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spk02: Good afternoon, ladies and gentlemen. My name is Mariama and I will be your conference operator today. I would like to welcome everyone to the Kirkland Light Gold conference call and webcast to discuss the company's third quarter 2020 financial and operating results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, you may press the pound key. With that, I would now like to turn the call over to Senior Vice President of Investor Relations, Mark Eding.
spk08: Thank you very much, Operator, and good afternoon, everyone. Welcome to our third quarter 2020 conference call and webcast. On today's call, we will be reviewing our results for the three and nine months ended September 30th, 2020. On the call today are many members of the Kirkland Lake Gold senior management team. Speaking today will be Tony McCooch, our president and CEO, David Soares, our chief financial officer, Ian Hahn, co-lead of Australian operations, Evan Pelletier, our vice president of mining, Kirkland Lake, Larry Laziski, our general manager of Detour Lake Mine, and Eric Calio, our senior vice president of exploration. After we go through the presentation, we'll then open the call up for questions. Oh, I should also mention there are several other members of our management team on the phone as well. After we go through the presentation, we'll open up the call to questions. We ask that each person limit themselves to two questions. The slide deck that we'll be referring to is available on our website, both on the homepage and in the events section. Before I get started, I'd like to direct your attention to slide two in the slide deck, which relates to forward-looking statements. Our remarks and answers to questions today may and probably will contain forward-looking information about future events affecting our companies. please refer to slide two, as well as the forward-looking information section of our most recent MD&A, dated November 4, 2020, for more information. Also during today's call, we'll be making reference to non-IFRS performance measures. A reconciliation of these measures is available in our most recent MD&A. Finally, I'll mention that all figures we use today will be in U.S. dollars, unless otherwise stated. With that, I'll now turn the call over to Tony Makuch, President and CEO of Kirk and Lake Gold. Thanks, Mark, and thanks, everyone, for joining. And maybe before I get started, maybe we should acknowledge and thank all the people at Kirk and Lake Gold and their families for what's been going on. I know it's been a very unusual and difficult year for people. We don't take it lightly, the trust you put in us to keep people safe, providing a safe workplace. And in that order, keep the families safe and keep the communities we live in and we work in safe. As well, you know, we acknowledge the fact that the people that do work for Kirkland College, the people that haven't come into work, you know, they've been very, very good on working safely and during this period of time and really, you know, being COVID-free as much as we can at our sites. And, you know, that's an acknowledgement of people that really recognize the importance of things and attention to detail. you know, and also the attention to looking out for everybody else. So anyway, thank you for everybody for what you've done, and let's look forward to continued success as we go forward into Q4 and into 2021. I'll start here now on slide four, and it's This is starting off with discussions on our efforts into environmental and social governance at Kirkland Gold. We've been making a lot of progress with formalizing our approach to document and reporting on all the good things we are doing. In terms of the next slide, slide five, a key area for us, as I mentioned, is formalizing our processes around public disclosure. We have signed on to the World Gold Council responsible gold mining principles and are aligning ourselves to be ready for the Mining Association of Canada towards sustainable mining. We've conducted internal gap assessments and engaged a third party verifier to review our readiness towards these standards. Today, we've made a lot of progress in developing and implementing policies and standards, namely human rights, inclusion, equality, diversity, Supply chain management, stakeholder engagement, and community feedback. Regarding greenhouse gases, we have a great success story in Kirkland Lake Gold. Maybe I'll spend a little time telling you more about that later. We really have been a leader in the industry. Turning to slide six, this is us actually showing you where we are in our greenhouse gas emissions in more detail. This slide shows our performance versus the global gold mining and gold industry. As you can see, we compare very favorably to our peers with Detour Lake, Macassar and Fosterville, all well below the comparable industry averages. In particular, you can see just how low Macassar's greenhouse gas emissions are given the extensive use of battery powered mobile equipment at the mine. Turning now to our financial and operating results as shown on slide seven. We had a strong quarter in Q3 of 2020. Adjusted earnings were $0.91 per share, which increased from $0.80 in last year's third quarter and $0.79 in Q2 of this year. Once again, we generated substantial amounts of cash flow. Operating cash flow totaled $431 million, and free cash flow was $275 million in the quarter. On a year-to-date basis, if you exclude non-recurring items, we generated almost $700 million of free cash flow. The key driver to our strong performance was significantly higher revenue, partly compared to last year's third quarter, particularly compared to last year's third quarter. I'm sorry about that. And, you know, a big part of that will be due to gold price. You know, David will get into it in the details of that shortly. We also benefit, though, from solid growth and gold sales, which largely reflected the addition of Detour Lake. Effectively, we substituted high-volume production at Detour for high-cost, small-scale production at Old Complex, where operations were suspended in April. From a return standpoint, it was a very valuable shift for us and our shareholders. Going to slide 8, we reported significant growth in cash in Q3, increasing by over $300 million to about $850 million. The key contributor to cash growth was our $275 million of free cash flow. In addition, we added $108 million of cash from selling our shares in Cisco Mining. This was a good investment for us with a gain of $60 million being recorded on a comprehensive basis. We also gained $75 million in cash from Newmont Canada through a strategic alliance agreement involving the whole complex and exploration opportunities in the region. Offsetting these sources of cash, we continue to invest aggressively in our key assets, and we make further progress returning capital to shareholders. I'll turn to slide nine. Our number one priority in terms of capital allocation is investing in Macassar, Detour Lake, and Fosterville, our three cornerstone assets. So far this year, we have invested about $345 million of capital into these three mines. Our total growth capital year-to-date is $60 million, and that number will go up significantly in Q4. Macasta accounts for over half of that amount, with the number four shaft project being the largest component. The shaft is progressing very well, and you will hear more about that in a few minutes. Growth capital at Fosterville here today is about $15 million. We finished constructing a new ventilation system and a new refinery earlier this year. The new ventilation system was critical in terms of being able to increase tonnage coming out of the mine. And that was the result of it. But the critical aspect of it was significantly improved working conditions in the mine, lowered the heat. and gases and basically improve the working environment for people. At Detail Lake, we had a number of other projects since the acquisition. We're constructing a landing strip to begin bringing people in via air and coming into 2022 as opposed to buses. Sorry, 2021. An assay lab, new welding shop, and other infrastructure as well. We also have tailings and mill enhancement projects underway. We're adding new mobile equipment to support growth as we move forward. Now I'm looking at slide 10. The key part of investing in our assets is exploration. It's been a big driver of value creation in Kirkland Lake Gold since 2016. We've invested year-to-date about $87 million in exploration, and we expect to reach about $130 million by year-end. I don't want to steal Eric's thunder. We will speak shortly about exploration, but we are clearly having significant success this year with the drill bit. Our last announcement was a couple weeks ago at Macasa, and they were some of the best exploration results we have issued in a long time. We have long felt that the area where the self-mine complex comes together with the amalgamated breaks could be extremely interesting. And with results like 254 grams over 15 meters, that view is only intensified. At Detour, we have had considerable success very early on in our drilling program. Our drill results increasingly support our view that there is one very large deposit covering the areas around the Main and West Pits. Finally, at Fosterville, we have put out some very encouraging results during the third quarter. They include better than expected grades from infill drilling in the Swan Zone. also included results to demonstrate the scale and growth potential of mineralized systems at signet robbins hill and harrier now turning to slide 11 we've made great strides with the second component of our capital allocation strategy returning capital to shareholders so far this year we have returned almost 650 million dollars through share purchases and dividends 527 million of that amount has been used to repurchase 14 million shares through our NCID. We have a stated goal of buying back 20 million shares over 12 to 24-month period and doing very well against that goal. In terms of dividends, we have ramped it up considerably. We first doubled the quarterly dividend in Q1 to 12.5 cents per share. That resulted in over $100 million being paid for our Q1, Q2, and Q3 dividend payments. About a month ago, we announced another dividend increase, this time by 50% to $0.1875 per share per quarter. The new dividend takes effect with the Q4 payments in January. As you can see, we are very committed to returning capital to shareholders. Between buybacks and dividends to date, we have returned about $2.35 per share or $643 per ounce of production per year to date, 2020. Moving on to slide 12, the third component of our capital allocation strategy is adding new assets that have transformational potential. Obviously, the most recent example of this is the Detour Gold acquisition. The addition of Detour Lake has been a tremendous transaction for our company and our shareholders. We've already talked about exploration and where results have been very encouraging. In terms of performance, the mine is doing very well. So far this year, Detour Lake has generated $231 million of free cash flow, which is over 40% of our total free cash flow. We expect to see higher levels of production next year and in the process of getting the permit and making the investment needed to increase tonnage on a go-forward basis. Moving to slide 13, redoing well against our guidance. You may recall we reissued guidance on June 30th after withdrawing it due to COVID-19. In terms of production and unit costs, we're in very good shape to achieve a consolidated guidance. Looking at the components of production, we expect Fossaville will beat its target range of 590 to 610. That will be offset by Macassar, which will not get to 210,000 ounces, the low end of its target range. The CAFSA has had a number of challenges this year. It has been impacted by COVID more than any of our other operations. We also were affected by extreme heat and mine during Q3. This impacted our productivity and equipment availability. The result was reduced mining rates and a lower average grade because we didn't have access to many of the higher grade areas we planned to mine. In terms of other consolidated guidance, we are in very good shape. As mentioned, we are adding new projects at Detra Lake, which will result in higher capex in Q4, and we will see a significant step up in exploration expenditures this quarter as well. With that, I'll turn the call over to Dave Soros, our Chief Financial Officer. Thanks.
spk06: Thank you, Tony, and good afternoon, everyone. I will start on slide 14. As Tony mentioned, we had strong earnings in Q3 2020. Adjusted net earnings totaled $249.3 million, or $0.91 per share. a 49% increase from Q3 2019 and 14% better than last quarter. We had a significant difference between adjusted net earnings per share of $0.91 and net earnings per share of $0.73 in Q3 2020. The difference was mainly related to rehabilitation costs of $32.6 million resulting from an increase in our environmental remediation provision. These costs relate to a new rehabilitation program we have commenced in Northern Territory aimed at addressing legacy environmental issues caused by previous owners. Also excluded from adjusted net earnings in Q3 were $23.6 million of non-cash foreign exchange losses reflecting the strengthening of the Australian and Canadian dollar against the U.S. dollar during the quarter, as well as about $8 million of restructuring and severing costs. mainly related to old complex. Turning to slide 15, as you have heard, the key driver of improved earnings in Q3 was higher revenue. Revenue in Q3 2020 totaled $632.8 million, 66% higher than revenue of $381.4 million in Q3 2019, and higher than the $581 million of revenue reported last quarter. Of the increase from a year ago, $141 million resulted from a $425 per ounce increase in the average gold price to $1,907 per ounce. $112 million of revenue growth came from a 30% increase in gold sales to 332,000 ounces, mainly related to the addition of Detour Lake. Compared to last quarter, we had a $63 million increase in revenue, which resulted from a $191 per ounce increase in the gold price from $1,716 per ounce in Q2. This impact more than offset a $16 million reduction from gold sales, with gold sales of 332,000 ounces in Q3, slightly lower than 341,000 ounces last quarter. The reduction was mainly due to lower sales at McCassa and Fosterville, as well as the suspension of operation at Holt Complex, which had no sales in Q3 versus 3,600 ounces of sales in the second quarter. Looking at EBITDA, as shown on slide 16, Q3 2020 EBITDA totaled $384 million, a 30% increase from $296 million in Q3 2019. Compared to last quarter, EBITDA increased 24% from $310 million. The change from last quarter relates to net earnings, which were higher, driven by revenue growth and lower losses due to FX, $23.6 million in Q3 2020 versus $72.8 million in Q2 2020. The deferred income taxes are higher compared to last quarter, driven by increased earnings before tax. Excluding FX gains and losses, we would have compared favorably to last quarter in terms of EBITDA. Turning to slide 17, it looks at our cash and cash flow. On the slide, you will see that our operating cash flow was very strong. It includes $47 million in cash taxes paid in Q3 2020. Other factors impacting our cash were ongoing investments in our key assets, in which we spent $156 million, which was offset by $109 million from the sale of investments, mainly our Cisco shares, and also $75 million received as part of the Newmont Strategic Alliance Agreement. These items mainly account for the $25 million of net cash from investing activities. Cash used for financing activities of $146 million reflected $107.4 million that were used during the quarter to repurchase 2.1 million shares. Also, as Tony mentioned earlier, we used $34.5 million for our Q2 quarterly dividend payment of 12.5 cents per share in July. Turning to slide 18, it looks at the change in cash in a different way. You can see that the largest contributor to growth in cash was from our operations, which generated about $310 million of cash, which is before interest, income taxes paid, and the impact of changes in working capital. Slide 18 also highlights the impact of key items mentioned in the previous slide, including the sales investments, the Newmont option, cash taxes paid during the quarter, share repurchases, and dividends paid. On the slide, the reference other includes exploration expense and working capital movements, including the build-up of AP at Detour Lake due to timing and increased capital spend and the impact of the Fosterville royalties approval. With that, I'll turn the call over to Ian Hahn, co-lead of our Australian operations.
spk08: Yeah, thanks, David. Good afternoon, everyone. I'll be speaking to slide 19. Fosterville had another strong quarter in Q3 2020. We produced 162,000 ounces. Production was slightly higher than both Q3 in 2019 and the previous quarter in Q2. Our production in Q3 came from increased tonnage with the graders planned slightly lower than their previous periods. We produced, processed about 168,000 tonnes per in Q3, which was a significant step up. It was 40% higher than Q3 in 2019 and 36% higher than the previous quarter. In fact, at times in September, we were running at record mill throughput. This was a tremendous effort. The average grade for Q3 of 30 grams compared to around 40 grams for both the prior periods. We have been investing in infrastructure in the mine to support the higher mining rates. We completed our new ventilation system earlier in the year and completed a Pacefield project late last year. Both of these projects have been very important from the standpoint of increasing our production volumes. We continue to achieve very low costs in Q3 2020, operating cash costs of 142 per ounce, higher than the prior periods, mainly due to average grade. Asset per ounce sold averaged $349 versus $289 in Q3 2019 and $273 in Q2 2020. The change from Q3 2019 largely reflects the impact of the new royalty introduced by the Victorian Government at the end of 1 January 2020. That alone contributed $52 per ounce to foreign sustaining costs in Q3 2020. Excluding the royalty, ASIC per ounce was similar to the prior year levels. ASIC was higher than the previous quarter due to increased operating cost per ounce, as well as higher royalty expense. In addition, sustaining capital expenditures were higher in Q3 versus Q2. And that really just reflects the disruptions of project work through the middle part of the year due to all the COVID-19 protocols. We're back working on nearly all our projects in Q3. On a year-to-date basis, we produced 476,000 ounces in the first nine months of 2020 at operating cash costs of $132 and ASIC of $311 per ounce. Of the $311 per ounce of ASIC, $47 per ounce related to the new royalty. As Tony mentioned, we are on track to meet our production guidance for the year. very good shape to achieve our operating cash cost per ounce guidance. Finally, during last quarter's call, we discussed the spike in COVID cases in Victoria. We can report that the situation has improved significantly, with many of the restrictions having been lifted. It is something that's been monitored very closely at Fosterville, and we continue to have all of our health and safety protocols in place. I'll now turn the call over to Edmund Pelletier, Vice President of Mining, Kirkland Lake. Thanks, Ian. I'm starting on slide 20. Tony briefly discussed Macassar in his remarks. As he stated, we had a challenging quarter. We produced 38,000 ounces at an operating cash cost of 648 and an all-in-sustaining cost per ounce of 1,081. Production was based on processing 78,000 tons and at an average grade of 15.4 grams per ton. There was a combination of factors that contributed to the quarterly performance. First, we were impacted by the health and safety protocols we had in place. Some of which were related to COVID and some were related to the excessive heat in the mine. Essentially, there were areas where we couldn't let workers go for their own safety. And these areas were largely higher-grade areas. We were also impacted by the limited development in some areas, which constrained our flexibility and reduced equipment availability, which largely related to the heat. As a result, our mining rate was down and our grade was lower, given the sequence that we mined. On a year-to-date basis, production totaled 131,000 ounces at an operating cash cost of 573 and an all-in-sustaining cost of 915. While not tracking to meet guidance, we are expecting and seeing a stronger fourth quarter. Looking ahead, we have projects in place to improve ventilation. Some of the benefits is being realized this quarter, with more to come in 2021. and will achieve significant improvements in ventilation with the completion of foreshaft. Now turning to slide 21. This slide looks at the foreshaft project in more detail. We're about a month ahead of schedule with the shaft. During Q3, we sank to the shaft 780 feet for a total of 3,366 feet by quarter end. We're currently at about the 3,700 level and expecting to achieve over 4,000 feet of advance by the end of the year. We also continue to make good progress with the steel installation and putting in place all required infrastructures, as you can see on the slide. I'll now turn the call over to Larry Lazinski, General Manager of Detour Lake Mine.
spk07: Thanks, Evan. Returning to Detour Lake on slide 22, the mine produced 140,000 ounces in quarter three compared to 132,000 ounces in quarter two. Mill throughput totaled 5.9 million tons, which was a quarterly record. The average rate for the quarter was 0.81 grams per ton versus 0.79 grams per ton in Q2. We're already seeing significantly higher grades in quarter four and expect to finish the year with a solid performance over the final three months of 2020. Looking at unit costs, operating cash costs averaged $634 in Q3 compared to $573 the previous quarter. The increase reflected which totaled 6.8 million tons versus a total of 5.9 million tons melted. Also contributing to increased operating costs were reduced deferred stripping and increased maintenance and procurement costs as the mine ramped up following reduced operations in Q2 of 2020. All-in sustaining costs per ounce sold averaged $1,259 versus $1,090 per ounce last quarter. Sustaining capital totaled $80 million versus $6 million in Q2. The increase largely reflected the ramp up of capital projects and equipment procurement, which have been impacted by reduced operations related to the company's COVID-19 response in Q2 2020. Also, as Tony mentioned earlier, we have added a number of projects at Detour Lake, some of which impact sustaining capital expenditures. On a year-to-date basis, production at Detour Lake totaled 364,000 ounces, an average cash cost of $630, an all-in sustained cost of $1,156 per hour. In terms of guidance, as mentioned, we expect a strong quarter in Q4 and are already seeing improved results. We are well-positioned to achieve our goals for the year of 520,000 to 540,000 ounces of production. at operating cash costs of $610,000 to $630,000. With that, I'll turn the call over to Eric Calio, Senior Vice President of Exploration.
spk09: Thanks, Larry, and good afternoon, everyone. My first slide today is number 23, which is from the CASA, where we continue to ramp up exploration from Q2, and as we do, now starting to get some very good results from a few different areas, such as those we announced in an October press release. As shown on the slide and discussed in the release, a large portion of the recent work has been in the west part of the mine and focused on infill and expansion of the amalgamated lower SMC and central SMC zones. Building for the amalgamated lower SMC was mainly from the 53, 56, 57 levels and testing near the west limits of those zones. And building for the central SMC was from the north part of 57 and directed to the south contact of the zones nearby to be amalgamated. Intercepts, key intercepts from the three different target areas are shown in clusters on the map in different colors. Those from the lower SNC are with purple, amalgamated with blue, and then the one new intercept from the central SNC is in the lower right-hand corner with yellow. And although all three areas produced some very good results, We did have the very special hole, of course, from the central SNC of 253.7 grams over 14.5 meters, and which is shown on this slide is right where the two, the SNC and the amalgamated, start coming very, very close together. And although it's very possible this hole is not the best angle or a very large step out, the high grade is very encouraging, as well as the possibility that this could combine with other structures with the amalgamated to create wider and better grade zones. We also note that the area to the west of the intersection is open for at least another 25 or 30 meters. With that, now I'll turn over to slide number 24, which is a long section. It should be a long section showing some additional details for the drilling on the lower SNC. And where it's indicated, the main focus was on infill and expansion on the west edge of the current resource and reserve. indicated the drilling here was very successful overall, had a high proportion of good grade holes, and some of the best success being in two areas within the main target area. The lower left side was very, very encouraging, an area which has mostly inferred resorts at this time and some gaps. And the other area was up in the upper left where there was an untested gap just below the 53 level. So, you know, not big step-outs, but, you know, still adding potential to add quite a few new reserves in this area. Turning to slide number 25 now, we see some details for the amalgamated. We're shown we had whole testing, a number of different areas, both upgrade and expand the resource. As indicated, most of the results are quite visible here as well. And again, a couple of key areas to point out would be the area to the knee-deep west of the current resource, where we extended by at least 25 metres, And then, of course, directly above, we've got several hydrate values up to 50 meters of depth of the zone. So now turning down to slide 26, you should be seeing an image for the detour lake property and illustrating results from our second batch of results from the large bill campaign, which we condensed in March. And these results were announced in October. As mentioned in the release, the drilling is part of the 250,000-meter program, which we aim to complete before the end of 2021 and will allow completion of an updated resource and potentially expanded mine operations. Results on the plan are from the Main and West Pit areas and indicate another eight holes into the saddle between the Main and West Pits. where there are no current reserves and very limited resources. As indicated in the release, all the holes were very successful. It continued to intersect broad zones of mineralization with attractive-grade scoping pits and higher subintervals that could have potential for underground resources at depth. Although there are a number of good holes in the relief, the C1 to me really was number 16, which intersected 1.1 over 142 in pretty much the central part of the saddle, so basically demonstrating a continuous a strong chance of a continuous structure extending between the two main pits. Then turning on to slide 27, you see a long section view looking northwards through the main west pit and saddle areas and offering a different perspective on the current reserve and new drill holes. And as indicated, the current reserves are contained in two pit shells. outlined in magenta and filled with colored blocks for grade. These are the reserves that we have that make up the 15 million ounces, and the new holes are located in the area between. Most of these holes are in the west side of the saddle and east side of the previously announced hole 4, which also had very good results. Hole 16 is in the central part of the saddle near the 380-meter level. So in summary, work to date at Detour continues to go very well, and our focus now is mostly on finding ways to increase the speed of drilling. We have fixed drills on site at this time and plan to have up to 10 before year-end, with most of our efforts being directed towards this battle area. So now turning on slide 29 in Australia, just like to mention that as with Canada, our program at Fosterville continues to ramp up, and as indicated in our release at the beginning of the quarter, having some good success in a number of areas, including the Swan, Cygnus, Carrier, and Robbins Hill. At this point, we have 12 building operations versus only three in Q1, which is close to the original budget, and continuing to build on the recent success. Although we don't have any new results at this time, we continue to see signs of courts, visible goals, and potential for higher grade mineralization in a number of areas. So we remain very optimistic on our chances to add to the high-grade resort states. And with that, I'll pass the call back to Tony.
spk08: Thanks, Eric. And I'm on slide 29 now. To conclude, Kirkland Lake Gold achieved strong results in Q3 2020. We had solid earnings driven by significant revenue growth. We generated over $270 million of free cash flow in Q3 and close to $700 million for the year to date, excluding non-recurring and unusual items. We significantly built up our cash position during the quarter, growing cash by 58% and maintaining our industry-leading financial strength. We continue to invest in Macassar, Beecher Lake and Fosterville. Macassar, the number four shaft, ventilation, Beecher Lake, mill improvements for production growth, et cetera, and Fosterville. ventilation and pace fill, et cetera. And, you know, the results board well in Q3, whether it was record mill throughput at Detour Lake in Q3, and really there's been a significant growth in production and mill production at Fosterville. On top of that, with the investment at our assets, we've generated some very encouraging exploration results as well. And, you know, I think, you know, if you listen to Eric and you see what's happening, you can see there truly are three of the most compelling exploration stories in the industry. Another key part of our strategy is returning capital to shareholders. Between share buybacks and dividends, we have returned close to $650 million to shareholders this year, representing $2.35 per share. This will continue to be a priority of ours going forward. Finally, we are extremely pleased with the acquisition of Detroit Lake. It truly has been a case of the right deal at the right time. Detroit Lake has generated over 40% of our free cash flow this year. There are many opportunities to enhance the operation, and we are making the necessary investments for the mine to achieve its full potential. Speaking of potential, the exploration results to date have been very encouraging and provide increasing evidence that we can achieve our goal, substantially growing reserves at Detour in support of production growth and improved unit costs. If you really want to look at and get a sense of where Detour can be over the next few years, there's potential there to become the largest, not just the largest gold mine in Canada, but the largest gold mine in North America. Anyway, with that, I'll say thank you, and we'll be happy to take your questions.
spk02: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from Obey Habib with Scotiabank. Your line is open.
spk08: Hi, Tony. My questions. So just a couple of questions for you, Tony.
spk06: Starting off at hospital, the grade coming down in Q3 was due to basically the higher tons process and increasing the mine rates from Harrier and Lower Phoenix to Monahe, I understand. And this is also decreasing the tons from swan. So can you provide us, you know, just the percentage that where these tons came from, from each zone?
spk08: Ian, hi, I'm on the call. Ian, can you... You OK with providing some colour in this, through these? Yeah, no worries, Tony. Hi, guys. Look, for Q3, the swan composed about 54% of the tons. Whereas if you compare, say, to Q2, it was 62% of the tonnes. And if you compare back to, say, Q3 2019, it was around 61% of the tonnes. So as a percentage of the tonnage coming through, SWAN came down for that quarter. And then is this the mix that we should expect going into Q4 as well? Look, you can see on the diagram on slide 19, you know, we are fairly tightly constrained on the sequence with the SWAN and the AUDAC system there. We're certainly with the improvement with the pace bill coming on and the ventilation to the entire mine, we are certainly able now to open up a few more areas apart from these within the operations and we'd expect that to continue. And then that should give you, you know, runway to achieve that full, achieve the full milk capacity then going into 2021? We certainly have a lot of our plans built around continuing to consistently and sustainably increase our tonnage throughput through the milk over the coming quarters. Okay, perfect. And just moving to detour then, you know, Mining and milling rates improved nicely quarter to quarter.
spk06: Our grades were below expectations, I guess.
spk08: Can you give us an indication whether you've started mining into higher grades in October and November? And also, should we expect similar kind of mining and milling rates going into Q4? Larry, are you okay with answering this question? I mean, I can tell her, but how about I drop it out with you?
spk07: No problem, Tony. Okay. So, yeah, so money and billing rates, we expect to be very similar to Q3. And as far as grade, if you remember in Q2, we were impacted with our slowdown, and that pushed our plan back a little bit. But we're getting back on track in the plan, and our grades in Q4 are actually going to be, you're going to see some improved grades going on to the end of the year. We are confident that they will be coming in at our guidance. Okay, sounds good.
spk06: And just quickly switching gears to exploration, are we looking to get any sort of exploration results from Fosterville anytime soon?
spk08: Well, I think, you know, I mean, it's always a function of when we get material results coming out. And I mean, there's a lot of drilling going on. There's a lot of work happening. And when we have information to put out, we don't sit on information. We will be putting it out. The question is a combination of maybe yes or no, right?
spk06: Sounds good, Tony. Thanks so much. Thanks.
spk02: Your next question comes from Josh Wolfson with RBC Capital Markets. Your line is open.
spk05: Thank you. For MACASA, is there any more information you can provide on some of the high heat issues and what the progression of the quarterly results will look like for the asset to get back to steady state?
spk08: Yeah, well, I mean, Evan and Duncan are on the call and they can give us some color. But fundamentally, I mean, the Macassar is still, I mean, and the reason, a big part of the driver with getting the battery powered equipment there was the fact that we needed and developing a new shaft from surface and a new ventilation system, which we started quite some time ago, was to get more air to the mine as it's going deeper and far out into South Mine Complex. So it is somewhat ventilation constrained. And then combine that with the, you know, high heat, high temperatures outside in Kirken Lake this summer. It was a very hot summer. And that's the source of most of the source of the air. So we already have mine heating conditions happening. And combine that with bringing more hot air into the mine and not having the ability to put significant ventilation down there. That impacted it. Evan might be able to give you some more color on that, but we do have a program. We are developing new ventilation raises to surface. There is some improvements scheduled for this quarter plus coming into 2021, beginning of 2021, and then fundamentally once we complete the shaft, the number four shaft will be a significant improvement in ventilation. And the other parts of that question, Evan, are you happy to talk about it, quarter over quarter production and where we see production going? Yes, sure, Tony. So Q4 production with us getting the ventilation coming on board and the projects being on schedule, we definitely look at getting into some of these higher-grade areas. We're in them now, and we're getting back on track to getting a solid quarter for Q4.
spk05: Okay. Thank you. And then looking at, you know, 2021 going forward for the company, you know, as well as, I guess, in context, the new detour life of mine plan, how are we going to be provided with information, disclosure on what the outlook is for the company? Should we expect to see kind of three-year guidance and, you know, coinciding with the new detour life of mine plan, or are those two separate events that investors should be looking out for?
spk07: What is the new detour?
spk08: Sorry, you came in muffled. Can you repeat the question?
spk05: Sorry. I was just wondering, on the forward-looking guidance for the company, should we expect to see the three-year guide coincide with the new detour lifeline plan that will incorporate a number of the initiatives that were completed this year, or are those two separate things that investors should be looking out for?
spk08: Well, I mean, in terms of a new detour life of mine plan, you know, we have a lot of work happening with exploration, et cetera. And, you know, we really don't, the new life of mine plan, we could put something out, you know, something out partly out this year, but it really would just be a short-term reflection of truly what we're trying to build there. And so we don't anticipate, we're not going to work towards putting out a new life of mine plan until we've really got our work done and coming into 2021 and a whole new reserve resource estimate for that in the mine, combined with some, you know, new permits for West Detour, et cetera. So that's number one. But number two, in terms of guidance for next year and even for the next three years, we're working on things in terms of going through a budgeting process, et cetera, and we may be putting something like that out early in the new year. Or I would say maybe we're looking to put something out early in the new year.
spk05: Great. And just to clarify, you know, the initiatives on – the throughput of detour, maybe some of the saddle zone opportunities, is that something that would be reflected within three-year guidance or is that a longer term or just kind of evaluated as future upside?
spk08: That will be longer-term future upside. We will be able to give some sort of three-year outlook, but it would be an outlook that isn't necessarily going to be what we're trying to build because we're looking at something different. So we can give a three-year outlook, but with the sense that we're looking at building something different there over time, right? And, you know, that fundamentally, you know, again, we want to, you know, we want to get the exploration done in the saddle zone and really understand the deposit as it moves to the west and the area. You can get a sense for yourself if you have the ability to tie these pits all together, what the impact of that may be and or, you know, combined with some, you know, other sources of feed in the region, in the area. Maybe it's There's a couple different scenarios. On top of that, you know that if we get the permits to proceed with the west detour, that has some impact on just moving the west detour pit into production, and then combine the west detour pit with mining into the saddle zone out into the current pit area. And that's the overall third scenario of what might be happening. So we can give some three-year guidance out, which probably won't include the West Detour at this point in time. And we think it'll be some good guidance, some good numbers. But truly what we want and what we expect to be able to demonstrate to the market from Detour will be when we get the drilling results done for us, upgraded permits and and and and agreements to proceed with with the west feature and then and then understanding what's up at the saddle zone which will be towards the end of 2021. thank you very much your next question comes from john timazos with independent independent research your line is open thank you for all the good work in a tough year um
spk03: Concerning Detour, the prior company for almost a decade had used the U.S. $1,000 to estimate reserves and hadn't replaced reserves as they produced each year. Will you go to $1,250 or something like that in looking at their reserves this year, and will that add very many ounces? Yes.
spk08: You know, maybe Natasha Vaz is on the call. Natasha, are you okay with providing some color here, and then we can get Eric to get some color?
spk10: Sure, Tony. Yeah, yeah. So overall, with respect to reserves, hi, John, by the way. Overall, with respect to our reserves, this year we're looking at, you know, maintaining similar gold price that we had. used last year, so it will be definitely higher than $1,000, and it will impact the life of mine for detours. We haven't finalized the goal price yet for year-end reserves, but of course, yes, a higher goal price will add to the ounce base in that detour.
spk03: In terms of drilling, it's a tough year to replace the 1.4 million ounces of production Aside from the gold price at Detour, should we expect resource additions at each major mine? Should we expect reserve replacement at one or two of the locations but not all of them?
spk08: Some of that is a little bit early to say, John. I mean, we are working as much as we can to try to replace reserves. We may have some areas that we have some success. You know, you make a point that there may be some resource additions. There's potential for resource additions that will help us there. Again, it is early to say you are correct in saying that, you know, there was a reduced effort in drilling and really, you know, significantly in basically Q2 and then partly coming into Q3. That had some impact there. But, you know, we're building long-term mines here. And whether, you know, whether we demonstrate the reserve and resource growth all in 2020 or over the next few years, it's a combined effort that we do year over year. And, you know, we expect 2021 to be a pretty good year for expiration as well.
spk03: Should we be holding out for a million ounces out of the million four, for example, or do you think it's too early to say?
spk08: I think it's too early to say, but, you know, there will be some ounces added, but, you know, maybe Eric's on the call. Eric, do you want to, you know, you got some color you want to put in that? I guess he doesn't. That's okay, John. Anyway, we have a lot of work going on at Macassar. And you see the exploration success at Macassar. We are having a lot of exploration success at Detour. And at Detour, there's a lot of inferred resources, a middle inventory that we can bring on. We expect that. And there's a lot of drilling going on, a lot of work happening at Fosterville. You know, if it's about replacing tons mined, I don't think we, I don't think Ian Hahn will comment that we don't, we're not going to have a problem with replacing, more than replacing tons of mine in the year. It's about replacing ounces and finding, you know, 30 to 40 ounce material, which is a big part of his challenge at this point in time. Okay.
spk03: Thank you very much, Natasha, Eric, Tony. Good hunting.
spk02: Your next question comes from Kerry McCurry with Canaccord Genuity. Your line is open.
spk06: Hi, good afternoon, everyone. Maybe a question for Tony on the balance sheet. You know, you've got $850 million in cash, generating a lot of free cash flow. I know you've obviously ramped up the dividend doing share buybacks, but, you know, just how are you thinking about the balance sheet these days?
spk08: A couple of things. I mean, first off, I mean, we're still committed to share buybacks. We talked about up to $20 million, so we've got about, six and a half million shares to purchase back. We are, you know, we do want to continue to be able to aggressively invest in exploration and infrastructure at our sites to help improve production and lower costs at those sites. So to reinvest our capital, we do really want to maintain a very clean balance sheet. We're debt-free, and that's important for us. And then fundamentally, it's all about, you know, extra returns to shareholders, and we're going to We are in a funny time financially, but we do have to sit there and create a dividend policy that provides maybe a little cleaner outlook for shareholders in terms of where we might be in terms of return back to shareholders. There is a point in time when we don't need to keep on keeping cash on the balance sheet. And, you know, we're looking at what do we think would be, you know, as we do our three-year or five-year plans and look at our cash balances, et cetera, and then work out what our minimum balance needs to be and then say the rest. If we don't have a place to invest it very, very well for our shareholders, then it should be something that's given back to shareholders. Great.
spk06: And then maybe on that detour, and you may have mentioned this, but can you just remind us of the timing on, you know, getting the mill permits and potentially expanding the mills?
spk08: Okay, well, we're doing something. I mean, really, the permit, we're kind of looking at Q2, Q3 next year for the permit to have the general increase from currently around 75,000 tons per day maximum to 90,000 tons per day on average, or I think it's sort of an average number, but we're trying to work on that number one. It's one thing to get the permit, but the other part of it is to get the projects in place to be able to allow you to do that. And so the other part is investments that we're making into the operation that, you know, can go to incrementally increasing throughput year over year over the next few years to get us up to a higher rate. I know, Larry, do you have a little bit more color than what I gave on that? Okay, sorry, I guess we must have lost Larry, but that's where we are. We're expecting 2223 next year to have the permits. We are working very closely with giving an upgraded IBA for the West Detour up there. That will help us moving forward in terms of, you know, getting higher mining rates. And as I say, we are investing in a number of projects, capital projects in the mill plant. to not only improve increased throughput, but also to improve metallurgical recoveries, as well as reduce overall operating costs and efficiencies and safety at the cycle. Thanks. So in terms of the average throughput rate, you're thinking it's more like 75,000, 80,000, somewhere around there? Yeah, more like what we're looking at doing, you know, and this is just some, you know, arm waving on things, but we're looking at trying to grow through an annual throughput from somewhere around, you know, 22, 23 million tons a year to maybe 25 to 28 million tons a year. Okay, great. And then just in terms of the changes to the mill, is it mostly the back end of the mill that needs upgrades or the front end is pretty good shape? No, well, it's a combination of maybe some screen decks, improved feed systems into the plant, so feeds from either the gyratory crusher to the cone or direct feeding, improved feeding methods, screen decks into the crushing plants, improvements with the pebble crushers, how that works, some additional fixing a leach tank, some additional leach tanks, to help with retention because it's one thing to get two put up and get the grind up but the other one is you don't want to lose on the metallurgical recovery and some water tank for processed water plus there's some other incremental improvements in a lot of areas that just from a maintenance point of view the other part is for we want to go from say 80-89% availability of the plant to grow to 92-95% availability as well so We're working on a number of those initiatives.
spk06: Great. Thanks, Tony. That's helpful.
spk02: Your next question comes from Mike Parkin with National Bank. Your line is open.
spk04: Hi, guys. Thanks for taking my questions. With respect to Detour West or the West Pit, The old management owners always kind of spoke to a separate fleet. Do you see the potential that you would be able to avoid that with potentially connecting the pits, just continue to use the same fleet and avoid big investment into another fleet in itself that's different scale?
spk08: I mean, that's part of the things considered. It could be the option where you just keep the same fleet. On the other side, you know, if you're looking at ways to increase flexibility of the mine, increase productivity, we may be investing in fleet. So there's a lot of tradeoffs to do. The other thing we're doing, Mike, is, you know, and then I think John Tomasso asked earlier about, you know, cutoff grade or, sorry, about goal prices used and that somewhat affects cutoff grade. And, you know, there's a number of scenarios. We are looking at putting in an assay lab at site and and to get processes where we can get a lot more production assaying happening in the pit and have the ability to combine either improve or grade segregation going to the mill, maybe try to mill higher grades and create much larger low-grade stockpiles and or just increase overall throughput to the plant than throughput from the mine. So there's a number of trade-offs. If we were to just do west detour by a pit by itself as a pit by itself, uh that's that's one scenario but you know we're looking at it we're looking at it over the over time that it could be could be something bigger the fleet there i mean i mean the fleet is is it really supports the current mining rates we would have to increase the increase the fleet over time to increase mining rates but some of it also affects what we use for cutoff rate because that affects the strip ratio so right now okay um
spk04: And also, milling rates have been really good. Are you still seeing any potential? You saw some tweaks implemented just before you guys bought it. I assume you're kind of continuing on the fragmentation improvement that raised mining costs a little bit but had the huge benefit that you were getting much better tonnage rates out of the mill. Is that fully exhausted, or do you guys see more room to go on optimizing on fragmentation patterns?
spk08: I mean, a big thing we did was we've taken over the blasting ourselves from the contractor. So now the explosive supplier supplies the explosives. We have a more hands-on approach to doing that. There are optimizations being done. Some of it is wall control. We are looking at some, you know, now as you get better wall control, et cetera, some increased bench heights at certain parts on the, say, the north wall of the pit. which have some benefits in terms of what it might be able to do. You know, definitely as you optimize fragmentation, it might cost you a little bit more in drilling and explosives, but we're looking at, you know, ways to automate or optimize our drilling. We are increasing our drilling fleet. But the improvements in fragmentation help you in terms of, you know, whether it's shovel productivity, truck productivity, crusher productivity, so that it might be a little bit more money spent on explosives and drilling, but there's, you know, it saves, it pays for itself all the way back down the line until when you deliver the rock to the sag mill. Everybody forgets that. Before you get an ounce of gold out of it, we've got to turn that stuff to dust. And if we found a way to drill and blast it and make dust at the first part, then that would be the best. It would be nice if you can blast it and shake the gold right out of it right in the pit.
spk04: Yeah. One last question, switching over to Macasta. Now that you're just continually getting very interesting results at depth, you kind of mentioned heat can potentially be a challenge in the summer season. You're bringing on additional vent races to address that. Is there anything, like, do you find the ventilation that you're bringing in plus what will come in with the shaft, you know, more than sufficient? Or is there any, just because everything just seems to be getting more interesting as you go a little bit deeper, is there any thought around, like, a cooling unit, like, if NECO uses at La Ronne just to ensure ventilation? productivity is maintained at highest levels in maybe the summer months where it's maybe the most challenging. It doesn't seem like there's an issue at all, you know, fall, winter, spring. Or are you comfortable with the ventilation program you're implementing?
spk08: No, I mean, so we are looking at a combined, I mean, the cooling combined with increased ventilation. We, you know, fundamentally, Macassar, over the next three to four years, we're going to almost quadruple the amount of, not quite quadruple, but over three times the amount of fresh air or air brought into the mine is what we need. And then depending on conditions and heat, whether the requirement will be for cooling. There's lots of options for cooling, but we've got to make sure that the cooling plants we bring in don't create heat conditions as well at the operation. And a part of it is just the logistics of where the mining is in relation to the ventilation raises, et cetera. A big part of the challenge has been to put in raises and improve the system to get less recirculation of air. which helps in terms of, you know, not having hot air being pushed back into the workplace.
spk04: Okay. Well, that's it from you guys. Thanks very much. Thanks.
spk02: Again, it is star one if you would like to ask a question. Your next question comes from Lane Cooperman with Cobalt Capital. Your line is open. I'm having a friend.
spk01: Hello?
spk08: Yes, hello.
spk01: Oh, hey. Oh, I stepped out. I was just seeing if you guys were going to give us some guidance for the next year or two, but I think someone already asked, and you said you were going to do that later on, so kind of a moving point.
spk08: Yeah, so we expect that as we complete our year-end – we're into year-end budgets at this point in time. We'll be reviewing things and coming up with our plans for 2021 and the next few years, and we should have something out early in the new year. All right, thanks. Okay.
spk02: There are no further questions at this time. I will now turn the call back over to the presenters.
spk08: Thanks very much, operator. And again, thanks, everybody, for taking part in today's call. As you heard, we had a very solid quarter in Q3. And you also heard that we expect and, in fact, are having a very strong finish to the year in Q4, both in terms of our performance but also in terms of our activity around advancing projects. And we're very active in exploration this quarter. So next time we get together for our next call, we should have a lot of good things to talk about. Thanks again for joining us today. Enjoy the rest of your day.
spk02: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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