Q4 2020 Kirkland Lake Gold Ltd Earnings Call
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Yes.
Good afternoon, ladies and gentlemen, my name is <unk> and I'll be your conference operator today I would like to welcome everyone to the Kirkland Lake Gold conference call and webcast to discuss the company's fourth quarter and full year 2020 financial and operating results all lines have been placed on mute to prevent any.
Back ground noise. After the Speakers' remarks, there will be a question and answer session. If you would 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 press the pound key with that I would now like to turn the call over to senior Vice President Investor Relations.
Eddie.
Thanks, very much operator, and good afternoon, everyone.
Welcome to our fourth quarter and full year 2020 on webcast.
On the call today are many members of <unk> senior management team.
Speaking today will be Tony Macoun, President and CEO, David Soares, our Chief Financial Officer.
And Paul <unk>, our Vice President mining personal Lake Larry.
Our general manager of Detour Lake Mine, Ian Hahn, Vice President and co lead of Australian Operation and Eric Kallio, Senior Vice President of exploration.
There are also several other members of the management team on the phone as well that may participate in the Q&A.
After we go through the presentation. We will then open up the call to questions. We ask each person to limit themselves to two questions for the purpose of this call.
The slide deck that we'll be referring to is available on our website both on the homepage and in the events section.
Before I get started I would like to direct everyone to the forward looking statements slide slide two on our slide deck, our remarks and answers to questions may contain and likely 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 MD&A dated February 24, 2021 for more information.
Also during today's call, we'll be making reference to non <unk> performance measures.
A reconciliation of these measures is also available in our most recent MD&A.
Finally, I'll mention that all figures given today will be in U S dollars, unless otherwise stated with that I'll turn the call over to Tony <unk>, President and CEO of Kirkland Lake Gold.
Okay. Thanks, Mark and thanks, everybody for being on the call and I guess, it's definitely been a.
Different time over over the last year.
In 2020, we can say.
A lot of different things happen, but in terms of the people of Kirkland Lake Gold, which includes you know.
People don't directly work for us our suppliers.
Our communities, where we work and our partners.
Everybody really steps that stepped up to the forefront and we put in some good efforts, we have and we had we had a record year and a lot of different areas.
Areas, we can be very proud of it in terms of of how people work together and.
And achieved these results but.
When it came to COVID-19, and COVID-19 response and are all of the processes that place I think we've had significant success in our sites still remains very safe and operating and operating well.
Can feel pretty good about that but what we can achieve cheapest recruitment when we get challenged.
And maybe if I can turn to slide number five.
Talking about ESG, we've been putting a lot of effort into into the different income components of ESG at Kirkland Lake Gold and really a big part of it would be one.
Ensuring that we communicate better in terms of what we do from an ESG perspective.
And if we go to slide slide number six.
As I mentioned, a key here for us is formalizing our processes around reporting and public disclosure.
And as I also said, we have made significant advancements deposits. Our second consolidated sustainability report in November of this year, sorry 2020.
And net we are on track now to issue our 2020 sustaining really report before our annual meeting in May and will be actually issuing our sustainability report every year around the same time and with our normal filings that we would be doing it.
At the end of March.
Additionally, we adopted the World Gold Council responsible gold mining principles in 2020, and we have completed our year one external assurances.
We finally policies and standards on human rights supplier code of conduct content commerce start conduct devens resolution and workplace diversity, we have.
We're an industry leader in minimizing greenhouse gas emissions and invest significant funds managing modern tailings and we wanted to actually be increasing our efforts in those areas and going forward.
The people.
Detour achieved an important recognition in the year with the competition.
Memorial Mine Reclamation award for their Progressive Reclamation program, which which has been going on there for quite some time.
Now on slide seven as you can see we firmly believe in being socially responsible and providing support to community organizations in group that provides essential services.
At the beginning of the global pandemic Kirk can make both committed to supporting medical social and community organizations of our areas of operations with a focus on homelessness mental health addiction.
Training and youth training and development and senior citizen care.
Our teams have been actively engaging with public service organizations in both Canada, and Australia to help those in need both financially and within kind donation of hand, sanitizer masks and other PPE.
The port for our local community goes beyond COVID-19, Theres a long list of initiatives highlighted on this slide in total what they demonstrate as a company is deeply committed to and immersed in the communities where we operate.
Turning now to <unk>.
Fiscal year 2020 on slide eight we achieved a record year performance.
We reported record production earnings and cash flow. We also achieved all of our consolidated full year 2020 guidance.
We returned almost $850 million to shareholders through share repurchases and dividends.
We completed the acquisition of Detour gold and made a considered made considerable progress at detour Lake mine, which generated 40% of our free cash flow and is already realizing some of the substantial upside for <unk>. When we looked at this asset and speeding up the upside we achieved significant exploration success in 2020, despite challenges related to COVID-19, and then.
All three of our cornerstone assets, we made good progress with our key projects and that includes that number four shaft that net project at macassar, Rob until development over at Fosterville and <unk>. The biggest driver is going to be seen in 2021, a detour with the with the expansion of resource that we have.
With the exploration success and that combined with good day mill expansion.
Mine expansion net working on right now.
And before.
Before I leave that slide and again I mentioned that we had a record year financially operationally, but we also had a record year for Kirkland Lake Gold from a health and safety perspective lowest injury frequency with the head now in.
Five years are ever for the company.
Looking at <unk> at our financial and operating results on Slide nine our earnings were very strong adjusted net earnings were $923 million or three.
$3 41 per share this increased 23% from 2019.
Operating cash flow totaled just over $1 3 billion and free cash flow increased 50%, 58% to $733 million.
The key driver to our strong performance was significantly high revenue and solid increases in gold sales looking at our operating results. We had record production of 137 million ounces of gold that was 41% higher than 2019. Obviously. The addition of detour Lake was a key contributor to the increase.
Unit cost performance remained very strong with operating cash cost per ounce, a full force, which beat our guidance and all in sustaining costs averaged $800 per ounce again next.
Yes.
From a cost perspective, we are in.
And then leading into the package.
Of our industry.
Turning to slide.
And looking at Q4 2020, again Mary mentioned, we reckon regenerating record results in the quarter production was 369000 ounces and a 32% higher than Q4, 2019, and 9% increase from the previous quarter with all three of our operations, having their highest production levels of 2020 in 2020.
In Q4, and 2020, our unit costs were strong with operating cash costs of $396 per ounce and all in sustaining cost of 790 per ounce.
Looking at earnings adjusted net earnings were <unk> 98 per share, which increased from 88 per share in last year's fourth quarter and <unk> 92 in Q3.
The 98 tenths of adjusted net earnings was <unk> <unk> per share reduction due to prior period adjustments on depreciation cost David stores will discuss that more in detail in a few minutes.
And looking at cash flow operating cash flow was $421 million, while free cash flow totaled $232 million.
Now looking to slide 11.
With our record operating and financial results in 2020, we finished the year with a very strong balance sheet cash totaled just under $850 million is 20% higher than that and then at the end of 2019 and that with no debt to key contributor of cash growth with our 88% increase in free cash flow to just over.
$733 million of as I mentioned previously we also achieved $174 million of proceeds from the proceeds from the sale of strategic investments and $75 million through a strategic alliance with Newmont moving to our whole complex of exploration in northern Ontario.
Offsetting our strong cash generation was a significant capital we returned to shareholders. During 2020 returned $848 million through both a combination of repurchasing shares and growing dividend for the year.
Now on Slide 12 provides a detailed.
What we think is one of our very important components of our capital allocation strategy, which is returning capital to shareholders of $848 million returned to shareholders. In 2020 $732 million was used to repurchase $18 9 million shares in the year I should point out that we are we also repurchased an additional $1 1 million shares.
In early January of 2021, and have now achieved our goal of buying back 20 million shares we did that in less than 12 months. We had mentioned before that we would do it 12 months to 24 months and average a goal that we announced as part of the closing of the Detour Gold acquisition in February of last day end of January of last year. We also paid down 160.
$8 million in dividends in 2020, we tripled the dividend during the year through two dividend increases and now are paying $18 75 per quarter or <unk> 75 per year.
Yeah.
Moving to slide 13 as mentioned.
All of our full year consolidated 2020 guidance.
I won't go through each component, but if you look at production we predicted at last year in last quarter's call that possibility beat its targeted range driven largely through higher than planned tonnes process.
We also said during the Q3 call that Mckesson would not achieve its production guidance, which it didn't but it had a stronger fourth quarter and we fully expect to show improved results in improved results in 2021.
You can also see from slide 13 that we were slightly below guidance for both growth and capital exploration that really involved the timing of ramping work back up after it was suspended due to COVID-19.
Moving on to 2021.
And then given the <unk> 2021 guidance on slide 14.
We issued our 'twenty, one 'twenty, one guidance and three year production guidance in December of 2021 guidance includes production similar to 2020 with stronger growth at Detour Lake and the cash returning to 2019 levels.
This will offset lower production at Fosterville.
And foster, though we expect to continue drilling for new reserves and resources.
Looking for the next high grade zone, which was which.
It will be a big volume.
The value driver for Fosterville, but as we mentioned previously we're going to really look at fosterville not being more of a 325 to 425000 ounce a year producer and really tried to create sustainability in that way because of the challenges with trying to replace that.
The number of ounces, we mine very quickly from the Swan zone in 2018, 19% to 20.
Our unit costs will remain strong with all in sustaining cost guidance unchanged from 2020, we're seeing a shift from sustaining capital the growth Capex in 2021, which is largely at each relate Cline.
Finally, with exploration guidance of $170 million to $190 million, we will be doing more drilling than we've ever done before.
And our history of Kirkland Lake Gold and we believe we are one of the more if not the most aggressive explore in our industry. We continue to have substantial exploration upside at all three of our cornerstone assets and we will plan to go after that upside very aggressively.
Before turning the call over to David sorts all day.
Slide 15, and briefly look at our mineral reserve estimates at December 31, 2020, which were released yesterday with as part of our year end results.
It's important to note that our drilling program for 2020 were significantly impacted by disruptions related to COVID-19, we shut down the drills in Q2 and ramping back up for several months in total we did about 60% of our plan in mind drilling at Fosterville and even less than that at Mckesson.
Even without limitation, our total mineral reserves net operating assets increased 3% to 21 million ounces. The increase reflected reserve growth of 6% at Detour Lake basically what we did at detour Lake would become more selective using variable cut upgrades to help us with our sorting and great optimization to the mill, but also.
Instead of putting some low grade material into into waste piles, we actually said, we would be more selective in place setting foot low grade stockpiles that we can use to process post the end of mine life and a bit later.
We have identified as non <unk>, where we have identified a reserve of 14 million ounces that will feed.
Similar to previous years, and we've been separated from that additional 2 million ounce low grade reserve, which will be a low grade stockpile as I mentioned that will be fed into the mill when the pit is mined out.
When we acquired <unk>, we saw an opportunity to build an assay lab in software to optimize the feed to the mill using using the stockpiles and the split of reserves to milling reserves and low grade stockpile material.
Part of that exercise will be doing a lot of lifestyle sampling improved grade control management had site over the next few years.
To help in terms of the operation.
And we did announce that we.
We have the permit to increase mill throughput and we do have capital programs taken place this year going into next year to increase the mill throughput capabilities.
<unk> given guidance showing that we're increasing production of 680 720000 ounces a year for the next four years at detour under its current form and with the potential to growth of over 800000 ounces by 2025. All of this is still a still a subset of what we're going to get the results from the drilling in 2020 in 2021 net.
Saddle zone et cetera, and by the way no new drilling no no new information was used to into this into the from from new drilling.
Into the into the reserve statement for 2020 for detour.
This is all.
A catalyst.
Work, that's going to be done in 2021 as part of our exercise.
And then at the cash that we did have a small reduction in reserve with law, which again, we should expect limited drilling and Youll see that Mckesson. We did have solid resource growth with partly reflects the fact that we didn't get to join them to convert resource into reserves other set of about 60% of drilling at Mckesson at Fosterville, We completed 647000 ounces and Abbvie creative.
<unk> III <unk> prevent per ton, we were able to replace 239000 ounces, albeit at a lower rate. The reality is to replace the number of bounce you really need to find the next high grade zone with an exploration budget as possible of $85 million to $95 million. This year, we are doing going to work very hard at doing that in 2021 and I also want to emphasize that based on our <unk>.
Reserve estimates, we are well positioned to achieve our existing three year production guidance at all of our sites and we expect that 2021 will be a really solid year for reserve replacement and growth as well and with that now I'll turn the call over to David Soares, Our Chief Financial Officer.
Thank you Tony and good afternoon, everyone.
I will start on slide 16, as Tony mentioned, we had strong earnings in Q4 2020, adjusted net earnings totaled $265 8 million or <unk> 98 per share a 43% increase from Q4, 2019, and 5% better than last quarter. The difference between adjusted net earnings per share of <unk>.
98, and net earnings per share of <unk> 86 in Q4 of 2020 was mainly related to the add back of $35 million of noncash foreign exchange losses, reflecting the strengthening of the Aussie and Canadian dollars against the US dollar during the quarter and costs related to non operating sites of $8 9 million incurred at the whole complex.
<unk>, which are not reflective of our operations as well as severance cost and COVID-19 related costs totaling $2 2 million for the quarter Q4 earnings and earnings per share is impacted by higher depreciation depreciation in the fourth quarter included an adjustment of approximately $10 million or <unk> <unk> a share relating to the first three quarters.
Of the year, resulting from purchase price allocation adjustments at Detour Lake.
Turning to slide 17, the key driver of improved earnings in Q4 with higher revenue revenue in Q4, 2020 totaled $691 $5 million 60, 68% higher than the revenue of $412 4 million in Q4 of 2019 and higher than the $632 eight.
Millions of revenue recorded last quarter.
Of the increase from a year ago of 393 per ounce increase in the average gold price to $1875 per ounce accounted for $146 million of the increase in revenue year over year and $137 million related to a 33% increase in gold sales to 371000 ounces.
Compared to last quarter, we had a $74 million increase in revenue from a 12% increase in gold sales increasing to 371000 ounces from 332000 ounces last quarter. This impact more than offset a $12 million reduction as a result of average price decreasing from $1907 last quarter to one.
$875 in Q4.
Looking at EBITDA as shown on Slide 18, Q4, 2020, EBITDA totaled $458 million, a 16% decrease from $286 million in Q4, 2019 compared to last quarter EBITDA increased 19% from $384 million the change from last quarter relates to net earnings which were.
Were higher driven by revenue growth.
Depreciation in Q4 was $33 million higher than Q3, 2020, partly due to increased sales volume, which accounted for $10 million of the 33 as mentioned earlier the increase in depletion and depreciation was primarily at detour due to depreciation adjustments on the fair value estimates related to the purchase price acquisition.
Allocation sorry.
These adjustments increased depletion and depletion depreciation expense in Q4, 2020 by approximately $20 million as compared to Q3, approximately $10 million of the $2000 related to revisions to depletion and depreciation expense during the first three quarters of full year 2020.
Turning to slide 19, adjusted net earnings and full year 2020 totaled $922 9 million or $3 41 per share a 60% increase from full year 2019. The difference between adjusted net earnings per share of $3 41.
And net earnings per share of $2 91, and full year 2020 was mainly related to $58 5 million of non cash foreign exchange losses, reflecting the strengthening of the Australian and Canadian dollars against the U S. Dollar during the year the environmental remediation provisions at the E&P accounted for $32 6 million.
And transaction cost of $33 8 million related to the detour acquisition.
Turning to slide 20 to look at our cash balance and cash flow on slide Youll see that our operating cash flow was very strong generating over $490 million of operating cash flow in the quarter before $70 million of cash tax paid.
During the quarter, we also invested in our key assets spending $189 million in capital as well as $20 million on strategic investments. We also received $65 million from the sale of our investments in <unk> and Novo accounting for the $147 million of net cash used in investing activities during the quarter.
Cash used for financing of $277 million reflected the $245 3 million, we used to repurchase five 7 million shares.
In Q4, as well as $34 2 million used for dividend payments.
Slide 21, it looks at the change in cash and a differently you can see that the largest contributor to growth in cash was our operations, which generated about $401 million of cash which is before income tax paid a $70 million gross capital investments $33 million and X.
<unk> spending of $36 million other cash outflows include costs incurred at our non operating sites at the NTN Holt complex as.
As well as corporate G&A of 12 million.
As noted in the previous slide during the quarter $279 $5 million was returned to shareholders, including $245 3 million used to repurchase just over $5 7 million shares.
Two the Companys CIP and $34 2 million of dividend payments related to a quarterly dividend of $12 <unk> per share paid on October 14th 20 to shareholders of record on September 32020.
Next I will turn it over to <unk> <unk>.
<unk> of mining at Kirkland Lake to discuss performance of cash.
Thanks, David I'm, starting on slide 22.
For 2020, Makassar produced 183000 ounces at operating cash costs of 562, and all in sustaining costs of 922.
There are not these are not the numbers that we were expecting on prior calls we have talked about the impact of COVID-19 loans on our operations and the excess heat we experienced in Q3.
We bounced back in Q4 and had a solid quarter with the average grade up 45% and higher levels of tons processed compared to Q3.
Production for the quarter totaled 52000 ounces at an operating cash costs of 534, and all in sustaining costs of 941.
The all in sustaining capital numbers were still high which largely reflected the level of sustaining capital expenditures as.
As we continue to catch up on some key projects, including capital development.
37% increase in production compared to the previous quarter was due to a 45% improvements in the average grade, reflecting a greater portion proportion of higher grade stopes and the SMC being mined during the final quarter of the year.
As you've heard.
This year, we expected to see numbers more like 2019 with production of 220 to 255000 ounces and cash costs of 450 to 470.
Next slide please.
Turning to slide 23, looking at our major projects for the year, we had made excellent progress on a number of fronts.
The four shaft project is approximately a month ahead of schedule and on target for completion in late 2022, we're tracking well against our capital cost budget.
$320 million and have the potential to come in below that level. The total spend to date at December 31, 2020 was $177 million.
During Q4, we sank the shaft 375 feet to a total of 4250 feet by quarter and we will also continue to make good progress with steel installation and putting in place all required infrastructure.
Day, the shaft is down around 4600 feet.
We also have projects in place to improve ventilation.
Currently completing an upgrade project that should increase err to the mine by about 50% to around 300000 CFM.
This should be done in Q2, we are also expanding our ventilation with to vent raises which should add another 200000 CFM by the first half of the year. When the four shaft is done we will go to about 750000 CFM is are better.
We're also doing a number of other projects underground infrastructure mill enhancements and the ramp surface zones, along the amalgamated break.
Generally I would say these projects are all progressing well.
I'll now turn the call over to Larry Jasinski General manager of Detour Lake bias.
Turning to <unk> on slide 24, before we look at the Q4 2020 numbers I will answer the call to your attention that the results for the full year 2020 or for the 11 months from January 31, 2020 to the end of the year.
In fiscal year 2020, Detour Lake produced 517000 ounces of gold sales were 537000 ounces for the year.
Production for the year was just under the guidance range of $520 to 540000 ounces.
Reflecting a slightly lower than planned average grade.
Our unit costs operating cash costs averaged $625 for the year all in sustaining costs per ounce sold averaged 1100 simple.
For Q4 2020 production of Detour Lake totaled 153000 ounces at an average cash cost of $612 and an all in sustaining cost of $207 per ounce.
Looking at 2021, you've already seen the guidance, we expect significant growth in production to 600 to 700 680000 to 728000.
Ounces, which is based on our own over 24 million tonnes of throughput at much higher average grade.
To support this growth we have received a revised air permit to support annual production rates up to 32 million tons.
Although our current plan does not fully utilized new minutes, we do anticipate reaching 28 million tons as previously.
Spoken about earlier.
And throughput and the new plan.
With the growth in production unit costs should improve with cash costs of $580 to $600 per ounce and all in sustaining costs better than $900 per ounce.
With lower sustaining capital expenditures.
Yes.
Moving to slide 25.
Tony mentioned earlier, we have a number of projects at Detour Lake.
We're investing in a significant mill enhancements to improve throughput by adding screens to the crushing circuit.
On a leach tanks.
A detox tank and capital improvements to the CIP in gravity circuits.
We are also continuing with the major tailings expansion project.
Surface infrastructure projects include a new assay lab communications on periods Korczak airfield.
Welding sure Ken.
Camp expansion and.
Improved access roads.
Payment of areas around the camp surface buildings from the front gate, which also includes a new way station.
Mobile equipment procurement was a key area of capital expenditures as well in the second half of 2020 as we upgraded the fleet with a supportive plan growth.
This will also continue in the 2020.
We also have significant deferred stripping component in our growth capital this year, which reflects a major stripping campaign with planned as part of phase four which will support production in future years.
With that I'll turn the call over to Ian Holland, Vice President and co lead with our Australian operations.
Yes. Thanks.
Good afternoon, everyone I'll be speaking to slide 26.
Hospital had a record production year in 2020, we produced 640, <unk> enhances that 3% higher than the 600 non anchor advances.
<unk>.
640 <unk>.
Answers of production.
We exceeded the full year guidance for 2020, and this was driven by higher planned tonnage.
The increased Chinese more than offset the reduction in the average head grade.
Throughout 2020, we invested in infrastructure for demand to continue to support the higher mining rates.
We completed the <unk> system.
Our new doldrums.
Net new transformer station.
And these projects along with the addition of Hyattsville down again operations I was very important for the increase in volumes.
We continue to achieve very low costs in financial year, 2020, with operating cash costs of $139 per ounce.
Higher than last year due to the slight reduction in average price.
All in sustaining cost per installed.
Full year 2020 average $312 average.
This is $291 in the full year 2019.
The change is a result of the increased royalty payments.
Resulting from the new royalty the Victorian government introduced as of January 1st Laci.
If we exclude the impact of that new royalty.
So for the full year 2020 actually improved non consent.
From the EBITDA 2019.
And this is not a good loss signing capital expenditures.
Looking at Q4, we produced 160 growth had dances.
This is based off of 194000 tons at an average rate of 28 grams per tonne in average mill recoveries of non <unk> non Hussein.
These production compared to record production in Q4 29 of 100.
92, <unk> <unk>.
When we had a record quarter head grade of <unk> 43 grams a tonne.
The production for Q4, we're encouraged.
From the 162 day as enhances and that we manage the non key trade and this was purely a result of slightly higher tonnage share growth in Q4.
Turning to 2021 Chinese already address it we are.
Transitioning to our high tonnage law of gravity outlook.
We plan to lower levels of production over a longer period of time.
While we continue to have very extensive exploration programs.
With that I will turn the call over to Eric Kallio, Senior Vice President of exploration.
Thanks, Dan and good afternoon, everyone. In my first slide day will be number 27, it summarizes final results and year to year changes for exclusive resources.
And as indicated and we've already heard earlier, we did a test we did experience some challenges with this resources replacement.
But a large part fist quarter, COVID-19 and not just not being able to do all the buildings that we have planned.
Thank you Bob.
Good day.
Success and good growth at the cost of our detour.
In here, but for slightly different reasons macassar with almost 32% increase in <unk>, 4% and indicated which are basically areas.
We did have exploration success.
But just not enough time to be able to convert these to reserves.
For <unk>, we also saw a good increase.
20% for <unk>, and 29% free inferred, but this was mainly due to an increase price for the gold use them, you'll update which was $500 versus 300 in the previous.
Slightly above we did see a sizable decrease the fosterville, including a 36, 33% drop in EBITDA and.
At 27% drop in inferred at Fosterville mine and we're looking at this could say most of this is due to the limited drilling a large amount of hydrate depleted during the year, but also due to some refinement of resources at Harrier Cigna, We also removed some lower grade historic resources.
Part of the mine, which are away from the current mining.
Turning now to my next slide which is number 28.
Okay.
This slides relate the detour, where we're continuing to advance large scale drill program started in early 2020 to evaluate resource potential near the main pit.
As previously announced the program includes a minimum of 250000 meters of drilling as designed towards creating an updated resource and potentially expanded mine plan.
For early 'twenty two zone.
On the screen that the long section two of the areas Haynesville showing.
Is there a target and results from our latest.
Press release, which was announced in late December our third sexually since starting the program.
As shown on the image. The release includes information from additional 25 holes for the project, which will drill namely into the saddle zone.
As well as some are first of all.
Central extension of mineralization to the west or West pit.
And overall continue to be very positive with several holes at this affecting broad zones of mineralization.
With attractive open pit grades, but also higher grade subsidiary, which could provide potential for underground resources as well.
Although.
So there are large number of highlights in the release to talk about I believe it's worth drawing attention to the east part of the saddle just west of the main pit, where we had quite a few holes, indicating both the broad zones of minerals.
But there's a large river hole.
You could point to some of the key well could include 25, <unk>, which had which intersected four <unk> grams per day.
Total over 43 meters at 258 over 79 as well as cold.
The holes in the central part of the cell.
Which continued to confirm continuity of system between the two pit reserves as well as some territories.
So up to 200 meters west of the West pit.
Assembly work to date at day Tour continues to go very well, we now have 12 drills on site and all the necessary.
Equipment to complete the program.
I'm, feeling very confident about hitting our goals by year end.
So now turning on to slide number 29.
We should see an image from a cassette.
Where which was one of the main areas that we did absorb a solid hit from the Covid.
And in the end result at <unk>.
Only doing about 50% of our planned drilling and also coming up slightly short of replacing.
Our reserves.
Despite the above we do feel that there was still a lot of exploration success during the year, including intersection of New high grade zone in several areas to SMP definition revenue 700 meter low.
High grade corridor at the main break as well as identification of almost 180000 ounces of newly insured.
Resources.
Which we believe could have replaced much of the remaining.
Reserve shortfall, given a little bit more time.
So considering the above and the fact that all drills are now back up.
In running we feel we are now back on track too.
To start replacing reserves again in 'twenty, one, but their target for the year again being about 250 to 300000 ounces.
So details for the plan are shown on the slide as indicated focused strongly on direct extension of the SMC to the east and west as well as the Malaga weighted which are areas. We've always had success in the past.
In addition to this we are initiating what we feel is a significant new work on a $34 51 level to start testing upper parts of it on regional exploration.
In total for the program will include about 2000 meters of development.
226000 meters of drilling.
With about 40% of the drilling being dedicated to the SLC west.
40% to the east and the remainder to the new projects.
And the new development will be shown on the slide will be completed in several areas defined by the yellow line.
Design, mostly to support drilling into these new areas.
Now turning on to slide 30.
We should see a slide for Fosterville, whereas in Canada. We also had some strong setbacks from COVID-19, which caused us to lose about 42% of planned drill meters and being unable to gain some very important platform to test down price of the Phoenix and Florida.
These two items plus a large amount of depletions at the year. Some of the main reasons for the change is seen the reserves and resources with the remainder being from Reinterpretations, new drilling movement as well as movement of certain low base zone.
In the upper historic part of the mine to mineral inventory.
Secondly, Bob we do feel there are a lot of great accomplishments again.
Exploration.
In 2020 here, including new high grade intersections.
The Swan Signet carrier as.
As well as extension of the mineralized envelope that robin tail up to 900 meters down plunge and continuing to see.
Instrument and signs of quartz with visible gold similar to swarm.
Given the above we remain optimistic about our chances for success in 'twenty, one and as with the cash that designed what we believe is a very good program with a strong chance that replacing the ounces we will volume.
Again, the details for the plan are shown on the slide and will focus mainly on the <unk>.
On the lower Phoenix, and Robin's Hill area, we have 232000 meters of drilling five.
Six kilometers of development.
Approximately 65% of the total meters will be dedicated to lower Phoenix.
25% to signet.
65% to lower Phoenix and Cygnet.
25% to Robin's Hill, and the remainder to other new projects on the mine leases.
Turning to development was split between lower Phoenix and Robin's Hill.
20 percentage of the meters going to lower Phoenix to develop new hanging wall platform. So that we can drill down plunge as well as to completing two new hanging wall as well.
And then the other 80%.
Being targeted towards Robin's Hill, and continuing to advance the new exploration drift.
Towards that Robin he'll reserve.
So in summary, 2020 was a bit challenging.
And we think this one will become even better.
And with that I will pass the call back to Tony.
Hey, Thanks, Eric and thanks, everyone for listening in everyone for contributing on the call for you didn't.
Too long and we try to be concise here anyway, I'll just finish up here on slide 31, and definitely you can see that.
No.
Good strong year end to end 2020, with COVID-19, and you might tip their sales.
Year, we might want to forget but at the same time, we had some significant.
Performance and really get a sense of quality of people and what people can do when we work together.
And again look at the weather it was record levels of production earnings and cash flow for the company here.
Record sales.
Results in really some strong performance in terms of.
Of our of our responsibility responsibility to the communities with local events and we work and the people that live in those communities ending.
The environment and et cetera, that's going on with the company.
Anyway.
Some other highlights for the year again.
In terms of returning $850 million to shareholders in 2020.
She says into.
Into January.
2021.
We have a strong balance sheet, our business plan going forward positioning.
First in 2021, and the next few years and we have an extremely large projects variation budget, but.
We are going to sit there and say 2022 behind us only because we got some such exciting things as Eric talked about some exciting things from an exploration point of view in 2021, and we are we have given up some updated guidance for detour again that shows broken production in each over the next five years.
And that's really just a subset of what a real view of detour is going to come and with the exploration drilling being done in 2021, and our continued advancements of permits in 2021 at detour with <unk>.
The continued development of the new shaft at Mckesson, and what can happen there plus the ongoing.
<unk> provides the fosterville into raw material plus.
Great.
So the exploration program going on naphtha and net down at Fosterville and in 2021.
An exciting year and good day.
We look at where our share price is and where we can where share price can go over the next few mix next year as we as we as we demonstrated new value coming into the company appear to be an exciting year for shareholders.
We also have a lot of other initiatives.
We will be coming on in terms of how we're going to how we're going to move forward from us.
<unk>.
Social responsibility point of view, where we want to take ourselves in terms of leading the industry are being.
Okay, being upfront and front and center in the industry, whether it's to greenhouse gas.
Whether it's to community support in any way and whether it's really going to into the 20 <unk> century strongly in terms of automation and digitization of at our at our sites and making smart minds over the next few years.
Those are things to talk about it maybe at our next calls on our next meeting sending globally.
And then maybe we will get to see some of you personally at the BMO Conference next week and definitely we're always open to any calls people want to park and happy to have had meetings here.
I'll be holding to speak one on one to people, but without any way I'll end the call and will be happy to take any questions. Thanks.
As a reminder, if you would like to ask a question you will need to press star one on your telephone.
First question on cash from the line of Tyler Langton from Jpmorgan.
Hey, good afternoon, and thanks, Matt Thanks for taking my question.
Just with the exploration at Fosterville.
Thank you, Steve a sense of whether we will be getting I guess updates throughout the year or is it something more to expect.
Towards the end of the year early 2022.
Got it.
Okay.
Speaking.
Yeah.
We don't have the actual timeline.
Plan to bring out an exploration release, we do.
We got price systems identified where.
The characteristics of the Swan zone.
But.
The press release as low as low tiny.
But.
We will give updates as needed.
Okay, and then just as a follow up.
In terms of cash capital allocation.
Yes.
For the dividend.
Okay great.
Well we lead in.
In terms of our capital allocation and strategy, we communicated a couple of times in a number of areas that we want to refocus on definitely.
Where our dividend is at arena, we have a strong dividend and you can see as we progress into 2021 ramps in both a strong cash position and potential for further free cash flow generation, we're going to be.
<unk> towards being strategic later in CIB, where possible and we're going to we will be considering what we can do with out with our dividend.
Terms of growth, but at the same time, we want to we want to make sure that we can we can fund and be well positioned to drive new value for the Kirkland Lake for shareholders.
Whether it's in relation to get again.
Crescive exploration program, we have this year, our aggressive investment into growth that we see a detour plus we're looking in terms of trying to do at Fosterville.
We want to make sure that we responsibly keep keep our business strong and profitable but at the same time returning.
A good portion of any free cash flow to shareholders and we don't see ourselves building up the cash position to a vote.
Over a 1 billion or multibillion dollar.
David If you want to give any more color on David Soares, our CFO as a color on that very low for me I think.
What you just mentioned in terms of having progressive sustainable dividends looking for opportunities to grow the dividend.
And our shareholders have expressed.
Interest in both of the brands that have a different things we consider on basically the nurses that we'll be opportunistic on the buyback.
Okay, great. Thanks, so much.
Your next question comes from Oman.
Hawaii is a beep from Scotia Bank.
Hi, Tony and picking the game at that thanks for taking my questions.
Just a couple of questions for me.
Adjusted onto other day on the on the call just based on the trigger guidance at Fosterville.
The plan essentially was to reduce the material from the Swan Zone now does the new reserve grade change your thinking at all in terms of the mix or increasing the throughput.
Manage that reserve grade.
Okay.
Hum.
I think in terms of where we're going I mean, a lot of the plan. We have this year is <unk> to be.
Improve the mix going in I mean, you have a lot more flexibility now at fosterville with with improved ventilation and.
Paste fill et cetera, and they have.
But opening up more phases of that but I think.
Maybe he can give a little more color there, but we also see that degrade as reducing or in terms of what we got for our resource it and we need to get me be able to be less selective and more more more able to be more proportional to the mining in various areas, but <unk> got any more color to that you want to get.
Yes, sure I mean, we've got.
We've got a really well.
Schedule that claim for <unk> stoping fronts.
Kevin the ROI.
J D.
Considerations price deal was certainly unlocked a few.
The flexibility of net area.
And the broad design channel that's opened the raptors.
And Yahoo.
Not to get into the <unk> and things like that net hard.
Hard times and lower grades the show.
But what it does to give them that flexibility.
Things are around sometimes side.
Yes.
All the more stoping fronts that we have.
And then the more rival the saudis to be attic type with any sort of bumps along the way.
We're setting ourselves up for flow.
Pretty robust.
Production production's going forward and Thats reflected in the tonnage numbers.
Thank you.
And just in regards to the reserve replacement that possible.
But 50% of depletion.
When was this material added promises that's coming from other carriers lower Phoenix getting demand other color on that.
You, Okay with that Ian.
Sure.
Hey, guys, Hi, Eric do you want to tackle that one.
Yes.
Perfect.
That's a net.
The big focus for the drilling underground was really.
Lower parts of the.
The lower Phoenix, which we could reach from the annual logo that we have in place already.
And.
And.
As well as the net.
So those are the two main areas that we didn't generate any reserves profit sales.
Okay, and then and then just want to kind of your.
'twenty 'twenty drill program.
You talked about where you guys are going to be targeting in terms of how that applies to some of the data out can you give us a little bit color as to where that reserve replacement is going to come from for 2021 day.
But we don't see that opportunity.
Yes, exactly yes, as I mentioned, we've got.
The large majority of our.
Our drill meters are allocated to the lower Phoenix.
Downtime just the Swan reserve.
That drilling is going to get done too.
The new hanging wall drift that we're.
They are in progress at actually this year and and.
I think can be completed sort of midyear.
But that's going to allow us to drill quite a ways down plunge.
Moving up to 4900 meter credit it will give us a big area to drill it so thats going to be a big.
The common areas.
Yeah.
Got it thanks, Eric and thanks, Tony.
Okay.
Your next question comes from non line of Cosmos.
Hi, Thanks, Tony and team for our conference call, sorry, Antonio will be seen at the BMO.
But I've heard some other approvals.
Yeah.
Maybe let me my first question is on day two here.
Good to see that.
Tony you got the permit to get up to $32 8 million ton per annum.
I guess as you talked about you are not planning to get up there just yet but.
Have you thought about that works out to about 90000 tons per day.
Thought about how you to that I'll say, what I used to cover detour they had talked about potentially like a third line.
<unk> low ball mill configuration.
Maybe some backend more leach tanks, and thereby having thought about at all.
Once we get there and give some color to this but.
Right now in the program. These net capital programs for Dieter for the processing in 2021, and 2022, we're doing a lot of things to improve.
Improved throughput at the mill in terms of whether it's new mid some additional leach tanks with improved improved performance on the crushing either through screens, Andrew alternate feed systems try to work on an on scheduling and again the things that give you more flexibility to improve in terms of overall mill availability and non.
Utilization.
There's a number of areas right now.
As we discussed previously.
Our perspective, I think Larry mentioned, we we now we're seeing it's getting up to somewhere around 28 million tonnes, a year, which is about 80000 tons a day and we are at a point, we say it's sort of in one way we are.
Non.
Not necessarily working towards that.
100%.
Drive throughput at the detour.
Being a big growth strategy.
You see there.
We need to also want to improve grade control and great management, and that's part of us when we install a new assay lab this year and maybe we'll be able to do a combination of all.
To improve grade control, great delivery to the to the plant and building mentioned rebuilding stockpiles over the life of the mine that can really generate a lot of cash flow, but I know Larry you got any color you want to give in terms of COVID-19.
Mill performance. Thanks, Tony the only thing I would add really is.
<unk>.
Over the course of the next.
A couple of years, there is theres a lot of capital going into the mill various areas.
So increasing the crushing side.
Obviously is going to.
You're pushing the material through the through the mills and the rest of the planet.
We need to understand and continue the debottlenecking to get to that 28 million.
Two years or three years down the road, we understand exactly how the mills running and then we make more decisions from that point.
The slippage.
In line with current circuit line.
But right now we don't we're not in we're not seeing the requirement to do that yet.
And there is lot of other opportunities in terms of maximizing throughput and low.
Which lowers cost and but I mean fundamentally we want also to try to optimize grade delivered to the mill at any one time.
And then be responsible for pull deposits, so thats, where instead of throwing a lot of low grade away. If we can start creating a low grade stockpile.
And use that and it.
Saves us on tailings too because and disturbances on service.
And our overall.
Footprint on site and the mine life, because then we processed that we put it back in the pit.
We create a better closure plan for <unk>.
And then my second question is on Europe.
One in 'twenty one outlook here.
And you talked about Q1 is our lowest production quarter.
The highest sort of all in sustaining costs per day, you also gone by saying that the all in sustaining cost is higher due to the timing of Capex.
Sustaining capex could you maybe help me out because.
During the presentation, you talked about detour, a big part of the Capex is the tailings facility my understanding from before was that a lot of that money is spent on tailings will be during the summer months.
So I'm just trying to reconcile net all of the profile of Capex.
For the company and how that fits in with what you had talked about detour.
It features so first of all yes.
You do have the tailings that channel.
That is it.
Doesn't necessarily 100% stock.
We don't remember that Theres, another saying why wait for spring do it now right. There theres a lot of stuff, we're continuing to progress and we need to progress tailings, but in terms of capital programs.
There's a lot of the mill programs that are taking place from a capital perspective at detour. There is theres the aggressive exploration that part of the part of our costs in Q1 and Q2.
Moving on any more than it is in that Larry and we.
Got it all there.
We do have some deferred stripping happening that happens in Q <unk> Q1 Q2.
All right.
And then.
Progressing into cash that we're looking going into the next phase of with chat on not just your thinking in 2021, but also some more shaft infrastructure starting to come into play such as.
<unk> been sitting in AR.
Mark on those type of areas.
We are doing some work.
I'd for detour in terms of how.
How we progressed.
Liquefied tanning deposition to a to a high density of paced type of tailings deposition for better water management as we as we progress into future years.
Great. Thanks, Thanks, Tony Thats those are the two questions I have and I look forward to the remainder of 2021 and joking aside has a good parameter BMO conference.
Okay.
Your next.
Cash on them.
Oh, sorry, sorry go ahead.
Just to finish up at Cosmo assets Thats already been.
One point that maybe forgot to mention we mentioned net all in sustaining cost per ounce was going to be the highest in Q1 not necessarily sustaining capital.
And so because our production and our production in Q1.
It's lower than that in future quarters. So that's a big driver of our AFC per ounce in the quarter, So sorry about that.
No problem. Your next question comes from the line of Mike Parkin with National Bank.
Hey, guys. Thanks for taking my call.
Most of my questions were answered but.
You've got that nice permitted under the way.
It wasn't a nice permit.
But <unk> got the new one in there for detour can you give us some color in terms of how often maybe in Q4 in the second half you were bumping up against that daily limit just to get give us a sense of just how kind of handcuffed you were in being able to show what that mill can really do.
Thanks, Mike.
<unk>.
Throughout the year last year, I think we bumped up against that.
So many times give or take.
Manifested.
Manifests itself into the middle of having a kind of slowdown.
In mid to late night shifts depending on depending on the situation right. So so.
I think although we could.
As is we could we could take advantage of that permits but not to the degree that we plan on taking advantage of it with us.
The throughput initiatives.
And as we get later into later into the year. This year and then into the following years.
<unk> consistently above that level 75000.
Okay.
Sorry go ahead sorry.
And again at the other aspects of increasing throughput was also we don't want to do that index at the expenses.
Recovery total so thats the other aspect of it.
Bumping this is sort of leading in you get the permit to this level. It leads into a lot of the capital and the programs, we're putting in place at detour.
Due to both improved mill throughput, but also improve mill performance.
At the operations zone.
Okay, Alright, I guess, the tankage as to kind of keep retention times.
No similar given.
Throughput is going to be going up alright, thank you very much.
Great color.
Okay. That's it for me.
Your next question comes from the line of Shah to Marcel from John Tumazos.
Hey, Tom Thank you.
If you could explain.
A little on the tour.
<unk>.
Above a half a gram classified 408000 analysis it looks like.
Or the reserve went down more than depletion.
And then.
Almost 2 million ounces at 0.41 are those all end of life stockpiles.
Sorry, and the cash events <unk>, our VP technical services and CVP extra senior she can answer a lot of it right now.
Hi, John.
Sure.
Part of that.
Neutral.
Update.
Good morning.
The geology model and so it did have an impact because of the teams.
Okay.
So it did have an ambassador zone.
King.
At this time.
The cutoff grade.
Thanks.
As Tony mentioned variable comp faithful one day.
<unk> revenue.
Total.
Hey come on muscle and other hardware offering.
Michael.
So.
On a separate line.
That we optimize our production footprint for a higher grade ounces and stockpile will likely.
To be more mainly at the end of March.
Okay.
And the ultimate yes, Thats right Walter.
Did it meet the pit smaller I would think that that cash.
Yes.
Yes, one other things that we did.
John is.
With the with the previous reserve so we.
We depleted some but what we did was there were some margin allowances maybe at the bottom of the pit where we adjusted we adjusted we did we adjusted costs et cetera from previous years in terms of what was in the model on previous reserves and so the pit doesn't drop pulled down quite as far as it was before.
That's where it looks like the day there are some ounces came up but it just because of the pits little bit smaller right.
If I can ask another on Fosterville.
The three year production forecast solely from the reserves already on the books or does that include some MRI and inferred or does that assume a few extensions that you think are there, but still need to document.
Sure.
Based on the other day.
You asked a financial model on the EBITDA.
Got it.
Thank you.
Your next question comes from Milan.
Robert now Friday from Robert Hall.
Yes.
Yes.
Thank you very much for taking my two questions.
First of all I am a little confused.
All of the reports that you.
Putting a note in the last while it's been extremely positive and extremely encouraging.
But for some reason the market is not buying into it as matter of fact, if you take a look at the stock history in the last six months, it's been down about.
I'd say $25 or so over the last year, it's down about 32 to $33 today Youre, making another announcement thats record breaking in all areas.
We have more cash than anybody we have more research, we have more confidence leadership and so forth and yet here. We are at last time I checked it was down $1 50.
So my question is this.
We are so positive about this stock.
Why is plummeting.
And secondly.
What are you listening executive of this company planning on doing to stop the bleeding and the plummeting that seems to be affecting the stock I mean, it should be according to I think scotiabank, we should be trading between $65 to $70. Yet here. We are what is it 43 something.
Can you please explain that for me please.
So thanks for the question Robert.
First in first thing Robert.
I don't know if I can get yourself back in date myself remember, there's an old saying that says you can you can lead a horse to water, but you can't make him drink right. So.
<unk> you.
You, sometimes you have to.
It has to be something that people want to own et cetera.
Definitely.
There's been a lot of positive growth and continued positive things messaging and positive things we're doing.
At.
And currently gold and.
It's up to us to Q2.
To demonstrate value and drive drive new value for shareholders.
The market is.
Hole in the gold space Theres, some sometimes you and other things things things things are you kind of wonder what can be going on I think we have to we look at first principles that we got to tell our story and we got to execute our story as we have I think.
There's a couple of key drivers for the.
<unk> of KL and I'm sure everybody, one and one is <unk> going to go.
New discoveries et cetera, and then as we continue to progress.
<unk> catalysts or <unk> of this year, the upgraded updated resource and an updated reserve that we'd expect free for 2021 and that tied to a whole new updated mine plan et cetera that might even.
Bringing those ounces that John <unk> talked about came out because we did slightly smaller maybe just split it would be bigger again. So there's a lot of these catalysts that we got to work to drive and demonstrate new value and fundamentally share price. It should should go up because of where.
Where where somebody sees.
The overall value of the company was $1 yesterday, but tomorrow, it's going to be worth $2 and that's how we got to demonstrate value.
It's got to be that in.
I mean in terms of the market and what the market sees I think the biggest probably.
The thing around Hercules gold is going to be what's the what's the relationship to Fosterville and <unk> and then maybe over time with them and we work in demonstrating the reason why <unk> is such a great acquisition for the company.
But how do you get that message across because on any reserves that you have right now and the cash. The fact that you have no debt.
According to some of the analysts this stock should be trading in the sixties.
It's trading at 40, so it appears to me as if that message isn't going out there. So what does the team have.
In.
The plant to make sure that that message gets out there that it's a $60 stock or $65 stock as opposed to a <unk> 43 to other stock because it is today.
No.
Does the team have any idea of how they are going to handle this.
Well I mean again.
We need people like <unk> going out there and saying this is a $60 sockets important.
Fundamentally it is us.
<unk> to demonstrate.
The results continue to demonstrate that the business as it goes forward and again.
Biggest catalysts are going to be.
What we see as new discoveries at Fosterville.
A major catalysts driver, that's only going to be positive.
And as we complete the day, but we're working it with a <unk> of this year and what that can do what we can tell as we can tell a story but.
We're trying to do is in our story.
Sales to tell the truth and demonstrate step demonstrate that.
I know and I'm sure and you can see by by lot of the analyst reports that people are seeing it and it's going to take time for people, they're going to want to know it's there and then people will be buying in the stock and there is a lot of value and it is a 60 or $70 value stock and it's.
It's going to be coming over time, as we as we demonstrate that value and you've had a big pullback in the gold price vetted out other things that happened that stuff, we don't control and we don't take credit for it.
When it goes up and we don't take blame for when it goes down we've got to focus on on value in the business right.
Are there any promotional aspects that the company or the executive Ken undertake to get that message out there because I can do it but I don't want to go into reach five or six or 10 people I think we do.
Does that mean.
But we I mean, we do have a lot of marketing you've got to recognize the marketing has been virtual and we continue to do to two two.
To be deemed to.
To be heavily out there and communicating to our existing shareholders and new shareholders, whether it's the.
The BMO conference next week, there's a there's a number of things happening over the next.
A few months here.
We continue to to communicate too and it's.
Everybody you heard on this call.
And a few others.
We are out there talking to shareholders communicating but.
We are in and I wouldn't say, it's a challenge we convert to a meeting where we're getting good at virtual meetings. It's about it's about getting continue to get domestic deposits.
It's.
It's challenging, but it's new opportunities for us and we do have an aggressive marketing schedule.
It's going to be going on over the next few months, but fundamentally.
Non about trying to to tell to tell a story, we're about trying to demonstrate the results and make sure that the story that we're on.
We're telling you we can demonstrate it in the results or youre going to see over the next six months or a year I think well hopefully you'll come up pretty soon the other way does this thing.
$25, which none of us want to see anyway.
Keep doing well I shouldn't say keep doing share doing it because the stock goes down but hopefully this will stop.
We will see it back up to $60 $70 in the near future. Thank you very much for taking my questions.
Thank you very much take care bye bye.
There are no further questions. At this time you may continue with any closing remarks, you may have.
Thanks, operator, and thanks, everyone for participating today and I'll just put my my own take on the last question and that is that.
Right now we believe we're an excellent buying opportunity and we think we have a lot of value upside in front of the company. We have three outstanding assets all of which has.
Significant exploration and value creation upside so key for us is as execution, both operationally and with our exploration programs and then aggressively market and let's make sure. The street realized progress were making and Thats exactly what we expect to do and on that in that vein I'll say that we're very much looking forward to our.
Our next quarter and cost we can tell you how much further we've come thanks, a lot for participating today and have a good day.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
Yes.
Okay.
Yes.
Yes.
[music].
Okay.
Okay.