NSTYY - Northern Star Resources Limited (NESRF) Q3 2022 Results - Earnings Call Transcript

Northern Star Resources Limited. (NESRF)

Q3 2022 Earnings Conference Call

January 18, 2023, 6:30 PM ET

Company Participants

Stuart Tonkin - Managing Director & Chief Executive Officer

Ryan Gurner - Chief Financial Officer

Simon Jessop - Chief Operating Officer

Conference Call Participants

Levi Spry - UBS

Daniel Morgan - Barrenjoey

Matt Green - Credit Suisse

David Radcliffe - Global Mining Research

Kate McCutcheon - Citi

Mitch Ryan - Jefferies

Neil Watkinson - Kalgoorlie Miner

Sean Smith - The West Australian

Presentation

Operator

Thank you for standing by, and welcome to the Northern Star Resources December 2022 Quarterly Results Conference Call. 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 and CEO. 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 am pleased to present our December quarter results marking the midpoint of FY ‘23. We have continued significant progress on our growth projects in line with our profitable growth strategy to 2 million ounces per annum. Our December quarterly production of 404,000 ounces at an all in sustaining cost of A$1,746 an ounce demonstrates their capability to operate at A$1.6 million ounces per annum. And for the second half higher forecast production is expected to drive unit costs lower as Thunderbox delivers expanded nameplate capacity and grade improves at Pogo. We maintain our full year guidance of A$1.56 to A$1.6 8 million ounces at an all in sustaining cost of A$1,630 to A$16 90 an ounce.

Our safety performance is sector leading with a lost time injury frequency rate of 0.9, but we continue to see numerous incidents. So our concerted focus on training competencies and safety leadership is on-going. This is reflective across the sector with staff turnover and skill shortages continuing to challenge improvement in safety performance.

Simon will speak to the Australian operations shortly. At Pogo, we're continuing to make the mill freight book rate of A$1.3 million tonnes per annum with an increased percentage of stocking tonnes now it's 72% of the blending.

Overall grade improved quarter-on-quarter, but some stock mining dilution on the margins of the deposits or reduced average mill grade and ounces sold at 65,000 for the quarter at an all in sustaining costs of US $1,362 an ounce.

The second half focus at Pogo is improving mined grade to deliver a full year guidance. While it is very pleasing to see unit cost improve at Pogo and the operation generated mine operating cash flow of 30 million U.S. dollars in the quarter, we have more optimization work to do at Pogo in the remainder of the year.

During the quarter we released an exploration update highlighting continued new discoveries as well as in mine extensions across the group. The new Joplin deposit at Kanowna Belle underground provides mine life extension there and the regional drilling at Red Hill discovered significant mineralized system providing growth optionality for the Kalgoorlie region.

The Yandal north and Yandal wonder discoveries are in close proximity to the newly expanded Thunderbox plant. And in Alaska, we continue to extend the Goodpaster deposit beyond the existing high grade resource.

Our financial position remains very strong, which Ryan will talk to shortly. And we are well leveraged to capitalize on the strengthening gold price with fully funded growth commitments advancing. We have growing cash earnings, which enables prudent capital allocation including organic growth, dividends and share buybacks all with a focus on delivering superior shareholder returns.

In regards to the Fimiston mill expansion study, our team continues to evaluate the most compelling design options and actions to de risk its execution to present the case towards final investment decision.

Now over to Simon's Australian operations.

Simon Jessop

Thank you Stuart. For the Kalgoorlie production center, including Casey [Ph] Jim, Carosue Dam, Kanowna Belle, in South Kalgoorlie, we sold 210,000 ounces of gold at an Australian all in sustaining cost of A$1,738 an ounce down on gold sales from the September quarter while A$24 an ounce lower on costs. This production delivered a mine operating cash flow of A$177 million, while we spent A$99 million on significant growth capital projects. Of this major growth capital total A$62 million was spent on KCGM open pit mine development.

Carosue Dam open pit material movement increased to 21.1 million tonnes in line with our material movement plant. Pleasingly, truck hours increased 13% as we take advantage of the new open pit fleet. Grade of mine ore was higher due to increased volumes and higher grade ore from Golden Pike South. The open pit physicals have now delivered 41.5 million tonnes of total material movement for [Indiscernible] which is delivering into our strategic goal of 80 to 100 million tonnes per annum of annualized movements. This is an amazing effort from the team.

Progress in the equal remediation area continued and remain on track, re-establishing airport 24 access back into Golden Pike North High Grade. Underground Mining volumes for the Kalgoorlie region increased 5% compared to the September quarter to deliver 115,000 ounces. KCGMs underground Mount Charlotte operation lifted volumes by 19% to 470,000 tonnes as access to greater stoping areas came online. This was very pleasing and it's part of growing this operation to 3.5 million tonnes per annum by FY ’26.

Carosue Dam increased ore tonnes while grade was lower due to segments constraints in Colorado. The Porphyry underground mine commenced during the quarter and it's well established after three months of development. Kalgoorlie operations Kanowna Belle and South Kalgoorlie produce consistent volumes quarter-on-quarter, while all-in sustaining costs reduced to A$114 an ounce with margin focus was a key driver for the total.

Processing volumes in the Kalgoorlie region was 4.8 million tonnes or 2% higher than September quarter despite no processing activities at South Kalgoorlie mill, which was moved into care and maintenance during quarter one. The revised processing strategy of three plants and the Kalgoorlie Production Center has been successfully established, right and recovery is consistent quarter on quarter. And at the end of production center including Jundee, Thunderbox and Bronzewing, we sold 128,000 ounces of gold and an Australian all-in sustaining cost of A$1,591 an ounce, up 26% on gold from September quarter, and flat on all-in sustaining costs. This production delivered a mine operating cash flow of A$112 million, up 38% from September quarter, while we spent A$56 million on growth capital projects A$11 million lower quarter-on-quarter.

Bronzewing spent A$8 million on major growth capital during the quarter as we develop this mine for the expanded process plant. At Jundee operation achieved a new record quarterly underground ore mined with a 39% increase in all at an average mine freight of 4.1 grands per tonne. As a result mined ounces increased 93,000 ounces for the quarter, up 31% from the September quarter. Total Jundee development this operation was steady at eight kilometers to the quarter and will continue to be a key enabler of both on -- platforms and increased opening areas. Processing throughput was steady at 740,000 ton back to nine platforms.

Thunderbox underground operation continues to increase the Stoke mining fronts with 503,000 tonnes of ore mined in the quarter. Ore tonnes mined from both underground and the open pits increased to 1.7 million tonnes, up 30% on September quarter and exceeded the processing volume by 50%.

Open pit mining volumes more than doubled to 4.6 million VCMs mined during the December quarter. The substantial increase in material movements is very pleasing and will provide future access to all sources of Thunderbox. The [Indiscernible] mined ounces were 62,000 ounces, increasing 15%. Processing volumes in the Yandal region increased significantly quarter-on-quarter to 1.95 million tonnes. As previously mentioned, Jundee was steady with the throughput growth coming from the Thunderbox mill expansion. The new process plant continued to successfully ramp up milling 1.2 million tons for the quarter. We will systematically be ramping up processing volumes as it stabilized running the new plant over the course of the second half.

It is pleasing to see spring capacity at or above nameplate [Ph] run rate of 6 million tonnes per annum already, while our focus is on bending in the new operational processes for this expanded plan. The Thunderbox project remained a key focus in the second half as consistent throughput will drive lower costs.

I will now like to pass over 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 set out in table four on page eight, with cash and bullion of A$495 million at 31 December. And we remain in a net cash position of A$145 million with corporate bank debt of A$350.

The Company has recorded strong cash earnings for the first half of FY ‘23 which is estimated to be in the range of A$460 million to A$475 million. A reminder is that our dividend policies based on 20% to 30% of cash earnings. Pleasingly, all three production centers generated positive free cash flow, with capital expenditure fully funded.

Figure sheet is on page nine sets out the company's cash and bullion and investments movement for the quarter with key elements being the company recording 354 million of operating cash flow. Looking ahead to the remaining quarters, this is forecast to rise with TBO positioned to operate at an annualized rate of 6 million tonne capacity during the second half of FY ‘23 and stronger margin from Pogo through high grade stoke contribution across the remainder of the year.

Quarterly investment in sustaining capital growth capital and exploration are tracking to plan. Growth capital investment during the quarter included waste material movement at KCGM, establishment of Porphyry underground and CDO, remote underground at Jundee are really open pit development, auto bore pit development and TBO mill expansion.

In respect of the companies on market share buyback, during the quarter 9.4 million Northern Star shares totaling 82 million were purchased and cancelled. Since initiation 42% of the 300 mill program has been completed with 15.5 million units being purchased and an average of A$8.21 per share. The 12-month program remains open until September 23.

On other financial matters, depreciation and amortization are in line with company guidance provided of A$600 to A$700 per ounce. First half depreciation is at the upper end of the guidance range at approximately $680 per ounce. And for the quarter, non-cash inventory charges for the group of A$57 million or A$140 per ounce.

As mentioned previously, the majority of these non-cash inventory charges relate to the milling of acquired stock piles of cash at KCGM and for FY ‘23 this charge will likely be approximately 50% to 60% higher than FY ‘22.

In respective costs, our business like all others is experiencing pressures. The size, scale and flexibility within our portfolio positions us to maximize efficiencies and productivity in the business, which provide opportunities to reduce costs. In addition to this, our fleet investment program at KCGM and plant expansion at TBO, which is now complete, means we are well placed to navigate the current challenging cost environment. We remain confident in a stronger second half of the year in terms of both production and costs from maintaining, mining and processing volumes at Pogo, with a focus on high grade stope delivery ramped up in throughput at Thunderbox to 6 million tonnes per annum and increased all volumes for Mount Charlotte and greater contribution from the lower cost ounces of Golden Pike at KCGM.

Lastly, in respect of hedging, Table five on page nine sets out the company's committed hedge position at 31 December. During the quarter, the company delivered 174,000 ounces into contracts in place to 145,000 ounces in FY ‘26 at an average price of A$2,954 per ounce. The overall hedge booked being 1.2 8 million ounces and average price of A$2,673 per ounce.

I'll now hand back to Ashley for the Q&A session. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. Your first question comes from Levi Spry with UBS. Please go ahead.

Levi Spry

Morning. Morning, everyone. Happy New Year. Thanks. Thanks for the call. Just a question on the KCGM plant expansion FYD. Can you just update us on timing there? And just remind us around the I think in the last press I mentioned the three year build from [Indiscernible] ID is there any any change to sort of timing and scope on that?

Stuart Tonkin

Thanks Levi. So yes, we're still working into the final detail on the two elements of that is getting much the engineering final design for the expanded case and the tighter accuracy on that pricing. And the second part is that de risking elements for the execution phase. So ensuring some of the long lead items and/or pre works to be advanced or progress. So we haven't given a date as to what when FYD would be reviewed. But we're certainly in the second half, charging ahead with the information provided to our board to give consideration so I think it's more likely in the next guidance year for us to look at what we're doing there. But it's it's still very compelling. And still advancing.

Levi Spry

Right. Thanks, Stuart. And, and just on the just suddenly the South Kal mill, few clients, suddenly gold's going up much higher in the next few months. What is the sort of status there is there? Is it about people or if it were, if you're comfortable, that gold's a couple 100 bucks an ounce higher by the end of the year? Can you turn it back on? Is it really a an optimization game? Or is it still constrained by people?

Stuart Tonkin

It's probably linked to your first question in that tweet, move it from 13 million to 24 million times. The catch up capacity for that extra million that Star offers, we'll get we'll get gobbled up quick. Say it's not about turning it on for a million times, unfortunately, some margin and cash because it was one of our higher cost mills in the region. And in April, I guess that’s the three mills at [Indiscernible] and obviously Carosue. And they've got great ability for teams, good focus.

So strategy was the right one. It's worked. And we're happy with it. And as far as the vesting and otherwise, it's happy, happy for it to sit there. Not operating because it doesn't compete with us, as well. So it's certainly contributing to the cash generation in the region. Not my advice to turn it on. He's on.

Levi Spry

Thanks, Mate. Thanks for time. Thank you.

Operator

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

Daniel Morgan

Hi, Stuart and team, you just highlight Golden Pike access being steadily regained in FY ‘24. Is that going to be material in terms of all access? Or is it mainly just steady, steady growth over time from FY ‘25 onwards? Thank you.

Stuart Tonkin

Yes, thanks for that, Daniel. So on the – in terms of access back into Golden Pike north as part of our growth in ounces at KCGM, up to 650,000 ounces in FY ‘26. So Golden Pike North is the a key driver of those increased ounces over the next few years. So we're remaining on track with with a wall in terms of that capital to pull that down. And during FY ‘24, we’ll start to regain access back into Garden Pike North. So that's all in the in the current plan, as we've outlined with the growth in ounces in KCGM.

Daniel Morgan

Okay, thank you very much. Just switching to Pogo, and the grade, which was 6.6 in the quarter. I know it was telegraphed that you'd be a lot weaker in the first half and stronger on the second. What are your expectations on grade in the next couple of quarters? If you could go on to that place?

Stuart Tonkin

Yes, thanks, Daniel. So north of eight grade is obviously the reserve grade at eight and a half. That's our ultimate landing point. But with what we're seeing in the near term plan, this is my dilution in those states that were addressing the summons and the legacy development in that place. But yes, certainly just really looking at where that is. But our current plan forecast that we deliver into the guidance is there for the full year to achieve that there is some capacity to mil a bit harder than the 1.3. But that's more linked around the shutdown timings. And essentially above eight grand, delivers that. So it's a real focus on quality over quantity. But the real impressive thing I got was really the unit costs kept coming down. And you're still there's still plenty of work to optimize that in the second half of the term we are focussing on.

Daniel Morgan

Okay, thank you and an accounting question. When you define cash earnings, one element of that is cash tax paid. I presume that stamp duty payments that I think were made in September quarter is not included in that. Can you just confirm?

Stuart Tonkin

Yes, that's right. Yes. So it's not included in the cach earnings for this part.

Daniel Morgan

Okay, thank you very much.

Stuart Tonkin

Thanks Dan.

Operator

Your next question comes from Al Javi [Ph] with JPMorgan. Please go ahead.

Unidentified Analyst

Congratulations Stuart and team. Just a quick one on Thunderbox. Just on the path of that 6 million tonnes per annum, right? Do we get that from pretty much now? Or did that rate more like the final quarter of 2023? Maybe you can just provide us with an estimate of the exit rate into the end of 2022?

Simon Jessop

Yes, thanks. Alice on the -- obviously, last quarter, we started the commissioning and changeover and did the motor time. So that was a big quarter for us. During the second half, we’ll progressively ramp up the process plant. So it's just betting in everything to consistent high utilization high run rates. So our plan is that the exit rate of FY ‘23 is at 9.

Unidentified Analyst

Thanks, Simon. And just looking at the buyback, obviously, the cadence picked up in the quarter, I was just wanting to understand whether that can be sustained. I assume there's a few blackout periods into reporting. And just how you guys are thinking about, I guess the returns from a buyback? I mean, obviously, the average price you've achieved so far has been pretty good. And the stocks now trading a fair bit higher. What our options are there to deploy that capital over the state of dividend policy, but is there any upside to special dividends or any other things we should think about from a capital management perspective?

Stuart Tonkin

Yes, thanks. So you're right in as much as [Indiscernible] but we average it at $8.21. So yeah we're still looking at it all of these things, these instruments through the lens of superior returns. So when we come back to exactly that your dividend calculator 20% to 30% of cash, any decisions to come up in the year round 2% expansion, capital allocation, those types of things, we weighed a lot. So yes, we're going to back out the moment on the buyback. You take them through till September, this calendar year. So these things also float with gold prices, and where valuations sit. So it's an instrument in the toolbox. We'll keep it live and keep evaluating returns on it.

Unidentified Analyst

Sure, thanks to you.

Operator

Our next question comes from Matt Green with Credit Suisse. Please go ahead.

Matt Green

Hi, good morning all. Simon, I've got a couple on Thunderbox. Just firstly, can you give us an indication of the volume and growth portfolio you are expecting in the second half from the open pit?

Simon Jessop

Yes, thanks, Matt. Fairly consistent, you're not going to see, you obviously got increasing volumes. So you're not seeing huge changes in the grade profile and the reserve profile for the Thunderbox operations is 1.6 million to tonne. Last quarter, we milled 1.5. So it's not going to change a great deal over the journey. It takes more increased contribution from the Thunderbox underground, these zone, we're starting to get into slightly better grade as we get deeper into the into the pit there. So it's, it's fairly consistent around what we delivered in the last in the last quarter.

Matt Green

That's helpful. Thank you. And then just secondly, you mentioned you're testing the sprint capacity of the mill, as you're commissioning it. Has this given you any early indication what throughput rates you think the mill could settle on a more sustained basis relative to the six million rate [Ph]

Simon Jessop

We certainly have seen short periods where we're in excess of 6 million tonnes. But our real focus is just around getting that consistency at that rate. And then obviously, like most process plant over time, you optimize things and gradually push it up. So first, first, first focus for us in FY 23 is just bedded in at the exit rate at nameplate. And then over the next six months we’ll really stress test that as to going into FY ‘24 and beyond.

Matt Green

Okay, that's great. And my last question is just going on to Pogo. Stuart you mentioned with weightage [Ph] you can push that mill beyond 1.3 million tonnes. And I guess last few quarters you've been able to reach nameplates of the expanded mills. But do you? Do you feel this is the upper capacity? Or is this going to push it harder? If you can deliver the higher mining rates? And if so what does that involve in terms of permitting and sort of any sort of upgrades in front of the mill? What would you like to do? What's What do you see 1.3 has really been the sweet spot here.

Stuart Tonkin

Yes, so we haven't. There's no permitting constraints really on time throughput things that you see, like in Canada and otherwise. But it's in that regard, it's it's available, across that -- capacity, all of those things are there to run it, it really comes down to I don't necessarily want to fill it up at 1.4 or five and a lot of grade. The reserve grade is eight and a half. We’re focused on the quality that will get us the best unit costs. So that's, that's really key. I guess we're giving the confidence that for the second half, part of it can be fruitful part of it can be great. But it's around timings and shutdowns and that uptime on that plant. We kind of know where its Achilles heels are so that you know when things were bottlenecks, basically stop it from that throughput. So some of the things are oversized some of the things right at the limit in pumps, and it might -- those top rate rating side of things.

Matt Green

Okay, that's helpful. Thanks very much, guys.

Operator

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

David Radcliffe

Hi good morning, Stuart and team. So my question is on really the trending costs for the business and whether you think that they have peaked now. And then how sticky you think higher industry costs could be with you're seeing any downward pressure in any of the cost elements of the business. And maybe within that if you could provide some color I guess on WI labor pressures and current staffing levels?

Stuart Tonkin

Yes, thanks. I would say probably the only cost of seeing come off is in fuel. And all the rest are fairly steady, fairly sticky. And it really depends on I guess what all the commodities are doing in the same space. So we've seen some relief in staff turnover and stability. They're posted a COVID border opening. But we certainly haven't every quarter, we would ask ourselves, have we peaked? Is it coming down? We don't see material signals for it to those unit costs to come down. So yes, we've reevaluate later, to get our strategy which is growing profitably, the unit cost derived by economies of scale, the larger plants are on the same fixed cost base. That's really how we're getting a unit cost down. But the inputs we haven't seen lining up with your materials and all your labor.

David Radcliffe

Okay, thanks. And then maybe I had a similar question that's on Thunderbox and the profile going forward. Specifically, maybe, I guess, on in terms of the open pit material, because you're currently processing around a gram. But the reserves for sort of Otto and a rally are a lot higher. So is it still correct that we should start to see that that open pit material gray going into the mill, so it's sort of the larger function, like I said, the expanded capacity, start to lift and come up?

Simon Jessop

Yes, Dave it’s Simon. You will say the grade for stocks come on, just depending on which parts of the pit you're accessing. So, auto [Ph] bore is a higher grade, Thunderbox is better grade at depth. And then a really a grade will come in sort of April at 24 and beyond. So yes, you'll see some better grade from the open pit as we get deeper into into the pits. But it's not going to materially move on the on the large volume. So you might see 0.1, 0.2 grand sort of changes over some quarters.

David Radcliffe

Okay, thanks very much. I’ll leave it there.

Operator

The next question comes from Andrew Bola [Ph] with McQuarrie. Please go ahead.

Unidentified Analyst

Just a couple of questions on Jundee power plant upgrades or potential power plant upgrade leaving some pretty handy emissions reductions by 2030. Is that also expected to bring our costs down? Or is that is that purely an assay exercise?

Stuart Tonkin

Well, it should, depending on what energy costs do. It certainly could give us that, that that savings. But I guess we're working with the incumbent energy provider that provides that gas fired power. And we'll be able to switch between that gases the backup and then the solar with battery storage, and eventually wind turbines.

So it will de-risk energy costs at the moment is probably neutral on operating costs. But the way gas prices have gone it will certainly protect us from escalation in energy costs. And remembering this, this limited capital, they're all related to the PPA just provide us putting that capital in.

Unidentified Analyst

No and obviously, in terms of my output agenda, maybe be quarter on quarter and it obviously records the mine itself. Is that just a function of scheduling or is that sort of, 2 million tonnes per annum rough underground output? Looking a little bit low now or will that come back down towards that 2 million tonnes per annum in the near future?

Stuart Tonkin

Yes, so look, it was a fantastic results of the team and Andrew, Jundee, it's got those moments where you've got your playhead, including stage in front and obviously the team trying to do it, deliver it, and we build the stockpiles to future milling. But essentially, it's fairly similar. Last question on Thunderbox and South is keeping these two centers it's a 300,000 ounces Jundee in the north around 1000 ounces to the South for that 600. There's there's always different sources that are underground open pit that feeds that might plan throughput. So yes, 2 million times coming from Jundee underground, adding a million to million and a half of open pit material on top of that to keep it around 1000 ounces from satellite pits, and the same thing as Thunderbox. There's different sources, different grades, but ultimately running it 6 million tonnes gives you 300,000 ounces and that's that's go from a plant.

Unidentified Analyst

No thanks for talking to me, thanks.

Operator

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

Kate McCutcheon

Hi, good morning, Stuart and Ryan. A quick question for Ryan, can you just remind me how we think about cash tax for the half? Are there still some receivables or refunds to come through?

Ryan Gurner

Hi, Kate. Yes now look for the half it's, it's going to be pretty light. So we're going through our FY ‘22 tax return now. So looks like it's probably going to be neutral to a small refund. So you won't see if there's not much cash tax paid payable this half.

Kate McCutcheon

Okay. Perfect, crystal clear. Thank you. And then if you're filing at KCGM, 80 to 100 million tonnes target. So an effort to get that TMM up above 80. What are the key levers to pull now to go higher? Is a purely access to faces here but utilization and optimization.

Ryan Gurner

Thanks, Kate. It's really around opening up new South areas. So as we had a really leveling out that part of the open pit, we're getting bigger benches. More and more access and the efficiency, the efficiencies then go up on our DS as well as utilizing the new fleet. So Golden Pike South takes a lot of trucking hours to move that and dig this part of the pit. You'll see that finish over FY 23. And then we'll gradually ramp up in FY 24 into Golden Pike North. But it's really around better access to large event space, higher in the peak. So it's using the new equipment. And we'll get an increase in material movement just where we are on the schedule over the next few years.

Kate McCutcheon

Yes, okay, that makes sense. And you've got all your news right now.

Ryan Gurner

That's correct. Yes, we finished that at the end of FY 22. So really, we've had sort of six months so far of the full fleet embedded in it's just continuing to increase those tracking our skateboard material movement and realize the efficiencies of a fleet. That's news versus 20 years old.

Kate McCutcheon

Okay, that's all for me. Thank you, Ryan.

Operator

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

Mitch Ryan

Thank you, team. Just one quick question from me, just with regards to the KCGM mill study. I've seen I guess that's on-going. But I thought we would have had that by now. Remind me when it's due? And is the fact that you're continuing to study it for the return metrics don't stack up? Which sort of would surprise me or isn't that the you're waiting for certainty of inflation sort of peaking? Or is there a third factor that I haven't considered?

Stuart Tonkin

Thankfully, so we hadn't, we hadn't forecast that would be out by now. It's really the work to be to be done this year. And we're still continuing on those final engineering design. So it's really getting into the nuts and bolts of the final design and getting the engineering companies to give us hard numbers on all that work.

So from what was produced last doing profitability level, we're going right down to the feasibility level to be able to make a final investment decision. And that's continuing at the moment. So there's been no, no retraction on timing or rapid to get this done as frequently as it can be. Obviously, we're watching what's happening out there in the market in regard to other projects and timing and execution risks. But at the moment, we don't see that as a reason to not do it. Financial results are still very compelling. If they respond, a lot of stuff, all that's sitting there, right visibility of the mine plant going forward. So it's a really important enabler. But it's not currently in our five year plan. But we'll make a decision this year on it.

Mitch Ryan

Thank you. Appreciate it.

Operator

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

Neil Watkinson

Good morning, gentlemen. I'm interested in just the more specifics on what's happening underground at Mount Charlotte out here in Kalgoorlie. There's some sort you've got some sort of project going to ramp up ramp up production from underground. Can you just give us a few details about how far through that is when you expect that to reach its objective? And what what, what production figure do you have in mind for that?

Ryan Gurner

Thanks, Neil. Yes, so essentially the Mount Charlotte operation when we acquired it and had a very short mine life. It was producing at about 1.2 million to 1.4 million tonnes per annum. So we've been moving it towards 2 million tonnes per annum, running between four and building out the volumes, re-establishing drill platforms at the bottom levels, and really proving up extension, mineralization in our system. It’s a significant operation. And we see huge opportunity to be able to grow volumes from Mount Charlotte to 3.5 million tonnes per annum over the next couple of years.

So the plans at the moment continue exploration drilling, conversion of that resource to reserve the development activity to open up those stoping fronts, and obviously start to increase volumes that basically get trucked to the super pit, and then hauled with the big trucks to the mill.

Neil Watkinson

When do you – think you’ll get to 2 million tonne per annum?

Ryan Gurner

Essentially at those rates now at the 2 million, and it's obviously all truck haulage. And so the next couple of years is really the ramp up and the volumes.

Neil Watkinson

Ramp up to 3.5.

Ryan Gurner

Correct.

Neil Watkinson

Yes. So in terms of how that contributes to the overall sort of super pet type operation? How does it fit in to the what's happening in the open pit? Obviously, you're expanding here as well. It's all sort of part of did I understand correctly that you're aiming for about what was it about 650,000 ounces out of that whole sort of? Is that just a super pit or is that Mount Charlotte as well?

Ryan Gurner

Yes, so all of the whole what we call KCGM operations by FY 26, that 650,000 and 700,000 ounces, sits at that for it at 500,000 ounces presently, growing out to 650 to 700,000 ounces by FY 26 basically comes from the case of the super pit, Mount Charlotte underground and the stockpiles. And so we see huge opportunity of growing Mount Charlotte. It presently doesn't have an underground on the Super pit. And there's an opportunity there. And that's part of what we're considering when we evaluate the Finniston [Ph] mill expansion study. For those new portals and drill drives that we've put in a couple of years ago, what we're proving up there, we've got 5 million ounces of inferred resource under the super pit. And that's a potential future lies underground.

Neil Watkinson

Yes, for sure. That's excellent. Thank you very much.

Operator

[Operator Instructions] Your next question comes from Sean Smith with The West Australian. Please go ahead.

Sean Smith

Hi, gentlemen, I'm just wondering, read the safety record. You'd know better than me that mining safety and WI particularly has become a bit of a community and political issue. I'm just wondering if you could just flush out why that safety record is still not where you want it to be. And just perhaps is that more around the training of people who can't get the PP1 [Ph], you've had to dig deeper for staff. Appreciate any sort of comment? Thanks.

Simon Jessop

Yes, thanks, Sean. Look, our lagging indexes, sort of sit around half or below half of the state averages. So we're pleased with that performance, but it did deteriorate in the quarter on quarter. And we're still seeing, high potentials and near misses in that regard, which is reflective of dilution of skills to high turnover. And ultimately, those vacancies across the last couple of years. So it will take a number of years to restore that. So in the meantime, it's increasing supervision, having patience, and prioritizing and slowing things down in the operations to make sure it's done. Well, once well and safe. That they're the things that all of the industry are focused on, to ensure that we're not harming people.

Sean Smith

Thanks.

Operator

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

Stuart Tonkin

Okay, thanks for joining us on the call today. As you've heard this morning, their growth projects progressing well to deliver strong production in half to with unit cost reduction underway, as we delivered growth across Pogo and Yandal in the near term. And obviously KCGM over the subsequent years. Have a good day.

Operator

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

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Northern Star Resources Limited (NESRF) Q3 2022 Results - Earnings Call Transcript