Q2 2020 Kirkland Lake Gold Ltd Earnings Call
This time I would like to welcome everyone to the Kirkland Lake Gold to second quarter 2020 earnings calls all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question answer session.
If you would like to ask a question. During this time principal star followed by the number one on your telephone keypad, if you'd like to withdraw your question Chris The Punky. Thank you Mark I think you may begin your conference.
Thanks, very much operators and I just want to thank everyone for joining us today.
Welcome to our second quarter 2020 conference call webcast.
On today's call, we will review our results.
Three and six months ended June Thirtyth 2020.
On the call today, and many other certainly called senior management team.
Speaking today will be Tony macoutes, or president and CEO.
David Shore as our Chief Financial Officer.
King our vice President Canadian operations.
Having held share Vice president curtain like mining and Air Kallio Art Senior Vice President exploration.
They're also a number of others members of senior management team on the phone as well that may help that he had too many session.
As we did in Q1, we're doing today's call remotely consistent with our Kogan 19 health and safety protocols.
After we go through the presentation, we'll then open the call to questions.
But each person limit themselves to two questions on todays call.
That's fine slide deck that we'll be referring to is available on our website.
On the home page in the event section.
Before I get started I would like to direct to everyone to the forward looking statements on slide two of the slide deck.
Our remarks and answers to questions Nate and most likely will contain forward looking information about future events affecting our company.
Please refer to slide two as well for forward looking information section of our most recent Mdna faded July 29, 2020 or more information.
Also during today's call will be making reference to non <unk> for us performance measures.
A reconciliation of these measures is available in our most recent them getting as well.
Finally on mentioned that all figures given today will be in us dollars unless otherwise stated.
With that I'll now turn the call over to Tony huge President and COO Kirchen Michael.
Thanks, Mark and and as Mark said, thanks, everybody for being on the coal. So thanks again to give an update on what's happening in Q2.
Yeah, I'm going to start on slide four in the deck and you know I think I know they want to one maintained a highlight on on the slide I think maybe put you bring to your attention as is our number one priority the health and safety of our people and you know and that's that's everything we do is all about that a bubble and treat people come to work and work say from go home sites to their families.
And if you look at the results can you do you know you can see that we've had very good operating results in the quarter and yet you know, it's really a testament to the tune into two didn't these challenging times on how the people taking it seriously I've actually very professionally and paradox at work.
In a very responsible and safe manner.
You have to think that people who work for all the hard work that they did and you know we got for continued success.
And then you know what you mean, maybe I'll start by providing an update on where we stand on on the corporate 19.
Like many many of you know we place most people, making Mckesson begins operations at the end of March can be suspended operations entirely at the whole complex.
Well first of all remained in production zone, the old like all of our operations implemented an extensive bicycles, let's say protocols and we also suspended Oman central work there including.
Look on some of the projects and the exploration drilling projects would have included does.
Thing was a bit razen, we were doing some work or not.
Treatment plant.
Would you ever do most of our work or work in late April including shaft sinking up macassa.
In terms of expiration, we began the redeploying gildan possibility, but one that started in Canada in May and this process is continuing to we expect the ramp up going to go up on for sometime.
We began calling workers back a detour they can mckasson already made by the end of the quarter. There what their workforces are both you place were up back up to be a cold it doubles.
Breaking up a whole complex remain suspended entering <unk>, we recently announced that this will continue for the foreseeable future.
So with that we.
Transmitted many places we could who brought by the Canadian operation of Mckesson Detour are we.
We took advantage of love this opportunity and meet contractor contractors that were working where we could put her on employees and we put our poison pill filled the role.
And now like I said before we're looking at.
Opportunities for what to do with what's the whole conflicts and one of the things. There is you know there there is some significant exploration upside on the on these properties and those are something we made buckets in the future, but it's got to be something that fits within our cost structure and insurance and proper return for Kirkland Lake Charles.
Finally on corporate as you may know conditions are getting worsened in the state Victoria in Australia.
In the midst of a spike in Colby cases in many parts of Melbourne already locked down more in or I guess relative lock down like we are.
Canada at this point, we really haven't been impacted in terms of production. However, we are monitoring the situation very closely and we'll take the next necessary steps to protect our people.
Let's turn your attention dislike five and no I want to point out there you know weve no. We didn't kirchen my goal. We've adopted a response will go money principles that that that that working for developed by the World Gold Council No. We're focused on on a number of key areas you're natanson governance.
Governor Center, but at this point of contact at <unk>, sorry, our conduct and and how we how we manage your supply chain. How we are we understand the impacts.
Indeed virus, how we deal with regulators et cetera.
Social side to health and safety of people a human rights labor rights.
That's.
How we fit into our comedian recognize important sort of can you people and I will say third make was in the environment, but we know we focus on understanding the environmental so what we did do from an environmental stewardship point of view and divide good decent default devising our operating plans with mine closure in mind.
Work towards you know we are there we do have the impact of our impact not P.S.S. as as bad as it needs to be per se.
On the governance and social environment No way again.
Okay and getting into too much more detail on this weekend.
Outlines a few areas here I think one of the main point to one that I want it.
<unk> 0.2 leaves you know from but from a social point of view from a people point of view, we had a significant improvement in our in our tier my for medical injury frequency throughout the operations. We proved almost 100% no over the last few years now we're sitting at a frequency of 2.2 currently and our target is to get good luck.
So when we don't although we've made significant improvements over the last while we're not there yet and we're doing a lot of things in the company to get ourselves. So that we do you feel strongly that no. We wouldn't with this and we don't want people come to work to get harms and we're going to do what we can to make sure people could come to work to do the work that.
They did so to that burn and living they can have to go enjoy time with the family in the friends.
We've also you know I see no we.
Twond donation program.
The company coming out of Cobot 90, and that means the main thing I wanted to point out here, which is number but main areas, we really want to focus on mental health addiction, and homelessness, we get some critical area in terms of supporting people in the communities were living you training unemployment, we really want to you know set set things up for a succession and.
We intend to be building long life mine assets at each of our minds and want to make sure that we were developing the people that can come come come into that provide provides the opportunity for people.
Elderly care as well as to who didn't nutrition, we think he's a very predicts important areas as well and you know in terms of.
On the social side, we figure human rights policy and we were focused on.
Providing a but you know recognize and diversity and providing inclusive workout workplace that we about all people to prosper regardless of.
Any differences that may happen.
We also know what's going on slide seven.
On the environment side, we are focused on a number of areas I think when when thing that we need be should highlight is you know mckasson mine, it's been a leader and increasingly cool.
Are we using a battery technology underground we we.
We started I mean, it started before before Mike My Gen 10 tenure at currently cool and we just continued on with that we've made a lot of improvements.
You know, we still not quite there, but you know in terms of greenhouse gas emissions. We we recognize the importance of of monitoring this and managing this and trying to you know and see where.
And footprint and we're working hard and this is one of our priorities as we continue to advance our operations on the water side, we recognize water is important.
Most of our operations are obese face easier discharging possibility we.
Recently, Oh, putting a new water treatment plants to set it up for tier one discharge and so forth a deeper in the castle, we're working with Mcos working towards the there.
We focus on rehabilitation and one of the other areas is on tailings and our Tim facilities. We monitor accounted for 70, both both current operating ones as well as our.
Historic ones are the ones, we would need to get I've inherited for stability et cetera. We we've we do what we can.
Okay that new engineering standard so no adopt the highest level for them standards.
Jurisdiction, not just with the high standards that there aren't not to spend the regulatory environment that we're in.
We've made significant improvements in the Castleton facility.
All in some of the other things we're doing this will.
New facilities, where we look, especially in Kirkland Lake, where we go to second payoffs and in order to minimize our footprint for the Sam's area.
Yes.
Hi, guys go to go to slide I believe that slide eight.
Tim talked about a financial and operating results in the quarter and you can see we did have a very strong quarter. Despite disruptions caused by cold at 19.
Adjusted earnings of 79 cents per share. This increased from 52 cents in last year's second quarter in 70, some sense in Q1 of this year.
You'd have a significant difference between adjusted per share in earnings per share, which mainly reflected some noncash foreign exchange losses, which we had in Q2, David source, our CFO, who will be talking over later and he'll give me a little bit more update on that are more color on that.
Once again it was cash footwear business really showed its strength if we exclude the impact of a large tax payments in Australia related to the 2019 Act year, we generated operating cash flow of over 250 million breached free cash flow over 2200 25 million during the quarter.
We clearly benefited from a high gold price, but our operating performance was very strong.
Action with 332000 ounces with sales of 341000 ounces cash cost were $374 per ounce production to be sure like they were $241 per ounce. If you want to compare to the quarter a year ago on the same bases on CD cost with $526 per ounce.
Both and again, both net significantly better than your.
And on Dijker Lake It had a very solid quarter, which I'll discuss shortly I will say that we saw we saw improvement quarter over quarter in terms of unit costs and looking at well priced the timing of or acquisitions decouple couldn't have been better.
Definitely R&D actions as we were able to close hedges bofa gold hedges currency hedges and and.
[music].
Diesel fuel hedges business has had a significant benefit to the company.
To the operation efficiency.
Turning to slide nine we ended the quarter at 535 million of cash into debt.
Maintaining yourselves and industry, leading position in terms of our financial strength.
We continue to return capital to shareholders repurchasing 1.3 million shares during Q2 have brought year to date repurchases of just over 11 million transfer $380 million.
We've also recently paid our second quarterly dividend of 12 cents 12 and have sense for chair, which we doubled the first quarter of this year also during the first half of 2020, despite Colgate and we achieved significant exploration success.
More but that moment.
Moving on to Slide 10 art I already mentioned the strong performance said differently.
I'll just add that we're very encouraged but will be.
We currently that's the best is still yet to come.
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World Class assets will cost us operation the people are our exceptional indefinitely.
Do words.
Pretty excited about what we have happening its into it.
Yes.
We've been very challenging year, a challenging quarter due to colder.
Yes.
It is set up to date of the Beecher, but.
But the.
Sorry.
You can put production that detour was 100 through 2000 ounces degree at a 0.8 grams per ton in the quarter, we expect to see better grades going forward at mining rates have ramped up and.
We gave our guidance, we feel very strongly about meeting the production guidance, but for the years you can get since the second half this year.
He's going to be a much better second half.
Cash costs and all in sustaining costs, both improved from the first quarter compared very importantly, detour. They continue to generate substantial free cash flow generated 80, 89 younger free cash flow in Q2 and for the five months since January 30, Onest generated over $167 million, a free cash flow, which is about 40% of the company free cash flow so far.
And we expect production a dietrich increase as I said in the second half a 2020 and.
Since the production increase.
Cash cost down and gold price wherever it is and are going up you can see it's a very robust project.
Turning to slide 11, we we've consistently said that our three cornerstone assets are not just highly profitable operations. There also through the most exciting exploration stories in the industry. We do we do feel that the understanding the geology and making it makena, making that make you can.
An aggressive stance in terms of what where we think the geology of special it's something important that just driven value for kirchen make shareholders.
We see that would be Sweden threatened to be assets.
We did have a lot of success in exploration. So far this year I won't get into details because our khalia will discuss our exploration results later in the presentation, but at a high level had macassa. We continue to do continue to so that he can grow the salt mine complex.
Courage by drill results to have a both on the need to be a needle for break any amalgamated break.
The main menu for break have been ignored for quite some time with.
The discovery this off mine complex once the new shaft is in place.
Really opens up the opportunity for Bakken.
Look and be mines again back on the comment on the main break.
More significantly, especially at depth and I'll give me to break is helpful.
Like I said central system.
You know.
No.
Things are as I said earlier, it's a very close and number four Seth. We've also efficacy started development of new ramp from surface, which is going to some near surface mineralization, which is a combination of.
I mentioned some more for breaking the mineralization some another made a break information.
Yes, I'd mineralization something.
Some of it.
Maybe some remnants of.
South mine complex of higher and who knows what else. So we're very encouraged by exploration upside even near surface at Mckesson.
Beecher meter we.
We.
We recently put up was also some initial holes which successfully into light.
Second mineralization has attractive grades outside of existing them of the mineral resources at three locations when the settles on both west of the meat print it could be at north and that's north.
And then turning to fossil we just issued a press release with encouraging drill results for the number of targets infill drilling. It's one you can higher than expected grades. We've also been set into second high grade mineralization outside of existing mineral resources Signet Robin selling area and we continue to see that these are all very large full systems all contain forward because.
The gold well contained to traditional.
So sulfide mineralization and.
Thanks, its extensive and be able to fall for quite quite a distance most them down plunge.
In the systems.
Yes.
You're getting too much if at all.
I'd ever get into more of it and so forth.
Moving to slide 12, we issued 2020 guidance on June Thirtyth.
Based on the progress we are achieving a feature making macassa.
And ramping up from reduce operationally from confident that.
Thank you didn't give a better picture now back to our shareholders and what was happening.
Production guidance about 90% of the original guidance with most of the reduction coming from the removal of complex from our guidance after a second.
We are targeting 1.35 to 1.4 million ounces this year and are well positioned to achieve the target between the second half a year.
Operating cash costs and all in sustaining cost guidance improved and we are beating the new guidance range. After the first half of the year.
Any capital has been lower than planned for the year to date largely due to delays caused by cold it.
Good ceases need Katherine all in sustaining constant general increase in second half a 2020, but we remain very well positioned to achieve a beat our guidance.
In addition exploration expenditure guidance with reduced for the year, which largely reflects disruptions caused a cold and delays that could could move some work into next year at $130 million to $150 million is still a very substantial program and.
Let's say that isn't much more focused program.
The main priorities are possibility going underground the cost of though.
Between targets, a harrier Swan Signet and Grabens Hill.
Looking at detour.
Satellite area, though the west detour than get understand what's happened a little below current pits and to the west and fit.
Resources that we say, we we've indicated we would get is the acquisition the detail than field is substantial growth in resources and potential reserves over the next.
Here can.
[laughter] an over at Mckesson, we continue to be very very excited about what we can find the one this off my complex and up in Ukraine.
Overall, though our guidance in change that much, particularly if you factor out more complex and we're in very good shape to achieve from year to 2020 guidance as I said with that I'll turn the call over to David source, our Chief Financial Officer.
Thank you Tony and good afternoon, everyone I'll be starting on slide 13.
As Tony mentioned, we had strong earnings in Q2 2020.
Adjusted earnings totaled 202.9 million or 79 cents per share.
52% increase from Q2, 2019, and 13% better than last quarter, we had a significant difference between adjusted net earnings per share of 79 cents and net earnings per share of 54 cents in Q2 2020.
The difference was mainly related to 72.8 million of noncash foreign exchange losses, reflecting the strengthening of the Australian and Canadian dollar against the U.S. dollar during the quarter.
Perfect loss was primarily driven by the conversion of our significant cash balance, helping us dollars in Australia, and Canada and was also impacted by the conversion of an Australian denominated intercompany loan between are extremely and Canadian entities.
The other key difference between adjusted earnings and earnings related to 13.4 million of nonrecurring costs related to cope with 19.
These costs were mainly labor costs, and we're encouraged because we paid wages to people in the initial period that they were off during reduced or suspended operations. We also paid special bonuses to people who worked extra days are now were due to restrictions on movement of people at the time.
Turning to slide 14, the key driver of improved earnings in Q2 was higher revenue.
Revenue in Q2, 2020 totaled 581 million double the revenue of 281.3 million in Q2, 2019 and higher than the 554.7 million of revenue recorded last quarter.
The increase from a year ago 171 million related to 61% increase in gold sales to 341000 ounces.
A 396 per ounce, increasing the average gold price to $1716 per ounce accounted for 135 million of the increase in revenue year over year.
Compared to last quarter, we had a 44 million dollar increase in revenue from 130 per ounce increase in the gold price from $1586 per ounce in Q1.
This impact more than offset a 5 million dollar reduction from gold sales with gold sales of 341000 ounces in Q2 slightly lower than 344000 ounces last quarter.
The reduction was mainly due to the suspension of operations that whole complex, which had sales of 3600 ounces in Q2 versus 29600 ounces in the first quarter.
Looking ahead at EBITDA as shown on Slide 15, Q2, 2020, EBITDA totaled $310 million.
67% increase from 186 million in Q2, 2019 compared to last quarter EBITDA was lower than the 300.
391.5 million in Q1.
The change from last quarter, it relates to net earnings which were lower even though adjusted net earnings increased.
I already mentioned, the 72.8 million of FX losses in Q2, well in Q1, we had 73 million of gain from FX due to a weakening of the Aussie and Canadian dollar compared to the U.S. dollar at the time.
We will look to take advantage of any future trick on that then that will allow us to convert to a U.S. dollar functional currency, which will significantly reduce these FX fluctuations from period to period.
Excluding FX gains and losses, we would've compared favorably.
Last quarter in terms of EBITDA.
Turning to slide 16, it looks at our cash and cash flow.
On the slide you'll see that our operating cash flow was very strong but was impacted by the 132.6 million dollar tax payment in Australia, which I want to emphasizing the final tax installment we had to pay for 2019 tax year.
In Australia.
Other factors impacting our cash was ongoing investments in our key assets, which mainly accounts for the hundred 28 million of cash used for investing activities.
Cash used for financing activities of 90 million reflected the 49.9 billion, we used to repurchase 1.3 million up shares in Q2 that Tony mentioned earlier as well as 34.7 million used for dividend payments.
Slide 17 looks at the change in cash in a different way you can see that the largest contributor to growth in cash was from our operations, which generated about $322 million cash, which has before interest income tax paid and the impact of changes in working capital.
Slide 17 also highlight the impact of income taxes paid on cash during the quarter, mainly reflecting that hundred 32.6 million dollar payment.
Made for Australian tax payments for the 2019 tax year.
With that I'll turn the call over to John Landmark co lead of our Australian operation.
Thank you dive it and good afternoon, and good afternoon, everybody from Melbourne I should just mentioned also have with me Braun Hakan Who's our fellow co lead of Australian operations.
I'll be talking to slide 18.
First of all had another strong quarter in Q2 Twentytwenty.
We produced 155000 ounces.
Production increased 10% from Q2 20 non team with higher tonnes processed mainly accounting for the increased the average grades for the quarter was 39 and a half grams per tonne roughly the same as a year earlier.
Production in Q2 compared to production of 160000 ounces last quarter. When the average grade then was 42 grams per tonne.
Cash costs in Q2, 2020 $129 per ounce similar to both prior periods.
All in sustaining costs improved averaging $273 per ounce. This is $318 per in Q2 20, non team and 313 told us last quarter.
The change reflected lower levels of sustaining capital, which totaled $11 million versus $23 million last year and $16 million in Q1.
The reduction largely reflected the impact to cope with non team protocols, which led to the suspension of project work on the deferral of some expenditures.
We expect higher levels of sustaining capital in the second half of the.
I will point out that are all in sustaining costs of $273 was achieved despite the new 2.75% royalty that started in January the says this year.
The new royalty added $6.9 billion, all $44 announced to our all in sustaining costs in Q2 Twentytwenty.
On the year to date basis, we produced 315000 ounces in the first six months of Twentytwenty at operating costs of $127 and all in sustaining costs of $293 per ounce.
Entering the second part of the.
We are well positioned to meet our guidance with 2020, 590 610000 ounces of production at cash costs of 130 to $150 dollars per ounce.
In terms of projects. Despite disruptions, we've done well our new ventilation system was completed during Q2 2020 with the new system now fully operational.
We also completed our new refinery during the quarter and the moving forward with a number of other projects.
Finally, as Tony mentioned that we're seeing a spike can cause it coasters in Victoria. So the most caught it has been restricted to melt and the in recent days it does appear to be expanding to other areas, including bendeka.
Just wanted to reiterate what that we're monitoring developments carefully we have extensive protocols in place, we making arrangements around remote work and risk assessments for people coming from impacted areas.
As always we will do what we need to protect people formats.
I'll now turn the call over to Evan Tulsa, whose vice president to mining took less.
Thanks, John I'm, starting on Slide 19, Mckasson produced 42000 ounces in Q2, which was lower than both Q2 last here in the previous quarter. It was a significant impact related to covert 19, and the transition to reduce operations part of the impact related to the fact that macassa.
Produces using a shaft and poses a challenge is becoming to social distancing.
We have extensive protocols in place in or people are doing an excellent job.
Operating cash cost for the quarter average 547 per ounce in Q2 2020 versus spot for 46 in Q2, 2019 and 536 in the previous quarter.
Lower sales volumes were the key driver the higher cash cost per ounce.
All in sustaining cost per ounce average 841 versus 788 and Q2 2019.
And 850, the previous quarter again, lower sales volumes were the key factor driving increased.
Sustaining capital expenditure declined in Q2, 2020, totaling 10 million versus 17 million in Q2, 2019, and 14 million last quarter. The reduction was related to disruptions were caused by Covis.
We will see a pickup in sustaining capital in the second half of the year has worked levels increase.
On a year to date basis production totaled 93000 ounces, a operating cash costs of 541, and an all in sustaining costs of 686.
Looking ahead, we have a workforce back to pre covert levels and are expected to see increased production is based on higher tonnage and better grades over the balance of the year.
Our guidance for the years, producing 210 to 220000 ounces at a cash costs of 490 to 510 per ounce.
We are confident that we will achieve these targets.
Turning to slide 21.
Despite losing a month of shaft sinking in Q2 due to cope with the four shop is progressing very well.
During the quarter, we seek to shop Ssix hundred 17 feet for a total of 2577 feet by quarter end. We're currently at about 29 40 level and we were averaging over levered feet per day, which is better than planned. We're also making good progress with steel installation and putting in place all required infrastructure.
On our last call we discussed a change in scope to the project, which was going to allow us to complete for shot over a year sooner than initially planned by late 2022 at a lower capital.
We were very much on track to achieve the new schedule.
I'll now turn the call over to Duncan King Vice President Canadian operations.
Hi, Kevin.
Turning to detour late on Slide 21, the mine produced 132000 ounces in Q2, which compared to 92000 ounces for two months in Q1.
Great Great remain remained fairly low in Q2, averaging 0.79 grams to the top the lower grades of largely resulted.
From processing higher volumes of stockpiled material, so normally would be the case.
Which is typically lower grades in wind production.
Our unit cost improved compared to Q1 cash cost averaged $573 in Q2 compared to $696 the previous point.
All in sustaining toss improved with all the money from 11, but 1001 underneath.
For our sustaining capital totaled $66 million in the quarter.
As we've mentioned previously all of Detroit Lakes capital is reported in sustaining with the exception of a small amount of capitalized exploration. So our all our psyche of 1009 is really an all in costs.
On a year to date basis production that detour Lee totaled 220000 ounces at average cost of southern $28 and then all in sustaining cost of 1090 barrels.
Our guidance for the year is 522 other highlights for 2000 ounces of production operating cash costs.
610 to $630 per hour.
With mining rates, increasing we expect to see better grades in the second half of the year. We remain confident that three issued 2020 guidance will be achieved.
With that I'll turn the call over to Eric Taleo Senior Vice President of exploration.
Hey, Thanks, Duncan and good afternoon, everyone. My first like today will be 22, which is from the cap software expirations.
In Q2 started the Florida, Florida than planned rates, but then picked up quite a bit as the quarter progressed in our view still managed to show some reasonable progress on or projects.
He also paying what we believe our some very good results from drilling, which we announced in April and illustrated on the current current slide.
Syndicated the new drilling was done from the east limit of the 5300 level intersected a number of high grade zones to not only extend the SNC by another 75 meters to the east.
But also defined a new high grade corridor on the main break.
The number four shaft, which at this point measures over 700 meters long by 300 meters high remains open for extension, both along strike and to adapt.
Although I'm not going to be reporting getting new intercepts today.
I believe we did continue to make so good progress since that press release.
Including more drilling in the theme area extended the drip further to the east and now have a new platform that will allow us to reach even further along the structure.
And looking to the future.
See things starting to really pick up even more from John.
Where we were in June.
We averaged about number maybe only book to bills in Q2 from a lot at the time.
Correct.
As of the end of July were up to seven eight and we expect to be running.
Nine to 10 gels for the remainder of ear.
Which is very close to our original plan.
In Turkey.
Turning over now to slide 24.
Going to talk a little bit about detour.
Okay.
And what we see as an image for Detroit property illustrating the initial results from the large deal campaign, which we commenced in March and we announced in June.
As we announced the drilling that we're doing is part of the 250000 meter program being done over the next year and half the supply information for an updated resource potentially extended mine plan.
Despite the results on the plan from the main and west areas. The property and this indicated so eight holes in total with three specifically targeting the large gap between the west maintenance, which we call the saddle zones, where there's been very limited past drilling no current reserves and very limited resources as mentioned in the release all the whole.
As here, we're very successful, but we're especially pleased with the ones from the saddle as all three intersected very broad zones of mineralization with attractive wasn't that creates and several high grade sub intervals, showing us that there could be potential for underground reserves at depth.
We're also very happy that all the whole seemed to indicate intersect targets very close to our projections.
And contain similar grades and styles of mineralization that we see in the west and maintenance.
So this.
Makes us feel very good about our chances for continued success in the future.
So turning on turning over now to slide.
20.
Sure.
Looking at a long section through the made in west pit areas.
And showing the current reserves key drill targets and new whole syndicated the current reserves are contained in todays pistol defined by color blocks and the key target areas are the areas between needs, which we call the settle as well as the area below the west It where there are no current reserves and very little past drilling.
So in terms of the holes, we see that the intersect both east and west sides of the seven zone and area directly on strike with monetization from the main pit.
So a lot of area still drilled but a very good start to the program so far.
Turning now to slide number 25.
We see results from the 58 Norris cylinder detour, where we also had some very positive.
The project is located eight kilometers to the south of the mean nearby to the lower detour defamation zone and has an existing underground resource, which we believe has excellent chances for extension and eventually supplying higher greatly to the Detroit mill.
As indicated the key deposit here is located near the intersection of an east west trending sheer structure with a series of poor freeze and the new drilling focus mostly on the west side of the current resource which set lined in orange.
As indicated their release results of the program were very successful and added 175 meters strictly to the west side and had some of the best grades that have been team in this resource area.
Considering these ending stocks in this area. We believe things are going very well detour at this time and now putting most of our new efforts towards speeding up the drilling and getting the results even faster.
And in summary, overall I would say, it's kind of I would say that despite the continuing terminal August we still managed to have a reasonable success for the veteran of projects and things are picking up for the future.
And so now that I'm going to turn over to Australia, and going to slide number 26.
Where we had slightly less drilling again.
Then planned in Q2, but just released I believe our some very exciting results from fosterville from several different target areas, including the Swan Signet carrier and until.
The best results overall were from the zone, where we had several new holds for both when it both within and possible the print mineral reserves.
Turning to extremely high grade visible gold intercept the new results for the team during infill drilling of the reserve near the intersection of the Swan and the swap footwall slate play and were very encouraging to us.
Due to the fact that they were much higher than expected.
For this area and although the total extensive the high grade and the effects on reserves are still on Poland. At this time, we do have a lot more drilling plans for this one in the second half the year areas down plunge and this would be coming from a new hanging wall, Jeff that was actually installed during the quarter.
So this gives us a whole lot more options to hopefully find the same kinds of things happening.
Yes.
Also include the race was new results for signature, which Richard Cygnet significant intercepts up to 100 meters north of this.
Of the current resource as well as from areas immediately downtime entities. So current reserves at Harrier, which both have the potential to add reserves in the near term locations close by to current mining.
And then to add to these we also had some very good results from Robert Hill.
Which which.
Indicated not only.
Okay excellent results up to 950 meters down plunge of the current reserve, but also potential extension of the overall system up to two kilometers along strike and then news on occurring in the hanging wall <unk>.
Important to note as but some of these new zones that relocating along strike and an angle do have ports and visible gold, which are the hallmarks of course for the slot and what we're really looking for.
Overall, we're very encouraged by the drill adults racing in all of these target areas.
And.
We believe that the all continue to present growth opportunities for the company.
Hi, great potential.
With that I'll now turn the call over 20, muffins, and he's going to round out the presentation.
Hey, Thanks, Eric and thanks, everyone, John and David and.
Mark and everybody for for presenting in any way yet and you get it you can get a very excited about that about perking. My goal is you know not only are.
Industry, leading in terms of earnings.
Drawn cash flow generation.
But you, but you get the sense that the you know there is exceptional exploration upside lots of gold on the on the properties. We are really really good geology.
The exciting times and in terms of what's happening in the company and you know if you look at the results and again just to reiterate it's been a challenging environment Cobot 19, we still do people out of this company's turn still continued to turn into solid quarters and reading again.
Acknowledged all the hard work and professionalism and the responsible safety.
It's been taking place in this company.
And.
We generated 223 million to free cash flow totaled $400 million that year to date.
Excluding unusual items again, we have an industry leading financial strength.
And on the other side you know weve focused on return to share.
We continue to buy back shares and as well as we've raised our dividend and you can see there's lots of upside in terms of were dividends and return to shareholders can go in this company and and again I'll go back to we have three outstanding assets in our portfolio.
We're very very excited about the acquisition of Detour Lake. We can see continued to see tremendous upside in this mine and I think we're going to work over the next one up demonstrate that the value of Detroit Lake would be what would the previous value up curtain linked by itself was before we acquired Dieter Lake So just hold on and keep your and.
That is a forward looking statement by the way.
Anyway.
And we know we do see signal.
Continued exploration success going onto year as Eric mentioned, you know when you get the sense on the on the non of exploration. We doing this year, we do Ics we aren't.
Drilling just for it because we read on the study to jolts you were looking for we want to study GLG, but for deposits and and we expect to get significant news flow from exploration drilling over the year heads as we progress and even into next year and I know and then finishing up hearing all we know we you can see the first half of the year, which we've got some good.
Hi, Good results, we did have a very strong second quarter, but we are front really poised for a strong second half of the year and went well positioned to achieve their reissue 2020 guidance and with that I'll. Thank everyone for listening and well be happy to take any questions that anybody might have take care.
As a reminder to ask a question no need to press star one on your telephone to withdraw your question press the pound or hash key he's done Bible the compiled acuity roster.
Our first question comes from obey is happy with Scotiabank. Your line is open.
Hi, Thanks, operator.
Hi, Tony and congrats on a quarter, despite the challenges with the cobot impacts.
20 couple of questions from me.
First of all in regards to production at during Macassa. So so great to see that detour and Mcus operations are kind of ramping back up nicely going into the second half.
I mentioned workforce have returned to pre corporate levels.
And specifically a deep door.
The question is have you brought back all the trucks and shovels or would this be of ramp up throughout Q3.
No we're pretty much a we pretty much have at most everybody working that can be working at this point in time and we we have a lot of other work happening to at that site now with the.
With the Tami and some of the other capital projects that maybe been put on hold so we do have a long happy. We're we're we're being challenged by corporate 19, and you know, but providing social distancing both in and out in the workplace, but also in the <unk>.
Kitchen et cetera, I think people to do an exceptional job there, but you know.
We are pretty much at had had back back to normal levels and we do have all all of our equipment. If its operating plan b operating or planning to be mine.
So then in terms of throughput travels and mining.
Levels, that's that's you're back to pre corporate levels as well.
Yes.
Okay, Perfect and then just switching gears on my end on exploration. So regarding your release from possible today. So that piece, obviously contain some positive infill results from Swann.
Small step outs from Hereon, Robins Hills, where somebody largest up as well, but is the focus for Twentytwenty drip program.
To continue with infill at Swan and primarily improves the reserves going into the next reserve update.
Early next year.
Well I'll, maybe I know Charlie colors on the line I can let him answer a few these questions, but you know our priorities with with all of our exploration number one first priority is to is too.
Replace reserves mine. So some of that is is upgrading resources. So that they can we can move from inferred et cetera to it to indicated are measured so we can convert it to reserve. So that's that's one of our priority went in the second priority is looking for extensions and third prior to them for new mineralization, but Troy I don't know if you want to give a little bit of color.
If you will carry with them.
Yeah show a tiny.
Yeah, certainly we are looking to size and said drilling on.
Brazil.
Thanks, and particularly in the in the Swan song.
Hanging will draw it's that we've recently established and a lot of the focus of the drilling is fees on the.
NCC made a down plunge extension at the mineral reserves site side, there is a real real focus on that.
But but additionally, we still continue to to undertake outlast stepped out programs and the remainder of the year Aboriginal expiration at.
A slug.
But obviously, we'll we'll get back into that as soon as where I will.
Okay. Thanks, So that's on the and I think thats good for me.
Okay. Thanks.
Ladies.
Our next question comes from Cosmos Chiu with CNBC. Your line is open.
Hi, Thanks, Tony and team I.
I guess my question is also on the exploration results that came out about an hour ago now.
You know you kind of talked about the infill drilling here at Swann.
It also kind of early on.
I'm just wondering if it all we can give us a sense of how that can improve potentially improve your reserves.
You know if I remember correctly earlier on this year when you convert us somebody inferred into reserves.
Lost some grade.
Im just wondering if you know these results today and certainly there are great.
Hi, Andrew almost 1000 Gram per tonne over eight meters or is that going to add backs about I'd grade that you know you quote unquote lost.
Earlier on this year.
Hi, Troy do you want me to maybe a little bit early to answer that question, but trying to you can you give some color on that front.
And you feel comfortable.
Yeah, Yes show.
Certainly.
Hi, how are you we did see some reductions.
With the model uptight.
And our primarily driven Boston volume metric.
Adoptions in the models on site. So we did see some some reduction there.
These recent drill results.
Thing and exceptional.
And very hard dried and they brought along the intersection sign of the swung and swarmed supply.
And two of those results are greater than five seven Gram betas and created results said right in that they haven't Graham majors and and what we've said he's a continuity of a very hard drives shooting.
We're still doing the work.
I understand the impact on on reserves thoughts.
But it looks very encouraging that very bunch hydride than what we expected ins on hot pot that answers your question.
Yeah and then.
Sorry, I guess, you know a lot of it was based on infill drilling as we saw it today.
You know any any potential for stepping out and Swan because if I remember correctly you know at one point in time to swallow somewhat contained.
But you know any where there any kinda encouraging results coming out of potential step out I guess my point is could we see the footprint of Swann.
Get bigger potentially or is that not the case right now.
Yeah, what we're saying I'm certainly potential to extend the reserve levels.
Infantry current drilling.
And look a lot of that drilling in the second half of the.
These directly damn ponds from this foreign reserves itself.
So I will be in a bit better position at the end of the year August it just to see what sort of grades we get to the SAP clearly on that.
Okay and then the second part of my question here is certainly very encouraging results out of Robbins Hill and Harrier.
But it all the grades are not the same as Swan sort I expect to not yet I guess my question is what's the potential of potentially finding some of these bonanza grades.
Actually robbinsville and Harrier.
I guess I won't point in time to theory. It was as you go deeper and Robins Hill, you know it could get higher grades to be honest I haven't looked all the drove results I came up earlier today by is that still the case in terms of potentially you fighting on new Swan maybe.
What's the potential here robbinsville inherited.
Yes, so certainly it.
Robin sale.
Yeah racing release, one of one of the safest seem to six in fact that takes us into sit on the dam punch.
Projection, all the curie mineralization need to stick it visible golf.
I had a bad Oklahoma vertically by surface such size. So we are encouraged by what was saying there.
We now we can't it's visible gold at a similar elevations in the in the authentic system in Eagle and Swann.
Side. So we are very encouraged by what we're seeing in the early stages of drilling felt with Bob talked quite a bit more drilling to guide to to fully be loss of potential and ending harissa. Yes. We are seeing feasible go dipped in the system.
We still have a lot more drilling to do there to fully understand.
The structural architecture.
As we are drilling we will blending in developing m. models and absolutely we think they could be could be something still down in the Harry system.
And then.
Oh I won't put in time to the highest potential was something that you would call Harrier teams are you. Although results I came out today I guess is just semantics, but we into Harrier deep snow and you know in terms of priority has robbinsville sort of surpassed.
Area or slash area tapes.
Hi, yes, so it's a harissa yeah, we did see some solid results.
Come out in the press release on the Harry advice fault.
Further down plunge that they are little bit Waco demeanor loss system is still a laws and they are you still potential further down plunge thought, but what was saying it Robins Hill is the emergence of visible gold at Dick's and we're seeing strong SALTGUARD results eyebrows over a long punching state I'm so sorry.
Nothing more aggressive we set out without Robin seal drilling programs and ER and also pushing the growth they corn at towards role, Brazil, which will provide an exploration platform also set a drilling.
Our next question comes from John Tumazos, with John Tumazos, very independent research. Your line is open.
Thank you Tony.
Concerning the 573 cash costs of detour seems really great.
Was there a temporary benefit from.
Crude oil and very well in April or the C dollar weaker.
If you sent some of the workers home not mention probably sent the contractors home and you didn't have to feed the workers were those temporary benefits.
Or.
Should we look at a cost could fall under 501 degrade rebounds in your mining and milling stockpiles are.
It falls to 450, if you have autonomous trucks or 400, when you get more tons down the road.
It.
Same exciting.
Well you know that thanks, John I mean first off I mean, it it's a lot of all all of those what you said definitely the.
Fuel prices coming down as helped currency changes as helped.
You know Neil and you know that as we go forward to mean that there are potential cost for improvements a lot again, we're we're focused on improvements by increasing increasing but are increasing results same costs. So so you can get a sense that as as we progress you can get a sense that yeah.
We produce more more with the same amount of work in the same amount of money. We we expect to see cost coming down, but we are working at a lot of areas in train and to improving we don't you know that mean lot of that is going to take its going to not this all happened in the next three three months I think Gary, but but I think if you look over the next year or two you're going to see some so.
If again.
Movements anti tumor signal savings reese's in in production reductions in costs and and is an exciting time and you know we aren't we are happy to have the right pricing than I am very motivated workforce and very capable were up there.
So it is exciting.
What does the timetable for autonomous trucks is three to five years.
Current fleet wears out.
No. We're actually looking at that then and reviewing options are what we can do I am not mean I'm not sure. If we go a 100% autonomous trucks, we are looking to bring improving our our infrastructure up there. It is one of our one of one of things we're looking at though combined with a number another number other areas.
Take advantage of technology right.
It's it's it's working now right there aratana mistrusts operating at that various mines and you know prior to covert 19 happening back in March we were talking to some some other operation. Some other groups about do you know can we go visit and see what's going on that's been delayed.
By what happened, but it doesn't stop us from the long term in terms of what we're going to try to do to improve working conditions improve.
Improve opportunities for people at the same time, but look at making it safer and and reduce costs and improvement.
Improve the overall operations.
We're not going to we're not waiting for it and it's not like we have to reinvent the lot of this stuff is gone and it's just a matter of its getting set for the time that fits into move and we were not going to just wait for the trucks to wear out.
TD opportunity, we're going to go we have the financial strength to do that.
Thank you.
And by the way lot of our trucks or have there aren't that have the capability and lot of equipment has the capabilities. We already are manning running the drills are great.
A number of the drills remote at this point in time.
Super.
Our next question comes from Josh Wolfson with RBC capital markets. Your line is open.
Josh Wolfson your line is open.
Sorry to talk first time, thank you.
The last last third quarter conference call for Detour, what are the opportunity the company had talked about was expanding.
Ideally permitting for a throughput up to about 90000 tons, a day, which was a plan for 2020 why don't they said could have hopping RK been realized I guess would send out within 12 months has there been any progress on on your side in advancing that opportunity.
That's something we should think about incorporating into our forecast for 2021.
It is.
We are working on that we do have that.
Advancing as peak you know I'm not sure that.
You may get the.
Approvals in 21, but then on it you know, we do up kind of capital programs planned, beating up to being able to increase throughput.
[noise] Oh.
If we view you can give you a little bit more color on that but that is our plan I think.
No. We didn't we did pick up detour continue at 21 million tons a year.
Yup.
Production.
And girls grow milk put in its currently.
All things together.
So.
It's going to 2021 that will get to that full 90000 tons of we'll see incremental improvements year over year over the next two to three years.
Okay, and then second question I guess early in the quarter.
There was an and spent that had talked about the hiring of a special advisor a with a focus I guess more on the junior and exploration part a sector is there any read through we should have with the company sort of an M&A strategy with this update.
No I mean really the they that you're referring to is the pointed to a great gifts and where he's helping helping mean worker me as an advisor I mean, the biggest thing we're looking at the is Josh is because we see the opportunity for continuous improvements in business improvement in the company.
Whether it's in ensuring we get value getting getting the value for the integration we see it detour looking at costs looking at are at or added business processes at all at all of our operations how do how do we attribute performed better developing different meant extended management systems into into a cost management or.
Research and management accounting understand cost drivers understand the business and so we're we're reading working towards building our own internal if you want to say a management consulting group that can that can go around the operations and look where we can improve and so it's a group of people that are going to can be put into help and allow our operating people to focus on on the operator.
Yeah.
We see lots of upside and improving efficiencies in the company and being able to.
John Tumazos indicated some things such as going to autonomous trucks et cetera, we were trying to man up the company.
Our people up the company I should say and build the resources and the strength and that's going to move a lot of things forward.
Great. Thank you.
Our next question comes from Kent keen with S&P Global your line is open.
Yeah. Thanks for taking my question I'm just curious how are you looking at your 3200 and I'll reserve.
Pricing with higher gold prices now I think we've seen a lot of mining company.
Hey, they're going to stick with their sort of 1200 rationale reserves for now how are you looking at yours.
I mean, I think credit at this point in time, but you know, we we probably going to stay with where we are I mean, do we need a forecast that the fundamentally no. It's the value we want to make sure. We ensure we could get margin and we don't dilute the business now the.
I had the opportunity lies is if we're if we if we say a you know if we if we say and now use example, detour say, we think we get up to 90000 tons. A day can do 90000 tons a day at our current reserves.
As as stated in and gold price has stated that and then we still have exemptions additional throughput we can bring incremental R&D, we could do that.
But our focus is on on on maintaining margin, we're not going to start.
Lowering that expectation and this period of time, we are into short term gain at mediums as pricing goal continues on and we feel confident this going to be here for 10, 20 years and I guess, we can we can start looking at what we might do with reserves, but at this point in time, you know it's due to that.
We're not we're not planning to increase in the lower grades that we mine just because the gold prices higher.
Thank you.
Yes.
Our next question comes from carrying the TV with Canaccord. Your line is open.
Hi, Good afternoon, just a question back on detoured just in terms of mining rate now that you're you're back up and running there.
You have any guidance on the tons planned to move in H. too.
This management team had perkin functions you know trucks.
We're still able to keep the mill pull so just wondering about them anyway.
No I think but the the trucks that were parked.
Were some trucks that were sort of but not odd truck side of the fleet and as you know you got to maintain your feet trucks that I do think there's 35 trucks.
It is Larry on the call I believe learned as you can call. If you want to give a little color to that or Duncan you want to give some color to that I can speak to that Tony ancillary yeah. Thanks, Larry.
Yeah, we're where we're about to.
I will complement of all of our main crushing equipment as.
It is operating we're running 20 to 35 trucks.
Dissipate to be at full production levels for the rest of the year.
Give or take 290 300000 tonnes a day.
200 9300.
Yeah, so ore and waste yeah yeah.
Okay, great. Thank you.
Okay.
There are no further questions at this time and I'll turn the call back over to the company for closing remarks.
Thanks, very much operator.
It's mark here and thanks again, everybody for participating in our call today.
As you heard we had a very successful second quarter very strong profitability and cash flow generation and we've had very very encouraging exploration results. So far this year at all three of our cornerstone assets.
Looking ahead, I, we're well positioned entering the second half the year to achieve our guidance.
And we expect to see even stronger results, particularly at Mckesson Detroit Lake as we go forward as they've ramped up and we think we're well positioned to have quite a bit in news flow to deliver to the market. So thanks again, we're looking forward or next call to update you on or on our progress again.
This concludes today's conference call you may now disconnect.
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