Operational Disruptions at Jundee and South Kalgoorlie Temper Northern Star’s Q1 Momentum
Northern Star Resources reported steady gold production and disciplined costs in Q1 FY26, with the KCGM Mill Expansion project progressing on schedule for early FY27 commissioning. Despite minor operational disruptions, the company maintains its full-year guidance and a robust financial position.
- Gold sales of 381koz at A$2,522/oz AISC in September quarter
- KCGM Mill Expansion on track for early FY27 commissioning
- FY26 production guidance of 1.7-1.85Moz gold sold at AISC of A$2,300-2,700/oz
- Operational disruptions at Jundee and South Kalgoorlie expected to impact 2Q sales by up to 20koz
- Strong balance sheet with net cash of A$616 million and ongoing hedge unwind
Quarterly Performance Overview
Northern Star Resources Ltd (ASX, NST) delivered a solid operational and financial performance in the September 2025 quarter, selling 381,055 ounces of gold at an all-in sustaining cost (AISC) of A$2,522 per ounce. The company’s disciplined cost management helped offset inflationary pressures and ongoing capital investments, resulting in a group underlying free cash flow of A$14 million and net mine cash flow of A$183 million.
The Kalgoorlie Production Centre led the portfolio with 203koz sold at an AISC of A$2,474/oz, supported by strong underground mining rates at KCGM and record milling throughput at Thunderbox. Meanwhile, Pogo and Yandal production centres contributed 65koz and 113koz respectively, though both faced some grade and operational challenges.
KCGM Mill Expansion Progress
The KCGM Mill Expansion project remains a key growth driver, advancing steadily through its final build phase with commissioning targeted for early FY27. The project will nearly double processing capacity from 13Mtpa to 27Mtpa, positioning KCGM to produce approximately 900koz annually at steady state by FY29. Recent environmental approvals for the Fimiston South Project and associated infrastructure further underpin the expansion’s long-term value and cost efficiency.
During the quarter, structural and mechanical installations progressed significantly, with 75% of structural steel erected and electrical and piping works underway. Capital expenditure for the project in FY26 is forecast between A$530-550 million, consistent with prior guidance.
Operational Challenges and Outlook
Early in the December quarter, Northern Star encountered operational disruptions at Jundee and South Kalgoorlie, including a wall slip and a crushing circuit failure. These events are expected to reduce 2Q gold sales by up to 20koz, with affected ore volumes scheduled for processing later in the year. Despite these setbacks, the company anticipates stronger grades and improved volumes in the second half of FY26.
FY26 guidance remains unchanged, with gold sales forecast between 1.7 and 1.85 million ounces and AISC expected in the range of A$2,300 to A$2,700 per ounce. The company also plans significant growth capital expenditure of A$2.125 to 2.27 billion, including investments in the KCGM Mill Expansion, operational readiness, and the Hemi Development Project. Exploration spend is budgeted at approximately A$225 million, focusing on life-of-mine extensions and in-mine growth.
Financial Strength and Hedge Position
Northern Star’s balance sheet remains robust, with net cash of A$616 million and cash and bullion holdings totaling A$1.511 billion after dividend payments and tax instalments. The company continues to unwind its hedge book, with no new hedge commitments added over the past year. As of 30 September, hedge commitments stood at 1.275 million ounces at an average price of A$3,309 per ounce, providing some downside protection while allowing greater exposure to rising gold prices.
Managing Director Stuart Tonkin highlighted the company’s focus on capital discipline and operational efficiency, emphasizing Northern Star’s alignment with delivering superior shareholder returns through sustainable, high-margin gold production.
Bottom Line?
Northern Star’s disciplined execution and growth investments set the stage for a pivotal FY27, but operational hiccups and capital intensity warrant close market attention.
Questions in the middle?
- How will the KCGM Mill Expansion impact Northern Star’s cost curve and production profile beyond FY27?
- What is the timeline and risk profile for resolving operational disruptions at Jundee and South Kalgoorlie?
- How will ongoing hedge unwind influence Northern Star’s exposure to gold price volatility in FY26 and beyond?