Northern Star Resources Ltd to Acquire De Grey Mining Ltd Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Levi Spry - UBS Equities - Analyst : Good day. Stuart and Glenn. Thanks for your time and congratulations. Maybe just a question on the DD process. So could you talk us through the key items, I guess, from both your points of view and maybe as part of that, talk through where it's at in terms of the permitting process? Any early views on what Northern Star might do to optimize the project, going underground sooner, changing the flow sheet, for example? Maybe we can start there. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 02, 2024 / 12:30AM, NST.AX - Northern Star Resources Ltd to Acquire De Grey Mining Ltd Call

Question: Levi Spry - UBS Equities - Analyst : Okay. Thank you. And so just -- so back on the permitting, can you just give us a little bit more detail on what's happened there. I guess, maybe Glenn, in terms of is slightly delayed, what stage that's at? And confidence levels around that March quarter?

Question: Levi Spry - UBS Equities - Analyst : Thanks, Glenn. And maybe just one more for Stuart, I guess, around the valuation sort of metrics through the Northern Star land. Can you talk to just some more of those -- some more detail there, I guess, but also just how much you may have been factoring in further optimization of the project, given Northern Star's strengths in certain activities like underground mining and execution?

Question: Levi Spry - UBS Equities - Analyst : Okay, thanks. Thanks, guys. Thanks.

Question: Hayden Bairstow - Argonaut - Analyst : Good morning, Stuart, Glenn. Well done on the deal. Stu, just a couple from me. Just on the [met], I mean, obviously, that's a key talking point around Hemi. You guys are fairly experienced in dealing with, I guess, similar sort of complex ore bodies. I mean just your thoughts around any of the met risk and whether you actually see upside or what's in the feasibility study from the learnings that you guys can bring to the table?

Question: Hayden Bairstow - Argonaut - Analyst : Okay. Great. And Stu, just on your comfort around the approvals, obviously, in the Pilbara, there's an increasing focus, particularly on water rights. I mean, obviously, the grade is probably a significant advantage to others on that front. Is that sort of where some of your comfort comes from, these approvals will actually get over the line on time and on the current schedule?

Question: Hayden Bairstow - Argonaut - Analyst : Okay, great. Fantastic. Well done to both teams and I'll leave it there.

Question: Hugo Nicolaci - Goldman Sachs - Analyst : Hi Stu and the team. Congrats on the transaction. First one for me, more of a clarification and maybe one for Gold Road. But have you had any discussions with Gold Road to confirm their support of selling their stake into the transaction?

Question: Hugo Nicolaci - Goldman Sachs - Analyst : Got it. Thanks. And then Stu, one for you just on the capital management piece, you highlighted you expect to continue the current policy. But if I look at the business, the pro forma cash balance in your own organic cash flow looks more than adequate to build Hemi that De Grey have lined up a number of debt funding sources. Do you expect to bring some of those across and utilize things like the [NAF] debt and other things to support ongoing elevated capital management or other opportunities? Or do you not expect to bring some of that debt across?

Question: Hugo Nicolaci - Goldman Sachs - Analyst : Are you able to do the buyback in the interim? Or does that change the scrip ratio, if you do?

Question: Hugo Nicolaci - Goldman Sachs - Analyst : And then just one more if I can, just coming back to Levi's question on valuation. Have you factored in any tax synergies that you can bring across from the acquisition? And if so, would that be able to give a sense of what magnitude those are?

Question: Hugo Nicolaci - Goldman Sachs - Analyst : Excellent, thanks. I'll pass it on.

Question: Kate McCutcheon - Citi - Analyst : Hi, good morning, Stu and Glenn. Stu, at your last quarterly call, you made comments that the focus was on organic growth. Just wondering, what the catalyst was for executing now? Was it other strategic interest in the project, the recent resource growth, record gold price or something else you can talk to?

Question: Kate McCutcheon - Citi - Analyst : Okay. And just on the 2 million ounces, you referred to Hemi in your deck is producing that [530,000 COGS per annum]. The De Grey put out studies for a much larger operation. What do you assume in the offer in terms of upside and exploration? And when you say you'll update the market on CapEx and cost pre-FID, what are the key things for certainty on before releasing new numbers to the market?

Question: Kate McCutcheon - Citi - Analyst : Okay. Got it. Thank you. And then, sorry, I didn't catch the answer to the Gold Road question about their support?

Question: Kate McCutcheon - Citi - Analyst : Got it. Thank you, Stu.

Question: Matthew Frydman - MST Financial - Analyst : Sure. Thanks. Morning, Stu and Glenn. Can I, I guess, follow on a little bit from Kate's question around the timing of the acquisition and particularly as it relates to the outstanding approvals that obviously Glen's already talked to and given a good background on the history of the state and the federal approvals processes? But obviously, in the gold sector, we've seen some pretty unexpected federal approvals decisions recently. So just wondering if you could elaborate on how the Northern Star DD team and the Northern Star Board got comfortable with transferring that approval to risk to your shareholders, Stu, and transferring it now rather than waiting until maybe there's some more certainty around that process? Thanks.

Question: Matthew Frydman - MST Financial - Analyst : Okay. Thanks, Stu. And secondly, on, I guess, implied gold price or sort of maybe more broadly, how you're thinking about the gold price environment? I guess with respect to your valuation and your acquisition price, you talked to consensus gold prices and really the base case of the underlying DFS being -- all that's needed to kind of justify that valuation. So again, if I'm thinking about consensus, maybe your sort of implied gold price is somewhere more in the range of, say, AUD3,000 to AUD3,500 an ounce. Certainly well above the sort of AUD2,500 an ounce in your mineral resources for Northern Star as a group. So the question is, how does the price that you're willing to pay for Hemi compare to the options that are in your existing assets? If you're willing to invest shareholder capital at, say, $3,500 an ounce into Hemi, what other options in your portfolio can get you similar or better risk-adjusted returns at that sort of assumed gold price? Thanks.

Question: Matthew Frydman - MST Financial - Analyst : Yeah. Thanks, Stu. Maybe the other way to ask the question is, if I look at your organic growth options that you're executing on and the resources in your reserves in your current portfolio, as you say, clearly, you've applied some fairly conservative gold price assumptions to those and they're delivering solid returns, attractive returns. It appears like you're applying a more -- maybe more aggressive gold price assumption to underpin the acquisition case behind De Grey. So if you were to then apply that same sort of more aggressive stance to your existing portfolio, what options become available? What organic opportunities that maybe we're not thinking about currently would screen positively from -- on a returns basis at a similar sort of implied gold price as to what you've offered for De Grey?

Question: Matthew Frydman - MST Financial - Analyst : Yeah. Thanks Stu and Glenn, I appreciate the additional color. I mean, I guess the question wasn't really around what gold prices used to justify the acquisition or what you need to get Hemi to stack up. It was more around your existing portfolio, Stu, and what the risk-adjusted returns of investing within that portfolio compared to an external acquisition, which is, no doubt, higher risking and has a longer period to pay back. That's fine. I understand that. And I guess the comparison is more to your sort of reserve base of [2,000] an ounce and resource base of $2,500 an ounce, but all good. Thanks.

Question: Matthew Frydman - MST Financial - Analyst : Got it. Thanks for the details. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 02, 2024 / 12:30AM, NST.AX - Northern Star Resources Ltd to Acquire De Grey Mining Ltd Call

Question: Mitch Ryan - Jefferies - Analyst : Morning, Stuart and Glenn. Thanks for the question. If I look at the history of Northern Star, my impression is that majority of growth has been driven by M&A of operating assets and then operational delivery, not necessarily from greenfield development. What have you done to price the risk of -- the development risk associated when you've made your bid? Or have you thought about development risks?

Question: Mitch Ryan - Jefferies - Analyst : Yeah. Got you. Perfect. Thank you. Just my second question, just relates to the help -- can you just help me understand the structuring of the break [fee]? There was a lot to go through, but just -- there seems to be a bit of a dichotomy in the quantum between the break fee and the reverse break fee. Yeah, can you sort talk through around some of the key conditions precedent that would trigger those and the reason for the quantum difference?

Question: Al Harvey - JPMorgan - Analyst : Glenn just wanted to get a bit more of a sense of just timing for study -- updating the study, updating us on what the outlook is for Hemi capital and all-in sustaining costs. I suppose if we assume that permitting is achieved in the March quarter, do we expect a relatively quick FID after that? I suppose, refreshing the study, would that be based on that kind of hemi base case? Or are we be looking to bring in -- would you guys be looking to bring in the western concentrator, which would add another 150,000? I know De Grey are sitting on the underground study as well that was due for this quarter. So feasibly, what can we expect in terms of news flow as, I guess, across all those three different pieces across De Grey portfolio?

Question: Al Harvey - JPMorgan - Analyst : Thanks, guys. And so just to clarify, it's pretty -- it sounds like it's relatively unlikely that I suppose, ahead of the initial FID to go ahead. You wouldn't be looking to kind of talk about that upside to the (inaudible) concentrator or any underground contribution? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 02, 2024 / 12:30AM, NST.AX - Northern Star Resources Ltd to Acquire De Grey Mining Ltd Call

Question: Al Harvey - JPMorgan - Analyst : Second one for me. I'm hoping you could just kind of step us through on the De Grey teams sticking around and being integrated into the Northern Star team. Obviously, some great expertise on refractory ore bodies, as Glenn mentioned there. Maybe you can just let know who's sticking around?

Question: Alex Barkley - RBC Capital Markets - Analyst : Thanks, Stuart and Glenn. Thanks for the call. A question for you, Glenn, just around the deal timing. You've got the upcoming underground study and permitting decisions, which are hopefully going to be positive. Why would you not wait to realize the company's value post those events, particularly if you expect them to be positive? Thanks.

Question: Alex Barkley - RBC Capital Markets - Analyst : Okay. Sure. Final question, one for you, Stuart. Presentation said Northern Star are reviewing the CapEx. Obviously, you have a lot of operating and development experience in WA. How confident are you of what the final budget number will be? And I don't know if you can comment versus the DFS estimate. I think you might have answered Mitch and said it looks to be on budget. So if you could give a comment there, please.

Question: Alex Barkley - RBC Capital Markets - Analyst : Yeah. Okay. So perhaps there's still a little bit of learning for your team, but it doesn't really matter either way. Okay. Thanks very much, guys and congratulations.

Question: Levi Spry - UBS Equities - Analyst : Good day and thanks for the follow up. Just a quick one for Glenn. I guess, can you confirm whether or not you run a process here or you've only been in discussions with Northern Star the entire time?

Question: Levi Spry - UBS Equities - Analyst : Thank you.