Earnings Transcript for NST.AX - Q4 Fiscal Year 2024

Stuart Tonkin: Good morning, and thanks for joining us for our FY '24 financial results presentation. With me today is Chief Financial Officer, Ryan Gurner. We will refer to slides on the results presentation released on the ASX this morning. Starting now on Slide 3. Now there are many records that we have delivered throughout the last year, but 1 record we can't claim credit for is the record gold pricing. And in recent days passing through USD 2,500 an ounce. This is unprecedented territory. What is relevant for Northern Star investors is the opportunity against this record pricing backdrop to the significant leverage to the gold price that Northern Star offers; from simplicity of our gold-only portfolio with globally significant scale in the low-risk jurisdictions of Western Australia and Alaska, whilst also offering a strategic advantage of organic profitable growth as our diligent investments deliver returns today and into the future. We are pleased to present to you today on the records that are in our control, as a result of our deliberate strategy to deliver on our purpose to generate superior returns for our shareholders. And with that context, I'd now like to hand to Ryan to go through the highlights.

Ryan Gurner: Thanks, Stu, and good morning all. I'm pleased to present to you our financial results for the year ended 30 June '24. Firstly, to Page 4, which provides an overview of the key financial highlights achieved during the year. The underlying EBITDA of AUD 2.2 billion, resulting in record cash earnings of AUD 1.8 billion. After our investment in growth capital, which is advancing our profitable organic strategy. The business generated AUD 462 million in underlying free cash flow. With that strength in our cash generation, a final unfranked dividend of AUD 0.25 per share has been declared, which is up 61% from the final FY '23 dividend. During the year, the company bought back AUD 45 million of its shares through its on-market share buyback program. And I'm pleased to announce today the company is extending its AUD 300 million share buyback program for a further 12 months. As illustrated on Page 5, we remain well positioned to deliver on our profitable growth strategy with our strong balance sheet, which is in a net cash position of AUD 358 million at June. We have access to flexible long-term funding options with 3 investment-grade credit ratings, which is reflective of the strength of our business and the positive long-term outlook underpinned by the company's significant reserve back production profile. Our balance sheet strength supports our strategy and gives us flexibility through the cycle to fund opportunities that may arise to enhance our portfolio of assets to deliver long-term returns to shareholders. Turning to Page 6. I'm proud of our team for delivering our FY '24 production and revised cost guidance in a year that has seen challenges. Gold sold was 1.62 million ounces and an all-in sustaining cost of AUD 1,853 per ounce. We are 3 years into our 5-year profitable growth strategy with another great year of progress across all of our 3 production centers. Over to Page 7 now. This slide highlights the significant cash generated by the business during the year. The waterfall chart illustrates the contribution from each production center to the group's cash earnings for the year. Cash earnings for each production center is represented by the EBITDA generated minus the sustaining capital spent at that center. Corporate technical and exploration related costs of AUD 127 million are deducted as is the net interest cost and taxes paid of AUD 68 million. The AUD 1.8 billion of residual capital, which is cash earnings, is available to deploy for capital management, growth-related investments, which meet our hurdle rates and balance sheet management. Pleasingly, all production centers contributed well with Kalgoorlie, our largest center comprising 64% of the group's cash earnings for the year. I'd like to point out a reconciliation of statutory NPAT to underlying EBITDA and cash earnings has been provided in the appendix of this presentation on Page 21. And Page 20 outlines the abnormal items to reconcile from statutory profit to underlying NPAT. And there is also a reconciliation of all-in sustaining cost to cost of sales on Page 23. Over to Page 8 now. We are pleased to have doubled our return on capital employed year-on-year to 8.6%, which reflects progress in our profitable growth strategy and our focus on allocating shareholder funds to generate returns. This also highlights the strength of our FY '24 underlying earnings before interest and tax, which is up 122% from the prior year to AUD 1.1 billion. Note, the company's return on capital employed did get impacted at the time of the merger due to the recognition of acquired assets at fair value as required under accounting standards. Now to Page 9, which highlight EBITDA margins achieved for the group and each production center over the year. All 3 production centers performed strongly and achieved healthy EBITDA margins. Pleasingly, and as illustrated, contributions from all production centers improved significantly in the second half of the year. Notably, Pogo's second half performance, lifting its EBITDA margin from 33% to 48%, was achieved from higher physicals and productivity with grade optimization, stope ore contribution, a key focus area. Over to Page 10 now. The company is now 3 years into its 5-year organic profitable growth strategy. Over this time, we've delivered major milestones, which are key in achieving our plans including during the year access to Golden Pike North KCGM, which unlocks the significant high-grade long-term ore source, which is a key pillar that will provide increased free cash flow from the operation in the future. Thunderbox mill delivering 6 million tonne nameplate during Q4. Pogo's record performance also during Q4, where it achieved 91,000 ounces sold and generated AUD 141 million of net mine cash flow in that quarter and, of course, solid progress at the KCGM mill expansion project. Over the 3 financial years from FY '22 to FY '24, which includes the progress we've made on our strategy and the capital investment undertaken, the operations have generated AUD 1.7 billion in cumulative free cash flow. As illustrated on Page 11, the company continues its demonstrated history of returning funds to shareholders. A final dividend of AUD 0.25 per share declared today takes our total declared dividends of AUD 0.40 per share for the full year. This equates to a payout of 25% of full year cash earnings. Including the FY '24 final dividend, the company has returned AUD 1.8 billion in dividends to shareholders and bought back AUD 172 million of its shares totaling AUD 2 billion in returns over the history of the business, and we believe there is much more to come. Page 12 sets out the key elements of how we deliver value and manage our capital allocation. which is through owning world-class assets in Tier 1 locations and applying our DNA of operational excellence to deliver value to our stakeholders. We do this in a safe and responsible way with a demonstrated track record. Our portfolio of long-life assets in their locations provides us with flexibility and optionality to extract value and deploy capital prudently to where the best returns can be generated. And as a foundation, we maintain a strong balance sheet, which enables the execution of our strategic framework through the cycle. I will now hand back to Stuart to finish the presentation.

Stuart Tonkin: Thanks, Ryan. Turning to Slide 13. Northern Star has completed the first year of a 3-year build for the KCGM mill expansion project, which will see the plant throughput increased to 27 million tonnes per annum and average 900,000 ounces of gold sold from FY '29. This will position KCGM as a top 5 global gold mine. The project remains on time and within budget. As provided in the KCGM site visit presentation on 4th of August, I'd like to draw your attention to the CapEx guidance provided for FY '25, '26 and '27, and the total CapEx of AUD 1.5 billion remains unchanged and includes 10% contingency. Slide 14, KCGM expansion progress activity was witnessed firsthand by many analysts and investors during the site visit this month. And I'm pleased to say that all critical path enabling works are completed. Major civil foundation works are underway, as can be seen in these pictures, and we expect major equipment to arrive during this financial year. Slide 15 reiterates our FY '25 operational guidance. Please note that the first quarter will be our softest quarter for the year with planned major shuts across all of our sites' processing plants. Pogo has completed its major works and is expected to deliver around 50,000 ounces for the September quarter. For the year, our production is forecast to be second half weighted, driven by increasing grades at KCGM and increased milling throughput at TBO and Pogo. Slide 16. FY '25 growth capital and exploration guidance is set out in the table. And we have provided additional financial guidance for D&A per ounce and the group's estimated effective tax rate for FY '25. As previously flagged, the company is not expected to pay tax for the Australian operations until the second half of FY '25. And therefore, this is seen -- this will see any anticipated potential dividends to be unfranked for at least the next 6 months. On Slide 17, Northern Star's exploration program remains a highly attractive approach to value creation to support our purpose to deliver superior shareholder returns. And for the year ending March '24, our cost of resource addition is a compelling AUD 31 an ounce. And we are in the enviable position where we have nearly 21 million ounces of ore reserves, 61 million ounces of mineral resources, which corresponds to a minimum 10-year reserve back to production profile. On Slide 18, thanks to our team's continuing focus on safety. We maintain an industry-leading safety performance, and we are proud to have today released our annual reporting suite of publications, which can be found on our website. And I encourage you to access these to further understand the significant value a company delivers to employees and community stakeholders throughout business activities. And now I'd now like to pass to the moderator for questions. Thank you.

Operator: [Operator Instructions] Your first question comes from Kate McCutcheon from Citi.

Kate McCutcheon: Stu and Ryan, congrats on the results. Extending with buyback, as you say, the average price we purchased that has been AUD 8.85 per share. Do we think about that extension as extending the optionality rather than something that we should count on just given where the share price is and everything else that's going on?

Stuart Tonkin: We're just highlighting that historic price is probably not relevant to where we're sitting right now. I think what is relevant to our capital management, what we're doing with CapEx into our projects, you can see we're dividend paying. We've got a pretty clear policy on 20% to 30% of cash earnings. We know where we're growing with production. I think the benefit really is where gold price sits, and there's opportunity there with surplus cash to utilize in this way. So I think that's just prudent while we extended the period because we still had some remaining allocation, I guess, for that AUD 300 million. And that's probably the way to look at it. We've got other things we can see where cash proceeds may be returned to us early. So there's opportunities there to utilize that.

Kate McCutcheon: Okay. That makes sense. And guidance to this year, I know we got it at the quarter, but the Kalgoorlie that AUD 600 million or AUD 550 million, AUD 600 million being spent outside the mill expansion. How do I think about that split for KCGM? Because I think I have to go back some time to find a spilt of how much is being spent on stripping versus the underground. Is there sort of any color you can give around this year?

Stuart Tonkin: Yes. I think it should be in the site visit presentation in August, and on -- it's off the June -- it's probably kept 30% underground. I mean you've got probably another 40% of the open pit. And then the infrastructure around that obviously builds up to the full 100%. So that's probably the way I think about it. But there's details in the quarterly on it.

Kate McCutcheon: Okay. That is helpful. I will go back. And then finally, the D&A steps up this year from AUD 700-ish to about AUD 775 million to AUD 785 million. What is the driver for that? Or if we were to look at last year's rates versus this year, what are the key sites to go back and have a look at, I guess?

Ryan Gurner: It depends on – they’re all obviously advertising at different rates. Depends on – it depends on the mix of production. Obviously, we’re increasing ounces as well. And then obviously, we put capital to work into our balance sheet, if you like, too, so that’s unwinding. So it’s just a reflection of those 3 things

Operator: Your next question comes from Mitch Ryan from Jefferies.

Mitch Ryan: Stu and Ryan, just in your comments there, you said that there's some potential capital coming back earlier. I assume you're referring to your convertible funding agreement with Osisko. Just understanding that you can elect at normal size election, once there's been a change of control. You can either go into common shares or a stake in the asset of Windfall. Are we read into that, that you would prefer to elect to go into shares versus the project stake? Or how are you thinking about that convertible at this point in time?

Stuart Tonkin: Yes. So that is the value that I was considering on the normal course of the debenture, it would have been December '25. So we just expect with what's transpired that, that would likely come back earlier and be made whole. So there's options there. But ultimately, I guess, we explained what our interest was in that in the early days and why we were there. At the moment, we just see an opportunity that, that will be returned to us early.

Mitch Ryan: Okay. Perfect. And my second question, there was AUD 65 million spent on impairment and acquisitions during the year. Just can you provide some detail around where that spend is being corrected, i.e., is it a greenfield territory for Northern Star? Or is it for potential satellite deposits around existing infrastructure?

Ryan Gurner: No, it was the tenants we brought around Jundee from Strickland, Mitch, which we, I think we settled early Q1 this year. That’s the main purchase this year.

Operator: Your next question comes from Al Harvey from JPMorgan.

Al Harvey: Just another one on the buyback, I guess -- just want to get a sense, I guess, given it's been used fairly sparingly the last 12 months outside the start of FY '24 and a few days in late June, just, yes, trying to get a bit more color on how you're thinking about deploying it. Is there some kind of valuation function you looked at? And I suppose just to add to that, I mean, with your deals still being unfranked for at least the next 6 months, how does that change the way you're thinking about capital returns?

Stuart Tonkin: Yes. Good question, AL. Look, all our things are relevant. So absolutely on a valuation basis, but more on our returns of that applied capital basis. So you see the options we have, the organic options, the capital leading up to that to the middle of the year when we were allocating capital for FY ‘25 and valuing the returns on those. These are all just a suite of assets – suite of tools that you can utilize for shareholder returns. So dividend is pretty clear and affected by growth capital because it’s cash earnings, it doesn’t – isn’t affected by that. And then we look at, obviously, modest gold prices on our forecast. We enjoy higher gold prices. We get some surplus cash. We can utilize that through instruments like the buyback. So all those things come into play. It’s not a set and forget, but it will remind us that it’s the ability to turn it on and off. There’s blackouts as we’re reporting and just normal course of business. So it’s there [indiscernible]. I think we’ve been – got some great value in utilizing it today, and it was important that we extended it. So it exists and we’re able to utilize it.

Operator: Your next question comes from Hugo Nicolaci from Goldman Sachs.

Hugo Nicolaci: Stuart, Ryan and team. Thanks for the update this morning. First one, it's a 2 parter on capital management. Just, obviously, the current gold pricing environment, business looks pretty well positioned to fund the capital spend pipeline you've outlined as well as still moving increasingly into net cash and growing that liquidity position. So, obviously, a few questions already on the buyback. And first part of the question, how do you think about growing capital returns over the medium term versus keeping capital for other opportunities? And second part of the question, do you still see room for additional assets in the portfolio? And I'll come back.

Stuart Tonkin: Yes so -- yes, go, Ryan.

Ryan Gurner: I was going to say that -- I mean, the capital return piece. I mean, I guess, it's all the effort and work -- as I said in the talk, we're 3 years in. All the effort is around growing earnings, growing returns. And we think because of the option we have organically, we think that's the best thing to do. And that's what we're doing. So if you talk about how we're growing returns, those things I spoke about around access to GP North, getting Thunderbox consistently at that 6 million tonne, optimizing Pogo, those are the things that we see as providing those capital returns. And then, of course, on top of all that is the mill expansion. So that's how we're doing it. And then, I don't know, Stu, if you want to talk to the fourth, fifth.

Stuart Tonkin: Yes. So I think we're showing where we are as a mature business, particularly given the net cash. The growth we've set out over 5 years takes 5 years. That's what following the strategy is. We've got that 2 million-ounce target. We've also got Fimiston expansion that comes in on the back of that, and you've seen the sort of allocated capital. The returns that we can get from that double-digit IRRs is really compelling, and we're committed to doing those things. The dividend on cash earnings with AUD 460-plus million in cash returns. It's unfranked, of course, so efficiency for shareholders as well. We're considering the balance of that. Historically, we have done special dividends. And I think Ryan highlighted, company life to date, we've returned nearly AUD 1.8 billion through dividend and a couple of hundred million close to 1 buyback. So nearly AUD 2 billion returned to shareholders in that fashion. Exploration, adding AUD 31 of resource ounce. We've upped our exploration budget this year to AUD 200 million. And we've got very exciting projects to advance with the drill bit across all of our operations. So that's really compelling returns for investors there. And then we're enjoying the gold price with a bit surplus, and we're not having to service net debt. So we've got net cash. So that's where this buyback is -- we can enjoy it, and we can utilize it because it's surplus. So -- we think about all these things is not trading one off against the other. We certainly look to maximize the returns, the application of that capital. You know we're not afraid of giving it back, which we've done before, but also asking for it. So there's a balance of this, but I think have been very consistent with the approach of our capital management over the years.

Hugo Nicolaci: [indiscernible] portfolio sizing that kind of on a 5-year view, you're seeing a lot of opportunity organically in the portfolio. So not necessarily looking to add new assets?

Stuart Tonkin: Yes. We've said we've always looked at 5 and we have a 10-year reserve back to life. We've always talked about that happy place of migrating on the cost curve. So the 1.8 million to 2.2 million ounces per annum, 3 to 5 assets. But we've also told you how challenging it is to improve the portfolio through inorganic work. And we also have such compelling organic opportunities that we continue to invest in. So you're seeing the history and track record. That's what we're sticking to.

Hugo Nicolaci: Great. That's clear. And then just one more on costs, if I can. I mean, obviously, great to see the top line growing with gold price [indiscernible]. And typically across the sector, you tend to see costs creep up with that were typically only part of that is coming from chasing low grade tonnes have become viable. So can you just remind us of where you're seeing cost inflation in terms of labor versus equipment and consumables? And kind of what areas you maybe have a bit more control on that you can, I guess, help to keep those costs flat or even down potentially over the next 12 to 24 months?

Stuart Tonkin: Yes. So I think we're definitely seeing labor pressure come off a bit. We've seen stability of teams. We've seen new hires having skills coming from other sectors. And that stability, which also converts through to just performance in safety, production efficiencies. We're also seeing more competitive nature on procurement, supply, service contracts given maybe some excess of fleets and teams. So that will come in. But then gold has taken another leg up. And we know it obviously attracts increased dollars, dollar millions with royalties and other things associated with it. So we're enjoying some plateauing of costs. But as you know, and there's structural things that companies can decide to change cutoff grades or take economic material at these levels. You can see our modest assumptions with our resource and reserve calculations AUD 2,000 and AUD 2,500 in resource and reserve calculations. There's a lot of headroom to spot price based on the economics and margins of those ounces that we are secured with. So, I think, staying still in cost profile will naturally migrate us down the cost curve when you look at us on a global cost curve. We're doing very well, building out and growing our projects on economies of scale to keep our costs pretty flat. So, I think, we're watching that closely but just in the gold fields, we're certainly seeing some of that pressure come up.

Ryan Gurner: And Hugo, just to give a shout out to NSMS crew, Stu, they actually do significantly help. Yes, we're not paying a margin out to contractors, obviously, with our own operated crew. So that's the other thing that helps our business compete in this market.

Stuart Tonkin: Yes, that’s the other one you say we’re not price takers in that regard. The productivities we get from our owner teams like NSMS, we have great transparency and ability to flex, mobilize and drive productivities and that fact basically translates into better unit costs for Northern Star.

Operator: Your next question comes from Matthew Frydman from MST Financial.

Matthew Frydman: Yes. Stu and Ryan, can I ask, you ended the year with AUD 385 million net cash. You've just talked pretty extensively about your capital management plan and you're kind of thinking about returning the excess. Can you remind us how you think about the limits around net debt or leverage, how you think about where the sweet spot is in terms of the balance sheet, and I guess, what the sort of upper end of the range is in terms of working our balance sheet a little bit harder? That's the first part. And then secondly, Ryan highlighted the ROCE performance, obviously, working the balance sheet harder will help drive that. I'm sure I can find all the details somewhere in the annual report, but at a high level, can you remind us what the management incentives are that are aligned to ROCE?

Ryan Gurner: Management incentives aligned to ROCE, there aren't any, other than obviously try and get it as high as we can, Matt.

Matthew Frydman: Okay. That's a simple one. And in terms of the sweet spot on the balance sheet?

Stuart Tonkin: So quick clarity, like, historically, there were ROIC metrics, but with TSR/rTSR, with also some sustainability metrics is where the team is aligned with shareholders. I think that's clear and that's in our publications in our annual report. So I don't think there's any disconnect from alignment of management and shareholders.

Matthew Frydman: No, I wasn't suggesting it was a disconnect. Obviously, if you can improve ROCE performance, one way to do that is working the balance sheet harder. So yes, in terms of the -- I guess, how you think about the upper limits of whether it's the gross net debt -- sorry, absolute net debt figure or a leverage figure? How do you think about that?

Ryan Gurner: Yes. So Matt, so on Page 5, we sort of outlined our targets around leverage and gearing, which I think are reasonably conservative. They keep us in an investment-grade rating. Do we want to go outside those targets? Maybe occasionally, if there's an opportunity that we feel as though we should and it's compelling. As long as we see a pathway to get back into those ranges, that's where we want to be. And over the time I've been here, the balance sheet has been absolutely the pillar to allow the business to grow and do the things it's needed to do. So it is very important to our strategy.

Stuart Tonkin: I think it's an important point to raise because if we increase leverage and we ended up net debt, those metrics improve. It doesn't mean that the business is better or the risks are less. And I think when you comp against peers that have net debt and are levered, you might think they don't have lazy balance sheets or they're working their balance sheets harder and all those metrics look more impressive. It's due to our deliberate actions and involvement that we actually have no net debt, have retired debt. We've used debt prudently throughout acquisitions over the journey. We've generated returns from that with returns to shareholders through dividends, buybacks, reinvested in growth and still are building cash. What should be highlighted is that, that is the health of a very, very good business. And ROCE is one element where as you increase your liabilities, then obviously, that the denominator shrinks and the ROCE goes up. It's -- I just -- I wouldn't comp us to other peers, gold peers, particularly on that metric. I'd just say year-on-year showing it's working, and those will improve. Remembering, obviously, premerger, those were 20% to 30% return on equity, return on invested capital based on low acquisition prices. The roll-up of valuation [indiscernible] into balance sheet is what kind of broke the denominator. But again, this is about the trajectory or the improvement year-on-year-on-year, showing that our strategy is robust and works and is good for shareholders. So liquidity and size, we're a AUD 7 billion, AUD 8 billion company, so having strong liquidity is a great buffer and insurance policy for all our shareholders to -- we've got assets that survive through the cycles. We've got investments we have committed to. We got modest hedge book to protect some of those returns. These are all just -- it's a good problem to have. We're not about to just go and get leverage for leverage sake to improve 1 index. It's about using that lens of the returns.

Matthew Frydman: Yes. Got it. And, I guess, the other part of it is understanding those balance sheet targets, which obviously allows investors to get a sense of what you might consider to be excess in terms of capital returns. Maybe just one final one quickly. You guys have -- as a business have obviously been somewhat shielded by the, I guess, the cash tax benefit post the merger. It seems like reading the commentary that you expect probably in 6 months' time to be sort of paying more material amount of cash tax. Would that be a fair assessment? Is there anything that we need to sort of think about in terms of cash tax catch-up? Or yes, how do you expect the year will play out in terms of cash tax commitments?

Ryan Gurner: Thanks, Matt. It's a good question. I agree. We have been fortunate these last 3 years of not paying tax. So, I guess, look, there's a little bit on the balance sheet there. So you'll see there's probably AUD 20 million of what we think will be a catch-up payment for this year. That's going to happen in Q3. And then as you rightly pointed out, that's going to kick us then into start paying tax again. So I'm thinking it's going to be -- it will probably be in Q4, maybe AUD 40 million to AUD 50 million. We're still going to get through all the returns on these things, but it will be tens of millions, I guess, in that fourth quarter. So I'm sort of thinking for the full year between AUD 50 million and AUD 70 million in tax, which includes that catch-up payment. And then, of course, we'll be starting to pay again. And that will kick on until, again, we do the next tax return. So there will be the slight tick up in tax payments as we become tax payable as a business throughout the next few years.

Stuart Tonkin: Yes. So just also to reiterate how that translates into visible returns. Cash earnings is reduced by the cash tax paid. But given that the policy sets us 20% to 30% of dividend cash earnings, it will also come with a franking related to the tax cash. So there’s a balancing there that says cash earnings are reduced by tax paid. It also comes with a taxing frank credit that comes with it.

Operator: Your next question comes from Daniel Morgan from Barrenjoey.

Daniel Morgan: Stu and Ryan, just a question on the ops, if I may. I know the financial result, but just ops. At he end of the fiscal year, key items outstanding from an operational perspective was the Pogo mill motor replacement as well as rectifications of Thunderbox. I'm just wondering if you can make some comments about -- or has the Pogo mill motor been replaced? I presume it has and that project has been delivered and working well. And where is Thunderbox at?

Stuart Tonkin: Yes. Thanks, so Pogo's mill motor has been replaced and has been turned on. So we're in that ramp-up commissioning phase right now. And obviously, we've guided the quarter 1 of Pogo like to be around that 50,000 ounces. So the work was completed, primarily in the back of July into August and is complete. And then TBO, we obviously -- the exit rate in quarter 4 was at that 6 million tonne per annum run rate. We still have some planned work occurred at TBO, so again, second half weighted. But we're very -- we have visibility of what we need to do. And we stick by our guidance. Our guidance is considering all those impacts, and I think that's been digested why we put our guidance. We do reiterate the quarter 1 is our softest quarter and potentially outside of the raise of the average run rate throughout the guidance, which just means for the next 3 quarters in the second half is a really good springboard to launch in FY '26.

Daniel Morgan: And just back to tax. Is there a simple way for the investment community to think about the difference between the financial outcomes you report to us and then the tax accounts just so that we can effectively model the tax paid calculations through good gold prices and bad. Like is there some sort of DNA difference that you could simplify for us in the market?

Ryan Gurner: Thanks, Dan. Look, how can I say it? So we obviously -- the balance sheet has been changed a lot since the merger, obviously. We had this tax shield. We're coming back now into being tax payable, as I mentioned and Matt sort of asked the question. Look, going out, we pay -- when we come back into tax paying, we will pay on a percentage of our revenue. And then again, we do all the work to a tax return, just like everyone does, and then we true it all up and then that changes it next year as well up or down. So probably what I'd add, again, we've got to do the work. So I think it's just for a guide. I'd be thinking that the next calendar year is going to be once we start paying. So I'm going to say from Q4 '25 to then the first 3 quarters of '26, I'd say it's probably going to be in the range of 3% to 4% of our revenue, I guess, would be the tax we pay. Now then when we do our return, it might well be -- actually now it's 2.5% of revenue should have been or 3.5%. So there's going to be this lumpiness, Dan, for the next few years until we get into this consistent sort of tax paying period. So...

Stuart Tonkin: So first is changing that calculation. The second part is jogging it forward the actual timing of the cash payment, jogging it forward maybe 6 to 12 months on the returns time line.

Operator: Your next question comes from Ben Lyons from Jarden.

Ben Lyons: Just a really simple one from me this morning. I'm just wondering how the record gold price is currently influencing your approach at the operating level. Given you made some comments earlier in the call about the industry's propensity to drop cut-off grades in good times, which obviously extends the life of the operations that leads to cost inflation. Yes, the margin typically stays there or thereabout, some shareholders never really get those super normal returns for the higher commodity price. So just interesting in your current perspectives about how the gold price is influencing your approach to the operations.

Stuart Tonkin: Yes. Thanks, Ben. So look, it doesn't change. We use it, obviously, to test back to say what's the impact. But we've already done those sensitivities, both up and down in all of the financial decisions that we've made and the investment decisions only look better because we've done them typically and improve them at much lower pricing. So what it's doing is, actually it's compressing payback periods. And therefore, our cash growth and expansion is occurring earlier. So when we're looking forward in future years saying, well, the questions are probably early on the call, okay, where head of investors see that as cash returns. We look at, okay, well, does that compress your life asset plan of turning on projects because they become self-funding equally if projects don't deliver on time, budget or prices deplete, those other things don't start. You wait until you have it before you spend it. So that's the only thing is the rate at which our organic profile contracts or accelerates. There's no kind of additions as far as now that's economic or not, without a secondary behavior like locking in a hedge related to a return of a project. We have not dusted off and looked at any of those type of things. What does happen across the gold sector generally is those mines that were binary that need this price to be open, they potentially turn on, which then competes with our labor or resources that we already have deployed and then that puts cost pressure back across us. So they're not decisions that we make. But we know at this gold price, there's a lot of things around Kalgoorlie that suddenly become economic and companies start doing activity with. And it might even just mean drill rigs, us to deliver on a AUD 200 million exploration budget. Suddenly all the drilling fleet get reapplied to go and look for stuff because it's suddenly worth more. That's the type of pressure that comes as well as natural stuff like [indiscernible] and royalty that comes dollar millions increases with gold price lift. So yes, we certainly aren't changing. We never change our behaviors based on that blip. We make sure that we're going to utilize and stack the cash up whilst it's -- we can enjoy that. But if it stays up for a long time, costs, as we know, do trend to that sort of 70% -- 60%, 70% of gold price, costs tend to trend up there because of the genuine behavior across the gold sector. There's nothing wrong with that because it's making good margins and good cash. I guess, the feedback we get from investors is costs should go flat or down as price goes up and margins should be expanded and returned to shareholders. It's not always the case.

Ben Lyons: I guess, the nature of the question is around some of the historical behavior [Technical Difficulty] Northern Star, probably priority [indiscernible].

Stuart Tonkin: [indiscernible] your mine plan and our reserve life but you were -- it was very profitable because it was incremental on the capital you already sunk. And you had mill capacity [indiscernible] on top. The average grade went down, but overall ounces went up and overall cash generation went up, albeit AISC went up with it. So while something has to give -- I could shrink our ounce profile by half and crunch our AISC and increase our percentage margin, but it wouldn't be a better business. In shorter mine lives, higher percentage in margin but you'd be destroying these multimillion ounce quality assets. And so we're having to think now past a decade of these assets and longevity, and you look at KCGM as the point, decimal points on grade make a massive difference. They'll make a massive difference to the pit strip ratios of material we're actually moving anyway and the economics on a 27 million tonne per annum plant. That stockpile, there's nearly 3 million ounces there at 0.67 grams per tonne, and there'll be material coming out of the pit floor that would typically be called waste at the chosen gold price. But at today's spot price, it's generating very good cash margins. So I wouldn't criticize companies for being agile and nimble to utilize the spot market and sell into it. If they are structural changes in their behavior expecting that this price lasts forever, that's pretty poor. But I think people should be acting a little bit differently in this environment to generate the cash.

Ben Lyons: Okay. Stu, that's really helpful. And please don't take it as a criticism, just a simple question, but thank you very much for your perspective.

Operator: Your next question comes from Anthony Barich from S&P Global.

Anthony Barich: Just major gold industry player. Just wondering whether you had us -- what was your reaction to what the Fed did with [indiscernible] what we say just with the -- I know a lot of our industry lobby groups have said things about you can get approvals from state and Fed and then all of a sudden something could just happen at a Federal level. Does that give you any kind of concern around sovereign risk for Australia and maybe what that might say about what a federal EPA might do?

Stuart Tonkin: Yes. Thanks, Anthony. I won't comment specifically on that. I think there's a lot of rhetoric around that circumstance. We don't rely on those. I guess, purpose in that regard [Technical Difficulty] like that perhaps if we change [indiscernible]. We don't rely on those. I guess, purpose in that regard like that, perhaps if we change to [indiscernible] by 2050 is our goal.

Anthony Barich: And the expressions of interest period was ongoing when we're on site earlier this month. Is that concluded now for the Kalgoorlie renewable project?

Stuart Tonkin: No, no, that's still going to be some time to go through all the options. And as you can imagine, there's options plenty to review there. And it's a pretty significant project for the region. So it will take us some time.

Operator: There are no further questions at this time. I'll now hand back to Mr. Tonkin for closing remarks.

Stuart Tonkin: Great. Well, thanks for everyone for joining us on the call today, and I look forward to updating you as we continue to advance our profitable organic growth strategy. Have a good day. Thank you.