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

Thanks very much, and good morning all, who have joined the call today for the KCGM Mill Expansion Presentation. It's an absolutely exciting day today for Northern Star shareholders, for all of Northern Star employees and contract partners and particularly for the city of Kalgoorlie Boulder community with such an important and strategic investment in that key asset that is KCGM, the Kalgoorlie Consolidated Gold Mine. This is absolutely a historic new chapter for this Tier 1 asset. And it's culminated from the efforts to consolidate it through the joint venture and in the merger with Saracen and now it's time to evaluate the opportunities. We're very pleased to be presenting today this investment case that continues to drive value for our shareholders as is our purpose. With me on the call today our Chief Technical Officer, Steven McClare, who will also present some slides, and our Chief Financial Officer, Ryan Gurner, who will also be available for Q&A at the end of the session in the room. On to Slide 4, we'll be referencing slides throughout the presentation and then give opportunity for Q&A at the end. But starting on Slide 4, just to remind us what the portfolio of the investment thesis is for Northern Star. We have a very simple and low-risk business of scale. So simply those 3 key production hubs in Kalgoorlie, Yandal and Pogo in two Tier 1 jurisdictions of Western Australia and Alaska and the U.S. with one simple commodity in gold. What we're talking about today inside that Kalgoorlie hub and Kalgoorlie is made up of obviously Kalgoorlie Consolidated Gold Mines, KCGM. But including the Carosue Dam and the Kalgoorlie operations that also contribute to that production center. Really, what we're talking about focusing on today is KCGM. And to remind us of the quality and scale today, it's presently 100% owned by Northern Star and consolidated. The last financial year, produced 489,000 ounces 30% of the group's production. And it is there today with a mineral resource of 28 million ounces, which is 50% of the company's resource base sitting on that large century of mining historic gold mile in Kalgoorlie as well as a 12 million-ounce ore reserve, which again, is 60% of that group reserve. The key enabler of this project we're talking about isn't just the investment case of the mill expansion. But it absolutely provides further optionality which we'll enhance and talk about. We'll talk about the key project today. But I wanted to remind us that this is an enabling project that is essentially unmatched across Australia in quality and scale. When we move to Slide 5. The investment decision essentially absolutely aligns with our purpose of generating superior financial returns. And it is through that strong cash flow generation that this asset is delivering and will continue to deliver in it's large production scale, low cost, lower half cost curve globally and driving profitable growth of that asset. We also enhance as we already operate in a responsible producer, it enhances on our ESG metrics of conserving water usage on an intensity basis. on our pathway for emissions reduction on community engagement, employment security for jobs as well as local investment economic benefit into the regions. All of these enhanced and are on purpose and on strategy with Northern Star. Slide 6 is the fundamentals of what it is. And I guess you saw options a year ago when we put out some scenarios around a pre-feasibility level, and we have spent that year working intensely to get to -- we're proud to present this case today that we've made an investment decision on -- but essentially, it improves and increases the throughput of the plant from 13 million tonnes to 27 million tonnes per annum and modernizes this 35-year-old plant, absolutely modernizes and brings that to be the key asset that enables the whole district. You'll see that it's a 3-year build time. So $1.5 billion of CapEx spread fairly evenly. You'll see that later in the pack of a 3 years of bill time, and we've started already. We've secured long lead items. We've ordered those things. We're starting the preworks, we're awarding contracts. We're working through that as of now. We then anticipate from getting to that 23 million tonnes, 24 million tonnes per annum on turn on, a ramp-up period for 2 years, sort of FY '29 to be at that full 27 million tonnes per annum. And ultimately, landed an ounce profile around 900,000 ounces per annum at an all-in sustaining cost of AUD 1,425 an ounce. When you look at the business as a whole and ability to fund this, it is important to understand that there is no interruption to our operational cash flow building throughout this period. We remain net cash throughout the period of this. So it's fully funded from existing cash flows, existing balance sheet. The liquidity we have available $2 billion presently. And an interesting stat in regard to this CapEx, and I understand people have views of what the CapEx was in years and should be. This is a very robust priced up, understood CapEx, and we essentially are getting more for more as that's growing over that evaluation period. But when you bring it back to an ounce basis, it's equivalent to, at today's gold price around, 580,000 ounces. Put that into relativity, that is only 2% of the resources of KCGM. So it's really important to understand that the mine itself, the deposit reinvesting back in it to enable the costs being driven down and the value being created over this asset, very self-funding, very long life and relative to it's scale and worth. People anchor to a dollar value in CapEx, understanding what it is in ounces, understanding what that is as a percentage of the overall resource we know today. And we're also sitting on 130 years of historic production in that Golden Mile. So we've got views that there's further conversion of growth through the exploration lens as we go forward. Slide 7. really talks a bit to the -- how financially compelling. This is a conservative assumption as far as gold price at AUD 2,600 an ounce. And running that through and testing the economics throughout the cycles. So post-tax IRR of 19% at AUD 2,600. So at spot price, it's significantly better than that. The payback period from turning that production on 4.6 years. So it very quickly delevers the risk around that investment and the returns start to build. And that speed of payback shows how it can build and generate free cash flow added to our balance sheet strength. Net cash, as I mentioned, throughout the same build period, which means it's fully funded. We don't threaten our dividend policy. That's maintained throughout the cash earnings are impacted by this growth capital. So the equation of our dividend policy is still strong. And we're still throughout that don't threaten any leveraging metrics so we can maintain our investment grade rating, which is, again, a testament to the quality of the business and maturity of our business today. And highlighting that this is an enabling project. This is Stage 1. It's very robust. The economics are very compelling and strong. But there is more work to do to see what this can do for the whole operation and mine and also into the region. On to Slide 8, you'll see the primary driver of the thesis of this investment is to drive down costs to get us deeper into that second quartile in the second half cost curve, which is part of our strategic purpose as well, which insulates us throughout the cycles. So you'll see that improvement from today's all-in sustaining costs and the efforts that get there. And in line with our strategic sort of goals of where we see a really healthy manageable, sustainable simple business, that 3 to 5 assets, the 1.8 million to 2.2 million ounces per annum. From a replenishment and extension perspective, sitting in that first half of the cost curve and then having that runway multi-decade mine life runway to make sensible long-term value creation decisions has been key to why we believe this is important to do and important to do now. When you look at the cost curve on Slide 9, to show the significance of this asset. Anyone living in that first quartile of costs globally typically have some other commodity, copper otherwise being a by-product credit, which also offsets the gold costs and get some lower in the cost curve or you have to travel to some fairly exotic places to achieve those higher grade mines that keep people in that lowest quartile. When you look at the gold bars on this chart, it is Gold mines globally that sit in Tier 1 jurisdictions, very low-risk jurisdictions. You can wake up in the morning, you still in your asset. It's important to show where KCGM is on that and where it's moving to on that, and highlighting out of those nearly 50 mines in those -- across that whole global cost curve. KCGM is being delivered towards very deep in that cost curve against those Tier 1 peers globally. So reminding people the size, scale, quality of KCGM is definitely important to do here. When you move into what the asset currently does on Slide 10. Where we're sitting today, we already have a growth investment phase happening at KCGM. And we're moving -- it presently sits around that top 20 global gold mine. Where we already are delivering and what is unchanged over the next 3 years is delivering this to that 650,000 ounces per annum. And that's all of the stripping to the southern part of the pit as well as [indiscernible] remediation getting and growing the underground contributions to the mine. That's already moving us to a top 10 global gold asset. This investment today takes us that next leg to bring this asset to a top 5 global gold mine. And it really puts it in rare company. The gold bars again there on that chart are assets that are in what's considered Tier 1 jurisdictions. So there are very few of those that exist in those jurisdictions. Given the JV [indiscernible] history of this asset, it wasn't well understood and it is definitely the thesis behind Northern Star and Saracen originally getting involved with the asset and then consolidating it together and now investing and enhancing it. I think it's been missed for a lot of period of time, the understanding of the quality and what essentially can be. And I think it's very important that we can articulate and show and demonstrate, and we'll be providing site visits in August as well to showcase this asset and the quality of it and the potential of it. Slide 11 gives you the short term, the medium term, the long term. So the short term is what we're doing presently right now, it's already in our organic growth investment. It's all been around the mine optimization. As I said, the new fleets delivered and commissioned. The volumes have been increased materially. We're remediating the east wall. We've got new drill drives drilling out Fimiston at depth to get an underground resource. We've got over 5 million ounces to 2 grams of inferred resource. Expanding the Mount Charlotte underground mine, which also contributed to production as well as the large stockpile that sits there, which has nearly 3 million ounces, 120 million tonnes that's sitting in there. So the current short term is way in the production growth is happening. What we're talking about today is that middle bar, the mill optimization, mill expansion, which is liberating value from realizing that, bringing it forward from that stockpile, lowering the cost base, expanding margin and then absolutely enhancing the overall production up, cost down, life extension to drive that value. But importantly, the third leg of that page is what comes next. So -- and this then becomes iterative. So if we look at the mine, the mill and then the regional exploration, conversion and uptick. And that's with things that exist in the exact footprint of KCGM and as well as the regional. So there's another 400,000 ounces that comes out of Kanowna, South Kalgoorlie, Carosue Dam and into our southern tenements that has opportunity to come back to this centralized 27 million tonne per annum plant. And you can bring material in from a large hoop, as you've seen us do historically have the simplified centralized processing facilities with multiple diversification of all sources that derisks that production profile and guidance delivery. This is on an absolute scale, another leg of scale which we're excited to continue work doing on that third pillar there on the page. So that's the future I look out for. Slide 12 shows the asset of KCGM. So reminding us it is the super pit, and it will be a super underground in the future. The reserve dark-shaded purple there is the reserve shapes and then the mineral resource shapes, the 28 million ounces sits in the light pink shading. But then that other faded area shows we definitely have drill holes and with mineralization down 2 kilometers below the super pit there. And along strike, you've got over 7 kilometers golden miles of mineralized corridor. So we're very excited about the potential of this district and that lower cost price back to our fundamental formula of minerals, maths and motivation. This is addressing the math settlement that all-in sustaining cost reduction, which then in turn, converts more of that mineral into economic ore. And obviously, we have the motivation of the team to deliver that to drive value. So we're very excited and reminding people of the scale, quality, simplicity of where this asset is and the upside that comes from it. Pleasingly, on Slide 13. This project absolutely enhances our already great work in the ESG -- through the ESG lens. So for -- particularly in the community, the large residential workforce that we have in Kalgoorlie extending and securing those jobs. Yes, there's more jobs to obviously build this expansion. But it's around those consistent long-term sustainable production jobs that hinge off the back of that and gives the City of Kalgoorlie-Boulder Community significant confidence that we have, and we see and future-proofing this asset through our cycles. The commitment on that local investment as far as procurement as well. So not only is it jobs and employment, but certainly for businesses that are in that community regionally within the state that actually complements continuity of supply in there. On border conservation, some of the great engineering Steve can touch on in additional large [indiscernible] thickeners and those sorts of things actually reduces significantly the portable border consumption on a per tonne basis for this project. So all of these have been incorporated. There's no trade-off in the investment or the outcome modernizing this plant, it has certainly been brought into the modern view of what thing you should do, how they should be as far as automation efficiency and conserving the scarce resources of inputs that go into these operations. And particularly on power, the view of absolutely aligning with our emissions reduction target of 35% by 2030. There are huge opportunities here given we're in the Kalgoorlie power system, and we're connected to the grid and we have behind the meter solutions to enhance renewable energy into this project in time. So those things are still to come and enhance the project further. So now I'd like to hand over to Steven McClare, our Chief Technical Officer. He will go through some of the further details of the content. And then will, after that, open up to questions and answers. Thank you. Welcome, Steven.

Kicking off on Slide 15. What we've designed here is mostly a modern and simple plant. It's large, but there's fewer items. The whole intent of doing that was to reduce the operating cost. In doing this work, we have basically taken $7 a ton out of the processing cost out of the Fimiston plant. So starting on the left of the diagram, we retain a primary crusher. We have a coarse ore stockpile. We have a SAG mill. The items in green are then showing up all the new components. The items in tan or light brown are the bits that we have repurposed as we bring the remote Gidji facility back to Fimiston and consolidate and remove trucking, et cetera, from that system. So it's all in one area, all on one site. The control system goes end-to-end. It's modern. It's set up for IOI, a set up for deep learning. It's future-ready plant. And wherever possible, we've used simplicity in design. So we actually put 3 engineering houses in parallel, independent designs, that was post feasibility. We then went down to two and took the best parts of those three designs, and we went through a detailed value engineering size. In that, we did things like used gravitify wherever possible. We have overhead cranes, we have rotable spears and we optimized the system from end to end to make it easy to operate and easier to maintain. And that's how we've removed costs as we go through that. Moving to Slide 16. The feed ore sources, the open pit, the underground and the stockpiled ore. It's quite often a lot of people don't have the quantum of stockpiled ore we have at KCGM. We actually have in our reserves last year, 119 million tonnes with 2.7 million ounces in that stockpile material. If we stopped mining today, we could process that material. It would take more than 9 years to actually get through that stockpile. As we are continuing to mine in the open pit and underground, that stockpile continues to build. So it becomes a key feed source and importantly, through that, there's only 5% of the mining costs incurred and getting that back to the mill. The sunk costs are already gone in that, and there's large cash margin in that stockpile. Moving on to Slide 17. One of the key aspects in the design was to keep the approval simple -- as simple as we possibly could. So we worked within a disturbed footprint of the existing plant, and we're not on or in the existing plant or adjacent to it. So as part of the work that we've commenced already, we are doing the enabling works this year to basically set ourselves up to be able to start to build in the new calendar year. To give you an example, we're shifting things like offices shutdown [indiscernible] and minor miscellaneous infrastructure and preparing the pad, so that we can commence in earnest, as I say, early in the new year. There's a long history of environmental approval history at KCGM and there's a very good team, environmental team and the operational team who understand the business and have been doing this type of work for decades. And we're looking very forward to pushing this through. For instance, in that red outline there, we have an approved plant to 23.5 million tonnes per annum. We will require a minor amendment to move to 27 that we will have to seek permission on. Also in there as we sustain cash flows throughout this period. So one of the very good things as we move on to Slide 18, and we get into this build phase as we maintain cash flow until we are ready. We don't basically earn cash and hope the plant starts. We run the existing plant until we are finished, until we are comfortable, and only then do we switch over during one of our routine shutdowns and connect the plant into the new facility. That's very important. And there's a spend profile you can see on there, the $1.5 billion with a 35%, 30%, 30%, 5%, that's spread. And you note then the cash flow continues through that period, and we remain net cash positive. So it's a 3-year build. As I say, we kick off early. It was in the second half of financial year '24. And then we have a 2-year ramp-up to our 27 million tonnes per annum. And now I'll hand you back to Stuart.

Thanks, Steve. And look, on final Slide 19 before we jump to Q&A, just reminding us the absolute purpose of this investment is to drive down operating costs. So unit cost per tonne, which is being achieved on the economies of scale of this efficient modern, larger scale plant, which in turn, then converts through to the rest of the business. So that's been the fundamental driver of value, and it just absolutely relates back through to our purpose of generating superior returns through strong cash flow generation. And we're doing it in a very known simple, safe, low-risk jurisdiction on a high-quality asset. So with that, I'd like to hand back to the moderator, and we'll start with phone questions, and then we'll do the online questions as well. Thank you very much.

[Operator Instructions] Your first question comes from Daniel Morgan from Baron Joey.

Hi, Stuart and Tim. Now that you have confirmed you're definitely doing the mill, are you now going to undertake a resource optimization process on the current resources and restate reserves with the $7 a ton lower milling cost. Has that been enacted? Or is that to come?

Thanks, Daniel. So we obviously do have resource reserves and just did the close of March. So look, that will come in turn next March. We'll give that consideration to where that is. But yes, at the moment, there's not a -- no, there's not a need or an effort to recut that before just the normal routine annual review of resource reserves. Reminding us, there's already 28 million ounces of resource and 12 million ounces of reserves. It doesn't affect that, but it's around -- this is still a 3-year build. So delivering into that cost base, it's important to understand where to roll that as opposed to, this is a change that's happening tomorrow.

And conceptually, you talk about 4 million to 8 million tonnes per annum of ore sources coming from underground. Can you just expand on that a little bit more where that might come from?

Yes. So Mount Charlotte today is delivering around at 2 million tonnes, and we're growing that to 4 million, 4.5 million tonnes over the next couple of years. And then ultimately, the Fimiston underground, which currently is not even existing mine plan will come into that. So as the grade of the open pit mine comes off and we've mined the Golden Pike in the pit floor. We'll start to substitute that ore feed, ore source and those ounces with Fimiston underground. So it still makes a lot of runway, drilling, proving up, which is, to your point earlier on the resource identification reserve conversion, then the mining method, the actual activity of mining that Fimiston genuinely need 3, 4, 5 years to bring that in. So this is -- that guidance of the 4 million to 8 million tonnes is over that sort of 10-plus years from turning this project on what you're going to be saying as a super pit, turning into a super underground and complementing with regional resources that come into it as well as drawing off the stockpile.

Okay. And just on Slide 18, you've given some throughput run rates that you expect -- can I get some clarity on those the total throughputs on average through the year? Or does it build to that, i.e., the 23 million tons you've outlined for FY '27. Is that running by the end of FY '27, or do you expect to mill 23 million tonnes in 2027?

Yes. So the intention is that is the full quantum for that financial year. So after the 3 years of building this, it turns on at 23 million tonnes per annum that delivers in FY '27. And as we building those volumes are as it puts out there. So '27 is 23 million tonnes, FY '28 is 25 million tonnes by FY '29, we're at full run rate of '27 consistently.

Your next question comes from Levi Spry from UBS.

Thanks for the call, Stu and Steve. Maybe just expanding a little bit on the feed sources. Thanks for the spelling that out with the underground. But can you just sort of tie that into, I guess, the capital number and exactly would that pie chart there, exactly what it is in here. So it sounds like more capital for the underground is a long way away, but what else needs to be done, I guess, for the mining over that runway to '29.

Levi, it's Steve here. The $1.5 billion is the project scope. And so it's basically the circle around the processing facility with the plant as it sits. There is associated open pit and underground costs. The financials you see here have incorporated those costs, and they are in that model that gives the 19% return and they have been based on conventional as is expansion, not step change, not new, not modern. And that's the next phase of our work.

Yes. Okay. And just on the, I guess, the OpEx, so the ASIC, is there anything else you can sort of call out there? I think originally, you might have talked to $200 an ounce, lower ASIC is one of the key value drivers for the investment. Can you just help me sort of triangulate a little bit of that. So the $7 comes off the $26-ish cost to process at the moment. Is there any other items you can call out there? And if still roughly right...

Yes. So there's a recovery improvement as well, obviously, gives you a bit more denominator. And we've looked at this from life of asset and a first 10 years perspective, and we've used fairly conservative numbers. So typically, the teams, when you're doing these visibility levels, you try to break it with this one, particularly, you can't break it. It's very compelling. It's around optimizing and what's the best kind of format. So yes, we still feel that, that is a conservative all-in sustaining cost understanding where today's costs are, we haven't drilled it and factored in a reduction of relief in unit costs. We genuinely won't stop working until we drive that lower. And that's looking at an average. So there will be periods that we will be well and truly below that and achieve more than that $200 an ounce reduction. And we're trying to drill it from today's costs. So yes, we feel like 250,000 ounces up and $250 an ounce down are kind of what you get for the extra CapEx showing it in this model. We just wanted to make sure we are being relatively conservative to ensure it's robust through the cycle.

Just last one, I'll squeeze one in. So you mentioned recovery. Is there anything you can call out there? What gives us a couple of percent or...

It's 1.2% difference.

Your next question comes from Matthew Frydman from MST Financial.

Sure. Stuart and team. Thanks for the call. My first question is on the cost confidence that you've outlined in terms of, I guess, your assessment of risks on the project. Clearly, we're still in an inflationary cost environment. You've talked through how you've been able to start ordering long lead items and you've also given that spend profile, which includes 35% of the spend in FY '24. So I mean, I guess, we could assume that at least that chunk of the spend is potentially lower risk of kind of straying or varying from the costing that you've outlined. But can I get a view on, I guess, your assessment of the risk of the, I guess, the remaining 2/3 of that spend? Is that longer-dated chunk higher risk? Has some of it already been locked in. So there's a lower likelihood of variance? Or I guess, how do you view your ability to derisk the spend profile over the coming years?

Yes. Thank you, Matthew. I'll answer that one. The importance in this, a lot of projects we've observed and looked at and we've tried to learn lessons from have gone at between pre-feasibility and feasibility. One of the most important things we wanted to do here was to ensure we could remove the operating cost, and we can be as confident on the scope as possible. Hence, that prolonged period, we have spent 18 months in further engineering post feasibility. The numbers you're seeing here today are not a study. They're not a theory. They're market-tested numbers that everything in the project that we've been able to price has been priced in market, and we are set at today's rate. Basically it says a $150 million set aside in escalation and contingency. That has been done on the risk on a time basis. We have built an escalation as well as escalation being on the contractor as we go through this area. So it's very important. The -- as you say, the early equipment is ordered. We are placing orders right now for things like [indiscernible] and enabling top works, we are getting very quickly into that and push to certainty as quickly as possible.

Thanks for that, Steve. I also just want to touch on the fact that obviously, the construction phase is overlapping pretty significantly with one of your peers and neighbors in the region. In terms of [indiscernible] mill expansion aspirations. How does that influence the view on the costs that you've accounted for, I guess, the timing that you've accounted for in terms of the construction phase, but also the timing of the ramp-up and the tie-in given that some of those activities maybe overlap it pretty significantly with your neighbor in the region.

Yes. Matt, I reckon, this is the best project in the state. So I reckon we'll get the people that are there to do it. And it's well understood, and we've got credible counter-parties in there. And obviously, we are a significant employer. So we've got contingency on allocation of resources to do it. So reminding us we employ 6,500 people across the business. Added labor during this period kind of hits sort of 4,450. Obviously, different skills or whatever is required. But this is less than 10% of the overall business activity we're currently already conducting so it's not a crazy material change in what we do today and manage already. And the fact that the 13 million tonne per annum plant runs throughout this period. We're not in that [indiscernible] drawing down. So ability to flex. And these are decisions throughout a 3-year period, do you pay more to get labor and secure it? Or do you take your time and not incur that cost because there's often a trade-off between cost and time. that other companies are forced into because they're single asset, single project, high risk on that regard on the execution phase.

So you've got the attraction of the biggest project in the region and bigger is better. So that's going to help you guys secure the necessary talent.

You're in the city with 30,000 people with mining background resources, you're in the city, and you are adjacent to it. You can see the operation happening [indiscernible]. We can fly that from 30 and 45 minutes. It's genuinely, it's easier than most, let's put it that way.

Got it. Maybe just finally, it's clearly a transformative project for KCGM, but you're going to end up with a pretty big surplus of milling infrastructure in the region. You've got the mill in the roaster. It can own a Bell, you've got Jubilee, potentially, you're looking for something to do with the excess infrastructure at Gidji. So how can you extract value from all of that plant and all of that infrastructure. What optionality does that unlock for you in the region? And what's the best way to extract value from that excess.

Yes, it's a great point because you want to utilize this lower cost per tonne mill for every tonne within the net of that asset. So in your head, you've got idle infrastructure. We can certainly repurpose, relocate some of that to liberate value with other projects. That's not factored into this economics. But put, for example, Jundee. We know we've got material up there that could utilize UFGs and float banks and all those sorts of things. So either relocating it there or bringing concentrates down, there's things that are there. But we've certainly got, Steve and his team have got this focus immediately, but we've got ultimate streams that within the 3-year runway when this thing turns on. We have ability to go to use that infrastructure further in the business and recycle some of it. So we absolutely appreciate and like and notice as well, those things. But it's important that those things that we continue to see in driving value for us today that's essentially funding the build that this asset is doing. So they are key to our strategy over the next 3 years.

Your next question comes from Al Harvey from JPMorgan.

Just on the region optimization longer term, I'm just kind of trying to work out how you'd go about stepping out potential? Is it really just conversions to reserve story? Like what kind of news flow do you think we can expect to really step out and flesh out that grade increase story?

Yes. So if you kind of go back to our March resource reserve statement, a couple of key highlights in that. There was already some known stuff around Fimiston and underground. Obviously you've got 5 million-ounce inferred resource in Fim. That Red Hill target just out of Canada Bell that wouldn't have necessarily come through that 2 million tonne per annum plant that could easily come through an expanded plant here and be at a better grade. So they're the type of things that we've drilled, we've found, we identified, scale size within the district. And also just back on the zoo like a Southern part of [indiscernible] operations, Hercules and those targets. We've got some great sweetener high-grade stuff as well. And we're all about margins. So you saw us stop and put South [indiscernible] care and maintenance and truck that over to KB. Ultimately, this mill should take every ton of ore that we own and we'll also look at things that sit in and around that area that cannot be liberated and highlighting it's a refractory plant with really good recovery. So there are stranded assets worth nothing to people that suddenly can be liberated by this. And we get asked to utilize that infrastructure, but we've got our mills full. The quality here is we own 100% of these things. And so we've got opportunity to start sequencing the grade. So you probably saw a big field of ore sources in Steve's slide. It's throughout the cycle, we're basically prioritizing that higher margin or -- and that's the future upside. So it's definitely there in the gold fields to be able to liberate that value.

Yes. And maybe just quickly thinking about hedging. I guess you guys are still comfortable with the policy you've got in place and any thoughts on potentially bringing forward any of that. Just trying to step us through that, it would be helpful.

Yes. Look, we're comfortable with our policy. And again, in this typical if we took on debt or took on construction CapEx, we would keep that hedge there. So I think that policy we work within and we're content with. So have to be continue to be managing that work within that hedge policy. Ryan?

I was going to say that, obviously, we've done the math on the [indiscernible] hedge price at the moment is our own book is much above that, plus, obviously, just looking out across the build phase, the prices for locking ounces out there is 3,000 plus so makes the project better from a dual perspective.

Your next question comes from David Radclyffe from Global Mining Research.

Look, I've also got a couple of questions around the ore sources to fill the expanded mill, where the details do look a bit light. It's been a while since we've seen an open pit mining plan. Does the expansion really change the old one that you put out? I thought it had open pit feed sort of by the end of the decade coming down to around that sort of 6 million tonnes from Fimiston as the other sources or reserves have been sort of used. Is that still reasonable?

Look, it is. And this really accelerates the stockpile use because that wasn't being depleted. Whilst we sat at 13 million tonnes per annum and in fact, it was probably getting added to. The other interesting element is with the lower cost base in the current pit shell, what typically would have been stockpiled as mineralized waste or subgrade can now be direct trucked and be economic ore and go straight to crushers. So this reduced rehandle cost, but there's also a strip ratio change in that current mining plan. So sticking with the existing -- we'll keep refreshing and updating market as we make changes to this. But once you've set a large open pit mining schedule, it doesn't dance around year-on-year. You've pretty much got that plan and committed and you're executing it. The underground flex is where we've probably increased which is, Mt. Charlotte, and that's on the basis of greater understanding and definition of the resource and the reserve. And then the performance that we're getting out of the assets from the team has been fantastic. So we've got -- we're encouraged by what we can increase that throughput to.

Okay. No, that makes sense. And then in terms of the underground, so Mt. Charlotte obviously the linchpin. How does it take to sort of get to that 4 million, 4.5 million tonne rate. And I assume then that means that really that higher rate of that sort of $8 million comes from underground is really sort of a next decade sort of target?

Yes. So the different lines. So [indiscernible] kilometers north of the super pit moment, Mount Charlotte, independent, underground only and expanding, and that will be the next sort of 3 years to double its throughput from 2 to 4.5 million tonnes per annum. It still gets trucked out to the super pit and then larger trucks take it to the mill. The additional [indiscernible] is not going to be Mt. Charlotte. It's the creation of a low-cost, large-scale underground mine at Fimiston. And so that's the work that Steve said we will do on cave style, many cave style, low-cost bulk mining methods that could take a subgrade at very [indiscernible] time, that's essentially how you create a plus 4 million tonne per annum underground from Fimiston.

Okay. And obviously, the reserve conversion for underground reserves is quite low. So in committing to the expansion and feeling comfortable about being able to deliver sort of 8 million tonne rate. was the assumption there that there's still quite a bit of upside to reserves at Mount Charlotte or does most of those future reserves for the underground material is that assumed to come from Fimiston?

Look, both and that whole corridor that eventually, as you said, long section view, they kind of all merged together because it's all the same continuous mineralized design, this kind of half kilometer wide that goes up that belt. So they -- there's [indiscernible] in the middle. There's a lot of those areas that just stitch together. So it depends on us, almost creating these independent production fronts that don't disturb the other activity, and we can run them in their own right. So, yes, the conversion is more around drill densities and the investment and the time basis of us being being on top of the drilling it out, converting it, we're less worried about having it as a book outs on reserve. We've got huge run -- century of history at this asset and understanding of what the ore body can do and the margins sort of ASI in time absolutely, you'll see us grow resource to the resource to reserve conversion and start to put original questions on the list was around CapEx associated with those undergrounds. But that's the skill set of the team and the studies will start.

Your next question comes from Mitch Ryan from Jefferies.

Sorry, I'm just not quite getting it. So relative to PFS from 2022, there's been a material increase in fresh ore for seeds, both from underground and open pit, you clearly talked to the underground. But then open pit, you just said that's going long term 6 million tonnes, but you've actually increased relative to the PFS, the range from an open pit and decreased range of ore feeds from a stockpile or I'm just trying to understand that if you can provide more clarity. So that -- previously, it was 6 million to 8 million tonnes from open pit and now it is 6 million to 12 million tonnes from open pit.

So it's not just pits like Red Hill, it could be regional pits that are in that ...

I thought that was part of Stage 2. Okay. So those sources will be included beyond there?

Yes, correct. So look, this is -- yes, it's a pretty simple picture here. Slide 16, but -- and maybe Diggers and Dealers will give the site visit and we'll give much greater granularity on this asset on where all these things come from. So our headlines today, this is the helicopter.

So for example, if you're bringing Red Hill then, what sort of CapEx is associated with those -- bringing those sorts of assets in that sits outside the 1.5?

Yes, they're embedded in this economics for this in the mine plan life asset plan. So I think that's way too much detail that we're getting into this right now. It is absolutely there, and we can provide either off this call or at the site visit those things, but the headline 900,000 ounces per annum over that period, 27 million tonnes is never from 1 source. It's from lots of sources at a low -- at average blended grades and swings in cycles throughout that, and the turning on and off of underground and/or pits. Ultimately, what's historically been done there and what's been done on a different scale at all in on assets, you build stockpiles next to your plants and then you blend your feeds to deliver out that outcome. So I guess, have confidence that there's absolutely substantiation behind all these numbers. That's in 1 year, in 1 year, it will be 12%, that's the range we've given, right?

Yes. Okay. And so does that then impact the production profiles from the other assets inside the Kalgoorlie hub? Can we cumulatively, does the Kalgoorlie hub production grow as a result of this? Or will -- or is it just transitioning between the other mills?

So in the short term, this does not -- absolutely does not include. So this is KCGM, the things that we term that today. It does not include Carosue Dam, [indiscernible or South Kalgoorlie [indiscernible] the current production profile secure. So, they are on the long -- so the Kalgoorlie hub that's growing to 1.1 million ounces, essentially grows to 1.3 million ounces. That's the understanding of whether the life of those assets. When you actually go reserves, by production on those assets, they don't have that 10-year runway. And so they're high cost short life, but they are funding and useful today. So us enhancing our project, investing in our longer life, lower margin -- sorry, lower-cost, higher-margin assets is on strategy, and you've seen this before close or sell those assets, and that's the view. And if that's not for our teams today that are running these things have purpose to move way to go towards these things. We've got a lot of runway. But ultimately, those mines need to all stand and not subsidized. They need to stand on their own. And currently, they're performing very well.

Your next question comes from Alex Barkley from RBC.

Just a question on that study input grade, 1.3 grams per tonne. I presume you've sort of just picked that because it's the current reserve. But everything outside the stockpiles would be in your reserve is higher than that. So do you see that as perhaps being conservative as you eventually convert a bit more of the resources. So that grade per annum could go up. And then I guess, conversely, if you're a little bit stockpile heavy early at 27 million tonnes per annum, you might be operating a little bit below that 900 rate. Is that a fair way to think about the production profile?

Look, so that's an average grade. And so it will swing up and down. But as you said, it retires back to that reserve grade. If you change -- if you recalculate your reserves, that obviously a lot of cost and lot of cut of grade, the average grade goes down, right? And you're always sustaining cost potentially goes up. That's the trade-off. That's the risk. That's what we've done on every single asset we've owned to date, drop mining cost ultimately take more of the lower grade material into economic cash generation built and growing reserves. And obviously, there's been cost down price up, reserves extended and cash flow filled. And that pit Pogo, it had a cutoff grade at 8.3 grams per tonne. That's our head grade today. right? So the cutoff grades below 4 grams a tonne. Now that's the formula, but the all-in sustaining cost is the trade-off of that thing. So you can't have one without the other. So we've got to understand it's around cash margin, and we manage to that and we understand that. And when we make structural changes to assumptions around cost base like this plant getting $7 a tonne out of it when that flows through economic ore and it becomes high margin. It ultimately can be at a lower grade because it's got a lot of cost base and that's just how cutoff great work. So I think people got an anchor that you can't just drop your costs, bring in more material, keep the grade average there, it just doesn't work for that.

Yes. Sure. That is quite helpful and sort of speaks to where some of that more material might come from. Just one other question, a follow-on from something earlier. I think you mentioned that 1.5 million CapEx could well include all the mining required to fill the expansion. So is that including any Fimiston underground that you'd need because that's going to be a fairly large operation or is that additional?

No. So for clarity, it does not include buying CapEx. It is purely this mill expansion, the 1.5 million, which is inclusive of $150 million of contingency is purely the construction of the expansion to take it from 13 million to 27 million tonnes. We obviously already have growth CapEx guidance out there around waste stripping in the southern part of the pit in Mt Charlotte growth and underground. There is no CapEx guidance out there on a Fimiston underground, but we don't have guidance out that far in the market. So we'll go back and refresh people with this. This is the first stage, which is this is how much this mill costs. And the beauty is, there is a stockpile there that can generate significant cash flow without mining anymore. So the opportunity is to mine more at a better grade and higher margins. So that's what we'll do next.

Your next question comes from Sean Smith from The West Australian.

Two questions. One, you mentioned that you understand the environmental processes or approvals that how given your incumbency there. But I just wonder, first of all, whether there's a more challenging environment around that these days here in WA. And secondly, I think you mentioned with the new plan that will have some IOI optionality, I just wonder if you could dig a bit deeper into that.

Yes. So I guess what we're saying is that we fully understand and operating within that the approvals permit there, and Steve spoke about the expanded throughput requiring another extension to that. So that's fine. Has the state generally got more difficult? I'd say yes. It doesn't apply to this asset. We've used that lens to understand and stay within a brownfields footprint to not compound or complicate this project. But I think for the state and new projects, it's a challenge and it needs to be considered what that does to cost on time or even if projects get up at all. So yes, that's key. The IOI stuff, we've modernized. This is a 35-year-old plant. So just getting modernized equipment oversight on 100% of the plant is important. And that's the blend of the efficiency of the labor in Australia, but we certainly see what we've applied that on our other plants in the group. We've had huge benefits of very consistent throughput across all our plants. So yes, we certainly either have invested in that with this build, but we also have ability to add on these things afterwards at pretty low cost.

So you're not only sort of Wizbang IOI capabilities. You're just talking about adding it in your production?

No, what we're talking about is when we've set up the control system. We've set it up so that in 3 years time, we can choose the latest and greatest IOI, et cetera, to assist our operators to control it, which is much simpler, much calmer, much more steady state and is to really start to optimize and put that through. So to be clear, we haven't put an IOI system in. We haven't used a former technology. We deliberately did not want to. We want to watch line and continue to put the best system at the time of commissioning if and when it's appropriate.

Your next question comes from Neil Watkinson from Kalgoorlie [indiscernible].

Gentlemen, quite a big day out here at Kalgoorlie. Stuart, I was interested in just getting some general comment about what this decision means for the city of Kalgoorlie Boulder and the [indiscernible] gold fields in the future of the city and region.

Thanks,Neil. And look, I think it's a fantastic investment and confidence from Northern Star Inc., Kalgoorlie Boulder . What it does do, it just gives absolute certainty around the permanency of Northern Star there of the asset that is the pillar of Kalgoorlie, which is the super pit and the future of it being an underground just gives everyone confidence to invest in the city, keep residential outlooks, whether it's businesses, homes, and can make decisions over a multi-decade outlook, which just underpins all of the future regional economic growth there. So yes, very pleased to be part of it. And it just enhances what has already been a fantastic history in that region gold fields. We're excited to be part of its next chapter.

Excellent, excellent. And in terms of what can the people of Kalgoorlie Boulder expect in terms of social investment in terms of supporting the local clubs, the local apps, institutions, the local charity and wealthy organizations, there's Northern Star have sort of a vision going forward for respect of life out here in Kalgoorlie Boulder.

Yes. And we absolutely, we do, and a large part of our workforce obviously live there and are part of that fabric. So already do lots. We published it in our sustainability report, and we'll continue to do that. And obviously, the city benefits of our presence there and on investment side, yes, absolutely, it enhances that give back into the communities.

Excellent. And just to clarify a couple of points. If I look at Slide 10, is that telling me that this project is going to make KCGM Australia's biggest gold producing asset or is it taking Boddington, is that what's going to be happening here? Is that the objective?

Where Boddington sits today, and where we're taking this asset? Absolutely. And globally, it will be top 4 global gold products on that frame today. Now those assets can all move and shuffle in that same period. But just to a full understanding of what this asset was. When it was owned 50-50 by Barrick and Newmont, it was less than 2% and 3% of their overall production. So it really was missed so to enhance and understand what this asset is going to be is really important for investors and people to understand.

And if I look at Slide 8, is that telling me that, basically, this project is extending the life of KCGM by 20 years? Is it all more than 20 years, in fact.

This gives us a reserve back profile with resource conversion, confidence greater than multi-decades for the group. And cost that manages us through the cycles, so yes.

Multi-decades is the key point here. This is what's happening. We've got that multi-decade confidence going forward out here in Kalgoorlie.

Absolutely.

Unfortunately, that does conclude our time for questions today. I'll now hand back to Mr. Tonkin for any closing remarks.

Thanks very much for everyone joining us on the call today. There are still a lot of questions in the queue that we'll absolutely follow up and take off-line. So please reach out to Sofie. And we'll make sure we give people access to get greater knowledge on what this is. But again, very excited about the announcement today. Very pleased to be on purpose on strategy delivering the superior returns, which is our purpose. This benefits significantly all of our stakeholders on the back of this key Tier 1 assets. So thanks very much. Have a good morning.