Northern Star Resources Ltd

ASX:NST

Earnings Call Transcript 2019-Q1

[Operator]

Thank you for standing by, and welcome to the Northern Star September 2018 Quarter Results Conference Call. [Operator Instructions]I would now like to hand the conference over to Mr. Bill Beament, Executive Chairman. Please go ahead.

[William James Beament, Executive Chairman]

Good morning, and thanks for joining us. On the call today, we have our Chief Executive Officer, Stuart Tonkin; our recently promoted CFO, Ryan Gurner. As noted in today's quarterly, Ryan has replaced Shaun, who is leaving the company to pursue other opportunities. And I wish to thank Shaun for his significant contribution to the success of Northern Star over the past 4 years. We also have our Chief Geological Officer, Michael Mulroney. For Northern Star, the past quarter was one of growth. It was substantial growth. But more importantly, it was earnings-accretive growth. This growth will further underpin our industry-leading financial returns. It is the superior financial returns, which in turn underpin the strong value proposition at Northern Star. This value proposition reflects the combination of the scope for capital gains, strong fully franked dividends and the overall total shareholder return. This combination ensures Northern Star makes our long-stated overall objective, which is creating value and delivering earnings growth for our shareholders.During the quarter, we grew resources at our tier -- at our 2 Tier 1 Australian operations by over 5 million ounces to close to 16 million ounces overall, and our reserves grew by 0.5 million ounces to 4 million. Thanks to our acquisition of the Pogo Gold Mine in Alaska and the growth in our Australian resource base, our total resources as a company have doubled to 20.5 million ounces. And today, we are delighted to report that we're on track to grow production this financial year to within our stated range of 850,000 to 900,000 ounces at an all-in sustaining cost AUD 1,050 to AUD 1,150 an ounce. When put together, this adds up to substantial growth in mine life and free cash flow. But because this growth stems from the right balance of organic sources and value-creating acquisitions, it will enable us to maintain our industry-leading financial returns and create value for shareholders.Our highly successful organic growth strategy at our Australian operations is demonstrated by the fact that we are both producing now over 300,000 ounces a year from each operation. This is in line with one of our most fundamental strategic commitments, to own Tier 1 mines in Tier 1 jurisdictions of scale and size. Our Australian operations produced over 150,000 ounces at an all-in sustaining cost of AUD 1,122 an ounce, which is in line with our FY '19 guidance. Stuart Tonkin will discuss the Australian operations in more detail in a minute.At Pogo, we couldn't have had a better start. We aimed to convert the 4.1 million-ounce inventory to JORC status. But we did significantly better than that. While the JORC resources came in at 4.15 million ounces, this excludes 765,000 ounces of non-JORC inventory in the satellite deposits that wasn't included. The upshot is that the in-mine resources increased by 24%, and there is significant upside virtually everywhere we look. And Mike Mulroney will elaborate on that shortly.Pogo's operational performance during the quarter was as expected. The project is clearly mine-constrained as demonstrated by the fact that the mill operated at less than 70% of its capacity during the quarter. While we took ownership -- financial benefit of Pogo on July 1, we didn't assume management control until September 28. So we're only into week 4 as we speak. But we're already seeing results from some of the changes introduced in the recent weeks. The bottom line is that we expect mill utilization to run at 90% this quarter, reaching 100% by the June quarter. This will see Pogo perform in line with our published guidance of 250,000 to 260,000 ounces. And the combination of the changes we are implementing and the increase in production will see Pogo's all-in sustaining cost fall in line with guidance at USD 880 an ounce.Stuart Tonkin will now discuss the changes and the outlook for Pogo as well as provide some more detail on the performance of our Australian operations.

[Stuart Peter Tonkin, Chief Executive Officer]

Thanks, Bill. So the September quarter further establishes the strength of our assets and of our team. We have successfully taken management control of Pogo operation, as Bill mentioned, at the end of the quarter, which was greatly assisted by Sumitomo Metal Mining Co. and the Pogo site staff. Our due diligence team is now working as the integration team at Pogo to implement our proven strategy of mine life extension through operational improvements and exploration investments. This approach has been welcomed on-site, and in only weeks, we have made good progress of increasing production ore sources and lifting daily output. We maintained a view of quarter-on-quarter improvements to restore Pogo toward a 300,000 ounce per annum producer at strong margins.We held an Investor and Analyst site visit during the quarter, which established the baseline view of the operation, the infrastructure and the exploration potential of Pogo. We hope to keep you all updated regularly on our successful integration over the coming year. So as we've highlighted in the quarterly on Page 2, Pogo is on track to meet mid-point of annual production guidance, and the cost reduction is expected to flow through from the March quarter in 2019. Given the mine was constrained during the quarter, we've doubled available ore headings with over 20 new work areas identified, and many of these headings are actually in areas where capital infrastructure is already in place. Therefore, costs to get access to these are quite low and the time frame is minimal.We've ceased the development of small drives and we've converted those to larger 4.5 by 4.5-meter drives with really limited impact to any mined grade but generating an increase of more than 30% in productivities and reduced operating costs per tonne. We've increased -- in increasing the ore heading size, this has also allowed us to remove 17 pieces of mobile equipment out of that operating fleet to be parked up, which out of 55 pieces of mobile plant, that's a 31% reduction. And for those that can relate that through to our costs, you'll see significant manpower and maintenance savings yielded from that initiative.Coupled with that, the mining method changes are in progress to bring more long-haul open stoping into the plan. This again will lower unit costs and enable a much higher percentage of ore extraction from the orebody.There are legacy operational contracts, and these are all under review as well as the reliance on higher-cost external consultants and contractors, and we're going through that process as we've done on previous projects. And this will be expected to be largely completed by end of the calendar year.The operation is well advanced on reevaluating gold resources to add significantly to the mine reserves for a mid-2019 reporting, and really, significant progress in formulating the FY 2020 mine plan has already been made. And this isn't work that's been completed just from the last 4 weeks but literally been from 3 months prior, during the due diligence process. So we're well advanced on those plans. And that's really looking to demonstrate that Pogo has the potential to return to a 300,000-ounce per annum operation.Now over to our Australian operations. We maintained our plus 600,000-ounce run rate with 153,000 ounces sold in the quarter. Our Kalgoorlie operations remain in an investment phase with future production centers, with a lift in our development meters across the operations, primarily at the Kanowna, Millennium and HBJ operations. And ore production also increased 10% from previous quarter as Millennium ramps production, which is coupled with growth at Kanowna. This was mined but not milled, so you'll see that build in our ounces in the stockpile.The investment establish -- this investment establishes the capital infrastructure and drilling platforms to support the continued organic growth plan for our Kalgoorlie region. The quarterly costs were high due to 10,000 ounces mined that was stockpiled and not milled, and the effect of that is approximately $100 an ounce to the all-in sustaining cost. We still maintain our yearly guidance as we build throughout the year.Over to Jundee, our development meters were increased 15% from the previous quarter, and we're now at 1,830 meters a month. The Byrnecut team set a new Australian record for jumbo meters developed in a calendar month with a single jumbo crew. And over at the Gateway mine, they achieved 640 meters, including their bolting and meshing cycle, which is an absolutely outstanding result and a real reflection of the combined efforts at Jundee to rebase performance. Jundee's stoping is also being maintained at an increased rate of 120,000 stoped tonnes per month throughout the quarter, and Jundee remains an extremely active place with 10 underground diamond drill rig spinning and new production fronts being developed.So across the group, we should also recognize that the increased gold inventories, with now 133,000 ounces in contained stockpiles, gold in circuit and in-transit at the end of the quarter. And this is a de-risked asset for future returns.So in summary, the domestic operations are in a healthy state, and our emerging opportunities at Pogo are just commencing. We have commenced the financial year from a strong footing with a clear strategy to maintain superior returns for shareholders.I would now like to pass to Ryan to address the financials of the quarter.

[Ryan P. Gurner, Chief Financial Officer]

Thanks, Stuart, and good morning, everyone. I'm pleased to be able to present to you some of the key financial aspects of the company's 2018 September quarterly results.During the quarter, Northern Star completed the AUD 350 million acquisition of the Pogo Gold Mine and the successful AUD 175 million equity raising with Macquarie Bank. Approximately $176 million was drawn from the company's cash balance to complete the transaction post equity raising. Although the financial benefit of Pogo was received from 1 July, the net impact of this performance is reflected in the acquisition price and balance sheet acquired. And so the revenues and operational cash flows attributable to Pogo are not reflected in the September quarter. The gold inventory acquired as part of Pogo is included in table 1 and includes approximately 5,500 ounces of gold in circuit and approximately 10,000 ounces of gold in transit at quarter end. The cash flow waterfall chart on Page 4 provides an overview of cash, bullion and investment movements for the September quarter and the generation of $64 million in operating cash flow.During the quarter, just over $32 million was invested into organic growth across exploration and expansionary capital to further drive returns to our shareholders. In addition, a fully franked dividend of $0.05 per share or $32 million was paid to shareholders on the 28th of September. This took the full year FY '18 dividend to $0.095 per share and reflects the dividend payout at 6% of revenue. Also noted during the quarter was the net reduction of $14 million in investments, representing the mark-to-market position at 30 September. It should be also noted that within the cash flow waterfall, there is an additional $20 million outflow in respect of M&A activities during the quarter. This additional outflow relates to the acquisition of a further 15% stake in the Central Tanami project following Tanami Gold exercising its first put option. Northern Star now holds 40% of the Central Tanami project with the right to earn-in to 75%.Northern Star delivered a September quarter all-in sustaining cost per ounce sold from its Australian operations of $1,122 per ounce, which sits within the full year FY '19 guidance.Kalgoorlie operation's all-in sustaining cost for the quarter was higher than yearly guidance but well in line with budget. This was due to the increase of gold inventories across all sites and declined development expense at South Kalgoorlie operations. The all-in sustaining cost at Kalgoorlie operations are expected to trend lower for the remainder of the financial year.During the quarter, Pogo gold operations delivered an all-in sustaining cost per ounce sold expressed in Australian dollars of AUD 1,493. The high all-in sustaining cost at Pogo in part reflects the high levels of gold in transit at 30 September of 9,860 ounces. For the December quarter, the addition of these ounces and higher forecast new utilization rates will place downward pressure on Pogo's all-in sustaining cost per ounce.Finally, with the addition of the Pogo Gold Mine, the company's hedge book now includes both Aussie dollar and U.S. dollar-denominated positions, being 226,050 ounces at AUD 1,739 per ounce and 40,000 ounces at USD 1,220 per ounce. With the Pogo Gold Mine having a USD functional currency, the intent is to undertake USD hedging to manage Pogo's price risk exposure.I will now hand you over to Michael to discuss geology and exploration.

[Michael Geoffrey Mulroney, Chief Geological Officer]

Good morning, everybody, and thanks, Ryan. The September quarter was an extremely active quarter across the group for exploration and development activities in line with the increased budget announced earlier this year. At Jundee, we continued with our fleet of 10 underground rigs carrying out extensional and infill drilling across the mine, but of particular interest was the recommencement of drilling on the new Zodiac zone with a program of 4 wedge holes off one of the pre-existing parent holes late in the quarter.Regionally at Jundee, we continue our activities down at the Deep Well region and the new Ramone discovery with a number of new prospects being Marley, Ziggy and the new Tosh zone all reporting excellent results and shaping up to define this area as a significant new production area in the future for the Jundee operation.Moving down to Kanowna. Again, in the Kanowna Belle mine, we had an excellent quarter with 4 rigs operating. And of particular significance was a number of programs in the hanging wall of the main Lowes orebody system continue to discover new high-grade zones outside of the existing resource blocks throughout the entire length of the mine. Also across Velvet in the lower Velvet area between the Velvet deposit and the main Lowes orebody, we continue to highlight broad zones of mineralization that appear to link the 2 orebodies together. So we have high hopes for that area in the future.Across is the 100% owned Kundana complex. We have underground drilling operations underway at Millennium and the new Pope John mine ahead of production. But on the surface, we started drilling at the Moonbeam deposit further south of Pope John with excellent results, and we expect the resource upgrade to come into that area in the middle of the year.Across on the EKJV. We maintained 4 rigs underground on the Pegasus, Rubicon and Hornet complex, and also down at Raleigh on the new Raleigh South discovery. At Raleigh South, underground drilling continues to define visible gold intersections ahead of the main exploration decline down there. But also from surface drilling in the upper levels, we extended the orebody up towards the surface, again, with multiple visible gold intersections.Further south at the new Sir Walter prospects on 300 to 500 meters south of that area, initial drilling in that area has also achieved a number of visible gold intersections on the first 2 drilling lines which gives us over 1 kilometer extension south of the Raleigh mining infrastructure of high-grade mineralization.Further north in the Carbine District, with the predevelopment activities commencing at the Paradigm area, we switched our attention to the Carbine Phantom pit complex just to the west. Initial drilling under the Carbine pit has generated a number of new intersections in the hanging wall to the main Carbine ore zone. And further north, these zones extend up into the Phantom, and further north of those areas again with multiple targets, all generating excellent results during the quarter.Moving to Pogo, we continued the drilling activities at Pogo post-completion of the acquisition. Underground, we have a fleet of 4 diamond drill rigs focused primarily on resource infill and extension of the large resource base underground to build out the geological information ahead of the current mining front. On the surface, we maintain also a fleet of 4 surface rigs, 3 of which have been drilling on the Down dip extensions of the Liese zone and discovering new potential vein system adjacent to the Fun Zone at depth.Across the river, we have been active in an area known as the Goodpaster area where drilling continued until the end of September which is the end of the helicopter season as this area requires heli-supported drilling. Again, interesting results have been generated, and we'll be able to elaborate on these further in future calls.And finally, in the Tanami area, drilling results underneath the Hurricane-Repulse complex and further south in the Jims area started to indicate potential extensions from those mineralized systems at considerable depth beneath the current open pits.I now hand you back to the moderator for questions.

[Operator]

[Operator Instructions] Your first question comes from Warren Edney from Baillieu Holst.

[Warren Edney, Research Analyst]

I just want to clarify the treatment of the first quarter from Pogo. The cash flow waterfall shows that you've spent the whole amount of the $350 million. So is there a future adjustment to the acquisition cost from the balancing at the revenue and cost received during the September quarter by the previous owners? Or is it going to be -- how's it going to be treated?

[Ryan P. Gurner, Chief Financial Officer]

It's Ryan here. No. So obviously we've paid out that acquisition price. So no -- so there won't be any adjustment into the next quarter either from us or Sumitomo.

[Operator]

Your next question comes from Sophie Spartalis from Merrill Lynch.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Just in regards to the increased ore inventory. Is this something that we are likely to see going forward? Is this a risk management strategy that you're putting in place? Can you just sort of talk through why we've seen a sudden increase this quarter, please?

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. Thanks, Sophie. Stuart here. So no, no, this is not a strategy to stockpile gold. But some of it is definitely around the sequencing of getting ore through our plants. In the Kalgoorlie region, we still service the toll treatment of the RNC ore in the first month of the quarter at Jubilee plant. And we're also utilizing a third party's plant in Coolgardie. So it's really around us sequencing and trying to minimize the amount of parcel changeovers because then you reduce throughput. So longer parcels through Kanowna and Jubilee, and the result of that has been develop -- stockpiling that ore in Kalgoorlie. So in -- over the year, that's why we have great confidence in delivering our guidance over the year, in how we sequence and schedule those parcels. At the quarter-on-quarter or intra-quarter, there are some movements there. So really why we've highlighted it, it explains the lift in the Kalgoorlie all-in sustaining cost, because it's really the denominator driven. As far as Pogo, the mill was mine-constrained. So then your price is 70%. We're -- at the back end, there was a shut there where mine actually started to pick up. But with the opening up of those, we really got to start to match the capacity of Pogo, and there was 10,000 ounces there, which is basically gold in transit. And we're still assessing where that dore ends up. This goes down to Utah presently. There may be opportunities to move that around. So it's really just about the timing on the back end of that quarter for those ounces.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. So just going back to the Australian operations, we would expect all that working capital to kind of basically really draw down by the time we get to the end of financial year?

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. Look, it's still always, as we said, around that 90,000 to 100,000 ounces. So depending on the grade of it that -- yes, it won't -- it'll stay net-net year-on-year pretty flat.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. And then just a quick follow-up question, if I can. Just at Pogo, given the 70% mine constraint, were you aware of that when you did your DD? Is that sort of going -- in terms of that ramp-up to 100% by June next quarter, is that well within your expectations? Has that been slower than what you had anticipated?

[Stuart Peter Tonkin, Chief Executive Officer]

No. Look, we -- and all of the things, I guess, we're implementing, I think, we did identify through DD. We're going through and implementing those initiatives. And yes, that's on track, and I think we've coursed the project at an important point, and that's where we think we can effect that improvement or that change to the asset. So it will take quarter-on-quarter. There's been the need to move there but that's why we've given up the full year guidance of 250,000 to 260,000. And then we're looking already forward into FY '20 to show that can be built up towards 300,000 ounces. So there's quite a few moving parts, but we've got 20 Aussies over there complementing the American team, and those actions are already well underway.

[Operator]

Your next question comes from Michael Slifirski from Credit Suisse.

[Michael Slifirski, Managing Director]

I've got a few. First of all, a couple of quickies on Pogo, and I think one of them might have been partially answered, but I just want to make sure I've understood it. So the fact that you're mine-constrained but still mined more than you milled, and if I look at the day rates, this sort of implies about 6.5 days of ore mining that weren't milled at the end of the period. So does that imply that the -- there was a shut for that period at the end of the quarter? I'm just trying to understand that apparent inventory build.

[Stuart Peter Tonkin, Chief Executive Officer]

That is exactly what it is, Michael. At the end of the quarter, there was a shut. And therefore, that mined ore was stockpiled.

[Michael Slifirski, Managing Director]

Great. Then your guidance for next quarter and for next year, just want to be clear about that. So are you suggesting that next quarter, average is 90% or gets an exit rate of 90% capacity utilization?

[Stuart Peter Tonkin, Chief Executive Officer]

So look, the 90% is, at the moment, the tonnes through the nameplate is sitting at 70%, we'll lift that up this quarter. It's already what we're mining at, the 90%, and then we're basically going to be at 100% into the next calendar year. So yes, we're not saying that the mine -- sorry, we're not saying that the plant mechanical utilization is 100%, because that's not -- we can't shut down, that's not available. What we're saying is the percentage of the nameplate throughput is where we're going to be -- we're not -- we're going to turn to mill-constrained by the second half of this year, and we'll maintain about 250,000 to 260,000 ounces for FY '19.

[Michael Slifirski, Managing Director]

But absolutely explicit like many, 90% mill capacity utilization for the whole of the December quarter or you'll get to that 90% utilization rate by the end of the December quarter?

[Stuart Peter Tonkin, Chief Executive Officer]

For the whole quarter, Michael.

[Michael Slifirski, Managing Director]

For the whole quarter. And then your indicative look-through to '20, your initial planning suggesting 300,000 ounces, again, maybe an exit rate of 300,000 or a 300,000 achieved for -- potentially for the entire -- for the year?

[Stuart Peter Tonkin, Chief Executive Officer]

The plan is for the entire year. There's still a lot of consideration. We'll give that guidance out mid next year, but with already what we've seen, it really comes down to that head grade. And what we want to ensure is that we don't sterilize parts from the orebody that could potentially give us continued margin and continued mine life. You could probably exceed that, but we want to make sure that it's a long game, not just taking and then fading.

[Michael Slifirski, Managing Director]

Okay. Moving to Kalgoorlie region, I get also confused about the capacity available to you. I mean, the only thing that's clear in my mind is 2 million tonnes at KB and 1.2 million at Jubilee, which assuming there was no contractor third-party toll processing that's 800,000 tonnes per quarter. But processed significantly less than that and mined significantly less than that. So I'm just trying to understand how we should be thinking of modeling really process tonnes going forward. Is the objective to get to and exceed 800,000? Or is the September quarter what -- run rate what you're thinking is sort of sustainable? I would assume that Jundee eventually -- sorry, Jubilee eventually self-sustains its own capacity.

[Stuart Peter Tonkin, Chief Executive Officer]

Okay. So agree there's still a few moving parts. We milled -- at Northern Star's ore, we milled at a rate of 2.6 million tonnes per annum for the quarter. That's the rate we milled. Don't forget, there's still an annual rate of 600,000 tonnes that's the Rand-attributing contribution. So that's literally combined 3.2 million tonnes per annum quarterly run rate, right? Now we mined at 2.8 million tonnes per annum run rate as far as Northern Star's contribution. So those -- the Kanowna Belle is full. We now have -- we only had 2/3 of the Jubilee plant in this quarter. This is now the RNC ore's ounce. So going forward, we have 100% of that. We have also been utilizing the Greenfields plant in Coolgardie. So I appreciate there were some moving parts again during the quarter. And as we go quarter-on-quarter, we've got full access to our plants, and we're building and mining capacity, stockpiling our ore. So yes, we weigh up the financials about trucking and logistics to be trucked. I'm not going waste costs early by trucking it further to a plant that's at a higher unit cost. So stockpiling ore and waiting for that capacity is the sensible, the best financial return for us. So that's how we're looking at it.

[Michael Slifirski, Managing Director]

Yes, makes absolute sense. Then finally, with Jundee, the milled tonnes there the September quarter, do we annualize that as what a -- what is a sustainable capacity there now?

[Stuart Peter Tonkin, Chief Executive Officer]

Look, you obviously saw it around 2.35 million tonnes per annum inclusive of some upside low-grade stockpile. So that is 1 -- an outstanding throughput result. You can annualize that. We can't mine at that rate presently even despite the doubling of production from stopes in the last couple of years and the extensive growth of development inflow to the ore driving, we still would struggle to mine at over 2 million tonnes per annum from Jundee without a modified mining method. And the modified mining method could be offered from Armada or Revelation in that regard. So that milling rate basically says that it's not mill-constrained. So it's really around what's been mined and planned, and we still maintain our guidance for Jundee.

[Operator]

Your next question comes from Paul Hissey from RBC Capital Markets.

[Paul Hissey, Analyst]

Two questions from me. Just firstly on CapEx. If we sort of gross up or aggregate the sustaining CapEx implied by your cost from each asset, we get to about $35 million. In your cash flow waterfall, you say total CapEx for the quarter was about $40 million. Does that mean you only spent $5 million on other CapEx across the entire portfolio?

[Ryan P. Gurner, Chief Financial Officer]

No. So we've got $40 million across all CapEx. So that includes both expansionary and sustaining capital. So no, that's not quite right. So that's inclusive of all sustaining and non-sustaining capital for the full year.

[Paul Hissey, Analyst]

Yes, yes. But if I take the sustaining capital lines from each of your mine-by-mine breakdowns, $150 an ounce, if I gross all of those up, I get to $34 million. So if you spent $34 million on sustaining and $40 million on total, does that mean the difference of $6 million is expansionary?

[Ryan P. Gurner, Chief Financial Officer]

Yes, yes.

[Stuart Peter Tonkin, Chief Executive Officer]

Yes, that's -- the -- we've said there what the total annualized expansionary capital is for the year. So that will come at the back end.

[Paul Hissey, Analyst]

Can you remind me what that number is, Stuart, please?

[Stuart Peter Tonkin, Chief Executive Officer]

$73 million -- $74 million.

[Paul Hissey, Analyst]

Yes, yes. Bigger number. Yes. Okay. And then the last question. Just to back over again, you've said all along that the economic interest from Pogo accrues from the 1st of July, but it seems like reading through the results today, what that means is that you get the end product of the operation for the first quarter, and then you're going to recruit P&L, depreciation, all of that kind of stuff only for the latter 3 quarters. So just to be very clear, if we're trying to forecast your NPAT for December, for the first half, is that only going to include Pogo from when you took control or for the entire 6 months?

[Ryan P. Gurner, Chief Financial Officer]

When we've taken control. So we've acquired some balance sheet, so we've acquired some assets, and so we've acquired sort of 15,500 ounces and cash. And then, the other assets. But yes, the P&L and the revenues, our financial results will be only for December for Pogo and going forward.

[Operator]

Your next question comes from Warren Edney from Baillieu Holst.

[Warren Edney, Research Analyst]

Just going back to Kalgoorlie. Now that you sort of amalgamated your reporting and sort of amalgamating the operations themselves to make them work as a unit, can you give us some sort of longer-term view about what your exploration spend might be and what sustaining CapEx is on an ongoing basis now that you're sort of mixing and matching everything?

[Stuart Peter Tonkin, Chief Executive Officer]

Sure. I think probably we are going to drill on that too, Warren. We've got the split of the exploration spend in another corporate presentation, so you can pretty much cut that take up into all of those assets. So that's probably the best place to draw those numbers. Sustaining capital obviously -- or there's great capital is still baked in -- currently on that $74 million and combined, but we're still looking at where the production rate will come. So we give that expansionary capital guidance mid next year if we want to lift the production ounces that we believe so. There is 320,000, 340,000 ounces coming out of Kalgoorlie operations presently, and the optionality for us to either extend Kanowna or even HBJ continuity is really what we're working on at the moment. So we can perhaps give you those numbers in greater detail after this call.

[Operator]

There are no further questions at this time. I would now like to hand back to Mr. Beament for closing remarks.

[William James Beament, Executive Chairman]

Thank you. Much has been said in recent times about the distinction between growth and value companies. Today's results told that Northern Star is both. We are growing our inventory, production and cash flow, and we are doing it at the time when our global peers are shrinking on these fronts. And our strong financial returns, as measured by the likes of return on equity, return on invested capital and dividends, means we are creating great value for shareholders. Our Australian operations are performing to plan, and we are absolutely delighted with what we have seen at Pogo. All this means that we have a clear pathway to generating more growth and more value for shareholders. Thanks for joining us today.