Northern Star Resources Limited (NESRF) Q1 2024 Earnings Conference Call Transcript

Northern Star Resources Limited (OTCPK:NESRF) Q1 2024 Earnings Conference Call October 19, 2023 6:00 PM ET

Company Participants

Stuart Tonkin – MD

Simon Jessop – COO

Ryan Gurner – CFO

Conference Call Participants

Mitch Ryan – Jefferies

Daniel Morgan – Barrenjoey

Matthew Frydman – MST Financial

Meredith Schwarz – Bank of America Merrill Lynch

Al Harvey – JPMorgan

Hugo Nicolaci – Goldman Sachs

Alexander Papaioanou – Citi

Operator

Thank you for standing by, and welcome to the Northern Star September 2023 Quarterly Results Briefing. All participants are in a listen-only mode. There’ll be a presentation followed by a question-and-answer session [Operator Instructions].

I would now like to hand the conference over to Stuart Tonkin, Managing Director and CEO. Please go ahead.

Stuart Tonkin

Good morning, and thanks for joining us. With me today is Chief Operating Officer, Simon Jessop and Chief Financial Officer, Ryan Gurner.

I’m pleased to present our first quarter results for FY24, and maintain full year production and cost guidance, as we are well positioned to deliver growth throughout the year with a strong half two forecast. In September quarter, we completed planned mill maintenance across each of our production centers and delivered a production result of 369,000 ounces sold at all-in sustaining costs of A$1,939 an ounce.

The September quarter enabled further progress of our organic growth plans with record throughput to the mill at Thunderbox, the KCGM mill expansion preworks and procurement is now well underway. The Super Pit East wall remediation is accelerating to access the high-grade Golden Pike zone in the second half of the year, and Pogo volumes were consistent and cost improvement initiatives been identified and planned.

The balance sheet remains strong with net cash of A$284 million and A$2.2 billion of liquidity. Whilst we fully fund from operating cash flows, our production growth, our exploration activity, the active share buyback and subsequent to the quarter end, we paid the FY23 final dividend of A0.155 per share. These are all examples of a mature and sustainable business that you should own.

During the quarter, we published our annual report and sustainability reports as well as a number of disclosure statements, and I thank the team for the work to produce these reports highlighting the extensive business activity for shareholder and associated stakeholders. And I encourage listeners to review these documents as demonstration of the great work underway at Northern Star.

Now Simon will speak to the Australian operations, but first to Pogo in Alaska. Pogo delivered gold sold of 62,000 ounces and completed planned mill shutdowns during the quarter. Mining physicals were consistent with development above the required 1,500 meters a month at 1,581. Stepping contribution was two-thirds of the ore fed to the mill and grade was representative of mine areas and mining dilution, which remains a focus.

We also have focus on costs, and that’s key at Pogo with an all-in sustaining cost in the quarter of $1,438 an ounce. But pleasingly, total costs were down 12% than the June quarter. And planning is underway to reduce the fleet with the Rio Jumbo scope diminishing and whole fleet plans to operate fewer, larger and more productive trucks they’ve all been ordered.

During the visit to Pogo during the quarter, it was evident that the team are proactively identifying opportunities to improve productivity and drawback costs across all departments. Exploration activity across the group continued with $30 million invested in the quarter to advance our geological targets, and we look forward to providing an exploration update in December quarter, showing the significant potential of our world-class geological systems.

And now I’d like to hand over to Simon for the Australian operations.

Simon Jessop

Thank you, Stuart. For the Kalgoorlie production center, including KCGM, Carosue Dam, Kanowna Belle and South Kalgoorlie, we sold 183,000 ounces of gold down 19% at an Australian all-in sustaining costs of A$1,844 an ounce. This production delivered a mine operating cash flow of A$174 million, while we spent A$219 million on significant growth capital projects, including A$80 million on the KCGM mill expansion and A$70 million on KCGM open pit mine development at new tail storage facilities.

At KCGM, open pit material movement was in line with plan at 21.7 million tonnes in the quarter, along with a focus on the East Wall remediation area. Golden Pike South was completed during the quarter, which now enables uninterrupted access to mining the East Wall remediation area.

This is a real highlight as we continue to accelerate towards unlocking the 1.2 million ounces at the base of the pit. We’re on track for the recommencement of mining in Golden Pike North in H2 of this financial year, as a key driver of KCGM’s ounce profile over the next three years.

Underground mining volumes for the Kalgoorlie region increased to 1.61 million tonnes, while grade reduced 13% to deliver 120,000 ounces. The lower grade was driven from Mount Charlotte and Carosue having limited access to high-grade areas. KCGM’s underground Mount Charlotte operation stabilized all production at 520,000 tonnes with development lifting 52% quarter-on-quarter to 3.2 kilometers.

The Carosue Dam Porphyry underground mine successfully commenced stopping and will ramp up over the course of FY24 as a new high-growth feed source for Carosue. This mine is run by our in-house Northern Star Mining Services division, which average 470 meters a month with a single jumbo for the quarter.

The Kalgoorlie operations of Kanowna Belle and South Kalgoorlie mines were stable quarter-on-quarter on underground mine volumes and growth. Processing volumes in the Kalgoorlie production center had their major annual planned shutdowns for maintenance. KCGM had its full reline of the Fimiston South, along with the usual biannual major maintenance activities. Lower head grades were driven from the KCGM and Carosue Dam operations along with reduced mill volumes, which is planned for this time of the year.

The KCGM mill expansion spent A$80 million during the quarter and successfully commenced the on-ground enabling works. The engineering and design works are progressing very well with Primero assembling a high-quality team for this marquee project, which is integrating well with our Northern Star project team. The focus is on the preparation for the main construction team to commence on-ground start works at KCGM in quarter 3 of FY24.

At our Yandal production center, including Jundee, Thunderbox and Bronzewing, we sold 124,000 ounces of gold at an Australian all-in sustaining costs of A$1,929 an ounce. This production delivered a mine operating cash flow of A$96 million, while we spent A$40 million on growth capital projects, primarily A$18 million was spent on the Aurelia open pit.

At our Jundee operation development advance was 7.5 kilometers with 687,000 tonnes mined and 80,000 ounces for the quarter. Processing had its major planned shutdown, along with an unplanned crushing circuit downtime event, which limited throughput at the end of the quarter. This also delayed processing of high-grade ounces into the December quarter.

The Jundee renewable project is on track for the 16-megawatt solar farm and 12-megawatt battery energy storage system will be online in FY24 the second half. The 24-megawatt wind farm works are continuing and on track for FY25. Thunderbox underground operation achieved a new site record with 603,000 tonnes of ore mined and the highest physicals quarterly physicals to date.

For the quarter, the underground and open pit operations successfully mined 1.95 million tonnes of ore which is above the nameplate of the newly expanded process plant. The Thunderbox process plant achieved a new record of 1.37 million tonnes milled for the quarter with a major planned shutdown and 58,000 ounces of gold sold. The throughput tonne per hour lifted to an average of 775 tonne per hour for the entire quarter, which is 25 tonne per hour above the nameplate.

The focus for the processing continues to be around availability and utilization along with stabilization in the plant. We are very pleased with the quarterly step change in throughput of this processing facility and the lift in gold sold.

I’ll now pass over to Ryan, our Chief Financial Officer, to discuss the financials.

Ryan Gurner

Yes. Thanks, Simon, and good morning all. As demonstrated in today’s quarterly results, the company remains in a robust financial position. Our balance sheet remains strong, as set out in Table 3 on Page 8 with cash and bullion of A$1.2 billion at 30 September, and we remain in a net cash position of A$285 million. Pleasingly, our assets collectively generated positive free cash flow with the group’s capital expenditure fully funded.

Figure 9 on Page 9 sets out the company’s cash movements for the quarter, with key elements being the company recording A$397 million of operational cash flow. And looking ahead to the remaining quarters of the financial year, this is forecast to rise with access to high-grade low strip material at Golden Pike North KCGM, planned high head grade and recoveries at Jundee continued throughput increases and recovery at Thunderbox with increasing grade plant and contribution from high-grade ore source of the Porphyry underground at CDO.

After deducting CapEx of A$299 million relating to plant and equipment and mine development, A$31 million in exploration and A$39 million in equipment finance and lease costs quarterly free cash flow generation was A$28 million.

Fully investment in sustaining capital, growth capital and exploration are tracking to plan. Growth capital includes development of Porphyry underground CDO and open pit development at Aurelia and KCGM. Growth capital includes A$80 million for the KCGM plant expansion and includes work performed and commitments in respect of the major equipment package enabling works and prepayment to the EPC contractor relating to the process plant works.

As announced with the FY23 financials, the company has extended its A$300 million share buyback program for a further 12 months to the 30th of September 2024. During the quarter, A$3.7 million Northern Star shares totaling A$41 million were bought back and canceled. And the company purchased the New Rose Gold project, which is an advanced exploration asset located 40 kilometers east of our Jundee operations. While operational free cash flow is expected to increase in Q2, please note, subsequent to the quarter end, the company paid its FY23 financial dividend, which Stuart mentioned, semi-annual coupon payment on the bonds and the FY24 annual group insurance premiums.

On other financial matters, depreciation and amortization are in line with expectations at the midpoint of the guidance range of approximately A$700 per ounce sold. And for the quarter, noncash inventory charges for the group are A$29 million. The majority of these noncash charges relate to the milling of acquired stockpiles at KCGM and are a component of EBITDA.

Lastly, in respect to hedging, Table 4, Page 9, sets out the company’s committed hedge position at 30 September with the overall hedge book being 1.68 million ounces at an average price of A$2,929 per ounce. During the quarter, the company placed 330,000 ounces at an average price above A$3,300. These were predominantly placed across FY26 and ’27 financial years.

I’ll now hand back to Mark Travis for the Q&A session. Thanks.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. The first question today comes from Mitch Ryan from Jefferies. Please go ahead.

Mitch Ryan

Good morning, Stuart and team. Thank you very much. First question was just sort of A$45 million of M&A expenses in your cash flow waterfall, the majority of that relates to the Millrose project. Is that the correct understanding?

Ryan Gurner

Yes. Mitch, Ryan here. Yes, that’s right, Mitch, yes.

Mitch Ryan

Okay. But there might be some very busy bankers and there might be something –. Okay. And just the second one. Did the unplanned impact of the question second on Jundee, did that fall over into the current quarter as well? Or was it all resolved by the end of the September quarter?

Simon Jessop

Yes. Thanks, Mitch, Simon. Yes, all resolved during the quarter. The frustrating thing there was just it happened in month 3 of the quarter. So early in September, just as we sort of got the high grade from Jundee from the sequence came through. So that’s just being pushed into Q2, which we’ve milling. So yes, all resolved during quarter 1.

Mitch Ryan

Thank you very much for taking my questions.

Operator

Thank you. [Operator Instructions] the next question comes from Daniel Morgan from Barrenjoey. Please go ahead.

Daniel Morgan

Hi, Stuart and team. So first question is just on the Super Pit. Can you confirm if I’ve read this correctly, basically, you’re going to do a big waste removal campaign in half 1, which is going to give you access to high-grade ore at Golden Park in half 2. Can I just clarify if that’s the case, and is access at Golden Pike more weighted to Q4 and is Q2 grade likely to be similar to Q1 that we’ve just witnessed. Thank you.

Simon Jessop

Yes. Thanks, Daniel, Simon. Yes, so during the quarter, we finished Golden Pike South, so that’s successfully finished that part of the pit, we’ve been mining over the last few years. And while we were doing that, we were continuing to mine the East wall remediation area, which is probably about 80% complete now. So during Q2, we’ll continue to mine through the East wall area and progressively get ourselves set up for Golden Pike North access in H2. So, in terms of grades, it’s probably similar to quarter 1, but we don’t have the mill shutdown events. So Q2 is always a bigger quarter for us in terms of throughput and run time.

Stuart Tonkin

Yes. But you identified it right that the way it’s moving in half, it’s a transitional quarter and it sort of moves once that second half in that Golden Pike, just Simon spoken, its 1.2 million ounces there. So since it about 1.8 grams, the strip ratio is below 2. That momentum in the second half of that Golden Pike North really lifts the profile. And then that continues for years. It’s not just a sort of honey pot, that’s all of the efforts to get the user remediated is to access that high-grade pit for from that slip from back in 2018, we’re right on the cusp of liberating that value.

Daniel Morgan

So on that East wall remediation, is it safe to say that you should be mostly done by the end of this fiscal year on cleaning that up. I know it’s been a huge campaign at the start.

Stuart Tonkin

Yes. So the work done to access the floor will be there continuing to clear off the benches above and do that remediation work for the long term. But the two parts of it. One is to just access safely on the pit floor, and that happens half 2, there will be some continuing costs associated with waste remove all because we’ve got to get the containment bond and a few of those benches cleared, and that will continue throughout the year.

Simon Jessop

Yes, financial year, Daniel will be finished on the East Wall remediation.

Daniel Morgan

That’s a huge catalyst, many years in the making. Just switching over to Pogo, the physicals looked really good, but the grade was a hard week. Can we expect that this might improve in the future quarters? Thank you.

Stuart Tonkin

Yes, it is a bit stings around about very similar Jundee. You end up with sort of quite a variance in grade, and it will — we expect it always returns to reserve grade through the plant. We still have some modest stope dilution there that we’re working on, but a lot of that was the backlog of cleaning out a lot of waste stockpiled underground and the development of ore. So although stapling was two-thirds of the feed. There was just vary grade that was held in the stockpiled underground through that planned shutdown. So there’s a bit of that catching up for that material. But yes, we don’t see that as — we said that as a very temporary position on that grade.

Daniel Morgan

And last question is a financial one. During the quarter, you recommenced your buyback. Can you just clarify what is the — what are the triggers for bringing back the buyback on or not? Thank you.

Ryan Gurner

Yes. Thanks, Dan. Obviously, the company, we were sort of just under 50% last financial year. So obviously, the Board made the decision to extend that. Just to remind everyone, we’ve got blackout. We follow our own blackout period. So we can’t look to buy back shares all the time. And look, we’re just looking to be opportunistic over the 12 months. We bought back another $41 million bucks this quarter. So we’re advancing on that. We’ve got lots of time left in the financial year to complete.

Stuart Tonkin

And it sort of has to stay live, Daniel, as you appreciate that our internal model and valuation modifies in gold price changes. So probably gold is at $3,075 an ounce. So it’s always continually reviewing where our best returns are for our capital employed. We’ve obviously got a lot of organic growth projects underway, but the commitment is that, that buyback is available to us for that extension of 12 months.

Daniel Morgan

Okay, thank you very much, Stuart and team.

Operator

Thank you. The next question comes from Matthew Frydman from MST Financial. Please go ahead.

Matthew Frydman

Sure, thanks. Good morning. A couple of questions from me, if I can. Firstly, maybe drilling down into the mining costs at KCGM. It looked like a pretty strong quarter if my rough numbers are right. In the open pit, you’re moving it at about $1.20 a tonne. So I guess now that you’ve tidied up some of those areas in Golden Pike South, and you’re getting stuck into more productive areas, is it fair to assume that that’s the kind of material movement cost that you’re sort of aiming for going forward or your budgeting at the operation?

Simon Jessop

Yes, Matt, look, I’d love it to be $1.20 a tonne. It’s pretty consistent around that $4.50 a tonne, just depending on where we’re mining. So we’ll get some shorter haulage over the next sort of period as we’re mining higher up in the pit. And then as we access Golden Pike North, we obviously will spend some more money in terms of hauling from the base of the pit. However, a strip ratio of less than 2 to 1 and the grade 1.8 to 2 grams, we’re always going to go to the base of the pit when it’s available. So that’s broadly where we sit. We did achieve 66,000 trucking hours again. So fairly consistent now in terms of peak material movement.

Matthew Frydman

Yes. Got it, thanks Simon. I was talking on a TMM basis, whereas I’m not sure that you might have been talking on a per tonne of all mine basis. But anyway, I can dig through those numbers a bit after the call to work out where we’re at. I just see the open pit mining cost on a dollar per ounce basis and turn that into turn that into dollar millions and it’s obviously quite a low number relative to where you’ve been tracking for the last few quarters. But I appreciate that additional detail. Thanks. You can go ahead.

Stuart Tonkin

[Multiple Speakers] verify the growth — the allocation of that growing capital, which is all that waste movement, and there’s potentially some rehandle on stockpile is quite cheap in that as well.

Ryan Gurner

Yes. So Matt, so obviously, we’ve Golden Pike South finishing, which would be in your operating cost, whereas Simon is talking more just generally as a material movement, a lot of it is waste. So that’s either relative to the cutback, which were being great. So yes, we’ll go through the split after the call if you want.

Matthew Frydman

Yes, that would be helpful. Thanks, Ryan. Maybe secondly, perhaps a somewhat similar question on Pogo, and obviously, can you give some color about how you’re upsizing the equipment there. And obviously, with the improvements in, I guess, mine development that you actually don’t need necessarily all of the equipment that’s down in the whole, do you have in mind a mining cost either in Aussie dollars a tonne or U.S. dollars a tonne that you’re sort of targeting for that operation going forward? I think at the moment, in Aussie dollars, you’re sort of running at about call it, $200 a tonne mining cost. Is that — again, what sort of quantum of improvement can we expect from those changes?

Stuart Tonkin

Yes. I won’t sort of say cost per tonne targets at the moment. I guess I’m still trying to get to the 1,000 all-in sustaining U.S. an ounce, not talking tonnes. And I know we’ve got years to get to there, given where we guided in 1,100 is probably the first checkpoint. That’s a real target. So during the visit, it was going through. And the only way we can achieve that with the current format is striking out line items of costs. And so things like the sixth jumbo, we see that it will complete its work and then the rest of the jumbos will take up that type of sporadic rehab work as part of its normal activity so we can still maintain about 1,500 meters a month and all the rehab with 5 jumbos. So it takes 1 good cost light on up.

The trucking’s are really interesting ones. We sort of run 10 trucks, and we believe we can get down to six trucks with a larger fleet, and we’ve got 1 that we’ve been trialing and I view that in as there and have placed orders to order six of those to replace the current fleet. And that’s across the labor, not the congestion underground, the productivity of the tonnage and the speed of grade and all those things that come through of taking 10 to 6 trucks to move the same material, a step change improvement.

And what we’ve done and how we can do that has gone through the mine and taken and stripped out and move services to enable that much larger truck to fit. And that’s been years in the making because you’re retrofitting a historically old mine and we’ve basically got that physical truck on-site driving up down at the moment to all the areas to prove that that’s capable of doing that.

And then a lot of the costs in Pogo are above ground. A lot of the G&A and reagents and energy costs and those things. So is that this — it’s every department. In Australia, typically, the mining cost from an underground perspective is your biggest gains. In Pogo, there’s a balance between underground and open the surface activity where that cost is significant and the dry stack tails and the float plant and all those things. So across every department, there’s a lot of work to identify doing more with less and getting the most out of the infrastructure that’s there.

Matthew Frydman

Sure. Got it. Thanks. Thanks, Stuart. And then maybe finally, a bit of a higher level on M&A. As of this week, you guys are now officially the biggest [indiscernible] gold miner. Clearly, we can see from the end of the quarterly that you’ve got a strong balance sheet, $1.2 billion in cash and bullion is a pretty enviable position. There’s certainly a lot of peers out there that aren’t nearly as well capitalized as you guys. So how do you think about the high-level strategy for M&A in that setting? Has that changed? And how do you think about, I guess, the scale of inorganic growth opportunities, what you’d like to target and what’s meaningful for the business going forward?

Stuart Tonkin

Yes. Look, I went to the Gulf of America, North American Gold Conference [indiscernible] in the quarter, and there’s a lot of chatter around what would happen post that tie-up with Newcrest and any assets would go. But we’re pretty clear on saying the ones we like in all of their portfolio are the ones that you might also like. So it’s unlikely they’ll becoming available. And then down the lower end of registers, I still expect to see plenty of activity in that regard.

But where we’re sitting in our space, I think the best value and the efforts for us are our organic projects that we’re — this is humpier. We’re in a five-year strategy. We’ve progressed our projects very well across all of those assets. We spoke about where we’re positioned at KCGM, which is the next kind of real key lift up enhanced profile that is the team’s focus and efforts presently and there’s still enormous value to get out of the current portfolio with our were about external stuff. So yes, you always look, but we’ll keep busy on what we already have.

Matthew Frydman

Okay, got it. Thanks, Stuart.

Operator

Thank you. The next question comes from Meredith Schwarz from Bank of America. Please go ahead.

Meredith Schwarz

Good morning, Stuart and team. A question for the Pogo’s for me please. There’s been a lot of that this morning. But can you talk through the grade optimization work that you’re doing and the production initiatives that are ongoing and what that entails for lifting the grades? And then secondly, with reserve grades at around 8.6 grams per tonne, do you think that’s a level — a grade level that you can achieve in time. How do you look at the grade profiling for Pogo looking forward? Thank you.

Stuart Tonkin

Thanks, Meredith. So if you go back a number of quarters, we were, well, we’re incurring two things. One, sort of the lowest at tonnes overall. So there was development led and the development ore is a lower grade, which is opening up those new mining areas. So the ratio of development order to stoping ore, but also we were incurring some stope dilution, which we’ve modified our mining design. So there’s two key elements we’ve done to change that, bring in the drill and blast designs and shorten the length of the stopes to create less technical issues.

We’ve also put most of the ore drives the placement of those on a survey control so that the dilution, the vein is in the correct positioning in the face for the stopes benefit, not for the development phase, which means you might get worse development grade, but you get better stope grade. So that’s been a structural change, and it takes 6 to 12 months to work that through the whole mine design.

So there are things initiated by the site, and they’re underway and they’re working. And so we absolutely accept and believe we’ll migrate back to reserve grade. Remembering the insider resource grade is above 10 grams per tonne. Mining dilution factors taken down the reserve grade sort of in half. So yes, maintaining above 8 grams as an average mill feed will get us to that ounce profile.

We’ve also run the mill above 1.3 million tonne nameplate so that — during the quarter, it run at 1.45 and that’s a leveler for any sort of reduction in grade. So yes, lots of busy things happening at Pogo. Apologies, we can’t just take quarterly stats and drag right, it’s still moving, but we know which parts we’re working on.

Meredith Schwarz

Yes. Thanks for that. Because I know that it is quite a variable grade deposit. And so [technical difficulty] any mining dilution. So that 8.6% or the mid-8 gram per tonne is achievable as a mill rate. So that’s great. Looking at KCGM, I’ve noticed over the last few quarters, the recovery rates has been trending lower. Is that simply a function of lower grade? Do you see those recovery rates lifting back up to the 83%, 84% moving forward as you see lifting grade? Can you talk through the recoveries, please?

Simon Jessop

Yes. Thanks, Meredith. This is Simon. Yes, the grade in the last quarter was a couple of percent lower. That was really driven by — we had some filter maintenance issues at the back of the plant. So what that meant was, instead of sending treating majority of the concentrate up at GiGi, we actually used the Fimiston Ultrafine Grind facility at Fimiston and what that means is you get a reduced residence time through the plant. So that was a one-off in terms of — we had to do that just to try and get through the concentrate stocks. That’s all rectified now, and we’re back to along much longer residence time up at GiGi. That was the key driver, a little bit of float maintenance issues in the quarter, but we’ll absolutely go back to 83%, 84%.

Meredith Schwarz

Perfect. Thanks, Simon. Thanks for the answers.

Operator

Thank you. The next question comes from Al Harvey from JPMorgan. Please go ahead.

Al Harvey

Yes, good morning, Stuart and team. Just back to M&A briefly. So I guess Millrose was a bit of a bolt-on acquisition. Do note that you’ve still got the Cisco bond on the balance sheet. And I guess that was initially thought of something as a stepping stone to something a bit more substantive prior to the DD you did. Just want to get a sense of how that’s on sitting in the strategy in the medium to long term plans are there and just that kind of trade-off between smaller bolt-ons and something more substantive?

Stuart Tonkin

Yes. Thanks, Al. So yes, the debenture was a convertible note for in the purpose of almost a deposit to enable exclusivity and three months of DD with the opportunity converting to direct interest in the JV on that quality deposit. So we obviously didn’t get there in any agreement. And since then, it’s been dealt. So — but the debentures remains with coupon being paid, and I think it’s got another two years to run through, depending on what Cisco chose to do.

So no issue from our sense in where that’s at, it’s giving us a coupon, where net cash anyway. So we’re servicing all of the growth and the dividends and the buybacks from cash flows. So it’s not that it’s putting a hole in our pocket. We don’t like seeing lazy cash sitting around though, but I think I recall sort of CAD 154 million or something of that. So it’s meaningful, but it was more how it got there in the first place. We didn’t utilize it in the form to set it out to be. So it will eventually return to us.

Al Harvey

Sure, thanks, Stuart. And just quickly on Millrose, I guess, 350,000-ounce resource 1.8 grams per tonne, a bit lower than Jundee reserve grade and the 30,000 haul. Is there anything there that we should be thinking about in terms of upside beyond, I guess, or is it just purely for the ounces and life extension. And maybe if you could touch on when you think it could potentially feed into the mine plan.

Stuart Tonkin

Yes. So our exploration budget generally. I mean cost of growth is $150 million. But when you see things like that, the team did a Millrose 1, we did know that they’d advanced that resource well, and we’re exploring and developing that to be something and then natural fit is that it can come through our plant. So we saw a pretty neat transaction that met their shareholder needs and ours. It’s oxide, right? So it will come through fairly well quickly, free cheaply through the plant on top of current billing rates. So it doesn’t necessarily displace hard rock feed. It can come through that plant. But we’ve still got a fair bit of runway to sequence that into the mine plan. And again, drill it and see if we can grow it to get a bit of that supplementary satellite feed. But yes, I wouldn’t be counted in ’24 or maybe ’25. There might be some capital associated with haul roads and those sorts of things in ’25.

Al Harvey

Yes, sure it makes sense. Thanks, Stuart.

Operator

Thank you. [Operator Instructions]. The next question comes from Hugo Nicolaci from Goldman Sachs. Please go ahead.

Hugo Nicolaci

Good morning, Stuart and team. Thanks for the update this morning. Maybe just another one on Pogo. Obviously, a pretty good result in the quarter given the shutdown you highlighted some early success in cost reductions. I was just wondering if you could talk through what those were to date and what other opportunities you might have there to get the costs down at Pogo. And then I’ll come back with the second. Thanks.

Stuart Tonkin

Yes. So I mean, there’s many, I guess, the main structural ones are still to come in regard to sort of removal of fleet. But what we’ve seen in productivities across all of our fleet, and this is delivered by the U.S. team. So we’ve reduced our — if I kind of think about over the period, we started with about 80-plus expatriates across the team. We’re down to about 40 and therefore, the U.S. team are delivering those physicals out of the operation. So we’ve been able to remove some of those training levels of skills and duplication of costs in that regard, as the U.S. team are meeting and exceeding productivity rates. So that’s one element.

The other one is fewer machines and to do the same work or do more work, and that’s across everything. So even our diamond driller, they’re increasing meters per shift. The jumbo is increasing their meters per month and maintaining at those levels without training. All of the haulage fleet, liters and trucks have been performing at max sales and productivity. And then we can make structural changes in large trucks, fewer trucks. So that’s a lot of the underground activity producing dilution.

So we’re not moving waste are moving more ore. And they’ve also created more real estate outside of the portal when some of the waste has come out to create hardstand outside front of the workshop in the valley, which means a lot of the inventory has been moved up closer to their portals. So there’s less time training equipment around the region.

So there’s just so many things that are now done that set us up for the future, that will work underway in the last few years and some of this has to be done seasonally. We just see that benefit starting to flow through. Then there’s all the processing stabilization, and there’s still a lot of work to do there.

We see massive opportunities. It’s just around timing, capital associated with the disruption of production activity. The whole plant doesn’t even have a primary crusher. It all goes through a grizzly. We created our underground ore bins that help the flow of material and give a search capacity to keep sustainable fees.

All of these things are just adding to the benefit on the same. I can talk for hours on it, but it’s been what’s required. We’re setting this up for multi-decades. And that’s been the view to get the all-in sustaining cost ultimately down to that USD 1,000 all-in sustaining cost, and we’re setting up above $1,400 an ounce at the moment. So some of it’s out denominator. Some of it is true cost ripped out of the cost structure.

Hugo Nicolaci

Great. Thanks for that. That sounds like pretty successful so far and still a lot of optionality there. Second one, just really more clarification on Jundee. Apologies if you already mentioned it, but just how long was the crushing circuit out? And when did that one come back on?

Simon Jessop

Yes. Thanks, Hugo, Simon. It was out for 12 days in total on the crushing circuit that was sort of early September. So really, in the last week of September, we got the crushing going again. We obviously drawn down our crush stocks, but we’re in great shape at the moment. 60,000 tonnes crush stocks and have all that’s rectified on the crushing circuit.

Hugo Nicolaci

Great. Thanks for that Simon, I’ll pass it on.

Operator

Thank you. The next question comes from Alex Papaioanou from Citi. Please go ahead.

Alexander Papaioanou

Hi, Stuart and team. Just one from me. At KCGM, can you remind me what is needed to lift Mount Charlotte to the 2.5 million ton run rate? And is the target still to get to get to that 2.5% run rate this FY?

Simon Jessop

Yes. Thanks, Alex. It’s really incrementally just opening up more stoping areas. So as that development you see in the quarter, we’ve gone from sort of 2.1 kilometers of development in the previous quarter to 3.2 kilometers in the existing quarter we’ve just had. So the more development we get in, the more stoping areas we are bringing online and that really gives our underground team more opportunities to keep increasing the tonnes. So it will steadily increase as we really open up more mining areas, and it’s the leading pieces, the development activities required. So it will just steadily keep seeing that KCGM underground ramp up to 2.5 million tonnes. We’ll absolutely very confident we’ll get the 2.5 million tonnes this year step change over the course of the year.

Alexander Papaioanou

Great, thanks. That’s it for me.

Operator

Thank you. At this time, we’re showing no further questions. I’ll hand the conference back to Stuart for closing remarks.

Stuart Tonkin

Okay. Thanks for joining us all on the call today. I look forward to updating you as we continue to advance a profitable organic growth strategy. Have a great day.