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Kirkland Lake Gold Ltd. (NYSE:KL)
Q1 2020 Earnings Call
Apr 9, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. My name is Amy, and I will be your conference operator today. I would like to welcome everyone to the Kirkland Lake Gold Conference Call and Webcast to Discuss First Quarter 2020 Production Results and the Company's Response to the COVID-19 Virus. [Operator Instructions]

With that, I would now like to turn the call over to Vice President of Investor Relations, Mark Utting.

Mark Utting -- Vice President, Investor Relations

Thanks very much, operator, and good morning everyone. Welcome to our conference call and webcast. We're holding this call today to cover a few topics. First, we want to discuss our company's response to the COVID-19 crisis. We have taken extensive measures to protect our people and want to review them with you today. In addition, we will discuss our first quarter production results; quite a challenging environment. We have turned in a strong performance in Q1. We will also discuss the Detour acquisition and report on progress with the Detour integration plan. And finally, we will review some -- a number of business improvement initiatives that we are introducing at our three core assets, Detour, Macassa and Fosterville.

As these listed topics may suggest, we'll have a number of speakers today led by Tony Makuch, our President and Chief Executive Officer. Also speaking will be David Soares, our Chief Financial Officer; Duncan King, our Vice President, Australian Operations; Evan Pelletier, our General Manager, Kirkland Lake Operations; David Londono, our Detour Mine General Manager; Gord Leavoy, our Vice President, Mineral Processing; Natasha Vaz, our Vice President, Technical Services; and John Landmark, our Vice President, Human Resources. There are also other members of the management team on the phone as well.

As I'm sure many of you are, we are doing today's call remotely 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 slide deck that we'll be referring to is available on our website both on the Home page and in the Events page. Before I get started, I'd like to direct everyone to slide two in the slide deck. Our remarks today may and likely will contain forward-looking information about future events related to our company. Please refer to slide two, as well as the forward-looking information section of our most recent management discussion and analysis, which is dated February 19 and available on our website. Also, during today's call, we may make reference to non-IFRS measures. A reconciliation of these measures is available in our most recent MD&A. Finally, I'll point out that all figures discussed today are in U.S. dollars unless otherwise stated.

With that, I'll now turn the call over to Tony Makuch, our President and Chief Executive Officer. Tony?

Anthony Makuch -- President & Chief Executive Officer

Okay. Thanks Mark. Yeah, I know and this is a first time for us where we're doing the call as we are -- where we're all in a number of different locations. You have a number of different speakers on the line and with David Londono right at the Macassa Mine, I'm sorry, at the Detour Mine site; Evan Pelletier is in Kirkland Lake near Macassa, so is Duncan King in Kirkland Lake. So, we have everybody sort of scattered around the province of Ontario straight from as far -- not quite as far north as you can go right to maybe as far as south as you can go or maybe not quite as far south. So anyway, I hope things go good on this call and it's pretty seamless, and appreciate everybody for listening and taking their time and their patience.

So I'll start on slide three, and I'll be providing the start. I want to thank all the people of Kirkland Lake Gold. These are definitely challenging times for everybody and the people -- everybody has responded very well and many thanks for the understanding and everybody really pitching in, in these times. Protecting the health and well-being of our people, their families and our communities is our top priority and we have worked very hard to manage the COVID-19 crisis. We put our Macassa and Detour Lake Mines on reduced operations until April 30, 2020 and temporary suspended operations at the Holt Complex. We have discontinued test mining and processing at the Northern Territory in Australia. We've also discontinued all non-essential operations, which -- non-essential from a production point of view, which would include all direct exploration, diamond drilling, whether in Northern Territory, whether it's at Fosterville, whether it's at Macassa and Detour.

We've also suspended the development of the number 4 shaft at Macassa and we have a number of -- some capital projects that are taking place, say the ventilation raise at Fosterville had been suspended. So there's a lot of things that have changed, but there has been a lot of really good progress happening in the company. We've also put in place companywide, an extensive list of health and safety protocols. These are listed here in slide three. I won't go through them all with you, but I will say that our people have done an exceptional job of implementing them and really sticking to them. Turning to slide 4, there are few other points about COVID-19 I'd like to make. First, mining has been designated as an essential service by both the Government of Ontario, as well as the State of Victoria and Australia, given the contribution it makes in terms of deployment and community investment and support.

We don't reduce or suspend our operations lightly but felt it was necessary as part of protecting our people by reducing the numbers at site to assist with this and other safety protocols and in cases where employees were impacted or are impacted by these reductions we're providing the basic wages for a month in most cases until April 30, and we want to help people manage through these difficult times. The reduction in operations at non-essential activities, as I mentioned earlier, will impact production in Q2. It did have some impact on production in Q1 as well, especially when you start putting in all the different protocols and we're not going to put a number at this point because of the situation in terms of what it's done to our guidance. And as you, as we put out at previous press release, we have elected to withdraw our guidance for the year and we will update our guidance once we have resumed normal operations.

Looking at supply chains in Canada and Australia, we have management personnel working on this regularly. For the most part, we have not encountered any serious problems receiving consumables. We have had to make a few adjustments here and there. Over here in Canada, I would say that short of a complete closing of U.S.-Canada border, we should not have a problem. I will add though that we are looking at ways to maximizing country procurement going forward. Now turning to slide 5, movement on to Q1 production, sorry and it's the time we stopped talking about the COVID-19. A good indication of the effectiveness of our people is that despite many challenges during Q1 we've turned in a strong quarter production.

We produced over 330,000 ounces of gold in the first quarter, which includes 91,000 ounces from just over two months of production at Detour Lake. Excluding the Detour production increased 3% year-over-year to 239,000 ounces. Fosterville had a very -- another very strong quarter producing over 160,000 ounces. Our average grade here was 42 grams per tonne at Fosterville and a significant portion or almost 90% of the ounces were coming from the Swan Zone at Fosterville. Macassa produced just over 50,000 ounces and both Macassa and Detour had disruptions caused by COVID-19 which affected mining rates and also grades in the case of Detour. Now, I'm on slide 6, a major milestone during Q1 was completed the acquisition of Detour Gold. We did close the deal in January 31 and upon closing we issued 77 million shares to Detour shareholding.

Adding Detour Lake Mine provided a third cornerstone asset to the core jurisdiction for the company and one with tremendous growth potential and exploration upside. We are targeting significant growth in reserves over the next two to three years, which will support increased production and significantly improved unit costs. This is a main value proposition for us with Detour. We're spending around $50 million in exploration over the next 1.5 to 2 years with the goal of achieving significant reserve growth. We're also targeting between $75 million to $100 million of annual value creation through synergies and other opportunities. We're making good progress toward this target and have John Landmark discuss this as part of the Detour integration plan later on in the presentation.

Finally, as far as shown in slide 7, our -- finally, maybe [Indecipherable] something to talk about we were very active returning capital to shareholders in Q1. As outlined on slide 7, we repurchased 9.7 million shares through our normal course issuer bid during the quarter. Around 2 million of that came through the automatic share purchase plan, which we launched in February. We have since terminated the automatic share purchase plan given the uncertainties around COVID-19 and the desire to maximize financial flexibility. Our NCIB remains in place and we have the ability to repurchase more shares going forward as part of our NCIB and we also have the ability to relaunch our automatic share purchase plan maybe at the end of May or in June as things -- as circumstances change.

We used $329 million to buy back stock during the quarter. And this was to -- purchase of about 10 million shares. And this is a significant commitment. We have a goal to repurchase 20 million shares over 12 to 24 months. We are still committed to that goal though we are not repurchasing shares currently until we see a resumption in normal operations at all of our mines. Also during the first quarter, we doubled our quarterly dividend to $0.125 starting with our Q1 dividend payable on April 13 in this month. At $0.50 per share on an annual basis our current dividend will return around $140 million per year to shareholders. We're really -- with both -- looking to maintain liquidity and financial stability of the company, maintain -- keep the company ready to come back strong once this crisis is behind us and we're working toward remaining debt free.

But maybe I'll pass the call on to our CFO, David Soares to discuss the financial strength of the company. Thanks.

David Soares -- Chief Financial Officer

Thank you, Tony. I'm speaking to slide number 8 of the presentation. Kirkland Lake Gold is an industry leader in terms of our financial strength. We ended March with $530 million of cash and no debt. You can recall we started the year with $707 million cash. The change largely reflects the $329 million we used to buy back stock during the quarter. Some other factors to consider when looking at our cash include the following: We sold 344,000 ounces gold during the quarter, including about 16,000 ounces of gold in inventory at Detour. That was there at the time of the acquisition. This is why our sales figure is higher than our production figure in the first quarter. We received about $159 million of cash from the Detour acquisition. Having said that, subsequent to the deal closing we used $100 million to pay back Detour's debt and about $30 million to close out Detour's hedge position.

Detour had gold collars in place at pricing between $1,300 and $1,490 per ounce. They also had hedges on currency and diesel both at unfavorable pricing compared to today's current levels. We've done fairly -- we've done very well by closing out these hedge positions to-date and believe that will be the position going forward as well. We will have much more to say about our cash and cash flows in Q1 when we release our full Q1 2020 financial results in early May. For now, I'll conclude by saying that we have a great deal of liquidity between our cash on hand and also access to Detour's credit facility. As a company, Kirkland Lake Gold is very well-positioned to withstand the challenges posed by COVID-19.

I'll now turn the call to Duncan King, Vice President of Australian Operations.

Duncan King -- Vice President, Mining (Kirkland Lake)

Thanks, David. I am speaking to slide 9. As Tony indicated, Fosterville had another strong quarter in Q1 2020. Production totaled 160,000 ounces, an increase of 24% from Q1 2019. The increase was driven by higher grades with the average grade increasing 46% to 42 grams to the tonne. The increased grade reflected the continued ramp up of operations of the Swan Zone over the last year. In Q1 2020, well over 90% of our ounces mined came from the Swan Zone whereas Swan accounted for about 75% of the ounces in Q1 2019. Production declined from the record quarterly production of 192,000 ounces in Q4 2019. The change from the previous quarter mainly reflected mine sequencing and the impact of some grade outperformance in Q4.

Essentially we were in higher grade areas of the Swan last quarter. Turning to our COVID strategy, conditions in Victoria have been different than here in Canada though COVID-19 is becoming more of an issue now with the number of cases rising. We continue to operate at Fosterville with our company-health and safety protocols in place. Among these protocols, we have suspended all non-essential work at Fosterville so production has been largely unaffected.

I'll now call on Evan Pelletier, General Manager, Kirkland Lake Operations.

Evan Pelletier -- General Manager, Kirkland Lake Operations

Thanks Duncan. I'm starting on slide 10. Macassa had a solid quarter in Q1 2020. We produced 51,000 ounces, which compared to the record quarterly production of 73,000 ounces in Q1 2019 and 56,000 ounces in the previous quarter. The quarter-over-quarter change largely related to the lower tonnage, which was to a large extent related to the disruption caused by COVID-19. Now, turning to COVID-19, we are in a reduced operation now with our workforce running at about 65% of normal levels that is helping us keep the number of people down on site. For people who are working, those who can work remotely are currently working from home. We have introduced extensive measures around medical screening and social distancing.

We have also significantly increased our cleaning and sanitizing efforts. Overall, the implementation of COVID-19 measures has gone very well, and in fact, we have done very few -- very special things. One of them is we commissioned a local distillery to produce hand sanitizer and donate over 100 gallons [Indecipherable] such as local OPP detachments, grocery stores, and long-term care facilities. We have also donated masks to local medical professionals. Turning to slide 11, Holt Complex produced 28,000 ounces in Q1 2020. This compared to 30,658 ounces in Q1 2019 and 31,649 ounces in Q4 2019. The change from last year's first quarter reflected lower tonnes and grade at both Holt and Taylor. The reduction from last quarter was due to lower production at Holloway Mine in Q1 this year, which has more than offset the impact of higher grades at both Holt and Taylor.

The Holloway Mine was placed on care and maintenance in March of this year. The decision was not related to COVID-19. It was related to performance. Total production in Q1 was 1,286 ounces versus 5,800 ounces of the previous quarter. As part of our COVID-19 strategy, we announced that the whole complex was temporarily suspended suspending operations until March 30. Most of the 529 workers at Holt Complex are off work and are receiving the basic wage for the month. A small workforce is still on site to manage critical functions like water management and environmental activities. For these workers, we're following our companywide health and safety protocol.

I'll now turn the call over to David Londono

David Londono -- Mine General Manager

Thank you, Evan and good morning everyone. I will be starting on slide 12. As you already heard, the total produce, 91,000 ounces from January 21 in the end of quarter one. We processed 3.7 million tonnes at an average grade of 0.84 grams per tonne. The average grade was down from the previous quarter, mainly due to processing higher volumes of stockpile material, which is typically lower grade and mine production. Higher processing from the stockpiles reflected reduced mining operations related to COVID-19, as well as the impact of severe winter weather conditions and lower availability of drilling equipment during the quarter. Looking at COVID-19, we went to reduce operations on March 23.

Currently we have about 300 people on site versus a normal level of around 1,100. We're producing [Indecipherable] shovel from the mine and feeding and the process plant from the stockpiles. We're also managing water during this spring runoff and managing other environmental activities. For workers on site, we have introduced all of the companywide protocols as well as a number of other specific to remote comp operations like Detour. They involve medical screening before workers get on the bus to travel to site, higher levels of cleaning and sanitizing including within the company, the cafeteria and increased food safety with all meals being individually wrapped and chairs removed from sitting areas in support of social distancing.

Also we have [Indecipherable] professional super-emplaced processes for the assessment, isolation, care and transportation of anyone showing symptoms. I will reiterate what Tony said earlier that our people have done an excellent job implementing our health and safety protocols. The next three slides look at business improvement initiatives that have been undertaken across the company. I will start with slide 13, which deals with initiatives and Detour. On the geology side model update is going and aims to capture the ore tonnage announces upside down by this strong positive reconciliation -- as shown by the strong positive reconciliation of serving the past -- in the past four years, which averages 8.5 higher tonnage and 7% higher ounces than the reserve [Indecipherable]. On the drilling and blasting side, drilling and blasting optimization started in January 2019 and is ongoing.

And the aim is to optimize drill and blast for wall control to achieve or exceed mine design parameters and also to optimize mill throughput. Work is ongoing since January 2019 and are advancing well over the year on this front -- on fragmentation and drill and blasting. On the geotechnical engineering side, the aim is to capture the potential for pit slope in good wall areas like on the North wall of the pit and achieve design in the more challenging work conditions like on the West and the South. Improved data collection, analysis and reporting together with an integrated approach to drill and blasting is being implemented as we speak. On the mine planning side, develop the mine strategy to capture, if possible, a higher risk adjusted discounting -- discounted [Indecipherable] and also reflecting updated geothermical resource model and cost and strategic objectives.

In mine operations the aim of the initiatives is to drive for higher productivity and lower mining cost, also accounting for cost reduction on as a silo but globally. For example, choke feeding represent a higher mining cost, but on the overall, higher revenues. And on the mine maintenance side, optimize equipment production and maintenance resources to improve maintenance data, collection and reporting.

I will now turn the call over to Gord Leavoy, our Vice President of Mineral Processing.

Gord Leavoy -- Vice President, Mineral Processing

Good morning everyone. I'll be talking about slide 14. With our Leach, CIP, and Detox upgrade, our -- the processing plant was originally designed for 50,000 tonne per day with a 95% recovery. We're currently running above that throughput rate right now and the addition of the leach tanks and the CIP upgrade will increase our recovery and maintain the recovery after the -- we increase throughput. The secondary crusher screen installation, that's designed for -- that's going to improve throughput and reduce maintenance and downtime crushing costs. It will give us some efficiency. The line balancing is an improvement. It's scheduled to be installed this year, later in the third quarter and it's basically to -- if we overload one circuit we can balance the load to the other side. It will improve grind and it will also improve throughput and recovery. For the specialty tools, basically -- tools will be purchased as soon as possible. It will help with precision maintenance. It's going to be reducing cost, and it will improve reliability.

Now, I'll pass you on to Natasha Vaz, our Vice President of Technical Services.

Natasha Vaz -- Vice President, Technical Services

Thanks Gord, and good morning everyone. So turning to slide 15, I'll briefly touch on some of the operational improvement initiatives that are being either trialed or implemented at our other sites. So with respect to the first initiative we're going to trial a computerized face drill at Macassa's near surface portal. The aim here is to improve drilling, reduce our over-break, help level our roads and improve our underground terrain in general, which will in turn improves the tire life of our equipment and also optimize our haulage and production cycle time. And this will all help in reducing our overall cost and also improve our productivity. The second initiative tele-remote mucking from surface. So we initiated this trial at Macassa back at the end of 2018. Here we currently have two lowers at Macassa and one that was just delivered to the Robbin's Hill at the end of this week.

The goal here is to safely speed up our development and production cycle times by enabling us to clean out headings between shifts from surface. So basically it just gives us the ability to utilize hours that would typically be wasted. The last initiative is the implementation of the Mobilaris System at Fosterville, which is a location-based service platform. So basically what the system does for us is that it provides us with real-time situational awareness using 3D visualization of the mine so that we know what's happening underground and where our equipment and personnel are in real-time. We're anticipating that this ability will not only lead to safety gains but also productivity gains. And as part of this implementation we've also started installing on-board tablet on equipment to help with proximity detection of equipment nearby and also personnel nearby and also to mitigate traffic jams on our main haul roads thereby improving our haulage time.

That's just a quick snapshot of some of the things that we're working on. With that, I'll turn the call over to John Landmark, our Vice President of Human Resources.

John Landmark -- Vice President, Human Resources

Thank you, Natasha and good morning everybody. I'm speaking to slide 16, which deals with our progress on integration and synergy realization. During the due diligence of Detour Gold, we recognized that significant synergies would exist in four main areas, mainly in the people area, corporate, procurement, and productivity, and by that we mean productivity in terms of operational effectiveness and also effective use of capital. We brought together an integration team with members from our mine sites and corporate office and we've established a project management office with four key deliverables, which are listed in this slide. In addition to identifying and delivering $100 million in synergies, we'll establish a Timmins hub and an operation center and drive operational excellence as a value proposition.

In regards to the Timmins office, I should mention, we're already currently advanced in leasing the premises that will become our service center. The team is now focused on establishing a scalable operations control center with real-time analysis and visualization of full asset process data. As we've progressed, several strategic capital projects have been identified and they are now and in the planning phase. For example, these include an on-site airfield at Detour, improved communications to site by means of enhanced mobile network coverage, on-site Assay Laboratories supporting the process plant, and improved on-site welding shop. The current COVID-19 hiatus has also enabled us to address integration and organization structure and it's given us a chance to revisit systems and processes across Kirkland Lake and the integration of Detour Lake Mine.

I think with that I'll turn back the call to Tony for concluding remarks.

Anthony Makuch -- President & Chief Executive Officer

Yeah, thanks, John. And thanks everybody on the call for their input. Really appreciate it. As you can see, I know these are clearly very challenging times at Kirkland Lake Gold. We are working very hard to react proactively and responsibly to the current COVID-19 challenge, recognizing that the health and safety of our people is our top priority. We've reduced operations, implemented extensive health and safety protocols, we're monitoring developments daily through a management taskforce. Through this taskforce we aim to react quickly to ensure that we are taking the right actions to protect the people. Despite the challenges of COVID-19, Q1 2020 was also a quarter of significant accomplishments for the company. We had a solid Q1 production results. We rereturned significant capital to shareholders through our NCIB and through the use of our -- and by doubling our dividend.

And we maintained our industry-leading financial strength with a very strong balance sheet and access to substantial liquidity. Finally, we completed the acquisition of Detour Gold and see tremendous value potential through the integration of Detour and investment and support of growth as we go forward. And you can see as a company, we are well-positioned to withstand the current challenging environment. When you look at the attributes of Kirkland Lake Gold, we have three really quality assets in the company. Fosterville, one of the highest grade gold mines, lowest cost gold mines in the world; Macassa, high grade, large reserve base; and Detour with an extremely large reserve base and lots of potential for growth.

We have -- you can see the company has significant financial strength, strong cash flow generation, strong cash on the balance sheet and no debt. But fundamentally, you get the impression if you listen to this presentation and you see the depth of the people in the organization and the depth of the people isn't just the people we who are on this call but there's a lot of people throughout the company, and that's really the strength of the company. And as we go forward we believe that people coming together and working as a team at Kirkland Lake Gold can be emerging and stronger than before.

So, with that I thank everybody for listening and we'll be happy to take your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Cosmos Chiu with CIBC. Cosmos, your line is open.

Cosmos Chiu -- CIBC World Markets -- Analyst

Thanks. Thanks, Tony and team for hosting the call. It's really helpful here. My first question, you talked about, you're running at about 35% of the normal sort of workforce at Detour; about 65% at Macassa. Does that mean you're running at about 65% of throughput at Macassa and about 30% of normal sort of throughput a Detour? I don't think it's -- the relationship likely isn't that simple. So if it's not linear could you help us in terms of how we should model those two mines at this time in terms of throughput?

Anthony Makuch -- President & Chief Executive Officer

Well, I'll let David answer part of the question and Evan Pelletier as well, but for the most part where -- when you talk about throughput, one is mine through, one is mill throughput. At Detour we are processing low grade stockpiles combined with mining with a shovel, and he'll give you a sense on the performance we're seeing with the reduced workforce at site. Now, you also have to recognize that there are some capital programs that are on hold or suspended at this point in time. Similarly at Macassa, in terms of milling rates, et cetera, and mining rates, I mean, there's a lot of milling and mining happening, but some of the development is on hold as we say, some other capital projects and diamond drilling is on hold but maybe I'll let David Londono give us some color about what's happening Detour in that perspective and Evan for Macassa.

David Londono -- Mine General Manager

So we're running about 35% of the people here at Detour. We're running one shovel, one rope shovel and one shovel in the stockpiles. So we're feeding about, I would say 75% to 80% of what we normally process through the mill. So that's -- we're doing about 65,000 tonnes every day.

Evan Pelletier -- General Manager, Kirkland Lake Operations

Hi Cosmos, it's Evan. Like Tony mentioned, we are reducing some of the capital and taking some of the manpower and pushing them over to the ore headings to try and keep that going as much as we can with what we got.

Cosmos Chiu -- CIBC World Markets -- Analyst

Good. And then in terms of my second question here, you kind of touched on it in terms of Australia. Right now Fosterville production throughput hasn't been impacted. Sounds like the situation in Australia in terms of COVID-19 is a bit different. I'm not as close to it. So could you give us an update in terms of sort of what's happening and in the end what is the risk that restrictions could be placed on Australian operations? Thanks.

Anthony Makuch -- President & Chief Executive Officer

Well, I mean, as mining is determined is an essential service in Australia and maybe it even include diamond drilling in that, although we are focused on making sure we don't -- we balance what we do without creating any risk to the community and our people and the operation going forward. But Duncan can give a lot more color on this, if you're OK with that Duncan?

Duncan King -- Vice President, Mining (Kirkland Lake)

Yeah, that's fine. So we've done a lot of the same things as they've done here in Kirkland Lake I can talk to. They've done a lot of self-isolation. They're cleaning the equipment a lot more than what they normally did and everywhere that anyone -- they're trying to self-isolate as much as possible in the mine itself. So they're running into the same challenges as us. Right now is the other -- states over there have -- they're self-isolated. They shut their borders down but Victoria is still open.

Anthony Makuch -- President & Chief Executive Officer

Some of the things that's happening, right, Duncan and Evan and David is -- I'd say -- people going underground, say at Fosterville. They don't have more two people in a truck. They have limited amounted of people. So it takes longer for people to get to the workplace. Similarly at Macassa in the cage -- you have less people going into cage and they have sort of barricade between each other when the get in a cage. So there's lot of things like -- that's happening that's affecting the business in some ways, but the people have adopted very well -- adapted very well so they've adopted other things to do to maintain a semblance of operational efficiency.

Cosmos Chiu -- CIBC World Markets -- Analyst

Thanks Tony. Those are the questions I have. It sounds like it's a great response to COVID-19 that you have in place. Thank you.

Operator

[Operator Instructions] Your next question comes from the line of Josh Wolfson with RBC. Josh, your line is open.

Josh Wolfson -- RBC Capital Markets -- Analyst

Thank you. Thank you for the details on some of the business initiatives that you're advancing in light of the uncertainties today specifically on Detour a lot of different items that the company is addressing which is good to see. What would be the timelines in light of the uncertainties that we're seeing for the upcoming resource update in new mine plan? And would that be affected by the suspension or not suspension but reduced operations?

Anthony Makuch -- President & Chief Executive Officer

Well, for the most part, some of this work is progressing, when people are working off site. Natasha, can you give some color for that?

Natasha Vaz -- Vice President, Technical Services

Sure, sure. Hi, Josh. So depending on the results of the resource update, we may issue revised life of mine that captures the results of the model if there is material difference. And if so, I would say, in my opinion, anyway, we're expecting to have it completed by end of year, if not early next year.

Anthony Makuch -- President & Chief Executive Officer

There were some things -- we were planning -- and trying to improve some drilling and some of that's on hold. So some of the benefits we want to do in terms of growth in resources and reserves, it may be affected depending on how long this takes, but we're working on plans for -- there is a lot more exploration work than just diamond drilling, as I say, and a lot more engineering work than, sorry, lot more to think than just getting the work -- day-to-day work done from a physical perspective. And we've got a lot more time to be thinking and people are spending time geologizing and engineering plans. So there are some positives here, but there could be some impact that we don't quite know yet in terms of timing. We're not really anticipating much.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. I noticed the sort of deliverables timeline for the updated resource model was completion in the second quarter. Can we expect to see an interim update before the full revised life of mine plan by the end of the year?

Anthony Makuch -- President & Chief Executive Officer

I'm not sure that I think we could -- that would happen. More than likely we're going to probably try to really get our heads around things and come up with a revised plan toward -- maybe the right time that supports some updated mine plan.

Josh Wolfson -- RBC Capital Markets -- Analyst

Okay. And for Macassa, in light of some of the slowdown there for the shaft project -- that project, I guess, had been operating ahead of schedule and below budget. The timelines, if I recall, were not adjusted in light of some of that upside. What sort of delay would you have to experience now for the current timelines, which have not been adjusted to be delayed?

Anthony Makuch -- President & Chief Executive Officer

When we were above 250 feet ahead of plan -- when we put it into current maintenance, now some of the work we're doing in care and maintenance right now -- some of the things we're doing is -- you're fixing up some parts of the set up. We've just done a rope changeover that probably been scheduled a little bit later. So, you change the actual ropes. There is some communications upgrade being happening, so as part of the care and maintenance people -- there are some things that are being fixed up. So we were -- if you can get a sense of it, 250 feet, we're about a month ahead of schedule than we were in the plan. So it depends on how long we take, but I mean, I would think that by month, month-and-a-half, we -- I don't think it'll have any impact whatsoever on the final schedule. And we were getting pretty good performance, better than planned performance prior to going to care and maintenance. And we are taking this period of time in care and maintenance to improve some processes, improve some procedures and do some -- make some improvements in the setup and what's going on. So right now we don't -- as long as this isn't beyond two months we don't anticipate too much issues there.

Operator

Your next question comes from the line of Mike Parkin with National Bank. Mike, your line is open.

Mike Parkin -- National Bank Financial -- Analyst

Great. Thanks for taking my question guys and applaud the measures you're doing to help the communities with COVID-19 crisis. That's very nice of you. Questions on capex; would the capex guidance include everything that was kind of detailed on that one slide that was talking about a potential airfield or is that still kind of in process of being determined to be spent or not?

Anthony Makuch -- President & Chief Executive Officer

Yeah, that will be determined to be spent or not. We're still scoping out a lot of that. We're scoping out our -- scoping out the Assay Lab, scoping out the airfield, scoping out a couple of these areas in terms of what we might need from a capex point of view. But there's a lot of other moving parts happening as well. But I don't know, David, can you give some color to that [Indecipherable] offline what I answered there?

David Londono -- Mine General Manager

No, no. You are absolutely right. We're doing scoping studies and the trade-offs and benefits of all these projects.

Mike Parkin -- National Bank Financial -- Analyst

So would we be looking at like kind of piecemeal, bit-by-bit coming out in terms of updates and is that something we can just kind of watch for updates with quarterly earnings?

Anthony Makuch -- President & Chief Executive Officer

Well, yeah, in a way. But we're not -- we don't want to make it death by a thousand lashes, Mike. So we'll try to give some good color once we have it altogether.

Mike Parkin -- National Bank Financial -- Analyst

Okay.

Anthony Makuch -- President & Chief Executive Officer

Because we need that too for our own planning.

Mike Parkin -- National Bank Financial -- Analyst

And then with the Detour Lake this year you were going to be doing quite a bit of tailings work. Is that still ongoing or is that on hold right now with the COVID-19 initiatives?

Anthony Makuch -- President & Chief Executive Officer

Well, David give some color on that?

David Londono -- Mine General Manager

As we continue feeding the mill about 70%, 80%, so we need to do some of that work this year, so that's still going.

Mike Parkin -- National Bank Financial -- Analyst

[Speech Overlap] Okay, great. That's it from me guys. Thanks very much and congrats on the good quarter.

Operator

Your next question comes from the line of Ovais Habib with DB. Ovais, your line is open.

Ovais Habib -- DB -- Analyst

Hi, everyone. Thanks for hosting the call. Just most of my questions have been answered, Tony. But the one that I just wanted to ask you was with the reduced operations at Macassa and Detour and then assuming operations will resume probably at the end of April. How fast can you ramp-up back to normalized levels at both Macassa and Detour?

Anthony Makuch -- President & Chief Executive Officer

I mean, I guess I can -- I'll make a comment and David and Evan can comment. You got to recognize that we're not sure that end of April would be start up, but I would think that again, with some of non-essential working done so there is some capital development and sustaining development that's not quite taken place say at Macassa. Similarly there are some projects at Detour that are a little bit on hold. And then in terms of, when we do start -- we start up operations we don't anticipate just going all [Indecipherable] again and calling everybody back in one day. So we're probably going to have a staged approach to bringing people back to work and we're going to have new processes. The world is going to be different. We are -- a lot of what we're doing now and a lot of what we're learning and some of the processes that are happening now are probably going to be processes that are with us for quite some time. We're going to plan for that. So I would anticipate that it's going to take probably a month-and-a-half to two month transition getting back up to full operations but not including with some impact of the lower development drilling. But I don't know, David do you have some color on that? Evan?

David Soares -- Chief Financial Officer

Yeah, I can add a little bit. So as it also depends on if the government opens, let's say the borders with Quebec. So we have a lot of skilled people that are coming up from there. We have to bring our camp workers first and then start bringing all the maintenance people to do the maintenance that we didn't do during this time. So it's going to take us, as Tony said, probably a month, month-and-a-half to ramp up.

Evan Pelletier -- General Manager, Kirkland Lake Operations

Over at Macassa, we're also waiting for the other provinces to lift the border restrictions as well, probably about three to four weeks ramp up as well for Macassa.

Anthony Makuch -- President & Chief Executive Officer

And one other consideration Ovais is, it's spring thaw happening and there is a lot of snow, lot of ice still on the lakes and so -- and especially for like in relation to Detour and some of the workforce that comes from the Northern communities there is plan that there could be some disruptions related to flooding, et cetera, coming up to the Northern communities, which could impact us getting some people. But we're monitoring that and certainly -- we're prepping, as David said, prepping on site for water management similarly at Macassa for water management, so we don't have the same issue that happened to us last year.

Ovais Habib -- DB -- Analyst

Perfect Tony. That's the question I had and really appreciate you doing this call and really good info as well, so appreciate the call. Thank you so much.

Operator

Your next question comes from the line of Kerry Smith with Haywood. Kerry, your line is open.

Kerry Smith -- Haywood Securities -- Analyst

Tony for Detour with shovel running in the pit and one shovel running in the stockpile, would it be roughly one-third of the tonnage to the plant is coming from the pit and two-thirds coming from stockpile? Would that be roughly the split?

Anthony Makuch -- President & Chief Executive Officer

I think it might be a little bit skewed more toward -- little bit more from the mine but David is, I mean how close is it?

David Londono -- Mine General Manager

So we try to keep the stripping ratio at the pit at 4 to 1, which is the normal stripping ratio here. And not all the material coming from the pit, will go direct to the process plant as some is coming from some of the underground works contains some metal in it, some steel that we have to sort out before we process. So I would say we're doing about 80-20, 80% from the stockpile, 20% from the direct pit.

Kerry Smith -- Haywood Securities -- Analyst

Okay, perfect. And so you are stripping some waste as well with that shovel in the pit as you go. So you're not getting waste bound and are not getting too waste bound, is that right?

David Londono -- Mine General Manager

Absolutely, yeah, you're correct.

Kerry Smith -- Haywood Securities -- Analyst

Okay. Okay. So how long do you think, David that you could run at the current rate with that one shovel before you would be waste bound? Would it be -- it's a few months, I guess, right?

David Londono -- Mine General Manager

It's a few months and we have six shovels in the pit, so we can actually move from one shovel to the other and balance that material out.

Kerry Smith -- Haywood Securities -- Analyst

Okay. Okay.

Anthony Makuch -- President & Chief Executive Officer

We're mining the same -- we're actually mining ore and waste that -- we haven't tried to adjust the mine plan at all. So we're trying to stay on direct stripping ratio and not compromise anything.

Kerry Smith -- Haywood Securities -- Analyst

Okay. That 4 to 1. Okay, great, that's good. Thanks for that.

Operator

And your next question comes from the line of Carey MacRury with Canaccord Genuity. Carey, your line is open.

Carey MacRury -- Canaccord Genuity -- Analyst

Hi, good morning guys. Maybe another question on Detour. I know you were looking at increasing the daily permit limit there. I'm just wondering is that still progressing or is that sort of on hold? You've also laid out a number of mill initiatives here. I'm just wondering what sort of foot rate you're targeting now [Indecipherable] few months to have the asset here?

Anthony Makuch -- President & Chief Executive Officer

Hey, Gord Leavoy, you want to answer these questions?

Gord Leavoy -- Vice President, Mineral Processing

I had a hard time hearing the question.

Anthony Makuch -- President & Chief Executive Officer

He is asking about, one is, are we still looking for the permit increase? Are we still working on that? Second question is with the mill improvements that we've outlined, what is our targeting mill production rate that we're trying to get toward.

Gord Leavoy -- Vice President, Mineral Processing

Yeah, we're looking toward 75,000 to 80,000. It's probably going to be a two-year process by the time we get all the mill improvements in. What was the first part of that, sorry?

Anthony Makuch -- President & Chief Executive Officer

The permit -- are we still applying for that permit to increase production?

Gord Leavoy -- Vice President, Mineral Processing

Yeah. The permit has been submitted and we're looking probably around -- for next year before that comes back to us.

Anthony Makuch -- President & Chief Executive Officer

And so, we're looking at 75,000 to 80,000 tonnes per day on average throughput that we expect from the plant. That's what we're seeing and that's with -- with some of the process that is strong there.

Carey MacRury -- Canaccord Genuity -- Analyst

Great, thank you. And maybe I missed it on Macassa but any comment on potential or what the potential throughput at Macassa is roughly?

Anthony Makuch -- President & Chief Executive Officer

Well currently the mill -- mill is running about somewhere around 900 tonnes per day currently. We had been running somewhere, 950 to 1,000 tons per day. The mill itself has capacity right now to about 1,650. Correct me if I'm wrong Gord or Evan?

Gord Leavoy -- Vice President, Mineral Processing

No, 1,650 is correct. The ore supply is holding us back right now with the reductions [Speech Overlap].

Carey MacRury -- Canaccord Genuity -- Analyst

Okay, perfect. Thank you.

Operator

This concludes our question-and-answer session. I will now turn the call back over to Mark Utting for closing remarks.

Mark Utting -- Vice President, Investor Relations

Thanks very much everyone for participating in today's call. We covered a lot. Hopefully you found it informative. As you've heard, we're working very hard to ensure that we do all the right things to protect our people, which is our top priority. At the same time, we're performing well as a company and we're moving forward with a number of initiatives to create value to ensure that when we all emerge from the current challenging environment Kirkland Lake Gold will be even stronger, more valuable company. With that, thanks again and have a good Easter weekend.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Mark Utting -- Vice President, Investor Relations

Anthony Makuch -- President & Chief Executive Officer

David Soares -- Chief Financial Officer

Duncan King -- Vice President, Mining (Kirkland Lake)

Evan Pelletier -- General Manager, Kirkland Lake Operations

Gord Leavoy -- Vice President, Mineral Processing

Natasha Vaz -- Vice President, Technical Services

John Landmark -- Vice President, Human Resources

David Londono -- Mine General Manager

Cosmos Chiu -- CIBC World Markets -- Analyst

Josh Wolfson -- RBC Capital Markets -- Analyst

Mike Parkin -- National Bank Financial -- Analyst

Ovais Habib -- DB -- Analyst

Kerry Smith -- Haywood Securities -- Analyst

Carey MacRury -- Canaccord Genuity -- Analyst

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