Northern Star Resources Limited

Thank you for standing by and welcome to the Northern Star Resources September 2024 quarterly results. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director and Chief Executive Officer. Please go ahead.

Good morning and thank you for joining us today. With me, I have our Chief Financial Officer, Ryan Gurner. We are very excited to be reporting another strong quarter and to share with you the progress of the many projects across the business the team is working on to create additional value. We continue to deliver reliable and consistent operational results safely and responsibly in the most prospective and the most desirable jurisdictions. With our first quarter results a great start to the year, we are well positioned to reiterate our production, costs and capex guidance for FY25. The business is in good shape to deliver for our shareholders significant leverage to the increased gold prices, translating to increasing cash flows. Financially, Northern Star is in an exceptional position with an investment grade balance sheet that remains net cash at the end of the quarter. I'm pleased with our prudent and measured approach to our returns-focused capital investment program in the fourth of our five-year strategic plan to deliver 2 million ounces in FY26. At KCGM, our mill expansion work is on track and the project to deliver all feed infrastructure for the expanded Thimston Mill is progressing well. At Jundee, underground mine development commenced at Cook Griffin, while the ramp-up of mill feed sources continued at Thunderbox. And at Pogo, major millworks were performed successfully to enable us to continue delivering high-margin ounces and above the quarterly guidance provided to the market. I will now hand over to Ryan Gerner, our Chief Financial Officer.

Thanks, Stu. Good morning, all. As demonstrated in today's results, the company is in a great financial position. Firstly, our balance sheet remains strong in a net cash position of $148 million. with cash and bullion of a billion at 30 September. Secondly, free cash generation across the business is strong, with our capital investment program fully funded. We expect free cash to increase over the year as production lifts. And finally, we are focused on capital management, dividends and buyback, so our shareholders can benefit from increased gold prices. The company has been a regular dividend payer since 2012, and it underpins our company purpose of delivering returns to shareholders. And now to the details. On a net mine cash flow basis, the business generated $122 million, thanks to higher gold prices and operational performance. Figure 8 on page 9 sets out the company's cash and bullion movements for the quarter, with key elements being the company recording $585 million of operational cash flow. Looking ahead, this is forecast at Jundee, continued throughput increases and recovery at Thunderbox with increasing grade planned and increasing throughput at Pogo. After deducting capex of $423 million relating to plant and equipment and mine development, $60 in exploration and $50 million in equipment leases, quarterly free cash generation was $52 million. Also during the quarter, the company paid its FY24 final dividend, totalling $280 million to shareholders. Quarterly investment in sustaining capital, growth capital and exploration are tracking to plan. Growth capital investment includes a KCGM open pit development at Great Boulder and the East Wall, which will give us full access to Golden Pike North and underground development at Phimiston and Mount Charlotte, which is enabling us to lift production in those areas. At Jundi, underground development and infrastructure at the Cook Griffin mine and our renewables project, which will be fully commissioned in Q2. At Thunderbox, development of the high-grade Wonder Underground and open pit development at Aurelia. The KCGEM expansion project remains on track with spend of $130 million during the quarter. This included work performed and commitments in respect of engineering and design, on-site construction including bulk earthworks and major concrete pours and the major equipment package. Whilst operational free cash flow is expected to increase in Q2, the company will pay its semi-annual coupon payment on the US notes and the FY25 annual group insurance premiums. As previously mentioned, the company is not expected to begin paying corporate tax on its Australian operations until Q3. On other financial matters, depreciation amortisation is slightly under the low end of guidance range at approximately 710 per ounce sold. and for the quarter non-cash inventory charges for the group are a credit of $11 million. After the quarter end, the company converted its debenture with a Cisco mining for 38.5 million common shares. Shareholder approval for the plan of arrangement was obtained on 17 October and is expected to become effective 25 October. Shortly after, Northern Star is expecting to receive proceeds of Canadian $189 million, resulting in a $32 million Aussie pre-tax gain during Q2. Lastly, in respect of hedging, Table 4, page 9, sets out the company's committed hedge position at 30 September, with the overall book being 1.8 million ounces at an average price just over 3,200 Australian. The company replaced the 120,000 ounces of volume delivered during the quarter at an average price above 4,000 Australian per ounce. These commitments were prominently placed across calendar year 26, aligning to the final period of capital investment for the KCGEM plan expansion and commissioning start. I'll now hand back to Stu to cover the operations.

Thanks, Ryan. And today I will be covering the operations section as Simon Jessop is travelling. So as you can see in our results, we delivered strong operational and cost performance, starting with the Kalgoorlie Production Centre, which includes KCGM, Karasu Dam and Kalgoorlie Operations, and accounts for 52% of the group gold sales and 56% of mine operating cash flow. Net by cash was an outflow of $11 million due to the major planned works and $304 million of capital spent largely at the KCGM mill expansion. At KCGM, the east wall remediation works were temporarily paused to build a platform for the new crisis underground portal locations which have been fired subsequent to the quarter. Full access to the Golden Pike high-grade zone is delivered from the second half of FY25, growing production at KCGM. Open pit material movement achieved an annualised rate of 80 million tonnes per annum, in line with the guidance above 80 million tonnes. Pleasingly, the underground mines delivered a second consecutive quarter of increased activity, realising the benefit of increased resourcing. Underground ore mine was 20% higher compared to the June quarter due to the increased production from Mount Charlotte and ongoing development ore from the Phimiston underground, with the first stopes fired during the quarter. Development metres increased 50% for the quarter to 6.3 kilometres versus 4.2 kilometres in the previous quarter. Mill ore volumes were lower than the June quarter due to planned major maintenance shutdown activity, with mine grades reflective of the greater proportion of stockpile material processed. And gold volumes and grades are scheduled to increase along with recoveries in the following quarters. At Karasu Dam, gold sales were lower given a planned mill shut and lower gold grades, from the underground mining sequence. And at Kalgoorlie Operations, it continues to perform very well with strong milling performance at the Kananda Bell Mill. The KCGM mill expansion spent $130 million over the quarter and remains on track with on-site construction slightly ahead of schedule. Stage 1 engineering and design is now 71% complete with minimal changes to the original design. And major concrete pours are on track with 39% of total concrete poured to date. Shipping of all bulk steel has commenced and all major equipment has been fabricated and has been progressively freighted to site. We expect to receive all the major equipment by early calendar year 2025. Turning now to Yandle Production Centre, which includes Jundee and Thunderbox, where the quarterly highlight was the Thunderbox mill delivering nameplate throughput of 6 million tonnes per annum run rate for two consecutive quarters. A fantastic outcome by the team, and I thank them for their efforts. Yandle delivered positive net mine cash flow of $86 million, a record since the beginning of our profitable growth strategy commenced in FY22, demonstrating a returns-focused approach for this production centre. At Jundee, Northern Star Mining Services mobilised and commenced mining at Jundee's newest underground mine, the Cook Griffin, a recent exploration success. And Gold Soul benefited from a drawdown in Golden Circuit, offsetting lower milled grades and longer than planned mill shut. Milling performance has significantly improved so far this quarter, with grades expected to modestly increase throughout. And as I mentioned previously, Thunderbox was a standout, delivering a record mill throughput, including a planned mill shut. And pleasingly, at our new satellite mine, Wonder Underground, production stoping commenced whilst our NSMS team continue to deliver industry-leading development rates there. We are continuing to work on improving the reliability of the processing plant and work focusing on milling and crushing circuits in the December quarter will continue. This work is expected to deliver targeted stable mill performance there at Thunderbox and a lower cost base from the second half of this year. And finally, Topogo, a fantastic achievement by our Alaskan team to deliver 60,000 ounces for the quarter and whilst also delivering the planned major millworks that were significant there, and above our previous guidance of 50,000 ounces for the quarter. During the quarter, the underground mine operated at a 1.3 million tonne per annum rate, and it was constrained by stockpiling capacity, but certainly ahead of the total milled volumes in the quarter. And that underground stockpiled ore now provides future contingency and increased confidence to deliver our annual guidance of POGO. The Pogo Mill continues to operate at very good rates this quarter on the outset of the completed millworks, and we have established our guidance for the plant to operate at a targeted throughput now above 1.4 million metric tonnes per annum. So that concludes our operational highlights, and I would now like to hand over to the moderator, Ashley, for Q&A. Thank you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Daniel Morgan with Baron Joey. Please go ahead.

Hi, Stu and Tim. Simple question with regard to your operational performance. Could you just do a quick around the grounds as a simple snapshot of where your businesses, various businesses were versus your expectations in the quarter, like with each business, was it ahead or behind? And just to give us an overall sense of how we're tracking. Thank you.

Yeah, thanks, Daniel. Actually, we delivered as a group right in line. I think that's probably reflected in consensus view as well. We'd already flagged early that there was a significant amount of major works across all our plants within the quarter. And we explained that, you know, on the onset of the guidance. So I think that was anticipated. Pleasingly, Pogo really came out the gate strong. You know, we pulled out that mill motor, fully rewound it. We did a lot of other major works at Pogo on the course orbit and a lot of other circuit upgrades that were done in that sort of five-week major project. and pleasingly came out very strong, whilst the mine still continued to operate there. So that delivered 60,000 ounces, and we'd forecast 50 for the quarter. So we're very pleased with where Pogo's positioned, and it's continued run right into this quarter, generating really good US cash flow. I said in my opening remarks around the pause of the movement of the material for the bottom of Golden Pike at KCGM. Essentially, we've got that large, big... platform built with waste where the new creases portals have been cut, and that's the new access into that OBH cutback area. There's new portals being established and developed there that gives us new drill platforms and access to Finleston. So, yeah, very pleased with that work, and we'll essentially catch up the material movements throughout the next couple of quarters and really go hard into KCGM lower part of that mine for the second half of the year. So I'd say that was set off in ounces in the quarter at KCGM. But across the rest of the sites, Jundee had a great sequencing delay, but the rest are pretty much bang on where we expected them to be this time of the year.

So just following up a little bit on Thunderbox, surprised to see it at nameplate despite the big rectifications. I know it's early, but Have you got a sense for how much you might be able to push that nameplate for the rest of the year? And do you have confidence that the rectifications now mean that the mill can deliver?

Yeah, so if you recall, we spoke about on the onset of that expansion, it was really mechanical availability of the plant. So, yeah, the issue was we absolutely could deliver at the 6 million tonne rate, but the availability was sort of in the 70s, low 70s%. We've got that up mid-80s and that's what's giving us the 6 million run rate, which says that if we get it in line with, you know, most plants around Australia and our other plants at sort of low 90% utilisation availability, we will get in excess of 6 million tonnes. So we're just very pleased that, you know, that's the minimum and, you know, we've got a lot of material available. uh, in and around Thunderbox that can feed, you know, that stockpiled and can feed that in excess. We're not mine constrained there or source constrained. So if we can operate above 6 million tonnes, uh, that's, that's an opportunity in upside for us.

Uh, and then, I mean, just pivoting over to Pogo, um, again, the operation seemed to, uh, deal very well with a big mill rectification during the period. Uh, You've built some stockpiles. You're talking about operating at 1.4 million tonnes or above. Does that mean potentially this asset could deliver towards the upper end of your garden? So could you just unpick what the rest of the year looks like and your confidence from here?

Look, yes, that's what we see. And we know that the mill can operate at that 1.5 million tonne rate. It's really around the planned shuts and the unplanned shuts, I guess, that impact away from that. Hence why we've said now that the floor is not 1.3, it's 1.4 million tonnes through the plant. And we're obviously mining to match to that. You'll see the difference in the quarter table there showing that we mined 60,000 or tonnes more than we milled during the quarter, which is stockpiled effectively to to be buffer. We won't necessarily be able to maintain that level underground because we're pretty snowed in with real estate. But it is a good, you know, something we've never been able to do is create a lot of stockpile between mine and mill and allows us, you know, through thinking and planning to disconnect the two so we can work independently. So it's, yeah, pleasing with the outlook of Pogo, pleasing where they started in quarter two. on all things throughput, through consistency, through the mill, head grade and mining matching those volumes. And obviously the development's been always ahead of schedule. So we're opening up new areas underground. So it is, yeah, it's watch this space with Pogo. You've seen great US cash flow generation. You've seen great resource outlook at that deposit and exploration upside. So I think people start to really cast their eye to the valuation on it.

Thank you so much, Stu and Tim.

Thanks, Sam.

Your next question comes from Mitch Ryan with Jefferies. Please go ahead.

Morning, all. So just one interesting commentary. At Yandel, you called out that satellite feed sources are expected to double to 4 million tonnes in FY26. In light of that, I'm just wondering if you can sort of help us think about growth capex into FY26. I know the guidance for this year is 285 million to 307 million. Do we sort of expect that to be maintained, given the capital that will have to go into the infrastructure to maintain that satellite feed?

Yeah, thanks, Mitch. Look, it's capital related to building undergrounds, taking them to commercial production, which will include things like Wanda, and it will also be, you know, the pit capital that went into things like Aurelia. It's now being trucking its oil source and that down. So, yeah, that capital... Bannockburn is probably the only next future pit in a number of years, but ultimately it's pretty flat to reducing across the southern part of Yandall because we've already started those mines, spent that capital, bringing them to commercial production and then building stockpiles. So it's really whether, back to Dan's question, whether we increase throughput through Thunderbox, whether we need to accelerate production. any capital to match that extra milling throughput. But we won't give that capital guidance out till next year because there's still decisions to be made on whether that is or isn't. The thing at the moment is the Wonder Underground is in production and we've got an underground mine that's been developed and that's really been fed in as that high-grade material. And then to the north, the Cook-Griffin portals are being cut, so there's capital this year. Essentially, that will be ready for commercial production in FY26 with limited other major capital at Jundi region in the north part of Yandel. So, yeah, I think it's relatively flat to reducing into 26, but you've always got some capital in turning on satellite operations in the Yandel region.

Thank you for that commentary. My second question just relates to, you've called out the POGOs going from two to three shut down the year. You may have given timings, but I've missed it if you have. Can you just give some commentary around sort of which quarters we should expect those to fall in and will it be the same quarters every financial year?

Yeah, so I guess one thing that happens with increased throughput is you wear stuff out quicker. And we did do this sort of two shuts per annum And the risk is you call them early and you're unplanned for it. So we've strategically gone to three. Ideally, they are more compact and we can do other works. We could back all these other works up so that we also don't have the unplanned shut. So we'll get to trial. We'll plan it that way. We'll run it that way. We still believe we'll have sprint capacity either side of those shuts to catch up. But I guess we'll guide the park to make sure that the They look at the full year, not the, you know, pick a point and draw a line. There'll be lumpy points within, depending on those shuts. And then on other operations where we've tried to, you know, we've always been asked about why do you do all your shuts in one period? We usually did one major shut, you know, in quarter one, and we do a half shut in quarter three. And obviously that's reflected in the output for the group. And then when you line all those things up across all your operations, you know, a bit of a seesaw, We will. It's also around booking and planning that major works and labour a long way out. And once you're getting close to that, it's quite rigid to be able to move it. So we'll aim to smooth it. But I think as long as we just tell people to expect it, they're not surprised if there's a bit of a trough and then they'll expect to see a peak that nets it off.

Your next question comes from David Radcliffe with Global Mining Research. Please go ahead.

Hi, good morning, Stu and team. So the first question is a bit of a high-level one. Just maybe if you could give us sort of your thoughts on the impact of what the sort of $4,000 an ounce gold price actually means for the business day-to-day now. So really thinking about near-term opportunities, so do you consider accelerating some of the stripping or pushing some extra development, or do you think about even bringing forward some of the sustaining capital projects?

Thanks, David. I guess what it means for us right now is we are enjoying significantly improved cash flows from production we're doing today and delivering into spot sales. So you'll absolutely see that in strengthening of balance sheet and compression of payback periods on investments that we made decisions on and committed to in previous years that are on the back end of execution. These were very robust investments. investments and returns generated from assumptions around 2,700 Aussie gold, certainly not 2,700 US gold. So the thing at the moment is we don't need to change our plan. We're in our fourth year of a five-year strategic plan delivering into 2 million ounces next financial year. We're well positioned and ahead of that, that we don't have to scramble. What we're seeing across the gold fields is all of that thinking at these higher gold prices and you what typically happens in this environment, you end up with all these pop-up shops that start new mines that are only economic at these levels. That does put a bit of pressure on resources and potentially costs at a time. But right now we are producing, we have gold, we can physically sell into those spot levels and are enjoying those improved margins. So, yeah, we don't have to change behaviours. And it's really a question for when we get to March, April, when we assess our resource and reserves that are done at, you know, 2,000 Aussie, 2,500 Aussie, you know, what numbers should we be using on our resource reserve for our long-term outlook? Because the market's long-term outlook is about 2,900 Aussie dollars an ounce in consensus. But if you wanted to put forward hedges today, you can get four and a half to, you know, high 4,000 Aussie dollars an ounce. There's a massive disconnect at the moment on sentiment outlook and ability for producers to generate cash

Okay, thanks. Well, it's good to hear, obviously, you're sticking to plan. But maybe to follow up on that hedging comment, could you just clarify again what the hedging strategy is? Last quarter, no hedging. This quarter, we seem to be back to hedging and rolling that forward program. Obviously, as you say, the $4,000 an ounce is a great and very attractive price. But the forward strategy hasn't worked so well in the short term. So just a bit of clarification would be good.

The forward strategy of hedging never works on a rising gold price. But if you put our mark to market, if you put that against the forward consensus, it's well and truly in the money. So we do it for purpose on our investment decisions to guarantee those returns and guarantee those paybacks. And then we fall off after that. So our hedge book does tail off and we're not adding at the back end of it because we are off capex and we have significant production and we're generating revenue. a massive buffer of cash earnings as well as having no debt. So we're less concerned now on the other side of the capital hill and it's just the near term where we do have, you know, so 20-odd per cent of our production hedged, which was put in place for a prudent decision around the investments at the time. So, yeah, that's what we're able to do and why we've done it. We've been pretty clear on articulating that. It's worked. And I think at the moment it's, you know, the attitude is you can get those forwards, but we will be able to deliver into those spot levels with unhedged production that is double the next, you know, producer's ounce profile and, you know, four or five times the next producer after that. Leverage to gold price, Northern Star has it in spades.

Brilliant. Thank you. I'll pass it on.

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

Yeah, morning, Stu and Ryan. Just on the Cisco convertible conversion, I guess just trying to get a sense of what the plans are for the 188 mil Canadian. Could that come back through the buyback and maybe just a more general one, just how you're weighing up capital management options across growth versus capital returns at present?

Yeah, thanks. Thanks, Al. Yeah, that's right. So, I mean, we've got to, you know, obviously we're expected to receive the funds later this month, so looking forward to getting them with a small gain there. Yeah, look, it will be considered. Haven't thought through just yet what we're going to do with it. Once we see it in the account, we'll start considering it. You know, there's 125 mil left back on the buyback. You know, it's not a great deal left to do. That can be executed quite quickly. So there's plenty of time for us to execute that. And, you know, the gain, I guess, from a Cisco will weigh up what to do with it and sort of go from there. But as sort of Stu was mentioning or spoke about in the question around you know, do you change behaviours? Obviously, we're not changing behaviours from an operational sense. So we see good returns in what we've done. We've done a lot of the hard work now. So just really looking forward to the margins and the earnings growing from here under these gold price levels.

Sure. And I suppose maybe just to follow up, I mean, I think you've kind of answered it with discipline, et cetera, but just thinking, I guess, the ASISCO... convertible was kind of entered in as another option as further progress into North America. How are we thinking about potential growth M&A in that space?

Yeah, you're right. It was established as exclusivity to do DD and assess the Win4 deposit. That's where it was established. So, you know, view and appetite is to always look. We don't need things and we've got a great organic delivery and plan and strategy so um and look at the exchange rate it's uh it's difficult to see value uh offshore at the moment so yeah we'll just we'll just keep focusing on um you know pointed out the disciplined approach to it uh greatest returns right now in our organic delivery and we can consistently deliver into that um but yeah over the next couple of years you know it's pretty exciting position when we've built you know, build the balance sheet we've got today and it's only improving, there'll be options in front of us.

Yeah. Thanks, Stu. Thanks, Ryan.

Your next question comes from Matthew Freidman with MST Financial. Please go ahead.

Sure. Thanks. Morning, Stu and Ryan. Firstly, on KCGM, and I think you might have alluded to this already in your response to Dan's question, so apologies if I'm going over old ground, but I just wanted to understand the lower feed grade during the quarter. Obviously, you said more stockpiles, and that appears to be as a result of that lower open pit ore mined. Is that just as a result of, I guess, lumpy access to those high-grade zones as a function of the mine plan? Is there anything we should be reading into there in terms of the lower open pit ore mined during the quarter and the higher stockpile feeds, obviously, despite the fact that you had a plant shut Uh, and I guess ultimately is the expectation that all mine volumes are going to pick up in the following quarter. Thanks.

Yeah. Thanks, Matt. So you're right. I think it's the stockpiles contribution, you know, we're still getting 13 million tonne right through the plant. It's just the, it's just what blend and what grade, um, you've got to think of last year at a KCGM ultimately, you know, that 450 odd thousand ounces this year, around 550 odd. And then next year, the 650,000. So you've got these step changes, um, And we've said it's largely that second half when we're accessing the higher grade gob and pike sort of undisturbed. So, you know, the rate in two years going from 450 to 650, if you kind of cut the middle year in half, which we're in at the moment, you know, we're seeing, you know, extension of last year's rate going into quarter one, maybe quarter two, and then the second half basically being at the run rate into FY26. So it's just where we're positioned at KCGM. But once we've got all of the waste from that east wall off those bottom shelves, you know, the benches down the bottom, and open up and destack those levels, we'll have, you know, good access to that grade, which then comes into the feed. Standing off a bit of that is the improved underground performance at Mount Charlotte, particularly, and the development all coming at a thin. And I expect to see that continuing to improve as well. So, There is a bit of a lever and buffer there that not only are we relying on the high grade from the pit, we will likely get some better material, the same material but more of it from underground sources throughout the year as well.

Yeah, understood. Thanks, Stu. And then maybe just a bit more of a fulsome update on the mill expansion. If I look at the capital spend there, I guess in terms of the run rate, Relative to your guidance for the year, everything appears on track, but is there anything maybe at a more granular level that's moving around? How's progress on the ground relative to your timelines and your project expectations? And is there any sort of challenges or opportunities that are presenting themselves given the, I guess, the broader industry backdrop? You know, commentary's been that engineering services are a little bit easier to come by and maybe labours, you know, skilled labours are a little bit easier to secure. So is that kind of being reflected in how that project's progressing? Thanks.

Yeah, so we're very happy with its progress and we're ahead on some of the items in the schedule. We're actually ahead of plan, which is pleasing because we catch, you know, we... We catch that up and it's, you know, we're de-risking it each quarter we go forward. So, yeah, we're very pleased with that activity. You can appreciate there's still a lot going on. So, you know, the owners team and the contracting teams that are there. And then we start to get all of the physical items being freighted and delivered to site. So we always like to say we'd rather be looking at it than for it. So it'll all be laid out, you know, in sequence ready to be erected by pretty much early calendar year. All the hardware will be there and then we'll be, you know, slowly sequencing or just checking Q&A and making sure there's no issues with any of that. But, you know, historically when things are still coming on the water or, you know, they've got, you know, the Suez Canal issues or all that sort of stuff or, you know, going the long way around or ports not accessing it, all those sorts of things, you've just got to, You know, it's all going to plan and store theory. We're really getting past those, you know, really critical items or events to make sure that, you know, they're not going to hold us up. So, yeah, very pleased with where we're at. I wouldn't say there's, you know, massive opportunities on savings. I think when we look at the contingency, we're probably, you know, eating into it at the rate we would expect that it was there to achieve, and it's really around this labour productivity rate going into it with our contractors. So, yeah, working closely with them. We're seeing some repricing savings, but we're also seeing, you know, some small movements. But, yeah, very happy it's on time and on budget and de-risking every quarter, by the way.

That's helpful. Thanks for the commentary, Steve. Thanks, Matt.

The next question comes from Jonathan Sharp with CLSA. Please go ahead.

Yeah, good morning, Stu and team. Just a follow-up question from Mitch's question about Pogo shutdown. Has the maintenance strategy changed in terms of planned maintenance time over a yearly basis or over a per tonnes basis, or has that actually stayed the same and it's just you're producing more, so more maintenance?

Yeah, so stretching it out to the two shutts, what we've looked, even when we kind of, we upgraded the plant from a million to 1.3 million tonnes per annum. We essentially were still keeping to the two shots and trying to stretch out, you know, relines and works. And what obviously everyone experienced and we saw throughout the last few years, these unplanned issues that, you know, things just wore out at a higher rate. And so we've gone now on a bit more of a conservative side And it's not as simple as saying, you know, two or three in a year. It's, you know, taking weeks off gaps between, you know, so we look at meantime between failures, we look at which items can be upgraded so that they can last, you know, align with a major shut so they're not, you know, small pumps or something like that can't have to be brought down to replace or put in duty spares that can, you know, one can fail and you have a second one there that gets you through to the next shut. So all of that. overarching maintenance planning, thinking, alignment of all these things. So it's a bit more like an F1 car coming into the pit and getting everything done at once. That's the attitude as opposed to driving with a car around Australia and fixing your car piece by piece. This is sort of a different maintenance regime. Again, we'll see how it goes and we still expect it to give us a better planned result over the year and absolutely deliver that consistent guidance that we've marked. So it's a natural maturing of the view at the asset and we've got a very long-term multi-decade outlook there. So we're not just trying to tie it up with wire. We're certainly making sure that the investment we're making is for the longer term.

Okay, great. So could I summarise it as an increase in planned maintenance to decrease unplanned maintenance?

Absolutely. And that is the eternal balance of investing, you know, Capital versus operating. And that's, I guess, where we may have got criticism at the time for Finmerston building a $1.5 billion plant, but it was going to be there for 50 years. You're going to get the absolute lowest OPEX and the highest uptime and the reliability because of that investment. You could certainly have done it cheaper and it will break along the way and not give you consistency. So it's the exact opposite. approach to whether it's building mines or um you know running infrastructure um it is that that eternal balance um these aren't aircraft you you've got to keep in the in the air these are um there's there's a balance between opex capex uh uptime um so it is that fine line yep makes sense and just another question on kcgm mill expansion i mean it appears things are going

pretty well, at least on paper, but as you know, as we all know, there's always issues to manage. What do you see as the key risk or challenges in the next six months?

Look, it's probably, we're very pleased with the visibility on all of the elements, the quality of the work, the rate of the work. So we're very happy with that. In my view, it's really the coordination or the overlap of activities and making sure that someone's great work isn't undoing someone else's adjacent to them and that there's not that because we're obviously, we're running a 13 million tonne per annum plant. We've got a fence around it and building a 27 million tonne per annum plant adjacent to it. And so we've just got to make sure that those interactions don't compete or that if it's already in advance risk assessed and planned ahead. So That's the only part, but I've got a large owner's team really looking carefully at all this. We've got a very highly competent contractor there in Primero managing the build, doing great work. So, yeah, very confident with what we're seeing at the moment and it's been de-risked.

Okay, great. I'll pass it on.

The next question comes from Hugo Nicolasi with Goldman Sachs. Please go ahead.

Oh, hi, Stuart and Ryan. Thanks for the update and congrats to the team at Pogo for the performance there. A number of questions on the quarter have already been asked, so I want to try and come back to the mine grade outlook across the portfolio, particularly at Yandel. I appreciate we've tried to touch on this one before and you've historically guided to the outlook for grade across most assets being in line with reserve grade. So if I take Thunderbox as an example, mine grade there has been below reserve grade since 2021. Are you able to give us a bit more colour across the portfolio on how you expect grade to track over the coming years relative to reserve grade maybe? And also just with regard to, you know, the timing of new pits and new areas being opened up?

Yeah, I don't think it's departed too greatly there, Hugo. So I think there's a recovered grade, you know, so there's mining factors that have been applied as we've opened new mines. But I think relative to reserve grade, you know, it's around sequencing. So I think we've, you know, Jundi always historically had quite a lumpy profile because of the nuggety ore body and the sequencing of higher grade that comes in. It's less of an issue down the south because you've got more consistent grades, and therefore it is around, I guess, how much of that material goes into that now expanded 6 million tonne blend. So I think the Thunderbox Underground material Originally, at the higher parts or middle of the ore body was around those 2.2 grams, and on the periphery sort of gets down to 1.7s, 1.8s. So I don't know whether we're anchoring back to original reserve grades there, but it's certainly going to run very productive, very profitable at those lower grades, but that is reality of that ore body. And then it's just, you know, the sequencing of Aurelia or obviously Otto Boers come in, We really haven't seen a huge contribution from Aurelia PID to see whether it's meeting or matching reserve, but we certainly put in very conservative numbers on that to make sure it was economic. And then it's just the Wonder Underground coming in as well. So D-Zone's been consistent. So I don't know the reference to the set-up against reserves, but we're guiding essentially, you know, plus or minus, but 300,000 ounces in the north at Jundee, 300,000 ounces in the south at Thunderbox. It'll swing a roundabout, but ultimately that's what we're working to give us, a 600,000 ounce production centre across that Yandle system with multiple ore sources, all being satellite mines being fed into those plants.

Thanks for that, Keller. So maybe in the near term, just depending on where you are on that sequencing piece, then maybe grades kind of track a bit below reserve grade and then come back up as you start to see a bit more contribution from the higher grade zones. Is that fair?

Yeah, so the two things will happen. If we're over reserve grade, there's a time in the future we'll potentially be under it to average into it, but we will, secondly, every year when we cut our reserves, we've been looking at metal core factors and making sure we're reconciling those models closely. So You know, there's either two things happen. You either downgrade, upgrade your reserve on an annualised basis with that model feedback, or you're looking at your mining factors, which obviously being, you know, dilution that adds from your resource to your reserve grades. So they're very iterative things. I would not be, you know, macro-discounting any of our numbers based on a quarter outcome at any of our operations because they They have swings and roundabouts. You just go back through all the historic quarters. There's pluses and minuses. You know, Jundi will knock out an 85,000-ounce quarter, and then it will knock out a 60,000-ounce quarter, doing exactly the same activity in very similar areas. And reliably, over 10 years, it will have this seesawing to do that. Great.

Thanks, Carlos.

Your next question comes from Hayden Verstow with Argonaut. Please go ahead.

Yeah, morning, guys. Just a quick one on KCGM, Stu. Just noticed there's a stage one stage two engineering work and stage two's only 30-odd percent done. How much of that is the capex? Is there any concern that that's where we might get some capex variability as that engineering work's tidied up?

Yeah, good question. We broke, because it was a very big project, we actually broke it into two stages. We originally worked to try to tender them separately and have them as separable portions to see if there was any benefit in breaking up the project. And it was also around the levelling of the resources. So the engineering doesn't sit there and do all this work on everything and then nothing. They do the first primary critical path elements and then if it goes to the same group, they can then flow those resources into stage two. So it's a lot of that back-end leach tanks and... Yeah, the back end of the flow sheet. So we're on track with it. We don't see... You know, a lot of it is the engineering on a lot of the final design parts as far as, you know, cable trays and, you know, piping and small elements that, you know, even if it double, tripled in price, it makes no difference. It's the smaller capital items and that. The big, major, major works were all heavily defined. And if we... We'll probably look back at how we put that contingency in place, the sort of 150-odd million contingency. It was thinking about what was still moving parts and part of this design was considered in that review. So, yeah, the hardware and the final design is set. It's really around sequencing the work that happens to get it done and the closer they're doing it to that point, the more you see the detail. We're actually seeing some, revised downward pricing for some of those elements, you know, with some of the inputs. They were tended originally at high steel, high copper, high other elements, and then we're starting to see some reduction in costs in some of that final design work now, or even just optimisations where we can do less work and actually get a saving there too. So I don't see it as a threat. I see it probably as a benefit in the near term.

Yeah, OK. Just, I mean, there's not much in here on some exploration, but is there anything that the exploration guys are delivering, Hercules or underground at KCGM, that could actually come in and shift the five-year production outlook a bit?

Yeah, so it's probably the... It's getting the portals and the drill drives and the drilling happening at the moment. We would typically put out an exploration update around November, working out whether we want to do that or whether we just wait till the resource reserve sort of March-April sequence. Yeah, at this moment, you know, the teams, we had $180 million exploration budget and they're headlong into that. So it's really whether I can put drill holes up on a page and it makes not much differences around the formulation of that. As you mentioned, things like Hercules, you know, what does that look like from an overall resource and the capital, et cetera, to accelerate it into a mine? I think that's more likely to come after the resource reserve statement, not in the coming months. All right, great. Thanks, sir. I will just add, we are super excited with the exploration potential across the belts. And then in the mine at KCGM and underground, hence why we'll be putting in probably six portals this year and getting access to them. And then we will be drilling heavily to to prove out that that long-term plan for for phimston undergrounds and then pygarb in itself as well there's some really exciting ones over there a month ago there was some really exciting uh follow-up targets to to advance on so um you know seasonally been able to drill through the through the winter um from surface it's great and then also uh the productivities we're getting out of the underground rigs um is up is increasing so we might get some better results as well out of Pogo. So, yeah, pretty excited about the exploration. Yeah, with extra cash flow at the moment, if there's good projects, we might even throw some more resources towards that stuff. Thanks.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Levi Spry with UBS. Please go ahead.

Yeah, g'day, Stu and team. Thanks for your time. A lot of good questions there, updated on KCGM and Dave's questions around, I guess, price and where we are in the cycle. Maybe can you just sort of tie that together a bit for us, Stu? So how do you think about risks in, I guess, the business and, I guess, the sector overall? There's probably still a little bit of caution towards believing these prices from the investment community, I suspect. How do you think it plays out next?

It is hard to believe these Aussie levels, you know, above 4,000, you know, still coping with 3,000 and that's 4,100. I think that comes back to some of the original questions on do we change our behaviour? And immediately the answer is no. And, in fact, we're enjoying, you know, prudent, disciplined decisions we made in previous years. We're coming out the back of that. So people who are dusting off plans or thinking about, you know, investment decisions at these levels, they've got to really look at the payback periods and therefore they may have to look at hedging and those sort of things to commit to it because you can only enjoy gold price when you've got gold and, you know, we've got lots of it. So I think there's that imbalance there of sentiment, you know, theory, developers, timelines. You know, we're going to be coming out of our, you know, we're delivering into 2 million ounces next financial year. And then the following year, if Emerson turns on, you know, adding another couple hundred thousand ounces, you know, so yes, this year, next year, high capital spend. And we're still net cash, dividend paying, have our buyback active. We have surplus cash generation. So I think it just enhances what we're doing at the moment more so than anything. And we don't have to be considering or what if gold price goes up? Our resource and reserves are calculated at very, very conservative numbers compared to spot. But at the time we calculate them, we also looked at a really robust through the cycle downturn kind of attitude to say, you know, what's a, you know, with a 60 plus million ounce resource, how long does it take that to come out of the ground? And how many decades ahead and what's the cost of gold price going to be? So I think they're all the things that we, we have visibility and runway to assess and consider. But I think, you know, people that suddenly look at gold prices and go, look to gold producers and go, now, what do you do next? We're doing this day in, day out, you know, controlling what we can control. And the biggest ways we can create value, growing production, reducing costs, extending life. And when you overlay gold price, all it does is magnify up and down, but it magnifies the enhancement of that value creation. So, We're sticking to the stuff that's in our control and shareholders should benefit from being exposed to significant leverage to gold prices that we're enjoying at the moment. And I don't ever speculate on gold prices. We don't have to. We've got assets that will survive throughout the cycles and we're pretty much mid-point on the global cost curve. And so there's a lot of assets above us that would struggle with a retracement. and the back quartile of the cost curve gets really steep. It's not flat throughout quarter one to quarter four quartiles. It really gets steep. So there's a lot of things that production's being delivered into at these levels that it doesn't take much of a shock for a lot of those things to fall off. And as you also know, it's not really a simple supply-demand curve for gold. Like other commodities, there's another element with currency overlay in there.

Yeah, got it. Thank you. Appreciate your time. Thanks, Levi.

There are no further questions at this time. I'll now hand back to Mr Tonkin for closing remarks.

Right. All right. Thank you for joining us on the call today, and I appreciate it is a busy morning, lots of reporting. So, again, thank you for joining us, and I look forward to updating you as we continue to advance our profitable growth strategy. And go gold.

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