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

Good morning, everyone, and thank you for joining us on the call today. With me is Managing Director of De Grey, Glenn Jardine, and we are excited to announce Northern Star have entered into a binding Scheme Implementation Deed to acquire De Grey via an all-share transaction. Glenn and I will provide an overview of the transaction, including the benefits to all shareholders and the timeline for completion. And there will be plenty of time for Q&A after the presentation. We have released announcements on the ASX, and we'll be referring to the presentation slides on this call this morning. And I'll be starting on Slide 6. The transaction highlights, the combination of Northern Star and De Grey cements Northern Star's position as a global gold leader. The pro forma entity remains a simple business, 1 commodity, 2 low-risk jurisdictions and with the addition of De Grey's Hemi project, 4 high-quality production centers. This transaction has been the result of comprehensive due diligence by our respective teams and is an exciting opportunity for De Grey shareholders to join a global gold leader. Stepping through the transaction highlights, Hemi will be a globally significant large-scale and low-cost gold project in the Pilbara region of WA, where Northern Star has experience operating by our foundation asset, Paulsens. Hemi offers strong strategic fit, enhancing the quality and scale of Northern Star's portfolio. Hemi is estimated to deliver 530,000 ounces per annum once developed and increase our growth pathway to 2.5 million ounces per annum approximately. We can leverage our exploration, development and operational expertise and optimize the value of Hemi for all shareholders. And there is strong ESG alignment, including the renewable power options, traditional owner agreements and mining leases in place. The transaction delivers immediate and attractive premium to De Grey shareholders while also providing meaningful upside participation in the combined portfolio and immediate production exposure to the current gold price environment. An all-scrip transaction allows us to preserve our balance sheet to fund the development of both our KCGM expansion and Hemi and also capital management measures. Turning to Page 7, this transaction is unanimously recommended and supported by De Grey's directors and will be conducted via a friendly all-scrip scheme of arrangement. The exchange ratio of 0.119 implies consideration of $2.08 per share, based on Northern Star's last closing price, which delivers a significant and attractive 37% premium to De Grey shareholders based on the last closing price. Following completion, De Grey's shareholders will own 19.9% of the enlarged Northern Star. Transaction is targeted for completion around April or early May 2025. On Slide 8, Hemi is an excellent strategic fit for Northern Star that aligns with our strategy. It is genuinely unique transaction opportunity, creating significant value for all shareholders. We have maintained a disciplined approach to M&A, assessing against our 6 criteria outlined to the market several years ago, and we are pleased to confirm Hemi satisfies all of these criteria. A low-risk jurisdiction, the Pilbara is well supported by existing infrastructure and mining services. Hemi enhances overall portfolio with AISC forecast to be in the first half of the global cost curve. It has material scale, estimated at 530,000 ounces per annum production profile over an initial 12-year mine life with upside, particularly from underground potential. Continued geological upside, Hemi is a significant [ greenfields ] deposit in an emerging gold district. De Grey has strong ESG credentials in community and traditional owner engagement, with final environmental approvals expected to be received in 2025. And finally, on value, the transaction is accretive to Northern Star across a range of operating metrics. I'll now pass to Glenn for an overview of the project.

Thanks very much, Stu. It's a pleasure to be here with you this morning and everyone online and to have worked on this transaction with the Northern Star team. I'm proud to present this transaction, which the De Grey Board believes has a number of compelling benefits for its shareholders. Hemi is a large-scale, low-cost, globally significant gold project located in Western Australia, and De Grey has been operating in the Pilbara for several decades. However, Hemi was only discovered at the beginning of 2020, and we've worked very hard to derisk the project to this point in that short period of time. Most of you will be familiar with the project, but I'll just touch on a few highlights. First of all, with the resource, it's currently sitting at 13.6 million ounces of contained gold at 1.4 grams a tonne, and this is an increase of 16% since the DFS was released and an increase of around 1.25 million ounces per annum since the initial maiden resource. Reserves sit at 6 million ounces at 1.5 grams, and studies are underway for the conversion of the Eagle Cutback since the DFS, and also studies are underway looking at underground mining options. Hemi is strategically located in the Pilbara, 85 kilometers by road from Port Hedland and close to critical infrastructure and mining services. It's obviously in a world-class Tier 1 mining jurisdiction. As far as exploration is concerned, you can see on the figure there that the tenement package stretches for approximately 150 kilometers east-west and north-south for about 100 kilometers. Northern Star's expertise and balance sheet brings the potential to unlock the opportunities that you can see on the screen and which we presented previously, and Stuart will touch on that shortly. In terms of other matters, you'd be aware that we've had a traditional owner mining agreement in place since December 2022, and the mining lease over Hemi has been granted. Federal and state environmental approvals are pending, and work on this has been a significant focus for the De Grey team in recent months and going back for several years. Infill drilling programs are underway at Brolga, and we recently announced excellent results there from an infill drilling program, and we did that in October. We've also been ordering long lead equipment, and that's been presented in previous quarterly reports, and we'll be continuing to do that to reduce critical path schedules once [ FID ] is completed. And if we move to Slide 10, this is just touching on the outcomes of the DFS. And the DFS was completed in September 2023, and we used a range of high-quality independent consultants to do that, coordinated by the De Grey internal team. That study reinforced the potential scale of Hemi, with estimated annual production expected to position Hemi as a top 5 Australian gold producer and top 10 Tier 1 jurisdiction. In terms of annual production, we're looking at just over 550,000 ounces per annum on average over the first 5 years and 530,000 ounces per annum over the first 10. The DFS is based on a plant throughput of 10 million tonnes a year, and cost benefits accrue from that scale. The plant design also allows for potential upgrade to [ 15 ] million tonnes per annum. Hemi is a semi-refractory ore body, and De Grey has invested significant capital into studies and metallurgical test work to determine the optimal processing route. We ultimately chose a pressure oxidation circuit, which is utilized by many of the world's largest gold mines. Finally, the mining physicals are underpinned with 99% of reserves, sourced entirely from the Hemi deposits, with [ grade ] control drilling underway to derisk the project. I'll pass back to Stu now, who will provide an overview of the pro forma Northern Star business and Northern Star's plans for Hemi.

Thanks, Glenn. So on Page 11 now. Hemi will represent Northern Star's fourth production center in a Tier 1 low-risk jurisdiction and is complementary to our existing hubs. This is aligned with our [ long-stated ] target of having 3 to 5 Tier 1 production centers. We now have 3 in WA and 1 in Alaska. Turning to Page 12. Northern Star remains in the enviable position of only operating across genuine Tier 1 mining jurisdictions, and Hemi is located in the Pilbara 85 km from Port Hedland, as Glenn spoke about. And WA is a fantastic mining region with an established infrastructure network, with access to the deepest pool of highly skilled labor, contractors, suppliers and critical infrastructure, all of which help us in developing Hemi to its maximum potential. The Northern Star and De Grey teams have significant Pilbara operating experience, complementing the project. Turning to Page 13. Through our 2 million ounce per annum growth plan and world-class KCGM mill expansion project, we are already on track to reduce Northern Star's all-in sustaining costs to the first half of the global cost curve. Hemi's costs are expected to be in the range of KCGM post expansion, being complementary to the Northern Star portfolio. And importantly, the addition of Hemi is expected to further cement Northern Star's position in the bottom half of the global cost curve, enhancing the quality and profitability of the business overall. Now on Page 14, the acquisition supports Northern Star's strategy of strength from simplicity. There is no change to Northern Star's current growth trajectory, and we remain on track to produce 2 million ounces per annum in FY '26 and maintaining 1.8 million to 2.2 million ounces through FY '29. Therefore, the addition of Hemi enhances our growth pathway to approximately 2.5 million ounces per annum from FY '29. Post development, Hemi's forecast production of 530,000 ounces per annum will be equivalent to approximately 20% of Northern Star's FY '29 production. Underground and regional deposits provide opportunity for growth, with Northern Star well placed to use our expertise to unlock these opportunities for all shareholders. And I'll now pass back to Glenn to provide an overview of the exciting geological upside of Hemi.

Yes. Look, thanks very much, Stu. In terms of upside here, we've been talking about this for a while, and there's a number of elements to that. First of all, you're looking at extensions beneath Hemi itself, and that's at the top of Slide 15. So on the left-hand side of that slide, you've got the Eagle pit there from the DFS. And you can see that underneath the pit design there, there's obviously mineralization at good grades. And you can see a blue outline there, and that's the Eagle Cutback that was planned in November 2023. It's just a pitch optimization at the moment. It's not [ in the ] design, but that's an option we're looking at. And then, of course, we've mentioned we're looking at underground conceptual studies, and that's dealing with mineralization beneath that potential cutback. And the Eagle is just one option there. If you go to the projection on the right-hand top of that slide, you can see really good mineralized intersections beneath both Diucon and Eagle. And that part of the world is one of the areas that we've been focusing on with the underground conceptual study. As far as the Greater Hemi exploration area is concerned, which is in the bottom left-hand side there, we've had a lot of smoke around the main deposits. You can see that to the Southwest around places like Antwerp, which is extending to the west of Eagle, and then to the Northeast along the Diucon shear there leading up into Scooby. And in recent months, we've been drilling at Antwerp, we've been drilling along that Diucon thrust, and we've currently got an RC rig operating at Scooby. Furthermore, on a potential scale, we entered into a joint venture with Novo Resources on the tenements that are shown in orange there because the structures and geology that sit at Hemi and run to the Northeast also run the Southwest into Novo's ground. And we've had some recent encouragement on our own ground to the southwest of Hemi, and that encouragement has continued into the Novo ground as well. So look, we're really excited about the provincial-scale exploration opportunity here. We do know that we've got additional intrusions on that package. We are aware that there are Hemi-style intrusions on that package, and the company still has a lot of work to do following that up. So yes, very excited about the upside potential here. You can definitely see it and taste it.

Thanks, Glenn. Now on Slide 16. De Grey has laid strong ESG foundations at Hemi, which are aligned with Northern Star's industry-leading environmental and social responsibility values. We intend to build on De Grey's actions, and we'll apply our expertise and values at Hemi, including strong community and traditional owner engagement and responsible water management, progressing the state and federal environmental approvals, which we expect to receive next year; and developing Hemi with a high renewable power target. On Slide 17, we are very proud of our track record of shareholder returns and ensure that maximizing returns for shareholders is at the core of any investment decision. The acquisition of De Grey is expected to generate significant returns for all shareholders once it's in production. The transaction is accretive for Northern Star across a number of internal metrics, including free cash flow and cash earnings. And importantly, we do not expect this transaction to impact our dividend policy, and we'll maintain it at 20% to 30% of our cash earnings, which is a further benefit to De Grey shareholders. On Slide 19 (sic) [ 18 ], as we mentioned earlier, this is an all-scrip transaction, which preserves Northern Star's balance sheet to ensure Northern Star can fully [ fund ] KCGM expansion and Hemi development for the benefit of all shareholders. And this is consistent with our prudent approach to funding, ensuring we maintain our position of financial strength, including our target leverage ratios outlined at the lower part of the slide on the right. Following implementation, Northern Star will have a pro forma net cash and bullion of AUD 1.8 billion and AUD 1.5 billion in undrawn revolving facilities. Northern Star also has a strong track record of consistent cash flow generation and is delivering FY '24 operating cash flows of over $2 billion and growing. These liquidity sources provide the combined entity with the funding flexibility and capacity to pursue the KCGM expansion and Hemi development concurrently, all while pursuing further opportunities across the portfolio and maintaining superior shareholder returns. Turning to Page 19, the KCGM expansion and Hemi represent two of the world's most exciting gold development projects. I want to step you through the complementary development pathways at the current. KCGM there on the left, project is well advanced, with construction remaining on schedule for commissioning in FY '26 and '27. And on the right there, Hemi, under De Grey's leadership, the front-end engineering has achieved its 30% milestone and they've spent $169 million in long lead items that have been ordered. We see the federal environmental approval is pending and expected in the March quarter of 2025. Importantly, we expect the complementary timelines between KCGM and Hemi to drive development efficiencies. And the integration of De Grey's team into Northern Star will also ensure continued development momentum and the sharing of Hemi knowledge. On to Slide 20, the combined teams of Northern Star and De Grey have a unique skill set to develop Hemi to its full potential. We've summarized a few of the key strengths here, including the depth of our management, the proven operational excellence, large-scale project delivery, including the KCGM as it is the largest gold development project in Australia for over 10 years; and unique refractory experience, including two operations here in WA. There are efficiencies from KCGM and Hemi builds, as outlined just before. I'd like to now hand back to Glenn to take us through the benefits for De Grey shareholders.

Yes. Thanks very much, Stu. This transaction is expected to deliver a number of benefits for De Grey shareholders, and these include significant and attractive premium across all historical trading prices, ongoing participation in the future upside of Hemi and broader exploration portfolio through meaningful ownership in Northern Star. It derisks Hemi development through Northern Star's proven development, operating expertise and strong balance sheet, results in the ownership in a globally significant ASX-50 gold leader with enhanced market positioning, significant trading liquidity and a track record of paying consistent dividends, exposure to immediate gold production through Northern Star's portfolio of Tier 1 assets, generating stable and robust free cash flow. And finally, there's the potential for capital gain tax rollover relief for eligible De Grey shareholders. It's for all these reasons that the Grey Board is proud to announce that they have unanimously recommended De Grey shareholders vote in favor of the transaction, subject to the usual conditions that no superior proposal emerges and that the independent expert concludes and continues to conclude that the transaction is in the best interest of De Grey shareholders. Further details of these benefits are contained in the ASX announcement released today and will be outlined in the scheme booklet, which will be released to shareholders in due course. I'll now hand back to Stuart to outline the benefits for Northern Star shareholders and for concluding remarks.

Thanks, Glenn. So on Slide 22, in addition to being on strategy, this transaction delivers a number of benefits to Northern Star shareholders, which also flow to De Grey shareholders, given the all-scrip nature of the transaction. These benefits include the additional -- the addition of a low-cost, long-life, large-scale development gold project, delivering our fourth production center in a Tier 1 location. Hemi is the ideal fit for Northern Star's portfolio, a new pillar in our industry-leading growth pipeline. It enhances the quality and scale of our portfolio with increased profitable production. We are uniquely positioned to optimize the value of Hemi by leveraging our best-in-class operating and developing expertise. There is significant exploration potential, as Glenn outlined, at Hemi across its 150 km long tenure and in an emerging greenfields gold district. Our strong balance sheet will underwrite and optimize development while maintaining our investment-grade ratings. So that's the final part of the formal slides. I guess, I thank you again for listening to our presentation of this outstanding transaction opportunity, which is mutually beneficial for both companies, with Hemi being an excellent strategic fit for Northern Star and the transaction delivering strong benefits for both sets of shareholders. I would like to thank the Northern Star team for their extremely diligent work to make this transaction possible. And I'd also like to thank the De Grey team, who have equally worked together with us to achieve this positive outcome for all shareholders. And we recognize the excellent work that the De Grey team has completed to date in taking Hemi from an exploration discovery to a near shovel-ready mine and look forward to continuing working with the team as we bring Hemi into production. And lastly, we would like to thank the Northern Star shareholders as responsible stewards of your capital. We view a transaction like this as requiring an exceptionally high bar. The quality and scale of this asset is truly world-class, and Northern Star is uniquely positioned to maximize its potential, which is why we believe that this is a highly logical and accretive deal for our shareholders. And with that, I'd like to hand back to the moderator and open up to questions. Thank you.

[Operator Instructions] Your first question comes from Levi Spry with UBS.

Congratulations. Maybe just a question on the DD process. So could you talk us through the key items, I guess, from both your points of view and maybe as part of that, talk through where it's at in terms of the permitting process? Any early views on what Northern Star might do to optimize the project, going underground sooner, changing the flow sheet, for example? Maybe we can start there.

Thanks, Levi. Stu here. I'll look at anyone asking questions either, I guess, probably direct to Glenn or myself. But look, DD was very thorough and -- as you'd expect at this level and size transaction. Pretty much -- it's pretty bulletproof in the DFS and everything that's publicly disclosed. So I think it was really focused on looking at that value and -- rather than having to find extras, right? So I think importantly, the due diligence process is around proving up all the information that's there. And the De Grey team have done a fantastic job to get to that DFS state. So I think in that, there's nothing more to say than the information that's publicly out there and what we've reinforced. You can expect both teams have done amount of work to get to this point with the announcement.

Okay. And just -- so back on the permitting, can you just give us a little bit more detail on what's happened there? I guess, maybe, Glenn, in terms of slightly delayed, what stage that's at and confidence levels around that March quarter?

Yes. Thanks very much. So we've been updating the market quite frequently in the last 6 months on that matter. Just a little bit of history there for everybody, we made our initial submissions to the federal and state governments back in May and June 2023 for their assessment. Both entities provided levels of assessment that we were expecting when we put out the DFS. So we put out the DFS in September '23. And then after that, both departments came back with the levels of assessment we're expecting. That -- those levels of assessment allowed the regulators to ask further questions and require additional information. So as far as that's concerned, we put together what we call resubmission documents and the federal resubmission went in, in August. And we received final requests for further information on that earlier this month. So as far as the federal process is concerned, we're working through those additional request for information now. And we'll be having ongoing engagement with the federal regulator later this week, and then that will keep going in terms of our final submission into them. We'll be able to provide any updates on the March quarter federal approval either later [ this ] quarter or in the December quarterly report. As far as the state process is concerned, that's been quite interesting, in that, that process was running a little bit later than the federal process, with us not putting our resubmission in until earlier in November. However, the state regulator took the view that they were comfortable with that submission, to the extent that they decided to commence the public review process in November. And so we're now in a public review process with the state regulator, I think, which commenced on the 20th of November and which will complete around the same time in December. So they're running parallel processes on that. We said that we would come out in the December quarterly report with an update on the state process. But it's fair to say that paralleling of those two activities has been a positive for the company. So yes, look, we'll provide more updates in the December quarterly report. But yes, looks so far, so good on both of those fronts. As you know, there's a lot of work involved in these things. We do have very close contacts with the regulators and also with the government agencies and so forth that -- and their leaders. So there's a full-court press on all of that, and we'll update the market in due course.

And maybe just one more for Stuart, I guess, around the valuation sort of metrics through the Northern Star land. Can you talk to just some more of those -- some more detail there, I guess, but also just how much you may have been factoring in further optimization of the project, given Northern Star's strengths in certain activities like underground mining and execution?

Yes. Thanks, Levi. And look, there are certainly things that we consider that Northern Star can bring, not just reducing development risk and balance sheet strength, but operational long term. An asset like this, you're looking decades and you're looking at that underground potential. We don't necessarily have to bring that into our thinking to justify the announced deal. You really -- you can look at consensus numbers on De Grey, and you can understand what gold price assumptions people have into that as well. So I think it's -- yes, it's a very even and balanced valuation for both sides. And I think given the all-scrip nature of the deal, it gives De Grey shareholders an immediate premium out the gates into a cash flow-generating, dividend-paying company. And then it gives some significant upside exposure through [ 90.9% ] of the expanded business to enjoy Hemi and the broader Northern Star portfolio going into the future. So I think that's really what gets that right balance on valuations.

Your next question comes from Hayden Bairstow with Argonaut.

Well done on the deal. Stu, just a couple from me. Just on the [ met ], I mean, obviously, that's a key talking point around Hemi. You guys are fairly experienced in dealing with, I guess, similar sort of complex ore bodies. I mean just your thoughts around any of the [ met ] risk and whether you actually see upside or what's in the feasibility study from the learnings that you guys can bring to the table?

It's different circuits, pressure ox. Over 50% of Northern Star's gold production is from refractory sources anyhow. So we've got ultrafine grinds, roasters. We've got that experience. The mining is pretty boilerplate to what we do in scale, volume, technique. So the flow sheet, De Grey great team has done a significant amount of [ met ] test work that contributes to the design of that flow sheet and looked globally at other analog operations that also do it. So we're not doing anything crazy here. It's pretty standard and understood. And I think those things, maybe I'll let Glenn answer, but the actual flow sheet is well understood and proved up with good data. So I know there will be questions around looking for what's the upside, what's the improvement. It's a very solid, robust plan currently. So that's where the base case is.

Yes. Thanks, Stu. And Hayden, just a bit of background there. On the flow sheet, the flow sheet at Hemi hasn't changed in 4 years since we started metallurgical test work. So that's how robust it is. But obviously, we followed that up with hundreds of bench scale tests on everything you can think of through that flow sheet and also 2 pilot scale tests, one which was conducted at the world-renowned laboratories of Sherritt in Canada. All those tests have gone very well. We've used experts in the field who have worked on virtually every pressure oxidation circuit design that's ever been built and/or that have been involved in the commissioning and maintenance of those plants. So those people are embedded in our team. We've also got people in our team who've either worked on large-scale pressure oxidation circuits such as Pueblo Viejo. So that's our senior pressure oxidation metallurgist. Peter Holmes, who's currently Project Director, was responsible for the final construction and commissioning of the Pueblo Viejo project in the Dominican Republic, one of the largest pressure oxidation plants in the world. And our Project Director, Ivan Mullany, was also associated with overseeing that project, [ ran hatch ] for about a decade, who are obviously key experts in that area. And then on top of that, the team that's been involved in the design and detailed engineering now that are in-house, have visited Kittilä in Finland, Macraes in New Zealand, the Nevada operations of Barrick and Newmont. They've also been to Pueblo Viejo, and they've been in detailed discussions with the team at Newcrest at Lihir. So they've either visited those operations in-person or spoken with those people. And that's been about understanding the designs that people have put in place, whether there are any issues with those designs and what we can learn from that and then comparing those installations with the designs that we've got to make sure that we're not doing anything that might be a mistake from an initial construction and/or ongoing maintenance perspective. So yes, we've been tying those things down, technically and practically, over the last 2 years. So yes, to Stu's point, pressure oxidation is used in 19 or 20 of the largest gold projects in the world. It's not new technology. We're making sure we're learning. And we should be able to work together to make sure that, that process is successful. And as you're aware from the grade control drilling that we brought forward at Brolga, what we're now into is basically operational readiness. And that's around getting into the intrinsic detail on a monthly schedule to make sure that our mining, metallurgy processing in that critical commissioning and ramp-up period is nailed down. And that's why we brought Geoff Fenton into the team way ahead of getting to that point.

Okay. Great. And Stu, just on your comfort around the approvals, obviously, in the Pilbara, there's an increasing focus, particularly on water rights. I mean, obviously, the grade is probably a significant advantage to others on that front. Is that sort of where some of your comfort comes from, these approvals will actually get over the line on time and on the current schedule?

Look, we all understand it's a work in progress, and it's -- there's no shortcuts here. There's been great work to date and good engagement with regulators and all stakeholders. So very happy with what's been done there. And there's been, in our view, no showstopper red flag issues to be concerned about. But also just saying, there are risks, there are development risks. And it's on track for those processes. And this is the strength of being in a Tier 1 jurisdiction with pretty transparent, understood, I guess, processes. So we -- obviously, we are comfortable with where it's currently positioned.

If I could add to that, Hayden, the one of the comforting things for De Grey is clearly Northern Star's excellent track record in these matters around community engagement, which they've been doing for many years now, and track record in project development and operations. And one of the first things Stuart and I spoke about was the requirement and desire for continued engagement with traditional owners in the community in the Pilbara. So we're both committed to that going forward. And these things do have their challenges. We were obviously somewhat protected from a cash perspective prior to this transaction, in that the money that we raised in September last year and May this year provided sufficient interest to cover all of our fixed overheads and then some to deal with any delays that may occur in the approvals process. Obviously, with the increased balance sheet, that issue becomes less so in terms of making sure we get things right. So yes, I think that's the environment we're entering into, and I'm really comforted by Northern Star's approach to community engagement and engagement with traditional owners.

Your next question comes from Hugo Nicolaci with Goldman Sachs.

First one for me, more of a clarification and maybe one for Gold Road. But have you had any discussions with Gold Road to confirm their support of selling their stake into the transaction?

Yes. Look, it's Glenn here. Gold Road has been and remain a very supportive shareholder of De Grey. They supported all of our capital raising since they acquired [ DGI Gold ] share of the company. And they've also been very supportive of the Board and management throughout the process. But De Grey's relationship with Gold Road is arms-length and as a major shareholder. And Gold Road is aware of the transaction. And obviously, it will be up to them to consider their approach from here.

Got it. And then Stu, one for you just on the capital management piece, you highlighted you expect to continue the current policy. But if I look at the business, the pro forma cash balance in your own organic cash flow looks more than adequate to build Hemi that De Grey have lined up a number of debt funding sources. Do you expect to bring some of those across and utilize things like the [ NAF ] debt and other things to support ongoing elevated capital management or other opportunities? Or do you not expect to bring some of that debt across?

Good question. The best thing is we have now multiple lines. I mean, De Grey had Hemi fully funded with lots of those opportunities that are there. But we also have net cash, cash flow generation and other sources. So it will ultimately come down to the cost of capital. And we'll sit within our normal leverage ratios, will maintain our investment-grade ratings, and we'll utilize those things, whilst also maintaining our dividend policy. And we've modeled forward ability to continue to do that, so that all shareholders continue to enjoy those dividends and obviously, new shareholders that join get that sort of early exposure to that. So I think I went through $1.8 billion of net cash and $3 billion of liquidity. We are proud to say we can do lots of these things, which still continues to be build things, explore and add resource reserve growth, dividends and potential buybacks, as well as building cash and returning to shareholders. So that really comes back to the premise of why this is an all-scrip transaction, which allows that flexibility into the balance sheet to be able to fund the growth here without costing near-term returns to shareholders.

Are you able to do the buyback in the interim? Or does that change the scrip ratio, if you do?

No, the buyback, so you may appreciate lots of questions asked to us about the buyback, and you may now appreciate that we were in blackout. But ultimately, we outside of the blackout pretty much as of tomorrow. So yes, we're capable of utilizing that.

And then just one more if I can, just coming back to Levi's question on valuation. Have you factored in any tax synergies that you can bring across from the acquisition? And if so, would that be able to give a sense of what magnitude those are?

Look, we haven't calculated and relied on any of those, and I'd be careful to talk about them heavily, given the last merger that we talked about and they were focused on. It's a reality. There's great rollover relief for all shareholders, given this is scrip transaction and a 100% acquisition. But ultimately, you end up with that the uplift of the valuation on to the Northern Star the balance sheet and effectively get that tax shield in the same fashion. So there are real cash benefits, but there's a direct balance between improved cash earnings, but the dividend linked to that. So whether it's franked or unfranked, you end up with a balancing mechanism there. And any growth capital, remembering, does not affect our cash earnings calculation. So dividends aren't affected by any growth capital, including the development growth capital associated with Hemi.

Your next question comes from Kate McCutcheon with Citi.

Stu, at your last quarterly call, you made comments that the focus was on organic growth. Just wondering, what the catalyst was for executing now? Was it other strategic interest in the project, the recent resource growth, record gold price or something else you can talk to?

Thanks, Kate. And look, the -- that hasn't changed in Northern Star's portfolio. Everything is continuing as per our stated plans. It's not sort of this or that, it's as well as. And if anything, our confidence in the outlook of the progress of, say, the Fimiston mill expansion, the production coming from and cash flow is coming from Pogo, Thunderbox mill cranking, all these things and delivering into 2 million ounces next year gave us great confidence and outlook in growth, hence to the questions on our previous quarterly is around what's Northern Star going to do with all this cash. So our head has -- we've been watching for multiple years, the progress of this world-class deposit and proud of what that De Grey has team has done to develop it to this near shovel-ready operation and the DFS that's been published. So really, we see alignment and with our understanding of the -- working in our backyard, the associated timelines approvals fit need be with the activity that's already occurring inside North Star. So I often say things -- you buy things when they're for sale. But ultimately, we initiated this and engaged thoroughly and have got to this deal that we've announced today. So I think it's certainly not off strategy. It is very aligned with something we've been articulating to the market for multiple years on getting to that 3 to 5 assets, sort of rough around 2 million ounces and active portfolio management. So I think it's very aligned with what we've articulated.

Okay. And just on the 2 million ounces, you referred to Hemi in your deck is producing that [ 530,000 ounces ] per annum. The De Grey put out studies for a much larger operation. What do you assume in the offer in terms of upside and exploration? And when you say you'll update the market on CapEx and cost pre-FID, what are the key things for certainty on before releasing new numbers to the market?

Yes. So I think Glenn spoke about it in the opening remarks, for the first 5 years, it's over 550,000 ounces. You've got the slides there that show the development profile, but noting -- you've got KCGM by fiscal year, and then you've got Hemi year 1, year 2, year 3, et cetera. So it's around the timing of its commencement and the partial or full-year production coming into our portfolio. And essentially, what we've said is with Northern Star sitting around at 1.8 to 2.2, add on 500, you get to the sort of 2.5 million ounces. Remembering, if you add everything on full hammer, you're much higher than that. And if you see a look-through that Glenn's effectively got a plant that's capable of doing 15 million tonnes per annum, albeit built to 10, and effectively, the exploration upside, the underground opportunities; these are all things that will come in time. And all I'd ask investors and analysts today is you don't have to look much more than the [ bones ] and the DFS and the foundation quality of the asset. It's there, and these are opportunities for all shareholders to benefit in as they are in transactions like we did with Pogo, with KCGM and with other ones. We don't stand still. We get the base case operating, and then we continually look for opportunities to generate greater returns. So at the moment, we're not having to bake that in to this deal. There's a very, very solid shared scrip deal here that people get meaningful positions in and then the future gets brighter in the combined entity.

Okay. Got it. And then, sorry, I didn't catch the answer to the Gold Road question about their support?