Conventional silica fiber optics cannot currently deliver the high beam quality, high peak power pulses required for micro-machining applications due to damage limitations. Recently developed photonic bandgap (PBG) fibers have the potential to overcome this limitation as the power is mostly contained within an air-core, with guidance arising from the periodic nature of the cladding. We report the delivery of high energy nanosecond pulses from a high repetition rate (up to 100 kHz) Q-switched Nd:YAG laser through the fundamental mode of a PBG fiber at 1064 nm. The damage limitations of the PBG silica structure are investigated, together with its application to precision micro-machining. We present an optimized fiber design to reduce the light-in-glass fraction and hence maximize the power handling capability. Short pulses (around 60 ns pulse width) and energies of the order of 0.5 mJ were delivered in a single spatial mode through the hollow-core fiber providing the pulse energy and high beam quality required for micro-machining of metals. Practical micro-machining of metal sheet is also presented.