Northern Star Resources Ltd

ASX:NST

Earnings Call Transcript 2020-Q4

[Operator]

Thank you for standing by, and welcome to the Northern Star June 2020 Quarter Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Bill Beament, Executive Chair. Please go ahead.

[William James Beament, Executive Chairman]

Good morning, everyone, and thanks for joining us. On the call with me today are our Chief Executive Officer, Stuart Tonkin; our CFO, Ryan Gurner; and our Chief Geological Officer, Mike Mulroney.Today's results are a testament to the underlying strength of our business. They demonstrate that to a large extent, we have managed to weather the COVID-19 storm and generate record underlying free cash flow. Strong production and robust margins at all our operations drove the solid results.That said, the message we put in place early on to help protect our people against COVID, clearly took their toll on our performance in the past 2 quarters. The impact was particularly pronounced at Pogo, where we safely and effectively managed 36 cases of the virus in the June quarter. This had a direct impact on labor availability. We simply had fewer people, which translates into lower operating physicals.It was all the more disappointing given that during the quarter, we finished the transition to long-hole open stoping. The benefits of this new mining method can be seen in the ore tonnage, grades, ounces, costs and free cash flow generation. All these metrics would clearly have been better had our workforce not been limited by the virus.The reality is that as long as the virus is prevalent in Alaska, our volumes at Pogo will be reduced, probably to the tune of around 25%. That said, these results also show that our strategy for Pogo is working and that the mine will deliver the tonnages, grades and production we envisaged at the time of acquisition. It is a Tier 1 asset in a Tier 1 location, and the results will reflect that once we emerge from the COVID fall.Our results over the past 2 quarters have also been restricted to a degree by our decision to reduce our hedge book. We sold 170,000 ounces into hedges or approximately 34% of our production over the past 6 months, reducing our margins somewhat in the process. We expect to continue this strategy in the current half as we seek to increase our exposure to the significantly higher spot gold price, both Australia and U.S.The reality is that a significant portion of ASX-listed gold production is not selling for anything like the current spot price. Northern Star is already one of the lowest hedged ASX gold producers. Our hedge book now represents only 15% of our forecast production over the next 3 years.But while we are decreasing our hedge positions, we are also strengthening our balance sheet. Earlier this month, we repaid the AUD 200 million of debt we drew down at the start of the pandemic, and we are now in a net cash position. To cap things off, we also bought back early the payment of our interim dividend totaling $55 million. Our CEO, Stuart Tonkin, will now give us a rundown on the operations during the quarter.

[Stuart Peter Tonkin, Chief Executive Officer]

Thanks, Bill. We are very pleased to end the financial year with such a strong quarter 4 and set up FY '21 for further growth and strong cash flow generation from a very solid platform.Pogo operation in Alaska delivered a strong performance of 50,000 ounces sold despite the constraints imposed due to the impact of COVID. It's a credit to the operational team on-site to increase the control measures and contain as best as possible those 36 active COVID cases during the quarter. And I'd like to thank them for their exceptional effort in managing through this and continuing to do so.The operation maintained development rates at 1,200 meters a month across priority areas to access new stoping fronts, and we are focusing on 3 of the 5 main stoping zones. The total ore tonnes achieved an average of 68,000 tonnes per month at an impressive grade of 8.4 grams per tonne, showing the strength of the mineralized system consistent with our models.Our present COVID measures relate to an impact of roughly 25% reduction in mining physicals, as Bill stated, as we reallocate teams in response to isolated personnel. Until we are COVID-free throughout the state and the operation, this is the likely average run rate third quarter and will be reflected in upcoming guidance for Pogo given the reality of the prevalence of COVID in the state of Alaska.Despite this setback, our team remain dedicated to modify and adapt to the landscape, and we are generating strong U.S. dollar cash flow from Pogo, even at these lower operating volumes. This gives us great comfort of the growth potential of Pogo and the fundamentals of this Tier 1 asset. We will continue to build continuously to mitigate COVID impact to these operations.To the Jundee operations. The June quarter capped a very strong year with 78,000 ounces sold at $1,078 all-in sustaining costs, taking the full year to a 300,000 ounce produced operation. Underground production improved 10% from the March quarter with 584,000 total ore tonnes at 4.5 grams produced. This equates to an underground mining rate of 2.34 million tonnes per annum. Also during the quarter, our projects team successfully completed and commissioned a new 4.5 megawatt ball mill, taking the installed mill capacity from 2.2 million to 2.7 million tonnes per annum to accommodate various open pit sources to complement the underground feed.Ramone open pit mining continued during the quarter and planning works associated with the Julius pit advanced during the quarter. Contained gold in stockpiles at Jundee increased by 49,000 ounces over the year with 84,000 ounces in stockpiles at the end of the June quarter. And our regional project evaluation continued on the Southern Yandal tenements to advance the organic growth opportunity from the Bronzewing region.To the Kalgoorlie operations, we delivered it as expected, with improved mining volumes by 13% from the March quarter at 850,000 tonnes. We also increased milling 10% from the March quarter to 974,000 tonnes at 3 grams per tonne utilizing stockpiles from throughout the year. Our costs in Kalgoorlie do remain high due to the lower-grade material average across the mines, but Kalgoorlie operations continues to generate strong cash flow and has significant leverage to the gold price that we are experiencing at present.Kalgoorlie sold 79,000 tonnes -- 79,000 ounces at all-in sustaining costs of $1,615 in the June quarter, delivering a full year result of 317,000 ounces sold. And our contained gold in stockpiles at the end of the June quarter totaled 26,000 ounces.Now to KCGM, where our JV partner -- where with our JV partner, we are making strong progress in liberating the opportunities at this impressive asset. As demonstrated by an increase in material moved by 43% from the March quarter, there is a highs of activity across the 3 main pit zones of Golden Pike, Morrison and Brownhill. We are utilizing the idle fleet, and we remain on a recruitment drive to encourage existing and new Kalgoorlie residents to join the KCGM team on this long-life asset. It's a good way to spend your job safety dollars is relocate to Kalgoorlie and apply for a job at KCGM.Underground mining physicals at Mount Charlotte increased 25% from the March quarter and milling throughput increased 7% from the March quarter, demonstrating the significant efforts of the KCGM team and the acceptance of new ownership there. We look forward to providing greater insight into this asset in the coming quarter in concert with our JV partner. Northern Star's share of contained gold in stockpiles at KCGM were greater than 1.5 million ounces, underpinning a significant contingency and derisked asset for the company.With that, I'd like to thank you, our shareholders, for your support through a challenging period. We are well positioned with our Tier 1 portfolio to deliver continued organic growth and continued superior financial returns for many years to come.I would now like to hand to Ryan for the financials.

[Ryan P. Gurner, Chief Financial Officer]

Yes. Thanks, Stu. Good morning all. I'll go through now some of the key financial aspects of the June quarterly results.Starting with the cash flow waterfall chart from Page 5, which shows an overview of cash bullion and investment movements, which at June 30 stand at an impressive $770 million, up $218 million from March. Record production and sales during the June quarter generated $332 million in operating cash flow, up 80% from March quarter and $218 million in underlying free cash flow, both records for the company. This underlying free cash flow was generated after investing approximately $44 million into organic growth across exploration, set up future production areas and expansionary capital to increase production.As a result of the outstanding June quarter performance, at year-end, a key milestone was reached with the company being net cash positive with cash and bullion at $748 million and corporate bank debt of $700 million a fantastic achievement only 6 months following the transformational acquisition of KCGM. And as Bill mentioned, on the back of this exceptional performance, we repaid $200 million of that debt and brought forward our interim dividend early in July.During the June quarter, the Australian operations sold just over 212,000 ounces at an all-in sustaining costs per ounce of $1,360, taking full year performance to 727,000 ounces sold at $1,350 per ounce. Both Jundee and Kalgoorlie operations had a great quarter to end the financial year recording increases across all production metrics and realizing reductions in cash and all-in sustaining unit cost metrics.Pogo now where after a challenging June quarter, our team demonstrated their resilience with 50,000 ounces sold at an all-in sustaining costs of USD 1,276 per ounce, taking the full year result to 173 ounces (sic) 173,000 ounces sold at USD 1,402 per ounce. With spot U.S. gold prices at USD 1,870 per ounce, Pogo's cash generation is expected to grow.We're also seeing our procurement initiatives realized with Pogo's total site costs, excluding exploration investment, the plant expansion costs and our corporate allocation averaging USD 20.5 million per month over the June quarter, which is down approximately $1.5 million per month from the March quarter. Pogo did incur some additional operational costs from COVID-19 relating to employee benefits, some personal transport and accommodation, freight and cleaning. These costs are reflected in all-in sustaining metrics.KCGM had another solid quarter with pretax free cash flow contribution of $47 million for the June quarter, with 56 ounces -- 56,000 ounces sold at all-in sustaining costs per ounce of $1,400. Full year results under Northern Star's ownership were 116,000 ounces sold at $1,427 per ounce and pretax cash flow contribution of $88 million. One matter to highlight is Northern Star's all-in sustaining costs presented to KCGM are different to our JV partner. This is primarily due to Northern Star using sold ounces as a basis for calculating all-in sustaining metrics and of course, differences in corporate cost allocation to the operation.Finally, in respect to the company's hedge commitments, we have and will continue to accelerate delivery of ounces from our book consistent with our strategy to increase our future spot price exposure. No additional hedging commitments were executed during the June quarter. And at 30 June, the company's hedge commitment stand at 536,000 ounces at $2,085 per ounce, which approximately equates to 15% of annualized production over the next 3 years.Mike, over to you now for exploration.

[Michael Geoffrey Mulroney, Chief Geological Officer]

Thanks, Ryan, and good morning, everybody. Group in-mine exploration drilling activity was maintained across the Australian operations with a reduction in Pogo's in-mine drilling activity reflecting the impact of COVID-19-related travel restrictions. The in-mine exploration largely concentrated within existing mine corridors and continued to generate consistently good results, particularly at Jundee and Kanowna Belle.In Pogo, while underground drilling focused on infill and definition programs to support the production activities, excellent intersections were recorded from numerous unmodeled structures, particularly in the Liese "LQ" area, Leise 2 and North Zones. Our regional activity was restricted during the quarter. However, considerable work continued on the integration and valuation of the recent Echo Resources acquisition into the regional exploration portfolio.Going forward, Northern Star's planned FY '21 exploration program, we'll continue our strong commitment to reinvest into the organic growth opportunities contained within the group's existing asset portfolio. An extensive program of in-mine and regional exploration activity is underway across all areas to expand Northern Star's resource and reserve inventory.For example, at Jundee, we'll move into the second year of a 14-rig underground drilling campaign to build on the resource and reserve growth success achieved in the past year. Total in-mine drilling is forecast to increase by approximately 25% to approximately 444 -- 440,000 meters across the year.In addition, work has commenced on resource definition and exploration programs across the broader Yandal region encompassing the recently acquired Echo Resources assets.In Kalgoorlie, the underground and surface exploration programs will build on the recent success within the upper levels of the Kanowna Belle mine and the adjacent environment, the continued growth of the resources in the Carbine area and the long-term exploration of the large South Kalgoorlie exploration portfolio.At Pogo, in addition to the in-mine exploration expansion program, a significant investment we made into the first stage of resource definition drilling into the core of the Goodpaster area where initial exploration drilling has outlined a 2.5-kilometer long mineralized corridor.The benefit of sustained exploration investment into our operational centers will be reflected in Northern Star's annual resource and reserve update, which will be released in the next few weeks.I'll now return the call to the moderator for questions.

[Operator]

[Operator Instructions] Your first question comes from Sophie Spartalis from Bank of America.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Just a couple of questions. Firstly, Kalgoorlie, Stu, can you just talk through the path forward to lowering costs? I know it's obviously due to these lower grades, but sort of how long do these lower grades hang around for?

[Stuart Peter Tonkin, Chief Executive Officer]

Okay. It's pretty average at that 3. So that's pretty much going to be the story going forward there, Sophie. So yes, we see accelerated -- or increased unit all-in sustaining costs because it's the same amount of work for a bit of less contained metal. But there's a number of other initiatives that we're doing across the site to try and find some productivity gains and some absolute cost-outs. That grade drop is really driven by the removal of the Raleigh high-grade ore that we put on pause back in the quarter.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. Can you just maybe go through some of those initiatives and sort of the quantum of cost outs we can expect? And therefore, where that potential new normal could be for Kalgoorlie all-in sustaining costs?

[Stuart Peter Tonkin, Chief Executive Officer]

Look, we produced 16 -- just a bit over AUD 1,600 all-in sustaining. There's probably $100 to $200 an ounce that you can work on. We've got -- obviously, with KCGM, we've got some more buying power in the region. We're looking at the procurement ability and some synergies across those things, but at this stage, that's the challenge with the site. But they're already doing an enormous job on a lot of the productivities in development. It's really around looking at the production side of the activities.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. So that would be -- that was my follow-up question. So just in terms of the regional potential coming through, is there any high-grade satellite pits that you think you could bring on over the next 3 years to assist with bringing down those costs?

[Stuart Peter Tonkin, Chief Executive Officer]

Look, it's not necessarily high grade, but getting lower mining costs with those satellite pits. So Carbine, Paradigm region, so lower grade but lower mining costs. So they're the top opportunities with the blended fee that can bring the unit cost down.

[William James Beament, Executive Chairman]

Sophie, it's Bill. It's -- look, quarter 4 is a very good indication of the Kalgoorlie operations. As we said earlier on, it's not the highest grade, but it's leverage to the gold price is extreme. There's a lot of gold there. It's running at the cost structure it is, but it makes huge free cash flow generation. So it’s a great benefactor to the company's overall group cash flow.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay, sure. And Ryan, a question on hedges. Obviously, you're trying to continue to accelerate the closing out of the hedges that the gold price is still looking quite high. You didn't commit in the June quarter. Is there an expectation that you'll maintain that 15% average annualized rate sort of in a rolling 3-year fashion? So can we expect you to be adding to those hedges to take advantage of the high gold prices in the coming quarters?

[Ryan P. Gurner, Chief Financial Officer]

Look, Sophie, we talk and look at these things all the time. We -- as you know, we restructured our book. So we've got no absolute commitment this next half. But as we've demonstrated and have illustrated that we are wanting to bring them back. So we've got absolute discretion. I think we look at it as a percentage between 20% and 30%, probably of our book that we -- or our sales that we'd like hedged. So that's what we're sort of working on basically.

[William James Beament, Executive Chairman]

Yes. So Sophie, we obviously took on some hedging with the KCGM transaction, which will probably put us at the top end of our policy. We're probably just getting our book more back into the bottom end of our policy. And also, we have used put options which is something that's been fantastic. We made a lot of money out of put options with not committing to hedges, obviously, cheap insurance policy. So I expect us to probably use that as well behind the scenes as they're very cheap at the moment with what you can lock in from a book in the insurance policy.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. Okay. And then just a final question for me just in terms of Pogo. I understand and appreciate the huge challenging conditions that you've got over there with COVID. The reduced operating rate, how long do you anticipate that for? Like, I know you said until you're COVID-free. Or is that until we get a vaccine? Like, could you maybe just elaborate on potential timing there, just for modeling purposes, is it sort of 12 to 18 months?

[Stuart Peter Tonkin, Chief Executive Officer]

Look, who knows, but I think we're also doing -- we're not sitting still on those actions. So there's still a lot of things we're doing to build contingency into that. Look, I think the first half of our financial year, we'll maintain to be disrupted at that rate. But for every 1 case, you've got to knock out 3 so there's a 1 to 3 isolated staff. But what's happening in the state, we're getting better testing regimes, greater visibility, quicker turnaround of those tests. So we're basically putting it run through on a weekly basis those tests.So our guidance will reflect what that is, but we expect to be able to, as demonstrated, operate through experience in cases and a great outcome that the site is getting better and better at managing it. And pleasing for us is the effect of the health on our staff and their quick recovery and returning to operations has been positive, too. So I think in the health and the demographic of our staff, I think it's a quick recovery. Even at these lower levels, you can see with the U.S. gold price and the U.S. cost base, $1,200 and $1,800, it's still generating significant U.S. dollar cash flow from Pogo. So I think even if it was extended in this impact, it's still a very, very profitable operation.

[Sophie Spartalis, Vice President and Senior Resources Analyst]

Okay. Is there an opportunity to accelerate or bring forward any desktop work that's needed and therefore, we could see positive surprises out of the situation at Pogo.

[Stuart Peter Tonkin, Chief Executive Officer]

Look, the plans are there. It's really about the people on the seats. And I guess there are fixed constraints at the site. Drilling-wise, that will be probably the new flow. You're bringing a lot more drillings back and getting -- we basically continue to production drilling, not necessarily resource/reserve expansion because we've already got a good visibility of base there. They're the type of things that will feed through. As Mike illustrated, we'll be putting assets into the Goodpaster in the coming 12 months to drill that out. So potentially new slate from Pogo expansion of resource base is over the next couple of years.

[Operator]

Your next question comes from Daniel Morgan from UBS.

[Daniel Morgan, Director and Analyst]

Just firstly on the super pit. I just want to know how you're thinking about over the next couple of quarters. It appears in the last quarter that you're really hammering the material movements, dealing with the waste. Obviously, the production there -- productivity there was a lot higher. Is that what we can expect in the near term that you're going to focus on getting rid of that waste rather than gold?

[William James Beament, Executive Chairman]

Look, yes, thanks. Good question, Dan. Now look, it's between the JV partners and us here, we're accelerating. We're opening up that flexibility as we articulated the last couple of quarters. We want to have multiple mining fronts so we are moving that material to achieve that. And the team on-site, with the fleet that they've got, are doing an extraordinary job. So expect that to continue. We will give a lot more color and clarity on KCGM later on this quarter with our JV partner but expect the next couple of quarters and beyond a little bit like that. We've got some great opportunities to open up all those multiple mining fronts. So yes, expect material movement will be higher this financial year.

[Daniel Morgan, Director and Analyst]

Okay. And just on Pogo, I guess, I've been impressed and surprised at how the productivity production has been in spite of the challenges. I mean, obviously, there were massive challenges during the quarter on COVID. I'm just wondering, in simple terms, if you have the same quarter the same disruption, can you achieve what you've achieved this quarter? Or did you consume a little bit of the investments you've made? I'm just trying to work out if we have the same over the next quarter or so? Is this what we should expect from this operation while you're doing these challenges? Or could it be a little bit softer?

[Stuart Peter Tonkin, Chief Executive Officer]

Yes. So look, the revised strategy is deal with what we've got. You saw an increase in development meters quarter-on-quarter. So we slightly lifted that up to 1,200 meters a month. But we obviously -- we've always articulated we want to get 1,500 meters a month to get 5 main production stoping areas online. So we just had to triage and prioritize 3 of those 5 areas to get the efforts put into those. As things pick up, we can slowly open up more areas. So yes, you've pointed it out that the quality of the ores coming out is adequate. It's really a volume going from here.Just to reflect on, when we experienced these cases, it was predominantly the operating teams in the underground. So yes, you can potentially knock out your whole crew for days. It's not evenly spread across milling and mining and your admin and those type of things. So it's very hard to model risk. So I guess what we're saying is despite having those cases and the adoption that we did, we truly realized the sort of 20%, 25% reduction in the volumes. And it might mean 100% reduction for days and then back to normal. And it's just hard to model that going forward. So the 45,000 to 50,000 ounces per quarter is likely where we can deliver under the current disruption.

[Operator]

Your next question comes from Nick Herbert from Crédit Suisse.

[Nick Herbert, Research Analyst]

I'd like to start on Pogo as well, please. I appreciate all the uncertainty there on COVID. Just thinking sort of beyond COVID, with all your operating experience there now, once you get a clear run at it, how long do you think it could take you to ramp up to that 1,500 meters per month rate? And does that 1,500 -- does that give you 1.5 million tonnes per annum for the mill?

[Stuart Peter Tonkin, Chief Executive Officer]

So the 1 -- the 1,500 meters a month is really setting up those new stoping areas. And our expanded mill are putting -- are going down for our further process and things that are for the mill expansion. So that's still going down in the summer season at the minute. And that's in place to take us from the 1 million to 1.3 million tonnes per annum. And so if you sort of look at our total ore tonnes, 68,000 tonnes a month, we obviously want to get that above 100,000 tonnes a month, of which you'll have sort of 60%, 65% of stopes and the balance from development ore.So the lead indicator is development -- capital development and the operating development that converts it to long haul stoping. We're just saying 3 to 5 active areas because we're prioritizing. We know we can literally do those physicals when we have the people there. And we've shown instantaneous run rates with the teams there. But the ability to get expats out of Australia and to do long rosters. We've had Australians and sat there for 5 months continuously without seeing their families. We've had the low 48 stage staff commit and move to Alaska to limit the -- being locked in for entering the state. So there's been a bit of fatigue and a bit of logistics, but we're also looking at parallel contingencies to address that.So yes, the tap could be turned on hard and we can get those physicals. It's really just -- it's -- whilst the environment is there, we're having to put all those preventative actions in place.

[Nick Herbert, Research Analyst]

That's really helpful. Just to clarify one point there. So the mill expansion work that you've got through COVID, sort of when do you sort of best estimate in terms of when that work will be complete?

[Stuart Peter Tonkin, Chief Executive Officer]

If you look at the quarter, we produced 200,000 tonnes. So we're producing at about -- we're mining at about 800,000 tonnes a year run rate from the quarter under these disruptive circumstances, right? So with the expansion, well, that takes us up to the 1 million to 1.3 million tonnes, and we're still likely 12 months off taking -- needing that expanded mill, but we committed early to commit to that capital to get the work done in the right season so you're not dealing with at minus 43. So it's ready so that we're not mill-constrained when the mining physicals are there.

[Nick Herbert, Research Analyst]

Got it. And then just one sort of more broadly at the group level. I appreciate you haven't given guidance for next year. But just trying to get sort of a sense of what a sustainable level of growth CapEx and exploration spend is per annum that would sit outside your all-in sustaining costs? And should we take the year just gone as a guide sort of a sustainable go-forward rate? Or is it sort of above or below that?

[William James Beament, Executive Chairman]

Nick, we'll give guidance in the coming weeks as we put out quarterly. So all that will be clearly articulated and mapped out in a couple of weeks' time.

[Operator]

Our next question comes from Levi Spry from JPM.

[Levi Spry, Research Analyst]

Maybe just a follow-up on Nick's question. You are giving guidance in a couple of weeks, but you have given us a data point of 15% of your hedge book being 15% of your production, so incurring 1.2 million ounces for the next couple of years, 3 years. Can you just talk to what assumption is in that on Pogo? Is it business as usual?

[William James Beament, Executive Chairman]

Look, as I said, mate, we'll clearly articulate that in a couple of weeks' time. And the other thing we'll articulate is our organic production growth, which we're very excited about. So all that will be in there. And clearly articulated CapEx exploration and our forecast production moving forward.

[Stuart Peter Tonkin, Chief Executive Officer]

There's a delay to get to that rate, Levi. So this impact in Pogo and the updated guidance will show a ramp to that, not a step change.

[Operator]

[Operator Instructions] Your next question comes from Keith Goode from Eagle Research Advisory.

[Keith Goode;Eagle Research Advisory;Analyst]

I've just got a 2-part question. Do you intend to recommission firstly Paulsens and secondly, the Bronzewing plant?

[William James Beament, Executive Chairman]

Yes. Thanks, Keith. Good question. Yes, look, Paulsens, we're still doing the numbers. We went in there and some drilling during the previous financial year, so that's come up pretty good. So we're just reassessing that mine plan. We'll explore options on that. It's probably not the size and scale for a Northern Star, but it's a great little project there. So as you would have seen, we divested our Ashburton project. So some of the smaller stuff, we will definitely look at corporate options.From the Bronzewing side, look, in a couple of weeks' time, we'll clearly articulate what we do there. But we're very excited what the Yandal operations look like, Jundee and Bronzewing, put the brother and sister back in the same family again. We're really excited about that. So we'll clearly articulate our strategy on that. I think Mike already said in his spiel that we've committed large funds to basically grade control and infill drill the current reserves and resources there. So we expect to generate a mine plan on that in the coming 12 months.So we still haven't made a decision of refurbing that plan or not or we look at potentially expanding Jundee again. So there's a few options on the table. But we are committing to the Julius pit, and we're currently undertaking all the permitting of that side of things right now. So that is something that we will dig up. And I think we have expenditure in the budget to start digging that up later on this financial year.

[Operator]

Your next question comes from Stuart McKinnon from The West Australian.

[Stuart McKinnon]

I just wanted to follow up with your Bill some comments you made back in April, talking about the potential mental health impact of the longer rosters and the increased social distancing on-site. You mentioned then that the whole industry had to be on red alert for mental health issues among its staff. I was just wondering, since then, have you seen sort of any deterioration among your staff? Have you seen that problem get worse? Or are they holding up pretty well? What are your thoughts sort of 3 months down the track since you first made those comments?

[William James Beament, Executive Chairman]

Yes. Look, it was a real issue, and we saw -- we did see significant spikes with our EAP providers. So yes, it has been -- it was -- in the heat of battle, it was definitely a massive issue. Obviously, the industry returning back to normal rosters has greatly improved that. And obviously, back in WA, we're very lucky that we're pretty much all back to normal in society. And so that's gone a long way for everyone, doesn't matter what industry you're in, but I'm sure everyone's mental health is a lot better than what it was in March.So look, we've got great support systems inside our organization, and I think the industry has. So it's nowhere near as elevated what it was, but there was all the same challenges you were hearing about throughout the community. It didn't matter what sector, domestic violence, all those sort of things were elevated, but I think we're returning and have returned in probably last 1, 5 to 6 weeks back to sort of as normalized as possible.

[Operator]

Your next question comes from Matthew Frydman from Goldman Sachs.

[Matthew Frydman, Research Analyst]

Just a quick one for me on Pogo and the, I guess, the rate of development and sustaining CapEx spend. You've obviously been making that investment, so I guess build up the buffer of development ahead of production and open up all those spaces. Just wondering whether that -- the current spend rate, all things considered with COVID, et cetera, is the -- is how we should be thinking about it going forward into FY '21, whether you feel like there's now enough of a buildup or there still an investment to make in that area?

[Stuart Peter Tonkin, Chief Executive Officer]

It's probably steady state, Matt, for the current physicals. We still, like all our other operations, probably like to get ahead, build the contingency in the mine plan gives you optionality. So as far as the sustaining expenditure, if I could get 1,600, 1,700 meters at Pogo and have all those developed tonnes sitting there, it's like having our gold and stockpiles on the surface is the derisked mine plan.So yes, we'll put that -- we'll include that in the guidance, but we never hold our teams back and say you can only get so many meters. We try to give them as much clear highway as we can to get in front with our mine plan. So it is a bit of a balance there. And obviously, that reflects back into -- when you're building a new mine, that sustaining CapEx is lifted -- is lifting your instantaneous all-in sustaining costs, separated to a growth capital investment.

[Operator]

Thank you. I'll now hand back to Mr. Beament for closing remarks.

[William James Beament, Executive Chairman]

We have been positioning our business for this gold price environment for over 3 years now. We are focused on long-life assets in Tier 1 locations with strong potential to generate organic growth for our shareholders. This is the formula which underpins our superior financial returns. COVID is obviously leaving us mark on our performance in Alaska, but the impact would be far more severe if we're operating in some other corners of the globe. It's one of the several factors which justifies our strategy of focusing only on Tier 1 locations.As I said earlier, we've reduced our head book so we can capitalize on this opportunity. Our strategy at Pogo is proceeding to plan, and we'll continue to see the benefits of that as our workforce returns to normal, COVID permitting. And we have significant medium and long-term growth prospects within our portfolio. We will have more to say on this when we release our FY '21 guidance, reserves, resources and our exciting organic growth update in a couple of weeks' time as well as a full update on KCGM later in the September quarter. Thanks for joining us.