Kirkland Lake Gold Ltd. Common Shares

Good morning. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Kirkland Lake Gold third quarter 2021 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. And if you'd like to withdraw your question, please press star one again. Thank you, Mark Utting, Senior Vice President of Investor Relations. You may begin.

Thanks very much, Operator, and welcome everyone to our third quarter 2021 conference call and webcast. With the timing of our planned merger with Ineagle Eagle, which we're very excited about, this will likely be our last conference call. And I think if you've looked at our results, You'll agree with me that we're finishing with a bang. We've got record earnings, extremely low unit costs, and a continuation of an industry-leading track record over the last five years for returning value to shareholders. We're going to talk about all these things on today's call. With me today are most of the members of the Kirkland Lake Senior Executive Team. Speaking today will be Tony McCooch, our President and CEO, David Soares, our Chief Financial Officer, Natasha Vaz, our Chief Operating Officer, Ian Hahn, our Vice President, Australian Operations, Larry Lesecki, our Vice President, Cathedral Lake, and Evan Pelletier, our Vice President of Mining, Kirkland Lake, as well as Eric Calio, our Senior Vice President of Exploration. Slides accompanying today's presentation are available on our website and through the webcast. Following the presentation, we'll open up a call for questions and answers. I will draw your attention to slides two and three of the presentation, which contains our forward-looking information and other cautionary language. We will be making forward-looking statements in today's call, so I ask you to give that information due consideration. We will also be referring to non-IFRS measures during the course of the call. Reconciliations involving those measures is provided starting on page 37 of the MD&A we filed late yesterday. Finally, all dollar amounts mentioned 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. Okay, thanks, Mark, and thanks, everybody, for being on the call. Thank you. It's not necessarily our last quarterly call because we'll just have a different name maybe when we're talking to you in future quarters. But, you know, we have had lots of success at Kirkland Lake Gold over the last few years and definitely a very, very strong Q3. And, you know, we'll go through the results and you can see a lot, lot, lot, lots of performance in a number of areas, particularly, you know, Fosterville and Australia where at the end of three quarters already achieved full-year guidance. And, you know, it continues to, and it's not just grades. It's tons of grades coming out of Fosterville, plus, you know, very high levels. in terms of the kind of social issues there. We're doing a very, very good job in terms of environmental cleanup that's going on up in the Northern Territory in Australia, and a real tribute to the leadership and all the people, the whole number, the whole people that are working for us in Australia do an exceptionally good job in reading. We need to thank them for what they do. And then over in Canada, we have a significant success, in Q3, and, you know, again, Detour's had to have a very exceptional record in Q3, but we had a very exceptional Q4 as well. Again, you know, the demonstration of strong leadership in the company, we read from, you know, from corporate, we read out through the operations and fundamentally the people driving the trucks, the people doing the work at Macasa and at Detour are really making a big difference. And, again, you know, we really thank them for what they've worked on to achieve in the quarter and And as I say, we're looking at a very strong Q4 as well to finish off the year. Anyway, I'll start on slide four here. And then, you know, just to highlight a few things. We did have our recent announcement of an agreement to combine and merger with Eagle Eagle Mines. From our perspective, this is a very exciting development for our company and our shareholders. And, you know, the big thing is this merger creates a new leader in the global gold mining industry. And if we only create a gold mining company, it can definitely be a leader in terms of transforming, not only transforming the industry, but also transforming, changing the perception of our industry as we move forward. Moving to slide five, this basically gives some of the highlights of our merger with Agnico. Basically, we're creating the highest quality seeded gold producer with the lowest unit cost, best risk profile. leading in key areas of ESG and an extensive project pipeline to drive future growth. The combined companies have significant, very strong financial strength and an extensive pipeline of projects and combined with a strong balance sheet, good and solid operations that are performing well and profitable, we definitely see the opportunity to fund future growth internally. We're doing consolidation. A big thing, consolidation of the region of Northeastern Ontario, Northwestern Quebec, provides significant value creation opportunities through synergies. And then, you know, we see some other business improvement initiatives. And, you know, I think that one of the biggest things from our perspective is the development of the new opera beaver and the amalgamated Kirkland coffee. So, And, you know, we see the new eco-eco, you know, definitely being, you know, we got to demonstrate it, but, you know, the warrant of premium valuation and fundamentally, you know, what will drive that, I mean, combination of increased scale, low cost and low risk operations, but I think fundamentally sustainable. to have more of a pre-evaluation. And, you know, we see it as the right deal for our company and our people at the time, as well as our shareholders, communities, and all the stakeholders and groups that we deal with. Maybe I'll move over to slide number six and start talking about their core results. Slide six here is really, you know, focusing here on maybe giving a quick update on our responsible mining efforts. For us, responsible minding is integral to everything we do and is ingrained in our culture. All of our Canadian operations participated in the first National Day of Truth and Reconciliation, with learning seminars for all employees, and doing things to support local Indigenous companies through Orange Church programs and painting one of our 795 trucks at Heathrow Lake orange. Additionally, all truck bids were painted green to support mental health awareness with seminars and employee training programs as being held in both Canada and Australia. In Bendigo, Australia, we committed $600,000 to the COVID Wellness Center and Cancer Wellness Program to assist with the sustainability of the program and expanding wellness services and improving access for regional patients. Building on our leadership in minimizing and reducing car credit emissions, we took additional steps in QTree 2021 to achieve further reductions, including testing and building an energy storage system from entirety recycled components, including the battery case and batteries from our Z40s. Turning to our financial and operating results in slide 7, as mentioned, Q3 2021 was a quarter of financial progress. The main highlights are, as Mark alluded to at the beginning, but record quarterly earnings, solid year-over-year production growth, unit costs significantly better than full-year guidance, and strong cash flow generation. A record performance was driven by strong operating results, including quarterly production, throughput, and all-in-sustaining costs at each of our lakes. Q3 was its eventual quarter for diesel lake production with 189,000 ounces. That beat the previous record of 166,000 ounces in Q2 of this year by 23,000 ounces of 14%. And as I said, we're on track for a new record in Q4 of this year. Tossable also had a very strong quarter and a strong 5%. mill for the operation being very successful in terms of moving forward that possible you know and driving our you know having achieving record production performance it also has helped in terms of our unit costs and in our unit costs in Q3D to four year guidance ranges we are also being impacted by we are being impacted by the exchange rates and inflation pressures in certain areas but our operations are doing very very or our guidance for the year. In terms of cash flow, we had operating cash flow of $323 million and free cash flow of $141 million. David Soros will give a little more color on those areas. Turning to slide eight, we continue to have a very strong balance sheet with cash at September 30th of $822 million. Again, a very clean balance sheet and no debt. We also continue on our very successful track record returning capital to shareholders. During Q3, we returned $175.3 million, $50 billion through our Q2 dividend date on July 14th, and $125.3 million through the repurchase of 3.1 million shares through our NCIP. Turning to slide 9, a significant component of our successful track record with capital allocation was investing capital for future value creation. We released encouraging expiration results that all three of our cornerstone assets remain on track with our key growth projects. Eric Kelly will give a little bit more in color on that, but, you know, maybe I'll just talk a few things here. You know, the exploration, a lot of success in our exploration program at Detour, you know, when we announced, and, you know, in early September, we announced the 10.1 million ounce increase in open pit measured and indicated resources at Detour Lake. That's triple the open pit M&I resources. And, you know, it was, at Detour, we see it as, what's it, Definitely a milestone in terms of being able to support strong growth in mineral reserves in the future. That's going to come up next year as we complete our studies this year. And then earlier this week, we announced additional new drill results. And, you know, the needs continue to hide the fact that, you know, the 10 million ounce increase in resources is not the end of the dollar. what we give in terms of our view and the view we put out of Detour when we acquired it back in, when we made the acquisition announcement back in 2019. You know, besides the exploration success at Detour, we are making very good progress with a lot of other projects at the mine in terms of value creation and optimizing the operation. And that included, you know, increasing the throughput in the mill, Actually, the mill in July and August of Q3 actually was running at a rate of almost 28 million tons per year. We had significant improvements in grade management at B-Turk, and we have a lot of other infrastructure that we're installing at B-Turk that really helps in terms of building the operation for the long term and really supports At Macasta, the number four chaffer beans had a schedule on track for completion later this year. We also had, well, sorry, I should say, completion of the sinking later this year, the actual installation of loading pockets of 2022. We also had a significant upgrade in success at Macassar, expanding the cell phone complex and identifying new areas of high-grade minimization on both the modern-based and main breaks. And looking at Fosterville, we did come up with some very new and interesting exploration results. They were released at the end of August, and I guess what it tells you is there's potential for continued discovery of new high-grade intercepts, and our goal at Fosterville is to demonstrate a an operation of 300 to 425,000 ounces a year on an annual basis for seven to 10 years in production. I think we're definitely, we got lots of work to do, but we definitely feel confident that we'll be able to achieve that and demonstrate that to shareholders. Now moving on to slide 10, let's look at our year to date results. We had a solid year to date operating versus our full year guidance. Production with just under 1.1 million ounces, a 5% increase from year to date 2020. We achieved a very solid unit cost performance, record earnings, and strong cash flow generation. You can also see that on the slide that so far this year, we have repurchased 4.5 million shares for close to $184 million. We returned about $334 million to shareholders, which represents $1.28 per share, and $317 per ounce produced in year to date 2021. Now on slide 11, let's look a bit closer at our track record of returning capital to shareholders. We have now returned a total of $1.36 billion to shareholders since we first introduced our NCID in May 2017, and our dividend policy in March 2017. Of this amount, just over a billion was used to refer to 31.5 million common shares, and $315 million was used to make 17 quarterly dividend payments, Those dividend payments have increased seven times since we began issuing them in 2017. In addition, since mid-2016, we have eliminated over $190 million of debt. This includes paying $98 million of debt held by Dietrich Gold Corporation shortly after it was acquired in January 31, 2020. $30 million was also used to close up Dietrich Gold's hedge position. We earned a very good return on that $30 million given the changes in gold and commodity prices and FX rates that followed. 2020 and into 2021. We also repurchased a 1% NSR at McCastle in Franklin, Nevada in 2016 for almost $36 million. Adding it all up in aggregate, we have provided $1.6 billion of value to shareholders since mid-2016. And we've done all this while also building the industry's strongest and cleanest battle machines. Looking at slide 12, it shows our performance against guidance. As you can see, we are very well positioned to achieve our guidance entry in the last quarter of the year. We are targeting the top end of our production guidance and on track to achieve our operating cash cost per ounce guidance. We are doing very well in terms of long-sustaining cost per ounce sold at $785 here today, All-in-sustaining cost is better than our guidance. We definitely expect to potentially meet our all-in-sustaining cost guidance for the year, and that's in spite of inflationary pressures related to fuel and power, energy costs, and the change in the FX rates would have an impact. Looking at our expenditures, if you take sustaining and growth capital expenditures together, total capex guidance is $530 to $585 million for the year, and we are tracking to be in line with that range. Also, exploration spending should be at the low end of our guidance of $170 to $190 million for the year. The lower end of achieving the exploration guidance may be a function of lack of, you know, we can get access to drills, we can get access to a lot of equipment to do the work, but we can't get people to man the drills, and that's been a challenge for our industry. Anyway, with that, I'll turn it all over to David Soros. the 2020 tax terms. Foreign exchange gains, costs attributed to non-operating assets, mainly in Northern Territory, system implementation costs, as well as COVID-19 related costs. Turning to slide 14, in Q3 2021, revenue totaled $667 million. The change from Q2 2021 is mainly driven by an 8,000 ounce increase in sales volume and which partially offset by lower realized gold price in the quarter. Compared with Q3 2020, revenue increased by 34 million or 5% year-over-year, mainly due to a higher gold sales volume which increased mainly as a result of higher revenues. Looking at income taxes, our Q3 2021 net earnings benefited from a lower effective tax rate of 25.3% versus 31.6% in Q3 2020, mainly as a result of the $15.6 million net tax recovery related to the optimization of the eligible tax deductions for Ontario mining tax following a restructuring of the company's Canadian entities early in 2021. Moving on to slide 16. mainly the PNPN Hold Complex of $15 million and Corporate G&A of $14.3 million. During the quarter, $175.3 million was returned to shareholders, including $125.3 million used to repurchase shares through the company's NCIP and $50 million of dividend payments. million of income. operating results.

Thank you, David. Good morning, everyone. I'm on slide 18, which outlines our consolidated production results for the quarter and year-to-date. So overall, as Tony mentioned earlier, we achieved solid operating results in the quarter, with production just over 370,000 ounces compared to 339,584 ounces in Q3 2020, and a quarterly record production of 379,195 ounces the previous quarter. Our operating cash cost per ounce sold was $438 an ounce, which is well below our full-year guidance. And then as for our ASIC per ounce sold, it was also very strong at $740 an ounce. This is a 16% improvement from Q3 2020 and 5% better than the previous quarter. The $740 an ounce also compares very favorably to our full-year guidance range of $790 to $810 an ounce. So then when we look at our year-to-date operating results, they too are very strong. Year-to-date production total of 1.05 million ounces, which is a 5% increase from year-to-date 2020. Our operating cash cost per ounce sold was $466 an ounce compared to $407 in year-to-date 2020. And finally, our A6 per ounce sold was $785 an ounce versus $804 in year-to-date 2020. So with that, we'll now get into a little more detail on the operation. I'll turn the call over to Ian Hahn, our Vice President of Australian Operations, to provide an update on Fosterville.