Weak guidance, compounded by increased costs and capital expenditures (capex) have been revealed in Northern Star Resources' (ASX: NST) operational update, with its underperforming Kalgoorlie Consolidated Gold Mines (KCGM) operation the main culprit.
The West Australian (WA) gold digger delivered 1,634koz for FY25, hitting revised guidance of 1,630-1,660koz announced in April after the company was forced to slash original targets at the March quarter.
The Kalgoorlie production centre sold 832koz for the year, falling below its revised guidance range of 850-860koz and marking another year where the flagship operation has missed both annual guidance and multi-year outlook projections.
Mining productivity at KCGM improved across underground and open pit sources late in the quarter, with 118koz sold during June coming after months of underperformance that necessitated the guidance downgrades.
Meanwhile, Yandal delivered 518koz at the mid-point of revised guidance, while Pogo exceeded expectations with 283koz above the top end of its 265-275koz range.
Costs rise
The WA gold darling has outlined an FY26 AISC guidance of $2,300-2,700/oz - up from the current range of $2,100-2,200/oz.
Management attributes the increase to sector inflationary pressure, increased sustaining capital, and higher activity levels.
The company is committing substantial capital to KCGM, with the mill expansion requiring $530-550 million - unchanged from previous guidance.
Opex will come in around $500-550 million for open pit material movement and underground development.
An additional expenditure of $315-370 million covers new tailings dam facilities ($180-220 million), thermal power infrastructure ($85 million in FY26), and accommodation facilities ($30-35 million).
That's combined KCGM capital commitments of ~$1.4 billion for an operation that has consistently missed production targets.
RBC Capital Markets analyst Alex Barkley says weak guidance compared to estimates was the key takeaway from the update.
“NST states the FY26 cost increases come from industry-wide inflationary pressures, and an increase in infrastructure and development costs, which should provide some benefit in future periods. However, we expect this is unlikely to mitigate the headline blow to FY26 cash flow,” Barkley says.
Elsewhere, Yandal will require $300-310 million in growth capital, primarily for Thunderbox Operations development, while Pogo needs US$70-80 million for underground development and mill optimisation.
Northern Star's latest $5 billion acquisition from De Grey Mining, Hemi, adds another $140-150 million for engineering, design, and long lead items during FY26.
Northern Star completed its $5 billion takeover of De Grey Mining in May 2025, adding Hemi - one of Australia's most significant gold discoveries of the past decade - to its portfolio.
The purchase follows the miner's extensive M&A history of 13 acquisitions since 2010, transforming the company from a junior explorer into Australia's largest gold miner.
Gold reached US$3,500.05 per ounce in April 2025 and currently trades around US$3,335/oz - a 39.5% increase from a year ago.
JPMorgan Research forecasts gold averaging $3,675/oz by Q4 2025 that are set to provide unprecedented tailwinds for Australian producers.
FY26 Outlook
Northern Star forecasts 1,700-1,850koz gold production for FY26, with KCGM expected to deliver 550-600koz.
The September quarter will be the softest, as planned major shutdowns will occur across all three production centres.
KCGM underground mining volumes are forecast at 3Mtpa, while open pit productivity is expected to increase throughout the year as Golden Pike North returns to one mining horizon by 2H FY26.
The mill expansion project remains on track for commissioning in early FY27, enabling expanded throughput capacity of 27Mtpa.
Northern Star traded ~5% lower at open today and has dropped even further as investors breathed in the news, with shares down 8.56% to $16.82 per share at the time of writing.
