Q1 2021 Kirkland Lake Gold Ltd Earnings Call
Yeah.
Good afternoon, ladies and gentlemen, my name is Jason and I will be your conference operator today I would like to welcome everyone to the Kirkland Lake Gold conference call on webcast to discuss the company's first quarter 2021 financial and operating results all lines have been placed on mute to prevent any background noise.
The speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then one.
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 of Investor Relations Mark on them.
Thanks, very much operator, and good afternoon, everyone welcome to Kirkland Lake Gold first quarter 2021 conference call on webcast.
On the call today are many members are big Kirkland Lake Gold Senior management team.
Speaking today will be Tony Macoutes, sharp, President and CEO, David Soares, our Chief Financial Officer.
Natasha Vaz, our chief operating officer.
Larry Lasecki, our general manager for Detour Lake mine.
I Didnt tell chair Vice President of mining for Kirkland Lake.
And on our Vice President and co lead of Australian operations.
And Eric Kallio, our senior Vice President of exploration.
There are several other members on the management team on the phone as well.
After we go through the presentation, we will open up the call to questions. We ask that each person limit themselves to two questions.
The debt 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.
True to the forward looking statements on slide two of the slide deck.
Our remarks and answers to questions may 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 on our most recent management discussion and analysis.
Dated may five 2021 for more information.
Also during the call, we will be making reference to non <unk> performance measures.
A reconciliation of these measures is available in our most recent MD&A.
Finally on all figures mentioned today will be in U S dollars unless otherwise stated.
With that I'll now turn the call over to Tony <unk>, President and CEO of Kirkland Lake Gold.
Hey, Thanks, Mark and thanks, everybody for being on the call I know it's been a.
Trying times for people, but.
At the same time, you don't like it it's a pleasure to get the opportunity to give to give the update on how much. The successes we've had in Kirkland Lake in Q1 of this year, we're going to start on slide slide four.
And actually getting back to just just.
Thoughts on started off with.
These are challenging times, but there are also opportunities.
You know I guess more and more as we go through this and I know, we're all going through COVID-19 fatigue and.
A lot of people, who do a lot of different ways, but not a lot of good news coming out of people then we really got to acknowledge the support.
Oh, Oh Oh.
We received from shareholders communities from even the support we received from the healthy Memorial Health you ease up in Kirkland Lake and then in India.
Can be skewing region in northeastern Ontario, as well as the support from the.
People in Australia also you know you know.
We have to acknowledge the people that work for US there you know the decent definitely trying times for families coming to work.
And you know performing.
Performing debt.
Putting in a good base work this time and we really appreciate all the efforts been happening.
Our main goal is to maintain a safe workplace.
Okay.
It's definitely there is things are constantly evolving and changing and it could be challenged because of the people and the support we're getting from all the people that work force I think you know where.
We're moving forward and were winning the battle.
And with this fight I'll begin with talking about COVID-19.
In terms of our COVID-19 1919 protocols, we have a lot of port cost in fact.
And we continue to be intact throughout the quarter and as well we clearly.
New measures, including much more rapid testing at detour Lake we can test basically income to our operations, we antibody testing within 15 minutes, we would give you the result.
Oh in terms on some of the impacts on what COVID-19 during the quarter. We did have eight workers test positive phy that Mckesson III at detour in every case, it's happened the workers will fully recover fully recovered and theres been no additional transmission of the virus on site.
<unk> cash cash and we're all in early March and they were deemed an outbreak as defined by the local health unit. In response, we shipped 60 per rep per test kits and on the 1200 swab kits on the cancer and tested the entire workforce.
Great was resolved quickly with no further transmissions on site just over a week ago, we had another occur on certain cancer being classified as an outbreak by public health.
Balls are near surface ramp project debt at Mckesson, we're worried.
What piece of that.
Near surface Award.
We ended up here.
Overall seven people tested positive we did suspend the work on the approach of contests at all all people during the period of time and the project was halted for just under a week and then we had I can't tell you. We've had no further cases emerging we have resumed work on that on the ramp on this project last weekend.
Turning to slide five.
Q1, 2021 was also a very important quarter for us in terms of our commitment to responsible mining we released our 2021 sustainability report.
And indeed, we highlight a great deal of progress.
Companies May book in terms of the work, we're doing and our capabilities around reporting and disclosure of ESG issues also during Q1, we pledged to achieve net zero emissions by 2050 or earlier, we're well positioned to achieve this goal now already being an industry leader in reducing and minimizing greenhouse gas emissions.
During the quarter as part of follow our pledge with it we made a commitment to invest $75 million per year for five years in technology and innovation that our sites.
And working towards looking at alternative fuels and supporting.
Supporting our efforts toward.
Reducing our carbon footprint and a big part of it is in supporting our communities. These are three key areas, we will focus on.
In here and with what <unk> talked about are you would you be investing in alternative fuels and energy looking for new ways to do work debt that reduces our carbon footprint.
Building on the minds of the future by promoting automation and Digitization looking for alternative ways. We.
Understanding the impact what we do at site.
Determine macassar at Fosterville and find ways. We can we can we can minimize that impact.
Eliminate that impact or offset it in some ways and also you know I think the big thing what we've been doing is investing in communities and investing in communities, especially during these times of on focus on mental health.
Homelessness and addiction.
Citizens Terror and tenure.
Area that we feel it is important to me and youth training and development.
A number of reasons.
Turning to slide six getting to the results of the first quarter. We turn we did turn the solid performance. We previewed previously indicated that the first quarter to share with respects to be our lowest quarter production and the highest quarter of unit cost for the year, we even put out guidance for the quarter to drive that point home, we beat our guidance.
When we restart production.
And within our all in sustaining cost.
The beat of our guidance and even our own our own budget for the quarter really reflected a very strong strong operating performance from some of the people out of work done we really cant came together about in March.
And for the quarter, we produced 102000 ounces.
Operating cash cost of 542 announcing on a semi con tends to be 46 months I'm sure everybody can read that.
Looking at earnings and cash flow, we had adjusted adjusted net earnings of 63 per share and free cash flow of $43 million in the quarter.
Assuming current gold prices, we fully fully expect to see strong numbers for the balance of the year on on financial performance and that of price.
<unk> net also on price or operating results were also returned just under $100 million to shareholders. This included $50 million of dividend payments during the quarter. Following a 50% increase in the quarterly dividend and $46 million related to our nci's share repurchases are in CIB.
Going to slide seven now we had some key developments as well in quarter, we achieved additional exploration success and in fact, we issued a press release earlier this week with Newberry encouraging drill results at Detour Lake and read this was theres been a number of.
Very good results coming out of detour in the drilling we're doing there.
We also continued to make excellent project with our growth projects during Q1, our number four shaft project.
Cash flow remains ahead of schedule and the multiple projects at detour Lake are going very well and Larry and Natasha will talk a little bit about that later on in terms of some of the progress there.
So we issued a new technical report for <unk> at the end of the quarter.
Lines are very attractive project debt, we expect to improve upon going forward.
<unk> supported by.
With the drilling you can come up with an updated resource and reserve, but even even if you go to that just look at that that report and our projections now for the next five years.
<unk>.
680 to 720000 ounces a year, then growing 800000 ounces a year that reported does show a dip and then for a while while you go through it to us with a low grade cycle on it.
Yeah.
No.
Extra stripping per year and a bit.
And then we grow production at over 900000 ounces a year.
That report part of what I mean.
We're going to work on.
<unk> resource and reserve estimate that we expect to come on at the end of 2021 coming into 2022 and an updated mine plan is looking towards maintaining a day once we get the 800000 ounces a year to 200 to try to minimize that trough or eliminate that trough and see a way to move forward. We have been permitted to two process of $3 28.
<unk> tons per year on our current forecast, we just see ourselves getting up to 28 million tons per year.
Anyway, it's still on slide seven there is also a few things maybe I can emphasize that as well.
And then.
I think.
And there's lots of excitement, but in terms of Kirkland Lake Gold, we think we're definitely uniquely positioned to perform well.
Well going forward.
And why was that why would I say that well we haven't having completed Q1. We are now poised to have three very strong quarters over the balance of 2021, we were on track to achieve all of our 2021 guidance and we have a number of catalysts coming that we believe have re rate potential dietmar valuations.
To tell you a little bit more of that from what it mean by that.
I'll start with the detour Lake on slide eight Gibson.
Gibson give some discussions on the technical report and in terms of what it's doing and as I mentioned part of us going forward as we see us not only is this a very good approach it now.
And very definitely positioned for significant cost reductions.
And significant levels of production for quite some time.
A long mine life.
As you can see.
As I mentioned earlier, we expect to be able to come up with that.
Definitely on an improvement to this because we as we go forward interest to 2022.
On.
<unk> nine we are clearly.
You see in addition, supported with some of the exploration results.
We continue to come out of this.
Slide here showing.
He's taken from that exploration press release, Eric will give a little more color on it but you can see with the drilling and what's what's happening both in terms of extending the resources.
Mineralization book to the west through the saddle zone between between between the potential storage current main pit and the potential for the future west pit, but also.
You can see that mineral rights agent you identified at depth, both below current resources and reserves at <unk>.
On the main pit and <unk>.
Resources.
On reserves at the West future West pit and then to the web.
And I can say on this on this long section. It also shows the bottom of the old mine workings from Detour Lake underground mines and this is this is basically demonstrating over a four.
Maybe four to five kilometers.
Surface.
Long long section.
The potential for.
We've seen 30 to 40 million ounces of mineral inventory on minerals.
Resources.
700 meters.
<unk> been little to almost no testing.
Below the 700 meter level below the old underground mine debt does at Detour Lake and maybe we haven't even found the ore body yet. So I think there's a lot of upside in terms of feature.
Turning to slide 10, I have already mentioned that the number four shaft project at Mccann, So it's moving very well.
The really the key point is that it will mean when shaft what would it be on the shaft is done we're talking we've been talking for quite some time that the shaft.
I'll be very transformative from a cancer fundamentally we're building a new mine at my cancer and as we see going into sort of.
By the by Q4 next year or 2022, we'll be able to start taking advantage of the share.
The new shaft on one would allow us to go grow production when we're targeting to grow production over 400000 ounces by 2023, but it's going to improve working conditions in the mines improve ventilation in the mine.
True.
True productivity.
The day shaft alone will be over 4000 tonnes a day range.
If we go back to two.
<unk> sitting around 2000 tonnes, a day of capability 'twenty, one 'twenty 100 tonnes, a day capability will be going up to 4000 tonnes. A day with this new shaft, we'll still have the old shaft to help us in terms of thing that we see that.
The combination of the improved working conditions improved <unk> productivity.
Improve our unit cost substantially easily bringing on sustaining cost of about $600 per ounce and very importantly, facilitate a whole new chapter because it's going to create all new exploration platforms underground can't go back and re explore the Kirkland Lake Camp Kirkland campus.
100 years old and bidding on.
It was a lot a lot of work done over the 100 years in terms of gold production could look at in terms of what we have.
It's just as exciting it's almost like you get to a new discovery.
Okay.
Going to slide 11 now.
Many of you know, we also have big changes as possible in terms of reducing our production in Swan zone to draw to mine lifestyle, we executed on drilling programs.
In terms of that there's two key points I'd like to make first day at anywhere between 225 to 425000 ounces per year free cash cost between two and 200 200 $300 per ounce. It's possible, we'll still remain at very profitable mining and taxes, we expect to continue to be one of the most profitable gold mines in Australia and really.
Definitely in the top globally second and most importantly, we continue to believe that there is very attractive exploration upside as possible. That's why are we investing around $90 million on exploration. This year looking at a share price. We firmly believe that there is nothing unit evaluation today for future exploration success of cost to go with the.
The exploration program, we are completing on the multiple targets, we have to drill all containing quartz and visible gold while combining.
Still there's still a big gold system here.
We think there is.
The we've demonstrated.
Creating value and Kirkman Lake Goldman to pass with exploration Diamond drilling.
And we see this we see going forward that there's still lots of value creation to come from Fosterville.
Turning to slide 12 from just a summary summarize before I turn the call over to David.
We believe Kirk on the gold is very well positioned right now to outperform.
Number one we're on we are poised for three strong quarters of outperformance this year and we expect to lead to a very strong 2022, we are on track to meet all of our 2021 guidance. We just issued an attractive technical report for Detour Lake and we'll be issuing a new one in 2022 that we believe will establish detour Lake is one of the world's Premier gold mines.
We will effectively be opening a new mine on the CASM next year, leading to higher production lower unit cost decreased profitability and very attractive exploration upside and we are drilling extensively at fossil we believe the success, we are targeting very accretive to our share price I'll now turn the call over to David <unk>, Chief Financial Officer, who will give you a little bit of highlights on the financial results.
<unk>.
Thank you Tony and good afternoon, everyone.
I'll be starting on slide 13 in Q1 2021, adjusted net earnings totaled $167 8 million or 63 per share. The difference between adjusted net earnings per share of <unk> 63, and net earnings per share of <unk> systems. In Q1, 2021 was mainly related to the exclusion of the Holt complex.
Asset impairment charge of $6 5 million and $5 7 million of non cash foreign exchange gains, reflecting the strengthening of the Australian dollar against the U S dollar during the quarter in.
In addition, nonoperating site cost of $4 2 million incurred at the whole complex on empty, which are not reflective of our operations on COVID-19 related cost of $2 9 million, mainly at detour Lake related to the introduction of rapid testing are also excluded from adjusted net earnings.
Appreciation also had an impact on the quarter, we will go through depreciation and depletion expense in more detail on subsequent slides.
Turning to slide 14 in Q1 2021. The total revenue is $551 8 million. The change from Q4 2020 is mainly impacted by deep.
Decreased sales volumes.
And then <unk> 87 per ounce decrease in the average gold price compared with Q1 2020 at 202 per ounce increase in average gold price from 15 86 to 17 88 accounted for $55 million on the revenue growth year over year offset by a decrease from the ounces sold.
Looking at EBITDA on slide 15.
Q1, 2021 EBITDA totaled $349 million.
Changed from Q4, 2020, primarily related to a 20% reduction in revenues impacted by lower volumes and lower gold price higher.
<unk> cost, reflecting higher milling on consumable cost at detour on increased mining rates and milling cost on the cassa.
Compared with Q1 2020, the change in EBITDA was largely driven by $72 9 million of foreign exchange gains in Q1 of 2020, resulting from a strengthening of the U S dollar time.
As well as higher production cost, mainly reflecting three months results from detour Lake in Q1 2021 versus two months in Q1 2020.
All of this was partially offset by $33 8 million of transaction costs related to the detour acquisition last January 2020.
Depletion and depreciation totaled $104 million in Q1 2021.
Share to $21 million $121 million in Q4 2020 as discussed on our fourth quarter results call depreciation in the fourth quarter 2020 was impacted by a onetime adjustment of approximately $10 million, resulting from purchase price allocation adjustments on inventory at detour Lake.
There are the change from the fourth quarter in depreciation is mainly due to lower sales volume.
For the balance of the year, we expect depreciation to remain at levels similar to the last two quarters. Excluding this one time adjustment.
Turning to slide 16 to look at our cash balance and cash flow on.
On the slide you will see that our operating cash flow was strong we generated $272 million of operating cash flow in the quarter before $64 million in cash taxes paid in the quarter during the quarter, we invest in our key assets spending $165 million capital as well as $1 6 million on strategic investments.
And received $2 8 million from the sale.
On the investments in the quarter.
Cash used for financing activities of $98 2 million reflected the $46 3 million, we used to repurchase shares in Q1 as well as $50 2 million used for payment of the Q4 dividend.
Moving to slide 17, it looks like the change in cash in a slightly different way.
Can see that the largest contributor to growth in cash flows our operations, which generated about $294 million of cash which is before income tax paid of $64 million gross capital investment of $46 million.
<unk> spending of $42 million.
Other cash outflows on crude costs incurred at our non operating sites at the empty and whole complex of $10 2 million and corporate G&A of $14 9 million.
As noted in the previous slide during the quarter $96 6 million was returned to shareholders through share repurchases and dividend payments.
The $56 million and other largely reflects payment of AP balances at year end.
Next I will turn it over to Natasha Vaz, our chief operating officer.
Thank you.
Everyone. Okay. So starting on slide 18 for the first quarter of 2021 Detour Lake produced 147000 ounces, which actually exceeded our target levels because of higher than planned average growth for the quarter.
On for the $5 7 million homes.
In Q1, 2021 with a record level from first quarter platform.
On March 20, <unk>, we actually achieved.
A new day.
Good day, or a processing plant of over 10000 tons net.
So we're moving in the right direction.
Alright, so now looking at low cost.
Operating cash cost average $748, an ounce per the quarter book increase in operating cash cost per ounce gold compared to Q1 last year and largely relates to a stronger Canadian dollar in Q1 2021.
The value, we incurred higher stripping and milling cost.
Cost this quarter.
The increase compared to Q1 last year was that mainly reflects higher mill maintenance cost and higher cost for consumables such as <unk>.
Yeah.
As for all in sustaining cost per ounce gold detour averaged 1060 quota on the warrants, which was down from the previous quarter, reflecting low of deferred stripping cost and sustaining capital as well as lower expenditures related to the tailings management.
I'll now call on Lenny.
On a general manager of Detour Nick.
The project with in Q1.
Thanks Natasha.
Looking at slide 19.
As Tony mentioned earlier, we are at.
Projects ongoing at Detour Lake, which support the maintenance from the volume.
Our growth capital expenditure in Q1.
In 2021 totaled $27 8 million.
This includes $14 $9 million related to deferred stripping was changed for from the main pit.
The remaining on $12 9 million was related to the procurement of mobile equivalents projects involving Kevin's management area.
This plant enhancements as well as construction of the new assay lab and irrefutable.
We are fully mobilized and have already begun work on the tailings dam with an earlier start than in years past.
That's for the process plant enhancements were on track to accomplish.
Our objectives for this year, which supports our ramp up plans identified in the new mine plan.
This sheer focuses on crushing CIP and detox circuit.
Additional surface infrastructure projects include a new core shack.
Maintenance complex.
Expansion.
Proved access road and cell tower construction.
Day to their communications improvements initiated this year will support our investment in technology for years to come.
So with that I'll turn the call back to on the fashion.
Okay, so turning to the cancer from Steve.
Moving to slide 20.
On the Kathleen Q1 in 2021.
7000.
Operating cash cost $699, an ounce and an all in sustaining cost of $947 per month.
The change in production from Q1 of last year reflected lower tons, while the change from Q4 2020 was mainly due to lower planned grades during Q1 2021 as a result of mine sequencing.
The increase in operating cost compared to both prior periods.
And largely reflected higher operating tons mined in Q1 2021, and this is in terms of both ore and waste tonnes.
We also have increased maintenance cost related to mobile mine equipment and processing as well we have the impact.
Gold paid in dollars.
Okay.
As mentioned before eight per ounce.
So on average $927, an ounce from Q1, 'twenty, one which would largely unchanged from the previous quarter on higher operating cash cost were offset by lower sustaining capital expenditures.
Sustaining capital total about $9 3 million in Q1, reflecting the completion on you.
On completion of the number of projects during Q4 'twenty total.
We also had lower levels of capital development on this quarter and we also revised the timing of deliveries from new.
On mobile equipment.
Okay. So ill now ask Anthony to talk to you.
Mining Kirkland Lake to look at a project.
<unk>.
Thanks, Natasha looking at Slide 21, we had a very good quarter in terms of our projects as Tony mentioned earlier, we continue to make excellent progress on the shaft four shaft advancing approximately 750 feet in Q1, and reaching a depth of 5000 feet by the end of March.
Another project, we made good progress was in Q1 was our ventilation expansion involving the development of two new vent raises the first raise is targeted for completion by the end of this quarter with the second expected to be completed in the first half of 2022.
The two new raises will almost double the ventilation going into the mine dramatically improving working conditions.
We achieved a major milestone on the vent raises on Tuesday of this week, we broke through the surface with the first race. These raises are significant and that there will be two of the longest raises ever completed for a mine in north and South America, extending over 3300 feet. So to provide some context on that that's twice the height of the CN tower.
I'll now pass the presentation over to Ian on Vice President Co lead Australia on operations.
Hey, Thanks, Kevin Good evening and afternoon everyone.
Are we speaking to slide 22.
First of all for Jason just on 100, non das and answers in Q1 2021.
And that can pay too.
Ultimately 160000 ounces in Q1 2020.
164 hasn't answered the previous quarter.
The change from prior periods.
Finally, the result of low average guidance consistent with our previous and started playing to.
To reduce production in the Swan zone by increasing mining activities in other areas of them on.
The intention is to create a more sustainable operation over a longer period, while we continue on extensive exploration program.
Production in Q1, 2021 exceeded planned levels, mainly reflecting greater outperformance from the Swan zone in March.
This one's on accounted for 42% net tons milled and 72% of answers produced in Q1 2021.
Which.
Compare that to 62% and 93% respectively in Q1 2020.
Looking at cost operating cash cost in Q1 2021.
$228.
While all in sustaining cost of 420 tradeoffs.
<unk> were higher than in prior periods with the K factor driving unit cost performance by the impact of a low a guide on sales volume.
In addition, <unk>.
<unk> Q1, 2020, we also had significantly higher tonnes mined and milled.
System for their claim cost.
Thank you Rick described with increased throughput levels.
It was always on a foreign exchange impact given the significant strengthening of the strong dollar.
Contributed to jump a lot cost, particularly this last year as this quarter.
I will now pass the presentation over to Eric Kallio, Senior Vice President exploration.
Thanks, very much and good afternoon, everyone.
Thanks, Ian and good afternoon, everyone.
My first slide today will be number 23 and related to detour, where we're continuing to advance the large scale dual credit program. We commenced in 2020 to evaluate resource potential surrounding domain and future less kits as previously announced the program includes a minimum of 250000 meters and aiming for an updated resource on potentially expanded mine.
Plan for announcement in early 'twenty two in terms of progress to date, we believe it's been going very well with close to 70000 meters of drilling completed in 2020. Another 60000 in Q1 and things still proceeding very very well.
Additional to this we've now had low now already seeing quite a large number of assays return and had five press releases, including one earlier this week with the results that we believe are very very encouraging.
Summarizing some of these results.
Image on the current slide which is a long section from the latest release and as indicating 40, new holes, which are mainly from the saddle zone, but with a number of others from both under until the west of the future less debt. Although all areas continue to look very good we're especially happy with what we see in the central and east part of the saddle where drilling continues sooner.
Broad zones of mineralization that very good open pit grades with higher grade southern Iraq.
Difficult results further central and East area are shown on the image with thinking green dots and as indicated include a number of outstanding intersections such as 113 over $155, one two point or three over 73 net.
And over $13 31 over five all from the lower part of the current resource sale as well as one point away from 56, and <unk> nine of 103 meters from areas very close to surface.
Additional to the Bill we also saw some very good results nearby to the future west it.
Where again the intersections not only demonstrated very good widths in grades but extension of mineralization to depth.
And to the West key results from hole testing the debt are shown on the image of Blue and include intercept such as $2 nine for over $51 nine.
237 over 36 meters, which intersect the central part of the area.
Between the 25 and 50 meter level below the current pit shell.
We also had $2 two six over 'twenty, one and one point on for over $46 nine on the east side.
Area.
Okay key holes to the west are highlighted here on Yelp and as indicated not only confirmed strong mineralization up to 400 meters in distraction, but include a high level of $10 six six gram per tonne over 13 meters. In summary worked to date a detour continues to debt is very well and argue furthering our initial theory that there is a much larger growth.
And here than previously thought.
So now turning to my next slide.
So the number 24.
We see an image of the cost of mine.
Let's outline the overall exploration exploration plan for 'twenty, one as well as progress for Q1.
As announced in the past, we're aiming for a minimum on a 50% to 300000 ounces to replace the ounces mined this year and it's going to be from a different areas, but strong.
Yes.
Yeah.
Of the current resource.
So on here in Orange as well as it related to the sale.
They're all high potential target areas, where we've always had a lot of success in the past.
And we're very optimistic again this year.
Additionally to this the plan includes work on a number of new areas on the 34, 51% and 58 levels, where there has been not been any recent work, but non view have a lot of new potential to add.
Work on the 15th level will be done mainly from a new drip being developed for access to the number four shaft.
And targeting both the up dip extension of the SMC as well as the worst part of the main breaks at depth, where we announced high grade intercepts and a new high grade corridor.
Last year.
Work on 34.
From exempt.
So that number two shaft and testing for extensions of the main break switches.
Shown here in the dark blue in the background.
Yes.
As well as looking for new structures, which could be above on parallel to the south mine complex.
And the work on <unk> 51, which is on the far left side on the slide here will be will be from a new drift, which we're going to be developing this year and extending west from three shaft.
So on this area will be targeting is really the down plunge extension of the main break so again, the larger blue structure, which you see on the slide here on this area is going to bring us out past the previous Ltd pass mining, where there's very little testing.
Aside from this we have a small amount of work both on surface and then the new surface ramp where again, we still feel there's a lot of areas that have not been fully tested and a lot of untapped potential.
In terms of progress to date I believe it's been going very well, but 46000 meters of drilling completed in Q1 and more of a lot of this focused on the SMC, but some small amounts on $34 58 already starting.
Also accomplished about 450 meters of development with good portions of this being completed to gain access to the new targets on 34, 51% and 58.
Low low results to report today.
We see good progress being made so far and the income.
Our success from 'twenty one.
So now turning to my next slide.
Which is number 25.
We should see an image.
For the Fosterville mine area and outlining the exploration plan and recent progress here in Q1 as well.
And as with the cancer program here is aiming to at least try and replace all ounces mined in 'twenty, one which is in the order of about 450000.
As indicated the plan includes work on a number of different targets with most of the focus being on the lower part of the Fosterville.
<unk> and the Robin's Hill area with the remainder being on a series of new and what we believe are very interesting targets line to the south.
Work at Fosterville will be all from underground involve drilling that is strongly focused down plunge of the Swan zone to both convert and expand the current resource.
As you know this is a very high potential area. We already have we already have widely spaced drilling indicating that the system extends for at least another 900 meters.
Down plunge and with locally higher grades and visible gold. So we're putting a lot of emphasis on this some of the work is planned from existing debt.
Part of the zone and already in progress in Q1, but the largest part of this will actually be from a new hanging wall drive.
Is being developed.
Near the 3900 level.
And.
Aiming for completion in mid June so as such most of the new results from this drilling.
We will believe will be quite positive will only become available to US later this year.
Where could Robin's hill, non mainly from drilling from surface, but expecting to do at least some drilling from underground platforms and our new exploration drive starting sometime in Q3.
As with Fosterville, the drilling will be strongly focused on the area down plunge of the current reserve we already have seen some good success, but believe there is a lot more potential for ounces and higher grades.
In terms of progress to date brookstone for exceeding well again.
<unk> over 39000 meters of drilling into key targets at both Fosterville and Robin's Hill. We also have one eight kilometers of development on our two main exploration drives lower Phoenix and Robin's Hill.
So in summary, I think we had a pretty good overall quarter for exploration.
Still the feeling very confident on achieving our goals for 'twenty one.
With that I'll now pass the call back to Tony.
Okay.
Thanks, Eric.
Natascha is varian had been true and Ian for an end Mark for supporting this call I hopefully by giving you a variety of speakers, we keep everybody interested.
Anyway, that's going on.
As summarized on slide 26 and on.
Again, I think if we if we just keep things in very short touched on in terms of what the highlights for the quarter. It wasn't very stocks on solid quarter from our perspective, we beat many of our own targets for the quarter.
We are now poised for three very strong quarters over the balance of the year and we are on track to achieve all of our full year 2021 guidance and we see with projects coming on this year in 2022 being a very strong year 2023, having a lot of thought.
A lot of developments and really we see a lot of upside as we continue to move the company forward, but very importantly, we are well positioned.
Coming into Q2.
To outperform our peer group in coming months and really its based upon a number in Q3.
Three key points. One is we've had we continue to have significant success at detour Lake and <unk>.
Sure.
We really believe it's true we're going to be able to demonstrate to reform to the premium on the gold.
Gold mines.
In North American and definitely in the world.
We will be demonstrating that over that over the next while number two we're going to we have continued progress with a number four shaft at Makassar combine that with exploration operating success on operating growth, where we are going to be creating a new mine.
Again upside so we see Mckesson is being coming into 2023 as being one of the one of the motion.
The top 10 in terms of.
Largest underground gold mines, and what was again one of the most profitable coal mines in the world and number three with our extensive exploration program at possible we see.
We have next day, new attractive exploration upside.
In terms of being able to demonstrate that it's possible is already one of the best gold mines in the world.
With the exploration success, and new discoveries of new gold mineralization as possible.
It's true there is I'll call all things point to it being able to demonstrate long term sustainability.
At Fosterville as well so we have three solid projects very profitable company cash flow generating.
And we're focused on responsible mining and really being able to be leaders in terms of moving forward in terms of making a change in supporting a lot of change and lots of support from the communities that were debt would be working from.
And we thank you again for participating in today's call and happy to take any questions.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Cosmos <unk> from CIBC. Your line is open.
Hi, Thanks, Tony and team.
Maybe my question is on cost.
There's nowadays some concerns about inflationary cost in them.
Mining sector.
You know with a big project like shop number four.
Are you seeing any kind of impact in terms of higher input cost.
And how are you managing that risk and I guess, if we can talk about the strengthening Canadian dollar as well in this case it may actually help if you're making any purchases in U S dollars, but could you talk about you know inflation.
And how do you manage that risk or a big project like shop number force.
Okay.
I'll start on our public debt.
Cash and maybe gives us a little bit of color in terms of some of the things that we're seeing in seamless.
Great.
Thank you on the cash but.
First of all free cash number four I mean net project has been has been ongoing for quite some time a lot of the procurement has been done.
You are correct that there is.
<unk> effects and there is extra cost associated with just a lot of things coming out and learning how to live within this pandemic type environment in these processes, but for the most part debt number the number four shaft net since the scope is defined since the there are a lot of.
Parts of the project has been fine, we don't see ourselves going over budget and all that.
At Mckesson.
And schedule in terms of completing that we we are seeing.
<unk> and fuel cost et cetera.
Maybe it'd be better if by that Larry.
Very uneven and even give some color there I don't know Barry you want to give a little bit of thoughts on on what do you see some cost happening.
Yes.
We're seeing an impact I guess.
Some of our consumables.
Fuel in particular machine.
The increase in the price of fuel.
Surely mature low detour, obviously because of the high volume that we move.
We're seeing a slight increase from maybe some some things like steel and in parts Lake, but again, a lot of a lot of the activities and repairs.
Ongoing for this year, but our fixed fixed prices.
But unfortunately, we have no water truck boxes and things we have.
The contracts that are in place so we won't be impacted that way, but there is some question, but some.
I would think it's material at detour.
Yeah.
And.
I think it's definitely the day.
<unk>, both Canadian and Australian dollar has offset some of the some of the impacts on some of these areas.
Any color on Ian from Australia.
Yeah. Thanks, Tony.
Really seen strong pressure across the board.
Really at this stage.
Just on as Larry We've got a number of long term contracts in price.
A lot of that from shambles.
And app and their budgets and therefore your guidance were based on.
Slightly conservative numbers in those areas anyway, and we're actually tracking slightly under on some of them sorry.
Sorry, sorry.
It's on a mind you can share Nevada States certainly from a libre from a life of point of view, we're not seeing any significant increases in terms of.
So library library across indexes or anything about that.
Great. Thanks, Doug sorry.
Sorry, Tony.
And for the most part.
As you can see we're not ready.
And any of our cost guidance. So we don't we.
We see things being manageable as we progressed throughout the year so okay understood.
Understood. That's the only question I have less should keep mark hoppe. So thanks again.
Thanks Scott.
Your next question comes from line of <unk> Habib from Scotiabank. Your line is open.
Thanks, operator.
Tony in Brooklyn, and team and thanks for taking my questions.
Couple of questions from me.
Starting off with <unk>.
<unk> you had in March and obviously it was a pretty strong performance that you've been talking about.
Any color you guys can provide on whether this performance has continued into April.
Natasha you want to you want to give some income.
Color there that's okay sure sure sure no problem.
Hi.
So with respect to March we had a we had a pretty strong March.
Yeah.
There is a detour lake had mentioned that throughput for that and that's a function of the conditions me on them pretty mild winter. So we were able to operate both mine and the net.
Better than expected in net time, so that.
So that helped on that and then fosterville.
I think you know dimension this debt.
We had I still that outperformed how about what he had done.
So that was a very positive reconciliation on that end.
In terms of April.
Q2 weeks, that's like I mentioned I think we are.
On a week.
Great to have a Q1 that was on.
The next three quarters income that can be better it's going to be.
More weighted to the second half of the gasoline.
That's wrong.
Each day.
And Ken Burns on the catheter, we are seeing good productivity at 18 months.
I'm from good reconciliation.
Perfect. Thanks, and just kind of follow up on that.
Regarding detour.
<unk> grade was higher than average.
In Q1.
We're expecting in Q1.
Was this due to cluster reconciliation or was this just the fact that you moved into a higher grade areas during.
During the quarter and essentially what I'm asking is have you moved into phase III from phase two.
We're in phase two right now.
That could be actually mined.
We took more out of the pit.
What we had put on top of the meals Marshall you were able to it's a bit of a bolt on if anything I would say 50 50. He had all day I apologize that continuation, but we also when you book a bang up high grade material that you had for accounts that later on.
Okay. Thanks, so much on I'll stick with my two questions on jump back in the Creek.
Your next question comes from the line of Mark.
Sure Mike Parkin from National Bank. Your line is open.
Hey, guys. Thanks for taking my questions.
One would be on the new vent raises that in accounts is that.
Now on a situation where the challenge you had last summer with high ambient temperature side.
Where you could access safely underground from a heat.
Our perspective is that kind of a thing of the past so you've got that.
Q3 kind of Derisked.
Go ahead, Evan I think.
It's definitely going to help if it's helping as we speak.
Yes.
Absolutely going to provide more air in cooler air down there. So the range the raise actually extends all the way down to 5600. So that's just two legs, but the longest leg is 3300 feet.
Oh, yes.
There is a parallel raise that debt.
That's ongoing right now too so.
Hopefully you can get that done and then once that.
And that's another step change and then and then once the shaft is connected.
<unk> and major step change as well right.
Okay Super Oh, Yeah for sure.
And then just on the investments being made on the ESG front.
With the goals moving towards net zero is there any thoughts around you know detour, maybe using an in pit conveyor to limit the amount of trucks youre using is that something.
Might be considered for the new life of mine plan, especially as you if you're going into the west detour pit and you're moving further away from the pit seems like it could be a big opex savings too.
Yeah. Good point, we're looking at a variety of alternatives and debt that's one thing.
The cash at Larry again, even even provide some supporting commentary on that.
Yeah, that's part of that on that initiative.
On a number of actions things, we're looking at Vale day looking at conveyors have been looking at trolley assist as well.
Yeah. So.
Just starting off.
So there's still a lot of the one thing to do on on.
Yes.
Yeah.
Alright anything debt.
Yes for sure from all those things I'm looking at.
Can we put more on material hidden pits and not have to hold on.
And to the spoils other energies.
Yeah, that's one area, where you can be sequenced the pits, where there is a point in time when you start putting back filling back into the pit as you move from east to west, but Theres a number of goods.
Those initiatives one big initiative for this year is getting a private area networks. The partnership we have Rogers communication.
Up in the region and being able to start advancing treatment excess use of technologies and be able to look at the.
A lot of ways to really transform a button on the.
Operations at <unk> over the next one.
Great.
Just one last question the $75 million, you're planning to spend on most of your sheet initiatives for the next several years, how should we think about that flowing through will be all capitalized.
Okay.
Go into different buckets on the financial statements.
Go ahead.
David.
And a variety of areas some of it.
Parts of it that are already on our budgets, but David.
You can answer that.
Yeah, a lot of the tons per hectare that is already incorporated into our guidance.
Numbers.
There is a.
Arjun luck Wendy in the technology.
And on business optimization and debt.
Focused on growth.
And so I would say a little bit on each of the buckets, but with a focus on growth.
Okay Super Thanks, that's it from me guys.
Your next question comes from the line of John Tumazos from John Tumazos, very independent research. Your line is open.
On gross toning cash and the gang on the good work guys got to stick to two questions. So I can move from New Jersey shore on a detour camp.
<unk>.
First.
Thank you for disclosing the great.
Tonnes and ounces zone at Fosterville.
It looks like carrier in lower Phoenix more than doubled their tonnes from a year ago.
And their greed rose from 9.4 to seven.
296 from seven eight.
So something real goods happening in the new stopes at Fosterville in Q2.
Elaborated on that first.
Then second.
The whole number one O three that was the first line of the press release Tuesday.
I understand the great result.
There was nine grams over 13 meters.
The other 141.6 meters.
The algebra works on 0.397 grams.
Two.
The 1.1 on the three grams over 155 meters. So the 146, one a mistake.
Or do you have to take that out.
<unk> 907 grams.
Because it's between 350 and 400 meters and the pitch.
And youre going to have the world's biggest stockpile from $2 40 to 2000.
<unk> 45, or 50 of 0.4 Gram material.
Eric.
That's all I can tell you is that right.
On the nine over 13 meters does not in whole 103.
I might have an average versus the first sentence of Tuesdays release.
Well no.
No it is not an including.
On the 103 is.
That one is $1 one three over 155 meters.
And then that's a $1 three net.
<unk> is on hold 79.
B W.
So it's not inclusive, they're all different interception theres no smearing.
That's right that's a separate intercept altogether.
Thank you excuse me I thought it was.
Something else.
On the.
Sure Tony Hawk, and probably tackle the first part of that question when it comes true.
Cost of production.
We've got a number of designs in low Phoenix.
Debt contributed for the quarter brings.
For instance, I was wondering.
Tom we mined stopes in the rap that area that certainly is.
Proven to be.
Solid contributor for the quarter and we did have.
Well well worked out we did have some some solid contribution from the area and we saw some higher grades and Harry a hard than we historically have seen.
So we are trying to balance the entire mining production currently.
Looking good at Fosterville.
Yes.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of carry on recurring from Canaccord Genuity. Your line is open.
Good afternoon, everyone, maybe just a question on detour.
The daily limit lifted there just how should we think about throughput over the balance of the year I assume.
That's going to increase from here.
Well I think when we gave out our guidance for the year. We expect this year to be about 24 5 million tons total give or take a few percent process. This year.
And then by 2025, and our forecasts and our technical reports it gets up to 28 million tons a year.
Based on a number of project initiatives.
Progress but.
Natasha you want on it are Larry you want to give it.
Simple supports on that.
Thank you.
You mentioned the team in 2021, we're planning on having a $24 5 million times, so that hasn't changed so on average.
67000 tons per day.
And then slowly growing that 2025 to 28 million tons I'm sure. They plan on doing to just over 25 million tons slowly as the other projects come on line, we get to 2017 and in 2007 2020.
And then maybe.
Go ahead I'm sorry.
And I think day I mean, one of the things that's going on.
As the year progresses on Larry has been working on alternative feedstock, but I think the biggest two projects we have that debt going on this year would be the installing that screen decks be before that between the primary crusher and the secondary crusher on both secondary crusher sites will be doing one and then the other one in meantime, as an alternate feed system.
On being put in place to try to keep the mills to be able to keep the mills running on day, one Phd side running during the during this period of construction and net net to leads into further increases in 'twenty two as we progress with future years right. So.
Okay, Okay, Great and then in Q2 last year, where there was a pretty big cash tax payments just wondering if theres something similar that we should look out for this year for Q2.
David.
Yep Thanks, Tony.
Yeah last year, there was a large.
<unk> came in in June that was really related to the filing of our Australian tax returns.
And so we're.
We're still working through the.
Extra terms this year.
We probably will see an increase from Q1, because Q1 is just the.
But as we close out the year, we had a very strong year.
Last year in Australia.
Probably expect an increase from what we paid in Q1.
But I am assuming nothing near the magnitude of last year.
Well it could be it could be on last year was again a record year I expect the taxable income to be.
Significantly higher.
Last year was the previous year on installments keep in mind on installments are based on.
Not last year taxable income the year before so 2019.
And.
So I'm expecting so our installments aren't really enough to cover what the full taxes in Australia and so that's why you see a bit of a cash.
In Q2, because we are not prepaying.
Taxes, so when we file our tax from firms all that stood up and we but we get a better idea on what like.
Sometime in Q2 on the tax turns on finally.
Okay, great. Thank you.
That concludes our Q&A for today I would now like to turn the call back over to the senior Vice President of Investor Relations Mark Haden for closing comments.
Thanks, very much operator, and again, thanks, everyone for participating on the call today as you've heard we've.
Got a lot going on we've got a lot going to look forward to.
And a lot that we're going to have a lot to talk about over the balance of 2021 and into next year. So we look forward to our next call to update you on how much more progress is made it looks very much have a good day.
Thanks.
That concludes today's conference call you may now disconnect.
On the book.
Good afternoon.
Okay.
Right.
[music].
Yes.
[music].
Thank you.
[music].