How would you assess Kirkland Lake Gold’s performance in 2020, and what accomplishments have you achieved across the portfolio?
2020 was a record year for Kirkland Lake Gold (KL). We produced 1,369,652 oz of gold, a 41% increase from 2019, and more than we had ever produced. Very importantly, we joined the ranks of senior gold producers with the acquisition of Detour Lake in January. This acquisition was the right deal at the right time for KL. Detour Lake is a tremendous asset with substantial upside that is already making an important contribution to our operating and financial results. We are already achieving very encouraging exploration success at Detour Lake, which supports our view that we can significantly grow reserves, increase production and improve unit costs. Looking at our other cornerstone assets, Fosterville achieved record results in 2020, producing over 640,000 oz. At Macassa, this operation was impacted the most by COVID-19 as well as other factors, but we bounced back later in the year with a strong Q4. Very importantly, the mine made excellent progress with the #4 Shaft project, which ended the year on track for completion by late 2022, with target production growth to 400,000 – 425,000 ounces in 2023.
Kirkland Lake was again present near the top of the TSX30 list in 2020. What have been the keys to delivering sustained value over time?
The TSX30 is based on three-year return and, over that time, our strong performance has been driven by the success we achieved at Fosterville. Fosterville was a 150,000 oz/y producer when we acquired it in 2016. For the last two years, the mine has produced well over 600,000 oz/y at extremely high grades and low unit costs. We were able to transform Fosterville through success with the drill bit. What is very exciting for KL now is that we see similar transformational potential at all three of our current cornerstone assets. At Fosterville we are optimistic that we can identify additional high-grade zones and are investing over US$85 million this year on exploration. Like Fosterville, we acquired Detour Lake a year ago because we saw an opportunity to transform the mine through effective exploration. Our drilling to date has been very successful and provides increasing evidence that a much larger, more continuous and higher-grade deposit exists at Detour Lake than is currently included in the Mineral Reserves. Finally, at Macassa mine, our foundation asset, we are sinking a new shaft that will dramatically improve the operation, including significantly growing production, lowering costs and improving working conditions. The shaft will effectively launch a new chapter for exploration in Kirkland Lake, where recent drilling has clearly shown that there remains a lot more gold to be found in this historic mining camp.
How does Kirkland Lake weigh organic reserve growth versus M&A?
KL is a company built out of M&A. Through three transactions we took four junior producers, KL, St Andrew Goldfields, Newmarket Gold (Fosterville) and Detour Gold (Detour Lake), and created one, stronger, more valuable company. Through these deals, we generated significant value by combining assets with considerable exploration upside and then investing aggressively in the drill bit to prove up their potential. We did it at Fosterville, with the mine quadrupling production from 2016 to 2019, we are in the process of doing it at Detour Lake, and we are investing significant capital at Macassa to effectively create a new, modern mine.
Given the value created from our previous deals, we will never completely turn our back on M&A. Having said that, with the upside we currently see at our three cornerstone assets, we are not focused on doing any additional acquisitions at this point in time. This is particularly the case given the impact the current high gold price environment on valuations. As always, we will continue to look at opportunities and if we find something that we believe has transformational value creation potential, we may very well act on it.
