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Moody’s gives thumbs up to NST’s gold mine expansion

Moody’s Ratings has expressed strong approval for Northern Star’s (ASX:NST) $1.5 billion expansion plan for the SuperPit gold mine near Kalgoorlie. The company announced its intention to double production by 2029, aiming to increase output from the current 13 million tonnes to 27 million tonnes per year.

The expansion is projected to nearly double gold production to 900,000 ounces by 2029. Early works have already commenced, and construction is expected to be completed by 2026, followed by a gradual ramp-up to achieve the target production between 2027 and 2029.

Funding for the project, which includes $150 million allocated for contingency costs, will be primarily sourced from cash on hand and operating cash flow. In April, Northern Star raised $600 million through a 10-year senior guaranteed notes issuance.

Moody’s analysis suggests that while the expansion will not have an immediate impact on NST’s credit quality, it will generate an additional 250,000 ounces of production in the long term. The expansion is expected to reduce costs and increase free cash flow, subject to effective execution risk management and obtaining necessary environmental approvals.

Moody’s stated, “While the KCGM mill project will require significant capital spending, most of it is already incorporated in our forecasts and a large portion was pre-funded with the recent unsecured notes issuance. We expect NST to continue to operate within its publicly announced financial policy targets during the build phase.”

The financial policy targets include maintaining net debt/EBITDA below 1.5x, debt/(debt + equity) below 20%, and having AUD 1.0-1.5 billion of liquidity, with approximately one-third in cash and bullion. The current dividend policy will also be upheld. Moody’s anticipates that NST’s adjusted gross debt/EBITDA will remain below 2x throughout the construction phase, which aligns with the appropriate level for its rating.

The mill Expansion Project, according to Moody’s, will simplify Fimiston’s processing plant flowsheet, increase processing capacity, reduce operating and processing costs, and lead to the decommissioning of the nearby Gidji Processing Plant. NST aims to raise its overall annual gold production to 2 million ounces by the end of fiscal 2026. This includes KCGM growing its production to 650,000 ounces per annum by 2026, up from the current 472,000 ounces per annum. The growth will be facilitated by productivity-focused initiatives such as transitioning to a 24/7 operation, opening new mining zones, and updating the mining fleet. As ore throughput reaches 27 million tonnes in 2029, output is expected to gradually rise to 900,000 ounces.

Northern Star’s expansion plans have gained favorable recognition from Moody’s, signaling positive prospects for the company’s future gold production and financial performance.