Northern Star Resources Ltd

ASX:NST

Earnings Call Analysis

Northern Star's Strong H1, Optimistic H2 Outlook

Northern Star Resources reported robust performance with 412,000 ounces of gold sold at AUD 1,824 per ounce, delivering over AUD 100 million in free cash flow. The company reaffirms its 1.6 to 1.75 million ounces full year production target, with all-in sustaining costs between $1,730 and $1,790 per ounce. With gold prices soaring above $3,000, the outlook for H2 is positive. The net cash position is at $238 million with liquidity ample at $2.5 billion. Strong cash earnings for H1 FY '24 are projected between $685 million and $715 million, and Northern Star is fully funding its growth, exploration, and dividends with a promising free cash flow of $102 million.

Robust Sales and Production with Strong Free Cash Flow

The company continued its operational excellence by selling 412,000 ounces of gold at an all-in sustaining cost of AUD 1,824 per ounce, generating substantial underlying free cash flow exceeding AUD 100 million. They remain steadfast in their previous full-year production guidance, anticipating a robust output of 1.6 million to 1.75 million ounces at an all-in sustaining cost of $1,730 to $1,790 per ounce, reflecting a confident outlook for the latter half of the year.

Solid Financial Position and Investment in Expansion

Financial resilience is highlighted by a net cash position of $238 million and strong liquidity of $2.5 billion. Investments in growth are underscored by the early-stage construction of the KCGM mill expansion, which is proceeding ahead of schedule, with the goal of doubling the plant throughput by FY '29 and elevating KCGM to one of the top 5 global gold mines.

Increasing Operational Efficiency and Output in Key Regions

The Kalgoorlie production center saw a 20% increase in gold sales, amounting to 220,000 ounces at a reduced all-in sustaining cost of $1,683 per ounce. Mine operating cash flow surged by 65% quarter-on-quarter to $288 million, driven by enhanced processing volumes and successful mining initiatives like the East Wall remediation area, enabling accelerated access to high-grade ores.

Strategic Investments in Sustainable Projects

The company sold 125,000 ounces of gold at an all-in sustaining cost of $1,923 per ounce. Strategic investments, including the renewable projects at Jundee such as a solar and wind farm, signal a commitment to sustainability in conjunction with their mining operations. This aligns with the company's broader initiatives to mitigate environmental impact and optimize energy usage.

Strong Half-Year Earnings and Positive Free Cash Flow

The company's first half of FY '24 demonstrated strong cash earnings estimated between $685 million to $715 million. They also emphasized that dividend payments are between 20% to 30% of cash earnings. The robust operating cash flow of $486 million in the quarter reflects a healthy financial performance with quarter-on-quarter growth, while free cash flow remained substantial after accounting for capital expenditures and other costs.

Prudent Financial Management and Hedging Strategy

Depreciation and amortization are aligned with company guidance of $650 to $750 per ounce. The company has also proactively refinanced its revolving credit facilities, securing significant liquidity of $2.6 billion, while also delivering a matured approach to hedging by selling 100,000 ounces into contracts and placing an additional 285,000 ounces at favorable prices.

Future Growth and Access Enhancements

Work on the East Wall is due to be completed by the end of FY '24, affording unlimited access to the lucrative Golden Pike North for the subsequent two fiscal years. This access is crucial to the company's strategic plan, which aims to augment KCGM's production to 650,000 ounces.

Opportunities Amid Market Conditions and Resilient Cost Management

The company has evaluated its cost base, cutoff grades, revenues, and gold price assumptions. Although gold prices have significantly increased, they are more focused on drill density and resource definition to enhance confidence in their measured and indicated resources. Despite the current gold price trends, there are substantial opportunities predicted for the future.

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for standing by, and welcome to the Northern Star Resources December 2023 Quarterly Results. [Operator Instructions] I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director and CEO. Please go ahead.

[Stuart Tonkin, executive]

Thank you, and good morning. With me today is Chief Operating Officer, Simon Jessop; and our Chief Financial Officer, Ryan Gurner. I am pleased to present a strong December quarter performance, positioning Northern Star for growth in production and cash flows in the second half of FY '24 as planned.Each of our production centers contributed excellent progress towards our profitable growth strategy during the quarter with a number of highlights that Simon and Ryan will cover shortly. We sold 412,000 ounces of gold at an all-in sustaining cost of AUD 1,824 an ounce, generating underlying free cash flow of over AUD 100 million.We maintain our full year production guidance for costs as well, 1.6 million to 1.75 million ounces at an all-in sustaining cost of $1,730 to $1,790 an ounce with a strong H2 outlook, delivering gold sales into a very healthy gold price currently above $3,000 an ounce. We remain financially resilient in a net cash position of $238 million, with strong liquidity of $2.5 billion and strong cash flows, which funds all of our growth investments, exploration activities and dividends.For the KCGM mill expansion, we advanced enabling works and commenced early stages of construction ahead of schedule. It is exciting to see this activity underway at Fimiston, leading the 3-year build to double the plant throughput to 27 million tonnes per annum and production lifting to 900,000 ounces per annum by FY '29, establishing KCGM as a top 5 global gold mine. The Kalgoorlie team has endured some plus 40 degree days last week, complicated by state grid power outages to the city's homes and businesses. And Northern Star are fortunate to own and operate the Parkeston Power Station with TransAlta, which has been integral to minimizing operational disruption and facilitating the power needs across the city whilst the repairs are conducted.In contrast, the Pogo team are enduring negative 40 degree days in Alaska, but have maintained strong momentum in operational improvements with quarterly gold sales of 66,000 ounces at an all-in sustaining cost of USD 1,367 an ounce. At Pogo, stoping dilution is still affecting mine grade slightly, which has been partially offset by higher mill throughput, which milled at an annualized rate of 1.4 million tonnes per annum for the quarter. Mine operating cash flow from Pogo continues to strengthen with USD 40 million generated in the quarter, which is very pleasing to see.Simon will now speak to the Australian operations.

[Simon Jessop, executive]

Thank you, Stuart. For the Kalgoorlie production center, including KCGM, Carosue Dam, Kanowna Belle and South Kalgoorlie, we sold 220,000 ounces of gold, up 20% at an Australian all-in sustaining cost of $1,683 an ounce, down 9%. This production delivered a mine operating cash flow of $288 million, up 65% quarter-on-quarter. The region also spent $200 million on significant growth capital projects, including $72 million on the KCGM mill expansion and $65 million on KCGM open pit mine development and new tail storage facilities.At KCGM, open pit material movement was in line with plan at 18.3 million tonnes in the quarter, with a total movement of 40 million tonnes for H1, in line with our stated total material movement goals. The open pit successfully continued mining the East Wall remediation area to regain partial access to Golden Pike North with 25,000 ounces mined in quarter 2 and slightly ahead of time. This partial access to Golden Pike North is a real highlight as we continue to accelerate towards unlocking the 1.2 million ounces.Underground mining volumes for the Calgary region was steady at 1.54 million tonnes, while grade increased 13% to deliver 128,000 ounces. The higher grade was driven from Mt Charlotte and Carosue Dam as we regained access to higher-grade areas of the mine. KCGM's underground Mt Charlotte operation stabilized development at 3.3 kilometers for the quarter after a 52% lift in quarter 1. This is a key lead indicator for opening up new mining fronts as production increases will flow from further stope areas online. The Carosue Dam underground mines all performed well, enabling the underground ore mined to supply over 60% of the mill feed for the half.Open pit movements increased to 1 million BCMs as we started the new Wallbrook open pit. The Kalgoorlie operations mined lower volumes at Kanowna Belle with a major production blast completed late in December. While South Kalgoorlie ore mined was stable, the average grade increased to 5.4 grams over a total of 24,000 ounces. Processing volumes in the Kalgoorlie production center improved 11% post the quarter 1 major shutdowns to 4.85 million tonnes. KCGM recovered gold increased 36% quarter-on-quarter to 124,000 ounces on processing volumes, grade and the initial access to high-grade ore from Golden Pike North. Carosue Dam achieved 1 million tonnes milled for the quarter, along with increased head grade and gold sold.The KCGM mill expansion spent $72 million during the quarter and successfully continued with the on-ground enabling works. Significant earthworks have commenced in the core source stockpile area and clearing of the new mill footprint. We also achieved significant works on the 33 KV power line into the northern switcher. The engineering design works are progressing well with 20% complete and are on track. The focus remains on the enabling works in preparation for the main construction team to commence in the late-in-the-March quarter.At our Yandal Production Center, including Jundee, Thunderbox and Bronzewing, we sold 125,000 ounces of gold at an Australian all-in sustaining costs of $1,923 an ounce. This production delivered a mine operating cash flow of $125 million, while we spent $61 million on growth capital projects, primarily $22 million was spent on the Orelia open pit.At our Jundee operation development advance was consistent at 7.5 kilometers with 760,000 tonnes of ore mined and 80,000 ounces for the quarter. Processing had an unplanned SAG mill train bearing failure which resulted in 10 days of lost mill availability. We exited December with this rectified at an annualized 3.2 million tonne per annum mill throughput as issues were resolved midway through the quarter.The Jundee renewable project progressed with all of the panels laid out for the 16-megawatt solar farm and the wiring up of the project has commenced. The 24-megawatt wind farm foundation works have commenced with steel complete in 2 of the 4 foundations and remains on track for FY '24. At Thunderbox, our underground operation achieved 498,000 tonnes of ore mined at a slightly higher head grade of 1.7 grams per tonne. We also commenced our latest underground mine during the quarter at Wonder with the portals established and significant infrastructure already in place. Northern Star Mining Services established the portals with 74 meters of development achieved before Christmas, and we look forward to the future higher grade ore from this mine. For the quarter, the underground and open pit operations successfully mined 1.35 million tonnes of ore, matching the Thunderbox process plant mill tonnes.The Thunderbox process plant achieved 1.29 million tonnes for the quarter and 51,000 ounces of gold. The throughput tonne per hour remained above nameplate, averaging 759 tonne per hour. Availability was 77% for the quarter, with major impacts being the main feed built conveyor that was damaged and low crushing circuit availability ultimately affecting feed rate on the mills. The focus is on availability while fixing wear points and engineering improvements for operability. The continued opportunity is improving availability greater than 90% and milling in excess of 6 million tonnes per annum.I would now like to pass over to Ryan, our Chief Financial Officer, to discuss the financials.

[Ryan Gurner, executive]

Thanks, Simon. Good morning all. As demonstrated in today's quarterly results, Northern Star remains in a fantastic financial position. Our balance sheet remains strong as set out in Table 4 on Page 9 with cash and bullion of $1.1 billion, and we remain in a net cash position of $238 million at 31 December.The company has recorded strong cash earnings for the first half of FY '24, which is estimated to be in the range of $685 million to $715 million. And a reminder that our dividend policy is based on 20% to 30% of cash earnings. Pleasingly, all 3 production centers generated positive free cash flow with capital expenditure fully funded.Figure 9 on Page 10 sets out the company's cash and bullion investments moving for the quarter with key elements being the company recording $486 million of operating cash flow, a 22% lift on the prior quarter and includes -- and this includes a AUD 28 million coupon payment on the notes and $25 million of our annual insurance premiums. Then, after deducting CapEx of $315 million relating to plant and equipment and mine development, $28 million of exploration and $41 million of lease payments, quarterly free cash flow generation was a healthy $102 million.Fully investment in sustaining capital, growth capital and exploration are tracking to plan. Growth capital includes waste removal at KCGM at Finsouth and the East Wall development at FIM Underground, KCGM plant expansion, development at Porphyry underground and Wallbrook open pit at CDO. Development at Orelia open pit and Wonder underground at Thunderbox. And during the quarter, the company paid its final FY '23 dividend of $0.155 per share, totaling $165 million.In respect to the company's on-market share buyback, this remains open and is 56% complete. Our blackout period applies up to and including our first half FY '24 results release on the 22nd of February. On other financial matters, depreciation and amortization are in line with company guidance provided of $650 to $750 an ounce. First half FY '24 depreciation is at the midpoint of the guidance range at approximately $691 per ounce sold. And for the quarter, noncash inventory charges for the group are $33 million. For the majority of these charges, noncash relate to the milling of acquired stockpiles at KCGM and are a component of EBITDA.During the quarter, the company refinanced its revolving credit facilities, extending maturity dates to December 27 and December 28, across 2 equal tranches totaling AUD 1.5 billion. With the facilities remaining undrawn and available at the end of the quarter, the company retains $2.6 billion in liquidity.In respect of hedging, Table 5 on Page 10 sets out the company's committed hedge position at 31 December. During the quarter, the company delivered 100,000 ounces into contracts and placed 285,000 ounces at an average price of AUD 3,450 an ounce. The overall hedge book being 1.8 million ounces at an average price of AUD 3,028 per ounce.I'll hand back now to Lexi for the Q&A session. Thanks.

[Operator]

[Operator Instructions] Your first question comes from Hugo Nicolaci from Goldman Sachs.

[Hugo Nicolaci, analyst]

Maybe just one more on the medium and longer-term outlook and going back to the comments at the exploration update in November. I think broadly that the KCGM outlook is just pretty well understood, but maybe the perception around the medium-term outlook and some of the other assets is probably still lacking a little bit. So I was just wondering if you could please talk us through in a bit more detail what you currently see that capital commitments being, things like ongoing Pogo development, satellite pits at Jundee and Thunderbox and the broader medium- to long-term sustaining CapEx profile?

[Stuart Tonkin, executive]

So, yes, outlook, you're talking about as far as capital, compliance to capital guidance number or more production surety or exploration? Is it around like the CapEx compass?

[Hugo Nicolaci, analyst]

Yes, more on CapEx, but then anything you can give around physical for kind of the medium term beyond just reserve grade and that sort of thing would be great as well.

[Stuart Tonkin, executive]

Yes, sure. So look, the key changing things go through on the Pogo fundamentally is around the grade and improving the stoping grade by minimizing mining dilution. The percentage of stoping to development was a bit down in the quarter. But ultimately, it's around getting high-quality tonnes through that plant to get to 300,000 ounces. So lifting that average grade up is where we're going to get that uplift in the revenue. You can see costs are improving, but there's still a lot of fixed cost at Pogo. So the improvement primarily there is a combination of improved grade from mining dilution improvements, plus some increased throughput. We milled at 1.4 million tonnes. There's a few other plant, small capital items that will be there to stabilize maintain an increased milling throughput. So that's Pogo settled. The other growth fundamentally comes from the stabilizing availability of the Thunderbox plant. So we've been able to meet that milling rate fairly consistent but not for the full quarter. So it's around getting that available time up, keeping that average grade through there and basically in the 6 million tonne per annum rate consistently throughout the quarter. We think we'll be at the exit rate in quarter 4 at that 6 million tonnes. It is a bit later than we wanted to see this year, both around just getting that mechanical uptime. So there's a few of those small capital items being improved across that plant. The rest really is driven by volumes and grade coming out of KCGM. As you pointed out, we're in the golden pipe north in the pit floor, we still got about 6 months of movement of waste material at East Wall, but we're in the grade in the north, in the pit fall, which has been 3 years in the making, and it's a fantastic outcome ahead of where we expected we would be. So they are there the 3 key drivers of inflex. We'll put out of resource reserves. We concluded them at the end of March. So there will be a lot of content detail that underpins what life assets and the guidance is in grade. But everything else is pretty steady other than those 3 key moving parts for the remainder of this year and at least next year.

[Hugo Nicolaci, analyst]

Great. And I guess maybe moving beyond kind of the second half '24. I mean how much are you planning on having to spend, say, in FY '25 and '26 on new satellite pits at Thunderbox and Jundee and what's the ongoing, I guess, development CapEx per year you're kind of anticipating at Pogo? I mean is it in the order of $50 million a year over and above sustaining CapEx of plants and the like? Or how do you just, I guess, see that medium-term CapEx profile shaping up?

[Stuart Tonkin, executive]

Yes. So we haven't given multiyear growth CapEx in that regard, and we'll assess doing that in the middle of the year. So really, what it is is delivery of this year's capital and most of that is going into KCGM obviously in the waste stripping movement, but also in the mill expansion. So the lion's share of the capital is going there. There is a fairly consistent start of new mining year across the Yandal. So whether that's an underground or an open pit. We're managing with our own fleets. So ultimately, you're spending the same amount per annum because you're reallocating your people and your fleet to those jobs. So it's not a case of stacking them on top of each other, it's just the sequence through those underground mines and open pit mine. So there's fairly consistent spend around opening up those growth ideas. And you'll see that pipeline of targets or pipeline of ore sources coming through in the resource reserve statement in a few months.

[Hugo Nicolaci, analyst]

[Indiscernible] CapEx point, I mean, from a sustaining CapEx perspective do you think about that longer term in terms of dollars per ounce? And what sort of number, I guess, do you see sustaining CapEx out once you kind of settle out through growth projects? I mean is it north of $200 an ounce of sustaining CapEx?

[Ryan Gurner, executive]

Yes, Hugo, Ryan here. Yes. I think if you look over history, I think the trend for the business has been around $200 to $250 per ounce. And I think we've trended that way for many years. And even this year, if you have a look at the results for the half year, I think we're just over $200. We're about $210 million. So yes, that's what I would guide to.

[Operator]

Your next question comes from Daniel Morgan from Barrenjoey.

[Daniel Morgan, analyst]

First question is on the Super Pit and just asking about what drove the early access to Golden Park? And does it mean that potentially you're slightly ahead of plan and we could see better grade in the second half of this year? Or is it just that you got in a few days at the end of the quarter and sort of came this quarter, not next?

[Simon Jessop, executive]

Yes. Thanks, Daniel, it is Simon. I suppose after 3.5 years of work, it's really good execution by the team to stay on track and on the path. And fundamentally with some good mining and thinking and technical work, we've regained partial access to part of the southern side of Golden Park North and also regained a little bit of access in the northern end. So I think really most of it is just good mining, good focus and the team's really delivered there. So we access that slightly early. The grade in the second half, absolutely KCGM will climb. And you can sort of see that timing difference between the gold recovered and the gold sold of 112,000 ounces, we had a big buildup in gold in circuit there, and that was really getting access to some of that Golden Pike North late in the quarter. On KCGM it takes really sort of 3 weeks to get the gold through the full circuit. So a bit of a timing piece there. So big buildup in GIC at the end of the quarter, but we'll continue to get access into Golden Pike North going forward. So some really great work from the team.

[Daniel Morgan, analyst]

Yes, huge milestone. Just clarifying, you've got partial access that's been restored. And obviously, that I think you've guided for full access is restored at the sort of midway through this year end of June. Can I just clarify that you'll have full access at the bottom of the pit and for all intents and purposes you won't be restricted? Or is there still work to be done that will occur in FY '25?

[Simon Jessop, executive]

No, you're exactly right. By the end of FY '24, so June this year, we should have finished all of the East Wall works, and therefore we've got unlimited access to Golden Pike North for FY '25 and FY '26. And obviously that's critical for our strategic plan of growing KCGM to 650,000 ounces.

[Daniel Morgan, analyst]

More of an industry question. It's unfortunate, but your nickel peers are suffering right now through low prices. There's been a few shuts, and perhaps more in WA. Just wondering what, if anything, does that mean for your business in terms of getting access to people and contractors and equipment? Has there been any signs yet? Might we see some, I guess, relief on the cost inflation we've been feeling on your business?

[Stuart Tonkin, executive]

Yes. Thanks, Dan. So one of the first things we've done is reached out across those businesses that we understood were going on to care and maintenance or reducing staffing just we have vacancies across our group we can fill. So we've put that offer out there to get them in. I don't see it fundamentally as a cost saving. It's around keeping those jobs in the regions and keeping them employed and filling gaps. And as we're growing -- it will certainly aid delivery of our business and again quality of skilled people reemployed.

[Operator]

Your next question comes from Hayden Bairstow from Argonaut.

[Hayden Bairstow, analyst]

Just a couple for me. So just comments on the reserve resource update. Just interested to understand, is there going to be any sort of shift in how you're thinking about particularly around Kalgoorlie, given the ounces committed and the mill expansion sort of underway as opposed to Carosue Dam as a distinct operating center and same with KB and bringing more of those resources more directed towards the mill longer term? Is that something that you're thinking about? Or is it sort of a couple of years out?

[Stuart Tonkin, executive]

Yes. So we've obviously assessed all the things regarding our cost base, cutoff grades and obviously the revenues, gold price assumptions, we don't -- we may modify the gold price slightly given it's a lot of headway from sub-$2,000 being used in the spots north of $3,000. But it's more properly drill density at a place like KCGM around the confidence level of measured indicated in [indiscernible] resource and then conversion across the reserve. So it's not that sensitive to the cutoff grades or gold price assumptions. It's really around getting the definition density right. So at the moment, we just see huge opportunities to come in later. We know that there is material in the pit shell that exists, that will be economic and very profitable through that expanded mill and the lower milling cost. That won't be factored into this resource reserve statement. We've obviously still got 2.5 years of building that plant before that would be brought into the statement.

[Hayden Bairstow, analyst]

Yes. Okay. And then just on the hedge profile, there's a decision to add 185,000 ounces to the book? I mean, is that something that we should be thinking about that might be getting bigger over time, opportunistic just to understand what that was about?

[Stuart Tonkin, executive]

No, it's pretty reflective of that policy, keeping us at average around that 20-odd percent. We appreciate we growing our ounce profile. So it's about that full year outlook and maintaining at that level. Opportunistic when the price is up. So they were added over $3,400 an ounce, and it basically keeps that percentage flat throughout that period. So just as we deliver into those hedges opportunistically adding to that book using that container to get the price up, average book price is above $3,000 an ounce. If you took a spot out of the money, it's under $100 million, which is what we generated in cash flow in the quarter, it's pretty cheap insurance.

[Operator]

Your next question comes from Ben Lyons from Jarden Securities Limited.

[Ben Lyons, analyst]

Congratulations, Stu. It was a great quarter, clearly. Maybe in the context of what was a very strong result, sorry to hone in on one of the weaker numbers, but I just wanted to talk a little bit about the physicals at Jundee. So the grade reported there was the lowest in over 5 years. And obviously, understanding that there's always going to be a natural tension between chasing the tonnage and maintaining the grade profile, just wondering if you can make any sort of comments around your expectations about that grade profile as we move forward.

[Stuart Tonkin, executive]

Yes. I will turn to Simon. I'll congratulate Simon on a great quarter too because he did all the work. But it's around the sequencing of open pit and underground contribution and with sort of some mill outages on just utilizing some low stock -- low-grade stockpiles. So Jundee is particularly lumpy when it comes to sources and feeds. So it's around maintaining and getting back to those reserve grades. Just let Simon will give you the color on forward look.

[Simon Jessop, executive]

Yes, Ben, thanks, the grade was lower for Jundee. But when you look at it, it's partly due to a combination of Ramone lower grade as a percentage into the total blend at Jundee, and we had some better grade come through late in the quarter. So just really timing of mine sequence at Jundee. So it does fluctuate quite a bit in terms of the grade. But as an average, we have a high contribution of Ramone, a slightly lower grade, but it's not far off reserve grade 3.6 grams per tonne for Jundee.

[Ben Lyons, analyst]

Yes. Cool. And then just the second one, moving across to Thunderbox. Good to hear that you're opening up the under underground. Just wondering if you can possibly remind me what sort of rough throughput and grades you're looking to achieve out of that new underground operation.

[Simon Jessop, executive]

Yes, certainly really, really excited to cut the portals and establish it just late in the quarter there. And really that from this quarter on we'll just ramp up the Wonder underground. But the initial reserve for Wonder was about 455,000 ounces at around about 3.2 grams per tonne. So when you compare that to Thunderbox underground, which is sitting around 1.7, 1.8 grams per tonne, it's a really high-grade source for us, but we also see a lot of opportunity to drill and continue to grow. So pretty excited to get that project underway. Obviously, there's a bit of a lead time in terms of development for like a normal underground, it starts ramping up. But they're the initial numbers on last year's R&R.

[Ben Lyons, analyst]

Yes. Cool. Just intuitively, do you think about it as a 1 million tonne per annum dedicated underground or more sort of like sort of 500,000 to 600,000 tonnes per annum?

[Simon Jessop, executive]

I suppose a little bit depends on timing of when we open up in those different areas. But definitely up towards that sort of 1 million tonnes per annum I think is pretty reasonable for that operation. So certainly well north of $500 million, that's for sure.

[Stuart Tonkin, executive]

Yes. The combination of development ore and production ore, stoping ore would be towards that million, it's just a blend of that.

[Operator]

Your next question comes from Alexander Barkley from RBC.

[Alexander Barkley, analyst]

Just a bit more specifically on Pogo and those grades. Is it a bit low this quarter? And in the second half, you said you're only expecting marginally better. I don't know if there's any more detail you could give about that rising percentage of stope ore. And you mentioned dilution might be an issue. So when should we see this line getting up towards reserve grade? And is that really achievable?

[Stuart Tonkin, executive]

Yes. So if you sort of look at the physicals in the quarterly, we've maintained sort of over 1,600 meters a month in development. And that, when it's knocking to ore, basically that's going into the plant preferential to stoping. So that will in turn relate to higher stope tonnes in the future. But it's the balance of just total amount of people, total amount of fleet moving material. So when we do overachieve on development, it does chew a bit into stoping, but it gets us more working fronts and ability to pick it up in the future. So that's why we have the visibility and the confidence. Remember we're sort of hitting the 12, 13 [indiscernible] a month, not only where were we consuming stocks, we weren't getting ahead. So it's pleasing to see those lead indicators there. And the grade is also reflective of that high percentage of development ore going into the feed. The mining dilution, it's different for different zones and areas and ground conditions within the mine. So it's around us understanding not just having one pattern for each of those areas and the tech teams holding those things in. So yes, we've seen improvements throughout the year, but then there will be a certain area that will give us some grief. And it's just about isolating that and modifying that and continuing on. So we're working on all those things. Reserve grade, 8.5 grams, we'll again assess with all the drilling and the confidence of what we're finding in all of those areas as well as what those mining factors are. We'll reassess in March what the reserves kicks out if it stays at 8.5 grams or whether it comes back with mining factors, we're still doing that work presently.

[Alexander Barkley, analyst]

Okay. All right. That's very clear. And just a quick one. Recent power issues in Kalgoorlie, has that been a problem for you guys?

[Stuart Tonkin, executive]

Look, it's been a horrendous period for the City of Kalgoorlie-Boulder for the last couple of weeks. So we believe it's imminently going to be [indiscernible] next few days. But yes, there was a lot of drama up there with obviously power out for 30,000 residents, businesses. We're fortunate we have that Parkeston power station that can service the city and obviously service our mines. So we've managed through those things in the last couple of weeks, but sort of the state enterprises in regards to that. So yes, there's been certainly disruptions across the gold fields. It hasn't materially affected us, but we've also worked hard to support the community, providing even backup gensets and power and redistribution of our power. So we work under instruction of those energy companies on using Parkeston to feed and supplement the power into the city.

[Operator]

Your next question comes from Alex Papaioanou from Citi.

[Alexander Papaioanou, analyst]

Just one for me. At KCGM, when can we expect recoveries to move back towards 84%?

[Simon Jessop, executive]

Simon here. Yes, we had a number of issues really in the flotation area, which has been impacting slightly down on our normal sort of recovery. So what we've -- we've just had a shut recently and done a lot of work on the rougher columns and really it's the distribution of the material going into there versus bypassing some of that and going into the CIL train. So that's really the core impact there. We understand it. We're working hard on the float [indiscernible] to just try and lift the optimization there. And really that's the main challenges for us there on recovery at KCGM.

[Stuart Tonkin, executive]

To get to those sort of numbers, our attitude is around the fully expanded mill case, which obviously is a different circuit really targeting on that sort of much bigger ounce profile and the residence time, it's around getting all the fine grinding on the same site, not going after Fuji. Lots of residence time in multiple tanks added to that larger throughput circuit, stabilizing all those flat banks that go to that. So I think, as Simon said, we're focusing on the next couple of years of the things that we have, but it's really the big game changers on the new circuit and making sure that, that is the best recovery we can get through.

[Simon Jessop, executive]

Yes. The leach residence time is sort of going from our typical 8 to 10 hours out to not only 16 hours on the new circuit. So that's a fairly big difference in the new design of the expanded process plan. So we get the volume increase. We also doubled the residence time.

[Operator]

Your next question comes from Matthew Frydman from MST Financial.

[Matthew Frydman, analyst]

Apologies if I missed this at the start of the Q&A, but I just wanted to, I guess, get you to expand, please a little bit on the issues that you're facing at Thunderbox. Obviously, some ongoing, I guess, pinch points and problems that you guys are sort of working through and resolving with the mill there. I guess what's the pathway to rectify that in the second half? Will that get you back to that 6 million tonne per annum nameplate in your view? Or do you sort of have to start rethinking that? And then also maybe just following on from some of the comments on the last question. Any learnings you can apply from that expansion and the implementation of that expansion to what you're doing at KCGM?

[Simon Jessop, executive]

Yes. Thanks, Matt, it's Simon. I suppose just on the first, the last piece of your question there around learnings for KCGM. They are vastly different in terms of thinking methodology and all the elements in terms of the KCGM plant. So we've really worked extremely hard with Steve and the team around the operability of the new KCGM plant and done a lot on the design reviews to make sure that's going to come out of the build very, very strong. So yes, we've absolutely looked at internally to learnings from the Thunderbox process plant, but they're really chalk and cheese between the two. In terms of Thunderbox itself really had a major conveyor failure in terms of the belt, which was a fairly big job to fix during the quarter. But it's lots of small things here and there in terms of ware points in [ SAG ] feed shoot design and things like that which take a few iterations to get worked up and in place. And therefore, we sort of got to [indiscernible] this lower availability while we work through those. So working through the short term here and now issues fixed as well as medium-term improvements. And then long term, as we understand where rates around the process plant. So we're sort of at that 5.3 million tonne annualized when you take half 1 results, and that's running at 77% to 80% availability. All of our other process plants run well north of 90%. We don't see any issue at all getting to that. It is purely around just lifting that availability by 10% to 13%, and we're above 6 million. So we're not far off. It is a little frustrating. It's taken a little bit longer than we expected, but we've got the right people all over it. Yes.

[Matthew Frydman, analyst]

Yes, that makes sense. Yes, I appreciate that. Obviously the KCGM and Thunderbox plants, they are going to be very different. Just, I guess, with that confidence in the ability to get back above 6 million tonnes per annum clearly that's also factoring in the, I guess, the increasing mix of fresh ore that's coming into that mill. Obviously you talked about the development of the Wonder underground and others that are sort of increasing that fresh feed. So 6 million with a bigger proportion of fresh still highly achievable.

[Stuart Tonkin, executive]

Yes, or even just grade streaming. So any material that falls short of that sort of currently is the lowest grade. So we preferentially put in the better grade now. But it's a fairly consistent -- keep that fairly consistent blend in FY '25 and beyond. And there is capacity for that to go back over 90% of our ability to go beyond 6 million tonnes per annum, so knockout [indiscernible], but we're certainly working towards what we've done at every other part. As soon as we've got it nameplate, it's around optimizing it from there.

[Operator]

Your next question comes from Levi Spry from UBS.

[Levi Spry, analyst]

Maybe just sticking to the key value driver of KCGM Super Pit plant expansion, maybe that figure 5, I guess, could you just talk to the movie there over the next 18 months? What are the next activities? And I guess, is this the CapEx profile reminders of the CapEx profile in the second half and through into next year?

[Stuart Tonkin, executive]

Yes. So 1.5 billion, thanks Levi pretty much [indiscernible] balance in the fourth year. Really on that figure 5 showing that all the large part to date has been all of the preworks and getting the site cleared and ready for construction crews. And we've modestly commenced some of that construction work like in the quarter. So yes, we're pleased with that. The timing of how we're tracking against it, we'll keep this graphic and the commentary here updated in each quarter, talking through the milestones of what's occurring there. And we've obviously segregated production from this expansion activity so that the mine is unimpeded from milling and mining. And activity continues throughout the build period. And obviously the funding of this is all done from operational cash flows. And then this is under a separate leadership, a separate supervision with contractor building all of this activity in and around existing plants operating. So yes, pretty strictly run a lot of activity to occur. Obviously all the accommodation and the crews starting to arrive more so in this March quarter. And then really you've got 500, 600 people there for a couple of years doing pretty significant construction works. So we'll just keep that updated there and that CapEx pretty consistent over those years. Checks written versus commitments made might be a bit lumpy, but it's pretty consistent, and it's going to get built.

[Operator]

[Operator Instructions] Your next question comes from [ Jarrod Brian Lucas ] from ABC News.

[Unknown Analyst]

You mentioned, Stuart, at the top of the tape just about the Parkeston Power Station and the role it's playing keeping the lights on in Kalgoorlie at the moment. I was just curious if Western Power has indicated to you guys how much longer that will be relied on for just feeding into the grid more than you normally do?

[Stuart Tonkin, executive]

Yes. Thanks, Jarrod. Look, we've got guidance that it's days away, and that's the permanent solution. So we're expecting that, that work obviously has continued since the first outage and those poles are damaged through that storm. So like yourself, you hear a lot of different versions of actions at the start of this period. I think they've sold for a lot of those and understand have got multiple things underway. So the bulk of that disruption that was experienced will be solved very shortly.

[Unknown Analyst]

Okay. Obviously the state government utilities had to lean on you guys and how lucky they've had you guys there. I guess you'd like to see a bit more strategic investment potentially from the state into the power infrastructure, so they don't have to rely on you guys?

[Stuart Tonkin, executive]

Either/or. It's pretty known that, that Parkeston plant has underpinned the power in Kalgoorlie for a long time. So that's clear. I think it's more around the speed to act and having multiple contingencies. No one can predict what part of that system could fail. Yes, you could spend a lot of money in contingencies and all those sorts of things. But I think it's a case of a storm or otherwise, these things occur, it's about the right speed and the willingness to act quickly so that people aren't disrupted, and we understand the impact that's occurred across the community there. It's a pretty hot week, so.

[Unknown Analyst]

Last one on the power, then renewable plan with the solar arrays, the wind turbines that's been mooted for a while. Is there any update on where that planning is at?

[Stuart Tonkin, executive]

Look, it's still multiyear with an outlook that it gets [indiscernible] when we have the mill expanded. If that was in place today, it could have well solved the issues of the last fortnight. But it's just another -- it will be another asset that's one underpins continuity and power security in the region. So there's a lot of benefits with having that [indiscernible] either behind the meter or connected to the grid, renewable, reducing our carbon footprint there, but giving absolute power security for a lot of businesses, homes and obviously the business that we have in Kalgoorlie.

[Unknown Analyst]

Just to clarify before I let it go. So that's after the 3-year mill projects are still in feasibility level?

[Stuart Tonkin, executive]

Yes, still a number of options being evaluated in regard to wind solar battery in regards to that.

[Operator]

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

[Stuart Tonkin, executive]

Great. And thanks, everyone, for joining us on the call today. We're really pleased with the midyear quarterly results, and we look forward to updating you as we continue to advance on our profitable organic growth strategy. So have a great day. Thanks very much.

[Operator]

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.