Kirkland Lake Gold Q3 2021 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2021

There are 12 speakers on the call.

Operator

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Kirkland Lake Gold Third Quarter 2021 Conference Call and and Thank you, Mark Utting, Senior Vice President, Investor Relations.

Speaker 1

You may begin.

Speaker 2

Thanks very much, operator, and welcome, everyone, To our Q3 2021 conference call and webcast. With the timing of our planned merger with Eagle Eagle, Which we're very excited about. This will likely be our last conference call. And I think if you look at our results, You'll agree with me that we're finishing with a bank. We've got record earnings, extremely low unit cost And a continuation of industry leading an industry leading track record over the last 5 years for returning value to shareholders.

Speaker 2

We're going to talk about all these things on today's call. With me today are most of the members of the Kirkland Lake Senior Executive team. Speaking today will be Tony Makuch, our President and CEO David Soares, our Chief Financial Officer Natasha Bass, our Chief Operating Officer Ian Raun, our Vice President, Australian Operations Larry Lizette, Our Vice President, Detour Lake and Evan Pelletier, our Vice President of Mining, Kirkland Lake as well as Eric Kallio, our Senior Vice President of Exploration. Slides accompanying today's presentation are available on our website and through the webcast. Following the presentation, we'll open up the call for questions and answers.

Speaker 2

I will draw your attention to Slides 23 and Webcast. Of the presentation, which contains our forward looking information and other cautionary language.

Speaker 3

We will

Speaker 2

be making forward looking statements in today's call, so I ask you to give that information into consideration. We will also be referring to non IFRS measures during Call. Reconciliations involving those measures is provided starting on Page 37 and Webcast of the MD and A we filed late yesterday. Finally, all dollar amounts mentioned today will be in U. S.

Speaker 2

Dollars unless otherwise stated. With that, I'll turn the call over to

Speaker 3

Tony Makovich, President and CEO. Okay. Thanks, Mark, and thanks, everybody, for being on the call. It's not necessarily our last quarterly call because we just have a different name maybe when we're talking in We have had lots of significant hit, lots of success at Kirkland Lake Gold over the last few years and Definitely a very, very strong Q3. And I'll go through the results and you can see it's lots, lots, lots of outperformance in a number of areas, particularly Fosterville in Australia, where at the end of 3 quarters, already achieved full year guidance and it continues to and it's not just grade, There's tons of grades coming out of Fosterville, plus very high levels of safety performance and operational performance and high attention to in terms of the kind of social issues there.

Speaker 3

We're doing a very great job in terms of environmental That's going on up in the Northern Territory in Australia and a real tribute to the leadership and all the people, the whole number, the The whole people that are working for us in Australia do an exceptionally good job and we really need to thank them for what they do. And then over in Canada, we have a significant success, a significant success in Q3. And again, teachers have a very exceptional track record in Q3, but We had very exceptional Q4 as well. Again, the demonstration of strong leadership in the company, great From corporate breakdown through the operations and fundamentally the people driving the trucks, the people doing the work at Macassa and at Detour are really making a big difference. Again, we really thank them for what they worked on to achieve in the quarter.

Speaker 3

And as I say, we're looking at a very strong Q4 as well Anyway, I'll turn on Slide 4 here and just to highlight a few things. We did have a recent announcement and Webinar. Agreement combined and merged with Eagle Eagle Mines. From our perspective, this is a very exciting development for our company and our shareholders. And big thing is this merger creates a new leader in the global gold mining industry.

Speaker 3

And we create a gold mining company that can definitely be a leader in terms of transforming the not only transforming the industry, but also transforming and changing the perception of our industry as we move Moving to Slide 5. This basically gives some

Speaker 2

of the highlights of our

Speaker 3

merger with Eddyco. But Basically, we're creating the highest quality seed and gold producer with the lowest unit costs, best risk profile, We'll be leading in key areas of ESG and an extensive approach to pipeline to drive future growth. The combined company has significant very strong financial Design and an

Speaker 2

extensive pipeline of

Speaker 3

projects and combined with a strong balance sheet, good but solid operations that are performing well and We definitely see the opportunity to fund future growth internally. The merger will bring consolidation, a big thing, consolidation activity in Region of Northeastern Ontario, Northwestern Quebec requires significant value creation opportunity through synergies and we see some other and Webex improvement initiatives. And I think that one of the biggest things from our perspective is the development of the new upper fever and the ameligated Kirkland product. So I'm not going to add into the Macassa operations in Kirkland Lake, that's a significant benefit to Northeastern Ontario and definitely for the shareholders of the And we see the Newegg Eco Eagle definitely being we got it demonstrated, but the warrant Premium valuation and fundamentally what will drive that to be combination of increased scale, low cost and low risk operations, but I think fundamentally Very financial performance and continued strong balance sheet strength and good execution of operating of results, which will be key to driving that value That's more of a pre evaluation. And we see it as the right deal for our company and our people at the time and as well as our shareholders, Communities and all the stakeholders, many groups in the conference that we deal with.

Speaker 3

Maybe I'll move over to Slide 6 and start talking about our third quarter results. Slide 6 here is really focusing here on maybe give you a quick update on the responsible mining efforts. For us, the responsible mining is integral to everything we do and is ingrained in our culture. All of our Canadian operations participated in the 1st National Day of Truth and Reconciliation and Webinar. With learning seminars for all employees supporting and we do we think to support local divisions companies through Orange Share programs and and webcast.

Speaker 3

Additionally, haul truck bids were painted green to support mental health awareness with seminars and employee training program that is being held at both Canada and Australia. In Bendigo, Australia, we committed $600,000 to the COVID wellness center and cancer and webinar. Wellness program to assist with the sustainability of the program and expanding wellness services and improving access for regional patients. Building on our leadership at minimizing and reducing car credit emissions, we took additional steps in Q3 2021 to achieve further reductions, including testing and Webcast. Turning to our financial and operating results on Slide 7.

Speaker 3

As mentioned, Q3 2021 was a quarter of financial progress. It being highlights are Mark alluded to some at the beginning, but record quarterly earnings, solid year over year production growth, unit costs significantly better than full year guidance and strong cash and Web. Our record performance was driven by strong operating results, including quarterly production, throughput and all We've reached the previous record of 166,000 ounces in Q2 of this year by 23,000 ounces or 14%. And as I said, we're on track for a new record in Q4 this year. Fosterville also has a very Strong quarter and a strong contributor to our record results.

Speaker 3

And it was a combination of great outperformance as well and WebEx. It has higher levels of throughput to the mill. So the operation being very successful in terms of moving forward at Fosterville. No. And the drift that driving our having achieving record production performance is also a result in terms of our unit costs.

Speaker 3

And in our unit costs in Q2 and Q3 beat our full year guidance ranges. We are also being impacted by the exchange rates and inflationary pressures Certain areas, but our operations are doing very, very well in managing these costs, and we're in very good shape to meet our guidance for the year. In terms of cash flow, we had operating cash flow of and webcast. $323,000,000 and free cash flow of $141,000,000 David Sohriss will give a little bit more color on those areas. Turning to Slide 8.

Speaker 3

We continue to have a very strong balance sheet with cash at September 30 of $822,000,000 Again, a very clean balance sheet and no debt. We also continue on our very successful track record of returning capital to shareholders. During Q3, we returned $175,300,000 $50,000,000 through our Q2 dividend date on July 14 and $125,300,000 through the repurchase of 3,100,000 shares and webcast. Turning to Slide 9. A significant component of our successful track record with capital allocation was investing capital for future feature value creation.

Speaker 3

We released encouraging exploration results at all three of our cornerstone assets and remain on track with our key growth projects. Eric Kalia will give a little bit more color on that, but maybe I'll just talk a few things here. The and webcast.

Speaker 2

We've got a successful acquisition program

Speaker 3

at Detour. When we announced and in early September, we announced the 10,100,000 ounce increase of open pit measure and Webcast. That's triple the open pit M and I resources. And As we turn it, we see it as what's definitely a milestone in terms of being able to support strong growth in mineral reserves in That's going to come up next year as we complete our studies this year. And then earlier this week, we announced additional new drill results.

Speaker 3

And I think with these continue to highlight the fact that the 10,000,000 ounce increase in resources is not the end of it all. We still see the potential to continue to grow the resource at E3rd before the end of this year and then it really supports what we What we give in terms of our view is the view we put out of Detour when We acquired it back and completed the acquisition announcement back in 2019. Beside the exploration success at Deepwater, we are making very good progress with a lot of other projects that have to mind in terms of value creation and optimizing the operation. And that included we increasing the throughput in the mill. Actually, the mill in July August of Q3 actually was running at a rate that has been almost 28,000,000 tonnes per year.

Speaker 3

We We had significant improvements in grade management at Vitor. And we have a lot of other infrastructure that we're installing at We'll build the operation for the long term and really support future improvements, both in operating performance, and webcast, but also on the safety and care and consideration for P1 and for the site. At Macassa, the number 4 shaft for me is ahead of schedule on track for completion later this Here, we also had well, sorry, I should say completion of the sinking later this year, The actual installation of loading pockets and getting that ore handling and Webcast System and the changeover from a sinking plant to a production plant will be started. And we expect this shaft to come into full production or be and webcast ready for production in Q4 into Q3 and Q4 of 2022. We also had significant exploration success at Macassa, and webcast.

Speaker 3

And looking at Vosterville, we did We've come up with some very new and interesting exploration results. They've released at the end of August. And I guess what it tells you is and We have an operation of 300,000 to 425,000 ounces a year on an annual basis for 7 to 10 years in production. I think We're definitely we have lots of work to do, but we definitely feel confident that we'll be able to achieve that and demonstrate that to shareholders. Now moving on to Slide and Webcast.

Speaker 3

Let's look at our year to date results. We had this call year to date operating and off versus our full year guidance. Production was just under 1,100,000 ounces, a 5% increase from year to date 2020. We achieved a very solid unit cost performance, record earnings and and we've recorded $184,000,000 We returned about $334,000,000 to shareholders, which represents 1 point and $3.18 per ounce produced in year to date 2021. Now on Slide 11, let's look a bit closer at our track record of returning capital to shareholders.

Speaker 3

We have now returned a total of 1 point We've placed $6,000,000,000 to shareholders since we first introduced our NCIB in May 2017 and our dividend policy in March 2017. Of this amount, just over $1,000,000,000 was used to repurchase 31,500,000 common shares and Webcast. And $315,000,000 was used to make 17 quarterly dividend payments. Those dividend payments have increased 7 times since we began issuing them in 20 webcast. In addition, since May 2016, we have eliminated over $190,000,000 of debt.

Speaker 3

This includes paying $98,000,000 of debt held by Nichu Gold Corp. Internally after it was acquired in January 31, 2020. Dollars 30,000,000 was Call. We used to pull the futures of gold's hedge position. We earned a very good return on that $30,000,000 given the changes in gold and commodity prices and FX rates that followed and Webcast.

Speaker 3

In 2020 and 2021, we also repurchased a 1% NSR at the Castle Comprightment of that in 2016 Just so almost $36,000,000 Adding it all up in aggregate, we have provided 1.6 Looking at Slide 12, it shows our performance against guidance. As you can see, we are very well positioned to achieve our guidance entering the last quarter and Webinar. We are targeting the top end of our production guidance and on track to achieve our operating cash cost per ounce guidance. We're doing very well in terms of all in sustaining cost per ounce sold at $7.85 per ounce year to date. All in sustaining cost is better than our guidance.

Speaker 3

We definitely and WebEx. And the change in the FX rates we've had an impact. Looking at our expenditures, if you take sustaining and growth capital expenditures together, Total CapEx guidance is $530,000,000 to $585,000,000 for the year, and we are tracking to be in line with that range. Also, exploration Pending should be at the low end of our guidance of $170,000,000 to $190,000,000 for the year. That's the lower end of achieving the Expiration guidance, mainly a function of lack of we can get access to drills.

Speaker 3

We can get access

Speaker 2

So it's a lot of equipment to

Speaker 3

do the work, but we can't get people to ban the drills. And that's been a challenge and I think a challenge for and Webcast. Anyway, with that, I'll turn the call over to David Sorensen, Stifel.

Speaker 2

Thank you, Tony, and good morning, everyone. I'll start on Slide 13. In Q3 2021, we achieved record net earnings of $254,900,000 or $0.19 per share. This represented a 26% increase from $202,000,000 in Q3 2020 and 4% increase from $244,200,000 from the webcast. The increase from both prior year prior quarter and prior year resulted mainly from higher revenues.

Speaker 2

Adjusted net earnings totaled $241,300,000 or $0.91 per share. The main difference between adjusted net earnings per share of $0.91 and net presentation of discretionary deductions for Ontario Mining Tax on filing the 2020 tax returns. Foreign exchange gains, costs attributed to non operating assets, mainly in Northern Territory, system implementation costs as well as COVID-nineteen related costs. Turning to Slide 14. In Q3 B.

Speaker 2

Q3 2021, revenue totaled $667,000,000 The change from Q2 2021 is mainly driven by an 8,000 ounce increase in sales volume, which is partially offset by lower realized gold price in the quarter. Compared with Q3 2020, revenue increased by $34,000,000 or 5% year over year, mainly due to a higher gold sales volume, which increased from reached 332,000 ounces in Q3 2020 to 372,100 ounces in Q3 20 2021 with the increase largely reflecting record gold production at Detour Lake and strong production at Moving to the next slide and looking at EBITDA on Slide 15. Q3 2021 EBITDA totaled and $51,600,000 which was comparable to Q2 EBITDA of $451,300,000 Compared with the same period in 2020, EBITDA increased by 60 $7,000,000 mainly as a result of higher revenues. Looking at income taxes, our Q3 2021 net earnings benefited from a lower effective $6,000,000 net tax recovery related to the optimization of the eligible tax deductions for Ontario Mining Tax following a restructuring of the company's Canadian entities early in 2021. Moving on to Slide 16, we look at the Q3 cash flows.

Speaker 2

You can see that the largest contributor to growth in cash was from our operations, which generated about $396,000,000 of cash. This is before income tax paid of $78,000,000 growth capital investment of 88 point and exploration spending of $39,400,000 in the quarter. Other cash outflows include costs incurred at our non operating sites, mainly the and Webcast. The Hope Complex of $15,000,000 and corporate G and A of $14,300,000 During the quarter, dollars 175,300,000 was returned to shareholders, including $125,300,000 used to repurchase shares through the company's FCIB and $50,000,000 of dividend payments. Turning to Slide 17 to look at our cash balance and cash flow on a year to date basis.

Speaker 2

We generated We've nearly $1,100,000,000 of cash flows from our mining operations after sustaining capital. We paid $298,000,000 of income taxes. We invested in our key assets, starting $217,000,000 in growth capital and $128,000,000 in exploration expenditures. We would have accumulated any cash balance of nearly $1,200,000,000 before returning $334,000,000 of Capital to shareholders comprising of $184,000,000 used to repurchase shares and $150,000,000 in dividends paid on a year to date basis, ending the quarter with $822,400,000 in cash. Next, I'll turn it over to our CFO, Natasha Webcast to discuss our operating results.

Speaker 4

Thank you, David, and good morning, everyone. I'm on Slide 18, in which I've pointed our consolidated production results for the quarter year to date. So overall, as Tony mentioned earlier, we achieved solid operating results in the quarter with production just over 370,000 ounces compared to 339,584 ounces in Q3 2020 and a quarterly record production of 300 and and Webcast. Our operating cash cost per ounce sold was $4.38 an ounce, which is well below our full year guidance. And then as for our ASIC per ounce sold, it was also very strong at $7.40 webcast.

Speaker 4

This is a 16% improvement from Q3 2020 and 5% better than the previous quarter. The $7.48 an ounce also compares very favorably to our full year guidance range of $7.90 to $8.10 an ounce. Then when we look at our year to date operating results, they too are very strong. Year to date production totaled 1,050,000 ounces, which is a 5% increase from year to date 2020. Our operating cash cost per ounce sold was $4.66 an ounce compared to $407 in and Webcast.

Speaker 4

And finally, our 86 per ounce sold was $785 an ounce versus $804 in year to date and Webcast 2020. So with that, we'll now get into a little more detail on the operation. And I'll turn the call over to Ian Han, our Vice President of Australian Operations,

Speaker 5

Thanks, Natasha. I'll start with Fosterville on Slide 19. As you have heard, Fosterville had a very strong Q3. Fosterville produced 135,000 ounces in Q3 2021 Based on processing, just over 180,000 tonnes at an average grade of 23.6 grams a tonne and Average Mill Recoveries of 98.7 percent. Production in Q3 2021 exceeded expected levels, Mainly due to continued grade outperformance in the Swan Zone.

Speaker 5

For the year to date, we produced 401,400 ounces, significantly higher than target levels, largely reflecting great outperformance in the multiple Production year to date 2021 compared to production of 476,000 ounces for year to date 2020. The reduction reflecting lower average grade consistent with our previously stated plan to reduce production with the intention of creating a more sustainable operation while we continue our extensive exploration programs. Partially offsetting the impact of a planned reduction in the average grade was a 28% increase in tonnes processed to just under 525,000 tonnes year to date 2021. Turning to costs. Again, we achieved a very strong performance

Speaker 3

and Web.

Speaker 5

And all in sustaining costs was $3.37 an ounce. For the year to date, operating cash costs averaged $184 an ounce, with all in sustaining costs of $3.67 an ounce. I'll now turn the call over to Larry Lizecki, General Manager and Vice President of D2O Lake Mine.

Speaker 6

Thanks, Ian. We'll start on Slide 20. As Tony mentioned earlier, quarter 3 was an outstanding quarter for Detour Lake. We achieved record quarterly production in Q3 of 189,000 ounces, in Q3 of 189,000 ounces based on processing 6,200,000 tonnes at an average grade of 1.04 grams per tonne and average recoveries of 91.6%. This is an increase of 35% from Q3 2020 and an increase of 14% from the previous quarterly record of 166,000 ounces in Q2.

Speaker 6

The quarter over quarter increase was largely due to a 5% increase in tonnes processed as well as an 8% improvement in the average in web grade. Mining during the quarter focused largely on high grade areas as part of the Phase 2 minuteing plan. For year to date 2021, we produced 101,800 ounces, which is 38% higher than the 8 months after the acquisition last year and a 22% increase from the full 9 months of year to date 2020. Looking at our operating cash costs averaged $601 in Q3 $6.47 per ounce for the year to date. Very importantly, the mine achieved record all in sustaining costs of $9.37 per ounce sold.

Speaker 6

Our strong cost performance was achieved despite some inflationary pressures we have seen on diesel, fuel and energy and in a few other areas. We continue to work on mitigating the impact of those cost pressures. Moving to Slide 21. As Tony mentioned earlier, we have a significant number of projects on the go of Detour Lake. Our growth capital expenditures at Titor for the 1st 9 months of the year totaled $137,000,000 Of that amount, dollars 66,000,000 was for deferred stripping and $70,000,000 was for the procurement of mobile equipment and projects involving tailings management area, process plants as well as construction of a new Assi Mab airfield.

Speaker 6

With that, I'll turn the call over to Evan Telshey, Vice President, Mike, Kirkland Lake.

Speaker 7

Thanks, Larry. I'm starting on Slide 22. Production at Macassa In Q3 totaled 46,000 ounces and an operating cash cost of 6.57 and an all in sustaining cost of 8.59. The increase in production from Q3 2020 mainly reflected a higher average grade in Q3 2021 compared to the same period a year earlier. The The reduction in production from Q2 2021 reflected lower tons processed due to largely to higher levels of underground maintenance and reduced equipment availability, as well as the impact of the lower than planned average grade due mainly to mining sequencing.

Speaker 7

Looking at year to date production at Macassa totaled 148,854 ounces based on processing 243,615 tons and at an average grade of 19.4 grams per tonne and average recoveries of 98%. Production year to date is lower than planned with the underperformance being due largely to reduced equipment availability caused by increased maintenance requirements, poor battery performance and delay in receiving new batteries. Moving to Slide 23, where we are doing very well at Macassa is advancing our key projects, mainly for shaft as well as with exploration, which I know Eric talked about in last quarter's call. Looking at fore shaft during Q3 2021, the shaft That's approximately 500 feet and had reached a depth of 6,100 feet as of September 30, 2021, with development of the 6,100 level station also being completed. We also made good progress with other projects such as our ventilation expansion involving completing of the 2 van raises.

Speaker 7

With that, I'll turn the call back to Natasha Bass.

Speaker 4

Thanks, Evan. So to wrap up the operating review, I'll look at the outlook for the full year. I'm on Slide 24. On a consolidated basis, Tony has already touched on it. And as he mentioned, we are on track to achieve the top of our production guidance of 1,300,000 to 1,400,000 ounces.

Speaker 4

Operating cash cost per ounce is on track to achieve guidance. And we are positioned to either meet or potentially even Okay. So just looking at the individual operations, Fosterville achieved its full year guidance in the first 9 months of the year. So we're now expecting Fosterville to produce around 500,000 ounces for the year or higher. Also with respect to operating cash cost per ounce, we should easily beat the guidance range of $2.30 to $2.50 an ounce.

Speaker 4

Over at Detour, Webcast. So we now expect production for the year of at least 700,000 ounces with operating cash comp at the top end of our guidance range was slightly higher. And then over at the CapExa, we are already seeing improved results in Q4. Having said that, we're not expected to achieve our guidance with production now going to be within and Webcast,910,000 ounces and operating cash costs above the guidance range. With that, I'll turn the call over to Eric

Speaker 2

We continue to have tremendous success with both drilling and advancement of the resource, with the key product being an updated resource and a substantial increase in ounces from our latest year end. Here information from the estimates shown on the 3rd slide, which is a long section looking northwards across the project area containing pit shells for both the new and the older work. The updated results have added approximately 10,100,000 ounces

Speaker 3

of the overall total to bring in

Speaker 2

the new total to about 14,700,000 ounces, and WebEx. Exclusive of our reserves, which at year end were about $15,000,000 All this material lies in a pit shelf, which is measuring about 4 kilometers long and extending to about and Webcast 600 meters from surface with all reserves located

Speaker 3

at the top shaded in

Speaker 2

the dark green and all the resources mined below are shaded in yellow and lighter green, Which is essentially covering the whole Southwestern area, the main focus of our recent drilling. Important to note that all this increase is accomplished with and Webcast. We're building about 180,000 meters of drilling or twothree of the planned 270,000 meter program started last year. And the limits of the pit are really close to the limits of drilling, and we are still seeing good holes at those limits. So now turning to my next slide.

Speaker 2

Number 26, what we see here is another image of our Detour illustrating additional details From the results model, along with new growth results released just 2 days ago and already demonstrating additional upside potential here. New results include an additional 39 holes and fixed wedge holes targeting mainly towards the West pit and in our view, we're taking a lot of very good positive messages, including reinforcement of our overall geological model of westward funding To note, permit you with the cluster holes on the west side of the current mid shell, where there was very limited drilling in the past and now continues to widen and higher grade intercepts as well as Hole number 300, which is the more in the central part of the West pit, which is actually drilled under the north wall of the pit and also having good inter steps. The other good hole I'd like to point out is Pembroke Gold 295, located in the eastern part of the south, which intersected We continue the program and we actually are feeling very confident about the project and Web. And our possibility is to give more ounces by the time we need to do the next update.

Speaker 2

Now turning to my next slide, which is number 27. We see the first of 4 slides relating to Pontotville and where we also saw some very good success in Q3, including Call. I mean intercepts for both the Lower Phoenix and Robbin Hill areas. In terms of the slide to hand, what we see is a long section across the mine area that's showing location of and Webcast. As well as some details for our 2021 exploration program.

Speaker 2

Syndicate at the Lower Phoenix is on the left hand of slide has 2 main targets The Swan at Cygnet and most of the work at this time being focused on the Swan and down plunge extension of mineralization from current reserves. The Cygnet is the 2nd zone located 100 meters in the footwall and also an important target here. Important to note is that until early part of this year, Most of the work at Swan was not really available to us. It only became more available when a new drip was finished in June. And now we have 5 drills at this location and able to do a lot of drilling in this area.

Speaker 2

Additional to this, we also now have a lot of drilling and Webcast. As with Swan Area, the main target is down plunge from the reserve. Most of the work to date As you can see, we are still continuing to advance the underground deep line and getting very close to be able to start drilling from underground. Turning to the next slide. What we can see is some additional details for the work that's happening at the Swan Zone, the Lower Phoenix area.

Speaker 2

And key things to note here would be we're starting to get a large number of holes. 1 109 holes were actually released in the last press release here. And the following holes are showing a fairly Consistent trend down plunge from the reserve. We're also seeing some very high grade intercepts right near the limit of the reserve, Including 51.7 grams over 2.6 meters, 12.8 over 4.6, 9.6 over 6.4. So and webcast.

Speaker 2

In addition to that, what we've seen is higher grade intercepts within the trend, 14.1 Over 7.5 percent, 10 over 10.4 percent, 13.2 percent over 3.2 percent, so in our view, offering Potential for high grade lenses within the overall trend. So turning to my next slide. This is just showing a little bit more detail for the drilling, which is happening in the Synget area. And as indicated, As with the Swan drilling, we've got quite a few new holes located within this area now. And From the new drilling, seeing a lot of new high grade intercepts, some of the key ones being 2 Key part of this drilling goal has been not only the entire beat results, but identification, I think, of parallels of blades Coming from the main structure which we identified in the past, the key was being dependent and targeted.

Speaker 2

And these are defined these are shown on the left hand side Slide the slides. As you can see, these are more directly aligned with the Swan and containing some of the higher grade intercepts. So very important developments, I think. Turning to my next slide, which is from the Robbin's Hill area. As you can see here, we are also starting to get quite a few drill intercepts and now holes extending down to about 1,000 meters down slightly.

Speaker 2

As announced in our last press release, it seems very favorable results right near the limit of the trend Here's a 1,000 meter level, very close to the elevation where swan started to look better. We're seeing coals that have quartz visible gold and WebEx. And numbers which are much higher grade than the average as we saw at higher elevations, including 28 grams over 1.1, 23 over 1.4, on Webcast. As of Swan, we've also seen some very high grade numbers within the trends, such as 81 grams over 2.5 meters, Which again would suggest the possibility of high grade lenses. So all in all, we believe that the work at Hiperstone comes along very well A lot of possibilities for not only replacing ounces, but coming up with new hybrid material.

Speaker 2

Now I'd like to pass it over to Tony.

Speaker 3

Okay. Thanks, Eric. And I'm turning now to Slide 31. I'll turn the slide And then as a conclusion, as you can see, we had an excellent quarter in Q3 2021. And besides operating results, we also had to highlight the quarter in terms of the merger announcement with Igloo Eagle, which will create A new leader in gold mining industry.

Speaker 3

And again, as we talked about, lowest cost, highest margin, best jurisdictions and an extensive pipeline and development and Webcast. And with a very, very strong balance sheet and strong corporate, there's a depth of Q3 was a record quarter, both earnings and earnings per share for Kirkland Lake Gold. And as outlined, Nature Did you outperform and the nunch shot number 4 quarter, I got Macassa remains on track for completion in late 2022, and That will really help in terms of that and combined with that, plus the new ventilation system at Macassa, plus a new fleet of equipment as we We'll get to 2023. We'll really transform the cast into a holding mine. Eric outlined our success.

Speaker 3

It's a drill bit that continues to be part of all of our That's value creation. And you can see we're doing that in each one of our assets, each one of our mines. Looking ahead, as Tasha gave some color to, we're on track to finish 2021 strong and achieve all of our 2021 guidance. We're also looking forward to moving into 2022 as part of a new world leading growth great gold mining company and is One that's well positioned to generate superior long term value for shareholders. But before I finish, I want to say it's a bit before.

Speaker 3

Yes. We're as we talked about, we are having said strong and traditional production success coming into Q4, but We're also at the start of the holiday Christmas season. During a period of time, maybe I'd ask everyone within Kirkland Lake Gold, our suppliers, contractors, those on the call, Please remain diligent for your own personal safety and safety of others as we end the year. We don't really want anybody You have heard no ounce of gold produced, no dollar in cash flow, no penny in your earnings is more important than your personal safety. And the personal safety of people You work with everybody should end the year.

Speaker 3

You're going to be able to be with your families over the Christmas season. Anyway, with that, I'd be happy to take some of my questions. Thanks.

Operator

And our first question is from Tyler Langdon with JPMorgan. Your line is open.

Speaker 8

Good morning. Thanks for taking my questions. Maybe just to start, can you talk about Sort of the levels of cost inflation that you're seeing right now and sort of what you're seeing in areas for materials and labor and fuel. And then just kind of But talk a little bit about your expectations heading into 2022.

Speaker 3

So the first part, I missed sort of missed a little bit of the first part

Speaker 6

of the question, but it was you're asking about what we're seeing

Speaker 3

in terms of labor inflation as well.

Speaker 8

Yes, sorry. Just the cost inflation you're seeing now and just from whether it's from materials, consumables, Labor fuel just kind of served the different buckets.

Speaker 3

Yes. Well, I mean, we don't see anything untangible in labor. I mean labor All those tracks that we normally see year over year in terms of the net labor cost. But again, part of it all Part of it all is as we train and develop people, as people earn more, they become more productive and webcast. And create more value.

Speaker 3

So a lot of that gets offset. So people earn the pay that they get the increase to pay it. It's always money well spent in those areas. We're happy to do it. In terms of commodity prices, I mean, I think it's up some of the big areas and And I'll get to Tasha and Ian and Larry to give a little more color.

Speaker 3

But some of the big areas that we talked about Our forecast where diesel was at the beginning of the year to where diesel prices have gone, some energy prices costs where we see that And if you have the commodities, definitely the FX rates have had some impact on us. But as you can see, our operations have been able to weather that and Web And perform well. Probably we would have if commodity prices would have stayed the same, we probably would have been at a significant B and Webinar. In our cost items, but I don't know if you have any color there.

Speaker 4

Yes. Basically, hi, Tyler. In Q3 2021, yes, we have seen some inflationary cost pressure, As Tony mentioned, mainly in diesel and electricity and things like grinding media, It has mainly impacted us at Detour. There have been some supply chain issues, as Devin mentioned, particularly with batteries and battery powered equipment. But through effective cost management and higher than planned gold sales largely at Fosterville, our operating cash cost rounds and So our ASIC sold in Q3 2021 was significantly better than the full year 2020 and Webcast.

Speaker 4

And then so looking forward into 2022, we expect inflationary pressures for energy and consumables to And focusing on cost management as we go through.

Speaker 8

Great. And then just as a final My question is Macassa, you mentioned some of the issues that impacted production in Q3 and you said they were getting you're seeing improvement now in Q4. I mean, should these issues Largely be resolved in Q4 or could they sort of slip into Q1 of next year?

Speaker 4

Yes. So the underperformance we have seen at the Castle is again mainly related to equipment availability caused by Increased maintenance requirements and also core value performance and delays in receiving the new value. So the battery truck industry is relatively new, As you know and with demand soaring, we are seeing tightness in the market as well as some issues with quality. So the value like we're getting at our mobile equipment is down in some cases to 6 months instead of years. We are seeing some better results in Q4 so far, so it is encouraging.

Speaker 4

We are working with our suppliers hand in hand to try and resolve these As soon as possible, so it doesn't impact us as much going into future quarters.

Speaker 3

Yes. If you went back a few years ago, The cast was a leader in battery technology, battery equipment. I saw it underground. We were really the only consumer of batteries. And So we were getting the quality and timing delivery and effectiveness of them.

Speaker 3

But now as the industry is and webcast. Yes. And more of the industry is asking for this equipment. The supply industry is not able to match. And all of a sudden now that you're seeing Drop in quality as well as the timing of the delivery and even availability It's exceeding that we need to wait for the supply industry to catch up.

Speaker 3

And we're going to be working on a number of initiatives to support that.

Operator

Our next question is from Ovais Habib with Scotiabank.

Speaker 9

Thanks, operator. Hi, Tony and Kirkland Lake team and congrats on a strong quarter. And really thanks for taking my questions. Couple of questions for me and I apologize in advance if you've already touched upon these. Several companies have reported Update this morning and I'm trying to multitask as best as I can.

Speaker 9

So my first question is regards to Fosterville. Now obviously, Fosterville had a fantastic year, Q3 production beat as Fosterville kind of continues to on the grade outperformance. You have made changes to the mine sequencing essentially bringing higher grade forward, but at the same time, you've seen some seem to be getting some significant positive grade reconciliation as well. Are you expecting this to continue into 2022? And are you modeling this Great reconciliation in Q4.

Speaker 3

How about Ian, as you've evolved into your prepared answer to this question. Is that fair?

Speaker 5

Yes, sure, Tony. It's a good question. So the Grady outperformance So far, we've seen this year has really only come from 3 stopes mainly. And those 3 stopes Account for essentially about 60,000 ounces of the over performance so far this year. So We don't see the broad range of stopes in Swan are modeled Really well and reconcile really well.

Speaker 5

We do have the odd really, really extreme grade areas that are really difficult to model, to be honest. And it takes very small variation in physical size of vein to add significant ounces and let's into the equation for the stope. So do we see it continuing? We have seen a little bit of outperformance already in Q4. But having said that, over the year, we're really only talking about 3 main states.

Speaker 5

As for the sequencing changes, driven by mine sequencing at the start of the year, so these decisions were made in Q1 leading into Q2. It had the effect of dragging some higher grade stopes from Q4 into Q2 as compared to the original plan. But really, the main contributor for the year has been those sort of three stopes that outperformed significantly. Does that answer the question?

Speaker 9

Yes, it does. And just to kind of follow-up on that, are you looking to kind of tighten up drilling or Do you have some additional grade control ring to kind of tighten up that model or is this positive reconciliation, you're just taking it as it comes?

Speaker 5

Yes. Good question. The drilling that we'd need To be able to really pinpoint the very what are really very small physical changes in vein, width and or gradation, We'll be talking about 5x5 sort of drilling. So we don't intend to do that. And we understand the geological We're sitting where these types of really extreme out performances can occur and we'll be looking to try and Model that as best we can going forward.

Speaker 5

I'll reiterate, the vast majority of the Swan reconciles really well It's just the odd state where we tend to have a bit of a football supply to it that It's leaving any outperformance.

Speaker 3

With that though, you still are expecting a pretty solid 2020, I mean, is it right?

Speaker 5

Certainly, Tane. Yes, Yes. We see 2022 still being a very strong year for Fosterville.

Speaker 9

Perfect. That's great, Ian. And just shifting gears to B tour, it was great to see Throughput moving higher in Q3 to 67,000 tons per day and really to meet the target of that 24,500,000 tons For the year, you need to kind of process around that 70,000 to 73,000 tons per day in Q4. Now, do you need any additional equipment or any additional to the plan to achieve this or are you on track? Any color you can provide in how October is progressing?

Speaker 3

You can answer that question, Mike or Natasha?

Speaker 4

Sure. I can start and then Larry can finish. Yes, overall, we're in a pretty good shape always. In Q4 from a mine perspective, we have good material and we're on target to We have some good luck in the quarter. The mill is shaping up to be very good.

Speaker 4

We have a small shutdown of plan in the quarter, but Nothing material. So from a plant perspective and from a mine perspective, we're in good shape to hit our target. Larry, do you want to add some more color?

Speaker 6

Yes, sure. In fact, it's we're very optimistic that we're going to finish strong In Q4, we've already got a good start in October. As we mine through some higher grade zones in Phase 2, that's We haven't even seen the benefits of the growth projects at the front end of Mill yet. So yes, things are looking Pretty strong for Tim to finish the year. So the team has worked really hard to make some operational improvements.

Speaker 6

So the increase in throughput is actually not through our growth projects yet as they come online this quarter and into next year, but should only help us and de risk those tonnage.

Speaker 3

Yes. A lot of the success from a A good point of view, it's a lot of initiatives. There's a lot of small initiatives. It's like a lot of the big Projects are still to come in 2022, right?

Speaker 9

Perfect. That's a great update. And just to confirm, In terms of the grade, I mean grade moved up over a gram ton in Q3. And is that expected to remain around the gram per ton going into Q4 as well?

Speaker 3

Yes,

Speaker 6

absolutely. And again, Phase 2, we're kind of That's right in the heart of the ore body right now going to see underground areas and we expect to be in and around the ground, around the tonne maybe a little better.

Operator

Our next question is from John Tumazos with John Tumazos Independent Research. Your line is open.

Speaker 10

Thank you. I know you provided some explanation. I wanted to give you a chance to explain a little more. The tremendous 67,368 tons a day through the mill at Detour, I'm assuming that it wasn't softer rock and that part of it was a significant Increase in uptime due to better maintenance practices and infrastructure improvements and that some of it was due to specific Relatively small capital improvements that don't stand out on the cash flow statement, but obviously had a big impact. Please tell us how you did such a great job.

Speaker 4

How about Natasha? Yes. I'll let Larry speak to the details as Hi, John. So there are some initiatives that we've been working on with respect to drill blast and getting higher Webinar presentation. We did have we did see some opportunity where we recovered some work within the areas of the talc area, so it is a better Thank you.

Speaker 4

There's some work being done on the mill size with respect to choke feeding and filling that up. Larry, do you want to add any more details associated with that?

Speaker 6

Yes, sure. I think, Natasha, most of it there. It's Really focused around optimizing our high intensity feed, high intensity blast, it said. So we are producing more fines. And yes, it is just as hard as it ever has been.

Speaker 6

So you got that, the drill feeding and really just the team working together between the mine and the mill and making sure that the feed is consistent. And actually on the uptime, We did have 2 plant shutdowns in Q3, with only 1 in Q4. So we So

Speaker 10

uptime was not a factor. You actually have more downtime.

Speaker 2

Yes, that's correct.

Speaker 11

Congratulations.

Operator

Our next question is from Mark Parkin with National Bank Financial. Your line is open.

Speaker 1

Thanks, guys. Congrats on the good quarter. It's certainly been the focus of the call. But on Detour,

Speaker 5

Can you just give

Speaker 1

us an idea of like where you're seeing what's the bottleneck currently? Is it more The mine is hungrier or it's more on the mining side. Is it mine or mill that you kind of focus on near term in terms of unlocking the next step of throughput upside.

Speaker 2

Go ahead, Natasha.

Speaker 4

Sure. So I think the mine is producing in a pretty good rate. The mill is doing the front end is doing very well. I would say if we wanted to increase throughput going forward into the future even further, I would say it would be the back end in terms of the CIT We are good at debottlenecking that and that's part of the projects that Larry and his team are working on to get established and commissioned later next and Webcast. Larry, any more color on that?

Speaker 6

No, that's good. That's where our focus will be in the Half of next year for sure is in the back end of the

Speaker 3

plan. Yes. But in terms of mine throughput, I mean, if you look at the updated Mine plan that Andre Lettie group put up. As we progress into 'twenty and into next future years, we increase mine My hope is we're going to be adding trucks. To support adding trucks, we're going to we need shops and things on-site.

Speaker 3

So there We're looking at new infrastructure in terms of putting a private LTE network out of partnership for Broadridge Communications to do that And we take advantage of technology on-site. So a lot of those initiatives that will help in terms of increasing throughput. Plus, as we go into the larger pit concept, it service. It gives you more geography to work with and a lot more and more flexibility in

Speaker 2

terms of less delays in terms

Speaker 3

of moving around, etcetera. There's a lot of these things that are going to come. And as Natasha and Larry mentioned, in terms of the plant, we're working on the front end to improve throughput and WebDirect. Through the pressures into the SAG mill, and that's part of that is screens and the refeed system. And then getting more tonnes to the mill is good, but we don't monitor the expense of recovery.

Speaker 3

And that's where As you mentioned, we're working on improvements and expansion of our unique circuit, our CIP circuit as well as the new gravity Additional gravity circuit to be added to the mill over the next month.

Speaker 1

Thanks for those details. Two other things is, Historically, we saw loading rates in terms of what a truck could actually be loaded to versus what it was actually being loaded to. That was kind of a historical issue pre your management time. How has that kind of shifted But to where you're kind of operating today, are the trucks kind of right in line with maximum capacity? And then Historically, also, there was a fair bit of re handle.

Speaker 1

Now that the open pit continues to mature, are you seeing, But relative to historical years, the amount of re handle fall or is that still kind of something that the West It really unlocks the potential of showing significant improvement on that front.

Speaker 6

Okay. Sorry, I can speak to the truck payloads. It's something actually that's been ongoing for a couple of years now is we've looked at the bodies that we had originally with The 795s and looked at kind of right weighting the trays and to get the state of the increased table. So we've always been focused on maximizing GBW and keeping within a fairly tight range. But with these, as we Continue to add the truck bodies where we've increased payload by almost 2%, 2.5% here over the last maybe 4 quarters or so.

Speaker 6

So that's that probably gives you a bit of and we ask our shelf operators. It's something we monitor very closely and asking to make sure that we're paying close attention to maximizing payloads as well.

Speaker 1

Okay. Excellent. And just on the re handle?

Speaker 6

Sorry. Yes. Within the pit, there's very little rehab. We really focus on establishing a good the Collagen Ramp System right off the bat. However, we do still have kind of historic levels of re handle with ore up on the run.

Speaker 6

And that's actually been fairly important for us to achieve these levels of mill throughput. So When we focus on our high intensity blasting in the ore zones, we can't do it everywhere. It's only in the areas that we're kind of safe with respect to minimizing dilution. So we have to stockpile a fair bit of ore so that we can maintain that consistent blend going through the mill.

Speaker 1

And is that something that if you have West When Pitt opened up, you can kind of balance that off by doing ore in 1 while waste in the other? Or is that not how you guys see that yields still be something like what you're kind of running at now?

Speaker 6

Yes. We foresee a rehab of levels to be kind of in line with where we are currently.

Operator

Our next question is from Bahar Turek with Credit

Speaker 11

in Wedbush. Your line is open. Hi, good morning. Thanks for taking my question. I'm just trying to get a sense of what will be incorporated into the next year's Life of mine plan at Detour.

Speaker 11

So it sounds like obviously the year end reserves will be part of that. Earlier in this call, there was something mentioned about potentially debottlenecking the back of the plant. Are those efforts or that optimization, is that going to be pertinent to the plan as well? Or is that just potential further upside?

Speaker 3

Well, in terms of the All these efforts we've talked about demodelining the plant, this is all part of the what's going into the mine plant, which is being used at dry value. There's a lot of those in this sense. I alluded to it. Once we you've got to be increasing size of truck fleet, increase Maintenance Capability, a lot of other initiatives in terms of like So we're saying green control improvements that we're working on. Natasha mentioned about blasting improvements.

Speaker 3

That's been and Webcast. Natasha, maybe you can give more.

Speaker 4

Yes. So yes, everything we see tells us that we're headed for a strong growth in and Webcast. And that we're well on the road to transforming Detour into one of the largest And in terms of what next year's reserve increase will look like, the new mine plan will look like, yes, it will factor in All the improvements that we are working on, what Tony mentioned, the IPTV was mentioned was part of this past But there's still a lot of work to do from a life of mine perspective, and we'll get through that in

Speaker 3

I mean, on the CIP plant, I mean, if we could go back, we would have built a different style of CIP And we're there, but we live with what we got. And we have and people at the site have done a great job in terms of identifying areas

Speaker 11

Okay. Got it. So it sounds like all of that is being factored in. Okay. And then just switching gears to Fosterville just quickly.

Speaker 11

You already spoke about grades, but just on throughput, obviously throughput this quarter was quite strong. I'm just trying to figure out for Q4 because even if I keep throughput even flat or slightly down, you're going to be well ahead of even above 500,000 ounces for the year. So is that throughput level sustainable into Q4?

Speaker 4

Yes. Hi, there. There's with Fosterville, yes, we're expecting to see some pretty decent throughput levels. We do have a shutdown coming up. But overall, I believe that we're projecting the grades in some of these areas that we're mining to be somewhat lower.

Speaker 4

Ian, Ian, do you want to provide any more color on that?

Speaker 5

Yes, sure, Natasha. Look, the mines are really well sequenced At the moment, the guys are on top of the development and that flows through the stoping. I think what we've seen so far is that with the impact of Pay still coming on last year and then really embedded this year. And a lot of the work on-site has gone into The production sequences themselves, have we seen the benefit of that now with the increased productivity of our sloping? And we expect that to continue on.

Speaker 5

And in fact, we would see ourselves improving Our tonnage productivity over the coming years.

Speaker 3

And No, I guess the other part in terms of the plant itself, I mean, it's still not cheap. The plant is up to 800,000 to 850,000 tons a year or plus plant, right? So It's not milk that's holding it back. It's minecraft and that's a big

Operator

We have no further questions at this time. I'll turn the call back over to Drew Oetting for any closing

Speaker 2

remarks. Well, thanks, everyone, again for taking part in our call today. As you

Speaker 3

heard earlier, a very strong Q3

Speaker 2

and a very strong 1st 9 months of 2021. And even more important, we're We're positioned for a very strong finish and to finish the year very well relative to our guidance. Looking further ahead, as I said when I started, we're very excited Thanks, Frank.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now

Powered by Quartr
Earnings Conference Call
Kirkland Lake Gold Q3 2021
00:00 / 00:00