Q3 2020 Kirkland Lake Gold Ltd Earnings Call
Going down the line.
[music].
I'd like to welcome everyone to the Kirkland Lake Gold conference call and webcast to discuss the company's third quarter 2014 financial and operating results all lines have been placed on mute to prevent any background noise.
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 Macoutes, your president and CEO David.
David Sore as our Chief Financial Officer and.
Ian Han co lead of Australian operation.
I haven't told you our vice President of mining Kirkland Lake.
Larry loses b, 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 several other members of our management team on the phone as well.
We go through the presentation, we'll open 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 on the events section.
Before I get started I would like to direct your attention to slide two in the slide deck.
Which relates to forward looking statements.
Our remarks and answers to questions today may and probably will contain forward looking information about future events affecting our company. Please.
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 measures.
Reconciliation of these measures is available in our most recent mdna.
Finally, I'll mention that all figures, we use today will be in us dollars unless otherwise stated.
With that ill 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 though you know I'm going to give me here, maybe we should acknowledge and thank all the people at Perkin like Goldman their families for for you know for for what's been going on I know, that's been a very different unusual and difficult year for people.
We we don't we don't take it lightly the trust you put in us to keep keep people safe for providing a safe workplace and in order to keep the family sales think communities, where we live and work in sales as well as you know we we acknowledge the fact that the that the people that do work for her comments.
The people that have been coming to work.
Been very very good and then on working safely and during this period of time and we are now.
And Colby free as much as we can at our sites and you know that's an acknowledgment of of people.
People that really recognize the importance of things and and attention to detail and one and also the attention due to looking out for everybody else and we thank you for everybody for what you've done and lets look forward to continued success as we move forward into the Q4 and into 2021 preferred.
The third Aaron I'm now on slide four and so this is a you know this slide.
Just starting off this get good discussions on on our efforts into environmental social and government government's at FERC and legal.
The main meeting a lot of progress with formalizing our approach to document and reporting on all the all the good things we are doing.
In terms of.
Next slide slide five.
A key area for us as a as.
As I mentioned to formalizing our processes around public disclosure.
We have signed on to the World Gold Council responsible gold mining principles and aligning our lining ourselves to be ready for the mining Association of Canada towards a sustainable mining.
We have conducted internal GAAP assessments and engage third party verified to review our readiness towards the standard.
Today, we have made a lot of progress in developing implementing policies and standards, maybe human rights inclusion quality diversity supply chain management stakeholder engagement engagement in community feedback.
Regarding greenhouse gases, we have been agreements that you have a great success story and currently.
Gold and maybe I'll spend a little time, Tony is more about that later and we really have been a leader in the industry.
Turning to slide six this is 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 in the gold industry. As you can see we compare very favorably to our peers with detour Lake Mckasson profitable all well below the comparable industry averages.
And particularly you can see just fell little mchouses greenhouse gas emissions are given the extensive use of battery powered mobile equipment Assembly.
Turning now to our financial and operating results as shown on slide seven.
We had a strong quarter 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 increased free cash flow was $275 million in the quarter.
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 per ton compared to last year's third quarter.
Particulars, we compared to last years third quarter.
Sort of a button and a big part of that will.
We'll be due to gold pricing, David will get into it it will get into the into the details of that shortly we.
We also benefited from solid growth in gold sales was largely reflected the addition of these really.
Effectively we substituted high vol. The volume production a deeper for high cost small scale production of whole complex, where operations were suspended in April from a return standpoint is a very valued 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.
The key contribute 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 discuss with 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 in 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 invest in guess 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 the cancer feature Lake and Foster Bill our three cornerstone assets.
So far this year, we have invested about $345 million of capital intensive into these entities three months.
Our total growth capital year to date is $60 million and then number will go up significantly in Q4.
The cast that accounts for over half of that amount, but not with 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 as possible you today is about $15 million, we finish constructing a new ventilation system and a new refinery earlier this year.
The new ventilation system was critical in terms of being able to increase tonnage coming out of the mine and and that sort of that was the result of it.
But the critical bar aspect of it was and significantly improve working conditions in the mine.
Lowered lowered lowered the heat and and gases gases and basically improve the working environment for people.
As the delays we had a number of other approaches since the acquisition, we're constructing a landing strip that there.
With the in bringing people in by era.
And coming into 2022, as opposed to Boston, and and sorry, 2021, and assay lab, new welding shop, and other infrastructure as well. We also have tailings and mill enhancement projects underway, we are adding new Barlow mobile equipment to support growth as we move forward.
Non looking at slide 10.
With that key part of investing in our assets is X is exploration has been a big driver of value creation anchor clinical 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 Eric 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 the area, where the as South mine complex comes together with the amalgamated rate to be extremely interesting and with results like 250 programs have a 15 year meters that view is only intensified at.
<unk> 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 mean much better.
Finally at Hawesville, we have put up some very encouraging results during the third quarter included better than expected grades from infill drilling in this one zone.
It also included results to 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 five.
$527 million of that amount has been used to repurchase 40 million shares through our NC I'd.
We have a stated goal of buying back 20 million shares over 12 to 24 month period than doing very well against that goal.
In terms of dividends, we have ramped that up considerably we first double the quarterly dividend in Q1 to 12.5 cents per share that resulted in over $100 million being paid for Q1 Q2 in Q3 dividend payments.
But a month ago, we announced another dividend increase dividend increase this time by 50% or 18.
Thanks.
18 from quarter Centsper share per quarter, the new dividend takes effect with the Q4 payments in January.
As you can see we are very committed to returning capital to shareholders through buybacks and dividends to date. We have returned about 235, sorry, 2035 cents per share or $643 per ounce of production for you take 2020.
Moving onto slide 12, the third component of our capital allocation strategy is adding new assets that transformational potential obviously the most recent example of this is a detour gold acquisition.
The addition of these are lake has been a tremendous transaction for our company and our shareholders have 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 lake has generated $231 million of free cash flow, which is over 40% of our total free cash flow.
We expect to see.
Higher levels of production year over the next year and in the process of getting the permanent making investment needed to increase ton is 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 withdrawing its due to the pursuit to cope with 19 in terms of production and unit costs were in very good shape to achieve our consolidated guidance.
Looking at the components of production, we expect Bostco will for 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 this target range.
The case has had a number of challenges this year as it has been impacted by kobin more than any of our other operations. We also were affected by extending the mine during Q 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 each relates which will result in higher capex in Q4, and we will see a significant step up in exploration expenditures this quarter as well.
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 Q2 2020.
Adjusted net earnings totaled $249.3 million or 91 cents per share or 49% increase from Q3, 2019, and 14% better than last quarter.
We had a significant difference between adjusted net earnings per share of 91 cents and many meetings per share of 73 cents. In Q3 2020. The difference was mainly related to rehabilitation costs.
32.6 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 Q2 were $23.6 million of non cash foreign exchange losses, reflecting the strength the strengthening of the Australian and Canadian dollar against the US 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 in Q3, 2020 totaled $632.8 million, 66% higher than revenue of $381.4 million in Q3, 2019 and higher than the 581 million 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 Lou related to the addition of detour Lake.
Compared to last quarter, we had to $63 million increase in revenue, which resulted from a $191 per ounce increase in the gold price from $1716 per ounce in Q2.
This impact more than offset a $16 million reduction from gold sales with gold sales of 332000 ounces in Q3 slightly lower than 341000 ounces last quarter.
The reduction was mainly due to lower sales at Mccann 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.
Compared to last quarter, EBITDA increased 24% from 310 million.
The change from last quarter relates to 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 EBITDA.
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 includes 47 million in cash taxes paid in Q3 2012 in.
Other factors impacting our cash were ongoing investments in our key assets in which we spent $156 million, which was offset by a 109 million from the sales investments, namely our sysco shares and also 75 million received Thats part of the new Bond strategic Alliance agreement we.
These items when we account for the 25 million of net cash from investing activities.
Cash used for financing activities of 146 million reflected a $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 Q2 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 in cash was off from our operation, 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 sales 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 the detour Lake due to timing and increased capital spend.
And the impact of the Fox ago royalties accrual.
With that I'll turn the call over to Ian Han co lead of our Australian operations.
Thanks, Todd good.
Good afternoon, everyone I'll.
I'll be speaking to slide 19.
Also had another strong quarter in Q3 2020, we produced.
160 tape as Nancy.
Production was partly hardened by key.
Key trading 29, and the previous quarter in Q2.
At production and case rate came from increased tonnage with the grade is planned.
Slightly lower than that than their previous periods.
Because we produced priced at 106000 tons.
In key trade, which was a significant step up it was 40% higher than Q3, and 29 and 36% higher than the previous quarter.
In fact, it at Tom's in September we're running at.
Record mill throughput.
It was a tremendous at.
The average price for Q3, 50 grams compared to ramp 40 grants are back to prior periods.
We have been investing in infrastructure in the month to support the harmonics.
We completed and even licensee to nailing, Andy and completed high skilled project.
Late last year.
Today's projects have a very important from the standpoint of increasing production volumes.
We continue to achieve very like costs in Q3 2020.
Operating cash costs of 140, Jay parents.
Hi than the prior periods managed to average grades.
Excess parent so average 349 versus 289 in Q3, 29 and 273 in Q2 2020.
The change from Q3 29, largely reflects the impact of the new royalty introduced part of Victorian government Instinct is to January 2020.
[music].
That align contributed $52 per ounce to all in sustaining costs in Q3 2020.
Excluding the royalty assets.
Variance was similar to the prior year levels.
Actually it was higher than the previous quarter budget increase operating costs per ounce as well as hard roce expense.
In addition, sustaining capital expenditures were higher in Q3, plus Q2, big and it really just reflects the disruption to project what should a middle part of the Agita over the.
Dick Cavett Nanning protocols.
We were back weighted on the land projects in Q3.
On a year to date basis, we produced for.
476000 ounces in the first nine months of 2020 at operating cash costs of $132, an ethic of $311 per ounce.
Ill, just $311 per ounce of assay $47, which allowed incident no new royalty.
As Tony mentioned.
We are on track to.
Hey, Dan production guidance for the year and very good check to achieve the operating cash cost per ounce guidance.
Finally during last quarter's call, we discussed sparking kibet cases in Victoria.
We can report that the C. Triton Ism has improved significantly and.
With many of the restrictions have immediate to.
80, something is being monitored very closely as possible and we continue to have all of their health and safety protocols in place.
Ill now turn the call average Ed and power cost President Bonnie Kirkland Lake.
Thanks, Dan.
I'm starting on slide 22.
Tony briefly discuss Mckasson his remarks as he stated that a challenging quarter. We produced 38000 ounces that are 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.
It 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 mine.
Essentially there were areas, where we could let we couldn't let workers go into their own for their own safety and.
And these areas are largely higher grade areas.
Were also impacted by the limited development, 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 our 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 at an all in sustaining costs of 915.
While not tracking to meet guidance, we're expecting and seeing a 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.
And we will 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 sank to the shaft 780 feet for a total of 30 366 feet by quarter end. We are currently at about the 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 the slide.
I'll now turn the call over to Larry Jasinski General manager of Detour Lake mine.
Thanks, Kevin.
Turning to detour Lake on Slide 22.
The mine produced 140000 ounces in quarter three.
Two women.
32000 ounces in quarter two.
Okay.
Low throughput totaled 5.9 million tons, which was a quarterly record.
The average grade for the quarter was 0.81 grams per tonne versus zero point satellite grams per tonne in Q2.
We are already seeing significantly higher grades in quarter, four and expect to finish the year was sold performance over the final three months of 20 point.
Looking at unit costs operating cash costs averaged $634 in Q3 compared to $573 for the previous quarter.
The increase reflects additional.
Hi, Brian.
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 fully we reduced operations in Q2 2020.
All in sustaining cost per ounce sold averaged 1200 $50 million versus thousand Alain de Paraty.
On the last quarter.
Sustaining capital totaled $80 million versus 6 million in Q2.
The increase largely reflected the ramp up of capital projects and equipment procurement.
Which have been impacted by reduced operations related to the Companys core.
Teamwork form solution to that point.
Also as Tony mentioned earlier, we have added a number of projects would be to relate some of which incentive sustaining capital expenditures.
On a year to date basis production at Detour Lake totaled 364000 ounces that average cash cost of $630 and all in sustaining.
1100 66 barrels.
In terms of guidance as mentioned, we expect a strong quarter in Q4 already seeing improved results.
We are well positioned to achieve which for the year of 520 to 540000 ounces in production.
Our operating cash cost of 610 to $630.
With that turn the call over the air Kallio Senior Vice President of exploration.
Hey, Thanks, Larry and good afternoon, everyone. Let for slight today's number 23, which is strong the Casa where we continue to ramp up exploration from Q2 and as we do now starting to get some very good results from a few different areas such as those we announced that in October press release.
As shown on the slide and 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 now the maybe lower SNC and central SMP those builds.
Building for the amalgamated lower SNC was mainly from the 50 350 657 level in 10.
Being near the West list of those dollars and building for the Central SNC, let's from the North part of 57.
And directed to the south contact of dissolved nearby to be nominated.
It is the key intercepts from the three.
Different target areas are.
Solon clusters on the map in different colors.
It was from the lower FCC Aro with purple denominated with Blue and then the one thing that has stepped from the essential.
Fee is in the lower right hand corner with with yellow.
And although all three areas very good results. We did have the very special hole course from the central efficacy of 253.
0.7 grams over 14.5 meters.
And which is shown on this slide is rate where the two yet to see an unaudited start coming very very close together.
Although it's very possible that holds up the best angle or a very large step out the high grade is very encouraging as well as the possibility that we could combine with other structures within automated to create wider and better grade zone.
We also note that the area to the west of Introspection is open for at least another 25 or 30 meters.
With that now I'll turn it over to slide.
Slide number.
For Q4.
And which is a long section it should be a long section showing some additional details for the drilling on the lower occupancy.
And whereas indicated the main focus was on infill and expansion on the west edge of the current resource or reserve.
Dedicated to drilling here with very successful overall had a high proportion of great great bolt.
Both.
And some of the best discussed being in two areas.
Within the main target area.
The lower left side was very very encouraging very which has mostly inferred resources at this time.
The GAAP.
And the other area was up in the upper left where holes were drilled where there was an untested GAAP just below the 53 level. So.
Well not big step out but still.
Still adding potential to add quite a few new reserves in this area.
Turning to flirt slightly to 25 now we see a detailed study now automated where shall we had both testing the number of a number of different areas booked updated expanded resort.
As indicated most of the results are quite favorable here as well.
Again, the couple of key areas pointed out with the theory to the meeting left as the current reserve, where we extended by at least 25 meter and then of course directly above what we got several several high value up to 50 meters of depth of.
Zones.
Yes, so that turning down to slide 26.
We should be seeing an image for the detour Lake properties.
Excluding results from our second batch of.
Our second batch of results from the large local campaign with the condensed in March.
These results were announced in October.
As mentioned really the drilling is part of that.
Part of that part of the 250000 meter program, which we anticipate will complete before the end of 21.
And will allow completion of an updated dark and potentially expanded mine operations.
Results in the plan for domain, we left the area.
And.
Hit at least the weather indicate another equal to the battle between the new pit LNR websites, where there are no current reserve or very limited with Barclays.
As indicated in the release all the holes were very successful in making the second broad zones of mineralization with attractive grades welcome Ted and higher separate sub enable that have potential underground resources that gap.
Although there are a number but hopefully if we want it to be and really what number 16 intersected 1.1 over 142 is pretty much the central part of the saddle.
Basically demonstrating continued growth.
A strong chance of a continuous structure.
Standing between the two main pit.
Turning on to slide 27.
A long section view, but the northwest food and means that fit the saddle areas and operating a different respective on on the current.
Hello.
On the current reserve and these are all in as indicated the current reserves or containment tip that shell Atlanta magenta filled with color blocks the rate leases reserve that we have.
Make up to 15 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 cycle.
Side of the previously announced coal for its also had very good results across 16 is in the central part of this battle, we are the 380 meter level.
So in summary work at book today, a detour continues to go very well and our focus now is mostly on finding ways to increase the speed of drilling.
Fixed drills on site at this time.
Planned to have up to 10 before year end.
Most of our efforts directed towards the saddle area.
So now turning on slide 29 in Australia.
Perfect mentioned that as a candidate our program the possible continues to ramp up and as indicated in our release at the beginning the quarter, having good success in a number of areas, including the Swan Signet area and Robin sales.
This point, we have 12 sales operation versus only three in Q1, which is close to the original budget.
And to build on the recent success.
Although we don't have any move adults at the time, we continue to see signs of court visible and potential for higher grade mineralization in a number of areas, but we remain very optimistic on our chances to add to the Highgate resort base.
With that I'll pass the call back to go.
Yes.
Thanks, Eric.
And I am on slide 29 now.
To conclude Kirkland Lake Gold achieved strong results in Q3 2020.
We had solid earnings driven by significant revenue growth agenda.
We generated over $200 million of 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 Beecher Lake impossible accounted for the number four shaft ventilation beat to remake mill Mill Mill growth No milk mill mill improvement, so thats it for production growth et cetera, and foster Bill.
Ventilation and.
And paste fill et cetera, and the results of 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 you'll know mill production at Foster Bill.
And on top of that we with the investment at our assets. We've generated some very encouraging exploration results as well and I think if you listened to Eric and you see what's happening you can see they are truly are three of the most compelling exploration stories in the industry.
Another key part of our strategy is 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 equal.
Peaker Lake has generated over 40% of our free cash flow. This year. There are many opportunities to enhance the offering operation and we are they making the necessary investments for the mine to achieve its full potential.
Speaking of prevent potential the exploration results to date have been very encouraging and provide increasing every evidence that we can achieve our goal substantially growing reserves at featured in support of production growth and improve unit cost.
If you if you really want to look at it again get a sense of where beatrix can be over the next few years has potential to be become the largest non and not just the largest gold mine in Canada, but most of the large format in North America.
Anyway with that I'll say, thank you and then we'll 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 all day Habib with Scotia Bank. Your line is open.
Hi, Tony.
Great and my questions.
So just a couple of question for Tony Stoss.
Starting off at foster though.
The grade coming down in Q3 was due to basically the higher tonnes processed and increasing the migrates from how are you doing.
So we're pretty mixed mode I've spent.
And this is also decreasing the funds from Swann two can you provide us.
Just the percentage that were.
Where these sums came from each other zones.
Ian on on the call and can you you will be able to provide some color on this the surveys.
You know our as Tony.
Hi, guys look for key trade.
The Swan swarmed Sunpower is about 54% of the times.
Where we did you can pay side.
I'd say Q2 was 62% of the times and if you can pay back to the psyche trade 29 was around 61% of the time subsidies as as a percentage of the tonnage commentary swarm time, Dan for that quarter.
And then is this is this the mix that we should expect going into Q4 as well.
Look you can see you can say on the on the diagram on slide 19, and yes, we have been tightly constrained on the sequence. We just one and now or next system may.
We certainly with the with the improvement in at the high school coming on and and the ventilation to until our mine, we assume a Avalon actually open up a few more aries.
Apart from these repeating the operations and we'd expect that to continue.
And then and then that should give you run rate do achieve that full of.
Achieve the full new capacity that going into 2021.
We certainly have a lot of airplanes due to Rand continuing to act consistently and sustainably increase app al tiny Cherry put through the mill over.
Over the coming quarters.
Okay, perfect and just moving to before then.
Mining and milling rates improved nicely quarter over quarter.
Hello grades were below.
Vacations 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 mid mining and milling rates going into Q4.
And Larry are you, okay with answering this question or.
Color, Brad, but I am confident 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.
Remember in Q2, we were impacted.
Will occur on or slow down a little less.
Pushed our planned back a little bit, but we're getting back on track in the plan and Denmark, Greece and on Q4 actually aren't 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.
And Thats our guidance.
Okay sounds good and just quickly switching danced explosion.
Are we looking to get any sort of exploration results from foster the residential.
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 is a lot of work happening.
And when we have information to put out we we don't sit on information, we will be putting you know.
That does conclude the question you say at we the question you say.
Combination of maybe yes or no right.
That sounds good thanks, that's it for me thanks.
Thanks.
Your next question comes from Josh Wolfson with RBC capital markets. Your line is open.
Thank you.
From a cost side is there any more information you can provide on some of the highest issues and what the progression of the quarterly results will look like for that for the up dip back many states.
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 that I mean in the reason the 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 and a new ventilation system, which we started quite some time.
Our goal was to get more air to the mine has its going deeper and far out into South mine complex. So we do so it is it is somewhat ventilation constrained and then combine that with that with the.
Hi, heat high temperatures outside in making this summer it was a very hot summer and Thats. The source of most of the source of the air. So we we already have mining conditions happening and combine that with bringing more hot air into the mine and not having the ability to put significant ventilation down there.
That that impacted it.
Having 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 this quarter plus coming into into end into 2021, beginning in 2021, and then a fundamentally once we complete the shaft and add to the number four shaft to be significant improved.
And ventilation, but I know and.
And the other parts of that question Evan are you happy to talk about it in Q.
Quarter over quarter production, and where we see production volume.
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 now and we're getting back on track to getting on a solid quarter for Q4.
Okay. Thank you.
And then looking.
2021 going forward for the company.
As well as I guess in context.
The new detour life of mine plan.
How are we going to be provided with information disclosure on what the outlook is companies should we expect to see kind of for your guidance.
Coinciding with the future like my plan are those two separate events that investors should.
For December.
Okay.
Sorry, 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 like mine plan that will incorporate number the initiatives that work in it this year or are those two separate things that investors should be looking out for.
Well I mean in terms of a new deter life of mine plan and now we have a lot of work happening with their with an exploration et cetera, and we renewed all the new life of mine plan, we can put something out.
It's something up partly out this year, but it really would just be a short term reflection of went up pretty what we're trying to build there and so we don't we don't anticipate we are we're not going to work towards putting out a new life of mine plan until we until we really cannot guar worked on in coming into 2021 in a whole new reserve resource estimate for for that and.
The mine combined with some.
New permits for west detour et cetera, So thats 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 Im going to our budgeting process et cetera, and we may be putting something like that outcome early in the new year.
Our retirements or maybe we're looking to put something out early in the new year.
Great and just so just to clarify your initiatives on the throughput at 82 or maybe some of the saddle going opportunities.
That's something that would be reflected within three year guidance or is that is that the longer term.
Or just kind of evaluated in future upside.
We know that that will be longer term future upside, we will be able to give some sort of three year outlook, but but it is it would be it would be a.
Outlook with that isn't necessarily going to be what we are trying to build because we were looking at something different. So we can give a three year outlook, but with the sense that we tumor were looking and building something different there over time right.
And that fundamentally we you know we were again, we we want to.
We want to get the exploration Doneness out alone zone, and really understand the deposit as it moves to the to the west and the Air you can you can get a sense for yourself. If you have the ability to tie these pits altogether, what the impact of that maybe Andrew or.
Combined with some some.
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 just moving to west feature fit into into production and then combined the west feature pit with with mining with mining into the OSAT.
Im going out into the into the 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.
Which which morning, probably won't include West detour at this point in time, and we think it will be it will be some good guidance in some some some good numbers, but did the truly what we want and what we want and what we expect to be able to demonstrate to the market from detour will be what we when we get the drilling results on post upgraded permits and green.
The proceed with that with the West feature and then understanding was up at the saddle zones, which would be towards the end of 2021.
Got it thank you very much.
Yes.
Your next question comes from John Tumazos with Independent Independent Research. Your line is open.
Thank you for all the good work in a tough year.
Concerning to tour the prior company for almost a decade.
Good use to use a thousand dollars.
Estimate reserves.
Hadn't replaced reserves as they produce future.
We will.
Go to 12, 50 or something like that.
Looking at their reserves this year and will that very many ounces.
Hello.
Maybe Natasha Vas is on the call Natasha you, Okay with that provide some color here and then we can get Eric figure from Cowen.
Sure Yes, yes.
Along with respect to your doing hi, John Mcmullen, although.
Overall with the pension.
Again this year, we're looking at maintaining chemical price said and then yeah.
Not yet.
Hi than a thousand and it will impact the life of mine for four Detroit.
Given that we haven't finalized the corporate kicks in again management.
Yes.
Hi, a couple points well pad.
Okay.
In terms of drilling.
It's a tough year to replace the 1.4 million ounces of production.
Aside from the gold price at the tour.
Should we expect resource additions each major line.
Okay.
Sure should we extract reserve replacement.
At one or two of the locations, but not all of them.
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 had some success that you make a point there may be some resource additions that there's potential for resource additions that will help us there, but again. It is early to say you are correct in saying that there was there as new ones are reduced effort and drilling and create any amounts.
Significantly in basically Q Q2, and then partly in coming into Q3 that had some impact there, but where we are building long term minds herein, whether whether whether we demonstrate their 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.
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 that there will be some ounces added but you know.
Excellent.
Maybe ericsson.
Call, Eric you want to.
Thats some color you want to put in that.
And get these done that's okay. John anyway, we know we have a lot of work going on to Macassa, We and you see the exploration success and mechanics that we are having a lot of exploration success, a detour and an industry. There is a lot of inferred resources are minimum inventory that we have.
Bring on we expect that men theres a lot of drilling going on a lot of work happening at foster Bill.
Andy if it's about replacing tons mined I don't think we are only the inaugural comment that we don't we're not going to have a prominent replacing one replacing tons mined in the year, it's about replacing ounces and finding.
30 to 40 ounce material, which is the big part of his challenge at this point in time.
Okay. Thank you very much Natasha Eric Toni good hunting.
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 on a free cash flow I know, you've obviously ramped up the dividend doing share buybacks, but just how are you thinking about the balance sheet the effects.
On a couple of things I mean first off I mean, we still committed to two two share buybacks and we talked about up to 29. So 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.
Cost sensitive sites, so that does so to reinvest another 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 shareholders and we are going to.
We are and at times, not funny time, and financially and we but we do have to sit down and create a dividend policy that provides.
Maybe a little cleaner outlook for shareholders in terms of where we might 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 keep on keeping cash on the balance sheet and where we're looking at what do we think would be you know as we do our three year five year plans and look at our cash balances et cetera, and then where.
When 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 can do turn you may have mentioned this 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 apparent when we're kind of looking at Q2 Q3 next year. The the credit for the permit to have the general increase from from currently around 75000 tons per day maximum two to 90000 tonnes per day on average earn I think it's sort of.
An average numbers, but we're trying to work on that's number one it's one thing to get the permits 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 the other purchase as investments that we were making into the onto the operation that.
Go through incrementally increasing throughput year over year over the next few years to get us up to the higher rate I don't Larry Larry can indeed, the have a little more color than them. When I was in when I gave on that.
Okay, sorry, I guess, we must have lost money last Larry but thats, where we are we're expecting Q2 Q3 next year to have the permits we are working very closely with with with the.
Giving an upgraded IB for the west detour up up up there that should not doesn't help us move forward in terms of getting higher mining rates and as I say, we are investing in a number of Catlin perma fix capital projects in the mail plan to to not only.
Improve.
Increased throughput, but also lead to improved metallurgical recoveries as well as reduce overall operating costs and efficiencies and safety at site.
So in terms of the average coupon rate you're thinking it's like more like 70 580000 performer.
Yes, I want to run more like where we're looking at doing.
And this is just some arm waving on things when 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 per year.
Okay, Great and then just in terms of the changes to the mill.
Is it mostly the backend of the model upgrade to finance the kitchen.
Well, it's a combination of maybe some screen decks improve improve feed systems into the plan.
In summary says so in fees from the from either the dietary pressure to the to the to the to the corner direct feeding incident.
Beating BT methods screen decks.
And to the crushing plants improvements would be double pressures how that were submitted.
Some additional fixing a leach tanks, some additional leach tanks.
To help with retention because it's one thing to get to production and get the grind up with 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 purchased water plus there are some other incremental improvements in a lot of areas that just from a maintenance point of view just went the other part is for we want to go from say, 89% availability of the plan to grow to 92% to 95% availability as well. So we're working on a number of those initial.
Yes.
Okay excellent.
Your next question comes from Mike Parkin with National Bank. Your line is open.
Hi, guys. Thanks for taking my questions.
With respect to or western both the west pit.
The old management orders always kind of spoke to a separate fleet do you see the potential that you would be able to avoid that would potentially connecting the pets to continue to use the same fleet and avoid big.
Big investment into another fleet.
Fleet in itself that will scale.
Hi event that mean that that's part of that that's part of the things considered it could be the option where you just keep the same fleet.
On the other side 50.
If you are looking at ways to increase flexibility in the mine increased production productivity remain we may be investing in industry sales. So there's a lot of trade offs to do everything we are doing Mike is now and then I think John to mass was asked earlier about above.
Upgrade or sorry, our bulk of gold prices used in at somewhat of a tax cut off grade and you know there is a number of scenarios. We are looking at putting in an assay lab at site and to get processes, where we can you can get a lot more production as saying happening in the pit and have the ability to combine either either improve or great. It's great.
Aggregation pre in going to the Mel maybe try to no no higher grades and create more of a much larger low grade stockpiles and weren't just increase overall throughput to the plant than throughput from the mine. So you know.
There's a number of trade offs, if we were to just to west detour by a pit by itself as the pit by itself.
That's one scenario, but we were looking at it we're looking at it at the moment, but over time that it could be could be something bigger the fleet there and I mean that mean the fleet is meeting really supports the current mining range, we might would have to increase the piece of fleet over time to increase mining rate, but some of it also affects what we use for kind of great design.
Thanks, the strip ratio so.
Hi, Matt.
Then also ultimately where it's 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 the fragmentation improvement.
That race mining cost a little bit, but how the huge benefit that you are getting much better tonnage rates that are the mill.
Is that kind of fully exhausted or do you guys see no 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 we've taken over the blasting ourselves from that from the contractor. So now we did this improved due to close suppliers supplies explosives, we'd have a more hands on approach to doing that there are optimizations being done some of it is wall control we are.
Looking at some in own LNG, a better wall control center, some increased bench heights in certain parts of the in on on the say the north wall of the pit, which had 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 may cost us a bit more in drilling and explosives, but we're looking at.
Our waste to automate or optimize our drilling we are increasing our drilling fleet, but the the improvements in fragmentation and help in terms of whether its shovel productivity truck productivity crestor productivity. So the day it might be a little bit more money spent on on explosives and drilling but there is.
It saves it pays for itself I will 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 none of it we've got a we've got to turn that stuff to dust in I mean, if we found a way to drill and blast that make dust at the first part and then that would be that that would be the best and the nice. If you can if you can blasted to shake the gold we don't have it right in the past.
Yes.
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One last question switching over to my cap, though now that you've just continually getting very interesting results at depth.
You kind of matching key can potentially be a challenge in the summer.
During want additional fed raises to address that is there anything do you find the ventilation that you're bringing in clubs and what will come in with the shop 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.
Ron just to ensure productivity maintained at higher levels and maybe the summer months, where its maybe the most challenging doesn't seem like there's an issue at all.
Fall Winter spring.
Or are you comfortable with the ventilation program here you're implementing.
No I mean, new the result was a we are looking at a combined immediate immunity cooling combined with increased ventilation, we fundamentally macassa over the next three to four years, you've been almost quadrupled amount I'm not not quite quadrupled might do more over three times amount of pressure our air brought into the mine is what we need.
And then and then depending on conditions and money and heat, whether we whether whether to requirement will be for cooling. We got to there's lots of options for cooling, but we got to make sure that the cooling plants, we bring in don't create heat conditions as well right.
The operation sales and bright and part of it is just the logistics of where the mining is in relation to the ventilation raises et cetera, we've done a big part of the challenge has been to put in raises and improve the system to get less we circulation of air which shipped which which helps in terms of non pad, having hot air being pushed pushed back into the workplace.
Yeah. So.
Okay, all the upcoming guys. Thanks very much thanks.
Again, it is star one if you would like to ask a question. Your next question comes from Lane Kuperman with Cobalt capital. Your line is open.
Right.
No.
Hello.
Hello Hello.
Hi.
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 currently at 40.
Yes, so we expect that as we complete our year end the year and we're doing we're into year end budgets at this point in time, we'll be we'll be reviewing things in coming up with our plans for 2021 and the next few years and we should have something up early in the new year.
All right. Thanks.
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 our activity around advancing projects and port.
Very active and expiration of this quarter. So next time, we get together for our next call. We should have a lot of good things to talk about thanks again for joining us today and.
For 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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