Q3 2020 Kirkland Lake Gold Ltd Earnings Call
<unk> financial and operating results.
Lines have been placed on mute supervised any background noise after.
After the speakers remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw. Your question you May press the pound key with that I would now like to turn the call over to senior Vice President of Investor Relations marketing.
Thank you very much operator, and good afternoon, everyone welcome to our third quarter 2020 conference call and webcast.
On today's call, we will be reviewing our results for the three and nine months ended September Thirtyth 2020.
On the call today are many members of the curtain like gold senior management team.
Speaking today will be Tony my coach, our President and CEO Dave.
David stores, our Chief Financial Officer.
And on co lead of Australian operations.
I haven't felt shape, our vice President mining Kirkland Lake.
Larry Lozinski, our general manager of Detour Lake mine.
And Eric Kaleo, our senior Vice President of exploration.
After we go through the presentation. We'll then open the call up for questions. Oh I should also mention there are other met several other members of our management team on the phone as well.
If we go through the presentation all up the call to questions, we ask that each person limit themselves to two questions.
The slide deck that will be referring to is available on our website built on the home page and the events section.
Before I get started I'd like to direct your attention to slide two in the slide deck.
Which relates to forward looking statements.
Remarks, and answers to questions today main probably will contain.
Forward looking information about future events affecting our company.
Please refer to slide two as well as the forward looking information section of our most recent mdna dated November four 2020 for more information.
Also during today's call, we'll be making reference to non I have for us performance measure.
Reconciliation of these measures is available in our most recent mdna.
Finally, I'll mention that all figures, we use today will be in U.S. dollar unless otherwise stated.
With that I'll now turn the call over to Tony Macoutes, President and CEO of Kirker, Michael if.
Thanks, Mark and thanks, everyone for joining and maybe before I get started it all you know I'm going to just make it maybe we should acknowledge and thank all the people at park and my goal and their families for for you know for for what's been going on I know that's been a very definite unusual and difficult year for people Uh huh.
Well the we don't we don't take it lightly the trust you put enough to keep the P. keep people safe, providing a safe workplace and again in that I want to keep the family safe and keep the communities, where we live and work in safe as well you know way. We we acknowledge the fact that that's is that the people that do work for <unk>.
I want the people that have been coming to work I know they've been very very good and then on working safely and during this period of time and really.
Being copied free as much as we can at our sites and you know that's an acknowledgment of of Oh people that really recognize the importance of things and an attention to detail and you know one and also the attention due to looking out for everybody else and we thank you for everybody for what you've done and that's let's look forward to continued success as we go forward into.
In Q4 and into 2021.
Aaron I'm now on slide four and that's it.
This is a you know just like you know that's just starting off it's getting good discussions on on our efforts into environmental social and government governance at FERC in my goal, we terminated meeting a lot of progress we are formalizing our approach to document and reporting and all the all the good things we are doing.
In terms of Ah next slide slide five.
A key area for US is as I mentioned, the formalizing our processes around public disclosure.
We have signed on to the World Gold Council responsible gold mining principles underlying our lining ourselves to be ready for the mining association of Canada's towards a sustainable mining.
We have conducted internal gap assessments engage third party verified to review our readiness towards these standards.
Today, we've made a lot of progress in developing and implementing policies and standards name human rights inclusion quality diversity supply chain management stakeholder engagement engagement and community feedback.
Regarding greenhouse gases, we have been agreed that we have a great success story and Kirker My.
Gold.
Maybe I'll spend a little time, Tony the more about that later and we really have been a leader in the industry.
Turning to slide six this is that's actually showing you where we are in our greenhouse gas emissions in more detail.
This slide shows our performance versus the global gold gold mining gold industry. As you can see we compare very favorably to our peers.
Detour Lake Mckasson possible, all well below the comparable industry averages.
He particularly you can see just how low mckesson's greenhouse gas emissions are given the extensive use battery powered mobile equipment at the mine.
Turning now to our financial and operating results as shown on slide seven.
We had a strong quarter in in Q3 of 2020.
Adjusted earnings were 91 cents per share, which increased from 80 cents in the last in last years third quarter and 79 cents in Q2 of this year.
Once again, we generated substantial amounts of cash flow operating cash flow totaled 431 million in free free cash flow was $275 million in the quarter on.
On a year to date basis, if you exclude nonrecurring items, we generated almost $700 million of free cash flow.
The key driver to our to our strong performance was significantly higher revenue, partly compared to last years third quarter.
Particularly compared to last years third quarter.
I'm, sorry about that and and you know a big part of that will will be due to gold price you know David will get into it it will get into the into the details of a of that shortly.
We also benefited from solid growth in gold sales was largely reflected the addition of detour Lake.
Effectively we substituted high bulk volume production at feature for high cost small scale production at full conflict where operations were suspended in April from a return standpoint does it vary by valuable shift for us and our shareholders.
Going to slide eight we reported significant growth in cash in Q3, increasing by over $300 million to about $850 million.
A key contributor to cash growth was was our $275 million of free cash flow.
In addition, we added $108 million of cash from selling our shares and I'll skip the Osisko mining. This was a good investment for us with a gain of $60 million being recorded on a comprehensive basis.
We also gained 75 million cash from Newmont, Canada through a strategic alliance agreement involving the whole complex and expiration of two opportunities in the region.
Offsetting these sources of cash we continue to investigate aggressively in our key assets and we made further progress returning capital to shareholders.
Let's turn to slide nine.
Our number one priority in terms of capital allocation is investing in Macassa feature Lake and Foster Bill our three cornerstone assets.
So far this year, we have invested about $345 million of capital intensive into these into these three mine.
Our total growth capital year to date is $60 million.
And that number will go up significantly in Q4.
A cast that accounts for over half of that amount would not put the number four shaft project being the largest component. The shaft is progressing very well and you will hear more about that in a few minutes.
Growth capital that possibility here today is about $15 million, we finish constructing a new ventilation system and a new refinery earlier this year, the new new ventilation system is critical in terms of being able to increase tonnage coming out of the mine and and that started that was the result of it.
But the critical part aspect of it was significantly improve working conditions in the mine.
No lowered lowered the lower the heat and and gases gases and basically improve the working environment for people.
A detailed lake we had a number of other projects since the acquisition, we are constructing a landing strip to to begin bringing people in but by Harris.
And coming into 2022 as opposed to buying an asset sorry, 2021, and assay lab, new welding shop, and other infrastructure as well, we also have tailings and no enhancement projects underway and adding new biologic mobile equipment to support growth as we move forward.
No I'm looking at slide 10.
With a key part of investing in our assets is X is exploration, it's been a big driver of value creation in Kirkland Lake gold since since 2016.
We've invested year to date about $87 million in exploration and we expect to reach about $130 million by year end.
I don't want to steal their Thunder, we will we will speak shortly about exploration, but we are clearly having significant success. The success this year with the drill bit.
Our last announcement was a couple of weeks ago at Macassa and they were some of the best exploration results. We have issued in a long time.
We have long felt that Erie win at South mine complex comes together with the amalgamated break to be extremely interesting and with results like 254 grams over 15 minute meters that view has only intensified.
Dieter we have had considerable success very early on in our drilling program. Our drill results increasingly support our view that there is one very large deposit covering the areas around the main must fit.
Finally as possible we have put up some very encouraging results during the third quarter included better than expected grade some infill drilling in this one zone.
He also included results that demonstrate the scale and growth potential of mineralized systems at Signet Robbinsville and Harrier.
Now turning to slide 11.
We've made great strides with the second component of our capital allocation strategy returning capital to shareholders.
So far this year, we have returned almost $650 million through share repurchases and dividends.
Evan and 27 million of that amount has been used to repurchase 14 million shares through our NC Ivy.
We have a stated goal of buying back 20 million shares over 12 to 24 month period, and doing very well against that goal.
In terms of dividends, we have ramped that up considerably we first doubled the quarterly dividend in Q1 to 12 and a half cents per share that resulted in over $100 million being paid for Q1, Q2, and Q3 dividend payments.
About a month ago, we announced another dividend increase dividend increase this time by 50% or 18.
Thanks.
18, its reporters centsper share per quarter, the new dividend takes effect with the Q4 payments in January.
As you can see we're very committed to returning capital to shareholders between buybacks and dividends to date. We have returned about 235, sorry, 2035 cents per share or $643 per ounce of production for you to take 21.
Moving on to slide 12, the third component of our capital allocation strategy is adding new assets that have transformational potential obviously the most recent example of this is a detour gold acquisition.
The addition of Detour Lake has been a tremendous transaction for our company and our shareholders already talked about exploration and where results have been very encouraging.
In terms of performance. The mine is doing very well so far this year due to Lincoln generated $231 million of free cash flow, which is over 40% of our total free cash flow.
We expect to see.
Our levels of production year over year next year and in the process of getting the permanent making investment needed to increase tonnage on a go forward basis.
Moving to slide 13, we doing well against our guidance.
You may recall, we reissue guidance on June Thirtyth. After we're drawing it due to the difficult with 19 in terms of production and unit costs were in very good shape to achieve a consolidated guidance looking.
Looking at the components of a production we expect Fosterville will beat its target range of 596 cents that will that will be offset by mckesson, which will not get to 210000 ounces. The low end of this of its target range.
The cash has had a number of challenges this year as it has been impacted by covered more than any of our other operations.
Also were affected by extreme heat in mind during Q3, this impacted our productivity and equipment availability.
The result was reduced mining rates and a lower average grade because we didn't have access to many of the higher grade areas, we plan to mine.
In terms of other consolidated guidance, we are in very good shape as mentioned, we are adding new projects at Detroit Lakes, which will result in higher Capex in Q4, and we will see a significant step up in exploration expenses this quarter as well but.
With that I'll turn the call over to Dave Sorry, our Chief Financial Officer.
Thank you Tony and good afternoon, everyone.
I will start on slide 14, as Tony mentioned, we had strong earnings in Q3 2020, adjusted net earnings totaled $249.3 million or 91 cents per share a 49% increase from Q3, 2019, and 14% better than last quarter. We.
We had a significant difference between adjusted net earnings per share of 91 cents and net earnings per share of 73 cents. In Q3 2012. The difference was mainly related to rehabilitation costs.
Third and 2.6 million, resulting from an increase in our environmental remediation provision.
These costs relate to a new rehabilitation program, we have commenced in northern territory aimed at addressing legacy environmental issues caused by previous owners also.
Also excluded from adjusted net earnings in Q3 were 23.6 million of non cash foreign exchange losses.
Electing the strength.
And then of the Australian and Canadian dollar against the U.S. dollar during the quarter as well as about 8 million of restructuring and severance costs, mainly related to coal complex.
Turning to slide 15, as you have heard the key driver of improved earnings in Q3 was higher revenue.
Revenue from Q3, 2020 totaled 632.8 million, 66% higher than revenue of $381.4 million in Q3, 2019 and higher than the 581 billion of revenue reported last quarter.
The increase from a year ago 141 million resulted from a $425 per ounce increase in the average gold price.
The $1907 per ounce.
112 million of revenue growth came from a 30% increase in gold sales to 332000 ounces mainly related to the addition of detour Lake.
Compared to last quarter, we had a $63 million increase in revenue, which resulted from a 191 dollar per hour increase in the gold price from $1716 per ounce in Q2.
This impacts more than offset a $60 million reduction for both sales.
Gold sales of 332000 ounces in Q3 slightly lower than 341000 ounces last quarter. So.
The reduction was mainly due to lower sales that macassa and foster bill as well as the suspension of operations at whole complex, which had no sales in Q3 versus 3600 ounces of sales in the second quarter.
Looking at EBITDA as shown on Slide 16, Q3, 2020, EBITDA totaled 384 million, a 30% increase from $296 million in Q3 2019.
Fair to last quarter, EBITDA increased 24% from 310 million.
The change from last quarter, what makes the net earnings which were higher driven by revenue growth and lower losses due to FX 23.6 million in Q3 2020 versus 72.8 million in Q2 2020.
The deferred income taxes are higher compared to last quarter driven by increased earnings before tax.
Excluding FX gains and losses, we would have compared favorably to last quarter in terms of.
Turning to slide 17.
It looks at our cash and cash flow.
On the slide you will see that our operating cash flow was very strong it.
It includes 47 million in cash taxes paid in Q3 21.
Other factors impacting our cash were ongoing investments in our key assets were two cents, a 156 million, which was offset by a 109 million from the sales investments, mainly our sysco shares and also 75 million in received as part of the New Bond Strategic Alliance agreement. These.
These items, mainly account for the 25 million of net cash from investing activities.
Cash used for financing activities of 146 million reflected 107.4 million that were used during the quarter to repurchase 2.1 million shares.
Also as Tony mentioned earlier, we used 34.5 million for two quarterly dividend payment of 12, and a half cents per share in July.
Turning to slide 18, it looks at the change in cash in a different way you can see that the largest contributor to growth cash was off from our operations, which generated about $310 million of cash which is before interest income taxes paid and the impact of changes in work.
Capital Slide 18 also highlights the impact of key items mentioned in the previous slide including the sale of investments the newmont auction cash taxes paid during the quarter share repurchases and dividends paid.
On the slide the reference other includes exploration expense and working capital movements, including the build up of HP us into a lake due to timing and increased capital spend and the impact of the fosterville royalties accrual with.
With that I'll turn the call over to Han co lead of our Australian operation.
Yeah. Thanks, Doug good afternoon, everyone.
I'll be speaking to slide no one thing.
Hospital had another strong quarter in Q3 2020, we produced a 162000 answers.
Production was partly hardened by Q3, and 29 and the previous quarter and Q2.
Production in Q3 came from increased tonnage degrade as planed slightly lower than than in previous periods.
We <unk>, we produced price just hundreds you check CASM tons.
Key trade, which was a significant step up it was 40% higher than Q3, and 29 and 36% higher than the previous quarter.
Fact that at times in September we're running at record.
Record mill throughput, which.
She is a tremendous it.
The average grade four key trade ups 80 grams competitor in 40 grants are back to prior periods.
We have been investing in infrastructure to support the harmonic rights.
We completed and even a licensee and completed pay skilled project late last year.
Both of these projects are being very important from the standpoint of increasing production volumes.
We continue to achieve very light costs in Q3, 2020 operating cash costs of 142%.
Oh, hi than the prior periods manage average.
I think parents, so average 349 versus 200, Nike non key tree 29, and 273 in Q2 2020.
The change from Q3 29, largely reflects the impact of the new royalty introduced part of Victorian government.
Just a January 2020.
That line contributed $52 per ounce to all in sustaining costs in Q3 2020.
Excluding the royalty assay.
Two aunts was similar to the prior year levels.
Actually it was higher than the previous quarter due to increased operating cost per ounce as well as hard royalty expense.
In addition, sustaining capital expenditures were higher in Q3 versus Q2 and it really just reflects the disruptions of project went through the middle part of the Jeter over the.
Private Cabot Nanning protocols.
Well back working on the project.
Right.
On a year to date basis, we produce.
476000 ounces in the first nine months of 2020 at operating cash cost of $132, an ethic of $311 per ounce.
Oh, the $311 per ounce of assay.
$87, so lot incident, no new royalty.
As Tony mentioned, we are on track to.
Production guidance for the year a very.
Very good shape to achieve the operating cash cost per ounce guidance.
Finally during last quarter's call, we discussed the sparking kindred cases in Victoria.
We can report that the situation has improved significantly with.
With many of the restrictions having me to.
It is something that's being monitored very closely as possible and we continue to have all of their health and safety protocols in place.
I'll now turn the call EBITDA Evan.
Vice President Bonnie pick one like.
Thanks Ian.
I'm starting on slide 22.
Tony briefly discuss Mckasson. His remarks has he stated we had a challenging quarter. We produced 38000 ounces at an operating cash costs of 648, and an all in sustaining cost per ounce of 1008 one.
Production was based on processing 78000 tons and at an average grade of 15.4 grams per tonne.
There was a combination of factors that contributed to the quarterly performance fee.
First we were impacted by the health and safety protocols, we had in place some of which were some of which were related to covance and some are related to the excessive heat in the money.
Essentially there were areas, where we could let we couldn't let workers go into their own for their own safety.
These areas were largely higher grade areas for.
Were also impacted by the limited development in some areas, which constrained or flexibility to read and reduced equipment availability, which largely related to the heat.
As a result, our mining rate was down in or grade was lower given the sequence that we mined.
On a year to date basis production totaled 131000 ounces at an operating cash cost of 573 and an all in sustaining cost of 915.
Well I'm not tracking to meet guidance, we're expecting and seeing stronger fourth quarter.
Looking ahead, we have projects in place to improve ventilation. Some of the benefits is being realized this quarter with more to come in 2021.
And we'll achieve significant improvements in ventilation with the completion of four shop.
Now turning to slide 21.
This slide looks at the four shaft project in more detail. We're about a month ahead of schedule with the shaft. During Q3, we saying to the shop 780 feet for a total of 30 366 feet by quarter end. We are currently at about 3700 level and expecting to achieve over 4000 feet of advanced by.
The end of the year. We also continue to make good progress with the steel installation and putting in place all required infrastructures as you can see on slide.
I'll now turn the call over to Larry Jasinski General manager of Detour Lake mine.
Thanks Evan.
Turning to deter like on slide 22.
The mine produced 140000 ounces in quarter, three [laughter] compared to.
132000 ounces in quarter two.
[noise] mill throughput totaled 5.9 million tons, which was a quarterly revenue.
The average rate was 0.81 grams per tonne versus 0.79 grams per tonne in Q2.
We're already seeing significantly higher grades in quarter, four and expect to finish the year with a solid performance over the final three months of 2020.
Looking at unit costs operating cash costs averaged $634 in Q3 compared to $573 for the previous quarter.
The increase reflected there.
Right.
Which totaled 6.8 million tons versus a total of 5.9 million tons mill.
Also contributing to the increased operating costs were reduced deferred stripping and increased maintenance and procurement costs as the mine ramped up following reduced operations in Q2 2020.
All in sustaining cost per ounce sold averaged 1200 $59 versus thousand 90 per ounce last quarter.
Sustaining capital totaled $80 million.
6 million in Q2.
The increase largely referral reflected the ramp up of capital projects and equipment procurement, which.
Which had been impacted by reduced operations related to the Companys.
19 or.
20.
Also as Tony mentioned earlier, we've added a number of projects at the to relate some of which infest sustaining capital expenditures.
On a year to date basis production at Detour Lake totaled 364000 ounces average cash cost of $630 and all in sustaining costs.
1100 56 grille.
In terms of guidance as mentioned, we expect a strong quarter in Q4 were already seeing improved results.
We're well positioned for cheese or guidance for the year of 520 to 540000 ounces of production.
Operating cash cost of 610 to $630.
With that turn the call over to hear Kelly Senior Vice President of exploration.
Thanks, Larry and good afternoon, everyone. My first slide today's number 23, which is from Casa.
We continue to ramp up expiration from Q2 and as we do now starting to get some very good results from a few different areas such as those we announced in October press release.
As shown on the slide as discussed in the release the large portion of the recent work has been in the west part of the mine and focus on infill and extension of the amalgamated lower SMC and central SMC zones.
Building for the amalgamated nor SNC was mainly from the 50 350, 657 level and testing near the western limits of those zones and building for the central SMC, let's from the north part of 57.
Directed to the south contacts as its own nearby to the amalgamated.
It has stepped key intercepts from the three different target areas are.
So and then clusters on the map in different colors are.
Those from Dolores and see our purple the amalgamated flu and then the one do intercept from the central theme.
In the lower right hand corner with with yellow.
And although all three years pretty some very good results. We did have the very special whole course from the central lesson fee of 253.
<unk> 0.7 grams over 14, and a half meters.
And which is shown on this slide is right, where the two yes and see an amalgamated start coming very very close together.
Although it's very possible. This whole is not the best angle or a very large step both the high grade is very encouraging as well as the possibility that this combined with other structures with the knowledge needed to create wider and better grade zones.
We also note that the area to the west of intersections is opened for at least another 25 or 30 meters.
With that now I'll turn it over to Jeff.
Slide number.
24.
And which is a long section should be a long section showing some additional details for the drilling on the lower SMC.
Whereas indicated the main focus was on infill and extension on the west edge of the current resource and reserve.
Syndicated the drilling here was very successful overall had a high proportion of great great.
Oh.
And some of the best assessing into areas.
Within the the main target area.
The lower left side was very very encouraging very which has mostly inferred resources at this time.
And some gap.
And the other area was the upper left were holes were drilled where there was an untested GAAP just below the 53 level.
No not big step outs, but still.
Still adding potential to add quite a few new reserves in this area.
Turning to slide.
Slide number 25 now we see some detailed for the now completed were shown we had holes testing the number of a number of different areas books upgrade and expand the resort.
As indicated most of the results are quite favorable here as well.
We began the couple of key areas pointed out would be theory to the meeting lessens. The current resorts where be extended by at least 25 meters and then of course directly above what we got several though several high grade value up to 50 meters.
Zones.
Yes, so Doug turning now to slide 26.
We should be seeing an image for detour Lake properties Nils getting results from our second batch of.
Our second best result from the large local campaign with the commenced in March and these results were announced in October.
As mentioned released the drilling is part of a.
Part of that part of the 250000 meter program, which we incomplete aim to complete before the end of 21.
Well allow completion of an updated resource potentially expanded mine operation.
Results from the plan from the main pit areas.
And indicated at least another indicate another eight holes into the saddle between the main and main websites, where there are no current reserve and very limited resources.
As indicated in the release all the holes were very successful could sneak into second broad zones of mineralization with attractive grades welcome to higher separate sub intervals could have potential underground resources at depth.
Although there were a number but really the key wants to be really was number 16, which intersected 1.1 over 142 pretty much the central part of the cycle.
Basically demonstrating continuous.
A strong chance of a continuous structure.
Extending between the two main pit.
Turning on to slide 27.
A long section, we look more to the mean westat saddle areas.
Operating a different respective on on the current.
On the.
On the current reserve and new drill hole and as indicated the current reserves are contained in two pit shell Atlanta magenta filled with color blocks the grade leases the reserve that we have.
Make up to 50 million ounces and the new holes are located in the area between most of the holes and now are in the west side of the subtle you cited the previously announced coal for which also had very good results that whole 16 is in the central part of the saddle here the 380 meter level.
So in summary work at work today, a detour continues to go very well and our focus now is mostly on finding ways to increase the speed of drilling.
How six drills on site at this time.
Planned to have up to 10 before year end.
Most of our efforts in directed towards the saddle area.
So now turning on slide 29 in Australia.
Just like you mentioned that as with Canada. Our program. The classical continues to ramp up and as indicated in our release at the beginning the quarter, having some good success in a number of areas, including the Swan Cigna area in Robbinsville.
The point, we have 12 children operation versus only three in Q1, which is close to the original budget.
To build on the recent success.
Although we don't have any new results at this time, we'll continue to see signs of court visible gold and potential for higher grade mineralization in a number of areas. So we remain very optimistic on our chances to add to the high grade resources.
I'll pass the call back to Colin.
Thanks, Eric and I am on slide.
29 now.
To conclude Kirkland Lake Gold achieved strong results in Q3 2020.
Had solid earnings driven by significant revenue growth agenda.
We generated over 200 million.
$20, the free cash flow in Q3, and close to $700 million for the year to date, excluding nonrecurring and unusual items.
We significantly built up our cash position during the quarter growing cash by 50%, maintaining our industry leading financial strength.
We continue to invest in Mckasson Deca Lake impossible Mckasson, a number four shaft ventilation detour Lake a milk milk milk growth milk milk mill mill improvements that thats it for production growth et cetera, and foster bill.
Ventilation and and paste fill et cetera, and you know when the results the board well in Q3, whether it was record record mill throughput at Detour Lake in Q3, and really there's been a significant growth in production and Mel Mel mill production at Foster Bill.
And on top of that we have with the investment at our assets we've generated some very encouraging exploration results as well.
No I think you know if you listen to Eric and you see what's happening you can see there truly are three of the most compelling expiration stories in the industry.
Another key part of our strategy requires returning capital to shareholders between share buybacks and dividends. We have returned close to $650 million to shareholders. This year, representing $2.35 per share.
This will continue to be a priority of ours going forward.
Finally, we are extremely pleased with the acquisition of each relate it truly has been a case of the right deal at the right time each.
Future Lake has generated over 40% of our free cash flow. This year. There are many opportunities to enhance the upfront operation and we are taking making the necessary investments for the mine to achieve its full potential.
Speaking of profit potential the exploration results to date have been very encouraging and provide increasing ever evidence that we can achieve our goal substantially growing reserves at the dirt and support of production growth and improve unit costs.
If you if you really want to look at it get get a sense of where Dieter can be over the next few years has potential to be become the largest not in not just the largest gold mine in Canada, but the large format in North America.
Anyway that I'll say, thank you and I will be happy to take your questions.
Okay.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please stand by while we compile the culinary roster.
Your first question comes from Ovais Habib with Scotia Bank. Your line is open.
Hi, Tony.
Hi, my questions.
So just a couple of questions for me, Tony starting off at Foster though.
The breed coming down in Q3 was due to basically the higher tonnes processed and increasing the migrates from Korea and door Phoenix from what I understand.
And this is also decreasing the tons from Swann can you provide us.
Just the percentage that way.
Where these funds came from each other zones.
Ian on on the call and can you are you. Okay. We're buying some color on this the surveys.
You know our Tony Hawk.
Oh gosh look for key trade.
The Swan swung some parts about 54% of the times.
Well as you can pay a site to Q2 was 62% of the tons and if you kept it can pay back to psychiatric 20, knowing it was around 61% of the tenants such as as as a percentage of the tonnage chemistries as onetime Dan for that quarter.
And then is this is this a mix that we should expect going into Q4 as well.
Look you can see you can see on the on the diagram on slide no insane, Yeah, we have been tightly constrained on the sequence. We just won and they would act system now, we certainly with the with the improvement in the.
Hi, still coming on and and the ventilation to until I'm on we assume only I went out to eat I can up a few more aries.
Apart from these we didn't you operations and we'd expect that to continue.
And then but that should give you run rate do achieve that full.
Achieve the full new capacity that going into 2021.
Oh, well, we certainly have a lot of.
Claims due to Rand continuing to act consistently and sustainably increase yeah.
Tonnage throughput through the mill I've got I've over the coming quarters.
Okay, perfect and then just moving to be toward that.
You know.
Mining and milling rates improved nicely quarter over quarter. However.
Our grades were below expectations.
Petitions I guess.
Can you give us an indication whether you've started mining into higher grades in October November and also should we expect similar kind of men mining and milling rates going into Q4.
And Larry our year, Okay would answering this question or I mean, I know youve color, but I thought I'd dropping it with you.
No problem Tony.
So, yes, so mining and milling rates, we expect.
To be very similar to Q3.
And as far as agreed.
If you remember in Q2, we were impacted.
No with our slow down in the in that.
[laughter] push circling back a little bit, but we're getting back on track in the plan and our grades in Q4 actually going to be you're going to see some improved grades.
Going on to the end of the year.
We are confident.
That will be coming.
Coming and that's our guidance there.
Okay sounds good and just quickly switching gas exploration.
Are we looking to get any sort of exploration results from foster that anytime soon.
I think.
I mean, it's always a function of when we get material results coming out and I mean, there is a lot of drilling going on there's a lot of work happening.
And when we have information to put out we we we don't sit on information, we will be putting it out so.
That question to say, Yeah, we did question to say.
Combination of maybe yes or no right.
Sounds good thanks, all right that's it for me thanks.
Thanks.
Your next question comes from Josh Wolfson with RBC capital markets. Your line is open.
Thank you.
So from a cost side is there any more information you can provide on some of the issues and what the progression of the quarterly results will look like for them.
Back to steady state.
Yes, I mean, Evan Evan and Duncan or on the call and we can they can give us some color, but fundamentally I mean, the mckesson is still I mean, and the reason they big part of the driver with getting the battery powered equipment. There was was the fact that we needed and developing a new shop from surface on a new ventilation system, which we started quite some time.
The goal was to get more air to the mine as going deeper and far out into South mine complex. So we so it is it is somewhat ventilation constrained and then combine that with with the.
Hi, he tied temperatures outside and Kirk and making this summer it was a very hot summer and that's the source of most of the source of the Airseal. We we already have he mine heating conditions happening and combine that would bring it more in hot air into the mine and not having the ability to put significant ventilation down there.
That that impacted it.
We haven't might be able to give you some more color on that but we are we do have a program. We are developing new ventilation raises the surface. There has been there is some improvement scheduled for the for this quarter plus coming into enter into 2021, beginning in 2021, and then not fundamentally once we complete the shaft and at number four shaft will be significant improved.
And ventilation, but I know and there are other parts of that question. Evan are you happy to talk about it from Q <unk> quarter over quarter production, and where we see production going.
Yeah sure Toni So Q4 production with with us getting the ventilation.
Coming onboard and the projects being on schedule, we definitely look and getting into some of these higher grade areas. We're in them now and we're getting back on track to getting a.
Solid quarter for Q4.
Okay. Thank you.
And then looking.
2021 going forward for the company.
As well as I guess in context.
Due to our life of mine plan.
How are we going to be provided with information disclosure on what the outlook is.
Should we expect to see kind of for your guidance.
Coinciding with the new feature like my plan or are those two separate events investor should.
Looking forward to some.
Sorry, Yeah, you came in muscle can you repeat the question.
Sorry.
I was just wondering on the forward looking guidance for the company should.
Should we expect to see.
Three year guide coincide with the new Detour mine plan that will incorporate number the initiatives that were completed this year or are those two separate things that investors should be looking out for.
Well I mean in terms of a new detour life of mine plan. As you know we have a lot of work happening with them with an exploration et cetera, and we read it onto the new life of mine plan, we could put something out.
So it's something up partly out this year, but it really would just be a short term reflection of went up a pretty what we're trying to build there and so we don't we don't anticipate we are we're not when I'm working towards putting out a new life of mine plan until we until we've really got to garner worked on an income in 2021 in a whole new reserve resource estimate for for that.
The mine combined with some.
New permits for west Detour et cetera. So that's number one but number two in terms of guidance for next year and even for the next three years, we're working on things in terms of going through our budgeting process et cetera, and we may be putting something like that out early in the new year.
One reason I would say, maybe we are lucky to put something out early in the new year.
Great and just so just to clarify.
Sure.
<unk>.
Sure put a detour or maybe some of the satellite phone opportunities.
Is that something that would be reflected within three year guidance or is that is that the longer term.
Or just kind of.
Future upside.
No that that will be longer term future upside, we will be able to give some sort of three year outlook, but but it would be it would be of an outlook.
That isn't necessarily going to be what we trying to build because we were looking at something different. So we can give a three year outlook, but with the sense that we took that we're looking at building something different there over time right and.
And that fundamentally we you know again, we we want to.
We want to get the expiration done in the satellite on zone, and really understand the deposit as it moves to the to the west.
And they are you can you can get a sense you yourself. If you have the ability to tie these pits altogether, what the impact of that may be.
And Andrew or combined with some some you know are there other other sources of feed in the region in the area and maybe maybe as it does a couple of different scenarios on top of that you know that if we can we get the permits to proceed with the west Detour that has some impact on on just moving to west feature fit into into production and then combined.
The west detour pit with with mining with mining into the satellite going out into the into the current pit area and that so overall third scenario what might what might be happening. So we can give us some three year guidance out.
Good morning, Bobby won't include West Detour at this point in time, and then we think it'll be it'll be some good guidance. If some some some good numbers, but to truly what we want to what we want to and what we expect to be able to demonstrate to the market from detour will be what we when we get to drilling results on pause upgraded permits and agreements.
To proceed with the West Peter and then understanding was up at the South zone, which will be towards the end of 2021.
Thank you very much.
[laughter].
Your next question comes from John Tumazos with into bed Independent Research. Your line is open.
Thank you for all the good work in a tough year.
Turning to tour the prior company for almost a decade.
Jews U.S. a thousand dollars.
To estimate reserves.
Hadnt replaced reserves as they produce future.
Well.
Go to 12, 50 or something like that.
Looking at their reserves this year and will that had very many ounces.
Well, maybe Natasha Vas is on the call Natasha you, okay with that providing some color here and then we can get Eric to give some color.
Sure Yes, yes.
Overall and with respect to the June Hi, John Bullock.
Overall, it with respect to our reserves. This year, we're looking at no maintaining timmins gold price.
Yes last year, so it will be higher than in 2000, and it will impact the life of mine for four Detroit.
Given that we haven't finalized nickel price yet for yearend.
Of course, yes.
Oh, hi, nickel price well Todd.
Good.
I do too.
In terms of drilling.
It's a tough year to replace the 1.4 million ounces of production.
Aside from the gold price at detour.
Should we expect resource additions each major mine.
But.
Sure should we expect reserve replacement.
At one or two of the locations, but not all of them.
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Some of that is a little bit early to say John I mean, we are working as much as we can to try to replace reserves.
We may have some areas that we have at some success that you make a point that there may be some resource additions.
There's potential for resource additions that'll help us there, but again it is early to say you are correct in saying that there was there as there was a reduced effort in drilling and radiator male significantly in basically Q Q2, and then partly again coming into Q3 that had some impact there, but you know we're.
We were building long term minds here and whether whether you know whether we demonstrate they reserve and resource growth all in 2020 or over the next few years. It's a combined effort that we do is year over year and you know, we expect 2021 to be a pretty a pretty good year for exploration as well so.
Should we be holding out for a million ounces out of the million for for example are you saying it's.
Too early to say.
I think it's too early to say, but yes, there will be some ounces added but you know you know and you know and maybe Ericsson on the call Eric you want to.
We've got some color you want to put in that.
I guess you've done that's okay. John anyway, we know we have a lot of work going on at Macassa. We you see the exploration success of Mccaf, we're having a lot of exploration success, a detour and and a deeper there was a lot of inferred resources are minimum inventory that we have.
Can bring on we expect that men, there's a lot of drilling going on a lot of work happening at foster Bill.
Andy you know if it's about replacing tonnes mine I don't think we are only the and on a comment that we don't we're not going to have a problem, replacing worn replacing tons mined in the year, it's about replacing ounces and finding you know.
30 to 40 ounce material, which which which is a big part of his challenge at this point in time.
Okay.
Thank you very much Natasha Eric.
Good morning.
Your next question comes from Kerry Mcrae with Canaccord Genuity. Your line is open.
Hi, Good afternoon, everyone. Maybe a question for Tony on the balance sheet, you've got 850 million in cash generating a lot of free cash flow I know, you've obviously ramped up the dividend and share buy backs that you know just how are you thinking about the balance sheet.
A couple of things I mean first off I mean, we still committed to a two to share buybacks and we talked about up to $20 million, we got about six and a half million shares to purchase back. We are you know we do want to continue to be able to aggressively invest in exploration and infrastructure at our sites to help improve production and lower costs.
Costs at those sites. So that's a tool to reinvest the other guy capital. We do we do really want to maintain a very clean balance sheet, we're debt free and that's important for us and and then fundamentally it's all about extra returns to shareholder and we are going to we arent and it.
Time lot funny time, and financially and we but we do have to sit there and create a dividend policy that provides.
Maybe as a cleaner outlook for shareholders in terms of where we might it might be in terms of return back to shareholders. There is a point in time, when we don't we don't need to keep we keep on keeping cash on the balance sheet and where we're looking at what would what do we think would be no as we do our three year five year plans and look at our cash balances et cetera, and then.
What our minimum balance needs to be and then and then say the rest. If we don't we don't have a place to invest it very very well for our shareholders and it should be something that giving back to shareholders.
Great and then maybe on that could be turned you may have mentioned, that's but can you just remind us the timing on.
Getting the mill permits and potentially expanding the mill.
Okay, well, we're doing some I mean really the the the permit we've kind of looking at Q2 Q3 next year. The the for that for the permits or have the general increase from from currently around 75000 tons per day maximum two to 90000 tonnes per day on average or not again sort of.
An average numbers, but we're trying to work on that's number one it's one thing to get the permit but the other part of it is to get the get the projects in place to be able to allow you to do that and so that you had to purchase as investments that we were making into the onto the operation that.
Go to incrementally increasing throughput year over year over the next few years to get us up to a higher rate I don't Larry Larry can you do you have a little bit more color than than what I would then when I gave on that.
Okay, sorry, I guess, we must have lost we lost Larry but that's where we are we're expecting Q2 Q3 next year to have the permits we are working very closely with with with.
Giving an upgraded to IB for the west detour up up up there that shouldn't that will help us move forward in terms of getting higher mining rates and as as we say we are investing in a number of projects capital projects in the mail plant due to not only.
Improve increase throughput, but also into improved metallurgical recoveries as well as reduce overall operating costs and efficiencies and safety at site. Thanks.
So in terms of the average throughput rate you're thinking it's like more like 70 580000, so far on there.
Yes, a lot of unmet more like we were looking at doing you know and and this is just some.
Arm waving on things, but we're looking at trying to grow through an annual throughput from somewhere around.
22, 23 million tons, a year to maybe 25% to 28 million tons a year.
Okay, Great and then just in terms of the changes to the mill is it mostly the backend of the mall that need to upgrade their dependence pretty good shape.
Well, it's a combination of maybe some screen decks improve improve feed systems into the plant.
In some sense, so and fees from the from either the dietary pressure to the to the to the to the corner direct feeding into and.
Improved feeding feeding methods screen decks.
To the crushing plants improvements with the pebble crushers, how that work.
Some additional fixing a leach tank some additional leach tanks.
To help with with retention because just wanting to get to put up but you don't get to grind up but the other one is you don't want to you don't want to lose on the metallurgical recovery and some water.
Water and all water tank for process water plus there are some other incremental improvements in a lot of areas that just from a maintenance point of view just the other parties for now we want to go from say, 89% availability of the plant to grow to 92% to 95% availability as well. So we're working on a number of those initial.
No.
Great. Thanks, that's helpful.
Your next question comes from Mike Parkin with National Bank. Your line is open.
Hi, guys. Thanks for taking my questions with respect to do two or west or the west pit.
The old management owners always kind of spoke to it a separate fleet do you see the potential that you would be able to avoid that with potentially connecting the pets to continue to use the same fleet and avoid big.
Big investment into another fleet in itself its scale.
Oh, you did that mean that that's part of that's part of the things considered that it could be the option where you just keep the same fleet on the other side that you know if you are looking at ways to increase flexibility at the mine increased production productivity remain we may be investing and fleet until there is a lot of trade offs to do anything we do in mind.
It is now.
And then I think John Tomaso, that's earlier about above cut off grade or sorry, our about gold prices used in at someone effects cut off grade and you know there is a number of scenarios. We are looking at putting in an assay lab at site and and to get processes, where we can get lot more production as saying happening in the pit and have the ability to combine.
Hi, there either improved or.
Our grades Greg segregation for going to the Mel maybe try to mill mill higher grades and create and met Martin let much larger low grade stockpiles and ore just increase overall throughput to the plant throughput from the mine. So you know.
There's a number of trade offs. If we were to just do west detour by a pit by itself as a pit by itself.
That's that's one scenario, but we were looking at it we're looking at it at that and opened the over time that it could be it could be something bigger fleet, there and I mean, no I mean, the fleet is it meeting really supports the current mining rates, we might would have to increase the piece to fleet over time to increase mining rates, but some of it also affects what we use for kind of great does.
That affects the strip ratio so.
Right now.
And also like milling rates has been really good are you still seeing any potential like you saw some tweaks implemented just before you guys bought it I assume you're kind of continuing on with fragmentation improvement.
That raise mining costs, a little bit, but had the huge benefit that you're getting much better tonnage rates into the mill.
Is that kind of fully exhausted or do you guys see more room to kind of go on optimizing on fragmentation patterns.
I mean, there is I mean, we're on a big thing. We did was we we've we've taken over the blasting ourselves from that from the contractor. So now we did this is due to close supplier supplies explosives, we'd have a more hands on approach to doing that there are optimization is being done some of it is wall control.
We are looking at some you know now actually a better wall control center, some increased bench heights at certain parts and.
On the say the north wall of the pit, which have some that have some benefits in terms of what it might be able to do.
Yes, definitely as you optimize Frank brand fragmentation is it might cost a little bit more in drilling and explosives, but we're looking at ways to automate or optimize our drilling we are increasing our drilling fleet, but the the improvements in fragmentation and help you in terms of whether its shovel productivity.
The Trump productivity crusher productivity, so that they might be a little bit more money spent on on explosives and drilling but there is.
Saves it pays for itself I'll be back down the line. So when you deliver the rock to that to that to that to this is to the Sag mill.
Everybody forgets that before you get announced a goal a lot of it we've got a we've got to turn that stuff the dust.
If we found the way to drill and blast it make dust at the first part and then that would be that would be the best be nice. If you can if you can blasted and shake the gold we don't have it written the pit.
Yeah.
One last question switching over to Macassa now, but you know you just continually getting very interesting results hooked up a you kind of mentioned he can potentially be a challenge in the summer.
You bring on additional fed raises to address that.
Is there anything like do you find the ventilation that you're bringing in plus what will come in with the shops more than sufficient or is there any.
Just because everything just seems to be getting more interesting as you go a little bit deeper is there any thought around like a cooling unit like agnico uses at Laronde just to ensure.
Activity maintained at highest level and maybe the summer months, where its maybe the most challenging doesn't seem like there was an issue at all.
Fall Winter spring.
Or are you comfortable with the ventilation program, you're you're implementing.
I mean, they're the result, so we are looking at a combined to mean immunity cooling combined with increased ventilation, we fundamentally macassa over the next three to four years, you've been almost quadrupled amount of not not quite quadruple by two most over three times the amount of pressure or air brought into the mine is what we need.
And then and then depending on conditions and mine and he whether we whether whether to requirement will be for cooling. We got to you know there's lots of.
Options for cooling, but we got to make sure that the cooling plants, we bring and don't create heat conditions as well right at the operations and break a part of it is just the logistics of where the mining is in relation to the ventilation raises et cetera, we've done.
Big part of the challenge has been to put in raises and improve the system to get unless we circulation of air, which which which helps in terms of not having hot air being pushed pushed back into the workplace.
Okay.
Hey, guys. Thanks, so much thanks.
Again, it is star one if you would like to ask a question. Your next question comes from lean Kuperman with cobalt capital. Your line is open.
Right.
No.
Well, yes.
Yes Hello.
Oh I.
I stepped after I did my question I was just saying if you guys are going to give some guidance for the next year or two but I think someone already asked and you said you were going to do that later on so sort of them yet.
Yes, so we expect that as we complete our year end here are we doing we're into year end budgets at this point in time, we'll be we'll be reviewing things and coming up with our plans for 2021 and the next few years and we should have something out early in the new year Alright.
All right. Thanks.
Okay.
There are no further questions at this time I will now turn the call back over to the presenters.
Thanks, very much operator, and again, thanks, everybody for taking part in today's call you heard we had a very solid quarter in Q3.
And you also heard that we expect and in fact are having a very strong finish to the year in Q4, both in terms of our our performance, but also in terms of activity around advancing projects and we're very active in exploration. This quarter. So next time, we all get together for our next call. We should have a lot of good things to talk about thanks again for joining us today and.
Enjoy the rest of your day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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