Kirkland Lake Gold Ltd.
Q1 2020 Earnings Call Transcript

Published: 7 May 2020

[Operator:]

Good afternoon, ladies and gentlemen. My name is Taka and I'll be your conference operator today. I would like to welcome everyone to the Kirkland Lake Gold Conference Call and webcast to disclose the Company’s First Quarter 2020 Financial and Operating Results.All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]. With that, I would now like to turn the call over to Vice President of Investor Relations, Mark Utting.

[Mark Utting:]

Thanks very much, operator. And good afternoon, everyone. Welcome to our first quarter 2020 conference call and webcast. On today’s call, we will review the quarter and also discuss some of our projects as well as recent exploration results. We also provide some update information on the COVID-19 response by the company.With me today are many members of the Kirkland Lake Gold Senior Management Team. Speaking today will be Tony Makuch, our President and CEO; David Soares, our Chief Financial Officer; Duncan King, our Vice President Australian operations; Evan Pelletier, our General Manager, Kirkland Lake Operations; Dave Londono, our Detour Mine General Manager; and Eric Kallio, our Senior Vice President of Exploration. As mentioned, there are other members in the room as well and the Management Team in the room as well.As I'm sure many of you are, we're doing our call remotely today consistent with our COVID-19 health and safety protocols. After we go through the presentation, we'll then open the call to questions. We ask that each person limit themselves to two questions. The slides that we'll be referring to is available on our website, both on the homepage and in the events section.Before we get started, I would like to draw your attention to Slide 2 to our forward-looking statement disclosure. Our remarks and answers to questions today may contain and likely will contain forward-looking information about future events affecting the company. Please refer to Slide 2 as well as the forward-looking information section of our most recent management discussion and analysis dated May 5th, 2020 for more information.Also, during today's call, we'll be making reference to non-IFRS performance measures. A reconciliation of these measures is available in our most recent MD&A.Finally, I'll point out that all figures today are in U.S. dollars unless otherwise stated. With that, I'll call on Tony Makuch, President and CEO of Kirkland Lake Gold.

[Anthony Makuch:]

Okay. Thanks Mark, and thanks everybody, for being on the call. I know, we're not as organized or as maybe as sexy as sometimes you see some of these conference calls and video calls that are going on TV.And since that we know very good the speakers here again we're all on everybody working from their home offices as I'm sure a lot of everybody attending this call is from their home office. So, thank you for calling in.I don't know how comfortable you get in your home office, maybe you've gotten comfortable more organized overtime. And I have but at the same time I think I'm getting tired of have to come to my home office and be nice to get out about of the boat and see people.So anyway, thanks for being on the call. And then the other part is I think that acknowledge the people at Kirkland Lake Gold, we had a definitely a pretty solid quarter. And in Q1 2020, a lot of adversity but we could see work while many people rise to the occasion.And that's what we saw and that's what we see in Kirkland Lake Gold and then company and the communities around us. And a lot of our suppliers and third-party contractors as well and we see this lot of quality people in this industry.The other thing that really happened in instead of people did an excellent job protected themselves and each other and also turned in a very solid quarter of performance in the quarter. So anyway, thanks for the efforts and thanks for the attention to detail.Getting into some of the operating results for the quarter, production was 330,000 ounces. Cash costs were $440 an ounce an all-in sustaining costs average $770 an ounce. Excluding Detour, these numbers averaged $319 and $619 an ounce respectively; is a very strong unit cost numbers given the high unusual circumstances in Q1.Turning to earnings. We reported net earnings of $0.79 per share and $0.70 per share on an adjusted basis. That was a 30% increase from Q1, 2019. It is cash flow where our business really showed a strength in Q1, 2020.Excluding non-recurring transaction and restructuring costs, we generated free cash flow of over $190 million; which is a quarterly record. Detour Lake made a significant contribution to free cash flow during the quarter adding $78 million and that's in only two months of operations with Kirkland Lake. Overall quarter highlighted our ability to generate significant cash flow.Looking at our cash position, as shown on Slide 4, we ended the quarter at $530 million and no debt and I think as a company we're probably the only gold company with no debt on the balance sheet at all; maintaining and this demonstrates our industry leading strength in terms of financial performance and financial capabilities.We return capital to shareholders, we use $330 million in the quarter to buyback almost 10 million shares and doubled our dividend. We gained about $180 million of cash from Detour. But, I want to emphasize that we used much more than that by paying back Detour’s debt closing out it's hedge book, making change of control and other payments and incurring transaction fees related to the deal.We had total capital expenditures of about $110 million; a lot of that was sustaining capital. In terms of growth capital, we continue to invest in our projects, specifically the #4 Shaft project at Macassa. We did suspend thinking of the shaft at the end of March due to the COVID-19 issue. The suspension lasted about a month with shafts thinking resuming near the end of April.Excuse me, the shaft project is going very well and in fact actually we've now changed the scope and schedule for the shaft a bit. Evan Pelletier will get onto the details a little bit more later in the presentation. But, we now expect to complete the shaft in one phase by late 2022. That is over a year earlier than initially planned and at a lower cost.Turning to Slide 5. Clearly COVID-19 was a key development impacting our business in Q1, 2020. We had a call in early April to discuss the details of our COVID-19 response, including our extensive health and safety protocols. I won't go through them again, I will provide you with an update.Part of our COVID-19 response included going to reduce operations at Detour Lake and Macassa and temporary suspending operations at the whole complex. We also suspended all non-essential activities across the company which basically any capital project and or any exploration project that was not critical to the production in the current year.The reduced operations impacted our production and costs in Q1 and we'll do so again in the second quarter. And we don't know what's going to happen in third and fourth quarter depending on how this progresses. It also led to the suspension of key projects as I mentioned earlier such as a shaft surface ramp at Macassa and the ventilation project at Fosterville. We also stopped most exploration work not required for this year's production.We have now returned, we're doing work on these projects as well as others and but we'll be ramping up in 10 phases. We've started to recall workers at Detour Lake and Macassa and we expect it to be a slow process that may extend over the year.Turning to Slide 6. The measures we have taken obviously have an impact on our results. April 1st, 2020, we will do our company guidance for 2020. We will issue guidance for the year as we make progress towards moving Detour Lake and Macassa towards more predictable levels of production.These mines clearly will not produce what was in the original guidance. We will continue to assess how quickly they can ramp up but which will return to the guidance we'd eventually provide. And you got to understand it also impacts both capital costs, operating costs and exploration costs that was in our original guidance.We have also withdrawn our 3-year production guidance, while we assess the long-term impact of COVID-19 pandemic on our business and as we work to incorporate Detour Lake into our long-term business plan.When we discuss COVID-19, we don't talk about returning to normal because we are not sure what normal will be in the future. There are a lot of moving parts. There is no question that there will be some impact on how our business is done. This is a key reason why we have suspended or 3-year guidance.The world is going to be a different place because of COVID-19 particularly if there are additional waves of virus that occur, you're not going to take some, we're going to take some time to consider what works just like it is going to look like in the future; what impact will have on our operations.But our priority is to look after people and the communities and the sustainability of our business and beyond this period of time of this pandemic.Slide 7 looks at another key very important development for Kirkland Lake Gold during Q1, 2020. The acquisition of Detour Lake Gold. We have talked about the deal at length. And so I won't get into the terms and rationale behind the transaction. We see a lot of upside in Detour Lake and plan to invest aggressively to achieve it.We actually have and not disappointed at all in terms of what we see as a potential here and the quality of the people that are at Detour and then the ability for us to move this project forward to get to a whole new level.But we'll highlight a few things about the quarter, given that we own Detour Lake for two months and it was on reduced operations for part of that time. You get a sense of had very good operating performance producing 92,000 ounces in two months ending March 31.Cash costs of $696, an all-in sustaining costs of 11.8 per ounce were in line with expected levels for the quarter for the period. During the quarter, we saw the tremendous leverage Detour Lake has on the gold price. I already mentioned the $78 million of free cash flow that generated in two months and that was about 40% of our total free cash flow for the quarter excluding non-recurring items in the company.The last key development I mentioned for the quarter involves the non-core assets. I'm on Slide 8. On February 20th, we designated a whole complex and assets in the Northern Territory -- Northern Territory, sorry, as non-core.The whole complex includes our Taylor Holt and Holloway Mine and Holt Mill in Northern Kirkland Lake. In March, we placed the Holloway Mine in care and maintenance. We also suspended all tests mining and processing at the Cosmo Mine and Union Reefs mill in the Northern Territory of Australia and also sees all exploration drilling here.The results we were getting for both Holloway Mine in the NT did not justify continuing on with our operating activities particularly when we consider the potential we have at our three cornerstone assets

[David Soares:]

Thank you Tony and good afternoon, everyone. I'll be starting on Slide 10. As Tony mentioned, we had strong earnings in 2020. Net earnings total $202.9 million or $0.79 a share. Adjusted net earnings were $179.2 million or $0.70 per share.The difference between adjusted net earnings and net earnings related mainly to a $52.5 million after-tax of foreign exchange gains due to the strengthening of the U.S. dollar in the quarter. This impact was partially offset by the exclusion from adjusted net earnings of $24.9 million after-tax related to transaction costs related to the Detour Gold acquisition.In terms of key drivers of adjusted net earnings, it largely came down to strong revenue growth driven by both higher sales volumes and increased gold prices in the quarter. The change in earnings per share from both Q1 2019 and last quarter Q4 of, sorry, Q1 of 2020 was impacted by higher average shares outstanding in Q1, 2020.They totaled $257.4 million this quarter versus about $210 million in both prior periods. The increase related to the 77 million shares we issued for the Detour transaction on January 31st partially offset by the 9.7 million shares we’ve repurchased in Q1.Slide 11 looks at our revenue in more detail. Revenue in Q1 2020 totaled $554.7 million, 82% higher than Q1 2019 and a 35% increase from the previous quarter. On a year-over-year basis, both higher gold sales and an increase in gold price contributed to the strong revenue growth.Gold sales increased 48% to 344,000 ounces and had a $146 million favorable impact on revenue. The average gold price increased to $1,586 per ounce from $1,307 per ounce a year earlier. The increase in price increased revenue by $96 million in the quarter.Quarter-over-quarter gold sales were 24% higher which increased revenue by $98 million. The Q1 2020 gold price compared to $1,481 per ounce in Q4 2019. The increase in price had a $36 million favorable impact on revenue this quarter. Detour Lake had a significant impact on revenue in Q1 2020, contributing $179.4 million of the $554.7 million of total revenue.Gold sales at Detour Lake were just over an 110,000 ounces. Excluding Detour Lake, revenue totaled $375.3 million compared to $304.9 million a year earlier and $412.4 million in Q4 of 2019. You may recall that in Q4, we had record sales driven by Fosterville which had a grade of almost 50 grams per ton for the quarter.Looking ahead at EBITDA as shown on Slide 12, Q1 2020 EBITDA was a record $391.5 million, a 94% increase from $201.6 million in Q1 2019 and 37% higher than $285.6 million in the previous quarter. The increase from both prior periods was driven by net earnings growth as well as the impact of higher depletion and depreciation costs and current income tax expense.Turning to Slide 13. It looks at our cash and cash flows. On the slide, you will see that we have adjusted opening cash flow to net out $60.5 million of non-recurring items. These are mainly related to the Detour Gold acquisition and include transaction fees, change of control payments and other termination related costs and some restructuring expenses.We also have about $3 million of restructuring costs at the KL level and incurred some severance expense at our non-core assets mainly in the Northern Territory. Excluding the non-recurring costs, our cash from operations totaled $302 million.Looking at investing activities, we have a source of cash of $60.7 million which mainly reflected cash received from Detour Gold offset by capital expenditures. As Tony indicated earlier, the cash we received from Detour was more than offset by use of cash relating to the transaction or the acquired company.Turning to finance activities. The large use of cash related to a few things, the largest being the share repurchases in the quarter.Moving on to Slide 14. Here we look at the change in cash in a slightly different way. You can see that the largest contributor to growth in cash was from our operations which generated about $282 million. This is before interest income tax paid and impact of changes in working capital. The other large source of cash was $173.9 million of cash came from Detour Gold.We have already discussed it in this slide and this slide gives the details around the offsetting use of cash relating to Detour. We use $98 million to repay Detour’s debt; $30 million to close out at hedge positions; and also had $54 million of transaction and restructuring related costs paid in cash in the quarter.The chart on Slide 14 also highlights the significance of the $330 million used for share repurchases during the quarter on our cash balance. Other significant use of cash in the quarter included about $110 million of capital expenditures; about $90 million of which was sustaining.We also had higher cash income tax payments, and we paid $12.5 million in dividend payments based on a Q4 2019 dividend of $0.06 per share. As you've heard, we've doubled our dividend in Q1 to $0.125 per share. So, going forward that cash commitment for dividends will be higher.With that, I'll turn the call over to Duncan King, Vice President of Australian Operations.

[Duncan King:]

Turning to Slide 15. Good afternoon. As Tony mentioned earlier, Fosterville had a strong quarter in Q1, 2020. We produced 160,000 ounces. Production increased 24% from Q1 2019 with the increase resulting from a 46% improvement in the average rate to 42.4 grams to the ton.The higher average grade resulted from increased mining in the Swan Zone compared to the prior year. Production in Q1 compared to record production in Q4 2019 of 192,000 ounces. Then the mine achieved a record grade of 49.3 grams to the ton. The grade in Q4 reflected sequencing in the Swan Zone as well as some great outperformance during the quarter.Cash costs in Q1 2020 were $126 per ounce, 13% better than $144 per ounce in Q1 2019. Q1 cash cost compared to a record $106 per ounce in Q4 2019, again largely reflecting the average grade in the previous quarter. All-in sustaining costs average $313 an ounce in Q1 2020 versus $315 in Q1 2019 and $258 the previous quarter.It is worth noting that a new royalty introduced by the Victorian government, effective January 1st 2020 accounted for $7.2 million or $47 an ounce of all-in sustaining costs to Q1 2020. Excluding the new royalty, these costs were largely unchanged quarter-over-quarter.Looking at our projects, while Fosterville has continued to operate through the COVID-19 crisis, we did have some projects impacted when we suspended all non-essential work. Work on our new ventilation system was interrupted as were a number of surface infrastructure projects.We continue to target commissioning of the new ventilation system beginning in the second quarter and our project work is starting to come back online.I'll now turn the call over to Evan Pelletier, General Manager, Kirkland Lake Operations.

[Evan Pelletier:]

Thanks, Duncan. I'm starting on Slide 16. Macassa had a solid quarter in Q1 2020, we produced 51,000 ounces which compared to record quarterly production of 73,000 in Q1 2019 and 56,000 ounces in the previous quarter.The quarter-over-quarter change largely related to lower tonnages which was due in large part of disruptions caused by COVID-19. Operating cash costs averaged $536 per ounce in Q1 2020 versus $332 in Q1 2019 and $471 per ounce in the previous quarter.The increase from both prior periods largely reflected lower sales volumes as well as higher levels and operating development and other mining cost in Q1 2020. All-in sustaining costs per ounce averaged $850 versus $602 in Q1 2019 and $721 in the previous quarter. Year-over-year change was mainly due to lower sale volumes.The change from Q4 2019 was due to lower sale volumes as well as higher operating costs and increase sustaining capital expenditure. Sustaining capital of $15.1 million was higher than $10.8 million in Q4 of 2019 which was the lowest quarterly total we had last year. It was largely timing related in terms of schedule and capital development and equipment procurement.Before I get to #4 Shaft, I'll first address your plans around COVID-19. We're resuming work on key projects and starting to ramp up production. We resumed shaft-sinking at the end of April and have also commenced work on new surface ramp.Increasing productive activities will be a gradual process. We're maintaining all of our key health and safety protocols, including limited people on-site and social distancing. This will continue to impact our operations for some time.Turning to Slide 17. We have made a great deal of progress at the #4 Shaft project and now have made changes to the project scope and schedule. First during Q1, we sank the shaft to 760 feet to the 1,960 level at quarter end and this is fully equipped with steel and concrete. We also excavated and equipped the 1540 level station.At the end of March, we stopped sinking as part of COVID-19 protocol to suspend non-essential work. That lasted about a month and we started sinking again in late April.Based on the progress, we have achieved we have made changes to the scope and schedule the Shaft project. We are now planning to complete the shaft in one phase to a total depth of 6,400 feet with target completion for late 2022.The changes to the shaft scope benefit in a number of ways. This allows us to increase skipping capacity sooner, improves ventilation and working conditions, de-risk the mining advances; the timing for future exploration development of the shaft and support to future drilling.By reducing the development period by over a year, we'll be able to use the shaft sooner and have created a potential for a cost savings in the capital budget. At this time however, our budget remains at $321 million.I'll turn the call over to David Londono, General Manager of Detour Lake.

[David Londono:]

Thank you, Evan. Good afternoon, everyone. I will be talking to Slide 18. Detour Lake produce 91,000 ounces from January 31st still the end of the first quarter.We processed 3.7 million tons at an average of 0.84 grams per ton. The average grade was down from the previous quarter mainly due to processing high volumes of stockpiled material which is typically lower grade than mine production or direct grade.Operating cash costs of which $696 per ounce in Q1 2020 while all-in sustaining costs averaged 1,108 per ounce; sustaining capital total $48.2 million. But we have mainly all of the total eight capital is reported in sustaining, so our ASIC cost is of 1,108 is really all -in sustaining costs, all-in costs.In our conference call in April, I spoke at length about the health and safety protocols we put in place in response to COVID-19. Today, I'll provide an update. We have commenced ramping up our mining production starting with drill and blast and then moving onto load and haul and deduct mining fleet to the cluster.For this ramp up, we are requiring mass tunnel buses coming from and to Cochrane performing temperature checks prior to employees leaving Cochrane by bus and others arriving by truck to the gate house. Temperature checks are also being performed and can be forced back in shape.All body heat cameras were recently purchased and installed in strategic locations; at the Cochrane Bus Terminal, both camps and at the gate house. So, body temperature is now checked every time our worker passes through these locations. If someone is not feeling well or shows any of the COVID-19 symptoms, they are saved by the medic and then sent off side for precautionary measures.We're continuing also with physical distancing at camp; on the buses we doubled the number of buses; and in light vehicles; meeting rooms; and at the dining rooms. We’d also have removed some chairs to keep social distance in the mess and we have blocked some of the areas, we put some signage et cetera.With that, I'll turn the call over to Eric Kallio, Senior Vice President of Exploration.

[Eric Kallio:]

Thanks, David. And Good afternoon, everyone. I’ll be starting with Slide 19, which is a plan from Macassa Mine which is the main focus for Q1 exploration and where we recently announced more exciting news from drilling.As indicated in the plan, drilling was focused in the east part of the mine and on testing the SMC but also included new work on the main break. For the SMC, we are 18 new wells and continue to obtain very positive results with a number of new high-grade intercepts and another 75 meters of strike length added to the structure.With this now, we bring the total length of structure of the SMC to over two kilometers and still open for more expansion.And then in terms of the main break, we had one more new hole and 15 others that were not previously reported. So, we now interpret as part of the new high-grade corridor. As indicated in the release, the quarter extends between our new #4 Shaft in Kirkland Minerals and currently measures 700 meters long by 300 meters high.Of importance for future development, the corridor is also located very close to a new drift planned on 57 level. And in terms of the new hole, it intersects the each part of the corridor 300 meters below the deepest level of Kirkland Minerals and 50 meters east of the closest previously hole in this area.It also has one of the highest grades to-date from the zone and little-to-no drilling to the east; so again open for expansion.Turning now to Slide 20. We can see a cross-section through the east part of the area drilled and further illustrating the new results. As indicated, the SMC is located on the left hand side and just below the drill platform on 5300 and has a number of good holes to both confirm and extend the zone.And the main brake is on the right hand side and hosts a continuous string of values extending downward from the historic workings at Kirkland Minerals. Additional to this, the section also provides another view of the new high-grade intercept and hole number 40 52, which is located near the 6800 level, or 300 meters below the deepest level at Kirkland Minerals.And now turning on to Slide 21. We see here a long section for the main break and the high-grade corridor which has indicated contains a number of very good intercepts all together and all them located between the new #4 Shaft and Kirkland Minerals.Although the number of holes drilled is still quite low at this point, we are very encouraged by the overall continuity and number of high-grades that we see in this area to-date. We are also very encouraged by the fact our new high-grade intercept is at the east limit of drilling with little to no testing beyond this.And from what we know, the structure in this area is still likely open for testing all the way to Lake Shore mine which is at least another class to the east. So, considering all above, I think it's fair to say we continue to feel strongly about the potential at the mine and looking forward to doing more exploration here very soon.And with that, I'll now pass the call back to Tony.

[Anthony Makuch:]

Okay thanks, Eric. Pretty exciting in terms of some of the developments are at Macassa. Anyway maybe on the just final Slide 22, just to give you some highlights here or some summary highlights. And I guess you can start to get a sense despite the challenging environment in Q1 2020; Kirkland Lake continue to turn in a strong quarter.We had solid earnings, generated substantial free cash flow in the quarter. We maintained our industry leading financial strength, we also returned capital to shareholders probably the highest level cap returned to shareholders in a quarter and anyone in our industry and through it's and we did this through extensive share buybacks and by doubling our quarterly dividend.Excuse me, we had a very strong first two months from Detour Lake and we're very pleased with the progress we've seen in terms of improved productivity and really in terms of the upside of this operation.We also took steps during the quarter to streamline our portfolio to focus more fully on our three cornerstone assets just by turning making now they both the Northern Territory in Australia and the KL north assets as non-core at this point in time.We continue to invest aggressively in exploration and believe with that with Macassa, Detour Lake and Fosterville we have three of the most exciting exploration projects in the industry. And also I had somebody when I'm talking to is very now really and surely Kirkland Lake Gold is an exploration company. This happens to combine mine and generate free cash flow.Finally, and so we're partially optimistic that conditions are improving in terms of COVID-19 and we're starting to work resume work in key areas. This will be a gradual process, excuse me extending throughout the year. We also recognize that some changes may become a new normal and everything we do the health and well-being of our workers their families and our communities will remain our top priority.Thanks everyone, for listening on this call. Thank you for staying home staying safe and looking after your families and fundamentally if we all look after ourselves and our families, we're all looking after each other. So, thank you for what you've done. Anyway, we'll be happy to take your questions here at this time.

[Operator:]

[Operator Instructions]. Your first question comes from the line of Fahad Tariq of Credit Suisse. Please go ahead, your line is open.

[Fahad Tariq:]

Hi, thanks for taking my questions. On the 3-year production guidance that was withdrawn, can you give some more color on the long-term impact that you're seeing from COVID-19. Is it on productivity supply chain, just trying to get a sense of what is causing you to I guess with that the longer term guidance as a result of COVID?

[Anthony Makuch:]

Well, I think I mean there's a lot of moving parts, we don't know where things are going to happen. We don't know what the as government's going to lift the restrictions, we don't know what's coming on. And we just thought it's prudent to sit there and say you know what there's no use trying to commit to things and in year in 2021 and 2022.We still don't know where this is and where it's going on. We definitely see that there will be differences in our operating practices and use of PPE and on work schedules, et cetera. Some of it is we see as being maybe becoming some of the new norm in terms of how people will work.So, we got to consider that and really get an understanding of where things are going to go over the next few years. So, that's all, it just gives yourself some time to really understand and reposition the operations.We've also had as Evan mentioned about the #4 Shaft, I mean he also gives you time. We looked at things we're doing and we say like it's an example at #4 Shaft or instead of saying it's going to be done at the end of 2023, you can do it in 2022 and that's time to rethink things.So, gives us some time to rethink all of the business model, et cetera and incorporate what's going on with Detour. What we really want to do with KL north at this point in time. So that's what we decided to do and it's post coming up with a variety of changes over the next three months or six months that we didn't quite we might not be able to predict.

[Fahad Tariq:]

And just as a follow up on the Macassa shafts for now that the depth has been revised. What does that mean, I know you can you could probably can't get specific. But what does that mean just in terms of the production relative to what it was and previously expected to be like.How does that change in the depth of the scope of work impact production and the fact that it's coming back a year?

[Anthony Makuch:]

It doesn't -- it mean, it doesn't necessarily change much in on the production. It has that, it brings a little bit more production in that potentially 2022 then we had in our plan. I think it really it does help us in terms of focusing on costs; and productivity improvements; and operational improvements; and work conditions that previously were maybe not be there.So, at this point in time we're not necessarily saying it's, it's going to help us and you were going to increase reduction because of it but we see it as definitely it's going to de-risk reduction, it's going to de-risk the operation, it's going to provide a better safer workplace quicker.And we're going to do it at less capital costs, so we are not really ready to create what it is. But there will definitely be no cost overrun on that shaft. Is that a good answer to your question?

[Fahad Tariq:]

And that's very helpful. Thank you.

[Anthony Makuch:]

Yes, thanks.

[Operator:]

Your next question comes from the line of Cosmos Chiu of CIBC. Please go ahead, your line is open.

[Cosmos Chiu:]

Hi thanks Tony and team for the conference call here. It's great to see that you've talked about ramping up the Macassa and Detour starting in early May.If I remember back in the April during the conference call, you had talked about Detour the ramp up could take a month or a month and a half. I think David mentioned that. And Evan had mentioned that Macassa could be three to four weeks.But in today's conversation, it seems like it could take longer. Tony, in your opening remarks you talked about could be a year. Has that changed or could you help me sort of reconcile?

[Anthony Makuch:]

Excuse me. No, I don't, nothing has really changed. I guess, we're just trying to. The only thing that's changed from say a month ago versus now is the when you're reading about what's happening and getting the sense on where government lifting is going as well as understanding the practices and how they're being adopted in the workplace and what might be the new norm.We're starting to be realistic and saying "hey, you know what some of this stuff may at times take a little bit longer and or have a longer term impact."I would sit there and say, "I'm not sure that I'm going to be going to a hockey game and sit in a crowd of 20,000 people at the Scotiabank Centre and to see the drama play. No offense but maybe am I going do that in September?"And so there's a lot of things that are starting to happen and we're just trying to gauge that. We don't, it's just us saying they have taken a little bit longer term view and looking at risks et cetera and what potentially might happen.

[Cosmos Chiu:]

I guess again as a follow-up on the last conference call, you had mentioned Detour was running at about 75% or 35% of your normal sort of workforce; Macassa was running about 65%. Where are you at right now and then and I guess where you're at right now?

[Anthony Makuch:]

I'll let David Londono, right and speak for Detour and let Evan Pelletier speak for Macassa. How does that go, David you want to go first?

[David Londono:]

Yes, I am going to go first. So, even though at the mine at this moment with above 50% of the mine and 75% of the mill up by the 18th of May more or less we're going to be 85% of the mine and then we're just going to be full production with the mills. And again as Tony mentioned, the plan is maintain social distance of both in these holes.And so going to a 100% is going to be more difficult at this time. So, would see how these thing progresses but the idea is to at least go 85% of the mine.

[Operator:]

Your next question --.

[Evan Pelletier:]

For Macassa, Cosmos, are basically sitting at about 80% 85% now. So, we are up from 65% but we are still seeing some absenteeism due to COVID.

[Cosmos Chiu:]

For sure. And then --.

[Anthony Makuch:]

And part of it Cosmos is people trying as to come back to work, right? So.

[Cosmos Chiu:]

Yes, sure. And then just a quick follow-up if I may. Again on the 3-year guidance to be honest, I was a bit surprised that it was withdrawn but I think Tony you explained it well in terms of sort of what's happening. But if I were to look at your 3-year guidance that was put out at the end of 2019, it was focused on Fosterville and Macassa.But also today you also mentioned Detour and how that fits into the longer term mine plan. I am just wondering the impact of from COVID-19 and the decision to withdraw the 3-year guidance, was it based on more on what's happening at Fosterville and Macassa or it is overall?

[Anthony Makuch:]

I think it's already and I don’t think it's -- it's overall, Cosmos, and being part of that when we give up production guidance, part of it is all tied into where we see capital programs going, where we see accretion program going, et cetera and there is also a lot of inputs that come into it which is we basically decided that we need to spend a little bit of time.We're doing things that really understand what's going to happen; we don't know what's going to happen in September/October of this year. We don't know how things are going to progress and we are just trying to provide some guidance in that sense. I mean we said what we were doing this year. We indicated, even we can see what we did in Q1 compared to plan.We will continue to report on a quarter-by-quarter basis and in terms of how we did compare with plan for the year. We just don't know if something is going to come out and I'd say that's where we are just trying to not sit there and say we are going to do this and in three months later have to say we are going to do this.We think once we get everything marked-to-more predictable levels as well as get some of these stuffs behind us as well as understand the impact of lot of new protocols and that processes we are running and the potential impact on any potential capital programs. We might want to implement our exploration programs and you decide what to do. We just give ourselves few months to figure that out.

[Operator:]

Your next question comes from the line of Ovais Habib of Scotiabank. Please go ahead, your line is open.

[Ovais Habib:]

Hi everyone, just a couple of questions from me. Tony just starting off with again just to follow-up on Cosmos' question on the guidance wise. Is there anything specific you are looking for before you get comfortable in providing 2020 guidance I mean you were talking about Macassa and kind of Detour moving close through that anywhere from 60% to 85% mark.I mean is there something more of our sustainability side that you are waiting for before you can move forward with just at least the specific 2020 guidance?

[Anthony Makuch:]

I think it's we are recalling people we are moving back up people but so are our suppliers and so are the communities. So, it's all sort of fitting and try to get some sense on how things are progressing over the next few months. And ensuring that nothing changes in terms of government protocols that come on.We don't want to work without a plan. We don't want to work haphazardly so we got a plan and we got ideas of what we are doing in it. As soon as we feel pretty comfortable as we said earlier as soon as there is predictable levels say for 2020 we will be able to say it.And if nothing changes from what we see progressing over the next while we could definitely feel by the end of Q2 we will be able to say what 2020 it's going to look like. I mean part of our 2020 guidance isn't just production, it's also cost, et cetera anyway.

[Ovais Habib:]

For sure. And just I mean in terms of Fosterville then I mean in terms of operations continued and continue through Q1 and continue unaffected, maybe you pull back a little bit on departmental exploration. But is that do you feel that impacting maybe the two or 2-or-3-year guidance that you have provided previously?

[Anthony Makuch:]

Fosterville performed extremely well in Q1 and predictions were for Q2 that being of things since continue to go like that could be very well. I mean we are assessing Fosterville in terms of what's going on just like we're doing with the other mines.We are trying to make notes and take a position on what we see and what are the works we are doing and what do we see as in our long-term sustainable future there than what we have. And definitely exploration success is a key driver to what's going to happen at Fosterville, right.

[Ovais Habib:]

Got it. And just one quick question. Just so in terms of percentage coming from Swan in Q1, if you could just remind us what that was and is that percentage expecting to change over the next couple of quarters or a significant delay?

[Anthony Makuch:]

Duncan got -- I don't have those numbers. I had those numbers, I don't remember what they are, Duncan do you have that in terms of percentage on Swan? And then in terms of going forward for the year anyway it's pretty much consistent. If Duncan has the answer for that, I can have it. If not I can get you here offline in terms of what the percentage was from Swan? Probably 75% from Swan.

[Duncan King:]

I think it was 80%, from Swan.

[Anthony Makuch:]

Yes.

[Duncan King:]

And it's expected to be consistent the reminder of the year.

[Ovais Habib:]

Got it. So, that's it from me. Thank you so much, guys.

[Anthony Makuch:]

Okay.

[Operator:]

Your next question comes from the line of Joshua Wolfson of RBC Capital Markets. Please go ahead, your line is open.

[Joshua Wolfson:]

Thank you, very much. First question relates to Macassa. I assume there would have been a pretty reasonable sort of study that was done on the shaft expansion hat the long-term cost projections are for the mine beyond just what the production volumes are which have been guided.Can you provide some additional detail on what you expect with steady states sustaining capital and unit cost expectations to be once the project is ramped up and based on the old study and what the opportunity could be from what the discussion much earlier at this call about potential improvements?

[Anthony Makuch:]

Well, that's in terms of for this call I don't know if we have that, those answers are available but we're happy to share them with you and give you some sort of guidelines. I mean I don't think that it's much anything different than what we've been sort of achieving or what we have guided to previously.The whole issue with the shaft and part of the changes in the shaft by the way is we originally started the shaft development using a contractor and being a contracted item and back in September of last year we took over from the contractor ourselves and developing it ourselves.And with that we started to re-think this scope of the project and the timing of the project, there's the cost of the project and that's pretty much with what's happening there. How it affects the mine plan and that, those are moving parts at the time.And part of it is getting that shaft a lot earlier which's really going to help in terms of de-risking that operation and improving working conditions in the mine, so. But in terms of those numbers, I can get Natasha to speak to you after. There's a lot more numbers that we have sitting and we appreciate we are all in different home offices and scattered across the province of Ontario.

[Joshua Wolfson:]

Great, I appreciate that. And then, second question back to the common theme here on the guidance. It sounds like over the next quarter there will be some more information in terms of what the 2020 expectations will be but reasonably with the 3-year guide, there is a reasonable amount of more work required for the Detour plan as well as what the Fosterville and Macassa sort of outlook is going to be.When do you think we'll have enough information to actually formally provide that 3-year guide? Are they going to be relatively not too early 2021 or we have some and need your update where the clarity can be better understood?

[Anthony Makuch:]

Right. I think there with the Detour project, Detour and they're trying to get a handle on the plan that Detour where we're looking at trying to have something out by Q2 into Q3 of this year. That some was thus part of that was really trying to really do that right.We want to be able to incorporate some new drilling results and reinterpretation of geology and the resource there and a few other things from the permitting perspective that which applied for. Some of it recognized and delayed now, I'd say in long parts and that work has been delayed because of COVID-19.But I would say that we are really working towards probably do it by Q4 this year to really have that something solid out there but if we get it sooner we will get it out sooner.

[Operator:]

There are no further questions at this time. I turn the call back to Mark Utting.

[Mark Utting:]

Thank you, operator. And thanks everyone for participating in our call today. As you heard despite the COVID-19 pandemic and responses we've had, we had a solid quarter in Q1 with a very solid operating results, earnings and very solid cash flow.We have some exciting things going on with our projects. We're advancing in the #4 Shaft in Macassa very well and we're realizing some of the exploration up side we've talked about was some very encouraging results at Macassa this quarter.We'll continue to update the market as developments occur and as we continue to progress our operations and ramp up. And we look forward to our next conference call when you can we can talk again about our ongoing solid results. Thanks, very much.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, you may now disconnect.