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

Thank you for standing by, and welcome to the Northern Star June 2026 Quarterly Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director and CEO. Please go ahead.

Good morning, and thank you for joining us on the call today. With me on the call is Chief Financial Officer, Ryan Gurner; Chief Technical Officer, Steven McClare; and acting Chief Operating Officer, Jim Coxon, whilst Simon Jessop is out of country. I'd like to begin with the most significant highlights for the company in the recent period. The Fimiston expansion project is complete. Commissioning is underway, with planned tie-in and ramp-up to follow in the coming months. I can't understate how important this milestone is to the business at this time. And I'd like to acknowledge and thank our people and contracting partners who have completed this project on time and to a very high quality over the past 3 years. The KCGM is the cornerstone asset of Northern Star now set with production increasing, capital spend decreasing, coupled with a reducing hedge book, all point to significant cash generation in the near term, driving increased shareholder returns. During the June quarter, we sold 433,000 ounces of gold at an all-in sustaining cost of AUD 2,651 an ounce, contributing to annual gold sales of 1.543 million ounces at an all-in sustaining cost of AUD 2,698 an ounce. All three production centers generated positive net mine cash flow, delivering more than AUD 1.1 billion for the year. Pleasingly, operational improvements were evident across the portfolio, with record mining rates at KCGM, stronger milling performance at Jundee, record quarterly sales at Thunderbox and another outstanding cash flow performance from Pogo. At KCGM, we achieved record mining volumes with open pit material movement of 88 million tonnes per annum and underground mining of 3.2 million tonnes per annum, both demonstrating the caliber of our owner teams and the intensity of activity growing this premium asset. We are looking forward to showcasing this operation this Sunday prior to the Diggers & Dealers Conference next week. The June quarter marked an important milestone for Northern Star with KCGM mill expansion completed and entering commissioning on schedule. This represents the transition from project delivery to operations and is a defining step in positioning this business for the next phase of growth. This is a tremendous achievement by our project team over the last 3 years. Importantly, our operations team have also safely maintained the aged plant to deliver 10.3 million tonnes in FY '26, and we'll be as pleased as anyone to migrate from this aged and unreliable infrastructure to the new processing facility established for future decades of efficient gold production. Reaching the commissioning phase of Stage 1 at KCGM is a significant achievement and Stage 2 remains on track for completion in the first half of FY '27, creating an integrated processing hub with improved gold recovery and a simpler and cheaper operating model there. At the remaining Kalgoorlie operations, Carosue Dam transitions to underground mining and processing of stockpiles as open pit activity concludes at Wallbrook. The South Kalgoorlie and Kanowna Belle operations consistently deliver and continue to contribute strong cash flow to the group. Yandal delivered stronger production at both Jundee and Thunderbox in the quarter, with Jundee now operating at a more optimized mining schedule focused on near-term cash flow generation. And I credit both Northern Star team and Barminco on the pace at which they have implemented these changes for the benefit of the operation. At TBO, improved milling throughput at a rate of 6.5 million tonnes per annum and grade uplift from Orelia and Bannockburn delivered 67,000 ounces of gold sold. Pogo operation closed out the year very strong, with June quarter sales of 82,000 ounces, generating mine operating cash flow of USD 177 million in the quarter. Our Alaskan team continues to improve the consistency and quality of this operation and now with decades of life ahead, Pogo offers significant opportunities to self-fund growth. At Hemi, the project also continues to progress as planned with managed aquifer recharge trials commencing during the September quarter and final investment decision remaining targeted for late FY '27. During the quarter, the company released its annual mineral resource and ore reserve update as of 31st of March. We delivered 26% growth in resources to 88.9 million ounces at an impressive discovery cost of AUD 23 an ounce, and delivered a 27% increase in reserves to 28.4 million ounces, underpinning significant mine life. Importantly, our most significant discovery growth is centered on the large-scale, low-cost assets of KCGM, Pogo and Hemi. As we've outlined this morning, we intend to provide FY '27 group guidance together with our FY '26 financial results in August. The KCGM for commissioning during August will provide meaningful operating data from the expanded processing plant. That information will allow us to better assess throughput recovery and plant availability, which will be incorporated into establishing FY '27 guidance. Overall, we're entering FY '27 from a position of strength. The portfolio continues to generate strong cash flow. We've successfully transitioned KCGM expansion project into commissioning and we're focused on delivering a safe and disciplined ramp-up of what will become cornerstone processing hub within our portfolio. I'd like to thank our 10,000 employees and contractors who, despite the operational challenges faced in FY '26, delivered sector-leading safety performance and further underpin the quality platform that Northern Star is today. You are the true contributors to value creation. Keep your sense of humor, and thanks very much. I'll now hand over to Ryan.

Thanks, Stu. Good morning, everyone. As demonstrated in today's results, Northern Star remains in a strong financial position as we enter FY '27. Our portfolio continues to generate significant cash flow while we invest in the next phase of growth across the business. At 30 June, the company held cash and bullion of AUD 1.2 billion. And importantly, we achieved this while continuing to invest in our growth projects and returning capital to shareholders through our on-market share buyback program, with AUD 129 million of shares purchased during the quarter. In addition, we had AUD 1.75 billion of undrawn corporate facilities available at year-end, providing liquidity and flexibility to support our growth objectives. Our operating assets continue to perform strongly from a cash generation perspective. For FY '26, all three production centers generated positive net mine cash flow, contributing approximately AUD 1.2 billion for the year. As Stu mentioned, Pogo again delivered an outstanding result, generating a record annual net mine cash flow of AUD 609 million, demonstrating the value created through the transformation of the asset over the recent years. The company generated significant cash earnings also during FY '26, and we expect the final figure to be in the range of AUD 2.86 billion to AUD 2.9 billion. Turning now to the June quarterly cash movements shown on Figure 8. The business generated underlying free cash flow of AUD 206 million during the quarter, supported by improved operational performance across the portfolio. As Stu discussed earlier, the key milestone during the quarter was the commencement of the commissioning of Stage 1 at KCGM mill expansion project. Stage 1 of the project entered commissioning on schedule, marking a significant achievement after more than 3 years of engineering construction and execution. During FY '26, capital expenditure on the project totaled AUD 713 million, while operational readiness expenditure totaled AUD 322 million as we prepare the operation for expanded throughput rates. As we move into FY '27, our focus is firmly on safe, disciplined commissioning and ramp-up. The existing processing plant will continue operating through July and August with tie-in to the expanded processing facility scheduled for September. Commissioning will follow a measured approach designed to ensure safe, reliable and consistent operating performance before progressively ramping up throughput. While our immediate priority is the successful commissioning and ramp-up of KCGM, we continue to progress the next phase of growth at Hemi, where we are focused on advancing permitting, engineering and project development activities. During FY '26, expenditure totaled AUD 104 million, with final investment decision anticipated late in FY '27. The project remains an important component of Northern Star's long-term growth strategy. Exploration also remained a priority with FY '26 expenditure of AUD 217 million, supporting resource growth, as Stu mentioned, and mine life extensions across the portfolio. More broadly, we enter FY '27 with a strong balance sheet, a portfolio generating significant cash flow and a clear pathway to future growth through both KCGM and Hemi. Thank you. I'll hand back now to Harmony for Q&A.

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

Stu, huge milestone with the plant commissioning. I guess my question is just how does the following few months sort of track conceptually. So gold production, it sounds like it's from the old plant for July, August, then you tie in the new plant. I presume that's going to be a minimal interruption period or planned to be, and then you would ramp up using low-grade ores through the first few months to make sure gold doesn't end up in the tailings dam. Is that a fair summation of what you'd expect in the months ahead?

Yes. Thanks, Dan. I'll just let Steve McClare give you a picture of that.

Yes. Thanks, Daniel. Where we're at, at the moment, is basically we're ore commissioning from the primary crusher through to the coarse ore stockpile. So we have that coarse ore stockpile with crushed rock on it, and we've been very pleased with the front end of the plant. We're in wet commissioning for the remainder of the plant, from the mills right through the tailings thickener is in wet commissioning. And then the tails line post that has already been commissioned and is in full operation. So as we progress, we will work through that wet commissioning. We switch to ore commissioning early next month when we are comfortable. And once we are ore commissioning of the low-grade material, we will start to produce gold from that area.

Okay. And whilst prior to Gidji coming on, you're selling gold concentrate, or it will be a larger proportion of the sales. Can you just explain to us what impact that has, if anything, on the financials? Obviously, you have lower realized revenue. Is that significant or not?

Dan, it's Ryan. Good question. No. So as you would have seen, so we've been selling concentrate material this financial year. So I think in the end, it was totaling about 75,000 ounces in the financial year and about 300 in this quarter. So those sales will continue. So we've built out that capacity in our business to do that. So the intention is additional concentrate material once the plant -- the new circuit is running well, that additional concentrate material, the excess, if you like, will be sold similar to how we're doing it now. Obviously, equally, concentrate will still be going to Gidji and we'll still be pouring gold bar. So it's more of the same, really. It's just that we'll have more concentrate. Between the time that Gidji comes back to the footprint it's in, we will be selling some additional concentrate on the market. That's right. In terms of -- sorry, just in terms of your question on revenue and payability, payability is excellent, I'll say. So we don't anticipate any derating in revenue or performance on cash flows because we're selling concentrate. They're good commercial terms. So there's no derate of revenue, if you like, on that front.

And maybe just a conceptual question on the mines that feed expanded capacity at the Super Pit mill. Is there anything you'd call out on how productivity and ramp-up is going? Is there any frustrations, any unforeseen -- any issues accessing Golden Pike?

No, not at all, Dan. You can see by the volumes of the year, 88 million tonne rate for the year of the pit and 3 million, 3.2 million for the underground growth. So those are ramping very well. I'll remind us that the mill expansion was primarily based on -- the incremental throughput was based on that 140 million tonne stockpile that's there. So primary ore will be half of the feed of the new plant from pits and underground, and then the remaining part of the throughput will come from that low-grade stockpile to get that ounce profile. So yes, very pleased with the ramp-ups, very pleased with the commencement of our Northern Star surface mining team with the new excavator, another one coming in November. The productivities they're getting out of that fleet and the Ivanhoe cutback is outstanding. And again, great to demonstrate the caliber of the team and the efficiency and productivity they're getting at Super Pit. We'll showcase some of that on Sunday. So a lot of the team will see that firsthand.

Your next question comes from Kate McCutcheon from Bank of America.

Well done on the commissioning. I just wanted to check, you've noted no medium-term guidance this calendar year for KCGM. Does this mean that we shouldn't rely on the previous targets that were kind of given in August last year? And how do we think about what the mine plan assumes in terms of [indiscernible] through the mill this coming FY? I appreciate that you just gave us some comments around the feed grade, but any information would be great.

Thanks, Kate. Look, it's important to wait for that complete picture. And I think we've explained we will provide that with the full year accounts in August. So I'd say just watch this space and you'll be provided all of those details you require in the next few weeks. But yes, further to Sunday and next week's presentation will be focused as well on KCGM. That will be important messages from the group on how the ramp up, how we see it and where all the feeds and the grades and all coming from to deliver that ounce profile over the coming years.

Okay. So 1-year outlook in August, and then medium term a bit later?

Yes. We've spoken in the quarterly to reiterate that, that medium-term guidance won't be this calendar year. So expect that broader outlook will be ready when we've got that broader picture and support with the Board's outlook over a multi-year near-term guidance for the group.

Okay. And then we haven't spoken about Hemi since the resource update that we had in May. We had that grade go from 1.5 to 1.2, and it looks like you've changed the kriging methodology there plus the dilution assumptions. I get that there's more tonnes, but you've got less contained gold, so net-net, less production, I guess, average. Just how do we think about that going forward and upside opportunities?

Yes. Thanks, Kate. Look, it's one piece of the story, and it's -- resource remained sound with good rigor and review of what that resource was going to be. So same sort of scale and quality. We absolutely put some stronger mining factors on the reserve. But fundamentally, that's not the final plan either. So it's a consideration of a published reserve to bring it on to Northern Star's books. But ultimately, we need the full feasibility inputs into this asset of everything, including the flow sheet, obviously, CapEx, OpEx and the ounce profile as we ramp that up. So work is underway with the team to advance that. I appreciate you saw one piece of the information with the resource reserve update. It was important we brought that off De Grey declared R&R on to Northern Star's books, which contributes to that -- underpins our overall R&R.

Okay. So more details with the FID before the end of next FY, or this FY?

Yes, which we've said, that late FY '27 is the target at this stage.

Your next question comes from Levi Spry from UBS.

Looking forward to the site visit on Sunday. Can you just remind us, Steve, like how long do you expect the tie-in to take? And then just in terms of when you call out lower grade feed, I assume that means just the 0.6 from the stockpiles or a little bit lower for the first few months. Am I on the wrong train there?

No. You're right, Levi. Thanks for the question. While we go through that ore commissioning early on, there's a number of checks we have to do. These are big mills. We have warranties, we have guarantees, et cetera. And we go through a stage on stepping up and making sure we're comfortable before we proceed. So we don't want to be putting through that choppy period. We don't want to be putting high-grade material through because recoveries and everything will be a bit up and down through that period as you would normally expect in the commissioning of this scale. So the intent is to stabilize the plant before we start to move off of that lower-grade material and feed. And it's really about testing the reagents and everything else and a live system and tuning it and getting it stable. The beauty is at the moment is we continue to make gold through the existing circuit. And when we are comfortable running the new circuit, we can actually then switch in the Fimiston SAG. So that's the front-end primary crusher, Fimiston SAG mill and basically, it's a pipe connection into the new plant. So we do that over a number of days when we're comfortable. And normally, in that period, that will be sometime in early September.

And just moving to Jundee, it sounds like you're a bit happier with where things are going. Is there still an operational type review ongoing? Is there a time line for that? What's the sort of milestone, I guess, for us?

That will be incorporated and articulated in the group guidance that we provide full year accounts. But I think as I made in remarks, we're very pleased with the actions and the rapid speed at which Northern Star and Barminco adjusted to that in the June quarter, and they're now working under that plan. So pleased with how Jundee is positioned, and that will be provided with the full year outlook.

Your next question comes from Hugo Nicolaci from Goldman Sachs.

Maybe just picking up on that question on the outlook. Look, obviously, I appreciate not wanting to give KCGM just given the scale of that project and some of the near-term uncertainties. But are you able to provide some directional commentary at least across the broader portfolio in terms of production and maybe the moving pieces into next year?

No, not, Hugo. So we'll provide all that together with the full year accounts. And it's important that decisions related to KCGM do knock on the decisions with the other operations. So yes, you've isolated and said, look, knowledge around KCGM ramp-up and performance is one element, but how we allocate our resources across the group, focus, start new stuff, there is a contagion kind of knock-on effect in our overall risk profile in that regard. So the two go hand in hand. We can't just isolate the non-KCGM assets to give you some color on that today.

Yes. Fair enough. I thought I'd try anyway. Maybe just on Hemi then, obviously, the FID targeted late FY '27. Can you just talk us through what that critical path is looking like at the moment and the driver of that time line? Is it still federal permitting, native title? Is engineering maybe taking a little bit longer or maybe it's sort of timing around the procurement pieces and the time lines you've been given there? Just any extra color would be helpful.

Yes. Thanks, Hugo. I'll just let Jim give you a progress update on Hemi.

The project is developing really well. We're still continuing with the permitting, both federal and states. So that's progressing very well. We're working really well with the Garawa RNTBC to work with them about getting on country and working with them around the managed aquifer recharge trial. So that's going to happen in the September quarter. So things are really progressing as planned for now. And obviously, as we talked about, the FID is in late FY '27. So all progressing pretty well at this stage.

Got it. That's helpful. And then maybe just last one for Ryan on the hedging piece. Look, you've obviously historically talked to letting the hedge book run its course, but gold prices has pulled back. Does that potentially create an opportunity to maybe close out some of the smaller hedges in FY '28 and bring forward that free cash flow inflection? So if you closed out your FY '28 hedges, you'd be less than 12 months away from that free cash flow inflection and the potential rerate some of your smaller peers have seen?

Thanks, Hugo. Look, we have considered it. I think the beauty is we can continually consider it. I'd probably be more inclined to bring forward the nearer-term ones rather than the ones out because the closer we are to understanding price discovery right now, the near-term ones, you can get some certainty that the price is going to hurt you up or down, obviously. So look, we do talk about it. We've got our share buyback on, too. So I think it's just a balance between those decisions on the additional free cash made, Hugo.