Northern Star's New CEO Backs FY27 Guidance but Defers the Multi-Year Outlook as the KCGM Mill Ramp-Up Begins and Free Cash Flow Turns Negative
September quarter results call, October 20, 2026
A new CEO who will not yet be rushed
Suresh Vadnagra, who became Managing Director and CEO on October 5, used his first call to endorse FY27 guidance while declining to say when the market will get a longer-term plan. Several analysts, including Bank of America, UBS and JPMorgan, pressed for timing on a multi-year outlook. Vadnagra said he had not yet considered whether to issue medium-term guidance or hold market days and site visits. "That's something we're going to have to take on notice and engage with the team and the Board on and come back to all of you with a more considered answer," he said. He added that he wanted to finish understanding the business before drawing conclusions.
The message was delivery first. Vadnagra said nothing he had seen in two weeks of site visits suggested the company would miss FY27 guidance. He also committed to communicating "transparently and openly" if emerging risks forced a revision. His list of improvement areas was blunt for a CEO two weeks into the job: consistency of delivery, accountability, capability and capital discipline. He said investment decisions must be "supported by robust business cases, attractive returns, and with a clear view of their impact on the business as a whole." That reads as a signal that the capital allocation framework will be reviewed.
On the Gold Fields situation, which Bank of America raised, management said only that its position had not changed from what has been reported in the media. Vadnagra said delivering on commitments was "the biggest lever" for serving shareholders. He acknowledged that the market activity around the company had "created a lot of anxiety and uncertainty for people," a point that matters given the labor backdrop below.
KCGM: the old plant is off, and the ramp-up now carries the year
The tie-in of the existing circuit to the expanded KCGM plant was completed on September 28, about two weeks later than planned. The delay stemmed from minor commissioning issues with the thickener and ball mill, which have been addressed. The 37-year-old Fimiston circuit was switched off around September 20 and 21, and the plant has been handed from the project team to operations. Vadnagra called the engineering and construction quality "as good as anything else that I've seen in my career." He cautioned that early commissioning would bring "good days" and "not so good days."
The quarter's reported numbers flatter the new plant. Goldman Sachs estimated that roughly 2.5 additional weeks of running the old circuit added about 20,000 ounces. Management did not dispute the point and said the September quarter's head grade will not repeat. Simon Jessop, who oversees operations, said the company is targeting about 60% utilization initially, rising through FY27, from the 2.5 million tonnes processed last quarter. Feed grade will fall and tonnes will rise before the grade is rebuilt. "The head grade will go down from this quarter because we ran most of the quarter business as usual on the old plant," he said. High-grade open pit and underground feed will be reintroduced progressively once confidence builds in the flotation and gravity circuits. Float recovery for the quarter was 76%.
Barrenjoey suggested the December quarter would be the low point for ounces. Management did not confirm that, but its description of a lower-grade, higher-tonnage blend points in the same direction. Management also reiterated that the ramp-up supports full-year guidance, which implies a heavily second-half-weighted year. Stage 2 construction should finish shortly after the end of the first half, with commissioning starting early in the second half. It is expected to deliver a 1% to 2% recovery uplift and eliminate concentrate haulage between KCGM and Gidji.
Mill expansion and readiness capital was A$221 million in the quarter, and the FY27 forecast remains within the A$350 million to A$470 million range. Asked about overrun risk on the project's narrow budget, Steven McClare said the project is at "single-digit percentage to go" and that spend is now less than one-third of peak. He conceded that costs "could" exceed the range "if we materially got lower productivity."
Cash flow turns negative before the hoped-for inflection
The group sold 364,000 ounces at an AISC of A$3,217 per ounce. Cash operating costs fell 3% to A$893 million, and group AISC was broadly flat at A$1.17 billion. All three production centers generated positive net mine cash flow. After A$113 million of corporate tax, A$51 million of exploration and A$76 million of equipment finance and lease payments, underlying free cash flow was an outflow of A$31 million. Growth capital across the operating centers was A$473 million and sustaining capital was A$220 million, both elevated by KCGM and by infrastructure work at Pogo, Thunderbox and Jundee.
The balance sheet remains sound but is being actively managed. Cash and bullion were A$1.2 billion at September 30. After quarter end the company added a A$500 million revolving credit tranche maturing October 2029, lifting total bank facilities to A$2.25 billion. It drew A$500 million in October ahead of the FY26 final dividend, which CFO Ryan Gurner described as a prudent liquidity measure. No shares were bought back in the quarter, though the program remains open. FY27 cash tax guidance of A$450 million to A$550 million is unchanged, with A$130 million paid so far. A semiannual coupon and annual insurance premiums also fall in the December quarter.
Management expects cash generation to improve in the second half from the KCGM ramp-up, lower mill expansion spend, the end of Pogo infrastructure work and more spot price exposure. The hedge book stands at 648,000 ounces at an average of A$3,423 per ounce. Gurner said unit costs at KCGM should fall as throughput and availability rise, while other assets are expected to be broadly steady, subject to oil, royalties and other macro inputs.
Regional performance: Jundee reset, Pogo rehabilitated
Kalgoorlie, comprising KCGM, Carosue Dam and Kalgoorlie operations, sold 194,000 ounces at an AISC of A$2,919 and generated A$15 million of net mine cash flow after A$418 million of growth capital. Open pit mining of 23 million tonnes was on plan despite heavy rain. Underground development set a record 10.3 kilometers, which is the lead indicator for higher stope grades. Underground grade at KCGM was 1.7 grams per tonne. Yandal sold 118,000 ounces at A$3,687 per ounce and generated A$138 million of net mine cash flow, with Thunderbox posting record quarterly gold sales.
On Jundee, Goldman Sachs asked whether the sharp drop in mining costs, to about A$105 per tonne, is sustainable. Jessop said the cost base was deliberately reset in the June and September quarters, with 20 to 22 pieces of major equipment and about 190 personnel removed. He said this was done with "zero redundancies," as staff were redeployed across the group, and that mining costs "will stabilize around where they are at the moment."
At Pogo, sales were 53,000 ounces at an AISC of US$2,307 per ounce, hurt by a planned plant shutdown and the refurbishment of the underground ore bin. Material was crushed on the surface and trucked to the mill during the work, which disrupted the mining sequence. The bin is due back in service by the end of October. Management said this will cut trucking hours and support higher mining rates through the December quarter. Mine grade was 5.9 grams per tonne against a reserve grade of 6.8 grams per tonne. Jessop warned that variability will persist, noting FY26 grades ranged from 5.5 to 7.8 grams per tonne and averaged 6.7.
Labor and the portfolio
Staff turnover has flattened at 25% to 30%, which Jessop acknowledged is "higher than it has been a couple of years ago." Vadnagra said it is an industry-wide problem, especially in Canada and Western Australia, where activity is high. Asked by MST whether asset reviews could lead to divestments, management said continuous reviews are standard practice. Vadnagra said he intends to apply his "own lens" to the portfolio, and he did not rule anything out.
Hemi and Kena: the pipeline
The Hemi final investment decision remains on track for late FY27, subject to approvals. McClare said the field reinjection pumping trial, the key test of whether the water management design performs as assumed, should finish within about three weeks, and results so far have been "very pleasing." The company is consolidating metallurgical parameters, the mining schedule and plant changes into an updated feasibility study, targeted by roughly the end of the third quarter. Vadnagra called Hemi "one of the most compelling organic growth opportunities" in the portfolio, and said capital risk and expected returns will still be examined before commitment.
At Carosue Dam, the Kena underground mine is progressing through its box cut, with a portal expected in the second half. It will not contribute in FY27. Starting reserves are about 2 million tonnes at 3 to 3.5 grams per tonne, so it is a modest, higher-grade source rather than a step change in group output.