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spk08: Good afternoon, ladies and gentlemen. My name is Sidarius and I will be your conference operator today. I would like to welcome everyone to the Kirkland Lake Gold conference call and webcast to discuss the company's fourth quarter and full year 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 would 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, press the pound key. With that, I would now like to turn the call over to Senior Vice President, Investor Relations, Mark Udding.
spk07: Thanks very much, Operator, and good afternoon, everyone. Welcome to our fourth quarter and full year 2020 conference call and webcast. 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, Evan Pelletier, our Vice President Mining for Kirkland Lake, Larry Lozeski, our General Manager of Detour Lake Mines, Ian Hahn, Vice President and Co-Lead of Australian Operations, and Eric Callio, our Senior Vice President of Exploration. There are also several other members of the management team on the phone as well that may participate in the Q&A. After we go through the presentation, we'll then open up the call to questions. We ask each person to limit themselves to two questions for the purpose of this call. The slide deck that we'll be referring to is available on our website, both on the home page and in the events section. Before I get started, I would like to direct everyone to the forward-looking statement slide, slide two on our slide deck. Our remarks and answers to questions may contain and likely will contain forward-looking information about future events affecting our company. Please refer to slide two, as well as the forward-looking information section of our most recent MD&A, dated February 24th, 2021, for more information. Also during today's call, we'll be making reference to non-IFRS performance measures. A reconciliation of these measures is also available in our most recent MD&A. Finally, I'll mention that all figures given today will be in U.S. dollars and less otherwise stated. With that, I'll turn the call over to Tony McCooch, President and CEO of Kirkham Lake Gold. Thanks, Mark, and thanks, everybody, for being on the call. And I guess it's definitely been a different time over the last year in 2020. As we can say, a lot of different things happen, but in terms of the people of Kirkland Lake Gold, which includes the people that directly work for us, our suppliers, our communities where we work, and our partners, everybody really stepped up to the forefront and really put in some good efforts. you know we had we had we had a record year in a lot of different areas and you know in some areas we can be very proud of it in terms of of how people work together and and and achieve these results but when it came to uh COVID-19 and COVID-19 response and our all of the processes that place i think we've had significant success and our sites still remain very safe and operating well, and people can feel pretty good about what we can achieve as a group when we get challenged. Anyway, if I can turn to slide number five, talking about ESG, we've been putting a lot of effort into the difference of components of ESG at Kirkland Lake Gold, and really a big part of it is we want to start ensuring that we communicate better in terms of what we do from an ESG perspective. And if we go to slide number six, as I mentioned, a key area for us is formalizing our processes around reporting and public disclosure. And as I also have said, we've made significant advancements. We published our second consolidated sustainability report in November of this year, sorry, of 2020. And we are on track now to issue our 2020 sustainability report before our annual meeting in May. And we'll be actually issuing our sustainability report every year around the same time and with our normal filings that we would be doing at the end of March. Additionally, we adopted the World Gold Council's responsible gold mining principles in 2020, and we have completed our year one external assurances. We finalized policies and standards on human rights, supplier quota content, conduct, grievance resolution, and workplace diversity. We are an industry leader in minimizing greenhouse gas emissions and invest significant funds in managing water and tailings. And, you know, we're going to actually be increasing our efforts in those areas and going forward. And, you know, the people up at Detour achieved an important recognition in the year with the Tom Peters Memorial Mine Reclamation Award for their Progressive Reclamation Program, which has been going on there for quite some time. Now in Site 7, as you can see, we firmly believe in being socially responsible and in providing support to community organizations and groups that provide essential services. At the beginning of the global pandemic, Kirkland Lake Gold committed to supporting medical, social, and community organizations or areas of operations with a focus on homelessness, mental health, addiction, training, youth training and development, and senior citizen care. Our teams have been actively engaging with public service organizations in both Canada and Australia to help those in need, both financially and with in-kind donations of hand sanitizer, masks, and other PPE. Our support for our local community goes beyond COVID-19. There's a long list of initiatives highlighted on the slide. In total, what they demonstrated is a company that is deeply committed to and immersed in the communities where we operate. Turning now to fiscal year 2020 on slide 8. We achieved a record year of performance. We reported record production, earnings and cash flow. We also achieved all of our consolidated full year 2020 guidance. We returned almost $850 million to shareholders through share repurchases and dividends. We completed the acquisition of Detour Gold and made considerable progress at Detour Lake Mine, which generated over 40% of our free cash flow and is already realizing some of the substantial upside we saw when we looked at this asset. And speaking of the upside, we achieved significant exploration success in 2020 despite challenges related to COVID-19. And in all three of our cornerstone assets, we've made good progress, right, with our key projects. And that includes the number four project at Macassar, the Robin Hill development over at Fosterville. And, you know, the biggest driver is going to be seen in 2021 at Detour with the expansion of the resource that we – with the exploration success. And that combined with the mill expansion and mine expansion that we're working on right now. And before I leave that slide, again, I mentioned that we had a record year financially, operationally, but we also had a record year for Kirkland Gold from a health and safety perspective, the lowest injury frequency we've had now in five years or ever for the company. Looking closely now at our financial operating results on slide nine, our earnings were very strong. Adjusted net earnings were $923 million or $3.41 per share. This increased 23% from 2019. Operating cash flow totaled just over $1.3 billion, and free cash flow increased 58% to $733 million. The key driver to our strong performance was significantly high revenue and solid increases in gold sales. Looking at our operating results, we had record production of 1.37 million ounces of gold. It was 41% higher than 2019. Obviously, the addition of Detour Lake was a key contributor to the increase. Unit cost performance remained very strong with operating cash cost per ounce of 404, which beat our guidance, and all outstanding costs averaging $800 per ounce. Again, from a cost perspective, we are in the leading end of the pack of our industry. Turning to slide 10, looking at Q4 2020. Again, as I mentioned, we generated record results in the quarter. Production was 369,000 ounces. 32% higher than Q4 2019, and 9% increase from the previous quarter, with all three of our operations having their highest production levels in 2020. Our unit costs were strong, with operating cash costs of $396 per ounce and our own sustaining costs of $790 per ounce. Looking at earnings, adjusted net earnings were $0.98 per share, which increased from $0.88 per share in last year's fourth quarter and $0.92 in Q3. The $0.98 of adjusted net earnings was after a $0.03 per share reduction due to prior period adjustments on depreciation costs. David Storrs will discuss that more in detail in a few minutes. And looking at cash flow, operating cash flow was $421 million, while free cash flow totaled $432 million. Now looking to slide 11. With our record operating and financial results in 2020, we finished the year with a very strong balance sheet. Cash total just under $850 million. It's 20% higher than that at the end of 2019, and that with no debt. A key contributor to our cash growth was our 58% increase in free cash flow to just over $733 million, as I mentioned previously. We also achieved $174 million of proceeds from the sale of strategic investments and $75 million through a strategic alliance with Newmont leading to our whole complex and exploration in Northern Ontario. Offsetting our strong cash generation was a significant capital return to shareholders during 2020. Returned $848 million through a combination of repurchasing shares and growing dividends in the year. Now on slide 12, this provides the details of what we think is one of our very important components of our capital allocation strategy, which is returning capital to shareholders. Of the $848 million returned to shareholders in 2020, $732 million was used to repurchase 18.9 million shares in the year. I should point out that we also repurchased an additional 1.1 million shares in early January of 2021 and have now achieved our goal of buying back 20 million shares. We did that in less than 12 months. We had mentioned before that we would do it between 18, 12 and 24 months. And that was a goal that we announced as part of the closing of the detour gold acquisition in January of last year. We also paid $116 million in dividends in 2020. We tripled the dividend during the year through two dividend increases, and now we're paying 18.75 cents per quarter or 75 cents per year. Moving to slide 13, as mentioned, we achieved all of our full-year consolidated 2020 guidance. I won't go through each component. But if you look at production, we predicted in last quarter's call that Fossaville would beat its targeted range driven largely through higher than planned times process. We also said during the Q3 call that Macassar would not achieve its production guidance, which it didn't, but it had a stronger fourth quarter and we fully expect to show improved results in 2021. You can also see from slide 13 that we were slightly below guidance for both growth and capital exploration. That really involved the timing of ramping work back up after it was suspended due to COVID-19. Moving on to 2021 and then given the 2021 guidance in slide 14. We issued our 2021 guidance and three year production guidance in December. The 2021 guidance includes production similar to 2020 with stronger growth at Detour Lake and La Casa returning to 2019 levels. This will offset lower production at Fosterville. In Fosterville, we expect to continue drilling for new reserves and resources and looking for the next high-grade zone, which will be a big value driver for Fosterville. But as we mentioned previously, we've got to really look at Fosterville not being more of a 325,000 to 425,000 ounce a year producer and really try to create sustainability in that way because of the challenges we're trying to replace The number of ounces we mined very quickly from the swan zone in 2018, 19 and 20. Our unit costs will remain strong with all outstanding cost guidance on change from 2020. We're seeing a shift from sustaining capital to growth capital in 2021, which is largely a Deidre Lake mine. Finally, with exploration guidance of $170 to $190 million, we will be doing more drilling than we've ever done before in our history of Kirkland Lake Gold, and we believe we are one of the more, if not the most, aggressive explorer in our industry. We continue to have substantial exploration upside at all three of our cornerstone assets, and we will plan to go after that upside very aggressively. Before turning the call over to David Soares, I'll just talk slide 15 and briefly look at our mineral reserve estimates for December 31st, 2020, which were released yesterday as part of our year-end results. It's important to note that our drilling programs for 2020 were significantly impacted by disruptions related to COVID-19. We shut down the drills in Q2, ramping back up, took several months in total. We did about 60% of our planned in-mine drilling at Fosterville and even less than that at Macassar. Even with that limitation, our total mineral reserves at operating assets increased 3% to 21 million ounces. The increase reflected reserve growth to 6% at Beecher Lake. Basically, what we did at Beecher Lake was become more selective using variable cut upgrades to help us with ore sorting and grade optimization to the mill. But also, instead of putting some low-grade material into waste piles, we actually said we would be more selective and place that into a low-grade stockpile that we can use to process that end of mine life or end of pit life. We have identified a reserve of 14 million ounces that will feed at similar rates previous years, and we've separated from that an additional 2 million ounce low-grade reserve, which will be a low-grade stockpile, as I mentioned, that will be fed into the mill when the pit is mined up. When we acquired Detour, we saw an opportunity to build an assay lab and optimize the feed to the mill using the stockpiles and really the split of reserves into milling reserves and low-grade stockpile materials is somewhat a part of that exercise. We'll be doing a lot of blast oil sampling, improved rate control management at site over the next few years to help in terms of the operation. And, you know, we did announce that we have the permit to increase mill throughput and we do have capital programs taking place this year and going into next year to increase the mill throughput capabilities. And, you know, we have given guidance showing that we're increasing production to 680 to 720,000 ounces a year for the next four years. at detour under its current form and with the potential to go to over 800,000 ounces by 2025. But all this is still a subset of what we're going to get from the results from the drilling in 2020 and 2021, the saddle zone, etc. And by the way, no new drilling, no new information was used to into the reserve statement for 2020 for detour. So this is all a catalyst and the work that's going to be done in 2021 as part of our exercise. And then at Macassar, we did have a small reduction in reserves, again, which reflected limited drilling. And you see that at Macassar, we did have solid resource growth, which partly reflects the fact that we didn't get the drilling done to convert resources into reserves, as I said, of about 60% of drilling at Macassar. At Fosterville, we depleted 647,000 ounces, and that would create up to 33 grams per tonne. We were able to replace 339,000 ounces, albeit at a lower grade. The reality is to replace the number of ounces we need to find the next high-grade zone with an expiration budget of possible of $85 to $95 million this year. We are going to work very hard at doing that in 2021. And I also want to emphasize that based on our new reserve estimates, we are well positioned to achieve our existing three-year production guidance at all of our sites, and we expect that 2021 will be a pretty solid year for reserve replacement and growth as well. And with that, now I'll turn the call over to David Soros, our Chief Financial Officer. Thank you, Tony, and good afternoon, everyone. I will start on slide 16. As Tony mentioned, we had strong earnings in Q4 2020. Adjusted net earnings totaled $265.8 million or $0.98 per share, a 43% increase from Q4 2019 and 5% better than last quarter. The difference between adjusted net earnings per share of $0.98 and net earnings per share of $0.86 in Q4 2020 was mainly related to the add-back of $35 million of non-cash foreign exchange losses, reflecting the strengthening of the Aussie and Canadian dollars against the U.S. dollar during the quarter, and costs related to non-operating sites of $8.9 million incurred at the hold complex M&T, which are not reflective of our operations, as well as severance costs and COVID-related costs, totaling $2.2 million for the quarter. Q4 earnings and earnings per share is impacted by higher depreciation, Depreciation in the fourth quarter included an adjustment of approximately $10 million or $0.03 a share relating to the first three quarters of the year, resulting from purchase price allocation adjustments at Detour Lake. Turning to slide 17, the key driver of improved earnings in Q4 was higher revenue. Revenue in Q4 2020 totaled $691.5 million. 68% higher than the revenue of $412.4 million in Q4 of 2019 and higher than the $632.8 million of revenue recorded last quarter. Of the increase from a year ago, a $393 per ounce increase in the average gold price to $1,875 per ounce accounted for $146 million of the increase in revenue year over year. and 137 million related to a 33% increase in gold sales to 371,000 ounces. Compared to last quarter, we had a 74 million increase in revenue from a 12% increase in gold sales, increasing to 371,000 ounces from 332,000 ounces last quarter, This impact more than offset a $12 million reduction as a result of average price decreasing from $1,907 last quarter to $1,875 in Q4. Looking at EBITDA, as shown on slide 18, Q4 2020 EBITDA totaled $458 million, a 60% increase from $286 million in Q4 2019. Compared to last quarter, EBITDA increased 19% from $384 million. The change from last quarter relates to net earnings, which were higher driven by revenue growth. Depreciation in Q4 was 33 million higher than Q3 2020, partly due to increased sales volume, which accounted for $10 million of the 33. As mentioned earlier, the increase in depletion and depreciation was primarily at detour due to depreciation adjustments on the fair value estimates related to the purchase price acquisition. Allocation, sorry. These adjustments increased depletion and depreciation expense in Q4 2020 by approximately $20 million as compared to Q3. Approximately 10 million of the 20 related to revisions to depletion and depreciation expense during the first three quarters of full year 2020. Turning to slide 19. Adjusted net earnings in full year 2020 totaled $922.9 million or $3.41 per share, a 60% increase from full year 2019. The difference between adjusted net earnings per share of $3.41 and net earnings per share of $2.91 in full year 2020 was mainly related to $58.5 million of non-cash foreign exchange losses reflecting the strengthening of the Australian and Canadian dollars against the US dollars during the year. The environmental mediation provisions at the NP account for $32.6 million and transaction cost of $33.8 million related to the detour acquisition. Turning to slide 20 to look at our cash balance and cash flow. On the slide, you'll see that our operating cash flow is very strong, generating over $490 million of operating cash flow in the quarter before $70 million of cash tax paid. During the quarter, we also invested in our key assets, spending $189 million in capital, as well as $20 million on strategic investments. We also received $65 million from the sale of our investments in DeGray and Noble, accounting for the $147 million of net cash used in investing activities during the quarter. Cash used for financing of $277 million reflected the $245.3 million we used to repurchase 5.7 million shares in Q4, as well as $34.2 million used for dividend payments. Slide 21 looks at the change in cash in a different way. You can see that the largest contributor to growth in cash was our operations, which generated about $401 million of cash which is before income tax paid of $70 million, gross capital investment $33 million, and exploration spending of $36 million. Other cash outflows include costs incurred at our non-operating sites at the NT and Holt Complex, as well as corporate G&A of $12 million. As noted in the previous slide, during the quarter, $279.5 million was returned to shareholders, including $245.3 million used to repurchase just over 5.7 million shares through the company's NCIB, and $34.2 million of dividend payments related to a quarterly dividend of $0.125 per share, paid on October 14, 2020, to shareholders of record on September 30, 2020. Next, I'll turn it over to Evan Pelletier, VP of Mining at Kirkland Lake, to discuss performance at the CASA. Evan Pelletier Thanks, David. I'm starting on slide 22. For 2020, Macassar produced 183,000 ounces at operating cash costs of 562 and all-in sustaining costs of 922. These are not the numbers that we were expecting on prior calls. We have talked about the impact of COVID-19 on our operations and the excess heat we experienced in Q3. We bounced back in Q4 and had a solid quarter with the average grade up 45% and higher levels of tons processed compared to Q3. Production for the quarter totaled 52,000 ounces at an operating cash cost of 534 and all-in sustaining costs of 941. The all-in sustaining capital numbers were still high, which largely reflected the level of sustaining capital expenditures. As we continue to catch up on some key projects, including capital development, 37% increase in production compared to the previous quarter was due to 45% improvements in the average grade, reflecting a greater portion proportion of higher grade stoves and the SMC being mined during the final quarter of the year. As you have heard, this year we expected to see numbers more like 2019 with productions of 220 to 255,000 ounces and cash costs of 450 to 470. Next slide, please. Turning to slide 23, looking at our major projects for the year, we have made excellent progress on a number of fronts. The foreshaft project is approximately a month ahead of schedule and on target for completion in late 2022. We're tracking well against our capital cost budget of $320 million and have the potential to come in below that level. The total spent to date at December 31st, 2020 was $177 million. During Q4, we sank the shaft 875 feet to a total of 4,250 feet by quarter end. We also continue to make good progress with steel installation and putting in place all required infrastructure. Today, the shaft is down around 4,600 feet. We also have projects in place to improve ventilation. We're currently completing an upgrade project that should increase air to the mine by about 50% to around 300,000 CFMs. This should be done in Q2. We are also expanding our ventilation with two vent raises, which should add another 200,000 CFM by the first half of the year. When the foreshaft is done, we'll go to about 750,000 CFMs or better. We're also doing a number of other projects, underground infrastructure, mill enhancements, and the ramp surface zones along the amalgamated break. Generally, I'll say these projects are all progressing well. I'll now turn the call over to Larry Lazinski, General Manager of Detour Lake Mines.
spk05: Thanks, Sahuk. Turning to Detour Lake on slide 24. Before we look at the Q4 2020 numbers, I wanted to call to your attention that the results for the full year 2020 are for the 11 months from January 31st, 2020 to the end of the year. In fiscal year 2020, Detour Lake produced 517,000 ounces. Gold sales were 537,000 ounces for the year. Production for the year was just under the guidance range of 520 to 540,000 ounces, reflecting a slightly lower than planned average grade. Looking at unit costs, operating cash costs averaged $625 for the year, all in sustaining costs per ounce sold averaged $1,171. For Q4 2020, production at Detour Lake totaled 153,000 ounces at an average cash cost of $612 and an all-in sustaining cost of $1,207 per ounce. Looking at 2021, you've already seen the guidance. We expect significant growth in production to 680,000 to 720,000 ounces. which is based on over 24 million tons of throughput at much higher average grade. To support this growth, we have received a revised air permit to support annual production rates up to 32 million tons. Although our current plan does not fully utilize that new limit, we do anticipate reaching 28 million tons as previously spoken about earlier in throughput in the new plan. With the growth in production, unit costs should improve with cash costs of $580 to $600 per ounce and all-in sustaining costs better than $900 per ounce with lower sustaining capital expenditures. Moving to slide 25, Tony mentioned earlier we have a number of projects at Detour Lake. We're investing in significant mill enhancements to improve throughput by adding screens to the crushing circuit adding leach tanks, a detox tank, and capital improvements to the CIP and gravity circuits. We are also continuing with a major tailings expansion project. Surface infrastructure projects include a new assay lab, communications upgrades, core shack, airfield, welding shop, camp expansion, improved access roads, payment of areas around the camp, surface buildings and the front gate, which also includes a new weigh station. Mobile equipment procurement was a key area of capital expenditures as well in the second half of 2020, as we upgraded the fleet in support of planned growth. This will also continue in 2021. We also have significant deferred stripping component in our growth capital this year, which reflects a major stripping campaign we have planned as part of phase four, which will support production in future years. With that, I'll turn the call over to Ian Hahn, vice president and co-lead of our Australian operations.
spk07: Yeah, thanks. Good afternoon, everyone. I'll be speaking to slide 26. Fosterville had a record production year in 2020. We produced 640,000 ounces, about 3% higher than the 619,000 ounces we did in 2019. The 640,000 ounces of production, we exceeded the full year guidance for 2020 and this was driven by higher than planned tonnage. The increased tonne each more than offset the reduction in the average head weight. Throughout 2020, we invested in infrastructure for the mine to continue to support the higher mining rates. We completed the new ventilation system, a new gold room, a new transformer station, and these projects, along with the addition of paste films to the underground operations, were very important for the increase in volumes. We continue to achieve very low costs in financial year 2020 with operating cash costs of $139 per ounce, higher than last year, but only due to the slow reduction in average grade. Fall in sustaining costs per ounce sold for full year 2020 averaged $312 versus $291 in full year 2019. The change is a result of the increased royalty payments resulting from the new royalty the Victorian government introduced as of January 1st last year. If we exclude the impact of that new royalty, asset per ounce sold for the full year 2020 actually improved 9% from the year 2019. And this is mainly due to the loss done in capital expenditures. Looking at Q4, we produced 164,000 ounces This is based off 184,000 tonnes at an average rate of 28 grams per tonne and average mill recoveries of 98.9%. This production compared to record production in Q4 2019 of 192,000 ounces when we had a record head grade of 43 grams per tonne. The production per Q4 increased from the 162,000 ounces that we managed in Q3. And this was purely a result of slightly high tonnage throughput in Q4. Turning to 2021, Tony's already addressed it. We are transitioning to a higher tonnage, lower grade outlook. We plan lower levels of production over a longer period of time while we continue our very extensive exploration programs. With that, I'll turn the call over to Eric Callio, the Senior Vice President of Exploration.
spk04: Thanks, Ian, and good afternoon, everyone. My first slide today will be number 27 and summarise the final results and year-to-year changes for exclusive resources. And as indicated, and we've already heard earlier, we did experience some challenges with this resource replacement, but in large part due to COVID, and just not being able to do all the drilling that we had planned. Despite the above, we did see some success and good growth at Macasta and Detour during the year, but for slightly different reasons. At Macasta, we saw almost 32% increase in inferred, 4% in indicated, which are basically areas that we did have expression success, but just not enough time to be able to convert these to reserves. For Detour, we also saw a good increase, of about 20% for M&I and 29% for inferred, but this was mainly due to an increased price for the gold used in the new update, which was $1,500 U.S. versus the $1,300 in the previous. Aside from the above, we did see a sizable decrease at phosphoryl, including a 33% drop in M&I and 27% drop in inferred at the phosphoryl mine. And looking at this, you could say most of this is due to the limited drilling and large amount of high grade that was depleted during the year. but also due to some refinement of resources at Harrier and Signet, we also removed some lower-grade historic resources in the upper part of the mine, which are away from the current mining. Turning now to my next slide, which is number 28, and this slide is related to Detour, where we're continuing to advance the large-scale drill program started in early 2020 to evaluate resource potential near the main and west pits. As previously announced, the program includes a minimum of 250,000 metres of drilling and is designed towards creating an updated resource and potentially expanded mine plan for early 2022. Shown on the screen is a long section through the area being drilled, showing current reserves, targets, and results from our latest press release, which was announced in late December. This is our third such release since starting the program. As shown on the image, the release includes information from additional 25 holes from the project, which were drilled mainly into the saddle zone as well as some of our first holes to test the potential extensions of mineralization to the west of West Pit, and overall continue to be very positive, with several holes intersecting broad zones of mineralization with attractive open pit grades, but also higher-grade sub-intervals, which could provide potential for underground resources as well. Although there are a large number of highlights in the release to talk about, I believe it's worth drawing your attention to the east part of the saddle, just west of the main pit, where we had quite a few holes indicating blue, the broad zones of mineralization, several of them being between 150 to 200 meter wide, but often containing higher grade subatomals at very shallow depths, in some cases right at the bedrock interface. Although as shown by the green dots, there's a large number of holes we could point to. Some of the key ones could include 25A, which intersected 4.02 grams per ton over 43 meters, and 2.58 over 70.9, as well as hole 28, which intersected 4.38 grams per tonne over 31 metres. In addition to this, we also had several other good holes in the central part of the cell, which continued to confirm continuity of the system between the two pit reserves, as well as some very good results up to 200 metres west of the west pit. In summary, work today at Dator continues to go very well. We now have 12 drills on site and all the necessary equipment to complete the program. I'm feeling very confident about hitting our goals by year-end. So now turning on to slide number 29, we should see an image from a CASA where, which was one of the main areas that we did absorb a solid hit from the COVID and in the end resulted in us only doing about 60% of our planned drilling and also coming up slightly short of replacing all reserves. Despite above, we do feel that there was still a lot of exploration success during the year, including intersection of new high-grade zones in several areas of the SMC definition of a new 700-meter-long high-grade corridor at the main break, as well as identification of almost 180,000 ounces of new inferred resources, which we believe could have replaced much of the remaining reserve shortfall given a little bit more time. So considering the above and the fact that all drills are now backed up and running, We feel we're now back on track and ready to start replacing reserves again in 21, with our target for the year again being about 250,000 to 300,000 ounces. So details for the plan are shown on the current slide. As indicated, focus strongly on direct extensions of the SNC to the east and west, as well as the amalgamated, which are areas we've always had success in the past. In addition to this, we're initiating what we feel is some significant new work on a 34 and 51 level to start testing upper parts of the main breaks and areas to the south where we believe there could be new SMC-type structures. Works also plan from a new surface ramp, as well as on regional exploration. In total, the program will include about 2,000 metres of development, 226,000 metres of drilling, with about 40% of the drilling being dedicated to the SMC west, 40% to the east, and the remainder to the new projects. And the new development is shown on the slide. It will be completed in several areas defined by the yellow lines, designed mostly to support drilling into these new areas. So now turning on to slide 30, we should see a slide for Fosterville, whereas in Canada, we also had some strong setbacks from COVID, which caused us to lose about 42% of planned drill meters and being unable to gain some very important platforms to test down plunge of the Phoenix and Swan. These two items, plus the large amount of depletion this year, are some of the main reasons for the changes seen in reserves and resources, with the remainder being from reinterpretations, new drilling, movement, as well as movement of certain low-grade zones in the upper historic part of the mine to mineral inventory. Sides and above, we do feel there are a lot of good accomplishments again from exploration in 2020 here, including new high-grade intersections at the Swan, Zygmunt, Carrier, as well as extension of the mineralized envelope with Robin's Hill up to 900 meters down plunge and continuing to see intermittent signs of quartz with visible gold similar to swan. Given to the above, we remain optimistic about our chances for success in 21 and as with the casted design, we believe it's a very good program with a strong chance of replacing the ounces we will mine. Again, the details for the plan are shown on the slide and we'll focus mainly on the Lower Phoenix and Robin's Hill areas We have 232,000 metres of drilling, 5.6 kilometres of development. Approximately 65% of the total metres will be dedicated to Lower Phoenix, 65% to Lower Phoenix and Signet, 25% to Robins Hill, and the remainder to other new projects on the mine leases. It turns out development was split between Lower Phoenix and Robins Hill. with about 20% of the meters going to Lower Phoenix to develop new hanging wall platforms so we can drill down plunge, as well as to completing two new hanging walls, and then the other 80% being targeted towards Robins Hill and continue to advance the new exploration drift towards the Robins Hill Reserve. So in summary, 2020 was a bit challenging for Buc-Assa and Fosterville, but we believe things are looking up in 21. And on the other hand, Detour already had a good year, and we think this one will become even better. And with that, I will pass the call back to Tony.
spk07: Hey, thanks, Eric, and thanks, everyone, for listening and everyone for contributing on the call. We didn't take too long and try to be concise here. Anyway, I'll just finish up here on slide 31. And, you know, definitely you can see that it was, you know, we had a good strong year in 2020. Yeah, with COVID-19, and you might sit there and say, well, it's a year we might want to forget. But at the same time, you know, we had some significant performance and really get the sense of the quality of people and what people can do when you work together. You know, and you can look at whether it was record levels of productions, earnings and cash flow for the company or, you know, record safety results and really, you know, some strong performance in terms of our performance. of our responsibility to the communities we live in and work in, the people that live in those communities and the environment and et cetera that's going on with the company. Anyway, some other highlights for the year, again, in terms of returning $850 million to shareholders in 2020, Share repurchases and dividends, both were strong. And as I said, we met our guidance on share repurchases into January of 2021. We have a strong balance sheet. Our business plan going forward positioned us very well to have really good, strong success in 2021 and the next few years. And we have an extremely large expiration budget. But, you know, we're going to sit there and say 2020 is behind us. only because we got some such exciting things as Eric talked about some exciting things from an exploration point of view in 2021 and you know we are you know we have given up some updated guidance for detour again that shows growth in production at each over the next five years and that's really just a subset of what our real view of that detour is going to come and with the exploration drilling being done in 2021 and the continued advancements of permits in 2021 at detour with the continued development of the new shaft at Macassar and what can happen there, plus the ongoing development at Fosterville into Robbins Hill, plus a very aggressive exploration program going on down at Fosterville in 2021. So a very exciting year. We look at where our share price is and where a share price can go over the next year as we demonstrate new value coming into the company. It'd be an exciting year for shareholders. We also have a lot of other initiatives which will be coming on in terms of how we're going to move forward from a social responsibility point of view, where we want to take ourselves in terms of leading the industry or being being up front and center in the industry, whether it's to greenhouse gas, whether it's to community support, and whether it's really going into the 21st century strongly in terms of automation and digitization at our sites and making smart minds over the next few years. But those are things to talk about maybe at our next calls and our next meetings. I know we're going to – maybe we'll get to see some of you personally at the FEMA conference next week, and definitely we're always open to any calls if people want to talk and have meetings. We're always willing to speak one-on-one to people. But with that, anyway, I'll end the call, and I'd be happy to take any questions we've got. Thanks.
spk08: As a reminder, if you would like to ask a question, you need to press star 1 on your telephone. Your first question comes from the line of Tyler Langton from JP Morgan.
spk03: Good afternoon. Thanks for taking my question. Just with the exploration at Fosterville, do you have a sense of whether we'll be getting, I guess, updates throughout the year, or is it something more to expect sort of towards the end of the year, early 2022? Okay. Derek speaking.
spk04: We don't have an actual timeline that we plan to bring out an expiration release. We do the releases when we feel we have significant information that we can announce. We do feel that we're making steady progress on the programs there. Like I mentioned, we're finding, you know, we've got broad systems identified. We're seeing, you know, characteristics of the Swan Zone. But, you know, the press releases will, I mean, there's no timing for them. But... we will give updates as needed.
spk03: Okay, and just as a follow-up, in terms of capital allocation, this year is it more, I guess, preference for the dividend or anything about buybacks and just kind of any color there would be great?
spk07: Well, I mean, you know, in terms of our capital allocation and the strategy, we communicated a couple of times a number of areas that we want to really focus on. Definitely, you know, where our dividend is and, you know, we have a strong dividend and you can see as we progress into 2021, we have both a strong cash position and potential for further free cash flow generation. We are going to be, you know, continue to work towards being strategic with our NCIB where possible. And we'll be considering what we can do with our dividend in terms of growth. But at the same time, you know, we want to make sure that we can fund and be well positioned to drive new value for the Kirkland Lake for the shareholders and shareholders. you know whether it's in relation to our again again our aggressive exploration program we have this year our aggressive investment into growth that we what we see at detour plus our you know what we're looking in terms of trying to do at fosterville so we we we we want to make sure that we responsibly keep keep our business strong and profitable but at the same time you know returning a good a good portion of any free cash flow to shareholders and we don't see ourselves building up a cash position to over a billion or multi-billion dollars. I don't know, David, if you want to give any more color, and Dave Soros, our CFO, any other color on that? No, Tony, I think that, you know, what you just mentioned in terms of having progressive, sustainable dividends, looking for opportunities to grow the dividend, you know, when we can't, and our shareholders have expressed, you know, interest in both the buyback and the dividend, right, so things we consider on board basis, and as you said, we'll be opportunistic on the buyback as
spk03: Okay, great. Thanks so much.
spk08: Your next question comes from the line of Hovaiz Habib from Scotiabank.
spk06: Hi, Tony, and thank you for taking my questions. Just a couple of questions from me, and I'll pass it on to other guys on the call. Just based on the three-year guidance at Posterville, you know, the plan essentially was to reduce the material from the swan zone Now, does the new reserve grade change your thinking at all in terms of the mix or increasing the throughput to manage that reserve rate?
spk07: I mean, I think in terms of where we're going, I mean, a lot of the plan we have this year is to improve the mix going in. I mean, you have a lot more flexibility now at Fosterville with the improved ventilation and pace fill, et cetera, and, you know, they're opening up more faces. But I think, you know, maybe Ian can give a little more color there. Yeah. You know, we also see that it has a grade as reducing or in terms of what we've got for a resource that, you know, we need to be able to be less selective and more able to be more proportional to the mining in various areas. But Ian, you got any more colour to that you want to give? Yeah, sure, Tony. I mean, we've got a really well-scheduled out clean for our main stoping fronts, and that is governed a lot by our... geotechnical considerations. Paceville certainly unlocked a few, a fair bit of flexibility in that area. And the broader zones, you know, we're talking the Raptors, you know, we'll start to get into the Cygnets and things like that, you know, higher tones and lower grade for sure. But what it does is give the mine a fair bit of flexibility. So, you know, things go wrong sometimes. So, you know, the more stoking fronts that we have, then the more able the site is to be able to cope with any sort of bumps along the way. So I think we're setting ourselves up for pretty robust production going forward, and that's reflected in the tonnage numbers.
spk06: Thank you. And just in regards to the reserve replacement at Fosterville, which was about 50% of depletion, Where was this material added from? Is this coming from, like, Harrier, Lower Phoenix? Can you give me a little bit of colour on that?
spk07: You okay with that, Ian? Or... Yeah, I was going to say, Eric, do you want to tackle that one?
spk04: Yeah, I think I'm sorry about the call, but I can mention that the big focus for the drilling underground was really on lower parts of the Lower Phoenix, which we could reach from the annual drift that we have in place already. and as well as the Cygnet. So those are the two main areas. We didn't generate any reserves at Roberts Hill.
spk06: Okay, and then just once you kind of, you know, your 2020 drill program, you know, you talked about where you guys are going to be targeting in terms of, you know, how that plan is going to be laid out. Can you give us a little bit of color as to, you know, where the reserve replacement is going to come from for 2021 then? Yeah, exactly.
spk04: As I mentioned, we've got the large majority of our drill meters are allocated to the Lower Phoenix down plunge of the Swan Reserve. And that drilling is going to get done from a new hanging well drift that are in progress actually at this year end. And we think can be completed sort of mid-year. but that's going to allow us to drill quite a ways down plunge, maybe not the full 900 metres, but it will give us a big area to drill. So that's going to be a big component of that there. We also hope to be able to add to the reserves at Robbins Hill. That's really the main area.
spk06: Got it. Thanks, Eric, and thanks, Tony, for coming.
spk08: Your next question comes from the line of Cosmos Chu from CIBC.
spk10: Hi. Thanks, Tony and team, for the conference call. Sorry, Tony, I won't be seeing you at the BMO conference, but I've heard it's not that good anyways. Maybe my first question is on detour here. Good to see that, Tony, you got the permit to get up to 32.8 million ton per annum. I guess, you know, as you talked about, you're not planning to get up there, you know, just yet. But, you know, have you thought about, you know, that works out to about 90,000 tons per day. Have you thought about how you could get up there? When I used to cover detour, they had talked about potentially like a third line, sag mill, ball mill configuration, you know, maybe some back end, more leach tanks in the back. Have you thought about, you know, once you get there, how you might get to 90,000 tons per day?
spk07: Well, I'm sorry, and Larry's on the call. I can let Larry give some color to this. But right now, like you can have programs, capital programs for detour for the processing in 2021 and 2022. We're doing a lot of things to improve throughput at the mill in terms of whether it's new with some additional leach tanks with improved performance on the crushing, either through screens and through alternate feed systems, try to work on on scheduling and, again, the things that give you more flexibility to improve in terms of overall mill availability and mill utilization. You know, there's a number of areas. We now, I think, as we discussed previously, from our perspective, I think Larry mentioned, we now we're seeing us getting up to somewhere around 28 million tons a year, which is about 80,000 tons a day. And, you know, we're at a point, I mean, we say it sort of, in one way. We're not necessarily working towards the 100% just drive throughput at the detour as being a big road strategy there because We also want to improve grade control and grade management, and that's part of us. When we install a new assay lab this year, maybe we'll be able to do a combination of improved grade control, grade delivery to the plant, and building stockpiles over the life of the mine. That can really generate a lot of cash flow. I don't know, Larry, you got any color you want to give in terms of mill performance?
spk05: Thanks, Tony. The only thing I'd add really is, you know, Over the course of the next couple of years, there's a lot of capital going into the mill, various areas. Increasing the crushing side, obviously, you're pushing the material through the mills and the rest of the plant. We need to understand and continue to debunk the necking to get to that 28, and then maybe two or three years down the road, we understand exactly how the mill's running, and then you make more decisions from that point.
spk07: But the line, the current circuit line that's in place will definitely, you know, we're not quite sure what the... what the final total throughput might be on that. And, yeah, there is an opportunity to do a third line, but right now we're not seeing the requirement to do that yet. And there's a lot of other opportunities in terms of maximizing throughput, which lowers costs. But, I mean, fundamentally we want to also try to optimize grade delivery to the mill at any one time. and then be responsible for the whole deposit. So that's where instead of throwing a lot of low-grade away, we can start creating a low-grade stockpile and use that. And it saves us on tailings too and disturbances on surface and our overall footprint on site and the mine length because then we process that, we put it back in the pits, and we create a better closure plan for detour.
spk10: For sure. And then my second question is on your, you know, 2021 outlook here. As you talked about, Q1 is the lowest production quarter, you know, highest sort of orange sustaining cost. But then, you know, you also go on mentioning that orange sustaining cost is higher due to the timing of CapEx. sustaining CapEx. Could you maybe help me out? Because during the presentation, you talked about detour. A big part of the CapEx is the tailings facility. My understanding from before was that a lot of that money spent on tailings will be during the summer months. So I'm just trying to reconcile the profile of CapEx for the company and how that fits in with what you have talked about at detour.
spk07: Well I mean it's a detour so first off yeah you you you do have the the tailings that that is you know it doesn't necessarily 100% stop uh you know we don't remember that there's an old saying why wait for spring to do it now right there we mean there's a lot of stuff where we're continuing to progress and we need to progress tailings, but in terms of capital programs, there's a lot of the mill programs that are taking place from a capital perspective at Detour. There's the aggressive exploration that's part of a cost in Q1 and Q2. You know, we do have some deferred stripping happening that happens in Q1, Q2, right? And then the shaft is progressing at Mecasa. We're looking, going to the next phase with shaft, not just shaft sinking in 2021, but also some more shaft infrastructure starting to come into play, such as, you know, bins and work on those type of areas. We are doing some work for Detour in terms of how we progress the set of liquefied tanning deposition to a high density or a paste type of tanning deposition for better water management as we progress in the future years.
spk10: Great. Thanks, Tommy. Those are the two questions I have, and I look forward to the remainder of 2021. And joking aside, have a good time at the BMO conference.
spk08: Your next question comes from...
spk07: Sorry, go ahead. Just to finish up, Cosmo asked us, sorry, it's one point that maybe we forgot to mention. We mentioned that all-in sustaining cost per ounce was going to be the highest in Q1, not necessarily sustaining capital, because our production in Q1 is lower than future quarters. So that's a big driver of our AISC per ounce in the quarter. So sorry about that.
spk08: No problem. Your next question comes from the line of Mike Parkin with National Bank.
spk01: Thanks for taking my call. Most of my questions were answered, but you've got that nice permit out of the way. Well, actually, it wasn't a nice permit. But you've got the new one in there for detour. Can you give us some colour in terms of how often, maybe in Q4 in the second half, you were bumping up against that daily limit just to give us a sense of just how kind of handcuffed you were and being able to show what that mill can really do?
spk05: Thanks, Mike. Larry here. Throughout the year, last year, I think we bumped up against it about 70 times, give or take. um you know it's uh it would manifest itself into you know the middle having a kind of slow down and mid to late night shift um depending on depending on the situation right so so that you know i think although we could the mill has is we could uh we could take advantage of that permit um but not to the degree that we plan on taking advantage of with the with the throughput initiatives so you know, as we get later into the year, this year, and then into the following years, we plan on being consistently above that level, 75,000. Okay. Sorry, go ahead.
spk07: The other aspect of increasing throughput was also we didn't want to do that at the expense of recovery. So that's the other aspect of it that we're bumping in. This is sort of leading in, you know, to get the permit to this level. It leads into a lot of the capital and the programs we're putting in place at Detour to both improve mill throughput but also improve, you know, mill performance at the operation.
spk01: Okay. Right, I guess the tankage is to kind of keep retention times similar, given your throughput's going to be going up. All right, thanks very much. That's a great color. That's it for me.
spk08: Your next question comes from the line of John Tumatso from John Tumatso's.
spk02: Hey, Tony. Thank you. If you could explain a little on the detour reserves. Above a half a gram, you declassified 408,000 ounces, it looks like, where the reserve went down more than depletion. And then almost 2 million ounces at 0.41. Are those all end-of-life stockpiles?
spk07: Sorry, Natasha Vaz here, our VP Technical Services. I didn't see a VP Technical Services here. She can answer a lot of this stuff.
spk00: Hi, John. Hi, Natasha. As part of the detour update, we did redo the geology model, and so it did have an impact because we did change the shape of the actual pit itself. So it did have an impact, so the overall resources did change. But with respect to the cut-off grade, we went to, as Tony mentioned, a variable cut-off grade format and so on. Basically, what we ended up doing as a detour was becoming more selective, and that will help us with all sorting and grade optimization. So I just want to stress that when we did that, we optimized our grade and production profile to bring forward higher grade ounces and stockpile lower grades to be milled mainly at the end of month. And we also made, yeah, that's right, we also did make the pit smaller a little bit, so that probably impacted overall.
spk07: Yeah, see, one of the things that we did, John, is like with the previous reserve, so you'd be saying we depleted some, but what we did was there were some marginal allowances maybe at the bottom of the pit, where where we adjusted we adjusted we we didn't you know we adjusted costs etc from previous years in terms of what was in the in the model and previous reserves and so the pit doesn't drop pull down quite as far as it was before uh so that's where it looks like you did there's some ounces came up but it's just because the pit's a little bit smaller right if i could ask another on fosterville
spk02: Is the three-year production forecast solely from the reserves already on the books, or does it include some MI and inferred, or does it assume a few extensions that you think are there but still need to document?
spk00: John, it's based on only reserves. When we ran the financial model on the reserves, it falls within the guidance.
spk02: Thank you.
spk08: Your next question comes from the line of Robert Delfrati from Roboho, Inc.
spk09: Thank you very much for taking my two questions. First of all, I'm a little confused since all of the reports that you've been putting out in the last while have been extremely positive and extremely encouraging. But for some reason, the market is not buying into it. As a matter of fact, if you take a look at the stock's history in the last six months, it's been down about, I'd say, $25 or so over the last year. It's down about $32, $33. Today you're making another announcement that's record-breaking in all areas. I mean, we probably have more cash than anybody. We have more reserves. We have more competent leadership and so forth. And yet here we are. Last time I checked, it was down $1.50. So my question is this. If we are so positive about this stock, why is it plummeting? And secondly, what... Are you, as the executive of this company, planning on doing to stop the bleeding and the plummeting that seems to be affecting this stock? I mean, it should be, according to, I think, Scotiabank, it should be trading between $65 and $70. Yet here we are. What is it? $43-something. Can you please explain that for me, please?
spk07: Thanks for the question, Robert. You know, first thing, Robert, I don't know if I can date yourself, but I can date myself. There's an old saying that says you can lead a horse to water, but you can't make him drink, right? So, you know, sometimes it has to be something that people want to own, etc., and You know, definitely, you know, there's been a lot of positive growth and continued positive things, messaging and positive things we're doing at... Kirkland Lake Gold, and it's up to us to demonstrate value and drive new value for shareholders. The market as a whole and the gold space, sometimes you kind of wonder what can be going on. I think we look at first principles. We've got to tell our story, and we've got to execute our story as we have. I think You know, there's a couple of key drivers for the valuation of KL, and I'm sure everybody wanted is Fosterville, and where's Fosterville going to go with new discoveries, etc. And then as we continue to progress, you know, we've got a lot of catalysts at Detour this year, the updated resource and then updated reserve that we expect for 2021, and that tied to a whole new updated mine plan, etc., that might even bring in those ounces that John Tommaso's talk about came up because we picked slightly smaller, maybe just put it be bigger again. So there's a lot of these catalysts that we got to work to drive and demonstrate new value. And I mean, fundamentally, share prices should should go up because of uh there's you know where where somebody sees that this you know the the overall value the company was a dollar yesterday but tomorrow it's going to be worth two dollars and that that's how we got to demonstrate value it's it's got to be that and you know I don't know. I mean, in terms of the market and what the market sees, I think the biggest probably thing around Kirkland Gold is going to be what's the relationship to Fosterville. And then maybe over time, we work at demonstrating the reason why Detour was such a great acquisition for the company.
spk09: Okay, but how do you get that message across? Because on the reserves that you have right now and the cash and the fact that you have no debts, According to some of the analysts, this stock should be trading in the 60s, and yet it's trading at the 40s. So it appears to me as if that message isn't going out there. So what does the team have in the plans to make sure that that message gets out there, that it's a $60 stock or a $65 stock as opposed to a $43 stock as it is today? So does the team have any idea of how they're going to handle this?
spk07: Well, I mean, again, people like you going out there and saying this is a $60 stock, it's important. Fundamentally, it is us continuing to demonstrate the results, continuing to demonstrate that the business as it goes forward. And again, the biggest catalysts are going to be what we see is new discoveries at Fosterville. That's a major catalyst driver that's only going to be positive. And as we complete what we're working out with Aditra this year and what that can do. I mean, we can tell a story, but what we're trying to do in our story is tell the truth and demonstrate that. You know, I know and I'm sure, and you can see by a lot of the analysts' reports, that people are seeing it, and it's going to take time for people. They're going to want to know it's there, and then people will be buying the stock. And there is a lot of value, and it is a $60 or $70 value stock, and it's going to be coming over time as we demonstrate that value. You've had a big pullback in the gold price. You've had other things that happened. That's stuff we don't control, and we don't take credit for it. When it goes up, we don't take blame for it. When it goes down, we've got to focus on value in the business.
spk09: Are there any promotional aspects that the company or the executive can undertake to get that message out there? Because I can do it, but I'm only going to reach five or six or ten people. I think we need more than that many people.
spk07: but we do have a lot of marketing. You've got to recognize the marketing has been virtual, and we continue to be heavily out there and communicate to our existing shareholders and to new shareholders, whether it's the BMO conference next week. There's a number of things happening over the next few months here that we'll continue to communicate to, and everybody you heard on this call And a few others are out there talking to shareholders and communicating. But where we are in, I won't say it's a challenge. We've got virtual meetings. We're getting good at virtual meetings. It's about continuing to get the message across. It's... It's challenging, but it's a new opportunity for us. We do have an aggressive marketing schedule that's going to be going on for the next few months. Fundamentally, we're not about trying to tell a story. We're about trying to demonstrate the results and make sure that the story or what we're telling you, we can demonstrate it in results you're going to see over the next six months or a year.
spk09: Well, hopefully it will come pretty soon. Otherwise, this thing is going to go back down to $25, which none of us want to see. Anyway, keep doing what you're doing because the stock goes down. But hopefully this will stop and we'll see it back up to $60, $70 in the near future. Thank you very much for taking my questions.
spk07: Thank you very much. You take care. Thanks. Bye-bye.
spk08: There are no further questions at this time. You may continue with any closing remarks you may have.
spk07: Thanks, Operator, and thanks, everyone, for participating today. And I'll just put my own take on the last question, and that is that right now we believe we're an excellent buying opportunity. We think we have a lot of value upside in front of the company. We have three outstanding assets, all of which have significant expiration and value creation upside. Key for us is execution, both operationally and with our exploration programs, and then aggressively market and make sure the street realizes the progress we're making. That's exactly what we expect to do. And in that vein, I'll say that we're very much looking forward to our next quarter-end call so we can tell you how much further we've come. Thanks a lot for participating today and have a good day.
spk08: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
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