NESRF - Northern Star Resources Limited (NESRF) Q1 2023 Earnings Call Transcript

Northern Star Resources Limited (NESRF)

Q1 2023 Earnings Conference Call

October 18, 2022, 6:00 PM ET

Company Participants

Stuart Tonkin - Managing Director

Simon Jessop - Chief Operating Officer

Ryan Gurner - Chief Financial Officer

Conference Call Participants

Al Harvey - JPMorgan

Daniel Morgan - Barrenjoey

Levi Spry - UBS

Kate McCutcheon - Citi

Matt Greene - Credit Suisse

Peter O'Connor - Shaw and Partners

Neil Watkinson - Kalgoorlie Miner

Presentation

Operator

Thank you for standing by. And welcome to the Northern Star Resources September 2022 Quarterly Results. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director. Please go ahead.

Stuart Tonkin

Good morning and thanks for joining us today. With me is Chief Operating Officer, Simon Jessop; and Chief Financial Officer, Ryan Gurner.

I’d first like to acknowledge the two recent fatalities in the Western Australian gold industry and express my sincere condolences to family, friends and colleagues of these workers. The gold industry works collaboratively to improve the safety and well being of our sector employees. We are committed to continue to share best practices to eliminate harm in our industry.

I also acknowledge the sudden passing of Peter Bradford IGO Chief. Peter was a tremendous leader of innovation, cultural change and promoting diversity in the resources sector throughout his career. His purpose was to make a difference and his positive legacy will be remembered for decades to come.

Now to our quarter one results. Our September quarterly production of 369,000 ounces at an all-in sustaining cost of A$788 per ounce was slightly below plan, with some delay production expected to be recovered in future quarters. We made significant progress with our growth projects advanced during the quarter and we maintain a full year guidance with widening in the second half.

Our safety performance sector leading with LTIFR 0.7, but we are seeing numerous incidents that have led to an increased focus on training, competency and safety leadership. This is a challenge for the industry, on the recovery of a state skill shortage and high turnover of staff.

So I’m going to speak to the Australian operation shortly. But at Pogo, we’re meeting the mill throughput rate of 1.3 million tonnes per annum, with a major shut completed in quarter one, and development ore grades contributing to the lower produced ounces there. We finished the quarter with 13,000 ounces of gold in circuit and we’ll reduce that over the coming quarter.

Last month, we conducted an investor and analyst visit to Pogo on the back of the Gold Forum America’s Conference and it was pleasing to highlight the significant improvements made at Pogo, which are the foundations for the growth ahead. We’re also very excited about the exploration upside within the mine and regionally which continues to be explored and extended.

Ryan will speak to the financials. However, one highlight during the quarter was the announced A$300 million share buyback, of which we have completed 15% during the quarter. So with our first quarter completed, I’m extremely pleased with progress of our growth projects that we’ve advanced, the simplification of our operations and the outlook of the opportunities ahead.

Now over to Simon. Thanks.

Simon Jessop

Thank you, Stu. For the Kalgoorlie production center including KCGM, Carosue Dam, Kanowna Belle and South Kalgoorlie, we sell 215,000 ounces of gold at an Australian all-in sustaining costs of A$1,762 an ounce. Slightly up on gold sales from June quarter and 2% lower on costs.

This production produced a miner operating cash flow of A$170 million, while we also spent A$91 million on significant growth capital projects. Of this major growth capital project A$60 million alone spent on KCGM open pit mine development.

At KCGM open pit material movement increased 29% higher than the June quarter at 20.4 million tonnes. The tracking hours also increasing 21% as our training and recruitment plans continue to be successful.

Rate at the mine low -- was lowered due to planned growth control drilling and limited access into Golden Pike South. The pleasing out compete physicals have shown we are on track to deliver and in fact are now delivering into our strategic goal of 80 million tonnes to 100 million tonnes of annualized movement.

Progress in the Oroya period [ph] continued as planned. When we commence mining through the historic 2019 failed zone during quarter two. This key growth area remains on track for reestablishing FY 2024 access back into Golden Pike North low cost ounces.

Underground mining for the Kalgoorlie region steady compared to the June quarter at 1.52 million tonnes, but at a higher grade for 119,000 ounces. KCGM’s Mt Charlotte operation physicals was steady, while Carosue Dam increased underground ore tonnes and grades as starting volumes improved.

Kalgoorlie operations at Kanowna Belle and South Kalgoorlie produced lower volumes at 5 grades as grade quality was targeted at a South Kalgoorlie operation over volume. Processing volumes in the Kalgoorlie region was 4.7 million tonnes or 3% lower than the June quarter due to a planned major shutdown at KCGM and placing the South Kalgoorlie mill into care and maintenance. The KCGM shutdown maintenance works was successfully completed early in the quarter.

Going forward all mined ore from South Kalgoorlie will now be processed at Kanowna Belle on a campaign basis. The personnel from the South Kalgoorlie mill and some of the mine personnel have been redeployed back into KCGM and Kanowna Belle. They have been completed within the quarter with a new operating model successfully embedded.

At our Yandal production center including Jundee, Thunderbox and Bronzewing, we sold 102,000 ounces of gold at Australian all-in sustaining costs of A$1,584 an ounce, down 18% on gold from the June quarter and up 12% on cost.

This production produced the mine operating cash flow of A$81 million, while we spent A$67 million on growth capital projects, which is down A$27 million quarter-on-quarter as we close in on finishing the Thunderbox mill expansion. The mill expansion itself spent A$11.4 million of major growth capital during the quarter.

At Jundee operation continued with a strong development performance of 6.2 kilometers and an average mine ore grade at 4.3 grams per tonne. Remaining underground mine currently operated by Northern Star’s Mining Services Division achieved a new quarterly development record for the operation of 1,609 meters with one chamber and commenced all stoping at quarter’s end.

Total jumbo development was also a new Jundee record of 8.1 kilometers for the quarter and will continue to be a key enabler both on drill platforms and increase stoking areas. Processing throughput increased 28% back up to 747,000 tonnes and nameplate as less open pit Julius supply materials fit into the blend.

Thunderbox underground operation continues to increase the stoping mining front with 450,000 tonnes of ore mined up 2% on June quarter. Ore tonnes mined from both underground and the open pits was 1.32 million tonnes, which was 100% above the actual quarter mill tonnes 670,000 tonnes.

Mine ounces was also 54,000 and steady quarter-on-quarter versus a recovered gold of 27,000 ounces. The increase ore tonnes on stockpiles and ounces is in preparation to the expanded mill project.

The Thunderbox mill expansion completed the major toggling and commenced milling on the new SAG and existing Ball mill at quarter’s end. The project remained in line with expectations despite many obstacles over the last 18 months and will systematically ramp up over the course of quarter two.

We are pleased to see some initial results from the early commissioning data showing nameplate metrics in all areas. We expect to be achieving the 9.6 million tonnes per annum run rate during the half two of FY 2023. This project remains a key focus until we deliver consistent throughput with the increased gold volumes to the Yandal region and lowers the overall processing costs.

I’d now like to pass on to Ryan, our Chief Financial Officer to discuss the financials.

Ryan Gurner

Thanks, Simon, and good morning all. As demonstrated in today’s quarterly results, Northern Star remains in a robust financial position. Our balance sheet remains strong as shown out in table three on page seven. The cash and bullion are A$473 million at 30 September and we remain in a net cash position of A$173 million following the payment of A$155 million in stamp duty and A$132 million in dividends, with A$300 million in bank debt drawn from our corporate facilities. Pleasingly, our assets generated positive free cash, with capital expenditure fully funded.

Figure six on page eight, set out the company’s cash movements for the quarter, with key elements being the company recording A$301 million of operational cash flow. Looking ahead to the remaining quarters, this is forecast arise with the completion of TBI mill commissioning in Q2 and stronger margin contribution from Pogo across the remainder of the year.

Quarterly investment in sustaining capital, growth capital and exploration attracting to plan, in respect of the plan expansion at Thunderbox at 30 September, approximately A$30 million remains to be paid on the project which will be dispersed over the coming months. In respect to stamp duty on the merger as previously indicated, A$155 million was paid during the quarter.

As announced with the FY 2022 financials, the company has initiated an on market share buyback. During the quarter 6.1 million units totaling A$45 million over the 11 available trading days were bought back. We intend to restart the share buyback program following the end of the company’s blackout period at the close of market today. And during the quarter the company paid its final FY 2022 dividend of A$11.5 per share totaling A$132 million net of our dividend reinvestment program.

To other financial matters, depreciation and amortization are in line with expectations at the upper end of the guidance range at approximately A$700 per ounce sold and for the quarter non-cash inventory charges to the Group of A$56 million. As mentioned previously, the majority of these non-cash inventory charges relate to the milling of acquired stockpiles at KCGM.

And in respect with costs, we can continue to apply sharp focus and drive cost saving initiatives by leveraging our supply chain and relationships with suppliers to source lowest cost items and receive best terms and the company is not experiencing shortages or material disruptions to its supply chain.

Lastly, in respect of hedging, table four, page eight, set out the companies committed hedge position at 30 September, with overall book being 1.3 million ounces at an average price of A$2,600 per ounce. During the quarter the company extended its hedging policy to include an additional year, meaning commitments can be placed out to four years, previously three years. Further policy the fourth year minimum hedge commitment is nil and maximum is 20% of annual production. And in respect of that, during the quarter, the company placed 200,000 ounces in FY 2026 at an average price of A$2,815 per ounce.

I’ll now hand back to actually for the Q&A session. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from Al Harvey with JPMorgan. Please go ahead.

Al Harvey

Good morning, guys. Just to follow up on the hedging, I just kind of want to get a sense of what the key driver of that extension out to four years. Is that -- is there a particular project that’s concerning you and do you think once we get beyond that growth phase, you’re like -- we will be likely to pull that back to a three-year timeframe?

Stuart Tonkin

Yeah. Look, it’s quite nice in the fourth year there, I will say, zero to 20% of production. And what we saw was some ability to put in some A$2,950, A$2,900 hedges. We obviously added A$200 that 28 -- bit over A$2,800. So with a view of what we see CapEx coming up in a next couple of years, but we’re also going to make a decision around since the mill expansion the next year and so consideration of that gets to that sort of time horizon that we’re looking at. So, yeah, there’s some of the highest cost mines, obviously, like, Kanowna Belle, South Kalgoorlie, we’re conscious of we can’t hedge necessarily the costs, we’re just actually giving ourselves a bit of -- a type of error in each profile, so there’s no light shocks across the business, we can continue and complete our current growth plans.

Al Harvey

Cool. Thanks. And just on the Super Pit expansion, can you remind us of the starting timing and if you’ve got any incremental updates on how we should be thinking about that?

Stuart Tonkin

Yeah. Internally, the next quarter, we’re still getting some finalization and really just looking at the scope and the risks side of it. So getting, say, values on that feasibility level, for that expanded to 24 million tonne case, this is a 70% renovation, I guess. That’s the case we’re really circling up on.

We’ll update in the second half of findings on that, but we haven’t committed to any investment decision date at this point. We want to see Thunderbox mill absolutely cranking, we want to see Pogo’s production delivered in at that rate, just simplified portfolio before we committed to that.

Al Harvey

Cool. Thank you. Just, Stu, one last one in, just on the Carosue Dam underground, are you able to give us a sense of the split of open pit and underground ore and the impact we could expect on the grade profile, I guess, over the next year or two?

Stuart Tonkin

Yeah. I think our -- the profile is fairly consistent going forward. So as one mine starts to slow down, we start commence another underground operation. So during quarter two, the current quarter, we’re expecting to start all three underground operations. So you’ll see consistent volumes from Carosue Dam underground operations going forward.

Al Harvey

Thanks. Thanks, again.

Operator

Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.

Daniel Morgan

Hi. Oh! Sorry. I’m just taking myself on mute. Firstly, I mean, maybe a conceptual question across the Group. What areas of your business running ahead of your plan or expectations and what areas might be a bit behind? Thank you.

Stuart Tonkin

Thanks, Dan. I wouldn’t say anything terribly ahead. We’re on track. We knew we’d have a second weighted -- second half waited year and the growth plans, I guess, it will advance during the quarter.

So, as Simon highlighted, the volumes we have 20 million tonnes moved at KCGM, at least, I mean, that 80 million per annum run rate. So very pleased with the volume today. Very pleased with the progress and actions on these four remediation, did a large, fast class and rectified that first step down on the top of that stop. So that was really, I will say, ahead of plan, but it’s on plan.

And then Thunderbox mill expansion, it’s up and running, it’s really getting that better down consistency and sort of range testing to make sure we just bedded in and keep that consistent production for the second half of the year. So we’re pleased that that hasn’t slipped. It’s really now back getting that volume maintained at that 6 plus million tonnes per annum, which we’ve demonstrated we’re doing. It’s just the feed on that.

Pogo, we’re maintaining the 1500 meters a month, which is great with all that extra jumbo out, but still want to reduce total costs of that site. So that’s the focus. We’re just a bit cautious about pulling that too early and retreating backwards. So you’ll see grades driven by development and more waiting on development ahead of them in the plan, kind of grade 4.3 grams. A lot of that material that’s been fed to get a 6 gram quarter is the development all going in.

So we still probably would say we’re a bit behind on where we want to be with Pogo, but we’re confident the quality of the system, the ore body, the reconciliations, the stoping grades we’re seeing that the second half waiting comes in in the exit rate to move into a 300,000 ounce plan is there. So, there are generally up and down, I would not say we’re ahead of the plan on anything, but we’re pleased with the progress we are seeing so far and fewer things moving at the moment.

Daniel Morgan

Okay. Thank you very much.

Operator

Your next question comes from Levi Spry with UBS. Please go ahead.

Levi Spry

Good morning. Thanks. Thanks for your time, Stuart and team. Lots of focus on cash margins, I guess. So I think, Ryan, you kind of addressed it, but maybe you could just talk us through the waterfall one more time and what we can expect through the rest of FY 2023 in terms of expanding operating cash flow margins, maybe the CapEx rolling off a little bit and what else couldn’t take place of the stamp duty payment that you had in that quarter, we need to be aware of for the next three quarters? Another question after that.

Ryan Gurner

Yeah. Thanks, Levi. Yeah. So if you -- I guess looking ahead, I guess, this quarter case again, for instance, yeah, we’ll get back into more material from Golden Pike. So low cost ounces, low strip ratio, higher grade, so that’s helpful, there’ll be -- this next quarter.

Obviously, we had the shut at KCGM and Pogo. So, we’ve also had, as Stu mentioned, there’s been a bit of hold up in gold at the Pogo circuit. So that will come through. TBI is ramping up and I remind, there -- at Jundee, Simon sort of alluded to as well, we’ll start. So there’s a few things there that, when you talk about margin, and I guess, contributions, that’s what we expect to see over the coming sort of quarters.

In terms of sort of bigger hips are outstanding, so outstanding is all paid. So that’s done. Now, that’s an interim assessment. So we’re still on our balance sheet and other sort of A$70 million potentially that could be paid, but we’re unsure about when that’ll be, because the opposite of that revenues got to assess that that could be in years time. So we’re sort of holding that.

Other than that, cash, which is asked a lot about, we don’t expect there to be a large balancing payments in the second half of this financial year, we will likely go back to some tax installments, they’re not going to be large. But that’s -- that sort of -- that’ll probably be sort of more in April to June for this financial year and other than that, there’s no big ships, I guess, you could say to the cash flow.

Stuart Tonkin

The other thing I’ll add, Levi, just on realized gold prices just under A$2,500 for that quarter, as we’re taking some those lower hedges in. So you’ll see the hedge profile page eight. That starts to average up, we make sure we consume as low as hedges and then average it up. So some of the cash flow here is not realizing that spot in this quarter, we will consume in our lowest -- lower hedges probably impacts that A$20 million, A$25 million quarter.

Levi Spry

Yeah. Thanks, guys. Good answers. Thank you.

Stuart Tonkin

Thanks.

Operator

Your next question comes from Kate McCutcheon with Citi. Please go ahead.

Kate McCutcheon

Good morning, Stu and Simon. Can you talk me through Jundee a little bit, so you’ve finished Julius pit, is that correct? What does the feed look like into guidance this year in terms of underground open pit mining areas? Thanks.

Simon Jessop

Yeah. Thanks. Simon here. Yes. We finished the Julius open pit last quarter. But we still got stockpiles of that material over the next couple of years going forward. And at the same time, during the half two of FY 2022, we started the Ramone underground.

So stoping just commenced for Ramone which is a previously an open pit, mined a few years ago, is now well developed and we’re into starting the stoping phase of that. So, going forward, the main Jundee mines consistent and then we’ve got Julius stockpiles the next couple of years and then it’s really just Ramone stoping going forward.

Stuart Tonkin

And there’s about 190,000 ounces in stockpiles at the annual base that show that feeds can be blended through.

Simon Jessop

Yeah.

Kate McCutcheon

Okay. So Jundee underground and stockpiles going forwards.

Simon Jessop

Correct. Yeah.

Stuart Tonkin

Fed off the mine, Jundee Complex, Ramone and then just top up of stockpiles over the next few years, so fairly consistent production profile.

Simon Jessop

It’s always scientific, one-third pit is underground feed 2 million tonnes and an extra million coming out of stockpiles open pits regional satellite pits.

Kate McCutcheon

Okay. That’s helpful color. Thank you.

Operator

Your next question comes from Matt Greene with Credit Suisse. Please go ahead.

Matt Greene

Hey. Good morning, team. Hope you’re all well. I have got a couple on KCGM. Just your comments on the accelerated weights movement, sounds like there’s a bit of a catch up there. So how should we be thinking about that total material movement at 80 million tonnes to 100 million tonnes? Where do you expect the operation to be placed for the remainder of the year?

Ryan Gurner

Yeah. Thanks, Matt. It is actually spot on plan. So this year we’re targeting 80 million tonne to 85 million tonne of movement from KCGM. Last year we did 66 million tonne. So we’ve been building, we did the fleet replacement in the last 12 months we are a really completed that in quarter four. So quarter one is the first real quarter that we’ve seen the full new fleet as one integrated large plate really starting to move a lot of material. So really, really pleased with the large teacup of 21% more material movement at the KCGM and its spot on in line with our plan.

So that’s what we’re targeting this year, 80 million to 85 million. If we analyze quarter one, it’s an 82 million tonne run rate and we’ll continue to see more optimization and more benefits of the new fleet going forward. So very, very pleased with KCMG open pit material movements.

Matt Greene

Cool. Thanks for clarifying that, Ryan. So just on those new trucks, have you seen -- I mean, we -- you’ve flagged in the past the productivity gains you expect? I mean, how that sort of flowing through a year, obviously -- I mean, obviously, we’ve seen some of it already. But are we seeing the full product of the other number of quarters yet, when do you expect that to fully flow through?

Stuart Tonkin

Yeah. No. We have seen 5% reduction in diesel and sort of close to 15% improvement speed on rank heading up. So really when we back into Golden Pike South at the bottom of the pit, that’s the longest haul. That’s where we really start to see the advantages of the new fleet compared to trucks that are 20 years old, overheating and high maintenance costs. So, yeah, we’re pretty excited to see the optimization of that new fleet going forward.

Matt Greene

That’s great. And just going on cost, Ryan, you mentioned again back in there this quarter. You expect to be mining from that -- for the balance of the year and then just on diesel prices, what are you observing the new flag, because A$70 an ounce previously, are you still sort of seeing costs around that level?

Ryan Gurner

Yeah. In terms of Golden Pike South, so it comes and goes, so last quarter we had -- we mined a small amount of ore from Golden Pike South, then we had a big growth control program in the base of the pit and it really caught us in got back into mining into Golden Pike South.

So it comes and goes depending on the cycle down in Golden Pike South, it’s not continuous mining down there and the other piece around the diesel and the cost is, we took into -- we took the cost from quarter four into our budget. So we’ve probably seen fairly consistent diesel price compared to what we put in our cost assumptions for the FY 2023 budget.

Matt Greene

That’s very helpful. Thanks very much, Ryan.

Operator

Your next question comes from Peter O'Connor with Shaw and Partners. Please go ahead.

Peter O'Connor

I have got three questions. Firstly, on hedging, the shape of the forward curve relative to spot and your comments about adding a fourth year of hedging into your book, what level or what type of discussions have been held by the Board in terms of changing lifting the hedging profile more robustly given that backdrop and opportunity?

Stuart Tonkin

It was really just the addition of that fourth year and it can be nothing. It was the minimum zero percent and the maximum is 20% of the forward production outlook. So with a 10-year reserve backed mine life, 20 plus with the resource conversion, we’re thinking long-term and we build [Technical Difficult] arms around by the Thunderbox mill expansion. It will takes a couple of years to build. We want to make sure that the pay back coming in when on the back of that once we started. [Technical Difficulty] That’s just a view of what that we will use about.

Peter O'Connor

So no changing the shape of the curve in the early years, what’s given that gap at the mine full curve as the product?

Stuart Tonkin

No. So as we consume on a quarterly basis, you’re pulling there probably 100 ounces in a quarter. You’re replacing that. You are replaced and get out three years or four years out. So you’re keeping the same profile consistent, we’ve got a band obviously move within. It’s really also about pricing. And we’ve seen that contango pick up about A$100 a year on that forward curve, so it’s not about just trying to start the SAG in the first four months, taking out A$2,800, A$2,900 plug in hedges in the third year. When our always sustaining costs projections go down, that’s pretty good mine expansion view of some of the payback on the -- what we’re doing with the valuations of these investment decisions, that’s actually really helping us get confidence from those costs.

Peter O'Connor

Is that due to the buyback and the cadence of the buyback, it would appear to casual observer that your buyback is slow, could you just map out what’s the strategy for buying, what percentage could go or what measures do you use when you are buying back stock and what do we expect going forward is the last quarter reflection of that process?

Stuart Tonkin

Yeah. So we hand that over to a third-party to be managing within that realm. But I think what people didn’t understand is from the announcement, we needed to give 14 clear days for the market advising of that.

So once we can have that full year results, we will thankfully blackout for 14 days. So we couldn’t be buying. So we only really achieved 11 days of buying in the quarter. And in that we achieve A$45 million of buybacks in 11 days and we set anywhere between sort of 8% to 12% of the daily volume. So we can’t move.

There’s very rough rules, there’s percentage daily rules and we’ve given instructions to third-party who’s buying. So it’s got to be open transparent for shareholders to understand that and that’s 11 days of buying A$45 million and we’ll turn it back, I call it, tomorrow 24 hours clear this announcement today.

Peter O'Connor

Of that again sub rate 8% to 12% would be a good guide for the buying pattern going forward?

Stuart Tonkin

On an average day 20%, yeah, 10% is pretty sensible. But, yeah, we’ve got ability to pick that up or down, but it’s really driven by the pay wall not changing, materially changing or working without that, that pay wall.

Peter O'Connor

So if you’re looking to zero guidelines you’ll buy every day.

Ryan Gurner

No. Third pay, that’s right. So there’s a limit to what we can buy based on, it -- we can’t buy where the five-day prior is above 5%. So, yeah, we’re limited. There’s a regulation, as Stu said. So we’ve been in the market between to 10% or 8%, I guess, percent to be exact 8% to 12%. So it’s just a -- it’s just mechanical. So we intend to start tomorrow and get back to it.

Peter O'Connor

Understand. And it’s available too, but as long as I’m saying we buy every day, you’d be buying a pattern of days to be random.

Stuart Tonkin

No. Because we have to sit inside those rules and when we can buy we will be buying, but we’re already restricted. And many of the premises behind all these buybacks is the company shouldn’t be able to influence -- materially influenced share price. This is about us buying back our own shares with our own cash, shareholders money to get that return, because we see ourselves at a discount to their corporate models. So it’s not about trying to compete with everybody else out there buying and selling, it’s about a sensible way to return capital -- shareholders capital prior to buying and cancelling those shares at a discount.

Peter O'Connor

Okay. Got it clear to get that confirmation. And lastly, the skills issue and WA issue? Other companies have bought up over the last one or so weeks. How does this play out? You can clearly get bums on seats now for more dollars. But skills aren’t necessarily there. It’s just a multi-period process to get skills up and does that mean the industry is going to drag in terms of productivity for extended period?

Stuart Tonkin

I mean, absolutely, it takes years and so you can get people to a competency. But to get them operating full efficiently, full speed and a lot of our key frontliners it’s decades to get them really to that frontline average. So the strength we have is the Internal Mining Services division and we’ve kept a very stable team there and performing very high, high quality and high safety.

But those challenges are for the sector where there was a skill shortage and there has been a dilution across the sector in that regard for everybody. So we have to increase efforts, energy, focus, training, supervision and sometimes things just stop, because you’re not prepared to go forward in that regard, so that’s when you are living through COVID impacts, which are minimal now, you’re basically triaging what your activity you’re doing on a day. You’re not just asking people to do more with less recycle or cut corners. So I think they’re the things that people need to be patient with, it will take a number of years to raise the overall competency.

I think, Dan -- Dan’s question from the start saying, are we ahead on the plan? No, we’re unplanned and there’s some things that are behind, but we’ve consciously said, don’t do it and [inaudible], say, if we’re behind on something, it’s been almost a deliberate reallocation of resources to make sure we’re doing fewer things well, in recognizing that’s we will get.

Peter O'Connor

So does that mean the normalization journey to lower costs or one normal cost is slower because of that?

Stuart Tonkin

Absolutely takes written, you’ll see that, you’ll see that from an expiration spend, we can’t get rings, we can’t get outside through. So you’ll actually see reduced overall spend. But that’s not necessarily a good thing, because you’re not getting activity done. So you will see that.

But you’re back in kind of 15,000 ounces into this quarter for us, got our cost come back into the reported guidance. A lot of that go into could comes back into the plan in future quarters, so it doesn’t takes in back in check. So it’s not materially out of the rails and we’ve got ability to flex and it’s quarter one.

So I will say this is the full adapt and change and modify things along the way. But at the moment, we’re still sticking to what we set out to achieve. I think the great highlights things like the volumes at KCGM. It’s only one quarter ago, we are still didn’t have the new trucks commissioned.

We were still losing 20, 40 truck drivers to the Ion ore players in a quarter, still hadn’t tempted vacancy across our workforce. We did a quick three months, we’ve actually met the volumes, made up the trucks and hitting those metrics. So, yeah, things can move back relatively quick with it -- with attention.

Peter O'Connor

Thanks. Thanks so much, Stu.

Stuart Tonkin

Thanks, Peter.

Operator

Your next question comes from Al Harvey with JPMorgan. Please go ahead.

Al Harvey

Yeah. Follow up guys. Just at Kal Ops, I guess, looks like we’re seeing a bit of efficiency improvements quarter-on-quarter roll through? Is that a product of literally just switching off the Jubilee meal or is it those efficiency gains from shifting personnel around? And I guess, is today’s numbers about 40,000 ounces at A$2,100 an ounce, is that kind of the go-forward rate or you think you can improve that further especially on the cost side?

Simon Jessop

Yeah. Thanks, Al. Simon. And yeah, look it is pleasing to see some costs -- cost reduction in the Kal Ops. We probably see that looking a bit better going forward. We have made the changes turned off at a very high cost mill at HKO [ph] and even when tracking costs we’re in front or trading that ore over the Kanowna Belle. Plus, it’s using rather being shorter two process plants on people and personnel. We’ve now filled up a lot of vacancies across the Board.

And the reason we decided to do that was a 30,000 ounce reduction to the Kalgoorlie Ops region, but at the end of the year will be A$20 million better off cash flow. So that’s the processing side. Obviously in quarter one, we were still running for sort of half the quarter, the South Kalgoorlie process plant and then we turned it off and there’s some care and maintenance costs at the back of the quarter. So we’re pretty well executed that now. So going forward it will be just proved Kanowna Belle.

The other side of the coin is on the mining side, so really focused on quality and grade at South Kalgoorlie and pulled a jumbo and associated equipment and manning out that operation and redeploy to Mt Charlotte where we see huge underground growth going forward, as well as some pretty interesting areas around Kanowna Belle higher up in the mine.

So I think going forward, it’s representative in terms of ounce production of what we’ve done last quarter, but we should see lower costs going forward from the Kalgoorlie Ops, but a good step forward on the decision that we made in July around the mill and the mine.

Al Harvey

Thanks, Simon. And just one more for me, the A$37 million of exploration spend in the quarter, obviously, annualizing higher than the A$125 million guidance. Is that just a product of access at Pogo or is there something else? And anything particularly exciting from the exploration front you guys want to talk about?

Stuart Tonkin

Yeah. Thanks, Al. About 300 geologists get a bit excited straight out the gate in July, so a lot of it is seasonal profile on the spend. So you’ll see through. Obviously, the winter months in Pogo surface start tough and then you’ll see, again, with losing 10 mines, few of those things where we just don’t get out on grounds. So, yeah, it is a bit front loaded, but we still got A$125 for the full year then.

Al Harvey

Cheers too.

Operator

Your next question comes from Neil Watkinson with Kalgoorlie Miner. Please go ahead.

Neil Watkinson

Yes. Good morning, gentlemen. I’m interested specifically in the East wall remediation situation at Super Pit. Can you tell me how fast through that process you are, when you expect it to be completed and once complete, what effect that will have on production at the Super Pit?

Simon Jessop

Yeah. Thanks, Neil. Simon here. So in terms of the East wall remediation, we’re about 60% through in terms of material movement through the wall. So really pleased with how that’s been progressing over the last period.

Going forward, we still got probably, yeah, 12 month-ish to finish that, but as we get lower through the East wall, we’ll get -- we’ll gain further access back into Golden Pike North. So our plan all the way along with FY 2024, reestablish access in back into Golden Pike North, which is the northern end of the bottom of the pit.

So, yeah, on track for really 1.2 million ounces in Golden Pike North, a very low strip ratio and high grade. So that’s been a key focus for us over the last few years, but about 60% completed and yeah, on track for FY 2024 reestablishing access again. And…

Stuart Tonkin

And that sounds like that last mill was excellent sort of stats that show that remote firing, remote access drawn last and that obviously can be seen from the lookout for huge progress on that first mine shot coming back down through that scar. So it’s a fantastic achievement, taking a lot of work to get to that point for the…

Neil Watkinson

That was just last the one that I said that I just gone, was it?

Stuart Tonkin

Correct.

Neil Watkinson

Yeah. Sure.

Simon Jessop

Yeah.

Neil Watkinson

Any sort of unexpected challenges that you’ve found during this whole process so far, during dealing with the wall remediation?

Stuart Tonkin

Not other than, sorry, not other than just, it’s not something that’s written in a textbook. So the team is definitely needed to risk assess, redesign, relook at all the information and take it step-by-step. So, again, they’ve taken that approach and it’s working. So but this is not something that is just standard work. So there’s a lot of brains on fixing this idea. Very pleased with the progress has been made.

Neil Watkinson

Excellent. Thank you very much.

Operator

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

Stuart Tonkin

Great. Thanks for joining us on the call today and as you heard this morning is clear, we advancing our growth projects to deliver a strong half two, with efforts to reduce costs underway as we delivered growth across Pogo, Yandal in the near-term, in KCGM over the subsequent years. We maintain a profitable growth strategy to 2 million ounces by FY 2026. Whilst measuring success by maximizing shareholder returns through disciplined and responsible investments. Have a good day. Thanks.

Operator

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

For further details see:

Northern Star Resources Limited (NESRF) Q1 2023 Earnings Call Transcript