Northern Star Resources (ASX:NST) has announced official board approval for the development of the $1.5 billion KCGM Mill Expansion Project in Western Australia.
The project is set to increase and modernise KCGM’s processing capacity for the Fimiston Processing Plant from 13 million tonnes per annum (Mtpa) to 27Mtpa.
Northern Star says it is continuing to advance key components of its ‘low-risk’, 5-year profitable growth pathway, with the 3-year construction phase of the KCGM Mill Expansion Project already underway and long-lead items ordered.
The KCGM revamp is aimed to deliver a simplified Fimiston Processing Plant flowsheet with increased ore processing capacity. Northern Star says that the Gidji Processing Plant will be decommissioned.
Northern Star reports that the total mill expansion capital of $1.5 billion is fully funded by cash on hand and forecast cashflow. The company adds its balance sheet is forecast to remain ‘strong’, with all current banking covenants and company financial targets to be comfortably met over the 3-year build phase.
The company expects its revenue and free cash flow to materially increase from FY27 as the ramp-up begins to reach 27Mtpa in FY29. The forecast cash earnings, earnings before interest, tax, depreciation, and amortisation (EBITDA), and net profit are all expected to increase and group all-in sustaining costs (AISC) decrease upon the project’s completion and ramp-up from FY27. The gearing ratio is forecast to remain below 0.
However, Northern Star predicts an accelerated capital spend with an increase in sustaining capital during FY25 and FY26 for an additional tailings facility to allow increased deposition rates and open pit and underground mining growth capex during FY25 and FY26.
Commenting on the board approval, Northern Star Resources Managing Director Stuart Tonkin says: “The board’s decision to approve the KCGM mill expansion and optimisation represents the next stage to revitalise our largest asset, as well as the surrounding district, for decades to come.
“This project is financially compelling and a significant enabling step towards delivering our strategy to generate superior returns for our shareholders”
This project is financially compelling and a significant enabling step towards delivering our strategy to generate superior returns for our shareholders. Our confidence in the economics of KCGM to remain a long-life, low-cost gold mine has been further reinforced through the feasibility study phase.
Expanding the processing capacity of KCGM will strengthen Northern Star’s portfolio, materially increase our free cash flow generation and progress our long-term strategy to be within the 2nd quartile of the global cost curve.
Further, the project is important in our sustainability journey and will also sustain 100s of local jobs, economic and social investment, and local procurement opportunities in the Goldfields region.”
In January 2020, Northern Star acquired 50% of the KCGM project and assumed 100% control due to a merger with Saracen Mineral Holdings carried out on 12 February 2021.
Northern Star is an ASX-listed global gold mining giant. The company’s KCGM Project is located in Kalgoorlie, Western Australia, and is 1 of the world’s ‘largest’ and ‘most significant’ gold mines, with a mineral resource of 28.3 million ounces (Moz) and an ore reserve of 12.2Moz.
Write to Aaliyah Rogan at Mining.com.au
Images: Northern Star Resources Ltd