Operational Hiccups Push Northern Star’s FY26 Costs Higher, Production Lower

Quarterly Performance and Operational Challenges

Northern Star Resources (ASX, NST) has reported a challenging December 2025 quarter, with gold sales totalling 348,061 ounces at an all-in sustaining cost (AISC) of A$2,937 per ounce. The quarter was marked by a series of one-off operational disruptions across its key production centres, including a primary crusher failure at the Kalgoorlie Consolidated Gold Mines (KCGM) operation, extended recovery works at Jundee, and unplanned mill downtime at Thunderbox.

These issues led to softer gold sales and prompted the company to revise its FY26 production guidance downward to 1.6-1.7 million ounces, from the previous range of 1.7-1.85 million ounces. Correspondingly, the AISC guidance was increased to A$2,600-2,800 per ounce, reflecting lower throughput and higher royalties driven by elevated gold prices.

Capital Investment and Growth Projects

Despite the operational setbacks, Northern Star continues to invest heavily in its growth pipeline. The KCGM Mill Expansion Project, a cornerstone initiative aimed at doubling processing capacity to 27 million tonnes per annum, remains on schedule for commissioning in early FY27. Capital expenditure for this project in FY26 has been increased to A$640-660 million, up from earlier estimates, to address labour and productivity challenges and ensure timely completion.

Operational readiness capital at KCGM has also risen to A$370-390 million, reflecting accelerated work on tailings dam facilities and infrastructure upgrades. Meanwhile, growth capital expenditure at Yandal has increased to A$340-360 million, supporting underground development and processing enhancements, while Pogo’s growth capital has been moderated.

The Hemi Development Project continues to progress with increased engineering and design spend, alongside ongoing regulatory and community engagement in the Pilbara region. Exploration expenditure remains steady at around A$225 million for FY26, focusing on life-of-mine extensions and organic growth opportunities.

Financial Position and Hedge Book

Financially, Northern Star maintains a robust balance sheet with net cash of A$293 million and combined cash and bullion holdings of A$1.176 billion at quarter-end. The company generated an underlying free cash flow deficit of A$328 million during the quarter, impacted by significant corporate tax instalments and capital investments.

Northern Star continues to unwind its hedge book, delivering 158,000 ounces during the quarter at an average price of A$3,132 per ounce. The hedge commitments now stand at approximately 1.12 million ounces at an average price of A$3,333 per ounce, with no new hedge positions added in recent quarters, reflecting confidence in the current gold price environment.

Safety and Corporate Developments

Safety remains a core focus, with the Serious Lost Time Injury Frequency Rate (SLTIFR) holding steady at 0.6 injuries per million hours worked, underscoring Northern Star’s commitment to workforce wellbeing.

On the corporate front, Northern Star has formed a joint venture with Zenith Energy to develop a 140MW thermal power station at Kalgoorlie and signed a 25-year renewable power purchase agreement, signalling a strategic push towards sustainable energy integration.

Looking ahead, Managing Director Stuart Tonkin emphasised the company’s focus on productivity improvements and cost discipline, while expressing optimism about the structural benefits from its growth projects and the potential for increased free cash flow as production ramps up and the hedge book unwinds.