Northern Star Resources Limited (OTCPK:NESRF) Q4 2020 Earnings Conference Call August 18, 2020 8:30 PM ET

Company Participants

Bill Beament – Executive Chair

Stuart Tonkin – Chief Executive Officer

Ryan Gurner – Chief Financial Officer

Conference Call Participants

Sophie Spartalis – Bank of America

Daniel Morgan – UBS

Nick Herbert – Credit Suisse

Matthew Frydman – Goldman Sachs

Operator

Good day and welcome to the Northern Star’s Full Year 2020 Financial Results. This is Hugh, your operator speaking. All participants will be in listen-only mode and there will be a presentation, followed by a question-and-answer session. [Operator Instructions]

And for opening remarks, I’d like to pass over, please, to Mr. Bill Beament, Executive Chair. Please, go ahead, sir.

Bill Beament

Thanks, Hugh, and thanks for joining us on the call today. Also today, we have our Chief Executive Officer, Stuart Tonkin; and CFO, Ryan Gurner on the call. If I could summarize today’s results in one word, it would be cash flow. Our results today come down to the simple fact that our underlying free cash flow surged by AUD 277 million or 190% to AUD 423.1 million.

It is important to note that this was achieved on an average realized gold price of AUD 2,200 an ounce, which is over AUD 500 below the current spot price of AUD 2,750 an ounce. This cash flow highlights the strength of our business. It shows how we are leveraged to the strong gold price. This is due in part to the fact that Northern Star is now the second biggest gold producer on the ASX, and we’re set to get bigger, with production forecast to rise to 1.3 million ounces per annum from FY 2028.

Of course, we’ve always said that we’re not about growing production for the sake of it. We are about maximizing financial returns. With our production rates set to rise to 1.25 million ounces over the next two years or so, and our capital intensity, one of the lowest in the industry, this growth in production and cash flow is entirely consistent with maximizing financial returns and returning dividends to shareholders.

It was a record result at the profit level, too, with underlying net profit after tax, up 69% to a record AUD 291 million. The upshot of this outstanding performance was the fact that we finished the year with AUD 770 million in cash, bullion and investments, up from AUD 361 a year ago.

At June 30, the company also had bank debt of AUD 700 million, which we subsequently paid down to AUD 500 million in early July. This was after investing AUD 1.3 billion in acquisitions and growth for the financial year, including AUD 1.14 billion for the 50% interest in KCGM and associated assets and AUD 178 million on the takeout of Echo Resources and a further AUD 206 million in expansionary growth, capital and exploration.

The final FY 2020 fully franked dividend has been increased to 27% and to AUD 0.095 per share, in line with our policy of paying out 6% of revenue. This took the full year payout to AUD0.17 per share fully franked.

In addition to this increased dividend, the Board has chosen to declare a special fully franked dividend of AUD 0.10 a share. We took this decision for several reasons. As I just outlined, we are in a very strong financial and operating position, which is set to get even stronger. At the end of June, we had cash bullion and investments, as I’ve said, of AUD 770 million.

With the current gold price and our FY 2021 production guidance, we are set to generate strong free cash flow this financial year. And we have budgeted AUD 198 million for growth capital in FY 2021 and another AUD 101 million for exploration. So we are well catered for — in respect to our growth plans.

Given this, the Board was faced with the option of accelerating debt reduction, retaining a large cash holding or increasing the returns to shareholders. The Board determined that given the historically low interest rate environment and the company’s relatively low gearing levels, accelerated debt repayments is an inefficient use of capital. Therefore, we decided to declare a special dividend. This reflects the strength of our position today and our confidence in the outlook of tomorrow.

Ryan Gurner will now take us through the financial results in detail.

Ryan Gurner

Yes. Thanks, Bill. Good morning, everyone. Look, it’s gives me great pleasure to present to you our financial results for FY 2020.

I’d like to start with you on slide 6, if I could, which provides an overview of the key financial highlights achieved during FY 2020, with increases and records across all metrics, with the company delivering an underlying net profit after tax of AUD 291 million and a statutory profit after tax of AUD 258 million. EBITDA of AUD 745 million, which is up 55% from the prior year. We generated strong net mine cash flows from our operations of AUD 559 million. The record Group underlying free cash flow of AUD 423 million, which adjusts for the M&A activity undertaken during the year was up 109% from FY 2019.

And as a direct result of that strong cash flow, and as Bill mentioned previously, today, we are pleased to announce a final fully franked dividend of AUD 0.095 per share and a special dividend of a further AUD 0.10 per share fully franked. This takes the total payout for FY 2020, including the special dividend to AUD0.27 per share or AUD 200 million.

We remain well-positioned to deliver on the organic growth outlined in our recently released guidance outlook with our strong balance sheet, which includes AUD 770 million in cash bullion and investments at 30%

Moving down now to slide 7, which outlines the record cash flow generation during FY 2020. A total of AUD 902 million of operating cash flow and AUD 559 million of net mine cash flow is generated from the operations in FY 2020, both substantial increases on FY 2019.

Jundee stand out with a AUD 280 million contribution. Capital investment to complete the mining method transition was a key feature at Pogo during FY 2020. This transition was demonstrated with a net mine cash flow contribution of AUD 25 million in the June quarter, even after the operational impacts endured by COVID.

KCGM’s six-month contribution was solid with nearly AUD 100 million of net cash flow contribution. And the strong cash build generated from the operations provides the capital for further organic investments, translating to greater returns to shareholders. Whilst we are in this current favorable gold price environment, we expect upside to cash flow contribution across all operations, further strengthening our balance sheet.

Turning to Slide 8. The operations continue to excel, recording strong EBITDA margins at both Jundee and Kalgoorlie operations. Pogo’s operating margin in FY 2021 is expected to further improve with completion of the mining method transition in Q3 last financial year and expected realization of the cost initiatives, which we implemented during the second half of FY 2020.

Current first half from KCGM with an EBITDA margin of 29%, and we expect this to grow in FY 2021, as we continue to execute cost and productivity initiatives. Northern Star’s focus remains to increase margin through productivity improvements and capture benefits of the higher current spot gold price, which, as Bill mentioned, is 25% above our FY 2020 realized price right now.

Over the page – Slide 9 outlines a reconciliation of our underlying net profit after tax from FY 2019 to FY 2020 and a statutory net profit after tax. The company achieved a record underlying net profit after tax of AUD 191 million in FY 2020. The main drivers of the profit related to the group’s increased production alongside the tailwind of rising gold prices.

As recently released to market, gold production is set to increase during FY 2021 and beyond. Costs have been well-managed through targeted cost initiatives and operational productivities, which will continue in FY 2021, particularly at Pogo and KCGM. Higher inventory charges were recorded due to the utilization of stockpiles at KCGM and higher D&A charges were a result of both our increased production base and, of course, a function of the M&A activity executed during the year.

During FY 2020, the company incurred AUD 44 million in acquisition integration costs associated with the KCGM and Echo acquisitions. These acquisitions, along with a non-cash exploration impairment of AUD 28 million and other non-cash charges of AUD 4 million gave rise to our statutory net profit after tax of AUD 258 million.

Slide 10 highlights the key cash flow movements and investments made during the year. FY 2020 was a year of significant organic and inorganic investment, which included the US$ 800 million acquisition of 50% of KCGM, which has just recently announced a 9.7 million ounce stock reserve and a 19 million ounce stock opportunities.

The acquisition of the Echo resources we’ll see operational synergies and further growth opportunities as we look to merge this project with our Jundee operations going forward. In addition to Pogo, Northern Star continues to invest organically with AUD 130 million in growth capital and AUD 76 million in exploration invested during FY 2020 to set up the business for future years.

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And over the past five years, Northern Star has invested AUD 327 million into exploration, which has driven our significant mineral inventory growth, which at 30 June stands at 31.8 million ounces of resources and 10.8 million ounces of reserves.

Down to Slide 12. Northern Star has a proud consistent history of paying fully franked dividends to its shareholders, including the recently paid FY 2020 interim dividend and both the final and special dividends just announced today. Northern Star will pay out AUD 200 million to its shareholders.

Including today’s dividend, Northern Star has returned $536 million to shareholders since our maiden dividend in 2012, equating to 42% of all the equity raise. And given our recently released growing production outlook and subject to the current buoyant gold price environment continuing throughout this financial year, shareholders can expect further dividend growth from the company. Finally, now let’s look ahead to FY 2021.

Taking you to slide 17 and our FY 2021 guidance, which for our Australian operations stand at 760,000 to 840,000 ounces at an all-in sustaining cost per ounce of 1,440 to 1,540. Pogo’s guidance takes into consideration operational restrictions from COVID and is, therefore, set at 180,000 to 220,000 ounces at US$1,200 to US$1,400 per ounce. FY 2021 gross capital is guided at $198 million and includes US$35 million investment at Pogo predominantly for processing capacity increased to 1.3 million tonne. AUD 37 million at Jundee for planned infrastructure upgrades, underground mine development and Julius pit. Probing at Kalgoorlie operations for mine development and processing infrastructure capital works, and AUD 99 million at KCGM which is our share for open pit development of OBH and south. The company plans to invest a record AUD 100 million – AUD 101 million actually in exploration in FY 2021 to continue this hugely successful campaign of mine life extensions across our assets.

With this investment, Northern Star continues a strong organic growth pathway with production set to rise to 1.25 million ounces in FY 2023. I’d like to recognize and thank the team for their enormous effort in getting all these documents together, it’s a huge task, and they have done a fantastic job over this last month.

With that, I’ll hand over to Hugh, who will open for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We now go to the line of Sophie Spartalis of Bank of America. Please go ahead. Your line is now open.

Sophie Spartalis

Good morning, Just following up on your comments around the dividend. Congrats on the special dividend declared today. It seems as though this is what we can expect going forward given that you’re going to have a stronger production profile, stronger gold price outlook. Can you just comment on that? Maybe Bill?

Bill Beament

Yes. Thanks, Sophie. Look, yes, look, obviously, we’ve got our policy of 6% of revenue. So obviously, gold price has gone up and we’ve unwound that hedge book. Obviously, the higher our revenue, coupled with the higher production, will increase a higher dividend per share. So look that’s a natural component, that’s easy to calculate. The special dividend was just like recognizing all the factors I previously talked about, strong environment. We’ve got our growth capital well and truly covered. It’s a low interest rate environment. We’re extremely cash flow positive. And we’ve got one of the lowest capital intensity. So it was a no brainer.

Sophie Spartalis

Okay. That’s great. And then just a follow-up on the organic growth opportunities that you keep referring to, are we — is it good for us to sort of look at that as the current production guidance that you’ve provided that there is some potential upside to that as these organic growth opportunities start to formulate? Or have they already been included in the near-term production guidance?

Stuart Tonkin

Yes. Well, look as you know last week, we gave out our sort of 7 year outlook. And the key thing here is the growth of our Pogo operations. So obviously, it’s a little bit affected with COVID at the moment. But that really is just a volume game now. So as we upgrade that processing plant for mid next year and the mining picks up post COVID, that heads towards 300,000 ounce a year operation.

And obviously at its cost base, that is a huge cash generator for the company. And obviously, with our acquisition of Echo bundling project that’s getting merged into Jundee to read that to Yandal, they’re really taking ounces so that grows that region really, really quickly.

Sophie Spartalis

Okay. So Bill just to confirm or just to clarify, so is Bronzewing in the forward outlook guidance?

Stuart Tonkin

Yes, it is. Yes. We put that in last week. So we’ve merged Bronzewing into Jundee and we’ll read that to Yandal operations, which used to be called years ago and that’s getting to 400,000 ounces a year in FY ’23.

Sophie Spartalis

Okay. That’s great. And then obviously, the assumption is around Pogo increasing to that 300,000 ounce, that’s again already incorporated into the guidance provided?

Stuart Tonkin

Yes. Correct. Yes.

Sophie Spartalis

Okay, that’s great. Thank you.

Operator

Our next question is from the line of Daniel Morgan at UBS. Please go ahead, Daniel. Your line is now open.

Daniel Morgan

Hi, Bill and team. Thanks for the update. So yesterday, the KCGM update, a lot of work has gone into that — with the reserves and also the production outlook. But it strikes me that it seems mostly focused on the open pit and the underground options, particularly under Fimiston are still to come. I was just wondering if you could talk to us through your impressions of the underground opportunity at Fimiston?

Stuart Tonkin

Yes. Look, thanks, Dan for your question. Look, obviously, first of all, Mt Charlotte is one of the existing undergrounds and contributes about 120,000 ounces a year to the overall operation. So that’s getting a lot of love at the moment, and the team there are really responding extremely well and the productivity levels have gone through the roof there.

So I think we broke record ore tonnes in the month of July. So Mount Charlotte, we increased that reserve from basically 2 year mine plan to 5 years. So that’s a step change and obviously, we increase the resources up, I think, call it, 2 million ounce resources at Mt Charlotte. But Dan just can’t mention, still got a long life and has a lot of growth opportunities there and lot of exploration upside.

On the Fimiston South and underground there, just bear in mind guys, we’ve only owned this asset for 6, 7 months. We’ve just put out a maiden inferred resource. So obviously, we can’t generate mine plans until we get higher confidence resources in the indicated and obviously, we can pull out a reserve from that category.

So that hence why we’re putting in some exploration over this financial year, we’ve allocated $10 million. That will give us areas to further drill out the resources inside the shell of the pit. And more importantly, look at structures in the wall parallel and that get Fimiston, so that work has to happen over the coming years, so we can actually get in there and put more drilling into the areas, improve up that — well one, grow that inferred resource, and more importantly sort of convert that into a high confidence, so that it can go into line plant.

The beauty of that in case of KCGM yesterday, we now have a very long life open pit. So there is no rush from an underground. An underground from really is a bonus. It will come in plan in due course, but we don’t need it tomorrow. We need it in years to come. So, we’ve got time to do this properly. It’s a very large-scale system. You’re talking something that pulled out 66 million ounces, 45,000, 50,000 ounces of vertical method. So, this will have a large-scale underground. We just don’t need it tomorrow.

Daniel Morgan

Thank you. And somewhat of a similar question on your guidance you gave regarding Bronzewing and Jundee. Can you just confirm what’s in the guidance, what’s not? I believe it’s an open pit opportunity that was planned to be progressed by Echo, but it struck me that — what’s the thoughts on the underground potential of Bronzewing and the other assets there?

Stuart Tonkin

Yes. Thanks, Daniel. It’s Stuart here. So, yes, the primary source for that growth to 400,000 ounces over the next couple of years is from the earlier pit, and that was in the resources sort of feasibility and plan. We’ve got to do some further drill out to find the full extent of that and we’re conducting that at the moment. That will come into that production as the primary.

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So, there’s also the Julius pit that’s well advanced in progressing for fraction of that — from an underground perspective, it still needs the drilling. And it’s more likely focused on your latest your underground, which is the northern extension to the rail system.

So, yes, this does that base load, and that is all based on pretty simple, low-cost open pit mining. The decision we’ve put into the previous announcement last week does the options exist to Bronzewing or to expand Jundee and we’re going through that work in the next few months.

So, at this stage, the visibility of the resource and reserves are there. It’s really Jundee itself staying is at 300,000 ounce center and adding extra 100,000 organic growth ounces at pretty low cost.

Bill Beament

And Dan, it’s Bill. Just to add like that, you said that the latest — the all latest underground, we have reviewed that data. It’s really interesting that ore body still was open at pit in a long stride. So, — and there’s a big gap between lotus back towards the pit. The trends definitely goes through there. So, there’s a lot of work and a lot of upside to potentially drill that out, of course, and we will be doing some exploration drilling on that this financial year.

Daniel Morgan

Thank you. And just, I guess, a follow-up on the decisions you’re trying to make regarding the mill location in Jundee and/or — what are the key thinking? Is that about the haulage distances of some of the open pits up to Jundee? Is it the efficiencies of the old mill, what it would take to refer, but can you just run through what is in the decision thinking?

Bill Beament

Yes. Look, good question. Look, there’s very good infrastructure at Bronzewing. We were there about three, four weeks ago, and it’s still in very good nick, and it’s not a huge CapEx to — its quite small CapEx to get that up and running. But it all comes down AUD1 per tonne.

At Jundee, we’ve got a fantastic set of infrastructure. The team just respond every time we throw a challenge. We just upgraded that plant. The milling costs have come down. It is on gas-fired power there. So, it’s obviously the biggest — put into your processing costs. So, — and counting material around the country side is pretty cheap in the moment, especially with the cost of diesel for haulage. So, it looks pretty attractive at Jundee, but we also got the option of Bronzewing. So, we’re just going through all that, but it just comes down dollar per tonne.

Daniel Morgan

Yes. Sure. And finally, the company has grown a lot over the last couple of years and obviously, become more global. Just wondering if you might give us some guidance about corporate costs going forward. I understand in the period, you had a lot of transaction integration costs. I’m just trying to get a sense for what is the group corporate costs going to be going forward?

Ryan Gurner

Yeah, Dan, I think using, sort of, AUD50 — if I talk about on per ounce basis, it’s probably useful. I think that AUD50 an ounce is probably right. That will exclude things like finance costs or interest costs on our debt. But I think that’s pretty reflective. We do include share-based payments in our number as well. So they’re noncash, they’re probably AUD8 to AUD10 an ounce. Yeah, corporate cost is probably more like AUD40, low AUD40s, I would say.

Daniel Morgan

Thank you.

Bill Beament

And just a follow-up your question on Yandal as well as Bronzewing and Jundee options is our capital that we have forecast out there allows for both options.

Daniel Morgan

Thank you.

Operator

Okay. Before going on to our next question, which is Nick Herbert from Credit Suisse. [Operator Instructions] And Nick over to you.

Nick Herbert

Thank you. Hi, guys. Bill, can I just clarify that last comment you made just around the capital allowed for both options. I haven’t seen that in your docs. Could you just cover that, please? And just to clarify the timing of that expense? Is that an FY 2022 expense? Or have you mentioned that capital is allowed for in this year?

Bill Beament

Yeah. Good question, Nick. In our FY 2022 capital component, we didn’t break that down individually, but that is in there, and it’s under the section.

Nick Herbert

Great. Thank you. And then just, sort of, I mean, I appreciate the longer term guidance you guys have provided. Just wondering, how you think about what a sustainable level of — sustainable CapEx is and what we should be thinking about? And how that steps up over time with the increase in activity and production outlook? Not asking formal guidance, obviously, but just how you think internally about that sustainable level?

And also more broadly, what sits outside of all-in sustaining cost, given all the projects and opportunity granted that will vary over the years, but in terms of an aggregate growth CapEx, what’s the sort of a fair assumption per annum if we look out into that seven-year horizon?

Stuart Tonkin

Yes. Good question. Look, obviously, our production base has expanded greatly with Bronzewing and also KCGM. So our exploration has gone up this year, which is on a per ounce basis is relative. That said, we are spending one-quarter of that exploration, spending at Pogo on a good path to discovery. So, we are doing — effectively doing a maiden resource drill out of that. We’re very excited about that potentially multimillion ounce system. And that’s a future production stores, hopefully for Pogo over and above the existing mine. So that’s going to attract capital where we see those opportunities in exploration, it will drive capital.

Look, when you come to growth CapEx is we are very quite — our growth CapEx is very light in the scale and size of our business when you reflect on ounce per — looking around the growth of plus one million-ounce producers.

Obviously, we’ve got a little bit of growth CapEx at Pogo. It’s US$35 million to increase that capacity, 1.3, but it drives our production from AUD320 million up to AUD300 million. So that’s huge value creation.

Bringing Bronzewing into Jundee and Yandal and like I said, it was about AUD100 million. So, again, that’s very light capital for what it does for the longevity of that operation and the extra production profile. The big CapEx drivers over the next two or three years is KCGM, which we previously announced, have outlined in our statements today. But from a Northern Star perspective, our capital — expansionary growth capital drops away quite substantially in two to three years time.

Nick Herbert

Yes. Great. Thank you. And then finally, I apologize if you covered this earlier. I missed, sort of, start of the presentation. Just interested in some of your other sort of growth options and, I guess, what’s not in sort of long-term guidance outlook you’ve provided, specifically, Tanami, I think, you still got a sort of 1.5 million ounce resource there, used to be in sort of that production outlook for you guys, but I haven’t heard any mention of that for quite some time. So just wondering, sort of, where that fits in your thinking, whether we should just sort of be discounting that one for now and you’ve got your hands full on the rest of the projects?

Bill Beament

No. Look, it’s an exciting district, and we’re still working through it there. So we’re still liaising with our JV partners. So there’s still the option of that. So we’re still working behind the scenes corporately with those guys. So that’s not off the cards at all. Don’t write that off, please.

But growth, it’s probably more in our control at the moment, is we’re still reassessing Kalgoorlie. Just remember, our South Kal tenements, there is an absolute plethora of historical open pit resources and open pits there that we haven’t even got to yet, because we have been — no constrain there in Kalgoorlie. So we are going to have a look at all that open pit potential there. And that’s on the South Kal and also our northern tenement. So a lot of work will be going in the next 12, 18 months looking at building that pipeline up for the future of Kalgoorlie as well.

And as I said, is Pogo. Obviously, it’s growing organically inside mine with expansion, but good pasture is something that, as I said, we’re going to spend a-quarter of our exploration, AUD 20 million, AUD 25 million on a full resource drill out, maiden resource drill out on that. So that potentially is another growth option that we haven’t really talked about. We’ve really got to prove up that resource that, that could be a second phase to also second expansion for Pogo.

Nick Herbert

Okay. Thanks very much.

Operator

Our next question is from the line of Matthew Frydman at Goldman Sachs. Please go ahead Matthew. Your line is open.

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Matthew Frydman

Sure. Thanks very much. Good morning, Bill and the team. Just a couple of questions on Pogo, please. And one of the growth projects that you do have in the pipeline that you didn’t touch on just there is the mill expansion at Pogo to 1.5 million tonnes per annum, which is not in the base case outlook that you guys presented the other week.

So just wondering now, I guess, what you need to see from that asset in terms of firstly, ramping up the nameplate capacity to 1.3 million tonnes per annum with the first phase of the mill expansion, potentially achieving that in FY 2022? And then also what you need to see in terms of the reserve and resource statement on paper to be comfortable in taking that next step to going to 1.5.

And then, I guess, the second part of the question, which follows on from that is the discussion that we just had around good pasture. Is it right to say that conceptually that would still potentially be a separate or a second processing facility if the scale of that deposit was supportive of that? Thanks.

Stuart Tonkin

Yes. Thanks, Matt. It’s Stuart here. So look, the plans are in action, the footings are down and the full process is getting structured at the moment to get us up to that 1.3. I guess the fact is that, that will be ready before the mining volumes needed because of the interruptions we’ve said. So that is always required and what we’re committed to in that CapEx is underway to have us at 1.3 million tonne per annum capacity by next calendar year. So that next two year profile of 300,000 ounces, that’s all we need to do that. It’s really the mining volumes. We’ve explained the productivity, restrictions with the current COVID actions, I’ve literally got few positive cases there at the moment. We managed through, but the team is doing an exceptional job in dealing with that. So last were that sort of reduced regime, you can see the 8 grams coming out of the stocks, you can see the quality of that’s there. You see the resource reserves in greater confidence growing, so all those things are in place. We don’t need that 1.5. That’s just an option, 1.5 or greater. What we’ve historically pointed out is where the bottlenecks sit within the plant, what needs the upgrades and what’s the associated CapEx with it. So all we’re showing is there’s — it’s not about going to building a new mill on a different site. It’s about optimizing. And you’ve seen it every other one of our plants want to give their teams that stability of the feet, they really, really eat out those gains out of the existing infrastructure before we then go and commit to months of CapEx, so the growth is pretty CapEx like.

Matthew Frydman

Second part?

Stuart Tonkin

Good, the second part of that question. We got a lot of that major drill out happening this year. Yes, I’d love to say that we justify building a new plant because that means we’ve got a ton of gold.

Matthew Frydman

Sure. Thanks, Stuart.

Operator

The next question is over the line of Daniel Morgan at UBS. Please go ahead, Daniel. Your line is now open.

Daniel Morgan

Hi, guys. I thought I will just take another opportunity given everyone is shy. Bill and team, I just want to go back to that Mount Charlotte underground and what you’re doing there. I was just wondering if you could expand on the resource to potential reserves conversion that might happen overtime? I mean — and also, the productivity you might be able to pull out of the mine. I mean, getting to 1.5 million tonnes is obviously a great result. Just wondering longer term, what do you think you could do from there?

Bill Beament

Yes. Look, Dan, again, like I said, both parties running at in 6 to 7 months. So it’s work in progress. But look we often step up when we only had a 200,000 ounce reserve towards in last statement. And we’ve mined 100,000 ounces and now we replaced that with 500,000. So look, that step change. We are doing — we just changed drilling contractors out there. And so we are expecting productivity improvements. So we’ll put the measures in the area. The exploration is going really well. Have a look at the statement there, there’s a number of areas there to look at. And like anything, the geology keeps evolving to the day you turn the lights out on any mine. So they are really getting a good understanding of the system. So obviously, we had a big step-up in resources at Mount Charlotte. And obviously, it just takes time to then start closing in that confidence level with drilling. So we’ve now got a 1.9 million ounce resource at Mount Charlotte. So and it’s still open in a lot of areas and don’t forget the whole distance between Mount Charlotte back to [indiscernible] via the same peer stake owned, there’s some really interesting opportunities from an underground perspective back along those structures that go back into the pit.

Daniel Morgan

And could you just talk about some of the productivity changes you’ve made since taking over the assets, specifically on the Mount Charlotte underground? Thank you.

Bill Beament

Yes. Look, pretty simple. We’re just — we’ve gone from 5 days a week to 24/7. So week on, week off, which is giving good great flexibility to the workforce. So they’ve responded extremely well to the changes there. And we’ve obviously just got people on the equipment sort of every hour of the day, which obviously just had a natural productivity improvement. And obviously, we’ve beefed up management. Northern Star has put in sort of the underground management into the operation now. And that’s obviously a few extra management people that can see the opportunities and direct traffic and take the plans from the technical people and execute. That link is obviously creating a good win for the operations.

So it’s no different what we do in any of our operations. That’s obviously, Northern Star’s keeping a underground productivity, working ourselves and applying to the open pit, and we’re enjoying that benefit and vice versa from underground perspective, we’re applying Northern Star skills set and they’re benefiting from them.

Daniel Morgan

Yes. And last question, any manning or people issues regarding the – that you’re going to be doing a lot more over the years ahead. Just wondering if you can talk about the manning side of things?

Bill Beament

No. Look, labor market, in general, mining is tied in a few areas, but – and that’s probably more on the diesel fitters and sort of the mining engineers plus fitters. But one thing we’ve done is, is we’ve put in a lot of apprenticeships over the years. So our trades people are very well supported there. I think our pay structure is quite competitive. But we’ve always been very competitive in our trades because that is a big chunk of our workforce. And if we don’t have fitters and electricians and all those we can’t operate. So they are critical just as important as a mining engineer or a manager.

And from the technical staff, we’re one of the biggest employers of graduate set of all the universities in Australia, and we’ve been doing that for probably eight or nine years. So we’ve got a great cohort of graduates, so coming through the system that we’re training up the right way and will be the future leaders of the business Look, we’re great. Kalgoorlie, obviously, is expanding. KCGM is about 80 or 100 positions there. So Dan, if you want to grab some high vision and relocate Kalgoorlie and help us out, we’ll take that every day of the week.

Daniel Morgan

Maybe we’ll take talk about that offline. Thank you very much.

Operator

Okay. At this stage, I will just pass it back to you for any closing comments

Bill Beament

Thanks. Our business is in great shape. And with our production profile set to grow on the back of our enlarged inventory, we believe it is perfectly positioned to perform even better. We are highly leveraged to the gold price and all our production comes from Tier 1 locations.

Our cash flow is strong and it’s set to get stronger. Our balance sheet is lightly geared and our financial returns are still the best in the industry. I think it’s very telling that in week when one of the big four banks has just canceled its interim dividend, this gold mining company has increased its final dividend by 27% to $0.095 and declared an additional special dividend of $0.10 fully franked. The times are changing, and Northern Star is perfectly placed to benefit from that change. Thanks for joining us.

Operator

This now concludes the call. Thank you all very much for attending. You can now disconnect your lines.



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