Northern Star Resources approves $1.5 billion for KCGM gold mill expansion

A positive feasibility study has convinced the board of Northern Star Resources (ASX: NST) to give the green light to proceed with a $1.5 billion expansion of the KCGM gold mill in Kalgoorlie, Western Australia.

Robust financial and production upgrade outcomes identified in various studies supported the company’s decision to increase and modernise KCGM’s (Kalgoorlie Consolidated Gold Mines) processing capacity from 13 million tonnes per annum (Mtpa) to 27Mtpa.

The positive Final Investment Decision by the Northern Star board will see a quick move to a three-year construction phase at KCGM, with a number of long-lead items already ordered.

Future production and expansion plans

Managing director, Stuart Tonkin, said Northern Star plans to ramp-up production at the mill from financial year 2027 towards a steady-state level of 27 Mtpa by financial year 2029.

“Today is an exciting day for Northern Star and a historic new chapter for this world-class asset,” Mr Tonkin added.

“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.”

Mr Tonkin said the company’s confidence in the economics of KCGM have confirmed a long-life, low-cost gold mine with the potential 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 hundreds of local jobs, economic and social investment, and local procurement opportunities in the Goldfields region.”

The KCGM mill expansion and optimisation feasibility study identified a post-tax internal rate of return (IRR) of 19% and a 4.6 year pay back on an estimated gold price of A$2,600 per ounce.

Innovation and efficiency gains

The new plant will have a high level of process automation, control and condition monitoring, leading to increased plant throughput.

It will also provide an increase in gold production capacity with improved gold recovery rates.

Northern Star has also identified benefits such as a reduction in fixed operating cost per tonne of ore processed and a 50% reduction in potable water use per tonne of ore processed.

The development will be fully funded from cash on hand and forecast cash flow.

Background of KCGM

The KCGM operation is one of the world’s largest and most significant gold mines with a mineral resource of 28.3 million ounces and an ore reserve of 12.2 million ounces.

Northern Star acquired 50% of KCGM in January 2020 and took 100% control of the asset in February 2021 as a result of its merger with Saracen Minerals.

The KCGM Operations include the Fimiston Open Pit (Super Pit), Mt Charlotte Underground Mine and the Fimiston and Gidji Processing Plants.

In 2019 KCGM celebrated its 30th anniversary and poured its 50,000th bar of gold, bringing the total produced from the Golden Mile to more than 60 million ounces in the 120 years since the lease was first pegged.

The Fimiston processing plant treats more than 13 million tonnes of ore from Fimiston and Mt Charlotte.

The plant was commissioned in 1989 and has since undergone two expansions to become one of the largest milling complexes in Australia.