Kirkland Lake Gold Ltd. Common Shares

Q2 2021 Earnings Conference Call

7/29/2021

spk01: Good afternoon, ladies and gentlemen. My name is Brandy 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 second quarter 2021 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 your Senior Vice President, Investor Relations, Mark Udding.
spk04: Thank you very much, Operator, and good morning, everyone. Welcome to our second quarter 2021 Conference Con webcast. With me today are most members of Kirkland Lake Gold senior executive team. Speaking during the presentation will be Tony McCooch, our president and chief executive officer. David Soros, our chief financial officer. Ian Hahn, vice president of Australian operations. Larry Lozeski, our general manager for Detour Lake Mine. Evan Pelletier, vice president mining for Kirkland Lake. and Eric Calio, our Senior Vice President of Exploration. As mentioned, there are also several other members of the executive team participating on the line as well. After our presentation, we'll then open up the call to questions. We ask each person to limit themselves to two questions today. The slide deck that we'll be referring to is on our website, both on the homepage and the events section. Before I get started, I would like to direct you to the slides on the show and on the website relating to forward-looking statements. Our remarks and answers to questions may contain and likely will contain forward-looking information about future events relating to our company. Please refer to slide two as well as forward-looking information section of our MD&A dated July 28, 2021 for the three and six months ended June 30, 2021. Also during today's call, we'll be making reference to non-IFRS performance measures. A reconciliation of these measures is available in our Q2 and six-month press release in MD&A. Finally, I'll just emphasize that all dollars mentioned today will be in U.S. dollars unless otherwise stated. And with that, I'll turn the call over to Tony McCooch, President and CEO of Kirkham Lighthouse. Thanks, Mark, and thanks, everybody, for being on the call. Nice summer day in Canada here. We don't get a lot of these days, so we've got to learn to enjoy them. So we'll try to be efficient. We appreciate you guys being on the call and give you some time after we get through this presentation and after question and answer to at least enjoy some of the sunshine that you've seen out there. Anyway, before, you know, I'm going to start on slide four. But, you know, I think, you know, we did put out a press release. You do look at the results for the quarter. And, you know, we had a very, very solid quarter with record results and earnings and throughput and feature, et cetera. And I'll get more detail of that later. you know we again we we're on this call and we get the uh benefit of the being able to talk about about these results but it's really uh you know the results of the work of a lot of people within within within kirk and my gold and our suppliers and and their efforts and the communities and everything that supports us and you know it's you know we we would be remiss if we didn't say thanks everybody for your hard work it's not easy our business that we do as one of the as the board recognizes some of the times You know, when you look at all the challenges that we face in terms of trying to mine gold at depth and or extract bits of gold out of the rock, it's not an easy business, but you've got a lot of people that are working really hard that make it look easy. Anyway, thanks for the efforts. The other part is, you know, again, in acknowledging that, you know, within our operations both in Canada and Australia, our mines are located on traditional lands of numerous Indigenous communities in Kirkland Lake, you know, and we have an IBA in Kirkland Lake for an expense agreement and a very good working relationship with both the Watership First Nation and the Matatchewan First Nation just outside of Kirkland Lake. Over at Detour, we occupy the traditional lands of the Loose Cree, based up at New Sanctuary Island, just on the James Bay Coast, as well as Tequitagamu First Nation, based outside of Cochrane, Ontario, and the Wagasig First Nation as well. And, you know, similarly, you know, we do have exploration agreements. We are working sort of over the Quebec border and the lands there. It's, you know, part of the traditional lands of the Cree nations of Quebec. And over in Australia, whether it's down in Victoria at Fosterville with the Jajawurrung, as well as up in the Northern Territory in Australia, where we're working on doing some seedlings to the land. It's the Wagamon and the Jawan groups So, you know, we have lots of respect, and we really appreciate the opportunity to be partners and to be able to operate on these traditional lands. You know, we're just going through a period of time here in Canada. There's been a lot of developments in terms of land. of uh the truth and reconciliation happening in canada and you know i guess from from our perspective you know we we as a company you know we support people we recognize uh you know maybe sometimes we have to all recognize the truth of maybe things that happened in the past you know we can't We can't do things to correct the past, but we can demonstrate as we go forward what we do and how we want to work on these lands and work with our partners in this area. Anyway, maybe I'll get into our results. And before I do that, again, that's why it talks about giving an update on the COVID-19 response. You know, this is COVID-19 we were talking about here, but it's in 2021. We're hoping it doesn't become a COVID 2021 or COVID 2022. But we are encouraged by the developments in Ontario. You know, we do know that now there's some new lockdowns in Australia. But in terms of everything happening from a COVID perspective and the impact on our site, it is minimal impact at this point in time. Maybe, you know, over the last year and a half, two years, the people in Kirkland Lake Gold have done exceptionally well in terms of coverage. you know, putting in good policies and procedures and how we work and people adopting ways to protect each other and work together. And, you know, we've had a lot of success. We have had some outbreaks as defined by public health at Boca Camp and Detour Lake in Ontario during the second quarter. But, you know, the company and the people were very proactive in responding and the situation was quickly resolved. And, you know, actually, in fact, in both cases, we were recognized for the local health units, both the Perks Mine Health Unit, which looks after the detour, and the Timiskameen Health Unit, and for Kirk and Mike, in terms of what we did to prevent transmission and protect our people and protect any community spread from these efforts. So thanks, everybody, for continuing to work hard in these areas and work towards staying safe. Turning to slide five, I'll take a moment to give you an update on our responsible mining efforts. We are signatory to the World Gold Council Responsible Mining Principles, and we're working to achieve compliance to these objectives in our business. And at the same time, we're working to also support the industry as a whole to achieve these objectives as well. And fundamentally for us, responsible mining is integral to everything we do, and it's part of our culture, and we believe it's not just good enough for us to do it, And in Kirk and Mike Gold, we want to make sure that the rest of the industry is there with us and we can demonstrate leadership to the rest of the industry and not just the gold mining companies, but all the mining companies in the region. Also, additionally, as you may recall in Q1, we pledged to achieve the net zero carbon emissions by 2050 or earlier. We've been working towards that, establishing a net zero task force. So we've been working on trying to identify what our carbon footprint is at this point in time in all different areas and then look at ways to, you know, what does it mean? How do we do it? And look at ways to communicate it internally. There's lots to do there. We've also made a pledge where we made a commitment to invest $75 million per year over the next five years, basically on supporting a number of efforts. One is reducing our greenhouse gas footprint and the impact from our sites, so looking at ways to reduce our use of carbon. Also looking at, you know, big areas investing in technology and innovation to support a safer, more productive workplace. And to, you know, digitization, automation, working towards creating smart minds at our mines, both here in Macassar and Canada, as well as Fossaville in Australia. And we've also, you know, committed to providing support to our local communities and regions where people live, where people work to support these areas, make them more livable for our people and for the people in those communities. who host us. During Q2 2021, we achieved a number of achievements in these key areas. We made a significant donation on the area of community support over in Bendigo and next to Fosterville in Victoria, Australia. We made a $12 million community partnership fund. We also made a major commitment to Kirkland Lake Hospital, including providing financing for complete redevelopment of the emergency department at the hospital. Building also on our leadership in minimizing and reducing carbon emissions, we took additional steps in Q2 2021 to further reductions, and some of those, for example, would be the rollout of a new fleet of Z-50 trucks at MACASA, which are the world's first 50-ton underground haul trucks. Now I'm going to turn over to our financial and operating results on slide six. As I mentioned, we had an excellent quarter in Q2, highlighted by record net earnings of $244 million, or 91 cents per share. I think that's pretty much industry leading, by the way. A solid increase in quarterly production, which was 15% higher than Q2 2020 and 15% from Q1 2021. We had strong revenue growth and significant increase in the both operating and free cash flow. All three of our mines increased production during Q2 2021, with fossil having a particularly successful quarter. In Canada, both D2 Lake and Mackenzie achieved solid production growth from both prior periods. Looking at our unit costs in Q2, we beat our full-year guidance ranges. We are being impacted by the FX rates. Our operations are doing very well, matching costs, and we continue to target our existing guidance. In terms of cash flow, we had operating cash flow of $330 million and pre-cash flow of $131 million. Operating cash flow translating to cash flow per share of $1.65 million. Turning to slide seven, financial strengths continue to improve. Again, we think we have industry-leading financial strengths. Cash increased to almost $860 million. And again, with no debt, we also continued a very successful track record around capital allocation. We made significant investments for future value creation into our assets while also returning capital to shareholders. And what have we been doing? Well, during Q2, we returned $62 million for giving the shareholders $50 million for our Q1 dividend in April and $12 million for repurchase of 300,000 shares. We also demonstrated our commitment to continue to repurchase stock. We renewed our NTID in early June, and our revised NTID now for the next 12 months gives us the right to have the ability to repurchase up to 27 million shares. We followed that up by introducing an automatic share purchase plan, which we used now to buy back 300,000 shares in June, and we're making good use of the automatic share purchase plan in July. To date, in July, we've purchased about 945,000 shares, and that's an additional $38 million. So in total, we're able to purchase 5 million shares on our automatic share purchase plan. Turning to slide eight, you know, again, when we talk about investing and investing for shareholders and providing value for shareholders, first part is, you know, definitely we invest by, you know, giving some money back to shareholders through our dividend policy, through our NTIB, and those ways to make allocations back to shareholders. Second thing is through exploration and investing in our assets in terms of, you know, improving the value of these assets. And another third way we create value for shareholders is through, you know, investing in capital investment into our assets. You know, we continue to have a very successful track record in that. you know at teacher lake we we're generating a you know very encouraging exploration results eric will talk about them a little bit later you know and and you know i think the results continue to point to the conclusion that we talked about when we originally did the detour transaction that there's there's an extremely large deposit along the determined trend uh that's near surface it's much much larger than is included in the current reserves and i would I would say that, you know, until that, you know, that's just the beginning, we might not have even found the other part yet. Once we recover this. We're also making good progress in multiple growth projects, including optimizing the Detroit mine and increasing throughput in the mill. We did have some record throughput during the period, both from a day perspective and for over a period. There's been improvements in grade management coming with the new ASEER lab and looking at changing some of our processes at site as well as other infrastructure to support improvements in terms of mill throughput. We're looking at putting sets of screens in front of the cone crushers and we have to have new feed systems to support when they're down for maintenance. There's a lot of projects. And we're investing over at Mercasa, the number four shot. The number four shot is a significant project. It currently continues to remain ahead of schedule and on track for completion late next year. uh we also had the macassar continued to have a significant exploration success we issued a pressure release couple weeks ago which felt you know the results continue to show that the sulfide complex is is going to keep growing and it also highlights the potential that among both the amalgamated break in the main break for for new mineralization and and new potential mining areas and future And at Fossaville, we've already talked about the strong results in T2 and today, 2021, but basically Fossaville is having a tremendous year, and Ian Hong will discuss it more shortly. Apart from the results, we have also made progress with key underground development, critical for future exploration and sustainability of Fosterville. We've been developing the Robbins Hill as a second mining front, but also looking for cheaper down plunge extensions and new discoveries such as a swan zone. Now on slide 9, this is looking at a year-to-date results. We achieved better than expected production of 682,000 ounces for the first half of the year. Again, this is mainly due to fossil fuel. We achieved very solid unit cost performance. We had record half-year earnings and earnings per share and very strong cash flow. You can also see on the slide that so far this year we have repurchased 2.3 million shares for close to $100 million. That includes 945,000 shares we had bought back in March. In total, we have returned around $1.1 billion to shareholders since the beginning of last year. I think that very importantly, we're additionally on top of the strong results. We've also played for a very strong second half of 2021. And for the strong value creation going forward, we do have a lot of catalysts coming up in the company, and the main catalyst being, you know, the updated technology. resource reserve estimated detour, which we're talking about into Q1, finishing for this year, effective December 31, 2021, but, you know, coming out in Q1 2022. And we talk about the completion and, you know, the use of the number four shaft and building a new mine over at Macassar. Looking at slide 10, this shows our performance against guidance. As you can see, we're very well positioned to achieve our guidance entering the second half of the year. In our Q2 results and press release, we discussed FX rates and the fact that stronger than budgeted Canadian and Australian dollars is having an impact on our cost and expenditure performance relative to unit cost guidance, not in terms of dollar spend. Offsetting that impact in the first half of the year, we're higher than planned sales and effective cost management, as I say, in all three of our operations. But as it is, if we continue to see the rates like we have in the first half of the year, we will likely come in at right around the top ranges for unit cost and capital spending. But just wrapping that up, what I want to emphasize is that in our operations, our operations performed very well. Our financial results are strong. We continue to have very encouraging exploration results. And we're making an excellent project with all of our key projects and value creation initiatives. Anyway, with that, maybe I'll turn it over to call over to David Soros, our chief financial officer, and give you some highlights on the financial results. Thanks, David. Thank you, Tony, and good morning, everyone. I will begin on slide 11. In Q2 2021, we achieved record net earnings of $244.2 million, or $0.91 per share. This represented a 63% increase from $150.2 million in Q2 2020 to and 51% increase from $161.2 million the previous quarter. The increase from both prior quarter and prior year resulted mainly from higher revenues and lower effective tax rates. Q2 2020 also saw a sizable foreign exchange loss of $72.8 million compared against Q2 2021 foreign exchange gain of $2.6 million. Adjusted net earnings totaled $246.9 million, or $0.92 per share. The difference between adjusted net earnings per share of $0.92 and net earnings per share of $0.91 in Q2 2021 was mainly related to the removal of $3.5 million net mark-to-market gains recognized on warrant liability, care and maintenance costs incurred at our non-operating sites, uh holt and cold complex and the nt and other items that were not reflective of our operations like cobit costs and other restructuring charges starting to slide 12 in q2 2021 total revenue is 652.7 million the change from q1 2021 is mainly impacted by an increased sales volume and a 26 per ounce increase in average gold price compared with q2 2020 A $111 per ounce increase in average gold price from $1,716 to $1,814 accounted for $36 million of the revenue growth year over year. Looking at EBITDA, as shown on slide 13, Q2 2021 EBITDA totaled $451.3 million. A change from Q1 2021 primarily related to a 20% increase in revenues driven by higher volume and gold price. Compared with Q2 2020, change in EBITDA was due to a 15% increase in revenues and a large foreign exchange loss impacting Q2 2020 EBITDA. Q2 2021 also saw higher depletion and depreciation expense of $111.3 million. The change from Q1 2021 primarily due to higher sales volume. Deferred tax expense was higher in Q2 2021, but overall the effective tax rate for Q2 2021 was lower, reflecting favourable tax adjustments during the quarter, resulting from reassessments of income taxes paid in prior years. Looking at the next slide, turning to slide 14, we'll look at our cash balance and cash flow. On the slide, you'll see that our operating cash flow was strong. We generated $487.5 million of operating cash flow in the quarter before $157 million in cash taxes paid in the quarter. During the quarter, a $98 million tax payment was made in Australia, representing the final tax installment for the 2020 tax year. During the quarter, we invested in our key assets, spending $199 million in capital. Cash used for financing activities of $64.3 million reflected the $11.9 million used to repurchase shares in Q2, as well as $50.1 million used for payment of the dividend. Turning to the next slide, slide 15, looks at the change in cash in a different way. You could see that the largest contributor to growth in cash was from our operations. which generated about $395 million of cash, which is before income tax paid of $157 million, growth capital investment of $82.5 million, exploration spending of $46.6 million. Other cash outflows include costs incurred at our non-operating sites, B&T and Holt Complex of $14 million, and corporate GNA of $17 million. As noted in the previous slide, during the quarter, $62 million was returned to shareholders, including $11.9 million used to repurchase shares through the company's NCIB and $50.1 million of dividend payments. Next, I'll turn it over to Ian Hahn to discuss operating results at Fosterville. Ian Hahn Thanks, David. I'm starting on slide 16. As you have heard, Fossil had a very strong quarter in Q2, and for that matter, for the first six years of the year, first six months of the year. Fossil produced 158,000 ounces in Q2 2021, focused on processing 107,000 tonnes at an average grade of 29.2 grams per tonne and average mill recoveries of 98.7%. For the year to date, we produced 266, nearly 367,000 ounces Down from last year, but consistent with our plan to reduce production in the Swan Zone to draw out mine life at more sustainable levels. The 266,700 ounces were approximately 60,000 ounces above planned levels for the half year. Two main factors were driving this. The main factor being very strong grade outperformance in several Swan Zone stoves. There was also the benefit of some re-sequencing that we did in Q2. Looking at the resequencing, it involved an area in Swan called Audax. We planned to start a section of stoats from the top and work our way down. However, once optimised, we changed that sequence and really flipped it on its head and did it from bottom up. The result of that was bringing some higher-grade stoats from Q4 into the Q2 time zone. Turning to costs, again, very strong for both Q2 and year-to-date. For Q2, we had operating cash costs of $162 an ounce and oil and sustaining costs of $353 an ounce. For the year to date, operating cash costs averaged $192 an ounce with oil and sustaining costs of $385 an ounce. And these are very low numbers. Entering the second half of the year, we're very well positioned to achieve our production guidance and potentially could do better. We're also well positioned relative to our cost guidance. I'll now pass the presentation over to Larry Lanzetti, my general manager, for the detail like mine. Larry, just before you come on here, Ian, I don't know if we could qualify. I don't think that was a Freudian slip at the beginning. It wasn't just for six months of solid performance, but Fosterville is on a track record of six years of solid performance, and I think There's a point in time when we all have to believe that, you know, it's a very good mine, very well run, led by some exceptional people. And the people working there, it's an exceptional workforce, an exceptional area to be in. And we're just lucky to have it in our portfolio. So anyway, thanks. And sorry about that, Larry. No, thanks, Tony.
spk03: Hey, no problem. And thanks, Ian. Starting on slide 17, Detour Lake achieved, as Tony mentioned, record quarterly production in quarter two of 21 of 166,000 ounces based on processing 5.8 million tons, an average grade of 0.96 grams per ton with a recovery of 91.5%. This is an increase of 26% from quarter two last year and an increase of 13% from the previous quarter. The quarter over quarter increase is largely due to significant improvement in the average grade with our sequencing into higher grade areas as part of our phase two mining plan. We've indicated to the market that you would start to see the ramp up in grade starting in quarter two, and we certainly did. The average of 0.96 grams per ton was in line with our reserve grade. We also had increases in tons processed since the first quarter. Throughput is typically the lowest of the year. Having said that, you may recall that Q1 this year was a record for first quarter throughput levels. The year to date, we produced 312,000 ounces, which is 40% higher than the five months after the acquisition last year, and 16% increase from the full six months of year to date 2020. Looking at our operating cash costs, we averaged $610 an ounce in quarter two, and $674 an ounce for the year to date. Excluding the impact of FX rates, our Q2 operating costs per ounce improved from last year's second quarter with much of the increase reflecting higher grades and increased sales volumes. All in sustaining costs per ounce sold averaged $996 per ounce in quarter two and $1,090 per ounce for the year to date. Looking ahead, we expect continued improvement in grade for the remainder of the year above the Q2 level and are well positioned to achieve our full year 2021 guidance. Moving to slide 18. Again, as Tony had mentioned earlier, we have a significant number of projects on the North Detour Lake. Our growth capital expenditures at Detour for the first half of the year totaled $80 million. Of that amount, $44 million was for deferred stripping and $37 million was to support ongoing work to expand capacity. Continued processing plant expansion is on track with good progress on crushing improvements for their capacity. Airstrip had significant progress. We anticipate that being complete by the end of Q3. The tailings facility is progressing well with favorable weather conditions and an early start-up. Full-bound maintenance facility expansion is nearing completion for the field maintenance area. And finally, as pictured, we're expanding our camp, which will be completed by the end of quarter three. It's just a note that this camp, once complete, will be the largest hotel in Ontario. So you can imagine the size of it. With that, I'll turn the call over to Evan Pelletier, President Mining for Kirkland Lake.
spk04: Thanks, Larry. I'm starting on slide 19. Production at Macassar in Q2 totaled 55,300 ounces at an operating cash cost of 586 and all in sustaining costs of 848. Q2 2021 production was 32% higher from Q2 2020 and increased 17% from the previous quarter. Higher tons were processed in Q2 2021, mainly due to better than anticipated widths and strike lengths from stokes in the South Mine Complex. Operating cash cost per ounce sold average 586 million versus a 547 for the same period in 2020 and 699 for the previous quarter. With the increase from Q2 2020 reflecting a stronger Canadian dollar in Q2 2021. The 16% improvement from Q1 2021 largely reflected the favorable impact of higher ounces sold. As well as lower maintenance costs and reduced expenditures related to operating development compared to the previous quarter. All in sustaining cost per ounce sold was largely unchanged in Q2 2020 as the impact of a stronger Canadian dollar was offset by higher sale volumes. When you include the impact of exchange rates, all in sustaining cost per ounce sold improved from Q2 2020, reflecting the favorable impact of higher sale volumes as well as lower operating cash costs and sustaining capital expenditures. Looking at the year-to-date production at the CASA total 103,000 ounces based on processing 167,000 tons and at an average grade of 19.5 grams per ton with recoveries in the 97.9%. Year-to-date production increased 11% for the same period in 2020, affecting a higher average grade and increased tons processed. Turning to slide 20. We'll look at our growth projects that are helping us build a human cast of mine for the future. Our growth capital expenditure for the first half of the year were $43 million, $30 million in Q2 2021. Of total growth expenditure so far in 2021, $22 million were related to the foreshaft project. During the quarter, the shaft advanced approximately 600 feet and had reached a depth of 5,600 feet as of June 30, 2021. The project ended Q2 2021 ahead of schedule and on track for completion in late 2022. An additional $10 million, $4.7 million in Q2 2021 of growth capital expenditure in year to date of 21 were related to the ventilation expansion project involving the development of two new ventilation raises. The two new raises will add significant to our ventilation into the mine, which have already improved from the level this time last year. The remaining growth capital expenditure in Q2 2021 mainly relates to the number of underground projects, including lateral development from the mine towards foreshore. I'll now pass the presentation over to Eric Calio, Senior Vice President of Exploration. Thanks, Kevin, and good morning, everyone. My first slide today is number 21 and related to detour, where we're continuing to advance the large-scale drill program commenced in 2020 to evaluate the potential surrounding the main and future westheads. As previously announced, the program includes a minimum of 250,000 metres in aiming for an updated resource and potentially expanded mine plan for announcement in early 2022. In terms of progress to date, we believe it is still continuing to track very well with 64,000 metres in Q2 and now close to 200,000 metres since starting in early 2020. Additional to this, we've now already seen quite a large number of assay returns and had six press releases, including the one in July. Those results continue to look very, very encouraging. Summarizing some of the results is the current slide, which is a long section from the latest release containing color-coded pierce points to highlight holes from different areas. Also shown in the image is a series of black dots, which are the pierce points for all holes drilled since the start of drilling in early 2020. As indicated, now starting to really fill in the page, especially in the central and east part of the saddle. Indicated on the image, results from the new work continue to look very promising in all areas, with some of the best continuing to come from the central part of the saddle, highlighted by pink and green dots, including new intercepts such as 1.7 over 80 metres and 1.31 over 87, which are in addition to several other good intercepts we've already reported in the same area. Additional to the tower, we also had some very good results from below and to the west of the future west pit, drilling to date is much more limited key intercepts in the west pit are marked with blue and orange dots and include 1.09 over 70.5 and 1.62 over 77.8 from near the lower limit of the resource pit as well as six grams over 14 meters including 25 grams over three near the five uh near the 550 meter level key intercepts to the west include 1.63 over 32, including 13.35 over 2 metres from approximately 250 metres below and to the west of the current resource kit. So continuing to demonstrate expansion potential in that direction. In summary, work to date at DTUR continues to advance along very well. Turning now to my next slide, which is number 22, we see an image for Macassar, where we continue to advance our large our large exploration program to confirm and expand resources. Key targets for the program include the direct extensions of the SMC amalgamated in main break between the 53 and 58 levels, but with additional work now in progress to access targets below and to the west of the main break on 51 and 58, as well as on the SMC on 34. So in terms of our drilling, our aim for the year is about 200,000 meters and tracking a little bit lower at this time, but NRV is still achieving some good success. The main highlight being shown on the screen at this time from the east part of the 53 level. As shown on the image, the work was focused mainly on casting of areas along strides to the east of the SMC as well as up and down depths of the current resource and reserve. And there are a number of good intercepts in the relief. Looking at the area to the east, we saw drilling reaching almost 180 meters in this direction and intersecting a number of good values, including a highlight of 589 grams per ton over two meters, quite near the limit of drilling. And looking to the areas up and down dip, we saw an intercept almost 100 meters in each of these directions, with those down dips being near the junction of the SMC with the amalgamated where we have announced success in other areas before, and those drilled up just identifying a significant new block with very little testing, and which we will continue to try and expand on from platforms on 53 and 58. Additional to this, we saw some good advancement of the expiration dress toward the new targets on 34, 51, and 58, keeping us on track for drilling to start on these most likely later this year. As mentioned earlier, New Jersey will provide access to areas the deep and west parts of the main break and as well above the SNC, where we have not really worked on before, but we think have a lot of potential. And now turning to my next slide, which is number 23, you see an image outlining the exploration plan and lease of progress at Fosterville. Whereas in the CASA, we have a very large exploration program in place, with the vast majority being directed towards the lower part of the Fosterville mine and Robins Hill areas, and the remainder towards a series of promising targets, which are mainly on the mine property. As indicated on the image, work at Fosterville is designed to focus pretty much entirely on the area down plunge of the current reserve for the Swan Zone, and includes both development and drilling to convert and expand mineralization to depth, with the vast majority of drilling being from the new 3912 annual address, which is shown here in the small red line, which we have been working on over the first half of this year. And now I'm happy to say that the address has just been completed in June, and we have drills in progress, five in total, and situated along the zone. So although work is still fairly early in this program, we can say that things are proceeding very well, and we expect to have a lot of new drilling done and information to talk about as we proceed later into this year and into early 2022. Turning to Robins Hill, the plan here again is to focus on the area down plunge of the existing reserves. We continue to believe that we can not only extend the legation, but we have the potential to identify high-grade zones similar to the swan zones. To achieve this, we put together what we think is a very good program, including continued advancement of the Robins Hill recline and drilling from both surface and underground. As with Phoenix, the North Phoenix area work is continuing to progress very well with significant advancement being achieved in the new decline, bringing it to more than halfway to Robins Hill now, and a substantial amount of service drilling preparations in place for underground drilling to start in Q3 to test the very south side of the Robins Hill structure. So from all indications to date, the project is advancing very well. We look forward to delivering an increasing amount of information on this in the near future and with that i'll pass the call back to tony Thanks, Eric. And thanks to David, Larry, and Evan and Ian for your presentations. As you can see, Kirkland Lake Gold is a very awesome company. We've had significant success this year. But if you really break it down, as I mentioned, Fossilville, six years of industry-leading and one of the lowest-cost gold mines in the world, most profitable gold mines in the world. significant exploration success and significant motivation of people going forward to continue on that track record. We have Macasta, you know, in its current form, producing one of the, you know, from the historic Kirkland Lake camp to be continuing to deliver the solid production results it is and where it can be. It's not quite where we want it to be yet, but we're investing in a new shaft and investing in new ventilation systems that will significantly improve Macassar. And, you know, we're patient and diligent working forward there. And once Macassar is, you know, by 2023 into 2024, we expect Macassar to be one of the largest underground most probable gold mines in Canada. And, you know, as we see with Detour and the growth coming at Detour, Detour has the potential to be the largest gold mine in Canada. And then growing from that to be one of the largest gold mines in North America, let alone, you know, definitely in the top portile in the world. So, you know, very solid company, you know. And if you go by that, you tie it into excellent results in Q2 2021. We had record earnings and earnings per share, strong revenue growth, capital generation, and as we talked about, progress with both our exploration programs and our investment into our assets. And by the way, when we talk about record earnings and earnings per share, it's not only record earnings and earnings per share, but industry-leading earnings, industry-leading earnings per share. And, you know, we're committed to responsible mining. We're committed to recognizing and supporting the communities where we are in terms of doing what we can to ensure the sustainability in the regions. And that we can make things better for the local communities and for the local Indigenous communities in the areas where we are. And we recognize and support a strong and honorable and trusting partnership as we move forward into the future. And also, as we look ahead from 2021, we're well-positioned to achieve our guidance. And again, when you look coming out of 2021 into 2022, we expect to see some very important value-creating catalysts in all three of our minds. And there's still lots of exciting things coming up ahead for us. So anyway, thanks, everybody, for listening, and happy to take any questions.
spk01: And at this time, if you would like to ask a question, please press star then the number one on your telephone keypad. Again, that is star then the number one. Your first question comes from the line of Fahad Tariq with Credit Suisse.
spk04: Hi, good morning. Thanks for taking my question. Just going back to the 2021 guidance, you mentioned now expecting the high end of the production guide. Can you talk a bit about just the puts and takes on the cost side? Because on the one hand, the higher production presumably would lead to lower costs per ounce. But at the same time, we're hearing about inflation expectations from some of your peers and for you specifically, more of an FX impact. So just want to get kind of a net effect on cost this year, thanks. Well, I mean, I'll let David kind of answer the question. But, you know, definitely, you know, we've got FX rates that are having an impact. But that's an impact on unit costs. You know, we spend a lot of our money in Canadian and Australian dollars. And I think in Canadian and Australian dollar terms, we are seeing some inflation, such as in fuel prices and steel and a few things. But, you know, I think the biggest impact is on FX. But, David, maybe you can give a little bit of color to this. Yeah, no problem, Tony. Yeah, we are seeing inflation in specific areas, as Tony mentioned, diesel and steel, for example. But overall, costs in local currencies are pretty much in line with what we had in the budget and what we were seeing even last year. And that's really due in part to very good cost management from the sites, our leads at our operations. You're absolutely right. You know, obviously, there is offsets there. Higher production will lead to lower costs, and some of these pressures that Tony mentioned with reverse effects, you know, are offset by some of that. But, you know, basically, on the full-year costs, and expenditure, our guidance was based on Canadian to U.S. exchange rates of 1.31 and Australian to U.S. exchange rate of 1.39 versus what we currently see to date, which is exchange rates of approximately Canadian 1.25 and Australian 1.35, and your date 1.25 and 1.30. If the current exchange rates continue through the remainder of the year, the expected impact over that period would be to see a bit of an increase in cash costs. and ASIC. But having said that, we're well below the budget levels for both measures in the first half of the year, and based on strong cost performance in each of our three operating operations, and if we achieve higher than planned production and sales, we're going to work hard to continue that trend. And based on that, we're continuing to target our existing guidance. So we've done well so far, and we plan on continuing that trend through to the end of the year. Okay, so it sounds like the midpoint is still kind of achievable on the cost side. My only other question, just on Fosterville exploration, you know, of course we've received pretty detailed updates on McCaffin, Detour Lake. Just wondering on Fosterville, is it just a function of the drilling is more second-half weighted, or I'm just wondering if, you know, when to really expect more detailed results from Fosterville. Thanks. Eric or Ian, want to answer that? I'll go and you can help me out. Look, the exploration efforts that are possible, certainly for the first time, we have been doing some drilling. However, the focus really has been on the development of the exploration drifts. So the Phoenix 31, 3912 drift that's... It's really going to open up drilling for the second half of the year into the lower Swan area, and we're expecting, you know, we've got five drills on that now, and we're expecting a lot of results to come through the back half of the year. And likewise with the Robbins Hill, you know, we've had excellent project... advance on the twin drifts all the way out towards Robbins Hill and we'll start to see some drilling in Q3 and certainly into Q4 at the really southerly and at depth on the Robbins Hill and trying to really expand that resource. But that's really been the focus for the first half has been the development side of things. Eric, if you wanted to add any more colour there? No, I just think that we have to keep in mind that the distance below surface, the Robin Hill target, you know, we're aiming for areas that are up to 1,000 metres on strike and to depth. Very hard to drill from surface with any detail, and now as we get the new platform in on the decline, we're going to start to get a lot more information quickly from that area. So it's, yeah, I knew that, all I can add. Okay, great. That's it for me. Thank you.
spk01: Your next question comes from the line of Josh Wolfson with RBC Capital Markets.
spk04: Thanks. Just sort of continuing some of the questions on Fosterville, you know, obviously the quarter was very strong partially from that positive reconciliation and partially from sequencing. Is there any sort of ability to give us some better insight onto what the outlook is for the second half of the year and specifically the re-sequencing changes that impact the fourth quarter now? Sure. I mean, Natasha or Ian, I think that would be up to you guys.
spk00: Sure. I'll start, Ian, and then we can go in. Hi, Josh. So effectively, we moved a couple of the higher grade stokes from Q4 into Q2. So I would say we moved about 20,000 or 30,000 ounces forward into Q2. So it will affect our Q4. You will see that we have maintained our guidance for 400 to 420,000 ounces for the year. But having said that, and looking at our plan, we are well positioned to potentially do better than that. But we want to just see how the grades perform for the rest of at least Q3. As we discussed in our results, we had a significant grade outperformance at Fosterville in the first six months. We're not going to assume that that will continue. Generally, at Fosterville, it's a very complex core body, so when you have stopes outperform, there is an also an offset somewhere down the line. So we just want to see how the mine performs over the next few months before we look at our guidance. But to say the least, we are very comfortable with the 400,000 to 425,000 ounces that we've provided.
spk04: Okay, thank you. And then one other question for Detour. You know, for guidance this year, you know, there's, I guess, an implied improvement in both grade, which it sounds like you're pretty comfortable on, as well as, you know, an improvement in throughput probably toward that, you know, 70,000 ton a day rate that's expected next year. You know, is there any sort of detail that can be provided in terms of how how that gap is going to be bridged from that, you know, 64 and a half that you're running it today to that 70,000 times a day towards year end? Larry, I mean, I think you can read the question pretty quickly.
spk03: Yeah, for sure. Really, it's just continuing to focus on the things that we've been working on. We're going to see, you know, by September, we'll see – um the the the bipod the 610 uh refeed the system in place so that'll allow us to uh can you continue to keep the signals at uh capacity anytime there's uh no any uh any downtime uh in the crushing circuit so that'll help us and and uh with the initiatives that we've already had in place like uh changing the vortex lifters. Those are showing promise and really focusing on fragmentation and then getting the right finds in the feed. As far as the mine goes, we're really starting to get to the heart of the ore box. As phase two develops, you know, at depth, we are working more and more on the other things, and that's really where the better grade is. So we do anticipate better grade there. We also, you know, have, you know, more talent there, too, which helps with our throughput. So kind of a combination of what we'll see.
spk04: So just your comment about the September delivery on some of those processing items, should we see the bigger step up in throughput more geared towards the fourth quarter in that case?
spk03: Yeah, it would be a gradual ramp up throughout the year for sure.
spk04: Okay. That's all my question. Thank you. But you've had some significant, you've been setting super records all the time and keeping higher levels off consistently, right, Larry?
spk03: Yeah. I mean, even in July here, we've already, you know, we've, since that's our limit of 75,000 tons a day has been removed, we're For 11 days this month, we've already tweeted that. So averages is when we're running, things are running quite well.
spk04: I don't know if there's any more questions.
spk01: Certainly. Your next question comes from the line from Obase Habib with Scotiabank.
spk04: Thanks, operator. Hi, Tony and the team, and congrats on a strong quarter, and thanks for taking my questions. A couple of my questions have already been answered, but just a quick follow-up on Josh's question regarding the changes in mind sequencing at Costaville. You talked about, you know, what the grade is kind of, you know, looking towards, like, going into the second half. but does this kind of bottom approach sequencing change impact any sort of longer-term cadence? I can take that. You got that, Ian? Yeah, I can take that one, Tony. Sure, and it's a good question. So, fortunately, you know, the team at Fosterville is constantly optimising the mine, and we found ourselves in a situation where with the, with the development ahead of ourselves and where we need to be, it gives the mine some flexibility. So we're not seeing any downside to the change in this. And it's only a certain part of the overall swan zone in the Audax area. We're not seeing any downside to changing the sequence. And in fact, we've seen some upside, particularly when it comes to the mine ability and and a few things like that. So it's been a really good sequence change in that part of the mind from the morning to me. And was this kind of in the works for a while now, or this is just a decision that you've taken just recently and made those changes? Yeah. Our plans are rolling, as you can appreciate. So the engineering teams are constantly looking at what we've got down there as new information comes in, as we see how the ground behaves, as doping advances, and we adjust to suit. And I suppose the fortunate position we find ourselves in is that we are on top of our development and that gives us the flexibility to make these adjustments as we go. And in this particular case, in this part of the Audax, you know, it was seen that, you know, we stood to have a better mineability of that part of the Audax by starting lower down than originally planned. So that was a decision that was made. Perfect, Ian. Dave, that's it for me. Thanks so much.
spk01: Your next question comes from the line of John Tomasas And please state your company name.
spk05: Thank you. It's John Tamazos for Independent Research. Congratulations on the big upturn in results both from the Swan Zone and the Harrier Zone at Fosterville. Could you just refresh us as to how tightly the drill hole patterns are for those reserves And as you develop them and mine the stoves, the potential for variances, which were so wonderful this current quarter.
spk04: Go ahead, Ian or Eric. Ian can maybe start on that. Thanks, Eric. And another good question. Look, the drill spacing, and you have to appreciate that the extremely high-grade areas of the Swan Zone are unique. And, you know, quite possibly you could drill that down to the nth degree and still not get a proper handle on it. But, you know, our drilling is down to, at times, you know, 12 by 25 sort of centres, 25 by 25. So in a broad range, we have a very good handle and very good reconciliations back against our models, which we are constantly updating. However, there are specific, you know, extreme high-grade areas of that complex, you know, swan vein itself that, you know, is very difficult to nail down. We have been accused of possibly being slightly conservative at times, and to be fair, you know... You know, one of the world's highest-grade ore bodies. You know, it is tough to not be maybe slightly conservative at times. So we see some swings and roundabouts. However, you know, on the long run, our reconciliation against model is pretty good, and, in fact, it's very good, and, you know, we get very close to the mark.
spk05: Thank you. If I could ask one more on the detour... west, deep west saddle zone extensions. And I know all the technical studies aren't done. The current reserves appear to carry your production two decades forward at a trend near 800,000 ounces expanded in a few years. Should in the big picture we be thinking of these new drill successes as a third decade of 800,000 ounces a year or possibly a fourth decade of 800,000 ounces a year? Or do you think it's possible that the output could be expanded above a million ounces?
spk04: I would say you have both of those scenarios. Sorry, both. So you're number two and you're number three. I think for another decade of 800,000 ounces, I think it's easy to see that there's potential to add and grow for another two decades and or at those levels and or work towards increasing production again further at Detour. If you do look at the plan, it does show Detour going up to 900,000 ounces a year as we progress. So there's that to look at, but at the same time, there's a lot of moving parts at Detour. And we have a lot of things to work on. You know, we talk about initiatives, getting to 28 million tons per year, but also putting in assay labs, changing some of the process internally. Combine that with trying to understand the size of the mineralizing envelope there and the resource, and then how you're going to mine it, right? I think the thing that we should all take away is the mine that Detour is today is going to be a much... It's a much better mine than it was a few years ago, and it's going to be a much better mine in a couple of years from now, and potentially has a chance to be a much better mine even beyond that, and a very long-life mine. And then I'll even say, you know, when we're talking about saddle and the west extension, to the west, it doesn't stop. There's a line there for the west of the drilling, so we could go further to the west, and we haven't even drilled any holes below 700 meters, and In the current main pit, there's indicated resource at the bottom of the pit. So the other part is we focus on getting costs down as you increase the overall site. And there's a lot of exciting catalysts that could come out of Detour over the next few years.
spk05: Thank you, and congratulations.
spk01: Your next question comes from the line of Cosmos Chu with CIBC.
spk02: hi thanks uh tony and team um i guess i can ask a question on my cast right here um good to see that you're transitioning um or adding uh even more battery-powered uh trucks to your fleet um could you remind me how much more can you transition over uh from diesel powered equipment to battery-powered equipment and what percentage is that right now in terms of uh the total fleet in terms of battery-powered uh equipment
spk04: I think Evan would probably be a good person to answer that question, right? I'll leave it up to you, Natasha. Sure, I can speak to it. Hey, Cosmo. Currently, we're sitting around 75% of our fleet at battery equipment, and the plan is definitely to increase that moving forward for numerous reasons. The trucking fleet has improved significantly. tremendously as well. And regardless of some of the ventilation improvements, we still plan on moving forward with carrying on with the battery here.
spk02: And that was the purpose for my question. You know, I know that you're adding the two ventilation raises, which will add about 200,000 CFM of capacity. But could you remind me in terms of, you know, with the battery-powered equipment with the current fleet right now, what's your draw on the ventilation and what's the capacity here?
spk04: So the current drawn ventilation that we're pulling from surface, Cosmo? Yes. So the plan is to have about 300,000 come down three shafts and then 230 of that, sorry, 200 of that is going to go towards the FMC with the current ventilation plan and 30,000 from one of the raised bores and 100,000 of that 300,000 going to the lower north. And obviously as we move ahead, things are going to improve with the second raise board. There's one more leg. We're on the last leg of the four legs of the raise board breakthrough on surface. And obviously with foreshaft reaching at depth and commissioning that will improve things drastically in the lower part of the mine. It's to bring the temperatures pretty well down. cooling off the mine as well. And if we, if you think about it, your main arteries right now are feeding your ventilation. If you start putting diesel gear in the main arteries, you're just going to heat the mine back up, right? So the point is, and the plan is to stick with the battery. It's much more healthier for our employees and for the environment.
spk02: Yeah. And then that's, yeah.
spk04: Cosmo, just to clarify, so it would be doubling or more than doubling ventilation air to the mine? which is a big part of it. We mean we want to reduce the heat heat and humidity in the mine and improve the working conditions in the workplace. I mean, there you would have some flexibility for diesel gear because we are working at the leading edge of battery-powered equipment underground, but our commitment is to battery-powered equipment. And, you know, the big part of the increase in ventilation was not, you know, I think the logic to say let's go battery-powered equipment so we don't have to ventilate to the same level I think is wrong. We need to ventilate to the level whether it was diesel equipment or battery equipment in order to deal with heat and other conditions in the workplace that affect people. That's our main motivation here.
spk02: That's good that you brought that up, Tony. I seem to recall last year there were some issues in terms of heat during the summer months. It's been fairly hot in Ontario once again this year. Has it been okay so far in the summer of 2021?
spk05: Go ahead, David.
spk02: Yeah, so absolutely.
spk04: We've definitely seen a positive impact on the ventilation upgrade. In the SMC alone, you're looking at a drop of three to four degrees from current year. And things are definitely improving throughout the mine on the ventilation aspect. So, yes, it is cooler down there compared to what it was. And Last year's summer was rather quite hotter than this year. So, yeah.
spk02: Great. And then one last question, just a follow-up. You know, in Northern Ontario, we've seen some forest fires. I track it. I think there's an Ontario website that tracks it. I don't think there's anything close to, you know, Kirkland Lake or Timmins or Cochrane or anything like that. Is that, you know, could you confirm that? And are you at all worried about, you know, what's happening?
spk04: So I can speak to that, too. Yeah, we do track it daily, Cosmo. We have an app called Windy.com, which helps us out, and it tracks its TO levels and forest fires and wind directions. So we're in pretty good shape here so far, and we've been getting quite a bit of rain up north. So things are looking good.
spk02: Great. Those are all the questions I have. Thanks again.
spk01: And there are no further questions at this time?
spk04: Great. Well, listen, it's Mark here, and thanks, everybody, for participating in the call. As you heard, we had a record quarter in terms of earnings, not just record. We had industry-leading earnings and very strong cash flow, two things we've been known for over the last several years as being at the forefront of the industry. We're making a lot of progress, moving towards some pretty big catalysts for our company from a value creation standpoint. And, you know, we look forward to our next quarterly call to update you on how much more progress we've made. Thanks a lot and have a great week. Take care.
spk01: This concludes today's conference call. You may now disconnect.
Disclaimer

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Q2KL 2021

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