Northern Star Resources Ltd

ASX:NST

Earnings Call Transcript 2023-Q4

[Operator]

Thank you for standing by, and welcome to the Northern Star June 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, and thanks for joining us today. With me is Chief Operating Officer, Simon Jessop and our Chief Financial Officer, Ryan Gurner. I'm pleased to present our exceptional June quarter results today that contributed to our delivery of group production and cost guidance for FY '23.

During the June quarter, we delivered a production result of 426,000 ounces sold at an all-in sustaining cost of AUD 1,700 an ounce. I would like to extend an enormous thank you to our teams and contract partners that contributed to this outstanding result which, for the full year, delivered 1.563 million ounces at an all-in sustaining cost of AUD 1,759 an ounce.

We've now completed the second year of our 5-year profitable growth plan to 2 million ounces per annum, and we have made significant progress across each asset, which underpins the platform to deliver continued superior returns for our shareholders.

During the quarter, we announced the decision to expand the KCGM processing plant to 27 million tonnes per annum, which will lift production there to 900,000 ounces per annum and reduce costs to $1,425 an ounce. At modest gold price assumption, this returns an IRR of 19%. It is funded from cash flows, and it is paid back in under 5 years. This investment in KCGM will lower costs, extend mine life and be an enabler for future opportunities to drive superior returns for shareholders, placing it as a top 5 global gold mine.

Today, we have provided our FY '24 outlook for production and costs with guidance for cost for gold sales of 1.6 million to 1.75 million ounces at an all-in sustaining cost of between AUD 1,730 and AUD 1,790 an ounce. We will invest growth capital of between $1.15 billion and $1.25 billion, including the KCGM plant expansion. And on exploration activity, we have allocated $150 million.

I'd like to remind listeners that we are able to maintain these growth investments given our strong operational cash flows and balance sheet, whilst also servicing our dividends that are based on 20% to 30% of cash earnings.

Now Simon will speak to the Australian operations shortly, but first to operations in Alaska at a Pogo mine. Pogo delivered an exceptional June quarter with gold sales of 80,000 ounces, representing an annualized production rate in excess of 300,000 ounces per annum. Pleasingly, the uplift was through consistent monthly performance across mining and milling metrics. Development averaged above 1,700 meters per month. Stope production was 2/3 of the ore mined. And the milling throughput approached an annualized rate of 1.4 million tonnes per annum. And impressively, mine operating cash flow for the quarter was USD 61 million. It is very pleasing to celebrate these milestones with the Pogo team, and I thank them for the efforts to date to demonstrate the exceptional quality of this long-life asset. And I believe we will start to see the market assign greater value to Pogo given its performance and significant resource and exploration upside.

Now over to Simon for the Australian operations.

[Simon Jessop, executive]

Thank you, Stu. For the Kalgoorlie production center, including KCGM, Carosue Dam, Kanowna Belle and South Kalgoorlie, we sold 224,000 ounces of gold, up 18% at an Australian all-in sustaining costs of $1,666 an ounce. This production delivered a mine operating cash flow of $280 million while we spent $112 million on significant growth capital projects. Primarily, $57 million was spent on KCGM open pit mine development and new tailings storage facilities.

At KCGM, open pit material movement was 21.8 million tonnes for the quarter, along with our new quarterly record of 66,000 trucking hours as we continue to optimize the load-and-haul fleet. This quarterly movement, combined with the previous 3 quarters resulted in 83 million tonnes moved for the year as a new record and is in line with our total annual material movement.

Grade of mined ore and volumes both increased for the highest quarterly volumes of FY '23. Underground mining volumes for the Kalgoorlie region were again steady at 1.56 million tonnes, while grade increased 5% compared to the March quarter, driven from Kalgoorlie ops and Carosue Dam to deliver 130,000 ounces.

KCGM's underground Mt Charlotte operation stabilized production with 1.04 million tonnes mined in the second half, which is above our annualized 2 million tonne per annum target run rate. We will continue to grow this operation to 3.5 million tonnes by FY '26. The Carosue Dam porphyry underground mine continued development as the next major underground ore source, averaging 390 meters a month for 1 jumbo. Kalgoorlie operations, Kanowna Belle and South Kalgoorlie underground ore volumes and grade volumes were stable quarter-on-quarter, showing strong cash flow margins from these assets.

Processing volumes in the Kalgoorlie production center returned to planned volumes with increased grade resulting in the 18% uplift in gold sold by 224,000 ounces. Carosue Dam's processing plant milled 1 million tonne for the quarter, a new site record, and finished with over 70,000 ounces sold as an outstanding result for the team.

At our Yandal production center, including Jundee, Thunderbox and Bronzewing, we sold 122,000 ounces of gold at an Australian all-in sustaining costs of $1,647 an ounce. This production delivered a mine operating cash flow of $124 million, while we spent $61 million on growth capital projects, primarily $26 million was spent on the Orelia open pit and new tail storage facilities.

Our Jundee operation achieved a new underground mine record of 829,000 tonnes of ore, up 21% on the March quarter. Development continued to be consistent at 7.8 kilometers for an annual total of 31.5 kilometers developed. As a result, mined ounces was an impressive 101,000 ounces for the quarter.

Processing throughput was also a new quarterly benchmark at 789,000 tonnes, while for FY '23, Jundee milled over 3 million tonnes which is 11% over the previous record. These exceptional mining and milling physicals delivered 320,000 ounces of gold sold and over $300 million of free cash flow generation.

The recently announced renewable project for Jundee is exciting as we have commenced works on the 24 megawatts of wind and 16 megawatts of solar generation, which will also include a 12-megawatt battery storage. This is part of our carbon reduction target of 35% reduction by 2030 with Jundee, an important first major step forward.

Thunderbox underground operation continued to be the high-grade ore source for the mill with 525,000 tonnes mined in the quarter and the highest physicals to date. For the full financial year, the underground and open pit operations successfully mined 6.5 million tonnes of ore tonnes, which is above the nameplate of the newly expanded process plan. We will continue to bring on life-of-mine ore sources in order to provide high-grade feeds to the newly built 6 million tonne per annum process plan.

The new Thunderbox process plant achieved 1.03 million tonnes for the quarter due to the first major reline and shutdown activities, which were successfully achieved. Thunderbox also had 2 separate downtime events totaling 1 week each to rectify a variable speed drive electrical repair. No further downtime has been experienced since the final repair in June. The throughput tonne per average for the quarter lifted to be in line with the design nameplate, which was very pleasing. Recovery also did improve 3% from the last quarter as the gravity circuit issues were resolved late in the quarter. Thunderbox over FY '23 successfully built, commissioned and milled 4 million tonnes and is a new step forward as we look forward to a full 12 months of run time in FY '24.

I would now like to pass over to Ryan, our Chief Financial Officer, to discuss the financials.

[Ryan Gurner, executive]

Yes. Thanks, Simon, and good morning to you all. As demonstrated in today's quarterly results, Northern Star remains in a very robust financial position as we enter FY '24, which is poised to be another exciting year for the company.

Our balance sheet remains strong, as set out in Table 4, Page 10, with cash and bullion of $1.25 billion at 30 June. And on the back of a great performance this quarter, we have built upon our net cash position, which now stands at $362 million. The company has generated record full year cash earnings of $1.22 billion to $1.24 billion, and pleasingly, we saw a material uplift in the second half as we continue to focus on cost optimization and lowering sustaining CapEx across the business.

A reminder that the company's policy is to pay 20% to 30% of cash earnings in dividends. After a very strong final quarter, we achieved our full year group sales and group cost guidance. Consistent with our profitable organic growth strategy, we continue to invest capital across the business where we see positive returns. During the quarter, work programs advanced ahead of expectations in 3 key areas: early works and procurement of long lead time items for our recently approved KCGM expansion project; additional resource drilling at Jundee; and commercial production being declared later than planned at the Otto Bore open pit operation at Thunderbox.

If we go now on Page 10, set out the company's cash, bullion and investment movements for the quarter with key highlights being the company recording $557 million of operating cash flow, which is up 50% on the prior quarter. After deducting CapEx of $223 million relating to plant and equipment and mine development and $34 million in exploration, quarterly free cash flow generation was a company record $300 million. Proceeds from the successful 144A bond issuance during the quarter was used to pay down corporate bank debt, resulting in a net cash inflow. Including cash and bullion and undrawn facilities, the company has $2.2 billion in available liquidity at 30 June.

All 3 production centers generated free cash flow with capital expansion fully funded. Kalgoorlie contributed more than half of the group's free cash flow performance. And pleasingly, Pogo's strong quarterly performance contributed over $70 million in net mine cash flow, the highest contribution since acquisition, reflecting the delivery of the Pogo team's optimization plans at the asset. Group net mine cash flow for the quarter was $302 million.

On other financial matters, depreciation and amortization are in line with company guidance provided of $600 to $700 per ounce. Full year depreciation and amortization is at the mid- to upper end of the guidance range at approximately $670 per ounce. And for the quarter, noncash inventory charges for the group were $12 million. As mentioned previously, most of these noncash inventory charges relate to the milling of acquired stockpiles at KCGM and are a component of EBITDA. A full reconciliation of all-in sustaining cost of EBITDA is included in the back of our half year financial results presentation.

And in respect to the company's on-market share buyback, no additional shares were purchased by market following the company's Q3 release. The buyback program remains open until September this year, with a blackout period applied until our FY '23 results released in August.

Following the strong Q4 performance achieved, the company is well placed to deliver production and cost guidance for FY '24. Overall, total capital expenditures for FY '24, including sustaining growth and exploration investment, are forecast to be broadly consistent with FY '23 levels, excluding the KCGM mill expansion capital.

In relation to growth capital expenditure, we are guiding FY '24 to $1.15 billion to $1.25 billion, which includes the $525 million relating to the KCGM mill expansion.

Figure 5 on Page 4 outlines the key areas of growth capital activity across the production centers to deliver our profitable project pipeline. Exploration is guided to $150 million in FY '24 with investment focus on KCGM and Jundee in-mine exploration, including drill drive development. At Pogo, additional drilling at the Star discovery is planned.

Importantly, with the company's strong liquidity position, our capital projects and exploration investments are fully funded. Finally, in respect of hedging, Table 5 on Page 10 sets out the company's committed hedge position at 30 June. The overall hedge book stands at 1.457 million ounces at an average price of $2,811 per ounce.

I'll now hand back to Melanie for the Q&A session. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Alex Barkley with RBC.

[Alexander Barkley, analyst]

Just a quick overall question on KCGM through FY '23. It doesn't look like it's coming light versus your guidance commentary without really having a major issue throughout the year. Is it fair to say it's underperformed? And how would you think it shifts going into FY '24?

[Simon Jessop, executive]

Yes. Thanks, Alex, Simon here. I suppose if I look at Q4, we returned to normal processing for KCGM. Q3 was a difficult quarter for us, but really pleasing that we saw Q4 come back and execution of the mine plan at the end of the year. So really processing was the challenge for us over the course of FY '23, but we exited FY '23 back at nameplate and things stabilized as usual.

[Alexander Barkley, analyst]

Okay. So no sort of impact going into next year. Just a quick one on Thunderbox. Thanks for those comments around Q4. When should we expect that sustainable 6 million tonne per annum plus into next year, so maybe second quarter onwards? Or how should we think about that?

[Simon Jessop, executive]

Yes. With the Thunderbox. So quarter 4 was the first quarter we did the full major shutdown and also completed some redesign of a few areas and beefed up wear packages in certain parts of the plant as we build our experience of running that. So pleasingly, we got through the shutdown really well, see some optimization in that going forward. And we really just had the variable speed electrical issue during the quarter. But post that fix, we've seen tonnes per hour at nameplate, and we're very confident going forward at Thunderbox because we still see that sprint capacity over and above nameplate. It's now just stabilizing the plant.

[Operator]

Your next question comes from Daniel Morgan with Barrenjoey.

[Daniel Morgan, analyst]

Simon, maybe just a quick follow-up to that last question on the Thunderbox throughput. So a lot of the issues you just answered have been resolved, but I just wasn't clear on whether you'd be running at 6 million tonnes for the whole of this year? Or is there still -- you'll be short of that for this fiscal year?

[Stuart Tonkin, executive]

Yes, Dan. So we're running at those rates now. It's whether we will maintain that throughout the FY '24. But I think importantly, what you and Daniel are probably trying to back calculate is the ounces. We've guided 520 to 570 koz for the Yandal contribution for FY '24. And that's with some buffer at TBO to ramp up, ramp down and sequence grade. So the guidance over the full year is second half weighted, and that's with some planned shutdowns in the mills in quarter 1 as we typically do. But that's also some range testing and ramping up of that plant. But we were able to run TBO today at those 6 -- plus 6 million tonne per annum run rates. We just have had some, obviously, commissioning setbacks in the last year.

[Daniel Morgan, analyst]

Okay. And you've marked a number of shuts for the September quarter. Could you just drill down onto which shuts those are in this Thunderbox included in that for any rectification work? Or is it -- when you look at the end? Or is it the Jundee mill that has a shut?

[Stuart Tonkin, executive]

Yes. So most of them are hinged around the main mill relines, and we typically do 2 major shuts per annum in just the wear rates and you can appreciate it's wear-driven, not time-driven. So we monitor them closely. And sometimes they do it in 5 months instead of 6, which means you've actually got more throughput through in that period, so you get a benefit from it. So unfortunately, or fortunately, by design, every mill is getting a shut this quarter. We've incorporated that into our guidance, and that's when we've said 1.6 million to 1.75 million, consider that around the entry rate and the exit rate throughout the year and the second half weighting of production with that planned maintenance.

[Daniel Morgan, analyst]

And a relatively simple question, I think, about total CapEx guidance. Have I got the math right that it's about $1.7 billion, if I put everything together? Is that about right?

[Stuart Tonkin, executive]

Are you counting sustaining? So growth $1.15 billion to $1.25 billion including $525 million of the KCGM mill expansion in year 1.

[Daniel Morgan, analyst]

Yes. So the $1.7 billion, is that including growth, sustaining, exploration? Is that accurate? $1.7 billion is....

[Ryan Gurner, executive]

What number, Dan? Did you say $1.7 billion? No, it'd be lighter than that, Dan. It would be a couple of hundred million lighter, I'd say. I mean you've got -- well, the midpoint we're guiding is $1.2 billion. In total -- exploration, if you want to throw that in there, depending on whether you are or not, [ $150 million ]. And then if you look at -- I sort of mentioned in my, I guess, talk that our CapEx, including sustaining would be similar to this year. So our sustaining CapEx is about $200 an ounce. So we've got a little bit more ounces this year. So if you use that $200, $220 an ounce sustaining CapEx and you look at our ounce profile, if you take the midpoint, that should be able to do the maths to get you there.

[Stuart Tonkin, executive]

Yes. So growth plus sustaining at $200 an ounce plus exploration, which I think you've included, will get you close to that $1.7 billion.

[Operator]

Your next question comes from Levi Spry with UBS. .

[Levi Spry, analyst]

A few of us probably are focused a little bit on FY '24 guidance and particularly for Yandal, which is a little bit different to mine. So I think you addressed the production, but can you just talk through AISC and then and where the growth capital is going into that hub over the next year or 2?

[Ryan Gurner, executive]

Yes. Levi, Ryan here. Yes. So obviously, you guys have spoken about production. I think from a weighting perspective of ounces, Thunderbox is a slightly higher cost mine than Jundee. And so that, obviously, that weighting impacts the overall AISC of that group. Look, there's no doubt just broadly across the business. There's still challenges in costs throughout our business, the sector we're in and the wider industry. So that's allowing for some cost increases across some items in our business. But broadly, the -- I think it's the fact that Thunderbox is a higher-cost operation than Jundee and that's obviously contributing more production. From a CapEx perspective, most of the investment is around that preproduction of Orelia open pit and establishment of the Wonder underground there, which are high-grade feed sources to the Thunderbox mill.

[Stuart Tonkin, executive]

Page 4 of liquidity gives you a bit of a percentage breakdown of those CapEx spreads. And the AISC, Yandal, obviously, Jundee is impressive, and you've got the higher cost of TBO as we haven't got the throughput. That's what's averaging it out at that sort of $1,655 to $1,700. So as we get the throughput up and the ounce profile up at TBO, it balances back that whole Yandal built, gets above 600,000 ounces per annum and bring AISC down, but that's beyond '24.

[Levi Spry, analyst]

Yes. Yes. Okay. And just pushing that a little bit further. So like what the gross capital comes sort of in the coming years and if we're getting the 600, 000 next year?

[Stuart Tonkin, executive]

No, we haven't got guidance yet to '25.

[Operator]

Your next question comes from Al Harvey with JPMorgan.

[Alistair Harvey, analyst]

Just want a bit more clarification on the growth CapEx. So Figure 5 does indicate 20% of group CapEx is going to sustaining waste maybe I was just trying to get some clarification on that categorization there. Obviously, it's in the growth bucket, but...

[Stuart Tonkin, executive]

Yes, so sustaining we're continuing -- not sustaining CapEx. It's continuing. Poor use of the word sustaining in that, but it just means continuing waste movement at those levels to get that southern cut back opening up those reserves to the south and [indiscernible] and so it's continuing, but it is growth expenditure.

[Alistair Harvey, analyst]

Sure. So can't really pull anything. It probably can't pull anything out of our sustaining CapEx number as a bit of an offset there, it sounds like?

[Unknown Executive]

No, no.

[Alistair Harvey, analyst]

No worries. And just briefly, the hedge position, it's come down 125,000 ounces in the quarter. Just want to get a sense of how you're thinking about risk management for the KCGM expansion at the moment?

[Stuart Tonkin, executive]

Yes. So not really changing that policy but maintaining it. So as we consume hedges in the quarter, we typically add them. Obviously, spots kicked up again, and you're getting 3,300-plus ounces at the back of the plan when KCGM gets turned on. So we only did the IRR was at $2,600 an ounce. It got 98%, and you can hedge at that point at about $3,300 an ounce. So we're not changing that policy, but we're certainly keeping it maintained around that sort of sub-20% production over those 4 years.

[Operator]

Your next question comes from Matthew Frydman with MST Financial.

[Matthew Frydman, analyst]

Sure. I just had a couple of questions to further unpack the FY '24 outlook. And the first one is around the Kalgoorlie hub in particular. So if we look at the implied year-on-year production growth. That's really the 1 hub where you're not saying -- or where you're saying there's not going to be that much growth on a year-on-year basis. But you have also called out that obviously KCGM is going to be working into the Golden Pike North area in the second half of FY '24.

So I would have thought that KCGM should be providing a pretty material lift there year-on-year in terms of production for that hub. So how do I interpret that? Does that mean you're implying that maybe Kal what's going to be a bit of a drag on a year-on-year basis or perhaps Carosue Dam? What's the breakdown of that hub in terms of the production growth?

[Stuart Tonkin, executive]

No, by CDO and the Kal which is obviously contributed from South Kal and Kanowna, relatively flat throughout the year. And definitely KCGM, it's a better year than this year because we don't have the quarter 3 in there. There's still a lot of work to be done at KCGM before it lifts back up to that 650,000-plus ounces in FY '26. So '25 onwards so it's -- this is still a flat year in production wise.

So yes, the whole Kalgoorlie range guided 820 to 900 koz. Probably isn't that different to what we've said or planned. The growth at -- is all about KCGM, and it comes late in the 5-year plan.

[Matthew Frydman, analyst]

Yes. Got it. Okay. That's pretty clear. So even though you're accessing Golden Pike North in the second half of FY '24, doesn't necessarily have a big step-up in ounces until the perhaps longer date.

[Stuart Tonkin, executive]

No. And the current mill throughput, it's really a grade driver that changes the ounce profile right to that 13 million tonnes per annum. And then obviously, the year after, we kind of hit that 650,000, 700,000 ounces, we get the contribution of the expanded plant to lift it another 250,000 ounces. So that's -- we're capped out on grade sequencing on the ounce profile for KCGM. And you'll find that AISC obviously links very closely to -- relationship with AISC is heavily driven by the denominator gold sold. So as we get that, we get that improvement in the back of the 5-year plan.

[Matthew Frydman, analyst]

Yes. Yes, that's pretty clear. It also leads into my next question, and Ryan did make some comments there, which I guess were probably more specific to the Yandal hub. But clearly, you are growing production at the group level into FY '24, but you're guiding to flat all-in sustaining costs at least at the midpoint. So obviously, a pretty good outcome to have flat costs, but it does imply that there are some -- there is some creeping costs that isn't being offset by the denominator or the higher production. So just wondering if there's anything in particular to call out at the group level? Or is that being driven by increasing -- stripping at any particular assets perhaps? Or is that more just a general industry cost inflation and labor costs, consumable costs, et cetera, as Ryan seems to imply.

[Stuart Tonkin, executive]

Yes. So cost going sideways is what we've planned. We actually do expect that on some levels, it's capped out and it may -- we may get some relief. We just haven't factored that into guidance. But we, like you see them at an elevated level and probably don't like it, like you, but it's -- there aren't tangible actions in there to say here's a qualified reduction in certain costs. But we control a lot of the labor cost. So we understand what they're doing. Obviously, consumables energy costs are up very high at the moment. So we don't think that they will last at those levels, but we were careful to not guide improvements in costs without tangible actions that sit behind that.

Even when you look at -- always looking at AISC here, but some of the all-in costs are very impressive. The gap between AISC and AIC is shallow. And the cash margins generated from these assets is significant. And back to the point of a strength of balance sheet, net cash position, all of that growth is fully funded. When you look at the all-in costs at mines like Kanowna and South Kalgoorlie, it's sub-2,000 all-in costs, say, AUD 2,900 gold price. They are generating significant cash, which is contributing in funding the growth plan. So I think AISC is one metric, obviously, standardized, but it's also to understand the genuine cash flow that the assets are doing.

[Matthew Frydman, analyst]

Yes. Yes, that's very fair, Stu. And good to hear that your view is that hopefully, there's at least some conservatism built into that outlook on costs.

Maybe just finally, if I could ask you quickly on the Strickland's transaction. Obviously, you probably haven't had a chance to talk about that much to the market. I guess the comment that I would make that the price tag, $67 million. That's nearly half of your FY '24 exploration budget, and you've purchased the 340-ish thousand ounce resource. That's nearly $200 an ounce to pay for that resource. So I would have thought that your discovery cost from that exploration budget would -- you would hope for a better discovery cost than that in your exploration spend. So just wondering if you can maybe expand on the rationale behind that acquisition and I guess, where it fits into Jundee and why that was an attractive purchase.

[Stuart Tonkin, executive]

Yes. I won't talk on that transaction because it's not complete. But I just will say our resource are a reserve that you know versus one that you spend exploration to find are very different prospects. In hindsight, you can say what the value of discovery is. But something that is in resource or reserve versus something where you're putting $150 million into an area with good planning and good [geos] trying to identify is a different prospect in that regard.

[Operator]

Your next question comes from Hugo Nicolaci with Goldman Sachs.

[Hugo Nicolaci, analyst]

Maybe a follow-up on costs and maybe getting into some of the assets. Just maybe looking at Kalgoorlie ops and the cost performance there in the quarter and marginally the lower sort of mined volumes production and milled tonnes kind of proportionately up. Just wondering what maybe the cost pressures were there in the quarter? And to what extent you see those cost pressures potentially kind of continuing into FY '24, both at the asset and then kind of across the group?

[Ryan Gurner, executive]

Yes. Hugo, thanks for the question. Look, in relation to Kalgoorlie, in particular, probably the one I'll call out is power costs were higher this quarter than what we expected. That's probably the main call-out that I would say at that asset. Yes, Stu spoke more globally about costs. Look, we're not -- as Stu has sort of said, we're not building into our guidance cost relief. Broadly, costs we see have stabilized. I mentioned it before that we are experiencing and will experience some higher costs in some parts of our business. So no doubt, they will -- whether it's labor or contractors, we're forecasting probably some uplift in those. But broadly across the board in the basket of our costs, we are anticipating to be sort of flat. But the power cost at that asset at Kalgoorlie in the quarter was the main drop of those higher costs this quarter.

[Hugo Nicolaci, analyst]

Yes. Great. So just on that power piece, is that more kind of your electricity contracts and maybe reflecting sort of domestic gas prices in WA? Or is that linked to anything else in particular on power?

[Ryan Gurner, executive]

Probably yes, yes. In a sense, not -- I guess it is all interlinked because it's a balancing price that we essentially pay for. So it would be linked back to the infrastructure at the state level. And then obviously, gas prices have rose, yes. I mean our guess at other sites like Jundee, Thunderbox, where we contract gas, they are contracted over a medium term. So they're not assets that we see large fluctuations in pricing. But Kalgoorlie, when we're on grid across South Kal, KB and KCGM, we do see variable pricing.

[Hugo Nicolaci, analyst]

Great. That's helpful. And then maybe just a second one, if I could, just around the growth capital. I appreciate you've touched on kind of across the assets, but you called out that 82% of the growth capital is going to the major growth projects. So I was just wondering if you might be able to give a bit more color around whether the other 18% or roughly $200 million is going in FY '24.

[Ryan Gurner, executive]

Look, broadly, it will be largely drill drives mine development. You can see across the business, and that's really spread, Hugo, across the asset. So where we're opening up areas declines across the business underground, that will be where basically the spend is. So what we've tried to do here is just outline the larger components particularly KCGM, obviously, the waste stripping, which is a multiyear project unlocked the high-grade Golden Pike North and Fin South. Obviously, Yandal will be really a pit and Wonder I've spoke about feeding the Thunderbox mill. And then you've also got Porphyry and Wallbrook open pit feed for Carosue Dam. So broadly, they're there. I would just say across the business, there's just mine development, as I said, accessing new areas would be the thing that I would call out.

[Operator]

[Operator Instructions] Your next question comes from Kate McCutcheon with Citi.

[Kate McCutcheon, analyst]

Since Matt asked on M&A, you've got a lot of liquidity but also have a lot coming up with KCGM, et cetera. How are you thinking about the portfolio here? You've said 3 to 5 assets is a strategic goal. Are you actively looking at anything else? Or for now, you're focused on the organic growth for the near term, I guess?

[Stuart Tonkin, executive]

Yes. Thanks, Kate. Look, we see some of the most compelling returns on our organic opportunities. And obviously, we've -- that gives us confidence to commit to things like the Fimiston mill expansion. We do have strong liquidity and strong balance sheet strength. We always assess opportunities, but we're fussy, and we obviously don't need to do anything. So we still expect to see that sort of the lower end of the small cap space, lots of jostling and collaboration or consolidation at that end. But that's not typically the space that materially changes our well. So we just -- we'll keep that for you on our long-term strategy around having that sort of 3 to 5 assets and maintaining the lowest cost portfolio we can attain. So we'll always evaluate opportunities as they come up.

[Kate McCutcheon, analyst]

Okay. Got it. And then Pogo Q4 numbers were great to see. What's been the key driver of that pickup or the step change that's enabled the Q-on-Q lift? Stoping tonnes look flat, but you picked up those development meters again. And then the second part of that question is forward-looking. So what's the next operational target to hit at Pogo? Is it still pulling costs out? Or is there more to go on head grade upside to reserve?

[Stuart Tonkin, executive]

Yes. Thanks, Kate. I was hoping for a question around Pogo after 20 quarters [indiscernible]. 80,000 ounces, for everyone, that is absolutely outstanding result. And impressively, not just delivered from grade. We're not even producing at the reserve grade because it's still 1/3 of the ore feed is development ore. And obviously, the stoping grade is higher. So I think it's really a testament to the consistency of development meters.

We said above 1,500 per month, and we obviously averaged 1,700 per month in the quarter, building out these new mining fronts, giving more flexibility in the mine plan so that you're not hand-to-mouth, that you've got capacity. Look, the underground ore bins and getting that consistent feed to the plant. Obviously, in quarter 3, we had the mill motor failure.

That got rectified. But that allowed us also to sort of look at the main flowsheet and critical elements within that aged plant to put some investment back into. So for us, it's around stabilizing -- maintaining and stabilizing at these levels. Obviously, we've guided 260,000 to 280,000 ounces at Pogo this year with a focus on optimizing costs and inputs.

So resourcing levels around equipment, people, reagents consumables. Really importantly, last quarter did USD 1,250 all-in sustaining cost. We're really working hard to get the unit cost down and then take the growth on the back. But you're sitting there with 7-plus million ounce resource, huge exploration success with things like Star to drill out. I really think people will look at the quality of this asset and over USD 60 million operating cash flow in the quarter. This will start to become more important for people to look at the valuation.

[Operator]

Your next question comes from David Radclyffe with Global Mining Research.

[David Radclyffe, analyst]

I just got a quick question on KCGM and then recoveries. During the quarter, obviously, mill tonnes was up and so was grade, but the trend of overall lower recoveries over the last year is continuing despite higher grades. So just trying to understand really what's going on there and what the expectation is going forward? Is this the new level until the new sort of mill is in place?

[Simon Jessop, executive]

Yes. Thanks, David. It's Simon. Certainly not. Don't drag right on quarter 4 in terms of recovery. If you look at the year, early in the year, we were 86% -- 85% to 86%. And then in quarter 4, we had some float circuit issues and gravity circuit downtime, which really, they're the 2 things that hurt us on recovery at KCGM. They've since been rectified and fixed and moved back to normal recovery. So over the full year, we averaged around that 84%, and that's consistent for KCGM. So certainly quarter 4 was not -- was the low quarter for us over FY '23 and historically. But now back to normal levels of recovery at KCGM.

[Operator]

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

[Stuart Tonkin, executive]

Okay. Thanks for joining us on the call this morning. It's very pleasing to close out FY '23 on a high and be in a position of strength as we embark on FY '24. I look forward to updating you as we continue to advance our profitable organic growth strategy. Have a good day.

[Operator]

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