Northern Star Resources Limited

Good morning and thanks for joining our FY23 Path 1 results presentation. With me on the call today is Chief Operating Officer Simon Jessup. Managing Director Stu Tomkin is at our PODA operations on a routine visit ahead of attending a North American Global Mining Conference. I will now step you through the results presentation which was lodged on the ASX this morning. I'll let you all review the usual disclaimers on slide two at your own leisure. I'd like to begin on slide three. You will see our results and throughout this presentation, we've continued to generate superior returns for our shareholders. Our focus remains on operational excellence and a disciplined and mature approach to investing shareholder funds. Northern Star continues to build from strength to strength. This is achieved from our simplified portfolio of three large scale production centres in tier one jurisdictions producing one commodity, gold. I'm particularly proud of the people and their commitment to safety and sustainably execute our value creation strategy. Turning to slide four. Despite the challenges the resource sector currently faces with cost pressures and labour constraints, The strength and resilience of our assets was illustrated with the company delivering a strong underlying EBITDA of $633 million during half one of FY23. Maintaining capital prudency and the realisation of tax synergies from the merger during the first half have resulted in a generation of significant cash earnings which totaled $467 million. Pleasingly, this was higher than the first half of FY22. A reminder that cash earnings represents the amount of underlying earnings which is available for return to shareholders, profitable growth related investments and balance sheet management. A reconciliation is provided at the back of the presentation. These strong first half cash earnings has enabled the board to declare a record fully franked interim dividend of 11 cents per share. This represents a 10% increase from the FY22 interim dividend and towards the top end of our dividend payout policy. The company is expecting approximately $32 million in income tax refunds in the second half of FY23. Following these receipts and the payment of the FY23 interim dividend, the company's available franking credit balance will be approximately $3 million. The company does not expect to generate franking credits for at least 18 months due to the synergies arising on merger temporarily reducing the company's taxable income of its Australian operations. This means we anticipate the company's next few dividends to be unfranked, subject to future profitability. In respect of the company's $300 million share buyback, good progress has been made on the program during the first half and it remained open subject to blackout periods until September. And we remain well positioned to deliver our near-term low capital intensity organic growth profile with our strong balance sheet, which includes $145 million net cash position at December. Now to our operations on slide five, which have all continued to deliver in what is a challenging environment. Across our three production centres, we remain on track to meet FY23 guidance. During the first half, and as outlined on this slide, we've made great progress across each of the production centres on our low-risk five-year profitable growth strategy to become a 2 million ounce gold producer by FY26. Turning over the page to slide six. As illustrated, all three of our production centres continue to generate positive cash earnings. Key growth projects at Pogo and Thunderbox are delivering significant cost improvements. We will maintain our sharp focus in the second half on costs which, alongside the expected lift in production, should further build cash to maintain the company's strong financial position. Moving on to slide seven. I talked earlier about our focus and disciplined approach to managing shareholder funds. This slide highlights the key elements of our capital management framework and the importance of our balance sheet and risk management to maximise shareholder returns over the long term. We remain in a strong financial position with $1.1 billion in liquidity at 31 December and continue our sensible and consistent approach to mitigate risk in light of external conditions to support the delivery of our strategy. Now to slide eight. And before I hand over to Simon to talk to our operations in the next few slides, I'd like to say that as the team we are really pleased with the progress made during the first half of FY23. And we are very proud to be the best performing senior global gold stock on a total shareholder return basis over the past 12 months. Over the Northern Star journey, and including our declared instant dividend of 11 cents per share, we've now returned over $1.1 billion to our shareholders.

Thank you, Ryan. And on slide nine, at the halfway point of FY23, we have sold 773,000 ounces of gold, or 48% of the midpoint of God. And in Australia, in all our sustaining costs, of $1,766 an ounce, which is 106% of the midpoint of guidance. We remain on track for the stated yearly guidance of gold sales ranging between 1.56 and 1.68 million ounces at an Australian all-in sustaining cost of $1,630 to $1,690 an ounce. Also previously stated, our guidance is second-half weighted due to the commissioning of the Thunderbox Process Plan, KCGEN's open pit or sequence timing, and POGO moving into higher-grade stoves. On slide 10, you can see our profitable five-year organic growth strategy planned out to FY26. I would like to emphasise that this growth path has low risk delivery and is executable from within our existing assets. So far this year, we have made significant progress. At KCGEM over half one, we saw a pleasing annualised movement rate of 84 million tonnes per annum, which is within our stated 80 to 100 million tonne per annum strategic goal. The new fleet is operating very well plus we continue to look for further optimisation. The Thunderbox mill is well positioned to operate at 6 million tonnes per year nameplate capacity during the second half and remains a key driver of increased ounces from the Andal region. The newly installed process plant expansion will take Thunderbox from 3 million tonnes per annum to a 6 million tonne per annum nameplate capacity. While at POGO, we have maintained the expanded 1.3 million tonne per year run rate through the mill. We continue to focus on optimisation initiatives at the mine, particularly high-grade stoke wall contribution. We are well on plan to deliver our profitable growth plan to 2 million ounces per year by financial year 26. Now moving on to slide 11. We maintain being in an enviable position with a significant mineral resource base of 56.4 million ounces and reserves of 20.6 million ounces. We have very effective and efficient exploration programs, which is shown on adding ounces to the resource base at $24 an ounce last year. We have committed 125 million to exploration over FY23, at our high quality geological systems to replace and profitably grow our mine lives. Turning to slide 12, the chart shows our visibility to improve renewable projects across each of our assets and to reduce our carbon footprint. We have commenced planning and implementation of these projects to enable a 35% reduction in scope 1 and 2 carbon emissions by 2030. and a net zero target by 2050. On slide 13, at present we are still in the process of evaluating whether to expand the milling capacity at Casey Gem due to the large stock bowls stranded on the surface from past mining. While the project has many merits, the current 13 million tonne per annum milling capacity does remain an option. A reminder that the potential expansion is not included in our five-year strategy to reach 2 million ounces by FY26. Earlier we spoke about capital management discipline. Given our extensive knowledge and our understanding of the KCGM ore body, we see low technical and geological risk to committing to such a project. We continue to monitor external pressures while working to de-risk the execution elements of any expansion and will come to a decision point during 2023 calendar year. Thank you, and I'll now hand back to Ryan.

Thanks, Simon. And to summarise just on slide 14 here, that we continue to execute on our clearly defined strategy of generating superior returns. Completion of growth projects at Thunderbox and Pogo are expected to generate increased cash flow and strong investor returns. And at Casey Gem, we are making great progress and are quickly unlocking the significant opportunities that exist at this tier one asset. Thanks very much for listening. I'll now hand back to Travis for questions.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from Daniel Morgan from Baron Joey. Please go ahead.

Hi. I guess just a couple of quick questions on the operations and how they've been going since your last update. So firstly, on Thunderbox Mill, how is that ramp up going? Are we, as of today, consistently hitting that 6 million tonne per annum run rate or is that still to come later this financial year?

Yeah thanks Daniel, Simon here. As we stated at the quarterly call we expect to hit the 6 million tonne per annum rate during H2 so continue to work through commissioning of the plant and ramping up with the consistency on all elements of the plant mainly crushing crushing and milling. But pleasingly, we absolutely see the spring capacity there for 6 million tonne per annum. So it's now just around feeding in the new shag mill and the crushing components of the plant.

Okay. And just switching to POGO, has the productivity of the underground been to your expectations are you consistently this quarter exceeding that 1500 meter per month target uh are you you know is dilution within your expectations just just wondering how the operation is going year to date yeah thanks daniel simon again um pogo is going well in terms of the second half waiting we've got the high grade studs coming in and um it is a

a major focus for us in terms of that dilution, just trying to take waste out of the stoking sequence and really give the mill the expanded grade profile that we know when we hit the 1.3 million tonnes per annum at the right grade, we can deliver our 300,000 ounces per annum. So Stu's over there, just headed over there on the weekend, so he's keen to spend a week there with the team on site. so he'll come back well informed as to where Pogo is sitting but right now we're second half weighted for Pogo with higher grades in the stoking sequence coming through.

And lastly the buyback I think you might have considered yourselves in blackout earlier this year will you now be activating the rest of the buyback? Thank you.

Hey, Dan, it's Ryan here. Yeah, so, yeah, look, we've obviously made pretty good progress. We are handed by Blackout. So, look, we've got another, what is it, nine months to run. So, yeah, the program's back open.

And just on that, will you be anticipating making purchases with the buyback commensurate with how you're purchasing prior to the end of the December half year? Or, you know, what's your thinking about that?

Yeah, look, I mean, the answer is we've got nine months to run on this. I think Stu's terminology is right for everything about Northern Star and that is it's never set and forget. So we're always reviewing our positions around even where we put our money, whether it's capital in the ops or in this case deploying it here. So all I'd say is we're always keen to review all our options. We'll always put the money where the greatest returns are. It's open for another seven months. Yeah, let's see how it goes.

Okay, thank you for your answers.

Thank you. Once again, to ask a question, please press Star 1 on your phone. The next question comes from Daniela Majura from the West Australian. Please go ahead.

Oh, good morning. Thank you for taking my question. I was just, I'm not sure who's best placed to answer this, but I was just curious as to what your outlook is on costs and inflation. How much longer are you expecting some of the inflationary headwinds that we've seen continue to impact Northern Star's operations? I've seen you've said it's going to be a continued focus in the second half, so just wondering what you think is there. Thanks.

Yeah, hi, Danielle. Thanks for the question. It's Ryan here. Yeah, look, I mean, it's certainly still challenging. We're not seeing significant cost reductions, albeit we are seeing some reductions. So, for instance, we're seeing it on our energy prices, particularly diesel, and also some of our input costs that are indexed around steel prices. We're seeing some peelback on costs, which is helpful and pleasing. Broadly though, the other input costs, obviously labour is a key cost for our sector as it is the entire mining business. We are seeing those costs still remaining elevated and then some other sort of commodity linked inputs in our reagents and things like that. So they are absolutely still there. This is where I guess having scale and size helps because you can leverage you know, your supply chains on, you know, with these costs sort of reductions or at least trying to get, you know, competition and volume, which does help unit costs. I mean, from us, we're looking, basically looking to do more with less, you know, looking at ways to use less. So for instance, in the processing, we're looking to use less reagents and still get the same outcome. So it's really about being more efficient, reducing scope of works, to actually get costs out of the business. So that's what we're sort of placed with, you know, into this second half. That's our strategy.

Thanks so much for that. If I can just ask a quick follow-up. How much of that cost impact had an effect on net conflict falling?

I'm sorry, Daniel. What was that last part of your question on the... Oh, sorry, I just saw net profit was down quite a bit, so I was just wondering how much of that impact was from... Yeah, well, I think what I'd... Well, perhaps what I'd point everyone to is if you look at... You know, even if you look at our costs, you know, half on half, so if you, you know, go back to the, you know, the quarterlies we put out, which, you know, had pretty good information in them, if you look at our cash costs on a per-ounce basis... They're about $200 higher. So the majority of that increase is from basically increasing in cost, which pretty much hit the sector, I'm going to say, this time last year. So half on half, you can sort of see that coming through in our cash costs.

Thank you.

Thank you. The next question comes from Matt Green from Credit Suisse. Please go ahead.

Hi, good morning, Ryan and Simon. Hope you're well. Simon, just a question for you, if I may, on the KCGM mid-expansion. What do you need to see change from here on the execution side? You've highlighted this as the key risk on remaining disciplined. What needs to change here for you to get more comfortable with pressing ahead with this project?

Yeah, thanks, Matt. We continue to just look at the elements of execution and primarily driven around the scope of work and the detailed engineering of the various options. So the more work we spend on that, the more accurate we'll get around the pricing and also the variance that you potentially get without that engineering phase. So that's really our focus is on that execution elements of the mill expansion. So we'll continue to look at pricing in the market, what we're seeing in terms of steel pricing and build slots and those sorts of things. But really the bulk of our focus is on get the engineering right, get the design right, and then we've reduced the risk of, execution there of you know having to change things as you as you potentially go along so really that that's our that's our core focus for for casey gem plant expansion as i mentioned we we certainly are we certainly see low geological uh mining risk due to the due to the stockpiles which are in front of us so the 120 million tons um so that so that's a great position to be in it really is around the processing side and the engineering to, you know, fit in that deep risk element.

That's helpful. Thanks, Simon. So it sounds like it's really just getting the scope of this project nailed down, not so much on external factors such as needing to see labour come off or perhaps permitting or anything like that. It's more isolated on a scope basis for the project.

Yeah, I think that's the best way to think of it, Matt. And look, you know, if we did nothing and continued with our 13 million tonne per annum milling capacity, we do have 21 years of processing in front of ourselves without increasing resources and reserves. So it is a very compelling case. We just want to get the work done up front and get it right.

That's helpful. Thanks very much, Simon.

Thank you. The next question comes from Al Harvey from JP Morgan. Please go ahead.

Good morning all. So just another one on the Super Pit expansion. So I guess last week we saw one of your peers indicate a fairly long build timeframe for a much smaller expansion in the Kalgoorlie region. So you have highlighted that you could continue to run at 13 million tonnes per annum. just kind of trying to get a sense if you're seeing some of that tightness in long lead items as well and potentially how long you could keep the study on the shelf before pulling the trigger.

Yeah, thanks Al. I suppose it is a large scale project so there's a lot of parties that would like to be involved in a substantial project like this as well as It will be built over a few years so having time on one project is in some cases better than doing two or three lots of small projects. So we are still seeing a lot of interest from groups who would like to be involved in the KCGEM mill expansion. Yeah, I can't comment on others in the area, but we'll just continue to do the engineering work, get the scope right, and then bring it to a decision point. We are seeing changes in steel pricing and things, which is pleasing to see, but really our focus is on the returns the project can deliver and taking out that execution risk.

Thanks, Simon. And just following that, you guys usually do your resource and reserve update in March. Can we expect a bit of an update on some of those higher-grade underground opportunities and how does that potentially act as a swing factor for the expansion to display some of those low-grade stockpiles?

Yeah, I think that, you know, we... We are going to update the resource and reserves in the June quarter. So that's on track as normal business as usual. And we saw significant growth from the underground portion of the reserves at Casey Gem at Mount Charlotte last year to nearly 1.2 million ounces. So the more we seem to drill at Casey Gem, the more gold we're finding. We see that in the exploration costs at $24 an ounce. So we see great upside benefit long term and that's part of the strategic elements we'll continue to look at as part of the KCGM mill expansion. So obviously lower cost per tonne milled will absolutely translate to increased margins for whether that's underground or open pit feeds. But last year's reserve, 280 million tonnes,

uh it's a it's a large reserve base to to process it casey jim without drilling any more holes thanks simon and just a final one for ryan perhaps um just on the capital management um kind of pretty slim on on the franking credits now buyback um looking somewhat what neutral on online and consensus price target numbers so just wondering

um how we think about the inorganic options given we're currently at the lower end of the three to five hub target you've outlined in your presentation yeah thanks um yeah i mean you know obviously um we've got you know good options within our own portfolio as you know we're growing to sort of that two million ounces so in terms of returns we think they're really compelling and then you know on top of that as set a number of questions on, we've got potentially this then lift with the expansion at KC Gem, should it be approved? So I guess we've got, coming back to the M&A type question, we sort of see that we've got a compelling offering, I guess, in this sector around our own growth and around our own returns that we have within our own business. So we're not, At this stage, we're not really compelled to go and do that. We're always looking, but we really like what we have at the moment and what we can see in the next few years.

Great. Thanks, James.

Thank you. The next question comes from Nick Evans from The Australian. Please go ahead.

G'day, guys. Just returning to Mill, KCGM Mill, I think June last year when you released the pre-fees, you were talking about sort of three options, a bolt-on to take it up to $17, a complete reserve to $24 and starting again from scratch and building something new. Have you made a decision between those three options or are they all all three still in the mix. And can I just get some kind of clarity on sort of when you expect to make a decision? Did the presentation say within 2023 or FY23?

Yeah, thanks Nick, Simon. Definitely during calendar year 23, it all comes down to, you know, just getting those engineering works completed and, you know, priced up accordingly and and de-risk those execution elements. That's our focus. We did have the three options of 17 million tonne, a sort of bolt-on expansion, a 22 million tonne per annum full rebuild, which would need some permitting and take longer to get to that, I suppose, outcome versus just the build. Our preferred case at the moment is the 24 million tonne, which is effectively replacing 70 plus percent of the existing plant. The existing plant has been bolted on over many years. It's got five mils, so it'd be a reduction in processing and less components throughout the process plan, as well as set it up for the next you know, two, three decades that we sort of see in front of ourselves. So I suppose out of all the options, the 24 million tonne is our preferred one at the moment and it's just working through that scope and engineering piece.

And then just heading back to costs, I know you answered, Danielle, on sort of labour market stuff, but there seems to be, I guess, a bit of a divide appearing between sort of the more junior single-mine companies and, I guess, the bigger players such as yourselves and the big iron ore guys. You guys seem to be a little bit more comfortable where the labour market is and the smaller miners seem to still be –

struggling is that sort of a fair um assumption um in terms of what's happening in the market at the moment hi nick it's ryan look um probably can't speak to the to the smaller guys i i guess you know for us at northern star um again back to the offering um you know we we like to think we can offer our employees you know uh you know a good career with different pathways just simply because of our diverse operations. I think it is tough out there getting good people, but we find that we're able to attract good people because of the long mine life that we have. We can show them the career progression that they can have in our business. That, I think, helps. And maybe that's the difference between your majors around their offering to potential employees and existing ones.

Thanks, guys. I'll pass it along. Thank you.

Thank you. Once again, to ask a question, please press star 1 on your phone. We'll pause for a moment to allow parties to enter the queue. At this time, we're showing no further questions. I'll hand the conference back to Ryan for any closing remarks.

Thanks, Travis. Thanks very much for joining us today. It is clear our strategy is delivering strong returns as demonstrated in our financials and balance sheet strength. We look forward to updating you on our progress throughout the year. Have a great day.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.