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The Gold industry’s most talked-about company

Jan 15, 2021

By Kevin Vincent
As a new year begins, industry watchers are wondering what, as-yet-to-be-declared announcements Kirkland Lake Gold has up its sleeve for 2021. That’s understandable as KL Gold has made significant strides forward in the past 14 months. The company acquired the Detour Lake gold mine a year ago as its third producing asset, invested in several junior mining companies including Wallbridge Mining, Melkior Resources, and more. Add to that, the Newmont exploration agreement for the Timmins region, and you have a lot of spinning plates.
The company is also establishing its Canadian Operations Centre in Timmins moving some 120-170 jobs to the city, many of which will be relocations from downtown Toronto.
“We want to take a lot of the jobs that were done in Toronto and move them closer to site,” President Tony Makuch told a Timmins Chamber of Commerce audience in November. “There are a lot of jobs that were happening at the site that we see we don’t always need them at site. They’d actually be better, more comfortable, at a central location.”
Timmins mayor George Pirie was instrumental in the decision. Pirie told Mining Life that he began conversations with Makuch shortly after he was elected. The two explored the possibility that Timmins would be a perfect location for establishing Kirkland Lake’s Canadian Operations Centre.
Makuch added, “Timmins fits for us for a number of reasons. It is the regional centre. You have a lot of services, especially air services in Timmins, so the logistics of bringing people in and out helps. We’re looking at it from that perspective.”
Timmins has long been one of Detour Lake’s central supplier hubs. That factored into the company’s decision as well.

Detour Pic
“We’re trying to recruit from Northeastern Ontario, from the region, as much as possible, as opposed to across Canada. We want to start flying people in and out to the mine site, as opposed to busing. Combined travel time to the workplace currently sits around 3½ hours. By the time people show up at the Cochrane bus terminal and get bused up to site, it’s a significant amount of time. We’re trying to improve the logistics on that. Trying to be more centralized,” Makuch added.
“People come to work at Detour; they’re already going to be 14 days away from home. Then I’m asking you to take a half a day, or a day, to get to work, and then a half a day, or a day, to get home. I think that’s not really proper,” added Makuch.
As for 2021, in early December, KL Gold issued a news release that suggested 2021 was going to be a great year for the company.
“Our business plan for 2021 positions Kirkland Lake Gold for another year of strong operating and financial results and continued industry-leading financial strength,” said Makuch, President and Chief Executive Officer.
“The plan also includes higher levels of investment, reflecting the significant growth potential and exploration upside at all three of our cornerstone assets, as well as the payment of over $200 million in dividends to shareholders. We have made significant progress returning capital to shareholders in 2020, and plan to continue this trend in the coming year at the same time as we build our cash position.”
Kirkland Lake Gold Ltd. announced the company’s full-year guidance for 2021, including production of 1,300,000 – 1,400,000 ounces, driven by strong growth at Detour Lake, with all-in sustaining costs per ounce on track to remain unchanged from 2020 levels. Guidance for 2021 includes increased capital spending largely in support of future production growth at Detour Lake, and a greater commitment to exploration to follow up on recent drilling success at all three of the company’s cornerstone assets. The company also announced three-year production guidance, which demonstrates the sustainability of solid operating performance and includes growth to 1,405,000 – 1,545,000 ounces in 2023.
During this period, the KL Gold will continue to work toward achieving a number of significant, and potentially transformational, milestones. Among these milestones is completing the current $50 million dollar drilling program at Detour Lake and releasing a new mine plan in 2022.
The company says drilling to date at Detour Lake provides increasing evidence that the Main, West and North pit locations involve one large, continuous deposit that can support the transition to a “super pit” concept and can lead to substantially higher levels of production.

Maccassa Pic
At Macassa, the #4 shaft project is continuing and remains on track for completion in late 2022, when production is expected to increase to 400,000 ounces at improved unit costs in 2023.

Highlights of 2021 guidance include:

· Production of 1,300,000-1,400,000 ounces (2020 guidance: 1,350,000 – 1,400,000 ounces including 29,391 ounces from Holt Complex)
· Operating cash costs per ounce sold of $450 – $475 (2020 guidance: $410 – $430)
·  AISC per ounce sold of $790 – $810 (2020 guidance: $790 – $810)
·  Sustaining capital expenditures of $280 – $310 million (2020 guidance: $390 – $400 million)
· Growth capital expenditures of $250 – $275 million (2020 guidance: $95 – $105 million)
·  Exploration expenditures of $170 – $190 million (2020 guidance: $130 – $150 million).

In Australia, the company is planning its largest exploration program at Fosterville since acquiring the mine in 2016, including $85 – $95 million of drilling and development. The primary objective of the program is to identify additional high-grades zones to provide future high-grade production. The 2021 exploration plan will largely follow up on existing drill results that included the intersection of quartz with visible gold, found in large concentrations and at exceptional grades in the Swan Zone, in multiple other locations.
Three months prior to the Timmins announcement, KL Gold announced a Strategic Alliance with Newmont Canada that raised a lot of eyebrows. The two companies announced that KL Gold and its wholly-owned, indirectly-held subsidiary St Andrew Goldfields Ltd., had entered into a strategic alliance agreement with Newmont Canada FN Holdings ULC in connection with exploration and development opportunities around the KLG’s Holt Complex and Newmont’s properties in Timmins.
Under terms of the agreement, Newmont paid Kirkland Lake Gold US$75 million to acquire an option on certain mining and mineral rights related to the Holt Mine property.   
The agreement also includes a commitment by the two companies to work together to identify additional regional exploration opportunities around their respective land positions in the region where they may be able to cooperate in the future to advance projects and create value for both companies.
Under terms of the Agreement, the Option may be terminated by the Company upon the assumption of certain liabilities related to the Holt Mine property. Kirkland Lake Gold will act as manager of Strategic Alliance activities. Ownership of all infrastructure on the Holt Mine property, including the Holt Mill, is retained by Kirkland Lake Gold, and the Option does not involve the other Holt Complex assets, including the Holloway and Taylor mines.
The Holt Advanced was acquired by Kirkland Lake in January 2016, and consists of three underground mines – Holt, Holloway and Taylor – in addition to the Holt processing mill. The Newmont agreement solely applies to the Holt mine. Built in the late 1980s by Barrick, Holt produced 113,952 oz. gold in its final year at a grade of four grams per tonne.
At the time, Newmont stated that the “formation of the strategic alliance supplies Kirkland Lake Gold with capital to gauge strategic options for the way forward for the Holt mining complex, discover on its present properties, and consider different regional alternatives the place Kirkland and Newmont might cooperate sooner or later.”
The announcement of the KL Gold / Newmont alliance put a spring in the step of a number of the area’s juniors, including Melkior, Moneta Porcupine, and others who have their fingerprints on a number of exploration properties in the Timmins and Kirkland Lake mining regions.
The news has also meant good things for the Timmins real estate market. With few new homes being built, existing owners are getting handsome offers for their properties, some before the listing is even made public – a rarity in Timmins.
Timmins Mayor George Pirie welcomes the news. “Tony (Makuch) knows Timmins well,” he told Mining Life. “I’m not surprised that KL Gold would take such an interest in the city as we continue to have enormous development potential. They already make substantial investments in the city and a number of our local suppliers are benefiting from their relationship with Kirkland Lake Gold as well, both in Kirkland Lake and at Detour Lake,” he added.
As for the three-year guidance, Kirkland has more good news for investors.
“Looking at our cornerstone assets, Detour Lake is set to significantly grow in 2021, with production for the year targeted at 680,000 – 720,000 ounces at AISC per ounce better than $900 per ounce. We regard the 2021 production level as a benchmark to be sustained and ultimately increased going forward. Under current assumptions, including receiving required permits and approvals, we expect production to grow to approximately 800,000 ounces in 2025 within the current mine plan. Having said that, we plan to present a new mine plan in 2022, following completion of the current drilling program, which we believe could transform and significantly improve the longer-term outlook for Detour Lake, with the establishment of a “super pit” concept based on the potential existence of a much larger, continuous deposit around the existing pit locations and Mineral Reserves.
“Production at Macassa is expected to ramp up over the next three years, reaching 400,000 ounces in 2023 following completion of the #4 Shaft. Production in 2021 is targeted at 220,000 – 255,000 ounces at AISC per ounce sold averaging below $750. With completion of the #4 Shaft on track for late 2022 and production commencing from near surface zones using a surface ramp, we anticipate production rising to 295,000 – 325,000 ounces in 2022 before increasing to 400,000 – 425,000 ounces in 2023.
“Production at Fosterville in 2021 will be lowered from the levels achieved in 2019 and 2020. We have a large orebody at Fosterville, but the high-grade components of the existing Mineral Reserve involve a short production life. When you consider that we have identified a number of large mineralized systems, all including intersections containing quartz with visible gold, we remain optimistic that additional high-grade zones can be identified. Our challenge is to maintain a sustainable and economic operation while we continue to drill to identify the next high-grade area for future mining. The result of our work is a production profile that includes 400,000 – 425,000 ounces in 2021, moving to a range of 325,000 – 400,000 ounces in 2022 and 2023. Longer term, we will work to sustain operations at that level of production for a number of years, subject to continued drilling success. Our budget for exploration at Fosterville in 2021 is $85 – $95 million, by far our largest commitment since we acquired the mine in November 2016.”

Three-year production guidance:

· Consolidated: Production targeted at 1,300,000 – 1,400,000 ounces in 2021, 1,300,000 – 1,445,000 ounces in 2022 and 1,405,000 – 1,545,000 ounces in 2023.
· Detour Lake: Production targeted at 680,000 – 720,000 ounces in 2021, 2022 and 2023.
· Macassa: Production to total 220,000 – 255,000 ounces in 2021, 295,000 – 325,000 ounces in 2022 and 400,000 – 425,000 ounces in 2023
· Fosterville: Production targeted at 400,000 – 425,000 ounces in 2021 and 325,000 – 400,000 ounces in both 2022 and 2023.



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