Q3 2021 Kirkland Lake Gold Ltd Earnings Call
Good morning, My name is Chris and I'll be your conference operator today.
At this time I'd like to welcome everyone to the Kirkland Lake Gold third quarter, 2021 conference call and webcast.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll be a question and answer session.
If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.
And if you'd like to withdraw your question. Please press star one again.
Thank you Mark, adding senior Vice President of Investor Relations you may begin.
Thanks, very much operator.
Everyone to our third quarter 2021 conference call and webcast.
With the timing of our planned merger with Agnico Eagle.
We're very excited about this will likely be our last conference call.
And I think if you've looked at our results you will agree with me.
And we're finishing with a bang.
We've got record earnings.
<unk> low unit costs.
And a continuation.
Industry, leading and industry, leading track record over the last five years for returning value to shareholders.
To talk about all these things on today's call.
With me today are most of the members of the Kirkland Lake Senior executive team.
Today will be Tony Makuch, President and CEO, David Soares, our Chief Financial Officer.
And attached to that.
Our chief operating officer and on.
Our vice President Australian operations, Larry Mcafee, our vice President of Detour Lake.
And having <unk>, our vice President mining Kirkland Lake as well Eric Kallio.
<unk>, our senior Vice President of exploration.
Slides accompanying today's presentation are available on our website and through the webcast.
During the presentation, all up the call for questions and answers.
I will draw your attention to slides two and three.
After the presentation, which contains our forward looking information and other cautionary language.
We will be making forward looking statements on today's call. So I ask you to give that information due consideration.
We will also be referring to non <unk> measures during the course of the call reconciliations.
These measures is provided starting on page 37.
DNA, we filed late yesterday finally, all dollar amounts mentioned today will be in U S dollars unless otherwise stated.
With that I'll turn the call over to Tony Mukherjee, President and CEO.
Okay. Thanks Mark.
Everybody for being on the call.
It's not necessarily our last quarterly call.
Named mainly when we're talking to you in.
Future quarters.
We have had lots of lots of success.
Mike over the last few years.
Definitely very very strong Q3.
I'll go through the results in the agency <unk>.
Lots and lots of outperformance at a number of areas, particularly fostered mill down in Australia, where at the end of the three quarters already achieved full year guidance.
It continues to that too.
And it's not just great tonnes and grades coming out at Fosterville plus.
Very high level of safety performance operational performance.
Thank you to detail in terms of the kind of social issues there.
Great job in terms of the environmental cleanup, that's going on up in the northern territory in Australia contributed to this but the leadership, but all the people at <unk> and <unk>.
Number the whole people that working for us in Australia.
Exceptionally good job in the region.
And to thank them for what they do and then over in Canada, We haven't been significant success and significant success.
In Q3, and again future tend to have a very exceptional.
Great record in Q3, but we had a very exceptional Q4 as well again.
Demonstration of a strong leadership in the company right.
<unk> from.
Corporate breakdown through the operations and fundamentally the people driving the trucks that people doing the work at <unk>.
At detour and rethink big differences again.
We thank them for what they do.
Work onto achieved in the quarter and as I say, we're looking at a very strong Q4 as well finish off the year anyway I'll start on slide four here.
I'll just highlight a few things we did have a recent announcement of an agreement to combine our merger of equals with Agnico Eagle mines.
From our perspective this is a very exciting development for our company.
And our shareholders.
The Big thing is for Andrew merger creates a new leader in the global one <unk>.
<unk> and.
Creating more mining company that can definitely be a leader in trend in terms of transforming the non recast property industry, but also transforming changing the perception of our industry as we move forward.
Moving to slide five.
<unk> is basically give some of the highlights of it.
All of our merger with Agnico.
Basically we are creating the highest quality vehicle producer with the lowest unit cost less risk profile.
Leading in key areas of ESG and extensive approach and pipeline to drive future growth.
The combined companies have significant very strong financial strength and extensive pipeline of projects to dentists.
And when combined with a strong balance sheet, good solid operations are performing well and profitable.
We see the opportunity to fund future growth internally.
<unk> will bring consolidation a big thing in consolidation activity region of northeastern Ontario, Northwestern Quebec provides significant value creation opportunities through synergies and we see some other business improvement initiatives and I think one of the biggest things.
From our perspective is the development of the new offer deeper in the amalgamated Kirkland properties now.
All remaining that into instead of a gas operations and program 19 guidance, a significant benefit to northeastern Ontario, and definitely for the shareholders.
Legal and.
We see the new Agnico Eagle <unk>, and we got a demonstrated by the <unk> warrants a premium valuation.
Fundamentally.
It will drive that.
Combination of increased scale and low cost low risk operations, but I think fundamentally superior financial performance and continued strong balance sheet strength and good execution of offering of results, which will be will be key to driving that value.
We want a premium valuation.
And we see it as a great deal for our company and our people at the time as well as our shareholders communities and all the stakeholders groups.
Group two to comment if thats has to deal with.
Now move over to slide number six centers, so talking about our Corp third quarter results.
Slide six years relief against you gave him focusing here maybe give you a quick update on our responsible mining efforts.
For US responsible mining is integral to everything we do and is ingrained in our culture all of our Canadian operations anticipated in the first National day of truth and reconciliation with learning seminars for all employees supporting ethanol and we are doing things to support local indigenous companies for our insurance programs and each one of our 795 trucks in each of our late March.
Additionally, altra bids were painted green to support mental health awareness with seminars and employee training programs.
He held that bookings in both Canada, and Australia, and medical Australia, We committed 600000 volatile Colby Wellness center and cancel wellness program to assist with the sustainability of the program and expanding wellness services and improving access for patients.
Our leadership had minimizing and reducing carbon emissions. We took additional steps in Q3 2021 to achieve further reductions, including testing and building an energy storage system from entirely recycled volumes.
The battery case and batteries for margin for us.
Turning to our financial and operating results on slide seven as mentioned Q3, 2021 was a quarter of substantial progress in being highlights.
As Mark alluded to some at the beginning but record quarterly earnings solid year over year production growth.
Cost significantly better than full year guidance and strong cash flow generation.
Our record performance was driven by strong operating results, including quarterly production throughput and all in sustaining cost of Detour Lake Q3 was a tremendous quarter for deal related production was 189000 ounces beat the previous record of 166000 ounces in Q2 of this year by 23000 ounces a 14%.
And.
As I said, we're on track for four and a new a new record in Q in Q4 this year.
We will also address.
A very strong quarter and a strong.
Contributing to our record results.
And it was a combination of great outperformance as well.
As high or higher levels of throughput to the mill. So the operating regions very successful in terms of moving forward at Fosterville.
And does the.
The drifting on driving our.
Having achieved record production performance and it also helps in terms of our unit costs and in our unit costs in Q2 in Q3 beat our full year guidance ranges.
We are also being impacted by we are being impacted by the exchange rates and inflationary pressures in certain areas, but our operations are doing very well in managing these costs and we're in very good shape to meet our guidance for the year in terms of cash flow, we had operating cash flow of $323 million and free cash flow of $141 million David sorry.
So we get a little more color on those areas.
Turning to slide eight we continue to have a very strong balance sheet with cash at September 30 was $822 million again, a very clean balance sheet and no debt.
We also continued on a very successful track record of returning capital to shareholders. During Q3, we returned $175 $3 million $50 million through Q2 dividend paid on July 14th out of $125 $3 million for the repurchase of three 1 million shares through our ntis.
Turning to slide nine a significant component of our successful track record with capital allocation with investing capital for future value creation, we released encouraging exploration results at all three of our cornerstone assets remain on track with our key growth projects, Eric Kallio will give a little bit more color on that but maybe I'll just talk.
A few things here and they know the exploration success that activation program at detour.
When we announced it.
In early September we announced a $10 1 million ounce increase in measured and indicated resources at Detour Lake is triple the open pit M&A resources.
Yes.
It was.
And feature and we CNS was was definitely a milestone in terms of being.
Able to support strong growth in mineral reserves and future that's going to come out next year as we complete our studies this year.
And then earlier this week, we announced additional new drill results.
I think with the these continue to highlight the fact that north of 10 million ounce increase in resources is not the end of the Dol.
Still see the potential to continue to grow the resource at <unk> before the end of this year and then really supports what we where we what we give in terms of our view and the view we put out a detour.
We acquired it back in when we made the acquisition announcement back in 2019.
And besides the exploration success at <unk>, we are making very good progress, but a lot of other.
The projects at the mine in terms of value creation and optimize the operation that included we increase increasing the throughput in the mill actually the milling.
July and August Q3, actually was running at a rate.
Almost 28 million tons per year.
We had no significant improvements in great management at Detour and we have a lot of other infrastructure that we are installing at each of the really helped in terms of the build build build the operation for the long term and we support future future improvements both in an operating performance, but also on the safety.
Karen consideration.
The silence.
<unk> the number four shaft remains ahead of schedule on track for completion later this year. We also had twice already.
Cases completion of thinking later this year the actual.
The actual installation of loading parkinson.
And getting the ore handling system and the changeover from a sinking plant two.
Our production plant will be when we started and we expect that shaft.
Turning to full production or be converted for production in Q4 into Q3 and Q4 of 2022.
We also have significant exploration success at macassar, expanding this <unk> complex and identify new areas of high grade mineralization on both the automated and main breaks and looking at Fosterville, We did come up with a very new.
And interesting exploration results David lease at the end of August.
And I guess, what it what it tells you there's potential for continued.
The discovery of new high grade intercepts in on our goal of possibilities to demonstrate an operation of 300 to 425000 ounces a year on an annual basis for seven to 10 years on production I think we're definitely we have lots of work to do but we definitely feel confident that we'll be able to achieve that and demonstrate that.
To shareholders.
Now moving on to Slide 10, this look at our year to date results.
We had a solid year to date operating opex.
Versus our full year guidance.
Production with just under $1 1 million ounces, a 5% increase from year to date 2020.
We achieved a very solid unit cost performance record earnings and strong cash flow generation.
You can also see that on the slide that so far this year, we have repurchased four 5 million shares for close to $184 million.
We returned $300 or about $334 million to shareowners holders, which represents $1 28 per share and three.
$317 per ounce produced and year to date 2021.
Now on slide 11, let's look a bit closer on a track record of returning capital to shareholders.
We have now returned a total of 136 billion to shareholders. Since we first introduced our NCI in May 2017, and our dividend policy in March 2017 of this amount one one or walk just over $1 billion was used to repurchase 31 5 million common shares and.
And $315 million was used to make 17 quarterly dividend payments.
So dividend payments have increased seven times since we began issuing them in 2017. In addition, since mid 2016, we have eliminated 195.
Of our $190 million of debt. This includes paying $98 million of debt held by New Triple Corporation. Shortly after the after acquired in January 31, 2020 $30 million was also used to close the features hedge position. We are in a very good return on that $30 million given the changes in global commodity prices and FX rates in fall.
In 2020 and into 2021, we also repurchased an RSA, 1% Anasarca at Mckesson for Franco Nevada in 2016.
I'll, just sort of almost $30 million to $36 million.
It all up in aggregate, we have provided $1 6 billion $1 billion of value to shareholders. Since mid 2016, and we've done all this while also building the industry's strongest and cleanest balance issues.
Looking at Slide 12, it shows our performance against guidance.
As you can see we are very well positioned to achieve our guidance entering the last quarter of the year. We are targeting targeting the top end of our guidance production guidance and on track to achieve our operating cash cost per ounce guidance.
We are doing very well in terms of all in sustaining cost per ounce sold and $785 with our year to date all in sustaining cost is better than our guidance, we definitely expect to meet potentially beat our all in sustaining cost guidance for the year and that's in spite of.
Inflationary pressures related to fuel and power and energy costs, and an effort to change, India and the FX rates without an impact.
Looking at our expenditures if you've taken the sustaining and growth capital expenditures together total capex guidance is 530 $585 million for the year and we are tracking to be in line with that range also exploration spending should be in the low end of our guidance of $170 million to $190 million for the year.
The lower end of achieving the exploration guidance, meaning mainly a function of lack of.
And get access to drills, we get access to.
Two sets of auditors lot of equipment to do the work, but we can get people demanded journals and thats been a challenge and it has been a challenge for our industry going into 2022 anyway with that I'll turn the call over to David Soares Our CFO.
Thank you Tony and good morning, everyone.
Slide 13 in Q3 2021, we achieved record net earnings of $254 9 million or 96 per share. This represents a 26% increase from $202 million in Q3, 2020, and 4% increase from $244 2 million from the previous quarter.
Increase from both prior year prior quarter and prior year resulted mainly from higher revenues.
Adjusted net earnings totaled $241 3 million or <unk> 91 per share. The main difference between adjusted net earnings per share of $19, one and net earnings per share of <unk> 96. In Q3, 2021 was mainly related to the exclusion of $15 6 million net tax recoveries, resulting from the optimization of <unk>.
<unk> deductions for Ontario mining tax on filing the 2020 tax.
Foreign exchange gains cost attributed to nonoperating assets, mainly in the northern territory system implementation costs as well as COVID-19 related costs.
Turning to slide 14 in Q3, 2021 revenue totaled $667 million. The change from Q2 2021 is mainly driven by an eight.
Ounce increase in sales volume, which was partially offset by lower realized oil price in the quarter.
Paired with Q3 2020 revenue increased by $34 million up 5% year over year, mainly due to a higher gold sales volume, which increased from 332000 ounces in Q3 2020 to $372 1000 ounces in Q3 2021, with the increase largely reflecting record oil production.
<unk> at Detour Lake and strong production at Fox possible path, partly offset by unfavorable impacts from the lower average oil price.
Okay.
Moving to the next line and looking at EBITDA on Slide 16, Q3, 2021, EBITDA totaled $451 6 million, which was comparable to Q2 EBITDA of $451 3 million.
Paired with the same periods in 2020, EBITDA increased by $67 million, mainly as a result of higher revenues.
Looking at income taxes, our Q3 2021 net earnings benefited from a lower effective tax rate of 25, 3% versus 31, 6% in Q3 2020, mainly as a result of the $15 6 million net tax recovery related to the optimization of the eligible tax deductions for Ontario mining.
Tax.
Following our restructuring of the company's Canadian entities early in 2021.
Sure.
Moving onto slide 16.
We look at the.
Q3 cash flows you can see that the largest contributor to the growth in cash was from our operations, which generated about $396 million of cash. This is before income tax paid or $78 million gross capital investment of $88 5 million in exploration spending of $39 4 million in them.
Other cash outflows since with the costs incurred at our nonoperating site, mainly at the MTN holders complex of $15 million and corporate G&A of $14 3 million during.
During the quarter of $175 3 million was returned to shareholders, including $125.
$3 million used to repurchase shares through the Companys, CIP and $50 million of dividend payments.
Sure.
Turning to slide 17 to look at our cash balance and cash flow on a year to date basis, we generated nearly $1 1 billion of cash flows from our mining operations. After sustaining capital we paid $298 million of income taxes, we invested in our key assets and during $217 million in growth capital.
At $128 million in exploration expenditures, we would've accumulated ending cash balance of nearly $1 2 billion before returning $334 million of capital to shareholders.
Rising of $184 million used to repurchase shares at a 150 in dividends paid on a year to date basis, ending the quarter with $822 $4 million in cash.
Next I'll turn it over to our CFO and Tasha bass to discuss our operating results.
Thank you David and good morning, everyone I'm on slide 18, which outlines our consolidated production results for the quarter and year to date.
Overall as Tony mentioned earlier, we achieved solid operating results in the quarter production just over 370, <unk> compared to 339500 <unk>.
2020 and of course, the record production of 379195.
In the quarter.
Our operating cash cost per ounce sold.
Alright, thank you.
<unk> announced which is well below our full year guidance and then as far I E. Take pounds sold. It was also very strong at $740 and now this is a 16% improvement from Q3, 2025% better than the previous quarter.
Systematically Telus announced 10 days inventory to our full year guidance range of 790 to 10 nanometers.
And then when we look at our year to date operating results. Thank you again, John Guinee production totaled one 5 million ounces, which is a 5% increase from year to date 2020.
Operating cash cost per ounce sold with $486, an ounce compared to 407 and year to date 2020, and finally, I think landfills were $75.
Announced that anytime in the board in year to date 2020.
So with that we'll now get into a little more details on the operations and I will turn the call over to Ian Holland, Our Vice President of Australian operations to provide an update on Mako.
Thanks, etc.
I'll start with book to Bill on Slide 19.
First of all we had a very strong Q3.
First we will produce 130 <unk> in Q3 2021 based on processing just over 190000 tonnes at an average grade of 23, six grams, a ton and average mill recoveries of 98, 7%.
Production in Q3, 2021 exceeded expected levels, mainly due to continued growth and performance in the Swan zone.
For the year to date, we produced 401 for SaaS enhances significantly higher than target levels.
Largely reflecting greater outperformance and the multiple Swan zone starts June year to date.
As well as some changes of sequencing involving moving hard ride starts from Q4 into Q2 earlier in the year.
Production EBITDA Tonight 2021.
With production of 476000 ounces.
Year to date 2020.
The reduction, reflecting lower average grade consistent with our previously stated plan to reduce production with the intention of creating a more sustainable operation. While we continue our extensive exploration programs.
Partially offsetting the impact of a planned reduction in the average grade was a 28% increase in tonnes processed to just under 525000 tons year to date 2021.
Turning to costs.
We achieved a very strong performance for both Q3 and year to date with <unk>.
Three we had operating cash costs of $170, an ounce and all in sustaining costs of $637 an ounce.
For the year to date operating cash costs averaged $194, an ounce with all in sustaining cost of $367 an ounce.
I'll now turn the call out <unk> General manager and box prison on day two of like months.
Thanks Kim.
Starting on slide 20.
As Tony mentioned earlier quarter, three was an outstanding quarter for Detour Lake.
We achieved record quarterly production in Q3 of 189000 ounces based on processing $6 2 million tons at an average grade of 1.04 grams per tonne.
Average recoveries of 91, 6%.
This is an increase of 35% from Q3, 2020, and an increase of 14% from the previous quarterly record of 166000 ounces.
In Q2.
Quarter over quarter increase was largely due to a 5% increase in tonnes processed as well as an 8% improvement in the average great.
Mining during the quarter focus largely on high grade areas as part of the phase two mining plan.
For year to date 2021, we produced 501 8000 ounces.
38% higher than the eight months after the acquisition last year and.
And a 22% increase from the full nine months of year to date 2020.
Looking at our operating cash costs averaged $601 in Q3.
$647 per ounce for the year to date.
Very importantly, the mine achieved record all in sustaining costs.
$937 per ounce.
Our strong cost performance was achieved despite some inflationary pressures that we've seen on diesel fuel and energy and then a few other areas.
We continue to work on mitigating the impact of those cost pressures.
Oh.
Yes.
Okay.
Moving to slide 21.
Tons processed due to largely to higher levels of underground maintenance and reduced equipment availability.
As well as the impact of the lower than planned average grade due to mainly.
Due mainly to mining sequencing.
Looking at year to date production that Makassar totaled 148854 ounces based on processing 243615 tons and then an average grade of 19.4 grams per ton an average recoveries of 98%.
Production year to date is lower than plan with the underperformance being due largely to reduce equipment availability caused by increased maintenance requirements poor battery performance and delay in receiving new batteries.
Moving to slide twenty-three.
Where we are doing very well at mchouses advancing are key projects, mainly the four shaft as well as with exploration, which I know are talked about in last quarter's call.
Looking at four shop during Q3 2021, the shaft advanced approximately 500 feet and had reached a depth of 6100 feet as of September 30th 2021 with development of the 6100 level station also being completed.
We also have made good progress with other projects such as our ventilation expansion involving completing are the two that raises.
With that I'll turn the call back in touch with us.
[noise] unconsolidated Tony touched Army mentioned here on package.
One three ordinary now.
Operating cash cost per hour on tactics.
Yes.
Actually.
Painting.
Yeah.
Okay. So just looking at the individual operation talk to village full year guidance.
Yeah.
Now.
About 500 dominoes.
Hi.
Operating cash cost per ounce.
Guidance range of 230 to $250 an hour.
Why targeting another record.
With production take.
The level of.
$109 an hour.
So we now expect production for the year.
700000 ounces with operating cash cost of the top end of our guidance range or slightly higher.
And then over at the Cat that we are already seeing improved results in queue for having said that.
Not expected to achieve our guidance with production now within 190 and 210 nothing.
At operating cash cost above the guidance range.
With that I'll turn the call over to Aeritalia, a senior vice president of exploration.
Thanks to touch on good morning, everyone. At first like today is the 25 from Detroit project, where we continue to have tremendous success with both drilling and advancement of those are.
Product being an updated resort substantially increased analysis from early this year.
Sure information from the estimate shown on the slide which is a long section looking northridge across the project area containing fitzgerald's for both the new and the older work vindicated updated resource designer approximately $10 1 million ounces. The overall total debating the new total to $14 and 7 billion ounces exclusive or preserves which adhere yet.
We're about 15 million.
Almost material lies the pixel, which is measuring about four kilometers long extending to evoke the maximum depth of 600 metres from server with all reserves located at the top initiated in the dark Green and all the resources lying below a shade of yellow and later agree which is essentially covering the whole battle in western areas for the main focus.
Of a recent drilling.
Wanted to note that all this increases accomplish with only with 180000 meters of drilling or two thirds of the plan $270. A unit program started last year and the limits of the pet.
Really close to the limits of drilling.
And we are still seeing goodwill at those levels.
So now turning to my next slide.
[noise] number 26, what we see here is another industry detour illustrated additional details from the resource model along with neutral adult released just two days ago and already demonstrating additional upside potential here.
I have now.
<unk> include an additional 39 holes in six legible targeting mainly towards the west.
And.
In our view containing a lot of very good positive messages.
Including reinforcement over overall geological model of westward funding soon as a very positive drill intercept.
Some of the cable.
To know from ability to include a customer for my view would be festivals on the west side of the curve itself, where there was very limited drilling in the past and.
And now continues to wider wider and higher rate intercept as well whole number 300, which is C. More in the central part of the West which is actually drove under the north wall and.
And also having good any steps.
The goodwill or would like to point out and Rahul 295, located in the eastern part of the total which intersected 20 grams over 25 years. So.
Immediate westfall of the main pit.
So considering all involved with the fact that we still have 11 12 jewels on site continue the program.
We actually are feeling very confident about the project and our possibilities give more emphasis by the time, we knew the next update.
Now turning to my next point, which is number 27, we see the first of four slides running the hospital and.
And where we also saw some very good success and.
In Q3, including multiple highway intercepts for both Dilaura, Phoenix and Ralph until areas.
In terms of the slides and what we see as long section across the wind area. It's showing the location of these two main target as well as some details for our 21 expiration program.
Dedicated to lower Phoenix is the best kind of slide as two main targets.
And the Swan is cigna.
And most of the work at this time being focused on the Swan and down punching extension of mineralization from credit reserves brick.
Cigna.
The second one located 100 meters into football.
And.
There is also an important target here.
Important to know.
Is that until the early part of this year most of the work at Swan with with not freely available to us, but only became more available when the new address was finished in June and now we have five rolls of dislocation and are able to do a lot of drilling in this area.
Additional best we also now have a lot of drilling happening at Rollins Hill, and as with a Swan area of the main target the downtime from the reserve most of the work to date is has been done for surface can see we're still continuing to advance the underground decline and getting very close to be able to start drilling from underground.
Tournament next slide.
<unk> C. As some additional details for the work that property at.
At the Swan lower Phoenix area.
And.
Two things to note here would be.
We're starting to get a large number of hold 109 holes were actually release in early in the last press release here.
All in all for showing a fairly consistent trend down clients from the reserve. We're also seeing some very lightweight intercepts right near the limit of the reserve, including 51.7 grams over 2.6 meters $12. An annual report 696 over six four.
So.
In addition to that what we've seen is higher intercept within within the trend.
Eight one.
475, 10 over $10 for $13, two or three two so in our view offering additional potential for high grade lenses within the overall trend.
But turning to my next slide.
This is just showing a little bit more detail for the drilling which is happening in the cygnet area and.
As indicated.
The the Swan drilling.
We've got quite a few new marble mcdougal located within this area now.
From new drilling.
A lot of new hybrid interceptor.
Some of the key was being 258 ground for one 842 or two meters and 49 490 441.
Keith part of this drilling though has been not only in the Iowa result, but edification I think.
Parallel of plays coming from the me from from the main structure, which we identify the path with the key was being dependent the target.
These are defined these are shown on the map.
Side of the slide.
You can see these are more directly aligned with the Swan and containing some of the higher grade intercepted so very important developments I think.
Turn to my next slide which is from the Robin Hilde area.
As you can see here. We are also starting to get quite a few that drove intercepts and now.
Standing down to about 1000 meters now and.
<unk>.
And as announced in our last press release seems a very favorable results right near the limit is of of the trend.
You are the 1000 meter novel very close to the elevation, where swan starting to look better we're seeing holes in how courts visible and numbers, which are much higher grade than the average we saw at higher elevations, including 28 grams of one 123 over one 430 and 19 over three four as the Swan We also see.
Some very high remembers within the trend such as 81 grams over two and a half meters, which again suggests the possibility of hybrid.
All in all you believe that to work.
Hospital come along very well with a lot of possibilities for not only replacing announces but coming up with new high grade material.
And outputs cough it over to Tony.
Okay. Thanks, Eric.
I'm turning out 531.
Uhm slight effect.
And as a component.
As you can see we had an extra quarter in Q3 2021.
And we talked besides operating results. We also have an order in terms of the merger announcement with a new vehicle.
Which will create nuclear and coal mining industry and again as we've talked about the lowest cost iced margin as jurisdictions and an extensive pipeline and development and integration projects to drive sustainable always growth and with a very very strong balance sheet.
Strong corporate corporate which.
Types of people.
Right that value for shareholders.
Q3 was a record order book earnings per share per vehicle.
And as our wine future Lakehead trio any quarter regular narrative through flipping on sustaining cost.
Possible continued outperformance.
Continue to outperform and then upshot on proposed project at my cast remains on track for completion of May 2022.
Re help in terms of that and combined with that plus a new ventilation system cash surplus.
Nuclear equipment as we move into 2023 will be transformed the cast into holes in mind.
Eric outlined our success Drillbit that continues part of all of our.
Probably a creation he can see me doing that in each one of our assets each one of our minds.
Looking ahead, and Natasha gave some color to where I am.
Practice finished 2021 strong and <unk> all of our 2021 guidance. We're also looking forward to it will be as of 2022 is part of our part of a new.
World, leading growth great great coal mining company and this one does well positioned to generate through long term value for sure but.
But before I finished.
Font face November 4th.
We talked about.
We are having some stronger charge of production success I'm going into Q4, but we also have to start at the hall for Christmas season.
During the period of time, maybe a SaaS everyone living perfectly goals are suppliers contractors those on the call. Please remain diligent for your own personal safety and the safety of others us as we end of the year.
We don't want anybody to get hurt no one ounce of gold produced north North dollar in cash flow and earnings is more important than your personal safety.
Personal safety of cheaply you work with everybody should end in the year year being able to be with your families over the Christmas season anyway with that.
Take some questions. Thanks.
As a reminder, if you'd like to ask a question. Please press Star then one on your telephone keypad.
And our first question is from Tyler Langdon with J P. Morgan Your line is open.
Good morning, Thanks for taking my questions. You know maybe just to start can you talk about you know the sort of the levels of cost inflation.
You're seeing right now and you know sort of what you're seeing areas for materials and labor and fuel and then just kind of you know they'll talk a little bit about your expectations I'm heading into 2022.
So the first part of this.
Soccer missed a little bit of the first part of the question, but it was curiosity about the world. We are seeing in terms of labor inflation as well correct. Yeah constant yeah, sorry, yeah, just either the cost inflation, you're seeing now and just you know from whether it's from materials consumables labor fuel just kind of sort of the different buckets.
And we don't see anything on.
Undo and made for every member.
Forest tracts that we normally exorbitant russi year over year in terms of.
Net labor labor costs agenda part part of it all that part part of it all is Nols, we train and develop people as people.
Earn more and they become more productive.
More value so under that gets offset to talk to people on current turn to pay that they get the increase in pay and it's always money well spent in those areas. We're happy to do it in terms of commodity prices I mean, I think some of the big areas and opening get Natasha in that unit in the area to give a little more color for talking to big area.
As we talk focus our forecast worth visa was at the beginning of the year diesel prices have gone some energy prices costs, where we see that and a few other commodities definitely be FX rates.
Had some impact on us, but as you can see our operations have been able to predict whether whether that in and perform well. It probably would have we would ensue if commodity prices where to stay the same.
We probably would have been at significant beat in our in our cost guidance, but tightened natashquan to color there.
Instantly and to high talent in Q3 21, Yeah, we have seen some inflationary cost questions. Then at times you mentioned.
Mainly in diesel and electricity and things like Glenn and began.
It has been the impact.
There have been changes shoes.
And mentioned, particularly in England.
Anytime equipment, but two affected cost management and higher than black sails, much Indian and functional operating cash off the ground and then online music.
So we're going to be a 2021 was significantly better than the full year 2021.
And then so looking forward into the 2022 weeks.
Inflationary pressures for energy inconceivable to continue and while difficult to predict again to begin.
Thank you can see the correct, we're focusing on on working to mitigate that.
Management.
Okay.
Great and just as a as a final question that Macarthur you cannot you mentioned some of the issues that impacted production in Q3, and you said they were getting you're seeing improvement now in queue for me to these issues.
Largely be resolved in queue for it or it could be sort of slipped into Q1 of next year.
[noise], Yeah programming performance 15 at the cabinet and again these related to equipment availability caused by caused by increased maintenance requirements and also core value performance securely in this evening and you managed so adding.
Adding a touch industries relatively new and you know and once demand so hang tight.
Tightness in the market as well as some issues with quality.
So does that mean like we're getting it.
While equipment is down in some cases 226 months instead of years.
Yeah.
Medical and cute.
Python is encouraging.
We are working with.
Pirates are hadn't had to tighten resolve issues as soon as possible. So.
Impactor.
As much going into the future.
If it went back a few years ago. We can the cast was a leader in battery technology better equipment I charge underground we were really the only only only <unk>.
Consumer of Nevada.
And so we were we were getting the quality and timely delivery and effectiveness of them, but now at the industry's picking up.
More of the industry is asking for this equipment.
Supplying the supply industry is not able to match and and all of a sudden now you are seeing.
The drop in quality as well as.
The timing and delivery and even even availability.
Is exceeded we need a break for the supply industry to catch up it we're going to be working on and we're working on a number of initiatives.
Great with it for me thanks.
Our next question is from obeys Habib with Scotiabank. Your line is open.
Thanks, operator, I, Donny and could make demon congrats on a strong quarter and really thanks for taking my questions.
A couple of questions for me and I apologize in advance if you've already touched upon these suburb companies and reported update this morning, and I'm trying to multitask as best as I can so my first question is regards to foster boat now obviously lawsuits had that fantastic. Your two three production beat as possible to kind of continue.
Used to on the on the Great outperformance you have made changes to the mind sequencing essentially bringing higher grade Ford, but at the same time, you've seen some seem to be getting some significant positive <unk> greed reconciliation as well.
Are you expecting this to continue with the 2022 and are you modeling discuss <unk> in in queue for.
How about that.
Involving you have.
Have a real good answer today's question is that fair.
Yeah sure tiny that's a good question so.
The the great performance Ah So I thought I would see me. She is really any come from three three stripes, Miami and ice three skypes Ah Ah cancel yeah, essentially I bet 60000 answers of either performance. So sadly she says <unk> <unk> <unk>.
I see you know the the the broad range of of stripes and Swan a mortal really whirlwind reconcile really well, we we do have the odd really really extreme variety areas that are really difficult to model to be honest and it and it takes very small variation E. Physical so as of nine to etsy.
Let me begin answers in in into the equation put the stuff. So do we say continuing we have seen a little bit of that performance already in queue for but but I haven't said that now yeah, we really only talking you bet, yeah, three mind stunts.
As as well the sequencing changes driven bomb on taking senior at the start of the year sides based decisions on my at and T. One leading into Q2.
Some some it had the effect of dragging some high grade starts from two four into Q T as as compared to the original plain.
But really the the main the main contributor put he has been those so I sort of three steps to they outperform significantly.
Does that answer the question.
Yes, it does and and and just kind of a follow up on that you know are you looking to come to brighten up drilling or do some additional.
Additional great control bleeding to kind of tighten up that model or is it sponsored recompletion, you're just thinking of that as it comes.
[noise] Yeah, that's good.
Good question.
The the drilling that we'd we'd need to be able to really pinpoint the very what what are really very smooth physical changes in vain. We tend to <unk> you know I <unk>, we'd be talking about you know I've thought before I'm sort of drilling size. So we don't intend to do that and we understand the geological sitting with these talks all good.
Oh really extreme and performance is kenna, K and we'll be looking to try and model that as best we can go and cool about a leader right I'll read out the the vast majority of this of this Swan reconciled you really well T T model.
It's it's just the old style will be tend to have been a a few football supply to it that did significantly outperforms [noise].
Got it.
If that's all you are still are expecting a pretty solid.
2022 right.
Right.
Sadly.
Sadly tiny yep Yep, we we we say received 2022.
Mm mm Steuben, a very strong you propose to.
Perfect, that's that's gradient and and just shipped against the beat door. It was great to see throughput moving higher in 232 7000 tons per day.
Yeah, and we need to meet the target of that 24.5 billion tonnes for the yeah, you need a car process around that 70 to 73000 tons per day in queue for now do you need any additional equipment or need additional to the plan to achieve this or are you on track any color you can provide in in how October.
Is is progressing.
You can answer that question record or an infection.
Sure sure I can start at midnight.
Overall.
Q4 from the line perspective.
Good material anywhere on time.
And a quarter.
Neil is shaping up to be very good.
We have a small shutdown plan and the quarterback nothing.
Nothing material so.
Some online effective we're in good shape to hit a target.
Want to add some more color.
That's true.
In fact, it's you know we're we're very optimistic that we're gonna finish strong in in in queue for we've already got a good starting October.
[noise].
How's remind through some some higher grade stones and fees to that's gonna continue not just this quarter, but in the <unk> in.
In the next year, so from the mining and we're in pretty good shape and actually is <unk>. So we haven't even seen the benefit of the girls project put it in the mail yet so [noise].
So yes things are looking up pretty strong for him to finish the year. So you know the team has worked really hard to make some more crucial improvements Ah. So the so the increase in throughput does actually what's your group project chat as as they come online this quarter and into next year.
Should only hopeless and deep red schools or tonnage.
[noise], Yeah, a lot of the success premonitory good point of view.
[laughter].
It's a lot of initiatives led to a lot of small initiatives cycle out of the big projects are self to come in 2022 right.
Perfect. That's a that's a great update and just just to confirm in terms of the greed I mean grade moved up over a grandson in Q3 and he was that expected to remain around the ground kept on going into Q4 is what.
Yeah, Yeah absolutely.
Absolutely and again that herpes too we're kind of right in the heart of the or body right now going to kindergarten areas and we expect to be in in her own to grow <unk>, maybe a little better.
Perfect and that's that's a great and I really appreciate the color that's it for me. Thank you.
Our next question is from John Tumazos with John Tumazos Independent Research. Your line is open.
Thank you I know you provided some explanation I wanted to give you a chance to explain a little more.
The tremendous 67368 tons of too.
Through the military each or.
I'm, assuming that it wasn't softer rock.
And a part of it.
Whereas a significant increase in uptime due to better maintenance practices infrastructure improvements.
And it's some of it was due to specific.
Relatively small capital improvements.
But don't stand out on the cash flow statement, and obviously had a big impact.
Please tell us how you did such a great job.
How about an attack.
Yeah.
Speaking of details.
Hi, John Uhm, so add some initiatives that we've been working on with respect to kill blocked and getting higher magnification, we did.
He did see some opportunity where we need the coverage.
Gary.
Material.
With respect to tell feeding until.
Okay and you wanted to.
Add any more details associated with that.
Yeah, sure I think Natasha Yep Yep.
It's it's.
Really focused around optimizing our high intensity feed high intensity blast <unk>, we are producing more fines and yes. It is just as hard as it is or whatever else didn't put the two of you.
That's a joke feeding and I'm really just the team working together between the mind in the middle of making sure that the peat is consistent and I'm actually I'm uptime. We we <unk>, we did have to put shutdowns in in Q3 with only one in queue for so uhm.
Uhm Sweet.
Was not a factor you actually have more downtown.
Yep that's correct.
Oh congratulations.
Our next question is from Mark Parkin with National Bank Financial Your line is open.
Thanks, guys congrats on the good quarter.
Certainly been the focus of the call but detour.
Can you give us an idea of like where you're seeing you know what's the bottle back you know.
Currently is it more.
You know the mind is hungrier or you know it's more on them.
On the mining side is it minor mail that you're kind of focused on near term in terms of unlocking the next step of throughput upside.
Oh go.
Go ahead and attack.
So I think the minus.
Take away the meal during the day.
Well I would say, we wanted to increase throughput going forward into the future.
Even further I would say would be the back end of September.
The bottle neck in that in that pilot projects that.
We're working on.
To get established in that condition.
Next year.
Any more cow.
Nope. That's good that's we're focus will be at the end of the first half of next year for sure as in the back of the appointment.
Yeah.
But in terms of monetary, but if you look at the updated mine planted Andre let a group.
As you progress into 2002 extra juice increased mine through but Mike might help, but we're gonna be adding trucks.
AG trucks, we're going to need shops and things on site, so they're saying we're looking at.
A new infrastructure in terms of putting a private LTE network error partnership of Rogers communications to do that and and and be taken advantage of technology in sight. So a lot of those initiatives best help in terms of increasing through book plus as we go into the larger a concept that gives you more geography to work with and a lot more and more flexibility.
In terms of less delays in terms of equipment.
Round et cetera. So there's a lot of these things that are going to comment in as Natasha Larry mentioned in terms of the plant we're working on the front end.
Throughput through through through through the pressures into the into the signal and that's part of that is the screens at and then retreat system and then.
And then getting more times through the mail is good, but we don't modest expensive recovery and that's where ash.
Dash mentioned, we're working on improvements and expansion of our each circuit, our CIP circuit as well as the new gravity circuit additional grabbing circuiting added to the bill over the next one.
Alright, thanks for those details two other things is historically, we saw you loading rates in terms of what a truck could actually be loaded two versus what it was actually being loaded too that was kind of a historical issue pre your management time, how is that kind of shifted.
To you know, where you're kind of operating today or the trucks kind of right in line with maximum.
Honesty and then historically also there was a fair bit of re handled now that the open pit no continues to mature are you seeing you know relative to historical years, the amount of free handle.
All or is that still kind of something that the west it really unlocks the potential showing no significant improvement on that front.
Hi, I can.
Okay, sorry, I can speak to the truck pillows, it's something that you that's been ongoing for a coupla years now let's is we've looked at.
The the bodies. It that we had originally with the 795 and looked at the only kind of right waiting the the trees and and and <unk> to get a bit of increased so we've always been focused on on maximizing G V. W.
And keeping within a fairly tight range, but but with these as we continue to add the truck bodies, where we've increased payload like.
Almost two 2.5% here were lost maybe four quarters yourself. So that's that's probably can see but if you.
You don't want and we asked her shop operators. It suddenly monitor very closely Oh, excuse me to make sure that the [noise].
We're paying close attention to maximizing pickles as well.
Okay excellent.
And just on the re handle.
Oh, sorry, yeah.
Within pet there's there's very little rehab, we we really focus on establishing you know a good college and Ram system right off the bat.
However, we do still have kind of a historic levels would resemble with or upon the room and that's actually been.
Fairly important for us to have to achieve these levels of milk throughput. So we we when we focus on our high intensity blasting in in the <unk>. So we can't do it's everywhere.
It's only in the areas that are kind of safe with respect to you know minimizing pollution. So.
Uhm. So we we have to stockpile of for a bit of work. So that we can maintain a consistent blood going through the mail.
And is that something that if you have west pit opened up you can kind of bounce it off by doing or in one wall waist and the other or is that not how're you guys see.
It you'll still be something to like what you're kind of running out now.
Yeah, we foresee a rehab a levels could be kind of in line with where we are currently.
Okay.
Alright, that's it for me you guys, thanks, very much and congrats again.
Our next question is from <unk> trick with credit Suisse design is open.
Hi, Good morning, Thanks for taking my question I'm, just trying to get a sense of what will be incorporated into the next year is like what mine plan a detour.
So it sounds like you know obviously, the ear and reserves will be part of that earlier in this call. It there was something that you mentioned about essentially debottlenecking. The back of the plant are those efforts are that optimization is that gonna be factored into the plan as well or is that just potential further upside.
[noise] [noise] [noise] in terms of the.
All in all he definitely talk about Debottlenecking a plan that this is all part of the the.
What's going into my languages.
Being used.
There's a lot of losses and et cetera.
You got me in recent sides of the truck fleet.
Increased maintenance capability a lot of other initiatives in terms of of.
Like.
Great control improvements that we're working on the Tasha mentioned above laughing.
Improvements that's been initiative for quite some time it needs work.
Natasha maybe you you get more.
Yeah.
You have anything these details et cetera.
Right.
Well.
Canceling Detroit.
And China with next year's Richard.
Like would you mind time will look like.
Yes.
All the.
Yeah, we're working on with Tony mentioned.
Five.
Yeah.
Hi.
So I can talk I didn't get that.
Providing at the highest.
There's still a lot of what to do from my perspective.
[noise] [noise] [noise] and the CIP flat.
We could go back.
Built a different style of CIP plan that was there, but we live with what we got away.
People that.
The people at the sight of done a great job of identifying areas that can be done.
Great.
Moving any bottlenecks theirs.
Okay. Okay got it so it sounds like all of that is being soccer then okay. Okay. And then just switching gears to foster Bill just quickly you already spoke about grades, but just on throughput obviously to put this quarter was quite strong I'm just trying to figure out for Q4, because even if I keep group.
We will put even flat or slightly down you're gonna be well ahead of even above 500000 ounces for the year. So.
Is that too will put level sustainable in two to four.
[noise], but attached.
Hi, there.
And with foster.
I think the.
You said that.
How many do you have a shutdown coming up but overall.
Projecting the great. Some of these areas of aligning at me.
Do you want to provide any more.
Yeah sure and it says you.
Nope that the the months it really well sequence at the moment, yeah with the guards are on top of the development and that flies have just typing <unk> I think what we've seen so far is that with the with the impact of pikesville coming on and my last year, and and and really embedded D. She and a lot of the work on so it's gone into the production.
Sequences themselves out I would say the benefit of that now with the with the increased productivity yoga, yeah, I'll be a sniping and and we expect that to continue on and and in fact, you know we would we would see ourselves improving yeah, a ton each productivity I've I've been a coming knees.
And I guess part.
Part in terms of the planet itself I mean, you still have not achieved that plant is a pain.
800 data 50010 year plus plan right. So it's not milk okay.
It's mine.
And that's been dating a fish.
[laughter].
Got it okay. That's it for me thank you.
We have no further questions at this time I'll turn the call back over to Mr. <unk> for any closing remarks.
Well, thanks to everyone again for taking part in our call today as you heard we had a very strong third quarter and a very strong first nine months of 2021 and.
And even more important.
Physician for a very strong finish.
We finished the year were very well relative to our guidance.
Looking further ahead as I said when I started we're very excited about the upcoming merger when they can easily go and we're looking for game 2022 is really a new leader.
Sure.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].