Q1 2020 Earnings Call

Good afternoon, ladies and gentlemen, my name is telecom I know repeal conference all participants will be I would like to welcome everyone to the pick long Lake Gold conference call on West Coast to disclose the company's first what those trains sweeny financial and operating results all lines have been leased on mute to prevent any progress.

After the speaker's remarks, there will be a question on substantial if you'd like to ask a question during the spine seem to press Star then to number one on your telephone keypad. If you would like to withdraw. Your question. You May proceed to foam key we done I would now like to tend to call. Although two flights precedent offerings as told me they should.

Marketing.

Thanks, very much operator, and good afternoon, everyone.

Welcome to our first quarter 2020 conference call with cash.

On today's call, we will review the quarter.

And also discuss some of our projects as well as recent exploration results.

Well I'll start by some updated information on the cold in 19 response by the company.

With me today are many members of the Kirkland Lake Gold Senior management team.

Speaking today will be Tony Macoutes, our president and CEO.

David storage or via our Chief Financial Officer.

Duncan King or vice President of Australian operations.

I didn't tell chair general manager Kirkland Lake operations.

Paid one dyno, our detour mine general manager.

And Eric Kaleo, our senior Vice president of expiration.

As mentioned there are other members in the room as well have the management team in the room as well.

As I'm sure. Many of you are we're doing our called the multi today consistent with our Kogan 19 health and safety protocols.

After we go through the presentation. We'll then open the call to questions, we ask that each person limit themselves to to two questions.

Like I said, we'll be referring to is available on our website.

Okay, Yeah event section.

Before we get started.

I would like to draw your attention.

To slide two.

For our forward looking statements disclosure.

Our remarks and answers to questions today may contain unlikely will contain forward looking information about future events affecting the company.

Please refer to slide two as well to forward looking information section of our most recent management discussion and analysis stayed at me since 2020 for more information.

Also during today's call will be making reference to non IR for us performance measures around.

A reconciliation of these measures is available and in our most recent mdna.

Finally ill point out that all figures today.

When you S. dollars unless otherwise stated.

With that I'll call on Tony Macoutes, President and COO correct Michael.

Okay. Thanks, Mark and thanks, everybody for being on the call I know a no. We're we're not as a as Oregon, nicer and maybe out of sexy or sometimes you see somebody said conference calls and video calls have to going on on on TV.

I think we know one day the speakers here again, we're all on everything working from the home office as I'm sure all the media.

Everybody attending this call is is there a home office. So thank you for calling in you know I don't know how comfortable you get your home office, maybe gotten comfortable more organized overtime and I know I had but it's the same time I think I'm getting tired of have come to my home office would be nice to get out of open C. People's.

Anyway, thanks for being on the call and that you know the other partners I you know I think there you know with knowledge you people personally my goal, we had to definitely I I didn't pretty solid quarter in Q1 2020.

Lot of in her city, but you can see where quality people writes an occasion and that's what we saw and that's what we've seen kirchen my goal and the company and the communities around this and a lot of our suppliers and and third party contractors as well maybe see that's not a quality people in this industry.

You know do the other thing that really happened in instead, our people did an excellent job protecting themselves and each other and also turned in a very solid quarter of performance in quarter. So anyway. Thanks for quite thanks for the efforts and thanks for the attention to detail.

You have to somebody a operating results for the quarter production, but she and her 3000 ounces cash cost report 40 announce an all in sustaining costs, having 770 announce excluding beater. These numbers averaged 319 and $619 an ounce respectively. As a very strong unit cost numbers given the high unusual circumstances.

Q1.

Turning to earnings.

We reported net earnings of 79 cents per share and 70 cents per share and on and on an adjusted basis that was a 30% increase from Q1 2019.

It is cash footwear business really showing the strength in Q1 2020.

Excluding nonrecurring transaction or restructuring costs were generating free cash flow over $190 million, which was a quarterly record.

Feature Lake made a significant contribution to free cash flow during the quarter, adding $78 million nothing only two months of operations were currently overall core quarter highlighted our ability to generate significant cash flow.

Yes.

Looking at a cash position as shown on slide four we ended the quarter at $530 million and no debt and no I think that as a company, we're probably the only gold company with no debt on the balance sheet at all maintaining and and if you know demonstrates <unk> industry, leading strength in terms of.

Actual performance and financial capabilities.

We turn we returned capital to shareholders, we use written $39 in the quarter to buy back almost 10 million shares and doubled our dividends.

We gained about 180 million of cash from detour.

But I want to emphasize that we use much more than that by paying back features that close another checkbook, making change of control than other payments and incurring transaction fees related to the deal.

We had total capital expenditures of about $110 million a lot of that was sustaining capital.

In terms of growth capital, we continue to invest in our projects specifically the number Porsche <unk> Kassa, we did spend thinking that the shaft at the end of March due to the cold 19 or issue. The suspension lasted about a month with SAP shaft sinking resuming near the end of April.

<unk> excuse me the shaft project is going very well very well in fact actually was no change to scope schedule public for the shop the bit had been okay, we'll get on any detail a little bit more later in the presentation, but we now expect to complete the shopping one phase by make 2022 that is over a year earlier than initially planned and at a lower cost.

Turning to slide five.

Clearly corporate 19 was a key developments impacting our business in Q1 2020.

We had a call in early April to discuss the details of our coal would 19 response, including our extensive health and safety protocols.

I will go through them again, I will provide you with an update.

Part of a covert 19 response, including going to reduce operations at detour Lincoln Macassa and terror temporary suspending operations at the whole conquest.

We also suspended all non essential activities across the company you know basically any capital project and war any any exploration project that was not critical to the production increase here.

[laughter] they've reduced operations impacted our production costs in Q1, I will do so again in second quarter, and we don't know what's going to happen in third fourth quarter, depending on how this progression.

It also we led to the suspension of key projects as I mentioned earlier, such as a shaft.

Surface rapid Macassa and ventilation project at Foster Bill. We also stopped most exploration work not required for the shoes production.

We have now return we doing work on these projects as well as others will be ramping up yeah. It's paid phases. We've started to recall what percent teach weekend macassa and we expect it could be a slow so process that may extend over the year.

Turning to slide six the measures we have taken obviously you have an impact on our results.

<unk> April 1st 2020 were through our company guidance for 2020, we will issue guidance per year, as we make progress towards moving detour Lake and mckasson towards more predictable levels of production.

These mines clearly were not produce what was in the original guidance. We will continue to assess how quickly they can ramp up which will determine the guidance. We eventually provide and you've got to understand it also had an impact side, both capital costs operating costs and exploration costs that reason or Richmond guides.

We've also withdrawn or three year production guidance, while we assessed the long term impact of Copel 19 pandemic on our business and as we worked incorporate teacher lake into our long term business plan.

When we discuss Kogan 19, we don't talk about returning to normal because we're not sure what normal will be in future. There a lot of moving parts there and so there's no question that there will be some impact in our business has done. This is a key reason why we have suspended or through your guidance, we're always going to be a different places because of corporate 90, particularly if there are additional.

Waves of virus that occur you're not going to take some you're going to take some time to consider what works like you did.

To look like in the future when in fact will have on our operations, but our priorities is to look after people in the communities and the sustainability of our business beyond this period of time this fantastic.

[laughter] slight slide seven looks at another key.

A very important developments currently cold during Q1, 2020, <unk> acquisition of be too late cool.

I've talked about a deal at length, and so I won't get into the terms and rationale behind the transaction you see a lot of Upsided teacher Lake and plan to invest aggressively to achieve it actually has not disappointed at all in terms of what we what we what we see as a potential here and the quality of the people that are at the tour and the ability for us to put this project for two.

Two older level.

I will highlight a few things about quarter, given that we own vitro lake for two months and it was on reduce operations were part of that time.

You get a sense of had very very good I'd go cooperating performance producing 92000 ounces in two months ending March 31st cash costs of 696, and all in sustaining costs up 11 weight per ounce were in line with expected levels for the quarter for that part for the period during the quarter. We saw the tremendous lever teacher Lake had something that a gold price.

I already mentioned, they $78 million a free cash flow.

Generated in two months and that was about 40% of a toll free cash flow for the quarter, excluding nonrecurring items for the company.

The last key development on mentioned for the quarter involves a non core assets I'm on slide eight.

On February Twentyth, we designated a whole complex in assets in the northern territory Northern territory Sarnia as non core.

The whole complex includes our Taylor Holt Hollaway mine and mill and North American light in March we placed the hollaway mine and care and maintenance. We also suspended all test mining and processing at the Cosmo mine and Union reached mill in the Northern territory of Australia, and also sees all exploration drilling here.

The only results we were getting football Hall, we mine in India, and he did not justify continuing on with our operating activities, particularly when you consider potential we have at our three cornerstone assets Mckesson Detroit Lakes in Foster Bill.

At the beginning in May we transitioned the remainder of the whole complex of temporary camp care and maintenance. The mood was done as part of our covert 19 protocols and also reflected the fact that were in the midst of strategic reviews the operations.

We decided that while we performed that review in light of nickel 19, kinetic pandemic sorry, it makes sense to continue to suspend the operations here.

When you originally indicated that the temporary suspension will last until April thirtyth.

It has now been extended and we have not determined the timeline for presumptions cooperation exercise.

Turning to slide nine I mentioned that met the tremendous broken expertise potential of a three cornerstone assets.

Turning to embed invest aggressively to realize all the upside we see.

Even with Cobot 19, we had exploration expenditures of 36 million in Q1 2020.

We did largely suspend drilling late in the quarter, but are starting to redeploy drills now.

I have already announced some encouraging drill results identifying a new large corridor of high grade mineralization at Macassa, along the main breaks that that debt favorite calendar will talking more about these exploration results shortly but when and when you go through the exploration program.

Part of this presentation and if we give you sense I mean expiration as one of the most exciting parts of this company not just that Macaos, but also at foster Bill.

A lot at Hawesville and naturally as Eric I'll show you overtime, a lot of detour Lake anyway, right now I'd like to call and David source, our CFO to review, our Q1 2020 financial results in more detail.

Thank you Tony and good afternoon, everyone I'll be starting on slide 10.

As Tony mentioned, we had strong earnings in 20 to 20.

Net earnings totaled 202.9 million or 79 Chin sensor share.

Net earnings were 179.2 million or 70 cents per share.

The difference between adjusted net earnings and net earnings related mainly to 52.5, new dollar aftertax foreign exchange gains due to the strengthening of the U.S. dollar in the quarter.

This impact was partially offset by.

By the exclusion from adjusted net earnings of 24.9 million after tax related to transaction.

Uh huh.

Related to the detour gold acquisition.

In terms of key drivers of adjusted net earnings it largely came down to strong revenue growth driven by both higher sales volumes and increased gold prices in the quarter.

The change in earnings per share from both Q1, 2019 and last quarter Q4 of the.

We're sort of Q1 of 2020.

Was impacted by higher average shares outstanding in Q1 2025.

They totaled.

257.4 million this quarter versus about 210 million in both prior periods.

The increase related to the 77 million shares we issued for the detour transaction on January 31st partially offset by the 9.7 million shares we repurchased in Q1.

Slide 11 looks at our revenue in more detail.

Revenue in Q1, 2020 totaled 554.7 million, 82% higher than Q1 2019.

And a 35% increase from the previous quarter on a year over year basis, both higher gold sales and an increase in gold price contributed to the strong revenue growth.

Goldfields increased 48% to 344.

Thousand ounces.

And had.

$146 million favorable impact on on revenue.

Average gold price increased.

To $1586 per ounce from $1307 per ounce a year earlier.

The increase in price increased revenue by $96 million in the quarter.

Quarter over quarter gold fields were 24% higher which increased revenue by $90 million.

The Q1, 2020 gold price compared to 14.

$181 per ounce in Q4 2019.

The increase in price had a 36% 36 million dollar favorable impact on revenue this quarter.

Detour Lake has a significant impact on revenue in Q1, 2020, contributing 179.4 million of the 554.7 million of total revenue.

Gold fields that detour Lake were just over 110000 ounces, excluding detour Lake revenue totaled 375.3 million compared to 304.9 million a year earlier and 412.4 million in Q4 2019.

You may recall that in Q4, we had record sales driven by foster Bill, which had a great of almost 50 grams per tonne for the quarter.

Looking ahead at EBITDA as shown on slide 12.

You won 2020 EBITDA was a record 391.5 million, 94% increase from 201.6 million in Q1 2019.

And 37% higher than 285.6 million in the previous quarter. The increase from both prior periods was driven by net earnings growth as well as the impact of higher deposit depletion depreciation costs and current income tax expense.

Turning to slide 13, it looks at our cash and cash flows.

On slide you will see that we have adjusted opening cash flow to net out 60.5 million of nonrecurring items.

These are mainly related to the detour gold acquisition and include transaction fees change of control payments and other termination related costs and some restructuring expenses.

We also have about $3 million of restructuring costs at the kale level and incurred some severance expense at our noncore assets, mainly in the northern territory.

Excluding the nonrecurring costs, our cash from operations totaled $302 million.

Looking at investing activities, we had a source of cash of 60.7 million.

Which mainly reflected cash received from detour gold offset by capital expenditures as Tony indicated dirty or the cash we received from detour was more than offset by use of cash relating to the transaction or the acquired company.

Turning to finance activities, the larger ships cash related to a few things the largest being the share repurchases in the quarter.

Moving onto slide 14, it where we look at the change in cash not in a slightly differently.

You can see that the largest contributor to growth in cash was from our operations, which generated about 282 million.

This before interest.

Income tax paid and impact of changes in working capital.

The other large source of cash was 173.9 million of cash.

Came from detour gold.

We have already discussed it in in this slight and dislike gives the details around the offsetting use of cash relating to detour.

We used 98 million to repay detours debt.

30 million to close out to hedge positions and also had 54 million of transaction and restructuring related costs paid in cash in the quarter.

The chart on Slide 14 also highlights the significance of the 330 million used for share repurchases during the quarter on our cash balance other significant uses cash in the quarter included about 110 million of capital expenditures.

90 million of which was sustaining.

We also had higher cash income tax payments and we paid 12.5 million in dividend payments based on the Q4 2019 dividend of six cents per share.

As you heard we've doubled our dividend in Q1 to 12.5 cents per share so going forward that cash commitment for dividends will be higher.

With that I'll turn the call over to Dunkin' King Vice President of Australian operations.

Turning to slide 15, good afternoon, as Tony mentioned earlier Foster real had a strong quarter in Q1 2020.

We produced 160000 ounces production increased 24% from Q1 2019 with the increase resulting from a 46% improvement at the average grade in the average grade to 42.4 grams to the time.

The higher average grade resulted from increased mining and this one zone compared to the prior year.

Production in Q1 compared to record production in Q4 2019 of 192000 ounces when the mine achieved a record grade of 49.3 grams to the ton degrade in Q4 reflected sequencing in this one zone as well as some great outperformance during the quarter.

Cash costs in Q1, 2020 were $126 barrel, 13% better than the $144 per ounce in Q1 29 to you.

Q1 cash costs compared to a record $106 per ounce in Q4, two felt like GE again, largely reflecting the average grade in the previous quarter.

All in sustaining cost averaged $313 an ounce in Q1 2020 versus $315 in Q1, 29 team and $258 the previous quarter.

It is worth noting that a new royalty introduced by the Victorian government effective January Onest, twentytwenty accounted for $7.2 million or $47 an out of all in sustaining softer Q1 2020.

Excluding the new royalty these costs were largely unchanged quarter over quarter.

Looking at our projects well foster role has continued to operate through the covert 19 crisis. We did have some projects impacted when we suspended all non essential work.

Work on our new ventilation system was interrupted as where a number of surface infrastructure projects. We've continued to target commissioning of the new ventilation system beginning in the second quarter and our approach to it it's starting to come back online.

I'll now turn the call over the Evan Pelted General manager Kirkland Lake Operation.

Thanks Duncan.

I'm starting on slide 16.

Because I had a solid quarter in Q1 2020, we produced 51000 ounces, which compares to record quarterly production of 73000 in Q1, 2019, and 56000 ounces in previous quarter.

The quarter over quarter change largely related to lower tonnages, which was due in large part of disruptions caused by corporate 19.

Operating cash costs averaged 536 per ounce in Q1 2020 versus 332 in Q1 2019 and 471 for also in the previous quarter.

The increase from both prior periods largely reflected lower sales volumes as well as higher levels and operating development and other mining cost in Q1 2020.

All in sustaining cost per ounce averaged 850 versus 602 in Q1, 2019 and 721 in the previous quarter.

Year over year change was mainly due to lower sales volumes.

The change from Q4, 2019 was due to lower sales volumes as well as higher operating costs, an increase sustaining capital expenditure sustaining capital a 15.1 million was higher than 10.8 million in Q4, 2019, which was lowest quarterly total we had last year.

It was largely timing related in terms of schedule in capital development and equipment procurement.

Before I get four shop, I'll first address or plans around over 19.

Our resuming work on key projects and starting to ramp up production.

We resumed shaft sinking at the end of April and have also commenced work on the new surface rap.

Increasing productive activities will be grad gradual process, we are maintaining all of our key health and safety protocols, including limited people onsite and social distancing.

This will continue to impact our operations for sometime.

[noise] turning to slide 17, we have made a great deal of progress for shaft project and now have made changes to the project scope schedule.

First during Q1, we think the shaft to 760 feet.

To the 1960 level at quarter end.

And this is fully equipped with steel and concrete. We also ask if they didnt equipped to 15 40 level station.

At the end of March we stop thinking as part of covert 19 protocol to suspend non essential work that lasted about a month when we started thinking again in late April.

Based on the progress we have achieved we have made changes to the scope and scheduled to shaft project. We're now planning to complete the shaft and one phase to a total depth of 6400 feet with target completion for late 2022.

The changes to the shaft scope benefit a number of ways. This allows us to increase gifting capacity sooner improves ventilation and working conditions. The Arista mine in advances the timing for future exploration development of the shaft and support to future drilling.

By reducing the development period by over a year, we will be able to use the shaft sooner and have created a potential for cost savings and the capital budget.

This time, however, our budget remains at 321 million.

I'll now turn call over to David when Donnel General manager of before like [noise].

Our pet care of I'm good afternoon, everyone.

I wouldn't be talking to slide 18.

People make but it was 91000 ounces French I already said affairs, Indiana, the first quarter.

We've brought over 8.7 million talks at an average of financing for comps but on.

Yeah, but that's great was down from the previous quarter, mainly due to processing higher volumes of stock buyback area, which is typically lower grade done my production or detect feed.

Operating cash cost suppressed fixed 96000, Kuwam 2020, why audience sustaining costs averaged 11 noise, but house.

Sustaining copied I've talked about 48.3 of them taught us.

I'm, sorry, I'm really automatic totally scopic values are picking sustaining so our AC cost base oil from 11, Oyo eight is really all in sustaining cost all in cost.

You're not conference call in April I spoke at length about to help them safety protocols, we put in place in response to public 19.

Today I'll provide an update we have commands ramping up our mining production.

Starting with the lump last I'm going moving on to lot alcohol and direct mining feed to the crusher.

For phase ramp up we are required in Moscow, Barbara I mean prompter caltrain.

But for me temperature checks prior to our employees living call came by bias on on all there so driving by truck to vacate house.

Separator checks that also being performed at the time before stuck in shirts.

For body cameras, where do you simply purchase Ari installing strategic locations I think all kind of goes bust terming out both camps out of the gate House. So body temperature is Matt is now check that anytime I worked at passes through these locations.

So I'm wondering about feeling well or shows any of the coffee 19 symptoms that assessed by a dramatic and then set off site or precautionary measures.

When container and also we faced a cosby's pension I've comp on the buckfast, we doubled the number of buffers.

In light vehicles meeting wrongs and added dining rooms, we'd also happen to move some chairs that keeps US you have these sponsoring the mats.

We have block somewhat the I'd ask with us on Saturday nights et cetera.

With that I've talked a kilometer kaleo as senior Vice president of exploration.

Thanks, David and ended up good afternoon, everyone all be starting with slide 19, which is a plan from the cost of mine, which is the main focus for Q1 expiration on where we recently announced more exciting news from drilling.

As indicated on the planned drilling was focused in east part of the mine and on testing U.S.M.C.

It also included new work on the main break for the SNC that 18, you'll see continued team very positive results with a number of new high grade intercepts and another 75 meters a strike lengths added to the structure.

This now we're bringing the total thinks that structure.

Since he to over two kilometers and still open for more extension.

And then in terms of they might mean break we had one where new hole and 15, others that were not previously reported that we now interpret as part of new high grade corridor.

As indicated in the release.

Quarter extends between our new number four shaft and Kirkland minerals and currently measures 700 meters long by 300 meters huh.

The importance for future development. The quarters also located very close to a new drift planned on 57 level.

And in terms of the new whole intersects east part of the corridor 300 meters below the deepest another kirkland minerals and 50 meters east of the closest previously in this area. It also has one of the highest screens to date from the zone little to no drilling to the east So again opens for extension.

Turning now to slide 20.

We can see a cross section through the east part of the area drilled it further illustrating the new results.

As indicated the SMC is located on the left hand side.

Just below the drill platform on 5300 and has a number of good holes to both confirm and extend the zone and the main break because on the right hand side and host the continuous string of values extending downward from the historic workings Kirkland minerals.

Additional to this the section also provides another view of the new high grade intercept.

And hold number 40, 52, which is located near the Sixsix hundred 6800 level or 300 meters below the deepest level a kirkland minerals.

Now turning on to slide 21.

We see here along section for the mean break and high grade corridor, which as indicated contains a number of very good intercepts altogether.

And all the located between the new number four shaft and crippling minerals.

Although the number of holes drilled still quite low at this point.

We're very encouraged by the overall continuity and number of high grades that we see in this area to date also very encouraged by the fact, our new high grade intercepts that east limited drilling with little to no testing beyond this.

From what we know.

The structure in this area is still likely open for testing all the way it let sure mine, which is at least another claw that east.

So considering only Doug I think it's fair to say, we continue to feel strongly about the potential to mine and looking forward.

Doing more exploration here very soon.

With that I'll now pass the call back to Tony.

Okay. Thanks, [laughter] pretty exciting in terms of some of the developments are at Macassa.

Anyway, maybe and I just find the slide 22.

You know some highlights here are some summary highlights.

I guess, you can tend to get a sense for despite a challenging environment and in Q1 2020 Kirkland Lake continued to turned in a strong quarter.

That's all that earnings generated substantial free cash flow in the quarter.

We maintained our industry, leading financial Straights. We also returned capital to shareholders is probably the highest level cap returned to shareholders in a quarter and anyone in our industry and two rigs and we did this year extensive share buybacks and by doubling our quarterly dividend.

[noise] excuse me, we had a very strong first two months from Detroit Lake and we're very pleased with the progress we see in terms of improved productivity and really in terms of the upside if this operation.

We also took steps during the quarter to streamline our portfolio to focus more fully on or three cornerstone assets. That's by turning now to make it now they both the a northern territory in Australia in or Kellogg North assets as noncore at this point in time.

We continue to invest aggressively in exploration and believe what that that with Macassa feature Lake impossible, we'd have three of the most exciting exploration projects in the industry and you also had somebody at one time talking to would say <unk> really in 30 Kirchen my goals as an exploration company. This happens that combine mine and generate free cash flow.

[noise] finally, you know and say, we're cautiously optimistic that conditions are improving in terms of covert 19, and starting to work resumed work in key areas. This would be a great gradual process excuse me extending throughout the year. We also recognized that some changes may become a new normal and everything we do the health and wellbeing of our workers their families.

And our communities will remain our top priority. Thanks, everyone for listening on this call. Thank you for you know staying home staying safe and looking after your families and and fundamentally if we all look after our ourselves on her family's we're all looking out to each other do so thank you for what you've done anyway, we'll be happy to take your questions that adversely.

I remind us how can we assume you will need to press star one on your telephone. So we try to your question. Please press the pound Oh Husky. Please standby why we compared to Q on Erosnow.

Your first question comes from the line Oh, sorry of Credit Suisse. Please go ahead your minds.

Hi, Thanks for taking my questions under three year production guidance that was withdrawn can you give some more color on the long term impact that you're seeing from kogut.

19, as it is it on productivity supply chain I, just trying to get a sense of what what is causing you to.

I guess revisit the longer term guidance as a result to cope with it.

Well I think getting all that and it means there's lot of moving parts. We don't know where things are going to happen. We don't know what's a in Alaska government is going to lift a restrictions. We don't we don't know what's coming on and we decided prudent to sit there and so you know what.

We know there's no you say trying to commit to things and engaged in 2021 2022, we still don't know where we're this is what's going on we definitely see that there will be differences in and out and our operating practices and use of PPD and work schedules et cetera, or some of it is a you know we see.

As being maybe becoming some of the new norm in terms of how people will work. So we've got to consider that and really get an understanding of.

Of where where things are going to go over next few next few years. So that's that's all it just give yourself, sometimes to really understanding and reposition the operations. We've also has as a haven't mentioned with the number number four shop I mean, it also gives you a time when we looked at things we're doing and we say you know like it's an example, with number four schaeffler instead of saying.

Going to be done at the end to 2023 to 2022. They had some time to rethink thing. So gives us some time to rethink all all of their business models et cetera, and incorporate a what's going on with detour, what we really want to do with scale north at this point in time. So that's that's what we decided to do exposed to you know coming up with a variety of.

Changes over the next three months or six months that we didn't quite we might not be able to predict.

Okay, and just as a follow up on the Macassa shops for now that the depth has been revised what's that mean I know you can you can probably can't get specific or what does that mean just.

Comes at the production relative to what it was than previously expected to be like how does that change in the depth to the scope of work impact production and the fact that that's coming back a year.

It doesn't necessarily mean, it doesn't necessarily a change much and on the production. It hasn't it brings a little bit more production is that essentially 2020 twos and then than we had enough plan I think it really <unk>. It does it does help us in terms of folks down on on costs and [noise].

Got it could be improvement.

Operational improvements and were conditions that previously written maybe not be there. So you know away at this point in time, we're not necessarily saying it it's going to help us into with an increase production because of it but we see it is definitely it's going to de risk production is going to de risk. The operation is going to provide a better safer workplace quicker and you know we're gonna.

Do it at less and less capital costs, it would not really ready to.

When it is but there will definitely be no cost overrun on I'm not sure.

Is that a good answer your question.

That's very helpful. Thank you.

Thanks.

Your next question comes from the line of Cosmos Chiu <unk>. Please go ahead your line.

Hi, Thanks, Tony and team cover conference call here you at all it's great to see that a you've talked about you know ramping up that macassa detour.

Starting in early May.

If I remember back.

Pro during the conference call I'm, you know you had talked about a detour the ramp up could take a month or a month and a half I think David mentioned I never have mentioned that macassa could be three or four weeks, but a in today's conversation. It seems like it could take longer you know Ah Tony in your opening remarks it.

Talked about could be you know a year has that changed or.

Could you help me sort of reconcile.

Excuse me I don't.

Nothing's really changed I guess, we just try and do you know the only thing that's changed them up from say a month of Bulkers has now it's you know the when you're reading a book about what's happening and getting a sense, I'm, where where government nothing is going as well as well as understanding.

You know practices and how how the being adopted in the workplace and what might be to be norm, we're starting to be realistic and saying Hey, you know what some of their stock me at the time to take take a little bit longer and or have a I have a longer term impact you know I'm no I would sit there and say a you know I'm not sure that I'm going to be going to a team that too.

To a hockey game and shit necrotic 20000 people.

Hey, Scotiabank Center and you see drama play no no offense, putting it you know I'm not going am I going to do that in September. So there's a lot of things that are starting to happen. Then we just trying to gauge that we don't it's just us taking up a little longer longer term view and looking at risk so sutra potentially might happen.

So I guess you know again as a follow on the last conference call you like I mentioned detour was running at about 75 per car, 35% of that all your normal sort of one of course.

Mikasa was running about 65% where are you out right now and then you know.

I guess, where you already know.

I'll, let David learn Battle, you can speak for detour lift.

Until she speaks for my guess How's that going David Wonderful first Oh, Yeah, I'm going to go first so it's not all that there might not be mom and went up about 50% at the mine and 75% of the mail.

By paid the 18 of May more or less we're going to be maybe 5% at the mine and then we've got to be for production at the meal.

And again as Tony mentioned, the planning my paying so shall be status I bought a and asphalt and it's all going to 100% he's going to be more difficult to expire so that would see how these paying progressive Baghdad PA through at least go 85% at the mine.

Your next question.

HM.

For Macassa Cosmo, a basically that about 80, 85% now so we're up from 65%, but we're still seeing some so some absenteeism due to Goldman.

Pusher.

And part of it again, one of them Cosmo is pretty much the come back to where they.

For sure and then just a quick follow up if I may you know the I got a three year guidance to be honest will also be surprised that it was withdrawn but you know I think Tony you explained at well in terms of it all sort of what's happening, but if I want to look at your three year guidance that was put out into 2019.

It was focused on foster bill and Mikasa.

But also today you also mentioned you don't need tour and how that fits into the longer term mine plan.

Yes, no wondering the impact or from Coven 19, and get all the decision to to withdraw the three year guidance was there based on more on what's happening at foster will and mikasa or is it you know overall.

I think it it would target and I don't think I know its overall cosmo on it I mean part of our when we give up production guidance a part of the news all tied into I know, where we see capital programs farm, where we see exploration programs going et cetera, and you know there's still some lot inputs that come into it because we.

We basically decided that we need to spend a little bit of time reviewing things that really understand what's going to happen. We don't know what's going to happen September October of this year. We don't know how things are going to progress and we're just trying to two Oh, you know provide some some guidance in that sense. I mean, we said what we were doing this year. We you indicated you know you.

I can see what we did in Q1 compared to plan will continue to report on a quarter by quarter basis and in terms of how we get compared to when you.

Compared plan for that for the year. We just we just don't know it if something is going to come out at us and that's where we're just trying to.

Not sit there and say we're going to do this and in three months later after saying we're going to do this we think once you get to think more to more predictable levels as well as you don't get some of this stuff behind us as well as I understand the impact of lot of new protocols and that process is we're running and the potential impact on on on any.

Potential capital programs, we might want to implementer, our exploration programs or do you decide what to do we just get give ourselves a few months figure that out.

[noise]. Your next question comes on the line not always how people Cotempla. Please go ahead. Your line is open.

Hi, everyone or just a couple of questions from me, Tony just starting off with a against one off on a causes question on a on the guidance wise.

Is there anything specific you are looking for before you get comfortable in providing a 2020 guidance I mean again, we're talking about you know macassa and you know kind of detour moving closer reside.

Anywhere from 60% to 85% Mark I mean, it there is there something more or less sustainability side that you are waiting for before you can.

You know move forward with the just at least a specific 2020 guidance.

I think you know, it's it's a yeah I mean, we know we're recalling people were moving back up people, but somewhere our suppliers and so so far so are the communities. So it's it's also the fitting in to try to get some sense sense on on how things are progressing over the next few months and ensuring that the you know nothing changes in terms of.

The government protocol, so Hamas I know.

You know we haven't we were not we don't want to work with bottom plan, we don't want to work on pads with diesel so were that we got Atlanta, we got the ideas, what we're doing and as soon as we feel pretty comfortable as as we said earlier suits are that predictable levels keep the 2020, we'll we'll be able to set up and you know if nothing changes from what we see it progressing over the next week.

We definitely feel bites, but you know for bike by the end of Q2 will be able to say what 2020, it's gonna look like.

Right I mean part of our 2020 guidance isn't just production. That's also you know costs assessed are too right.

And just I mean in terms of possible then I mean, you know in terms of.

Operations continued and contribute through Q1 and commute unaffected maybe you know you you pulled back little bit on development and exploration.

But is that do feel that's impacting maybe the two or three your guidance that you have provided previously.

Well Foster bill perform extremely well in Q1 and predictions for Q2 they'd be things seem to continue to go like that could be very well I mean, we are assessing fosterville in terms of.

What's what's going on just like we do the other mines, we kinda <unk> take a ticket take that take a position on what we see and where you know what what did the work we're doing and what do we see as a you know long term sustainable future there yet, but we have and definitely exploration success as a key driver too to what's going to happen if possible.

Got it and just just one quick question just in terms of percentage coming from Swann.

In in Q1, if you could just to remind us what that was and is that percentage expect can you change over the next couple of quarters.

Oh significant [noise].

Yeah, Dunkin Donuts, Nick I don't have little bump, which I had those numbers I don't remember what they what they are Duncan do you have.

In terms of percentage from swaps and then in terms of going forward for the year anything we it's pretty much consistent you know if dunkin' has the answer for that I can you haven't thought I can get you offline terms what percentage wise from swaps.

Be 75% firms long.

Well I think it was 80% from swap.

Yeah.

And it's expected to be consistent the remainder of there.

Got it so that's it for me. Thank you so much guys.

Okay.

Your next question comes from the line of touch well some of RBC capital market. Please go ahead your line.

Thank you very much.

First question relates to the cash that I assume there would have been a pretty reasonable sort of study that was down a shop expansion what the long term cost projections are for the mine beyond just what the production volumes are which happened guided.

Can you provide some additional detail on what you expect the steady state sustaining capital and unit cost expectations to be once the project is ramped up.

And based on the old study and what the opportunity could be from from would be discussion was earlier this call about potential improvements.

That's a bad it's a you know in terms of that for this call I didn't know if we had that those answers available, but we're happy to share them with Ya.

Give you some sort of guidelines I mean, you know I don't think that the you know it's much anything different than what we've been sort of achieving where we had guided to previously.

We all issue with the shaft and part of the you know by pardon the changes in the shaft by the way. We originally started the shaft development, using a contractor and and and convenient contracted item and back in September of last year, we took over from the contractor ourselves starting to commit ourselves and with.

That we started to rethink this open the project and the timing of the project that the cost of the project and that's pretty much what what's happening there how it affects the mine plan and that was or those are moving parts.

Time, and part of you know part of it is just getting that check them out earlier, it's really going to help in terms of de risking that operation and pre working conditions in the mine.

But I you know well trained to those numbers I can get done Natasha.

To speak to after there's a lot more numbers. If we have sitting Ingram appreciate we're all in a different different form offices and scattered across the province of Ontario.

Right I appreciate that and then second question back to the common theme here on the guidance it sounds like over the next quarter there'll be some more information in terms of what the 2020 expectations will be.

Reasonably with a three year guide there is.

Reasonable Matt of more work required for the detour plan.

As well as what the foster goal and Macassa sort of outlook is gonna be.

When do you think will have enough information to actually formerly provide for your guided they could it be realistically not until early 2021 or what we have some kind of major update we're the clarity can be better understood.

Well I think there with the would be a detour progen meter in the trying to get a handle on that one the plant at each or we were looking at trying to have something out by by Q2 into Q3.

This year, you know that that some which is part of that was greedy China to really do that right. We want to be able to incorporate a some new drilling results and reinterpretation of geology to resource there and a few other things from a permitting perspective that we that we read.

I'd for summer recognize it's been delayed now I'd say on parts of above that work has been delayed because of Goldman 19, but I would say that we're really working toward probably do by Q4. This year to really have that something solved but if we get it sooner. We we were we will we will get it out sooner.

[noise] there are no talk with some studies time, I turn the call, but tomorrow thing.

Thank you operator, and thanks, everyone for participating in our call today.

As you heard despite the coven 19 endemic and responses we've had.

Had a solid quarter in Q1 with a very solid operating results earnings and very solid cash flow.

We have some exciting things going on what their projects were advancing a number four shop at Mckesson very well and we're realizing some of the exploration upside we talked about listened very encouraging results a passive this quarter.

We.

We'll continue to update the market as as developments occur and as we continue to Ah to progress our operations and ramp up and we look forward to a two our next conference call. When you can we can talk again about our ongoing solid results. Thanks very much.

Ladies and gentlemen.

This conference call. Thank you for participating you may now disconnect.

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