Northern Star Resources Limited (ASX: NST) has presented three mill expansion options that were considered as part of the KCGM mill optimisation pre-feasibility study.
Next steps include finalising the feasibility study, where opportunities to further maximise value may be progressed, subject to an investment decision.
Located in Kalgoorlie, Western Australia, KCGM is one of the world’s largest and most significant gold mines with a Mineral Resource of 27.4Moz and an Ore Reserve of 11.9Moz. The growth optionality that comes with owning an asset as large as KCGM is significant and unmatched across Australia.
Following consolidation of a 100% interest in KCGM last year, Northern Star commenced a process to investigate opportunities to create capital-efficient, high-returning growth outcomes that may see the company unlock additional value – more quickly – from this world-class operation. As KCGM transitions to a lower-cost position, the company will be able to revisit the geological model and identify extra opportunities, including in the broader region.
Against this backdrop, Northern Star’s green power strategy will cut carbon emissions and lower power costs. Importantly, the mill optimisation study work enhances Northern Star’s social investment by ensuring KCGM can make a responsible and significant contribution to sustainable mining and offer broader ESG benefits in the Goldfields region, including in the areas of safety, social performance, employment and infrastructure. Northern Star continues to welcome highly capable workers into our Goldfields teams to strengthen the company’s position as a sought-after, highly respected employer.
Three expansion options were considered and evaluated in the KCGM mill optimisation PFS:
- Maintain 13Mtpa milling capacity – Steady State
- Expand to 17Mtpa milling capacity – Bolt-on expansion
- Expand to 24Mtpa milling capacity – 70% process plant refurbishment
- Expand to 22Mtpa milling capacity – Full rebuild (greenfield process plant)
All three mill expansion options are financially compelling (post tax) and deliver meaningful operational benefits:
- At a gold price of A$2,250/oz:
- IRR: 13–26%
- Payback: 3-5 years
- At a gold price of A$2,600/oz:
- IRR: 16-31%
- Payback: 2-5 years
- Capex: A$440M – A$1,400M
- Substantial increase in NPV
- Gold production growth of 100-200kozpa
- KCGM AISC reduction up to A$200/oz
Commenting on the KCGM mill optimisation PFS update, Northern Star managing director Stuart Tonkin said:
“The PFS outcome confirms the enormous opportunity on offer at KCGM, a truly world-class gold asset. Since we moved to 100% ownership of KCGM a little over a year ago, we have diligently and efficiently worked through potential options to create further value for all stakeholders. We believe Northern Star’s powerful combination of continued operational excellence, the strongest asset portfolio in our history and a commitment to deliver social value will enable us to provide attractive returns and long-term value growth.
“The PFS determined that the three mill expansion options are financially compelling and offer significant operational benefits to potentially create substantially more value than maintaining today’s 13Mtpa milling capacity. The PFS work showed an expanded mill capacity, underpinned by a simplified processing circuit flow sheet, could lower KCGM’s AISC by up to A$200/oz as well as boost annual production by up to 200,000oz. The key difference between the three mill expansion options is free cash flow generation, a key strategic pillar for the company.
“We will now embark on the final study phase to optimise the best pathway to generate superior returns for shareholders. We will not grow for growth’s sake but remain focused on the disciplined and transparent allocation of capital and a strong balance sheet.
“While we are confident and well-positioned to pursue a mill expansion at KCGM given access to a highly skilled workforce and our recent major project experience, maintaining the current 13Mtpa milling capacity is an option that remains firmly on the table.
“Regardless of the outcome of the final feasibility work to determine the most valuable option, the KCGM pathway to 650kozpa by FY26 remains unchanged, with regional synergies and production growth enabling a lower AISC position than we are achieving today.
“I am proud of the Northern Star team for getting us to this stage without losing focus of the overarching purpose to generate superior shareholder returns. The company is fortunate to have a world-class asset like KCGM in its portfolio, which gives us optionality that is unrivalled in the Australian gold space. I look forward to updating shareholders on the outcome of the final stage of our KCGM feasibility work in due course.”
