years ago. So when we do insert some new equipment in that job, we expect to get a higher productivity and lower unit costs again.

Our next question is from Warren Edney from Baillieu. [Operator Instructions]

I've just got one question. On the call yesterday, you talked about only getting 62% of your diamond drilling done at Pogo. Did that impact your mine planning for FY '21, therefore the restriction narrows? Or is that more something that might -- was impacting FY '22?

It's more just it didn't push the [indiscernible] out, Warren. So we're always focused on the near-term and pushing out, protecting that. So we sort of -- we got the near-term right, but it didn't really push our reserves as much as we wanted, and we didn't really push the resource further and extend it. So the key thing to highlight there is we still got better than replacement. The work we're doing is obviously increasing quality. We saw the grams jump 7.5 to 8.0 grams per tonne average grade. They're really -- the point to highlight is it's still massively under-drilled. We're not drilling anywhere near to [indiscernible] we want to get to, and we're working on getting that done now. And once we do that, it will continue to light up.

Our next question is from James Robertson from AllianceBernstein.

Guys, can you just give us 2 quick ones on Pogo. On Page 56, you mentioned that you've got 3 years of permitted capacity for the tailings. What happens post that 3 years? And secondly, if you've got any quick thoughts on how you're dealing with COVID, whether you're sort of seeing ongoing improvements as you get more used to running with it over in -- at Pogo. Can you see run rates improve? Or are you about as good as you're going to get?

Yes. James, it's Luke. Good question. So the dry stack, we're just going through extensions now, and that's more just going up the valley. So we've got plenty of headroom that just continues up the valley. It's just sort of guiding sort of 10 million tonne increments. So we're just pushing that next one out. The early engagement we have with the regulators is just really a formality to extend that. So that will happen in time. And the COVID is -- the guys are doing a cracking job really working around it. We still sort of see -- probably the 2 things to note is when we don't have any positive cases, we're going really well. We probably see, it's about a 10% hit. And then when you see the cases you sort of that's where you get up to a 30% hit instantaneously when you wipe out large portions of your [indiscernible] close contacts. So we see as we get better and as we get the beltway pushing out to the entry rather than on site, we do see some option. But broadly, we probably see the biggest thing is just getting those more areas online that will make a bigger difference as we push through that as well. So it should get better as we go through the year, subject to not getting cases this [indiscernible] summer.

Our final question is from Kate McCutcheon from Citi.

Bill and team, keeping on Pogo, can you just remind me of what quarter you're expecting to get the mill up to that 1.3 million? Or I guess to put it another way, the [indiscernible] mill versus mine constraints? You kind of talked a bit before about how much of the mine constraints were kind of COVID related versus what's left to do with development and opening up areas there.

Yes. So it's mid-calendar year '21. So basically end of this financial year, that mill will be at the run rate of 1.3 million tonnes per annum, and that will be just before we need it, or in advance of when we need it from the mining volumes to meet that. So it's really all the construction works happening at the moment. We'll have the enclosure all locked up before winter. And then obviously the fit-out internally inside that through the collar, they call it, let's say, freezing month, and then it will be ready in the calendar year -- new calendar year. As far as volumes go, it's -- we're sort of at 80-odd percent, we sort of being at about 800,000, 900,000 tonnes per annum, and the mill could do 1 million tonnes at the moment. So to Luke's point it's getting that -- getting those up new stoping fronts developed and online on that 1,500 meters a month. And all signs show us that the team can do it. It's understood. They've got the equipment and the people there to achieve those productivities. And there's still just modest productivities comp to what we would expect back in Australia. So they've been able to demonstrate it. But look, over 10% of our team there has, at some point, been positive COVID. And the growth contact is materially impacted. I think people need to really just reflect on what they've achieved there with that realized risk. So I think they've done an absolutely outstanding job in Alaska to manage through since March, basically manage through that disruption and just get better and better and better at mitigating that risk and keep building it out. And all this to sell nearly 23,000 ounces is an absolutely stunning signpost for where Pogo can go in the future. So we're pretty pleased with where it's at.

Yes. And so just to clarify around that mid-CY '21, is that when you're expecting to get 1.3 million out of the mine as well to be able to fill the mill?

No, it's not. It's the following year, where the 1.3 million gives us the 1.3 million at -- the north-of-8-grams gives us around 1,000 ounces. So our guidance setting up over those 2 years, this year is guided [ 180 million to 220 million ], next year's guided [ 250 million to 300 million ]. And then the FY '23 is guidance at the midpoint of [ 300 million ] maintained going forward.

Okay. So FY '23 is when you're kind of no longer mine-constrained.

Correct. And look, there is that CapEx associated with upgrading that plant to 1.5 million tonnes per annum. So balancing out where our mine plan and team and fleet is at. There's some light CapEx. I think we put USD 17 million, 1-7, USD 17 million against some expansion to take it up to 1.5 million. But at this stage, it's -- the 1.3 million is sufficient to get what we need in our guidance.

Yes. Okay, great. And then just jumping to the super pit for my final question. Can you talk through the next steps at Fimiston underground there? I'm interested in how you're thinking about the interactions with the pit. And I guess, then potential timing for more underground feed; and appreciating it's kind of really at resource stage, do you have a view in your head around what kind of rates you could do there?

Yes. Look, interactions -- so we budgeted $10 million this financial year, Kate, to do some exploration, sort of declines and get some drill locations. So really that doesn't interact with the pit or change us here at all. We're very fortunate to the north with [indiscernible] the decline asset that all the Mount Charlotte ore comes out of is [indiscernible] into the north end of the pit. So while we can always come off that area and a couple of areas we're looking at. So no interruption with the pit at all. But as you said, at the moment, we've just got an inferred resource on Fimiston South underground. So there's still a lot of work to do to define that, that size and scale of the prize for a potential underground. We haven't put a date when we're seeing that coming. We've got a lot of work to define that resource to get it into reserve. We're very fortunate. We've got a very, very long visibility on the large-scale open pit. We've got 9.7 million ounces in reserve; the bulk of that is in the open pit. So I think -- so it's going to be a large-scale piece. It doesn't have to rely on that underground coming. Would we like it in early? Of course, we would be [indiscernible] grade-feed, despite our current mill feed. But we do have time to probably define that and just to see what flows to that pricing. But that will take years to outline.

Yes. Okay. So I guess I was just more thinking in terms of just syncing underground [indiscernible] interactions with the pit, because that might kind of impact the timing and when you could get higher grade-feed.

No. We're very happy we've got great spot to come off in day time.

There are no further questions, so I'd like to hand back for any closing comments.

Yes. Thanks. Thanks all for joining us today, and hope you got a lot out of our Q&A session. There's a lot of information in that presentation. So we expect some follow-up in due course. But look forward to the Diggers and Dealers [indiscernible] in Southwest Australia and can get there, and we'll obviously have a site that is still [indiscernible] and hopefully get invitations to all of you very shortly. Thank you very much.

This now concludes today's call. Thank you all for joining. You may now disconnect your lines.