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Northern Star Resources Ltd
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Thank you for standing by, and welcome to the Northern Star's March 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.
Good morning, and thanks for joining us. On the call today, we have our Chief Executive Officer, Stuart Tonkin; our CFO, Ryan Gurner; and Chief Geological Officer, Michael Mulroney.Today's quarterly highlights the strength of our Australian operations and also the solid progress we are making on our Pogo operation. The Australian operations have again performed very well. Production and costs are comfortably within guidance, and they're on track for another strong result in the current quarter, if not a record. Their consistent performance and strong cash flows reflect the investment we have made in exploration and development at these mines, establishing them as Tier 1 operations.At Pogo, the story is still a work in progress. This is to be expected given that we've only had management control of the project for 6 months, and we always said that it would take 18 months to implement our change and improvement strategy.The quarter's performance at Pogo was adversely affected by the late delivery of underground mobile mining equipment. We expected 16 pieces of new underground fleet to arrive during the quarter. But by the end of March, only 5 had arrived, with the balance of the 7 -- balance of the 11 units arriving in the June quarter.There was also an impact on production associated with the change in the mining method to the much lower cost long-hole open stoping. The combined impact of these factors was that production at Pogo was restricted to 36,000 ounces during the quarter. This lower production, in turn, resulted in a higher all-in sustaining cost per ounce.But these headlines numbers disguise what was actually a productive quarter in terms of implementing our change strategy. One of the key benefits of this program can be seen in the reduction in overall site expenditure, which fell to an average of USD 18.5 million a month in the March quarter, down from an average of USD 22.5 million a month in the prior 2 quarters. This was -- this will be particularly beneficial in the current quarter because with the increased production, it would drive a significant fall in the all-in sustaining cost per ounce.Strong progress is also being made in the switch to the new long-hole open stoping method, which occurred late in the quarter. So far in the month of April, stoping tonnes account for 27% of all processed tonnes compared with only 11% in the March quarter. And the process head grade has risen to more than 8 grams per tonne. So at Pogo, the trend is clearly our friend.I would now like to hand over to Stuart Tonkin who will elaborate on some of the operational results during the quarter.
Thanks, Bill. Look, I'll now provide just greater detail as we have certainly maintained solid momentum in the Australian operations and met an inflection point in our progress at Pogo in our proven strategy of renovating Tier 1 assets. First, I'd like to address our progress at Pogo, our Alaskan operation. Our strategy to invest in exploration and improve mine productivities is well underway. And during the March quarter, we displaced the incumbent mining contractor and embarked to complete all mining in-house with a 21% improvement in development meters achieved by this team, which really demonstrates an impressive trend in the acceptance for this change.Productivities were hampered, as Bill spoke about, by the aged fleet and delays in delivery of the new replacement equipment, with only 5 of those 16 major pieces planned commissioned in the March quarter. The remaining equipment now is to be delivered and commissioned during June quarter, but that will enable a significant lift in mine production as we have the people and the mining fronts to fill the mill.Further to our strategy is the mining method conversion from jumbo cut and fill to long-hole stoping, which will improve productivity and dramatically drop unit cost per tonne. The establishment of the first stoping areas is underway, but with only 11% of the ore tonnes from this method in March quarter, it was not reflected in the quarterly results. So April to date, as Bill spoke about, we've seen this ratio lifted to 27%, and you'll see in the tables at the end of report, a 9.9 grams per tonne stoping grade, with an ultimate target of 60% over the coming quarters.We have reduced the monthly site expenditure by 20% to USD 18.5 million, with further projects underway to optimize unit costs and deliver a more productive core business to grow from. Despite this improved cost base, the March quarter gold production has resulted in our increased group all-in sustaining cost guidance for FY 2019 to AUD 1,225 to AUD 1,275 per ounce, but our group production guidance remains unchanged at 850,000 to 900,000 ounces.So we are establishing Pogo with the foundations of a long life Tier 1 asset, and are implementing the necessary changes in line with this strategy. Our view of Pogo being restored to this Tier 1 status has not changed, and we appreciate the efforts underway of the Pogo team to meet this objective.Now to our Australian operations. At Jundee, we maintained a consistently solid result with mining physicals at record levels with stoping up 14% from the previous quarter. Our contractor, Byrnecut, met an operational record with 142,000 stoped tonnes mined in the March month, which is exceptional with the narrow vein high-grade mining techniques employed there. Further highlights at Jundee included the commencement of mining the Ramone open pit south of Jundee. Our contractors there, BGC, mobilized and commenced mining with first ore mined in April from Ramone pit. This is an impressive time line from discovery to development in 19 months, which is a great credit to the exploration and operational teams to streamline this process there.The Ramone ore will supplement the underground feed as we have excess milling capacity from last year's plant upgrade and debottlenecking project, and Jundee remains on track to deliver a continued high-performance in June quarter result.To Kalgoorlie now. Our overall stoping activity has increased 5% in Kalgoorlie, with increased performance at HBJ underground as we took underground mining activity in-house displacing the incumbent contractor. Mining activities at Kundana also increased the stoping of Pope John, complementing the Millennium production tonnes whilst maintaining exceptional development performance from our single jumbo team there averaging over 500 meters a month throughout the quarter. The East Kundana Joint Venture is performing well with reliable stoping from multiple fronts, including the Pegasus-Rubicon-Hornet, our Pode and Raleigh surfaces. Successful trials of triple lift stoping techniques have improved efficiency across these zones.The Kanowna mine maintained consistent performance, and we continue drilling the Lowes hanging wall mineralization for further life -- life of mine extension planning, and Mike will speak about that shortly. The Kanowna mill debottlenecking project has delivered early improvements, with a processing record achieved in March of 189,615 tonnes throughput, which is a 2.2 million tonne per annum run rate.So across the group's operations, we have maintained performance at Australian operations and established solid progress on our Pogo integration strategy positioning Northern Star for a strong June quarter.Mike Mulroney will speak to the extensive exploration activity across the group, but first Ryan Gurner will address the financials.
Thanks, Stu. I will now present to you some of the key financial aspects of the company's 2019 March quarterly results. The quarterly cash flow waterfall chart on Page 4 outlines the cash, bullion and investment movements for the March quarter. During the quarter, Northern Star generated $63 million in operating cash flow, which included the finalization of incumbent contractors at Pogo and South Kalgoorlie and set-up costs on stores and investment at these now Northern Star-operated sites.During the quarter, just over $44 million was invested into organic growth across exploration and expansionary capital to set up future production areas. These investment included Pope John development at Millennium operations; drill platforms at Jundee, including targeting the Nexus and Revelation zones and the Ramone open pit operation; development drives at South Kalgoorlie operations; and exploration at Pogo.During the March quarter, the Australian operations sold just over 149,000 ounces at an all-in sustaining cost per ounce of $1,200. Kalgoorlie operations sold 81,649 ounces at an all-in sustaining cost of $1,347 per ounce.At Jundee, 67,420 ounces were sold during the March quarter at an all-in sustaining cost of $1,021 per ounce. The June quarter is set up for Northern Star to deliver full year guidance at the Australian operations.During the quarter, Pogo operations sold 36,227 ounces at an all-in sustaining cost of AUD 2,062 per ounce. Pogo's all-in sustaining cost per ounce are expected to trend significantly lower during the June quarter, with the increase in stoping activity and the final charge of mobile equipment expected to be delivered, increasing production. March quarter saw the reduction in overall operational cash expenditure at Pogo with an approximate 20% reduction against September and December quarterly spend. Whilst mining activity was temporarily lower during the March quarter, further cost reductions and efficiencies are anticipated over the coming quarters at Pogo.Finally, during the quarter, 81,875 ounces were hedged at an average price of AUD 1,874 per ounce, with delivery dates spread across 2019 and 2020 calendar years.I will now hand over to Mike who will discuss exploration.
Thanks, Ryan, and good morning, everyone. It was a busy quarter for exploration across the Australian sites with a rapid increase in the activity levels of Pogo.At Jundee, the underground drilling fleet continue to generate good results from resource definition and extension programs across all mining areas. Elsewhere, resource drilling beneath the new Ramone open pit continued to highlight the underground development potential of the Ramone system while the surface drilling on the adjacent Ziggy, Marley and Mosely prospects returned excellent results, including 17 meters at 4.1 grams a tonne and 9 meters at 6.2 grams per tonne from shallow depths in what will be potential satellite open pit mining opportunities for the Ramone mining operation.Moving to the Kalgoorlie region. The underground drilling in the upper B, C and D block levels at Kanowna Belle continues to extend the main Lowes resource block eastwards and outline new high-grade seams-type structures deep in the hanging wall from main mining infrastructure at KB. Across at our Kundana operations, surface drilling programs successfully extended both the Christmas and Moonbeam resource areas while underground drilling has commenced from the new Christmas access decline from the Pope John mine testing for further northern extension to the Christmas resource.Across the border at EKJV, underground drilling continues at RHP and it continues to extend both the Pegasus and northern Pode mineralization down-plunge from the current development.Of particular note is the underground drilling from platforms at Pegasus and Raleigh into the what's the new Falcon trend. The Falcon mineralized corridor, which is located between the Pegasus and Raleigh mining areas, is now being traced for over 1 kilometer long strike and remains completely open in all directions. This area is shaping into a significant new mining target, which will be accessible from both the RHP and Raleigh infrastructure.Further south, the regional exploration across the large South Kalgoorlie tenement holdings accelerated, with some early success in a number of areas. North of the HBJ mine, drilling on the newly discovered vein outcrops at Mutooroo West generated excellent first pass drilling results including 2 meters at 50.5 grams per tonne, while to the west the follow-up drilling at Glasswing also generated new intersections containing quartz vein with visible gold.Recently, generative RC drilling programs assessing new targets have recorded immediate success in several locations. Strong results recorded from the Phinisi and Caravel prospects in the Tindals area, at Nasi Lemak prospect adjacent to the Samphire pit and existing target areas at Location 41. The standout result came from the Colnago prospect, which is located within the prospective Zuleika Shear corridor with initial intersection of 21 meters at 2.7 grams per tonne, including 1 meter at 28 grams. Ongoing follow-up drilling has generated further intersections containing visible gold mineralization, including an earlier result of 1 meter at 246 grams per tonne from 122 meters depth, with most assays from this program still pending.Moving across to Pogo. The mine exploration has significantly accelerated with the underground drill fleet now increased to 9 rigs. In-mine resource development achieved strong results from all major Liese Vein systems, the North Zone, the X-Vein, South Pogo and Fun Zone areas with some exceptional intersections like 2.4 meters at 82.5 grams, 1.8 meters at 80.2 grams and 4.5 meters at 30 grams from extensions to the L2, L3 and North Zone systems in particular.We're on track to provide a maiden JORC-compliant ore reserve for the Pogo mine area in the media statement at the end of next quarter.On the surface, drilling activity continued throughout the winter season with 4 additional rigs concentrating on the new central vein discovery. The continuing strong results, including 1.5 meters at 48.6 grams, 1.3 meters at 33.2 grams and 5 meters at 13.9 grams per tonne, are outlining an expanded zone of flatter dipping Liese-type veins with recent intersections also indicating a component of steeper northeast trending veins similar to the North Zone trend that cross cut and link between the flatter surfaces.I'll now hand the call back to the moderator for questions.
[Operator Instructions] Your first question comes from Daniel Morgan from UBS.
Just looking for a little bit of clarification on the production guidance. If I were to take production -- if I were to take gold recovered year-to-date and add the guidance you've issued today from Q4, I get 822,000 to 847,000 ounces which is just shy of your production guidance. Just wondering if I could get some clarification on that. Is it measured against gold sold or gold within ore taken out of the ground or -- just looking for clarification?
Yes, now look, gold sold -- all your all-in sustaining costs are always worked out on gold sold, so our production's gold sold.
Awesome. Okay. And then just on the $18.5 million spend, which is occurring at Pogo, which is significantly down from earlier quarters. Can I just get a quick clarification on is that all cash out the door or is that OpEx or OpEx plus sustaining CapEx? Or what is that defined as?
Ryan?
So, yes. So that's basically cash out the door. So that's spend operationally, so no corporate allocation, and then exploration on top of that. So that's just a core operational cash plus CapEx.
Right. So would it be sustaining CapEx in that plus the growth CapEx. So when you're buying all this mobile equipment and things, is that excluded from that number?
No. No. That will be included. What will be excluded is exploration.
Yes. So importantly, Dan, that's obviously down from the historic run rate by USD 4 million a month and bringing in the new fleet actually reduces our maintenance cost significantly. So we get the higher availability just for putting capital into it, which will come through all-in sustaining. However, that reduced operating expenditure will be well offset by that new fleet.
Your next question comes from Michael Slifirski from Crédit Suisse.
I've got 3. First of all, the guidance for the June quarter, what's the read-through from that? Is that going to be like sort of every other year that we can remember where very strong June quarter, then September is weak? Or how do you sort of see that guidance for the June quarter given where you are with the -- with Pogo's ramp up to where you want it to be and all the developments you've undertaken elsewhere to improve your production flexibility?
Stu?
Yes. So Michael, look, we're giving you June quarter, and it is the hockey stick, and you've seen us do that. That's why we give out annual guidance. Throughout the year, quarter-on-quarter out, there's a lot of moving parts, so that's why we give that annualized guidance, and we have that flexibility and robust assets to deliver into that. So look, we'll give out FY '20's guidance in July as we typically do. A strong June performance is more related to delays in March as opposed to falling into a hole in September. So please don't read it in that manner of bringing things forward, it's about the catch-up. But we have the equipment, we have the people well underway. We're already well into April with visibility of that.
Okay. Secondly, I wanted to speak to Kalgoorlie operations. If I recall from last quarter, there was the suggestion that March could be quite a lot better because of having spent a lot more activity advancing development to improve your production flexibility. That doesn't really seem to have come through in the numbers in a significant way. Am I misreading something there?
No.
No, it's Bill, it's -- you'll see that come through in June quarter. Kalgoorlie will have a record quarter.
Okay. Terrific. So Ryan, the comments around the operating cash flow, the number are reflecting the demobilization of contractors and startup of owner mining. So if you were to normalize that number without those one-off costs, what would that have looked like, please?
The operating cash flow? Well, I mean, Mike, it's based on many things, revenue being one. So look, there's no doubt that this quarter was impacted by a couple of things. The demobilization is definitely one, but I can't normalize operating cash flow until production -- production and revenue are the other key pieces there. So it's hard to say. But note that those one-offs aren't going to be occurring in the next quarter.
Yes, I understand. So what I was chasing was really what the impact of those one-offs were because you highlighted that in your commentary? I recognize that production is the other part and I'm not really interested in that, it's just what that one-off might have done to your underlying cash flow.
Look, it'd be in the order of $10 million, probably $10 million to $15 million.
Well, okay. All right. Terrific. And then sort of just returning to that June quarter guidance. Given the June quarter's going to be the catch-up quarter, a very, very strong quarter, how should we think of the cost guidance that goes with that? Is there something in that if we normalize that production for perhaps, say, more normal run rate, in terms of a sort of adjustment to your thinking about cost compared to what the year started as?
Stu?
Yes. So with -- look, we've put a much stronger cost guidance in there for June quarter. What you're actually after, we've got it in the commentary there on what the June quarter's cost is at.
Yes, yes. I guess the question is if you -- if we take the midpoint of that cost guidance, $1,125, and recognize that's with elevated production. So if we normalize that production, then the implication for the June quarter cost guidance is sort of stronger than what the year started at. So I'm just interested in whether there's something, a structural change...
Okay, sorry. Yes. We've stated that there on Page 2, June quarter guidance, 235,000 to 260,000 ounces at an all-in sustaining cost of AUD 1,075 to AUD 1,175 an ounce.
Yes. No, no. The question is -- I understand that. So the question is that's -- the denominator is the higher production in the June quarter, which you're saying is not the normal production. So if we adjusted that cost number for perhaps a lower production on an annualized basis, the implied cost guidance is then quite a bit higher than what you started the year at. So I'm just interested whether there's something structurally changed in your cost.
Okay. So look, we're talking about FY '20, and we'll put out that guidance in July. So there's we're obviously going through the planning, the budgeting, our reserves updates for now. So look, that information will be provided in July when we state that FY '20 guidance there.
Add to that, Michael, obviously, it -- the denominator is obviously all-in sustaining cost is on gold production. So the more gold you produce, obviously, lower the cost structure there. So we haven't seen anything fundamentally change with our cost structure, it's just about the gold sold and the delivery of that. So there's no massive step change or any like that in cost structure if that's what you're trying to ask a question about.
Your next question comes from Matthew Frydman from Goldman Sachs.
Firstly, at Pogo, you've called out the ramp-up of stoping and the effect that's having on the head grade, what you're seeing in April. Wondering when exactly you're expecting to hit that targeted 60%-40% ratio? And at that point, do you have an idea where you're expecting grades to settle at?
Yes. So Matt, look, it's -- we're pretty much at our 18-month plan, we're 6 months into it at the moment. Throughout that we're going to be up to that 60% long-hole stoping. Really, what -- it's the geometry that dictates that. So the flatter draws will still need to be jumbo stoped, and what we've evaluated at the moment is 60%. We could actually go above 60%, but over the coming quarters, we're going to start to see that lift to that predominant -- what's been -- what has required if all the development setting up those levels for the new fleet, the size of the new fleet and at the right sub-level intervals and everything to set up well for that long-hole stoping. And that just takes time and that work is underway. And as we've said, we've been set back by that delayed fleet in getting ahead with that. So over the coming quarters, we'll just start seeing long-hole stoping lift. The impact to that's really going to be 1/3 of the cost per tonne of its contribution to the mining cost per tonne versus jumbo stoping method. So that's going to have a huge impact. You'll see the stoping grade there at 10 grams. You asked a question on grade. Look, between 8 grams and 10 grams is where we see that average coming out. If we get that up to sort of 60,000 stoped tonnes a month plus the development ore, get back over that 20,000 ounces a month.
Yes. Sure. So it sounds like still probably a 12-month ramp-up on the stoping but still expecting grade to sort of settle out in the, as you said, that...
Yes, it could be seen in the coming quarters, but we want to be at that run rate leading into the back end of that financial year.
Sure. And just secondly, you also called out there the late delivery of the fleet. Firstly, wondering what exactly drove that delay? And secondly, when in the current quarter are you now expecting that remaining equipment? And do you have sufficient equipment on-site already to meet what you've guided for the June quarter? Or do you need that equipment to arrive as per your current expectation in order to meet that?
Yes. So to be clear on that, we gave the incumbent contractor a 90-days notice, so October -- November, December was that period. We ordered the fleet back in October. We had delivery schedules of 3 months -- 3, 4 months. Pretty much it was all going to be delivered and commissioned in January or by January in the changeover. So -- yes, if we're through, and for that specification, it obviously comes out of different places around the world. We also send fleet from Australia to get there and get spec for the U.S. standards. So look, by the end of May, we'll have -- or during May, we'll have all that fleet in place. But pretty much right now, we've got our 50% of it and we'll be -- we've got the people in the headings of the work areas and to utilize that. So it's really about getting out the old fleet, taking that workload off the maintenance teams, getting those costs out of the aged fleet. But the productivities we're already seeing from the new fleets is exactly what we'd expect and what we'd planned from as the Australian standards.
Sure. But just to be clear, even if that equipment arrives at the end of June, you'd still be able to meet your guidance as per the current equipment that you've already got on-site?
Correct. We have what we require there as of the end of April. There's still a couple of extra bits of kit to come, but we're just utilizing the existing fleet to supplement that until the new units come in-site. Fleet won't be the problem. Obviously, operating cost is what we're trying -- the sooner we get the new fleet in, the sooner we enjoy the benefits from it.
Your next question comes from Mathew Hocking from JP Morgan.
Just another question on Pogo, and I'm interested to learn more about the timing of the transition of the mining method. Obviously, we see impact of the delayed arrival of the fleet. And I guess, more so around what flexibility you still have to go into some of the older mining areas and target higher grades. Was it a conscious decision not to delay the change in the mining method given the fact that the new fleet haven't arrived and obviously deliver the quarter that you have? Or was it a function of the fact that there wasn't a lot of older mining areas that you could have stayed in that had the higher grade material available?
Yes, good question. Look, and certainly, you've got to rip the band-aid off, right? It's -- we're setting this up for a long-life asset. We understand what is necessary, what is required. And those steps take time. So the redesigning, the technical input, the geological modeling, all those things, there has to be a transition. We'll work out the older levels in the old method. And even some of the size of the equipment, we couldn't fit in some of those older levels. So it's -- you don't want to just keep limping along with your teaspoon and moving material ineffectively. It was about -- we can do the catch-up. So I guess, you take the slough, but we can do to catch up with that new method. So you have to, at some point, do the conversion, and that's what we've decided to do.
Yes. Sure. And just turning to Matt's question around that profile, the shift to more stoping material and looking at the grade that was achieved in the quarter from the stoped tonnes, albeit small tonnages, the 10 grams per tonne from the stope, is that indicative of what you're anticipating going forward as you lift the mining rate? I mean if you're averaging -- you're targeting above 8 grams per tonne overall in terms of mill feed, then that certainly implies the stope's grade should be staying at that level. Is that fair?
Look, it is fair. But I guess the overall grade -- and we'll give the breakdown of development and stoping ore, so the development grade could be around near 4s -- 4 and 5s and your stoping grades are between the 8s and 10s. So -- and 60% of your stoping tonnes, when we get to that level, you'll start to see those average grades north of 8s. So historically, lower volumes, 11, 12, 13 grams but at almost double to triple the cost per tonne. So when you actually look at the margin per ounce, it's a much better way to go about it.
Sure. And just one final question on Kalgoorlie. I saw that you have seen a step up in the grade in the March quarter but you still have a big fourth quarter to come. Can you give any indication of what that targeted either stoped grade or milled grade at Kalgoorlie is for the fourth quarter? I looked at previous June quarters and it's been closer to sort of 5 grams per tonne. You've just achieved 3.8 grams through the plant. Is that -- would it be too aggressive to be putting sort of high 4s to 5s as an expectation for the fourth quarter?
Look, June quarter in Kalgoorlie is determined really by volume not grade, so it is around getting the tonnes through the plants and utilizing third-party milling in that period. So because they're mining at that rate above, we're always mill-constrained in Kalgoorlie. So the grades are really not going to spring around wildly from what we've seen. It's not going to be rescued via grade windfall, it's purely on the work being done, the stopings there, so it's tonnes related.
But I guess the ratio, again, similar to Pogo, development ore or stoped ore, is there any changing materially from the March quarter into the June quarter in terms of that ratio?
Look, only a slight increase in stoping to development. So I'm predicting out of HBJ grade and tonnage and the same as Pope John contributing more to the Kundana belt. But Kanowna is consistent, East Kundana Joint Venture is consistent month in, month out, so it's really just the increased tonnes. But given the grades of Millennium, grades of HBJ, it's not going to materially change the overall average grade.
Your next question comes from Sophie Spartalis from Merrill Lynch.
A lot of my questions at Pogo have already been answered on the mining front. Just at the mill then, just going back to some previous commentary, you said that the mill should be operating at 100% by the end of the June quarter. Has that now slipped or do you still see that being the case?
No. Throughput-wise, we can be utilizing that. We've got capacity there. We -- between the 1 million to 1.2 million metric tons per annum is what it's at. We have ability with some improvements to increase that. It will basically have that throughput throughout June -- in the June quarter, but really around the grade and the stoping tonnes is where it's going to be filled up, so it's probably more likely the September quarter to be for the full period.
Okay. And then just in terms of those bottlenecking assets. Can you just maybe go through some of that data if you can?
Yes. It's less of an issue at the minute. The work's been done, the filter presses through the back end of the plant, but everything from the grinding through the flotation at this stage can actually cope with that 1.2 million tonnes. It's more on the recovery of the sands and the filter presses to then create the backfill feed. So that's what we're looking at is really the back end rather than the throughput to the front.
Your next question comes from Nick Evans from The Australian.
Just a quick one or something slightly more broader. I know that you've said before that sort of Pogo is enough to digest and you haven't really got any intention of getting back into that sort of full productivity for a while. I'm just wondering, with the big majors above you and the big tiers that all of the new majors have been talking about dropping assets. Do you guys expect those assets to drop out on the market quickly? Do you think that Northern Star might be interested in selling if quality came on, for example, the Super Pit? And do you think that the -- just lastly, do you think that in terms of the pricing of those, do you think that we'll likely to see another round of sort of discounted asset sales as we did when Northern Star was built sort of half a decade ago?
Thanks, Nick, for your question. Look, I haven't got too much to comment on that, to be honest. So I think you've just seen a couple of, I guess, mega mergers with Barrick-Randgold and Newmont-Goldcorp. You know, I guess if I was running those businesses, I'd probably be more focused on combining cultures and assets and dealing with all that. So that will take time. Merging such large businesses together, I think divestments is probably a fair way down the to-do list, is probably my opinion on that.
Your next question comes from Patty (sic) [ Cathy ] Moises from Patersons.
Bill, it's Cath not Patty. But just a quick question following on from Daniel's question on your production calculation. Well, you actually set some sales and I'm just wondering whether you've changed that bar because you certainly quoted in the June '18 for the financial year that the production was based on ounces produced not sales? And the ounces produced were actually higher that year.
Look. Your all-in sustaining costs are done on your gold sold, so that should be the metric. Your financials are done on gold sold, so produced is just a timing issue.
Okay. Now, just that you did comment that you did set a guidance and you'd produce 700 and -- I forgot what it was, but it was very much production last year. So that's changed?
I'd have to go back and have a look at that, Cathy. So -- I haven't got that in front of me.
Your next question comes from Daniel Morgan from UBS.
Just a couple of follow-ups. At Jundee, just like to hear a little bit more about the open pit strategy going to be into Ramone. Can you talk in concept terms about the tonnages and grades you're looking to bring on and the timing of that?
Yes. So look, that will be -- the Ramone pit will be mined over that 18 months, but it will probably be milled over sort of the 2, 2.5 years period. So we'll actually maintain a stockpile at the Jundee plant. There are opportunities to treat that regionally, to bring that NPV forward. And as Mike spoke about, the discoveries of satellite deposits around Ramone are of great interest as well to perhaps look at continuity of the mining fleet that's there at the end of the 18 months. So look, that pit will contribute around sort of 80-odd-thousand ounces, and it's really just about how quickly we can get it through the plant. We certainly don't want to displace high-grade underground ore. So up to 2 grams, but sort of 1.7 to a bit over 2.3 grams is about where the feeds are coming through at the moment. But yes, this -- that's pretty much the metrics probably answers the question.
Just to add to that is in the quarterly. I mean our regional exploration at Jundee, we did mention the underground potential at Ramone too that's really starting to evolve.
And then one last question just on -- back to Pogo. Just the labor and more -- you're changing your mining methods and there's some questions that some people have on whether the workforce is being receptive, gearing up, facing turnover, those sort issues. Just wondering if there's not any labor or staffing type issues that you're facing, it's more just getting the equipment in?
So look, the acceptance is outstanding and I would even comment better than Australian -- attitude to change, is better than what are faced in Australia. So the acceptance and attitude there, as far as the pace, you can't just get a jumbo operator to learn how to bolt mesh in his first week. So that's going to take time to transition and upskill the staff that is currently using bolters to do that type of activity with the jumbo. So we need expatriates there. We have expatriates there transferring and training those methods. Things like the line of sight remote that they were doing there to bring in the teleremotes and commission that. The operators took to that [ dock stillwater ] and so super impressed with the implementation of that type of technology. So look, yes, I think there's a lot of cultural similarities. There are differences, but I think it may be a military background, it may be just different organizational structure, but the acceptance to understanding what's required, following instructions and respecting, care for equipment and work ethic is outstanding. You don't turn up in an underground mine in Alaska if you're lazy. That's pretty much what it comes down to.
So basically, it sounds like people issues are not a bottleneck on this at all is what you're saying. It's basically equipment and setting up the new mining method scenarios?
Yes. That's correct. It's really the -- there is time required to get -- so laying the right way is time required to get the pace associated with that, and what we're doing in the interim is giving them the -- yes, removing the Achilles' heel of a poor fleet. So upgrading that with the technology that comes with it, the productivity that comes with it and then expats, Aussie expats that are doing that training and going that pace. The example being at Millennium in the quarter, they averaged 500 meters a month with that 1 jumbo crew. That's 5x the North American average of development with a single jumbo. So that's jumbo does all the ground support and all the boring of the tunnel. So they'd use 2 machines, they still only get 100 meters a month throughout the North American mines. So that's the type of improvement we hope to get close to in time at Pogo.
Your next question comes from Stuart McKinnon from The West Australian.
I was just wondering if you'd had heard any rumors that the state government might look again at hiking the royalty rates in the -- whatever the state budget or try to target the gold industry in some other way. While it's been voted down twice, but I know the government still sort of has -- still expect that the gold industry could help more in repairing the budget. Have you heard any -- got any detail on that around the fears about -- in that regard?
Stuart, it's Bill. No, I've heard nothing. So that's news to me. I think there's been some major structural changes to inflows, which stays in the state budget. So I don't expect anything. I haven't heard anything. So I'd be very disappointed if it was because it's great to see the Western Australian gold sector put a lot of money into exploration in the last 18 months since it did get de-voted. We've put our money where our mouth was and we keep finding more gold for the state to keep jobs locally and in the cities. So I'd be very disappointed if something did transpire.
Just one further question also on a -- of a political nature. Do you have any thoughts about which currently -- which of the parties currently has the best policies federally for the gold industry and for the companies specifically? Have you got any thoughts on that?
No. I've sort of switched off, whatever. We'll build and work with anyone and anyone.
Your next question comes from David Radclyffe from Global Mining Research.
So sorry, apologies here, another guidance question that hopefully you can just clarify. Even using gold sold, I guess we would still struggle to get beyond the midpoint of your range. So is there something we're missing here in terms of drawing on other non-bullions -- non-sold bullion or gold inventories that would actually add to the fourth quarter number?
Stu?
No. We've said there 235,000 to 260,000 for the June quarter, and we've got our group guidance 850,000 to 900,000, say, on sold. So the math adds up.
Your next question comes from Mathew Hocking from JP Morgan.
Just back on Pogo and the stoping. So well, obviously, the change in mine plan was one of the key opportunities you saw when you acquired the asset. It was also one of the key reservations from the market in terms of the angle of the orebody and the ability to bring in that stoping method. Can you talk at all on, for the amount of stoping work you've done to date, what the ground conditions have been like, reconciliations of the stopes? Is there anything you're seeing, that say the positive or negative versus base case when you acquired the asset?
Yes. So look, some of the areas -- and this is very similar to what we experienced at Jundee. So a lot of the -- sort of 85% of the ore was north-south striking and you had those east-west cross-cutting structures with the balance. But when you look to the drilling orientation, it was 85% was east-west hitting north-south structures. So, yes there is flatline and the Liese lodes were flatlined at Pogo, but then you look at the North and the X-Vein and it's sub-vertical. So your ability to long-hole stope it, very easy. That's why we're probably being a bit conservative on saying 60% being the target, whereas traditionally most of those sub-vertical orebodies we get 80%, 85% through long hole methods by stretching out sublevels. So we think with the geometry we see today, without the other -- the central lodes and all that coming in, that to be -- that should be sensible -- 60% be sensible contribution from long-hole stoping. The other part from methods that we have been employing at the moment, yes, we're putting higher dollars in fact initially with expectation of lower hanging wall, potentially high dilution. But we've also just dropped sublevel infill, say, to control that, and we haven't seen geotechnical issues that -- any different to what we've seen in Australia. In fact, probably after, as we're getting deeper in the mine, we'd like to see more confining stress. Given you're sitting up in the mountain, you don't have that confining stress holding cave stones in. So it's -- yes, from that side of it, we've tested. We're looking at geometry. It is no different. It's not a radical mining method change. I would go back to say that the -- caught in a time capsule mining can't fill with jumbo unnecessarily. So really, the opportunity is as the Kundana mine was developed over 20 years ago, the conversion away from jumbo breaking dirt to your long-hole open stope -- not open stope, it would be paste filling, but a long-hole stoping method.
And with infill drilling that you guys are doing at the moment, is there any change though, with the enhanced data, the interpretations and geometries, anything that's coming through that would suggest any key changes versus what you guys inherited when you acquired the asset?
Mathew, it's Mike here. I think it's fair to say that with the drilling, we're actually seeing a stronger input and influence from some of steeply dipping north vein type zones. We're now recognizing that they extend further across the mine than first thought. And certainly, in the new central zone, they are starting to have an impact across that. And they provide quite interesting high-grade linking structures between the flat Liese vein. So from that point of view, that's been a real positive pickup. And as we push out this sort of geological knowledge in the drilling front, we're seeing an increased influence of these steeply dipping veins which feeds into the -- obviously, the increased input into the long-hole open stoping.
And just on the central zone, I know Bill mentioned at the -- on the February call that they'd -- you'd had an extension of the mining lease to bring in the central zone. Is that right?
Yes, that's correct. We've had a -- the authorities put it through very, very quickly. So that -- it's now extended across down to the bottom of the hill and across to the other side somewhat. So we're free to access that area when we're ready.
And Mike, from your perspective, is there an appetite for an underground drill drive as opposed to drilling from the surface?
Certainly yes,and it's in the planning.
[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Beament for closing remarks.
Thank you. The quarterly result is fairly summarized by saying that it was a strong performance in Australia, offset to a degree by the impact of Pogo's lower production and overall per unit cost per ounce. To an extent, that lower production was to be expected at some point as we change mining methods, but there is no question that the late delivery of key equipment exacerbated the reduced production, which, in turn, drove up our all-in sustaining cost. However, it's clear from the lower overall monthly site expenditure at Pogo and the increased stoping tonnages and head grade in April that we are making strong progress there.Nothing we are seeing changes our view that Pogo is an outstanding acquisition which will generate strong financial returns for Northern Star shareholders for many years to come, but we have to go through a process of setting up the mine, driving productivity and investing in exploration and development there in the same way we have done at our Australian operations. We always said that this will be an 18-month process. So we are on schedule.With the turnaround we are now seeing at Pogo and the consistently strong results being achieved at the Australian operations, we are set for record production in the current quarter. We expect this to be accompanied by tight costs, robust margins and strong cash flow. At the same time, we are investing heavily in exploration at Pogo with 12 rigs now operating, and this is expected to deliver a maiden JORC Resource in the middle of this calendar year. On that note, thanks very much for joining us today.