Northern Star Resources Ltd

ASX:NST

Earnings Call Transcript 2020-Q2

[Operator]

Thank you for standing by and welcome to the Northern Star December 2019 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 Chief Executive Officer, Stuart Tonkin; our CFO, Ryan Gurner; and Chief Geological Officer, Michael Mulroney.Today's results demonstrate the exceptionally strong and strategic position in Northern Star is now in. The company is extremely well placed on every metric by which a gold miner should be measured. Our cash flow is strong and set for further significant growth as we incorporate the KCGM acquisition in this quarter, continue making strong progress at Pogo and benefit from the record-high gold prices.Our mine lives are long, our assets are all in Tier 1 locations, and we have substantial scope for ongoing organic growth. This platform now lays out the opportunity for Northern Star to continue to grow earnings not only for the next few quarters but for the next few years. These key factors underpin our strategy to deliver strong, sustainable returns for all our stakeholders, including shareholders, the communities we operate in and workers alike.Our underlying free cash flow for the quarter was very strong at $88 million, and this was despite investing $53 million in growth capital and exploration, which includes Jundee's mill upgrade to 2.7 million tonnes per annum. This cash flow generation stemmed from the sale of 214,635 ounces at an all-in sustaining cost of AUD 1,421.Our Australian operations had a bumper quarter with sales of nearly 170,000 ounces at all-in sustaining costs of $1,263 per ounce. This exceeded the top end of production guidance on an annualized basis.At Pogo, the benefits of our changing mining methods and other efficiency matters continue to flow through with the sale of over 45,000 ounces at an all-in sustaining costs of USD 1,380 per ounce. This was a 56% increase in gold sold and a 25% decrease in all-in sustaining costs from the September quarter. Pogo's results for the month of December are particularly telling and marked the inflection point for the operation, with nearly 25,000 ounces mined at 9.8 grams, 22,500 ounces sold at an all-in sustaining cost of USD 964 an ounce. This continues the trend of rising production and falling costs, which is now well established.It is important to note that stoping tonnages have continued to increase every month at Pogo. Total stoping tonnes mined in the December quarter were 134,000 tonnes. This was almost double the September quarter figure. Stoping provided 60% of total mined ore tonnages in the December quarter.In the month of December, stoping contributed over 62,000 tonnes. Our target that we've stated before is around about 65,000 stoped tonnes per month, so we're almost there. The benefits of this can be seen in the grade, which rose to an average 7.4 grams per tonne in the December quarter, which is up 26% from the September quarter. In the month of December, as I said, it averaged 9.8 grams. Given these achievements, we are well on track to achieve our second half production guidance at Pogo.Coming back to Australia, we're absolutely delighted with our KCGM purchase. It is very rare that you get an opportunity to acquire one of the greatest gold systems in the world, let alone in our own backyard. And to do it in partnership with Saracen makes the acquisition even more valuable for Northern Star. The benefits of this partnership are already clear, as shown by how quickly we've established an executive management committee, comprising 2 representatives of each company. We have also wasted no time initiating a widespread strategic review, which will cover all aspects of the operation, including mining, processing and exploration.I will now pass to Stuart Tonkin to provide more detail on our business during the quarter.

[Stuart Peter Tonkin, Chief Executive Officer]

Thanks, Bill. It has been a very active quarter indeed, and we are pleased to demonstrate performance across all operations as we include yet another Tier 1 asset to our Tier 1 portfolio.At Pogo, we are now in the final stages of our 18-month transition plan, where the Pogo team is successfully implementing long-haul stoping mining methods and delivering improved metrics across the operation. The December quarter delivered a 56% quarter-on-quarter improved gold production with long-haul stoping contribution now at the desired 60% of total ore tonnes, which is the key metric to delivering lower unit cost mining. This was further highlighted by the month of December with performance which achieved 22,574 ounces of gold sold at an all-in sustaining cost of USD 964 an ounce, which are the milestone metrics we have targeted by the mining method change. It demonstrates a very profitable operation at greater than 20,000 ounces per month and less than USD 1,000 an ounce. And this delivers a solid platform to build on with continued improved productivities and grow production to further lower all-in sustaining costs.Our increased investment in development continues to access the future production areas and is building flexibility into the mining schedule to maintain more consistent long-hole stoping physicals. We averaged 1,200 meters a month of development during the December quarter as the stoping activity reduced the number of working development phases, and we maintain a forecast target of 1,500 meters a month to meet long-term growth plans and an expanded mill capacity.Further detail on Pogo can be viewed in the accompanying slide presentation on the ASX platform, demonstrating the ramp-up through December quarter and an impressive exit rate, posing us well for a second -- for the second half of the year.Now to our Australian operations. Jundee delivered a continued high performance with 13% increased development physicals quarter-on-quarter, with nearly 1,800 meters a month average across the 3 months. Production stoping averaged 121,000 tonnes per month during the quarter with a total ore of 525,000 tonnes from the underground, delivering an annualized mining rate of 2.1 million tonnes per annum.For the December quarter, Jundee sold 82,000 ounces at an all-in sustaining cost of AUD 1,030, generating continued strong cash flows. The Ramone open pit progressed mining on a reduced strip ratio and is building ore stockpiles, with 340,000 ore tonnes mined in the quarter at 1.5 grams. The capital works, as Bill spoke about, is now underway to increase milling capacity at Jundee, with the civils commenced for the new ball mill to meet a nominal 2.7 million tonnes per annum capacity. And commissioning of this project is planned for June -- the coming June quarter. The strong underground production, coupled with the open pit opportunity surrounding Jundee, makes this expansion project a compelling investment with a quick payback.To Kalgoorlie operations. We saw improved grade at Kanowna Belle and improvements across all operations, delivering a 7% increase in total ore tonnes mined and 15% increase in gold ounces mined quarter-on-quarter of 90,724 ounces. We maintained high development meters across all operations, including the capital accesses at the Moonbeam underground, to establish production growth for the second half of the year. The Kalgoorlie operations sold 87,000 ounces at an all-in sustaining cost of $1,483 an ounce, with the costs weighed on by impact of stockpile adjustments during that quarter.Mike will talk shortly to the exploration efforts around Kalgoorlie to maintain a pipeline of projects, and I look forward to reporting on KCGM performance at our March quarterly as this will include the consolidated addition of the Super Pit to our business. The Kalgoorlie gold field remains a premium address for future gold discovery and production growth, and our recently expanded footprint will underpin Northern Star's continued financial performance for decades to come.I'd now like to pass to Ryan Gurner to discuss the financials.

[Ryan P. Gurner, Chief Financial Officer]

Yes. Thanks, Stu. Good morning all. I'll present you now some of the key aspects of the company's December quarterly results.During the quarter, Northern Star successfully completed the takeover of Echo Resources Limited and completed an equity raise of $765 million to part fund the acquisition of 50% KCGM. In anticipation of an early January completion for KCGM, bank debt of $425 million was drawn on 31 December. Total bank debt at the end of the quarter was $500 million with cash and bullion of approximately $247 million after removing the purchase consideration on hand for KCGM.Moving to the cash flow waterfall chart on Page 5. We provide an overview of cash, bullion and investment movements for the December quarter and present the generation of $179 million operating cash flow and $88 million of underlying free cash flow, which, of course, adjust for working capital, financing cash flows and movements in the company's equity investments. Much of the quarterly free cash flow was generated in the December month with a stronger contribution from Pogo.This underlying free cash flow was generated after investing a total of $53 million into organic growth across exploration to set up future production areas and expansionary capital to increase production. This investment included Moonbeam decline and development at 100% owned Kundana operation; Jundee and Pogo process plant expansions; development and associated infrastructure at Pogo; an exploration focus at Kanowna, South Kalgoorlie following recent successes; and the exciting Goodpaster Project at Pogo.Finally, on cash flow, a fully franked dividend of $0.075 per share totaling $49 million was paid to shareholders on the 20th of November. This took the full year FY '19 dividend to $0.135 per share and reflects the targeted dividend payout at 6% of revenue.During the December quarter, the Australian operations sold 169,000 ounces at an all-in sustaining cost per ounce of $1,263. With a solid contribution from Ramone, Jundee had another great quarter, mining 97,000 ounces and selling 82,500 ounces at a cash cost per ounce of $783 and all-in sustaining cost of $1,030 per ounce sold. At the end of the quarter, Jundee had 60,000 ounces in stockpiles and GIC.Mine grade across all sites lifted in the December quarter at Kalgoorlie operations with just over 90,000 ounces mined and sold 87,000 ounces at a cash cost per ounce of $1,134 and all-in sustaining cost of $1,483, all improvements over the September quarter. Higher noncash stock movement cost and resource definition drilling were realized primarily at Kanowna Belle during the quarter. All-in sustaining costs at Kalgoorlie are expected to continue to trend lower for the remainder of the financial year.Over to Pogo now, which during the December quarter, mined 53,000 ounces and sold 45,000 ounces at an all-in sustaining cost per ounce of USD 1,380. The mining method transition continues to advance with the percentage of long-hole stoping tonnes to development tonnes rising to 60% during the quarter. As previously communicated, the month of December at Pogo was much stronger with 22.5 ounces (sic) [ 22,500 ounces ] sold.Pogo's total site cost, excluding exploration investments, corporate costs and ore stock movements, averaged USD 22.8 million per month over the December quarter. The highest total cash expenditure at Pogo for the quarter was due to planned mill maintenance; nonsustaining spend on the processing infrastructure expansion project, which is planned to increase the plant capacity 30% to 1.3 million tonnes; significantly increased meters of grade control diamond drilling; and seasonal expenditure on propane.With the anticipated increased leverage from the KCGM acquisition, 283,000 ounces of gold were added during the quarter to our hedge book. The additional cover placed results in Northern Star having approximately 16% of production hedged over the next 3 calendar years when using FY '20 midpoint guidance, inclusive of our 50% share of KCGM.I'll now hand over to Mike, who will discuss exploration.

[Michael Geoffrey Mulroney, Chief Geological Officer]

Thanks, Ryan, and good morning, everyone. Across the corner, Northern Star continued a significant level of in-mine drilling activity across the Australian operations with an increased level of activity at Pogo.At Jundee, the underground diamond drill fleet increased to 14 rigs with an expanded focus on exploration drilling across all mining areas. Resource extension drilling within the existing mine areas continued with particularly strong results recorded in the Deakin system, both north and south of current mine infrastructure. In-mine exploration drilling has accelerated with early positive results coming from the Lyons South/Hughes area, the southern areas of the Invicta Gap, which includes Deakin and Cardassian and the Gateway South area, while initial drilling in the northern areas indicated potential extensions to the Cook mineralization.Moving to Kalgoorlie. The underground diamond drilling at Kanowna Belle continues to define strongly mineralized structures in the hanging wall Sims and Troy trends across the C Block area with scattered high-grade intersections now extending up-dip into the A and B Blocks of the mine. Extensional drilling at Velvet also continues to extend the current system, both up and down plunge. Across at Kundana, the underground resource definition programs were completed at Millennium, Pope John, Moonbeam and Christmas across the quarter with modest depth extensions being identified at Millennium.At the adjacent East Kundana joint venture, the underground diamond drilling focused on the resource definition programs into the new Falcon trend located midway between Pegasus and Raleigh mines. In addition, the underground development to access the Falcon mineralized corridor from Pegasus infrastructure commenced during the quarter. Also at Pegasus, the resource definition drilling on the Hera Lode achieved better-than-anticipated results, while the exploration drilling from a platform at Hornet commenced late in the quarter, targeting possible southern extensions to the Falcon trend with some early positive indications.At South Kalgoorlie, in-mine and surface resource definition drilling continue to extend the north trend down plunge in the Mutooroo area and also located a new mineralized trend in the footwall of the NOZ system.Moving to Pogo. The underground diamond drill fleet changeover was completed during the quarter, with 8 rigs now fully operational in the mine area. Underground drilling focused on infill and reserve definition drilling within the main Liese Vein, North Zone, X-Vein, South Pogo and Fun Zone areas with results generally exceeding expectations. In addition, numerous unmodeled structures were intersected in all areas, particularly the Fun Zone and the North Zone, providing possible extensions to all known systems.Moving on to the regional exploration activities. At Pogo, surface diamond drilling continued at the Goodpaster Project and continues to confirm both the continuity of the flat-dipping Liese-type veins and the steep-dipping North Zone veins structures across the central and southern parts of the known mineralization footprint. Late in the quarter, the surface diamond drilling commenced on the new Lily Zone target, which is a series of outcropping Liese-type flat-dipping vein structures located approximately 400 meters above and southwest of the main production areas. All drill holes completed to date intersected one or more stacked quartz-sulfide and visible gold veins interpreted to represent the main Lily vein structure, close to the north-northwest striking fault zone. All assays in this program are still pending.Returning to Australia. At Jundee, RC drilling programs around the Ramone open pit confirm the shallow mineralized trends at Tosh, while the results for the Marley North area are still pending. Following the completion of the Echo Resources acquisition, the data integration and a full review of the exploration projects commenced late in the quarter.Within the Kalgoorlie area, surface diamond drilling commenced at the Fitzroy Chasers trend between the Kanowna Belle mine eastwards to the Red Hill deposit within the prospective Kanowna Belle mine stratigraphy. All assay results from this program are still outstanding.At Carbine, ongoing RC drilling continues to outline potential extensions to the main Phantom trend within the Carbine shear zone. And at South Kalgoorlie tenements, further extensional RC and diamond drilling is in progress at Triumph following the previous announced high-grade intersections. Elsewhere, extensive RC and diamond drilling programs are completed at a number of locations, including Samphire, Golden Eagle, Stockyard Dam, Abattoir, Greenback, Steinway and Enigma South areas.And finally, in the Central Tanami joint venture in the Northern Territory, RC drilling of the Ripcord prospect located southeast of the Groundrush mining area had early results indicating potential strike extensions to the existing resource. Our reconnaissance aircore drilling of the untested Ripcord-Groundrush corridor generated several geochemical anomalies for future drilling.In the Suplejack area, which is about 120 kilometers north of the Central Tanami plant site, early RC drilling results confirmed and upgraded the existing resource area, while further north on the same trend at Kokoda, initial RC drilling of an untested geochemical anomaly intersected minor gold mineralization with further drilling planned.And finally, across the board in the Western Tanami, a co-funded surface RC and diamond drilling at the Gremlin prospect indicated the presence of several mafic intrusive bodies at depth exhibiting significantly elevated base metal anomalism.I'll now return the call to the moderator for questions.

[Operator]

[Operator Instructions] Your first question comes from Levi Spry from JPM.

[Levi Spry, Research Analyst]

Two questions on Jundee, please. Can you just talk a little bit more about the plant expansion? So you've given us CapEx and time lines. Where will you feed it from? What's the ramp-up profile sort of look like? And also, just on FY '20 guidance for Jundee itself, it seems like it's going pretty well. Can you just remind me of what you said? And you've done 160,000-odd ounces, I think, already. So tracking, I think, above. What happens in the next 6 months?

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. Thanks, Levi. It's Stuart here. So yes, the guidance for Jundee was 260,000 to 280,000 ounces at [ that ]. And that takes us from, say, just nominally 2.2 million, 2.7 million tonnes per annum capacity. And also, it allows us to improve the grind size. So we had to pull that down, P80, with about 110 micron. So there will be a recovery kind of benefit in regards to that as well.So they are the metrics. It's not included in that 116 expansionary capital number that we put out there, but it's a very quick payback. And they've always been mined and then stockpiled and we can get that turn through. So it's not going to make a massive difference to this financial year. We shut down some tie-ins, but it'll definitely set us up well for next year.

[Operator]

Your next question comes from Daniel Morgan from UBS.

[Daniel Morgan, Director and Analyst]

I'm not sure if everyone on the call experienced this as well, but we lost you, I think, after you were reiterating the 260,000 to 280,000 -- sorry, saying the guidance was 260,000 to 280,000. We lost you, and then you came back online, at least from my perspective, at 2.2 million to 2.7 million tonne milling capacity. Just wondering if you could -- I presume it's not only me. Just repeat what your answers were. It looked like a technical problem.

[Stuart Peter Tonkin, Chief Executive Officer]

Okay. So that's why I think Levi went deadly silence. You were either totally impressed or you're off-line. Look, yes, the guidance 260,000 to 280,000 and cost of $1,115 to $1,195, we've exceeded that run rate at the moment. We've articulated the ore sources were coming from our stockpiled open pit Ramone area as well as the northern opportunities of Echo with Julius. And we sort of said that to get and maintain and grow from that 300,000 ounces, we either needed to expand the Jundee processing facility or utilize regional third-party toll treatments or look at the refurbishment of the Bronzewing facility.So at the moment, it's AUD 22 million. We increased the ball mill -- sorry, we put a brand-new ball mill in at 4.5 megawatts, replaces the 1.8-megawatt ball mill that's there. And we reduced our grind size back to 110 micron. So all those things, knock on...[Technical Difficulty]

[Operator]

Apologies, we seem to have lost connection with the speaker. [Operator Instructions]

[Stuart Peter Tonkin, Chief Executive Officer]

Hello?

[Daniel Morgan, Director and Analyst]

Yes.

[Stuart Peter Tonkin, Chief Executive Officer]

Daniel, are you there?

[Daniel Morgan, Director and Analyst]

Yes.

[Stuart Peter Tonkin, Chief Executive Officer]

We're back. I don't know -- did you get any of that?

[Daniel Morgan, Director and Analyst]

I got most of that. So if you put -- assuming that I'm getting what everyone else on the call is getting, I think we got full answers to those questions now. You broke off at roughly the same time we had you on the earlier one, if that helps.So to my question, I'm just trying to get the answer to the early ones. On the Super Pit, what was interesting is Saracen yesterday articulated that you guys would be working closer together than what looked like was envisaged when it was going to be Saracen and Newmont. And they referred to joint operatorship. Just wondering if you could talk about how you're going to operate the asset. Have you moved to a joint operatorship model? And just wondering about the acquisition price, which was -- you paid slightly more, which gave you control, and just want to know about that in that context.

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. So look, the difference in price, there was a couple of other tenements in the boundary area that weren't included in the other half as well as the option $25 million on the power business that we'll be evaluating. So there's other reasons why that's a different transaction from the headline number. It has defaulted back to the joint management, which is excellent for both parties, putting both skill sets complementary together. So it's not that one is the party -- is the lead manager.And we've quickly formed those committees. We've been on-site with the teams that are there, spent time up there recently at Raleigh going through those things. And we've sat down together and compared our due diligence findings and are prioritizing those actions. So I think both parties are very motivated and are working through those things. And we'll start to give color over the coming 6 months on the progress and the plans and the updates in that regard. So to be clear, it is joint management between Saracen and Northern Star, which is a great positive benefit for our skill set.

[Daniel Morgan, Director and Analyst]

And just, I guess, more disclosure, how are you going to be disclosing the grade at Kalgoorlie ops? Are we going to have Kalgoorlie ops separate from the Super Pit? Or are we going to get both?

[Stuart Peter Tonkin, Chief Executive Officer]

It will be completely ring-fenced. The Kalgoorlie operations will be -- continue to be reported as it currently is. And KCGM will be separately reported as -- and it will be aligned with the joint venture's timing on resource, reserves and all listings that come out and sent to all given both companies are ASX listed.

[Operator]

Your next question comes from Matthew Frydman from Goldman Sachs.

[Matthew Frydman, Research Analyst]

Hopefully, I don't go dead during this Q&A, but pushing forward, just a couple of questions on Pogo. You mentioned in your operational update you've removed all low-grade material from the mine plan. I understand that's been driven by the lift in stoping tonnes that's enabled that. But can you talk through how physically that's being achieved? Is it through tightening up your development headings now to only focus on high-grade core? And do you expect that that's now completely sustainable going forward?

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. Matt, so it's Stuart again. So I mean it hasn't been achieved as far as not mining it. It's still material that sits in that subgrade, but it gets stockpiled, and we're saying we've removed it from the feed. So back when we weren't at the desired stoped tonnes, we were basically taking that lower-grade development material and putting it through the plant. And we're also range-testing the plant and getting things sorted through on the throughput side of things.So what we've demonstrated this quarter is when we suddenly get these stopes, these multiple production fronts humming, you see 80% of our tonnes in the December month were from long-hole stoping. And you can see the impact on the grade when we get that high grade and that's very productive material.So the quarter is back weighted. When you look at it as a whole quarter, it's really to look at the exit rate of December, and it sets us up well for the March quarter. But that low grade at the mine, I mean, it's still there, it's still available. If there's any disruptions, production-wise or otherwise, we can utilize that material. But -- hence why our view to expand the processing facility from 1 to 1.3. That work will commence in the new season or the better weather and obviously have that by the end of calendar year '21 to take that extra material.

[Matthew Frydman, Research Analyst]

Yes, sure. I guess just following up on that. You alluded to, I guess, what drove the dip in development meters in the second quarter. I guess when are you expecting to hit the 1,500-meter rate for development? And is that what's required to fill the mill once it's expanded to that 1.3? I guess theoretically, would 1,500 meters support a 1.3 million tonne per annum mining rate? Or could it potentially support something larger?

[Stuart Peter Tonkin, Chief Executive Officer]

No. So definitely, the 1,500 meters a month supports that 1.3. We demonstrated we hit that in the September quarter to show in the September month, the fleet, the people, we can achieve those physicals. There was a natural trade-off, as you see, in December, where you're in congested amount of areas. But as soon as we get the capital declines in place, there's multiple areas open. You've got more flexibility in your plan.If you kind of look at Jundee, it's cranking out 1,800 meters a month, and it's doing double the stoped tonnes at Pogo. So it's doing 120,000 tonnes a month, and we're obviously trying to get 65,000 tonnes a month there at Pogo. It's doing that because of the multiple areas. And basically that's the extra real estate. So you're not congested. You're not sharing vent, power and those things.So ideally, it's the geography or the -- where you can actually work. And we're setting it up. The 1,500 meters, we've said, just gives us that consistency in the flexibility and sets us up for a very consistent 1.3 million tonnes per annum.

[Matthew Frydman, Research Analyst]

So it sounds like you'd expect to be hitting that rate around the end of this financial year potentially.

[Stuart Peter Tonkin, Chief Executive Officer]

At the end of this financial year and maintaining it. And the more consistent we maintain at that, and we can go beyond that to catch up. But it's really -- that just gives us the stability. So you're not seeing the sawtooth. But it's the normal growing pains. You can see that sawtooth in our graphs. That's just basically trying to coordinate everybody on top of each other in the underground mine.

[Matthew Frydman, Research Analyst]

Sure. And then just a quick update on the mill expansion, wondering how that's tracking, whether you've ordered any long lead time items. Is that driving the time line at the moment? I guess given that -- now that you've obviously been demonstrating your turnaround in the mine productivity, you've obviously got a lot of confidence there...

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. Look, it's very different to Jundee where you've got plenty of real estate and open air, and you can basically bang down your footings and get your milling quick. Pogo, you've got infrastructure constraints that you've got to -- and your real estate there. So all those long-lead items have been -- are being placed and are being set at the moment. And obviously, the contract is coming in to do that work and the tolling work. And we're trying to -- not trying to, we will time that. We've given that slate regarding the seasonal weather for getting things up the roads and getting things constructed.So before the next winter, it'll all be enclosed. And then obviously, during that winter period, there'll be tie-ins and electrical infrastructure. So all those long-lead items are on track in that commitment. It's about USD 10 million -- sorry, about USD 20 million to be spent this year and then another USD 10 million to tie it in, in the following budget year.

[Matthew Frydman, Research Analyst]

Sure. And maybe just a couple of quick ones on Jundee. Firstly, on the mill expansion, thanks for that additional detail there. Just wondering, back to the question on feed sources, wondering if you've got an idea in your mind of what the ideal split will be between underground feed and the open pit sources you've got. And I guess how -- in your view, how does Bronzewing fit into that strategy as well?

[William James Beament, Executive Chairman]

Yes. Look, it's Bill. So yes, look, obviously, underground's punching out 2 million to 2.1 million tonnes of ore. And as Stu said earlier on, we've been stockpiling Ramone ore. So that was a complete business case just on Ramone. But adding our Echo transaction is a shovel-ready pit at Julius onto the south. And as we've said on a number of con calls, we've stopped drilling our open pit resources around Jundee because we had no mill infrastructure. We've already made multiple discoveries in that region that Mike's again highlighted on a number of quarters. We can start again building up that open pit mine plan. But we can't do that without an expanded mill.

[Matthew Frydman, Research Analyst]

Sure. And then just finally, I think before Stu was cut off earlier, he suggested potentially taking that 1.8-megawatt ball mill down to South Kalgoorlie. Wondering what kind of uplift we might expect there from your processing capacity at the Jubilee mill.

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. So it's probably less about capacity and more about grind size. We've seen -- it gives us greater recovery. So we're just looking at all the business cases around it at the moment. But yes, you try to [ upsize ] the throughput, and obviously, we -- you get all losses at AUD 2,300 an ounce. You don't want to be throwing a percent at the back end, you don't need to.

[Operator]

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

[William James Beament, Executive Chairman]

Today's numbers convey one simple message, our business is in great shape. Our Australian operations are performing extremely well. The progress at Pogo is significant with much more improvement still to come, and it's getting set to be an outstanding contributor for the group. And we now have an enormous opportunity on our hands at KCGM. The current half will see us benefit substantially from the inclusion of KCGM in our results. That will also have implications for our dividend given that the company has a policy of returning an equivalent of 6% of revenue as dividends.In addition to our growing cash flow, we also have outstanding and strategic near-term organic growth opportunities. This has been central to our strong financial returns and outperformance over many years. And we are fully committed to maintaining our substantial investment in this area.In light of all this, I look forward to reporting to you on our ongoing progress at Pogo and updating you on our KCGM over coming months. Thanks for joining us today.