Negative Points

• FY27 production guidance of 1.5 million to 1.65 million ounces is expected to be weighted to the second half, reflecting planned major shutdowns and the KCGM commissioning ramp-up.

• All-in sustaining costs are forecast to rise to $3,050-$3,450 per ounce in FY27, impacted by approximately 5% inflation, higher royalties, and increased oil price assumptions.

• The company faces operational challenges, including a rationalized mine plan at Jundee that reduces primary ore production in FY27, supplemented by lower-grade stockpiles.

• Total capital investment for FY27 is significant at $2.6 billion to $2.9 billion, with a large portion allocated to growth capital and the Hemi project, which carries execution and approval risks.

• The KCGM ramp-up carries inherent risks, with guidance reflecting a balanced assessment of potential downside scenarios related to ramp-up performance, stockpile grade variability, and recovery rates.

• The Hemi project's final investment decision is targeted for late FY27, subject to external approvals, which introduces uncertainty regarding the project's timeline and capital expenditure.

Q & A Highlights

Q: What are the expectations for the KCGM ramp-up, and when will the company provide further updates? Is power supply a constraint? A: Steven McClare, Chief Technical Officer, stated that the 27 million tonne per annum processing expansion is in the commissioning phase and on schedule. The existing plant will operate through August before tying into the expanded facility in September. The company has achieved all commissioning milestones to date, giving confidence in the FY27 guidance. Power is not a constraint, as KCGM has a good connection and exclusive rights to the 110-megawatt Parkeston facility. The new thermal power project will improve efficiency long-term, but the ramp-up will follow a measured approach, with a 2-year period anticipated to reach the full 27 million tonne capacity.

Q: Can you provide more detail on the conclusions of the Jundee operational review and what has been incorporated into the updated mine plan? A: Ryan Gurner, CFO, explained that Jundee has faced grade decline and increasing development costs. The review has rationalized the operating footprint to maintain a steadier production profile, focusing on core ore zones. The company has rightsized equipment and people to slow activity and focus on quality. For FY27, the first half will be a setup period for development, with higher-grade ore sources expected in the second half, resulting in a lower tonnage but higher-quality ore source plan.

Q: What is the expected quarterly shape of the KCGM ramp-up, and how should we think about the transition from the old mill to the new one? A: Stuart Tonkin, CEO, stated that the ramp-up will follow normal industry averages, starting rough and getting tuned and optimized over time. The company anticipates a 2-year ramp-up to reach the 27 million tonne denominator. The old mill will continue operating as it has for years until September, when the operation changes over to the new expanded facility.

Q: Can you provide color on the KCGM production guidance range, specifically the assumptions for mill throughput, head grade, and the drawdown of low-grade stockpiles? Are any commissioning costs capitalized? A: Ryan Gurner, CFO, stated that the guidance range was informed by industry benchmarks, an independent technical assessment, and early commissioning data. The range considers downside scenarios relating to ramp-up performance, stockpile grade variability, and recovery performance. Regarding costs, some commissioning costs will be capitalized, including power, water, some reagents, and operational people, estimated at $10 million to $15 million maximum, which is covered in FY27 guidance and contingencies.

Q: Has the Board's thinking changed around the optimal portfolio of Northern Star over the next three to five years, given external calls for a broader strategic review? A: Ryan Gurner, CFO, responded that the company is always evaluating the strategic fit of its assets within the portfolio and has been active in that regard in the past. Nothing has changed in their approach.

Q: What is the expected impact on recoveries at KCGM during the ramp-up period, particularly when milling predominantly low-grade feed before the integration of the Gidji facility? A: Stuart Tonkin, CEO, explained that the plant design provides a 1% to 2% uplift in recoveries over the longer-term average, but this requires Stage 2 to be completed. During the interim period, the company will be feeding material to Gidji and producing at a constant rate without that uplift. Steven McClare added that overall recovery numbers will be slightly lower than historical levels until the improvement from the capital investment is realized.

Q: Is the FY27 sustaining capital spend of approximately $550 per ounce the right run rate going forward, or are there one-off items embedded in that figure? A: Ryan Gurner, CFO, noted that there is contingency in the profile and some lumpiness, including mid-life rebuilds at KCGM and deferred stripping at Bannockburn, which is now in commercial production. The total cost at Yandal is similar to last year's guidance, just with a bring-forward of stripping costs. There is also discretion in some of the capital, as demonstrated last year when the company guided $750 million but spent about $650 million, prioritizing capital based on operational and business performance.

Q: Regarding the Hemi project, are there any risks to receiving all primary and secondary approvals by the end of 2026, and does the FY27 capital expenditure guidance assume early works can commence in the second half? A: An unidentified company representative stated that the company does not control the approvals, but they are tracking to plan and are not currently a constraint aligned with the FID. The early works are minor matters like camps, which can be done whenever approvals are received. The $200 million to $250 million guidance for FY27 is focused on progressing engineering design, NPI works, and long-lead items, with FID targeted for late FY27.

Q: Can you explain the noncash charges associated with stockpile drawdowns, particularly at KCGM, and how they impact the AISC guidance? A: Ryan Gurner, CFO, clarified that for KCGM, the expectation is neutral to a small buildup of inventory, as the drawdown of high-grade material will be offset by increasing inventory costs across the business due to sector-wide cost inflation. For Jundee and Carosue Dam, there will be noncash charges from drawing down stockpiles. Importantly, the stockpiles carry no cash costs, so they come through free from a cash flow perspective, though they will have a P&L charge.

Q: What are the opportunities to beat the KCGM production guidance, and what work programs are being implemented to potentially exceed expectations? A: Ryan Gurner, CFO, acknowledged that while the new mill is phenomenal, it hasn't been demonstrated yet, so the company is being cautious. Steven McClare, CTO, added that the guidance is a very prudent assessment based on achieving all commissioning milestones to date. The team will continue to build a data set and methodically apply it to the future, keeping the market updated as progress is made.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .