NSTYY - Northern Star Resources Limited (NESRF) Q4 2023 Earnings Call Transcript
2023-07-19 01:20:18 ET
Northern Star Resources Limited (NESRF)
Q4 2023 Earnings Conference Call
July 19, 2023, 19:00 PM ET
Company Participants
Stuart Tonkin - Managing Director
Simon Jessop - Chief Operating Officer
Ryan Gurner - Chief Financial Officer
Conference Call Participants
Alex Barkley - RBC
Daniel Morgan - Barrenjoey
Levi Spry - UBS
Al Harvey - JPMorgan
Matthew Frydman - MST Financial
Hugo Nicolaci - Goldman Sachs
Kate McCutcheon - Citi
David Radclyffe - Global Mining Research
Presentation
Operator
Thank you for standing by. And welcome to the Northern Star June 2023 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 and CEO. Please go ahead.
Stuart Tonkin
Thank you and good morning, and thanks for joining us today. With me is Chief Operating Officer, Simon Jessop; and our Chief Financial Officer, Ryan Gurner. I'm pleased to present our exceptional June quarter results today that contributed to our delivery of group production and cost guidance for FY 2023.
During the June quarter, we delivered a production result of 426,000 ounces sold at an all-in sustaining cost of AUD1,700 an ounce. I would like to extend an enormous thank you to our teams and contract partners that contributed to this outstanding result which for the full year delivered 1.563 million ounces at an all-in sustaining cost of AUD1,759 an ounce.
We've now completed the second year of our 5-year profitable growth plan to 2 million ounces per annum, and we have made significant progress across each asset, which underpins the platform to deliver continued superior returns for our shareholders.
During the quarter, we announced the decision to expand the KCGM processing plant to 27 million tons per annum, which will lift production there to 900,000 ounces per annum and reduce costs to $1,425 an ounce. At modest gold price assumption, this returns an IRR of 19%. It is funded from cash flows, and it is paid back in under five years. This investment in KCGM will lower costs, extend mine life and be an enabler for future opportunities to drive superior returns for shareholders, placing it as a top five global gold mine.
Today, we have provided our FY 2024 outlook for production and costs with guidance for cost for gold sales of 1.6 million to 1.75 million ounces at an all-in sustaining cost of between AUD1,730 and AUD1,790 an ounce. We will invest growth capital of between $1.15 billion and $1.25 billion, including the KCGM plant expanding. And on exploration activity, we have allocated $150 million.
I'd like to remind listeners that we are able to maintain these growth investments given our strong operational cash flows and balance sheet, whilst also servicing our dividends that are based on 20% to 30% of cash earnings.
Now Simon will speak to the Australian operations shortly, but first to operations in Alaska at a Pogo mine. Pogo delivered an exceptional June quarter with gold sales of 80,000 ounces, representing an annualized production rate in excess of 300,000 ounces per annum. Pleasingly, the uplift was through consistent monthly performance across mining and milling metrics.
Development averaged above 1,700 meters per month. Stope production was two-thirds of the ore mine, and the milling throughput approached an annualized rate of 1.4 million tons per annum. And impressively, mine operating cash flow for the quarter was US$61 million. It is very pleasing to celebrate these milestones with the Pogo team, and I thank them for the efforts to date to demonstrate the exceptional quality of this long-life asset. And I believe we will start to see the market assign greater value to Pogo given its performance and significant resource and exploration upside.
Now over to Simon for the Australian operations.
Simon Jessop
Thank you, Stu. For the Kalgoorlie production center, including KCGM, Carosue Dam, Kanowna Belle and South Kalgoorlie, we sold 224,000 ounces of gold, up 18% at an Australian all-in sustaining costs of AUD1,666 an ounce. This production delivered a mine operating cash flow of $280 million while we spent $112 million on significant growth capital projects. Primarily, $57 million was spent on KCGM open pit mine development and new tailings storage facilities.
At KCGM, open pit material movement was 21.8 million tons for the quarter, along with our new quarterly record of 66,000 trucking hours as we continue to optimize the load and haul fleet. This quarterly movement, combined with the previous three quarters, resulted in 83 million tons moved for the year as a new record and is in line with our total annual material movement.
Grade of mined ore and volumes both increased for the highest quarterly volumes of FY 2023. Underground mining volumes for the Kalgoorlie region were again steady at 1.56 million tons, while grade increased 5% compared to the March quarter, driven from Kalgoorlie ops and Carosue Dam to deliver 130,000 ounces.
KCGM's underground Mt Charlotte operation stabilized production with 1.04 million tons mined in the second half, which is above our annualized 2 million ton per annum target run rate. We will continue to grow this operation to 3.5 million tons by FY 2026.
The Carosue Dam porphyry underground mine continued development as the next major underground ore source averaging 390 meters a month for one jumbo. Kalgoorlie operations, Kanowna Belle and South Kalgoorlie underground ore volumes and grade volumes were stable quarter-on-quarter, showing strong cash flow margins from these assets.
Processing volumes in the Kalgoorlie production center returned to planned volumes with increased grade resulting in the 18% uplift in gold sold by 224,000 ounces. Carosue Dam's processing plant milled 1 million ton for the quarter, a new site record, and finished with over 70,000 ounces sold as an outstanding result for the team.
At our Yandal production center, including Jundee, Thunderbox and Bronzewing, we sold 122,000 ounces of gold at an Australian all-in sustaining costs of AUD1,647 an ounce. This production delivered a mine operating cash flow of $124 million, while we spent $61 million on growth capital projects, primarily $26 million was spent on the Orelia open pit and new tail storage facilities.
Our Jundee operation achieved a new underground mine record of 829,000 tones of ore, up 21% on the March quarter. Development continued to be consistent at 7.8 kilometers for an annual total of 31.5 kilometers developed. As a result, mined ounces was an impressive 101,000 ounces for the quarter. Processing throughput was also a new quarterly benchmark at 789,000 tones, while for FY 2023, Jundee milled over 3 million tones which is 11% over the previous record. These exceptional mining and milling physicals delivered 320,000 ounces of gold sold and over $300 million of free cash flow generation.
The recently announced renewable project for Jundee is exciting as we have commenced works on the 24 megawatts of wind and 16 megawatts of solar generation, which will also include a 12-megawatt battery storage. This is part of our carbon reduction target of 35% reduction by 2030 with Jundee an important first major step forward.
Thunderbox underground operation continued to be the high grade ore source for the mill, with 525,000 tons mined in the quarter and the highest physicals to date. For the full financial year, the underground and open pit operations successfully mined 6.5 million tons of ore tons, which is above the nameplate of the newly expanded process plan. We will continue to bring on life-of-mine ore sources in order to provide high grade feeds to the newly built 6 million ton per annum process plan.
The new Thunderbox process plant achieved 1.03 million tons for the quarter due to the first major reline and shutdown activities, which were successfully achieved. Thunderbox also had two separate downtime events totaling one week each to rectify a variable speed drive electrical repeat. No further downtime has been experienced since the final repair in June.
The throughput ton per average for the quarter lifted to be in line with the design nameplate, which was very pleasing. Recovery also did improve 3% from the last quarter as the gravity circuit issues were resolved late in the quarter. Thunderbox over FY 2023 successfully built, commissioned and milled 4 million tons and is a new step forward as we look forward to a full 12 months of run time in FY 2024.
I would now like to pass over to Ryan, our Chief Financial Officer, to discuss the financials.
Ryan Gurner
Yeah. Thanks Simon, and good morning to you all. As demonstrated in today's quarterly results, Northern Star remains in a very robust financial position as we enter FY 2024, which is poised to be another exciting year for the company.
Our balance sheet remains strong, as set out in table four, page 10, with cash and bullion of AUD1.25 billion at 30 June. And on the back of a great performance this quarter, we have built upon our net cash position, which now stands at AUD362 million.
The company has generated record full year cash earnings of AUD1.22 billion to AUD1.24 billion, and pleasingly, we saw a material uplift in the second half as we continue to focus on cost optimization and lowering sustaining CapEx across the business. A reminder that the company's policy is to pay 20% to 30% of cash earnings in dividends. After a very strong final quarter, we achieved our full year group sales and group cost guidance.
Consistent with our profitable organic growth strategy, we continue to invest capital across the business where we see positive returns. During the quarter, work programs advanced ahead of expectations in three key areas: early works and procurement of long lead time items for our recently approved KCGM expansion project; additional resource drilling at Jundee; and commercial production being declared later than planned at the Otto Bore open pit operation at Thunderbox.
If we go on page 10 sets out the company's cash, bullion and investment movements for the quarter with key highlights being the company recording AUD557 million of operating cash flow, which is up 50% on the prior quarter. After deducting CapEx of AUD223 million relating to plant and equipment and mine development and AUD34 million in exploration, quarterly free cash flow generation was a company record AUD300 million.
Proceeds from the successful 144a bond issuance during the quarter was used to paydown corporate bank debt, resulting in a net cash inflow. Including cash and bullion and undrawn facilities, the company has AUD2.2 billion in available liquidity at 30 June.
All three production centers generated free cash flow with capital expansion fully funded. Kalgoorlie contributed more than half of the group's free cash flow performance. And pleasingly, Pogo's strong quarterly performance contributed over AUD70 million in net mine cash flow, the highest contribution since acquisition, reflecting the delivery of the Pogo team's optimization plans at the asset. Group net mine cash flow for the quarter was AUD302 million.
On other financial matters, depreciation and amortization are in line with company guidance provided of AUD600 to AUD700 per ounce. Full year depreciation and amortization is at the mid to upper end of the guidance range at approximately AUD670 per ounce. And for the quarter, non-cash inventory charges for the group were AUD12 million. As mentioned previously, most of these non-cash inventory charges relate to the milling of acquired stockpiles at KCGM and are a component of EBITDA. A full reconciliation of all-in sustaining cost to EBITDA is included in the back of our half year financial results presentation.
And in respect to the company's on-market share buyback, no additional shares were purchased on-market following the company's Q3 release. The buyback program remains open until September this year, with a blackout period applied until our FY 2023 results released in August.
Following the strong Q4 performance achieved, the company is well placed to deliver production and cost guidance for FY 2024. Overall, total capital expenditures for FY 2024, including sustaining growth and exploration investment, are forecast to be broadly consistent with FY 2023 levels, excluding the KCGM mill expansion capital. In relation to growth capital expenditure, we are guiding FY 2024 to AUD1.15 billion to AUD1.25 billion, which includes the AUD525 million relating to the KCGM mill expansion.
Figure five on page four outlines the key areas of growth capital activity across the production centers to deliver our profitable project pipeline. Exploration is guided to AUD150 million in FY 2024 with investment focus on KCGM and Jundee in-mine exploration, including drill drive development. At Pogo, additional drilling at the Star discovery is planned. Importantly, with the company's strong liquidity position, our capital projects and exploration investments are fully funded.
Finally, in respect of hedging, table five on page 10 sets out the company's committed hedge position at 30 June. The overall hedge book stands at 1.457 million ounces at an average price of AUD2,811 per ounce.
I'll now hand back to Melanie for the Q&A session. Thank you.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]
Your first question comes from Alex Barkley with RBC. Please go ahead.
Alex Barkley
Thanks. Morning Stu and team. Just a quick overall question on KCGM through FY 2023. It doesn't like it's come in light versus your guidance commentary without really having a major issue throughout the year. Is it fair to say it's underperformed? And how would you think it shifts going into FY 2024?
Simon Jessop
Yeah. Thanks Alex, Simon here. I suppose if I look at Q4, we returned to normal processing for KCGM. Q3 was a difficult quarter for us, but really pleasing that we saw Q4 come back and execution of the mine plan at the end of the year. So, really processing was the challenge for us over the course of FY 2023, but we exited FY 2023 back at nameplate and things stabilized as usual.
Alex Barkley
Okay. So, no sort of impact going into next year. Just a quick one on Thunderbox. Thanks for those comments around Q4. When should we expect that sustainable 6 million ton per annum plus into next year, so maybe second quarter onwards, or how should we think about that?
Simon Jessop
Yeah. With the Thunderbox. So, quarter 4 was the first quarter we did the full major shutdown and also completed some redesign of a few areas and beefed up wear packages in certain parts of the plant as we build our experience of running that. So, pleasingly, we got through the shutdown really well, see some optimization in that going forward. And we really just had the variable speed electrical issue during the quarter. But post that fix, we've seen tons per hour at nameplate and we're very confident going forward at Thunderbox, because we still see that sprint capacity over and above nameplate. It's now just stabilizing the plant.
Alex Barkley
Yeah. Okay. Thank you. I'll just -- I'll leave the questions there and end it on. Thanks very much, guys.
Operator
Thank you. Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.
Daniel Morgan
Simon, maybe just a quick follow-up to that last question on the Thunderbox throughputs. So, a lot of the issues you just answered have been resolved, but I just wasn't clear on whether you'd be running at 6 million tons for the whole of this year? Or is there still -- you'll be short of that for this fiscal year? Thank you.
Stuart Tonkin
Yeah. Dan, so we're running at those rates now. It's whether we will maintain that throughout the FY 2024. But I think importantly, what you and Daniel are probably trying to back calculate is the ounces. We've guided 520 to 570 for the Yandal contribution for FY 2024. And that's with some buffer at TBO to ramp up, ramp down and sequence grade. So, the guidance over the full year is second half weighted, and that's with some planned shutdowns in the mills in quarter 1 as we typically do. But that's also some range testing and ramping up of that plant. But we were able to run TBO today at those 6 -- plus 6 million ton per annum run rates. We just have had some obviously commissioning setbacks in the last year.
Daniel Morgan
Okay. Thank you. And you've earmarked a number of shuts for the September quarter. Could you just drill down onto which shuts those are in this Thunderbox included in that for any rectification work? Or is it -- when you look at the end, or is it the Jundee mill that has a shut? Thanks.
Stuart Tonkin
Yeah. So, most of them are hinged around the main mill relines, and we typically do two major shuts per annum in just the wear rates and you can appreciate it's wear-driven, not time-driven. So, we monitor them closely. And sometimes they do it in five months instead of six, which means you've actually got more throughput through in that period, so you get a benefit from it. So, unfortunately, or fortunately, by design, every mill is getting a shut this quarter. We've incorporated that into our guidance, and that's when we've said 1.6 to 1.75, consider that around the entry rate and the exit rate throughout the year and the second half weighting of production with that planned maintenance.
Daniel Morgan
Okay. Thank you. And a relatively simple question, I think, about total CapEx guidance. Have I got the math right that it's about AUD1.7 bill, if I put everything together? Is that about right?
Stuart Tonkin
Are you counting sustaining? So, growth 1.15 to 1.25 including 525 of the KCGM mill expansion in year one.
Daniel Morgan
Yeah. So, the 1.7, is that including growth, sustaining, exploration? Is that accurate? 1.7 is--?
Ryan Gurner
What number, Dan? Did you say 1.7? No, it'd be lighter than that, Dan. It would be a couple of hundred million lighter, I'd say. I mean, you've got -- well, the midpoint we're guiding is 1.2. In total -- exploration, if you want to throw that in there depending on whether you are or not 150. And then if you look at -- I sort of mentioned in my, I guess, talk that our CapEx, including sustaining would be similar to this year. So, our sustaining CapEx is about AUD200 an ounce. So, we've got a little bit more ounces this year. So if you use that AUD200, AUD220 an ounce sustaining CapEx and you look at our ounce profile, if you take the midpoint, that should be able to do the maths to get you there.
Stuart Tonkin
Yeah. So, growth plus sustaining at AUD200 an ounce plus exploration, which I think you've included, will get you close to that 1.7.
Daniel Morgan
Yeah. Okay. Thank you. Thank you for all your answers.
Stuart Tonkin
Thanks Dan.
Operator
Thank you. Your next question comes from Levi Spry with UBS. Please go ahead.
Levi Spry
Good day team. Thanks for your call and your time. A few of us probably are focused a little bit on FY 2024 guidance and particularly for Yandal, which is a little bit different to mine. So, I think you addressed the production, but can you just talk through AISC and then and where the growth capital is going into that hub over the next year or two?
Ryan Gurner
Yeah. Levi, Ryan here. Yeah. So, obviously, you guys have spoken about production. I think from a weighting perspective of ounces, Thunderbox is a slightly higher cost mine than Jundee. And so that obviously that weighting impacts the overall AISC of that group. Look, there's no doubt just broadly across the business. There's still challenges in costs throughout our business, the sector we're in and the wider industry. So that's allowing for some cost increases across some items in our business. But broadly, the -- I think it's the fact that Thunderbox is a higher cost operation than Jundee and that's obviously contributing more production.
From a CapEx perspective, most of the investment is around that preproduction of Orelia open pit and establishment of the Wonder underground there, which are high grade feed sources to the Thunderbox mill.
Stuart Tonkin
Page four of quarterly gives you a bit of a percentage breakdown of those CapEx spreads. And the AISC, Yandal, obviously, Jundee is impressive, and you've got the higher cost of TBO as we haven't got the throughput. That's what's averaging it out at that sort of 1,655 to 1,700. So, as we get the throughput up and the ounce profile up at TBO, it balances back that whole Yandal built, gets above 600,000 ounces per annum and bring AISC down, but that's beyond 2024.
Levi Spry
Yeah. Yeah. Okay. Thank you. And just pushing that a little bit further. So, like what the gross capital comes sort of in the coming years and if we're getting the 600,000 next year?
Stuart Tonkin
No, we haven't got guidance yet to 2025.
Levi Spry
Okay. Thank you.
Operator
Thank you. Your next question comes from Al Harvey with JPMorgan. Please go ahead.
Al Harvey
Good morning, team. Just want a bit more clarification on the growth CapEx. So, figure five does indicate 20% of group CapEx is going to sustaining waste. Maybe I was just trying to get some clarification on that categorization there. Obviously, it's in the growth bucket, but--?
Stuart Tonkin
Yeah. So, sustaining, but not sustaining CapEx. It's continuing. There may be poor use of the word sustaining in that, but it just means continuing waste movement at those levels to get that southern cutback opening up those reserves to the south of the super pit and so it's continuing, but it is growth expenditure.
Al Harvey
Sure. So, can't really pull anything. It probably can't pull anything out of our sustaining CapEx number as a bit of an offset there, it sounds like?
Stuart Tonkin
No, no.
Al Harvey
No worries. Thanks for that. And just briefly, the hedge position, it's come down 125,000 ounces in the quarter. Just want to get a sense of how you're thinking about risk management for the KCGM expansion at the moment?
Stuart Tonkin
Yeah. So not really changing that policy but maintaining it. So, as we consume hedges in the quarter, we typically add them. Obviously, spots kicked up again, and you're getting 3,300 plus ounces at the back of the plan when KCGM gets turned on. So, we only did the IRR was at AUD2,600 an ounce. It got 98%, and you can hedge at that point at about AUD3,300 an ounce. So, we're not changing that policy, but we're certainly keeping it maintained around that sort of sub 20% production over those four years.
Al Harvey
No worries. Thanks gents.
Operator
Thank you. Your next question comes from Matthew Frydman with MST Financial. Please go ahead.
Matthew Frydman
Sure. Thanks. Morning, Stu and team. I just had a couple of questions to further unpack the FY 2024 outlook. And the first one is around the Kalgoorlie hub in particular. So, if we look at the implied year-on-year production growth. That's really the one hub where you're not saying -- or where you're saying there's not going to be that much growth on a year-on-year basis. But you have also called out that obviously KCGM is going to be working into the Golden Pike North area in the second half of FY 2024. So, I would have thought that KCGM should be providing a pretty material lift there year-on-year in terms of production for that hub.
So, how do I interpret that? Does that mean you're implying that maybe Kal what's going to be a bit of a drag on a year-on-year basis or perhaps Carosue Dam? What's the breakdown of that hub in terms of the production growth?
Stuart Tonkin
No, both CDO and the Kal which is obviously contributed from South Kal and Kanowna relatively flat throughout the year. And definitely KCGM, it's a better year than this year because we don't have the quarter 3 in there. There's still a lot of work to be done at KCGM before it lifts back up to that 650,000 plus ounces in FY 2026. So 2025 onwards, so it's -- this is still a flat year in production wise. So yeah, the whole Kalgoorlie range guided 820 to 900. Probably isn't that different to what we've said or planned. The growth at -- is all about KCGM and it comes late in the five-year plan.
Matthew Frydman
Yeah. Got it. Okay. Thanks Stu. That's pretty clear. So, even though you're accessing Golden Pike North in the second half of FY 2024, doesn't necessarily have a big step up in ounces until the perhaps longer dated.
Stuart Tonkin
No. And the current mill throughput, it's really a grade driver that changes the ounce profile right to that 13 million tons per annum. And then obviously the year after, we kind of hit that 650,000, 700,000 ounces, we get the contribution of the expanded plant to lift it another 250,000 ounces. So that's -- we're capped out on grade sequencing on the ounce profile for KCGM. And you'll find that AISC obviously links very closely to -- relationship with AISC is heavily driven by the denominator gold sold. So, as we get that, we get that improvement in the back of the five-year plan.
Matthew Frydman
Yeah. Thanks Stu. Yeah. That's pretty clear. It also leads into my next question, and Ryan did make some comments there, which I guess were probably more specific to the Yandal hub. But clearly, you are growing production at the group level into FY 2024, but you're guiding to flat all-in sustaining costs at least at the midpoint. So, obviously, a pretty good outcome to have flat costs, but it does imply that there are some -- there is some creeping costs that isn't being offset by the denominator or the higher production.
So, just wondering if there's anything in particular to call out at the group level? Or is that being driven by increasing -- stripping at any particular assets perhaps? Or is that more just a general industry cost inflation and labor costs, consumable costs, et cetera, as Ryan seems to imply.
Stuart Tonkin
Yeah. So, cost going sideways is what we've planned. We actually do expect that on some levels, it's capped out and it may -- we may get some relief. We just haven't factored that into guidance. But we like you see them at an elevated level and probably don't like it like you, but it's -- there aren't tangible actions in there to say here's a qualified reduction in certain costs. But we control a lot of the labor cost. So, we understand what they're doing. Obviously, consumables energy costs are up very high at the moment. So, we don't think that they will last at those levels, but we were careful to not guide improvements in costs without tangible actions that sit behind that.
Even when you look at -- always looking at AISC here, but some of the all-in costs are very impressive. The gap between AISC and AIC is shallow. And the cash margins generated from these assets is significant.
And back to the point of a strength of balance sheet, net cash position, all of that growth is fully funded. When you look at the all-in costs at mines like Kanowna and South Kalgoorlie, it's sub 2,000 all-in costs, say, AUD2,900 gold price. They are generating significant cash, which is contributing in funding the growth plan. So, I think AISC is one metric, obviously, standardized, but it's also to understand the genuine cash flow that the assets are doing.
Matthew Frydman
Yeah. Yeah. That's very fair, Stu. And good to hear that your view is that hopefully, there's at least some conservatism built into that outlook on costs. Maybe just finally, if I could ask you quickly on the Strickland's transaction. Obviously, you probably haven't had a chance to talk about that much to the market. I guess the comment that I would make that the price tag $67 million. That's nearly half of your FY 2024 exploration budget, and you've purchased the 340-ish thousand ounce resource. That's nearly $200 an ounce to pay for that resource. So, I would have thought that your discovery cost from that exploration budget would -- you would hope for a better discovery cost than that in your exploration spend. So, just wondering if you can maybe expand on the rationale behind that acquisition and I guess where it fits into Jundee and why that was an attractive purchase.
Stuart Tonkin
Yeah. I won't talk on that transaction because it's not complete. But I just will say our resource are a reserve that you know versus one that you spend exploration to find are very different prospects. In hindsight, you can say what the value of discovery is. But something that is in resource or reserve versus something where you're putting $150 million into an area with good planning and good geos trying to identify is a different prospect in that regard.
Matthew Frydman
Yeah. Okay. Thanks Stu.
Operator
Thank you. Your next question comes from Hugo Nicolaci with Goldman Sachs. Please go ahead.
Hugo Nicolaci
Morning, Stu and team, and thanks for the update this morning. Maybe a follow-up on costs and maybe getting into some of the assets. Just maybe looking at Kalgoorlie ops and the cost performance there in the quarter and marginally the lower sort of mined volumes production and milled tons kind of proportionately up. Just wondering what maybe the cost pressures were there in the quarter? And to what extent you see those cost pressures potentially kind of continuing into FY 2024, both at the asset and then kind of across the group? Thanks.
RyanGurner
Yeah. Hi, Hugo. Thanks for the question. Look, in relation to Kalgoorlie in particular probably the one I'd call out is power costs were higher this quarter than what we expected. That's probably the main call out that I would say at that asset. Yeah. Stu spoke more globally about costs. Look, we're not -- as Stu has sort of said, we're not building into our guidance cost relief. Broadly, costs we see have stabilized. I mentioned it before that we are experiencing and will experience some higher costs in some parts of our business. So, no doubt, they will -- whether it's labor or contractors, we're forecasting probably some uplift in those. But broadly across the board in the basket of our costs, we are anticipating to be sort of flat. But the power cost at that asset at Kalgoorlie in the quarter was the main drop of those higher costs this quarter.
Hugo Nicolaci
Yeah. Great. Thanks for that clarification. So, just on that power piece, is that more kind of your electricity contracts and maybe reflecting sort of domestic gas prices in WA? Or is that linked to anything else in particular on power?
Ryan Gurner
Probably yes, yes. In a sense, not, not -- I guess it is all interlinked, because it's a balancing price that we essentially pay for. So, it would be linked back to the infrastructure at the state level. And then, obviously, gas prices have rose, yes. I mean, our guess at other sites like Jundee, Thunderbox, where we contract gas, they are contracted over a medium term. So, they're not assets that we see large fluctuations in pricing. But Kalgoorlie, when we're on grid across South Kal, KB and KCGM, we do see variable pricing.
Hugo Nicolaci
Great. That's helpful. And then maybe just a second one if I could, just around the growth capital. I appreciate you've touched on kind of across the assets, but you called out that 82% of the growth capital is going to the major growth projects. So, I was just wondering if you might be able to give a bit more color around whether the other 18% or roughly AUD200 million is going in FY 2024. Thanks.
Ryan Gurner
Look broadly, it will be largely drill drives mine development. You can see across the business, and that's really spread, Hugo, across the asset. So, where we're opening up areas declines across the business underground, that will be where basically the spend is. So, what we've tried to do here is just outline the larger components particularly KCGM, obviously, the waste stripping, which is a multiyear project unlocked the high grade Golden Pike North and Fim South. Obviously, Yandal will be really a pit and Wonder I've spoke about feeding the Thunderbox mill. And then you've also got Porphyry and Wallbrook open pit feed for Carosue Dam. So, broadly, they're there. I would just say across the business, there's just mine development as I said accessing new areas would be the thing that I would call out.
Hugo Nicolaci
Great. Thanks for that. I'll pass it on.
Operator
Thank you. [Operator Instructions]
Your next question comes from Kate McCutcheon with Citi. Please go ahead.
Kate McCutcheon
Hi. Good morning, Stuart and Ryan. Since Matt asked on M&A, you've got a lot of liquidity, but also have a lot coming up with KCGM, et cetera. How are you thinking about the portfolio here? You've said three to five assets is a strategic goal. Are you actively looking at anything else? Or for now, you're focused on the organic growth for the near term, I guess?
Stuart Tonkin
Yeah. Thanks Kate. Look, we see some of the most compelling returns on our organic opportunities. And obviously, we've -- that gives us confidence to commit to things like the Fimiston mill expansion. We do have strong liquidity and strong balance sheet strength. We always assess opportunities, but we're fussy and we obviously don't need to do anything. So, we still expect to see that sort of the lower end of the small cap space, lots of jostling and collaboration or consolidation at that end. But that's not typically the space that materially changes our well. So, we just -- we'll keep that for you on our long-term strategy around having that sort of three to five assets and maintaining the lowest cost portfolio we can attain. So, we'll always evaluate opportunities as they come up.
Kate McCutcheon
Okay. Got it. And then Pogo Q4 numbers were great to see. What's been the key driver of that pickup or the step change that's enabled the Q-on-Q lift? Stoping tons look flat, but you picked up those development meters again.
And then the second part of that question is forward-looking. So, what's the next operational target to hit at Pogo? Is it still pulling costs out? Or is there more to go on head grade upside to reserve?
Stuart Tonkin
Yeah. Thanks Kate. I was hoping for a question around Pogo after 20 quarters. 80,000 ounces for everyone, that is absolutely outstanding result. And impressively, not just delivered from grade. We're not even producing at the reserve grade, because it's still a third of the ore feed is development ore. And obviously, the stoping grade is higher. So, I think it's really a testament to the consistency of development meters. We said above 1,500 per month, and we obviously averaged 1,700 per month in the quarter, building out these new mining fronts, giving more flexibility in the mine plan so that you're not hand-to-mouth, that you've got capacity. Look, the underground ore bins and getting that consistent feed to the plant. Obviously, in quarter 3, we had the mill motor failure. That got rectified. But that allowed us also to sort of look at the main flowsheet and critical elements within that aged plant to put some investment back into.
So for us, it's around stabilizing -- maintaining and stabilizing at these levels. Obviously, we've guided 260,000 to 280,000 ounces at Pogo this year with a focus on optimizing costs and inputs. So, resourcing levels around equipment, people, reagents consumables. Really importantly, last quarter did US$1,250 all-in sustaining cost. We're really working hard to get the unit cost down and then take the growth on the back. But you're sitting there with 7-plus million ounce resource, huge exploration success with things like Star to drill out. I really think people will look at the quality of this asset and over US$60 million operating cash flow in the quarter. This will start to become more important for people to look at the valuation.
Kate McCutcheon
Okay. Thanks for the color.
Stuart Tonkin
Thanks Kate.
Operator
Thank you. Your next question comes from David Radclyffe with Global Mining Research. Please go ahead.
David Radclyffe
Hi. Good morning, Stu and team. I just got a quick question on KCGM and then recoveries. During the quarter, obviously, mill tons was up and so was grade, but the trend of overall lower recoveries over the last year is continuing despite higher grades. So, just trying to understand really what's going on there, and what the expectation is going forward? Is this the new level until the new sort of mill is in place?
Simon Jessop
Yeah. Thanks David. It's Simon. Certainly not. Don't drag right on quarter 4 in terms of recovery. If you look at the year, early in the year, we were 86% -- 85% to 86%. And then in quarter 4, we had some float circuit issues and gravity circuit downtime, which really, they're the two things that hurt us on recovery at KCGM. They've since been rectified and fixed and moved back to normal recovery. So, over the full year, we averaged around that 84%, and that's consistent for KCGM. So, certainly quarter 4 was not -- was the low quarter for us over FY 2023 and historically. But now back to normal levels of recovery at KCGM.
David Radclyffe
Great. Thanks for that. Cheers.
Operator
Thank you. There are no further questions at this time. I'll now hand back to Mr. Tonkin for closing remarks.
End of Q&A
Stuart Tonkin
Okay. Thanks for joining us on the call this morning. It's very pleasing to close out FY 2023 on a high and be in a position of strength as we embark on FY 2024. I look forward to updating you as we continue to advance our profitable organic growth strategy. Have a good day.
Operator
That does conclude the conference. Thank you for participating. You may now disconnect.
For further details see:
Northern Star Resources Limited (NESRF) Q4 2023 Earnings Call Transcript