Northern Star Kicks Off KCGM Expansion Commissioning as Hemi Timing Slips Again
Australia’s largest gold miner reaches inflection point
Northern Star Resources (ASX: NST) reported that the A$1.6 billion KCGM expansion project in Western Australia had started commissioning.
The project, which has been under construction since mid-2023, is being delivered in two stages, with the initial stage replacing around 85% of the existing 13 million tonne per annum plant and more than doubling capacity to 27Mtpa.
The second stage, which is on track for completion later this year, will consolidate KCGM’s processing by integrating the Gidji facility into the expanded Fimiston plant.
The existing Fimiston plant will continue to operate through July and August, with the tie-in to the expanded processing facility planned for September.
The full ramp-up will take two years.
“I can’t understate how important this milestone is to the business at this time, and I’d like to acknowledge and thank our people and contracting partners who have completed this project on time and to a very high quality over the past three years,” Northern Star managing director Stuart Tonkin said on a conference call on Wednesday morning.
“KCGM, as the cornerstone asset of Northern Star, now set with production increasing, capital spend decreasing, coupled with a reducing hedge book, all point to significant cash generation in the near term, driving increased shareholder returns.”
Hemi delayed
Last year, Northern Star completed the A$6 billion scrip takeover of De Grey Mining, giving it ownership of the 13.2 million ounce Hemi deposit in WA’s Pilbara region.
This time last year, Northern Star was hoping to receive approvals for the A$1.3 billion development and start construction around now.
The company spent A$104 million on Hemi in the 2026 financial year, well below guidance of A$165-175 million.
Managed aquifer recharge trials will be carried out during the September quarter following agreement with Traditional Owners, with results expected to support the state approval process, engineering design and project scheduling.
A final investment decision is still about a year away.
Tonkin said the timing of approvals was beyond the company’s control.
“There’s no showstoppers in that, but it’s the process we need to go through,” he said.
He added that he was pleased with the relationship with Traditional Owners and the extra time for engineering would allow a high degree of accuracy.
“You’ll see the expenditure that’s been occurring to date and will continue is for the aim of narrowing in what that flow sheet is, what the engineering costs are going to be, and the commitments to enable our board to make an educated, informed, returns-based decision on FID,” he said.
“We’re utilising the time effectively to get that accuracy, but some of this delay is really outside of the control of the company, and we’re in the in the process of the approvals train.”
De Grey’s 2023 definitive feasibility study for an open pit operation at Hemi outlined average annual production of 553,000 ounces over the first five years and 530,000ozpa over the first 10 years at all-in sustaining costs of A$1200-1300/oz.
At a gold price of A$2700/oz, the DFS returned a post-tax net present value of A$2.9 billion and IRR of 36%.
The Australian dollar gold price is now more than A$5700/oz.
Guidance achieved
Northern Star already pre-released its June quarter results earlier this month, with 433,000oz of gold sold at AISC of A$2651/oz.
Group underlying free cashflow was A$206 million and net mine cashflow was A$443 million.
For the 2026 financial year, gold sold was 1.54Moz at AISC of A$2698/oz, meeting revised guidance of above 1.5Moz.
Net mine cashflow for the year was A$1.17 billion, including record annual net mine cashflow of A$609 million at Pogo in Alaska.
“Pleasingly, operational improvements were evident across the portfolio, with record mining rates at KCGM, stronger milling performance at Jundee, record quarterly sales at Thunderbox, and another outstanding cashflow performance from Pogo,” Tonkin said.
“At KCGM, we achieve record mining volumes with open pit material movement of 88 million tonnes per annum and underground mining of 3.2 million tonnes per annum, both demonstrating the calibre of our owner teams and the intensity of activity growing this premium asset.”
Northern Star expects full-year cash earnings to be A$2.86-2.95 billion, in line with FY25.
The company will release its full FY26 financial results and FY27 guidance on August 20.
“For KCGM, commissioning during August will provide meaningful operating data from the expanded processing plant,” Tonkin said.
“That information will allow us to better assess throughput, recovery, and plant availability, which will be incorporated into establishing FY27 guidance.”
Medium-term guidance for FY28 and FY29 will not be released this year.
The company closed June with cash and bullion of A$1.23 billion, after A$129 million of shares were purchased under the A$500 million on-market share buy-back program.
“Overall, we’re entering FY27 from a position of strength, the portfolio continues to generate strong cashflow,” Tonkin said.
“We’ve successfully transitioned the KCGM expansion project into commissioning, and we’re focused on delivering a safe and disciplined ramp up of what will become cornerstone processing hub within our portfolio.”
Northern Star declined to comment on the activist campaign launched by Elliott Investment Management last month, except to say that engagement with Elliott was ongoing.
Tonkin will leave the company this quarter, with Glencore executive Suresh Vadnagra to join as managing director and CEO from October 5.
Tonkin said it was his 50th and final quarterly conference call presenting for Northern Star and thanked the company’s 10,000 employees and contractors.
“You are the true contributors to value creation. Keep your sense of humour, and thanks very much.”