Kirkland Lake Gold Ltd. (KL) Q2 2021 Earnings Call Transcript

Kirkland Lake Gold Ltd. (KL)
Q2 2021 Earnings Call
Jul 29, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. My name is Prandy, 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 the company's second-quarter 2021 financial and operating results. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. [Operator instructions] With that, I would now like to turn the call over to your senior vice president, investor relations, Mark Utting.

Mark Utting -- Senior Vice President, Investor Relations

Thank you very much operator and good morning everyone. Welcome to our second-quarter 2021 conference call and webcast. With me today are most members of Kirkland Gold's senior management team. Speaking during the presentation will be Tony Makuch, our president and chief executive officer; David Soares, our chief financial officer; Ion Hann, vice president of Australian operations; Larry Lazeski, our general manager for Detour Lake mine; Evan Pelletier, vice president of mining for Kirkland Lake; and Eric Kallio, our senior vice president of exploration.

As mentioned, there are also several other members of the executive team participating on the line as well. After our presentation, we'll then open up the call to questions. We ask each person to limit themselves to two questions today. The slide deck that we'll be referring to is on our website, both on the homepage and in the Events section.

Before I get started, I would like to direct you to the slides on the show and on the website relating to forward-looking statements. Our remarks and answers to questions may contain and likely will contain forward-looking information about future events relating to our company. Please refer to Slide 2, as well as forward-looking information section of our MD&A dated July 28, 2021, for the three and six months ended June 30th, 2021. Also, during today's call, we'll be making reference to non-IFRS performance measures.

A reconciliation of these measures is available in our Q2 and six month press release and MD&A. Finally, I'll just emphasis that all dollars mentioned today will be in U.S. dollars unless otherwise stated. And with that, I'll turn the call over to Tony Makuch, president and CEO of Kirkland Lake Gold.

Tony Makuch -- President and Chief Executive Officer

OK. Thanks Mark and thanks everybody for being on the call on another nice summer day in Canada here, we don't get a lot of these days, so let's enjoy them., so we'll try to be efficient. We appreciate you guys being on the call and give you some time to ask – as we get through this presentation and ask the question-and-answer, and we enjoy some of the sunshine that you're seeing out there. Anyway before – I'm going to start on Slide 4, but I think, we just – we did put out a press release.

You do look at the results for the quarter, a very, very solid quarter with record results in earnings and throughput in Detour, etc., and I'll give more detail of that later. But again we're on this call and we get the benefit of being able to talk about these results, but it's really the results of work of a lot of people within Kirkland Lake Gold and our suppliers and their efforts and the communities and everybody that supports us. And we would be remiss if we didn't say thanks to everybody for your hard work. It's not easy business that we do as one of the – as the board recognizes some of the times when you look at all the challenges that we face in terms of trying to mine gold at depth and/or extract bits of gold out of the rock, it's not an easy business, but we've got a lot of people that are working very hard that make it look – make it look easy.

And anyway, thanks for their efforts. The other part is I – again and acknowledging that within our operations, both in Canada and Australia, our mines are located on traditional lands of numerous indigenous communities in Kirkland Lake and we have an IBA in Kirkland Lake or Impact Benefit Agreement and very good working relationship with both the Wahgoshig First Nation and the Matachewan First Nation southeast of Kirkland Lake. Over in Detour, we occupied the traditional lands of the Moose Cree based up at Moose Factory Island just on the James Bay coast, as well as [Inaudible] move first nation based in south side of Cochrane, Ontario, and the Wahgoshig First Nation as well. And, similarly, we do have exploration agreements.

We are working sort of opening the Quebec border and the lands there. It is – they are just part of the traditional lands of the Cree Nations of Quebec and over in Australia whether it's down in Victoria, as well as up in the Northern territory in Australia where we're working on some healings to the land, it's the --. We have lots of respect and we really appreciate the opportunity to be partners and to be able to operate on these traditional lands. We're just going through a period of time here in Canada.

It's been a lot of developments in terms of true to reconciliation happening in Canada and all – I my guess from our perspective we as a company we support people. We can recognize – maybe sometimes we have to hold recognize the truth of things that happened in the past. We can't do things to correct the past, but we can demonstrate as we go forward what we do and how we want to work on these lands and work with our partners in this area. Anyway, maybe I'll get into our results.

And before I do that, again as Slide 4 talks about, I will give you update on our COVID-19 response. And this is COVID-19, we were talking about here, but it's in 2021, and hopefully it doesn't come as COVID 2021 or COVID 2022, but we are encouraged by the developments in Ontario. We do know that now there's some new lockdowns in Australia, but in terms of everything happening from a COVID perspective and the impact on our site, it has minimal impact at this point in time maybe over the last year and a half, two years, the people in Kirkland Lake Gold have done exceptionally well in terms of putting in good policies and procedures on how we work and people adopting ways to protect each other and work together and we've had a lot of success. We have had some outbreaks as defined by public health at both Macassa and Detour Lake in Ontario during the second quarter, but the company and then people were very proactive in responding and the situation were quickly resolved.

And actually in fact, in both cases, we've recognized for the local health units, both Porcupine health unit – health units in – for Kirkland Lake in terms of what we basically stop transmission and protect our people and protect any spread from these efforts. So thanks everybody for continuing to work hard in these areas and work toward staying safe. Turning to Slide 5, I'll take a moment and give you an update on our responsible mining efforts. We are a signatory to the World Gold Council Responsible Mining Principles and we're working to achieve compliance to these objectives in our business.

And at the same time, we're working to also support the industry as a whole to achieve these objectives as well. And fundamentally for us the responsible might have been hint for everything we do and it's part of a culture. And we believe that it's not just good enough for us to do it and in Kirkland Lake Gold we want to make sure that the rest of the industry is there with us and we can demonstrate leadership to the rest of the industry and not just the gold mining companies, but all the mining companies in the region. Also additionally as you may recall in Q1, we pledged to achieve the net zero carbon emissions by 2050 or earlier.

We've been working toward that establishing a net zero taskforce. So we've been working and trying to identify what our carbon footprint is at this point in time in all different areas and then work our ways to what does it mean, how do we do and look our ways to communicate it internally, there's a lot to do there. We've also made a pledge where we made a commitment to invest 75 million per year over the next five years basically on really supporting a number of efforts. One is reducing our greenhouse gas footprint and the impact from our sites.

So looking at ways to reduce our use of carbon, also looking at the big areas investing in technology and innovation to support a safer and more productive workplace and then digitization and automation, we're working toward creating smart mines at our mines, both Detour, Macassa in Canada, as well as Fosterville in Australia. And we've also committed to providing support to our local communities and regions where our people live, where our people work to support these areas to make them more livable for our people and for the people in those communities, who host us. During Q2 2021, we achieved a number of achievements in these key areas. We made a significant donation on the area of community support over in Bendigo and next to Fosterville and Victoria, Australia; we need a $12 million community partnership fund.

We also made a major commitment to Kirkland Lake Hospital, including providing financing for complete redevelopment of the emergency departments at the hospital building on – also on our leadership and minimizing and reducing carbon emissions, we took additional steps in Q2 2021 to further reductions. And some of the example would be the rollout of a new fleet of 50 trucks at Macassa, which are the world's first 50 tonne on the haul trucks. Now I'm going to turn over to our financial and operating results on Slide six. As I mentioned, we had an excellent quarter in Q2 highlighted by record net earnings of $244 million or $0.91 per share.

I think that's pretty much industry leading by the way, a solid increase in quarterly production, which was 50% higher than Q2 2020, and 15% from Q1 2021. We had strong revenue growth and significant increase in the both operating and free cash flow. All three of our mine increased production during Q2 2021 with Fosterville having a particularly successful quarter. In Canada, both Detour Lake and Macassa achieved solid production growth on both – related to both prior periods.

Looking at our unit costs in Q2, we beat our full-year guidance range. This is we are – we have the – we are being impacted by the FX rates for operations in very well managing costs and we continue to target our existing guidance. In terms of cash flow, we had operating cash flow at $330 million and free cash flow of 131 million, operating cash flow translating into free cash flow per share of – sorry, cash flow per share of $1.60. Turning to Slide 7, our financial strengths continue to improve.

And again, we think we have an industry-leading financial strength. Cash increased to almost $860 million and again, with no debt. We also continued a very successful track record around capital allocation. We made significant investments with future value creation into our assets while also returning capital to shareholders.

And what it would have been doing about during Q2, we've been doing that $62 million giving the shareholders $50million for our Q1 dividend, in April, $12 million to repurchase of 300,000 shares. We also demonstrated our commitment to continue to repurchase offering renewed our NCIB in early June. And new and our revised NCIB now for the next 12 months [Inaudible] continue to repurchase up to 27 million shares. We followed that up by introducing an automatic share repurchase plan, which we used to announce the buy back 300,000 shares in June.

And we're making good use of the automatic share purchase plan in July, where today in July, we've purchased about 945,000 shares, and that's an additional $38 million. So in total, we're able to repurchase 5 million shares on our and automatic repurchase plan, OK. Turning to Slide 8. Again, we'll be talk about investing and investing for shareholders and providing value for shareholders.

First part is, definitely we invest thereby to give me some money back to shareholders through our dividend policy, through our NCIB to make allocation back to shareholders. Second thing is to expiration and investing in our assets in terms of improving the value of these assets. And another third way we create value for shareholders is through investing in capital investment into our assets. We've continued to have a very successful track record in that.

At Detour Lake, we are generating very encouraging expiration results. Eric will talk about them a little bit later. And I think for the results continue to point to the conclusion that we talked about when we originally did the Detour transaction, that there's an extremely large positive along the Detour Mine Trend. That's near surface, that's a much, much larger than is included in the current reserves.

And I would say that potential that in order to just the beginning. We might not be founded yet that once we discovered this. We're also making good progress in multiple gold projects, including optimizing deeper mining and increasing throughput in the mill. We did have some record throughput during the quarter, during the period, both at – both from a day perspective and over a period.

There's been improvements in great management and had coming with the new assay lab, and looking at changing some of our processes at site, as well as other infrastructure to support improvements in terms of mill throughput, such as we're looking at putting sets of screens in front of the cone crushers and we have revenue feed systems supporting the down for maintenance. There's a lot of projects. And investing that in over Macassa, the No.4 Shaft and the No.4 Shaft is a significant projects, it currently reads continues to remain ahead of schedule and on track for completion that late next year. We also had – Macassa had continued to have significant expiration success.

And we issued a press release a couple of weeks ago, which felt – the results continue to show that the South Mine Complex is going to keep growing. And it also highlights the potential among both the Amalgamated Break and the Main Break for new mineralization and new potential mining areas and future. And if possible, we've already talked about the strong results in Q2 2021, but basically Fosterville having a tremendous year and Ion Hann will discuss it more shortly. Apart from the results we have also made progress with key underground development, critical product feature on – future exploration and sustainability of Fosterville, and the Robin's Hill as a second mining front, but also looking for keeping down tranche extensions, and move.

We discovered such as Swan Zone. Now on Slide 9, this is looking at in year-to-date results. We've seen better than expected production of 682,000 ounces for the first half of the year gain. Its mainly due to Fosterville to keep very solid unit cost performance.

We had record half year earnings and earnings per share and very strong cash flow. You can also see in the slide that so far this year, we have repurchased 2.3 million shares proposed a $100 million that includes 945,000 shares we had bought back in March. And total, we have returned around 1.1 billion to shareholders since the beginning of last year. I think that very importantly, we're additionally to on top of the strong results, we've also posted for a very strong second half of 2021, and for the strong value creation going forward.

We do have a lot of catalysts coming up in the company and main catalyst being updated and resource reserve estimated weaker, which we'll talk them about into Q1, the finishing for this year effect of the December 31, 2021, but coming out Q1 2022. And we talked about with the completion and the use of the No.4 Shaft new mining at Macassa. Looking at Slide 10, this shows our performance against guidance. As you can see, we're very well-positioned to achieve our guidance entering the second half of the year.

In our Q2 results and press release, we discussed FX rates and the fact that the stronger than budget to Canadian and Australian dollars sounding an impact on our cost and extended for performance relative to guidance relative to unit cost guidance, not in terms of dollar spent. Offsetting that impact in the first half of the year were higher than planned sales and effective cost management as they're saying in all three of our operations. But as it is, if you continue to see the rates like we have in the first half of the year, we will likely come in and right around the property just for unit costs and capital spending, but just wrapping that up what I want to emphasize that in our operations – with our operations performed very well, our financial results are strong. We continue to have very encouraging expiration results.

And we're making excellent project with all of our key projects and value creation initiatives. Anyway, with that, maybe I'll turn it over to – the call over to David Soares, our chief financial officer, and give us some highlights from the financial results. OK. Thanks, David.

David Soares -- Chief Financial Officer

Thank you, Tony, and good morning, everyone. I will begin on Slide 11, in Q2 2021, we achieved record net earnings of 244.2 million or $0.91 per share. This represented the 63% increase from 150.2 million in Q2 2020 and 51% increase from 161.2 million the previous quarter. The increase from both prior quarter and prior-year resulted from higher revenues and lower effective tax rate.

In Q2 2020 also saw a sizable foreign exchange loss of 72.8 million compared against Q2 2021 foreign exchange gain of 2.6 million. Adjusted net earnings totaled 246.9 million or $0.92 per share. The difference between adjusted net earnings per share of $0.92 and net earnings per share of $0.91 in Q2 2021 was mainly related to the removal of 3.5 million net mark-to-market gain recognized on warrant liability. Their maintenance costs incurred at our non-operating sites Holt and Colt Complex, and the NT and other items that were not reflective of our operations like COVID costs and other restructuring charges.

Turning to Slide 12 in Q2 2021. Total revenue is 662.7 million; the change from Q1 2021 is mainly impacted by increased sales volume and the $26 per ounce increase in average gold price. Compared with Q2 2020, a $111 per ounce increase in average gold price from $1,716 to $1,814 accounted for 36 million of the revenue growth year over year. Looking at EBITDA, as show on Slide 13; Q2 2021 EBITDA totaled 451.3 million.

The change from Q1 2021 primarily related to a 20% increase in revenues driven by higher volume and gold price. Compared with Q2 2020, the change in EBITDA was due to a 15% increase in revenues and a large foreign exchange loss impacting Q2 2020 EBITDA. Q2 2021 also saw higher depletion and depreciation expense of 111.3 million; the change from Q1 2021 primarily due to higher sales volume. Deferred tax expense was higher in Q2 2021, but overall the effective tax rate for Q2 2021 was lower reflecting favorable tax adjustments during the quarter resulting from reassessments of income taxes paid in prior years.

Looking at the next slide, turning to Slide 14. We'll look at our cash balance and cash flow. On the slide you'll see that our operating cash flow was strong. We generated 487.5 million of operating cash flow in the quarter, before 157 million in cash taxes paid in the quarter.

During the quarter a $98 million tax payment was made in Australia representing the final tax installment for the 2020 tax year. During the quarter, we invested in our key assets spending 199 million in capital. Cash used for financing activities of 64.3 million reflected the 11.9 million we used to purchase shares in Q2, as well as 50.1 million used for payment of the dividend. Turning to the next slide, Slide 15 looks at the change in cash in a different way.

You could see that the largest contributor to growth in cash was from our operations, which generated about $395 million of cash, which is before income tax paid of 157 million, growth capital investment of 82.5 million, exploration spending of 46.6 million, other cash outflows include costs incurred at our non-operating sites. The NT and Holt Complex of 14 million and corporate G&A of 17 million. As noted in the previous slide during the quarter 62 million was returned to shareholders, including 11.9 million used to repurchase shares through the company's NCIB and 50.1 million of dividend payments. Next I'll turn it over to Ion Hann to discuss operating results at Fosterville.

Ion Hann -- Vice President of Australian Operations

Thanks, David. I'm starting on Slide 16. As you have heard, Fosterville had a very strong quarter in Q2 and for that matter for the first six years of the year – first six months of the year. Fosterville produced 158,000 ounces in Q2 2021 based on processing 107,000 tonnes at an average grade of 29.2 grams per tonne and average recoveries of 98.7%.

For the year-to-date, we produced 266,000 nearly 267,000 ounces down from last year, but consistent with our plan to reduce production in the Swan Zone by draw at mine life with most sustainable levels. The 266.7 kozs or approximately 60,000 ounces of our planned levels for the half year. Two main factors that are driving this and the main factor being very strong grade outperformance in several Swan Zone stopes, there was also within the [Inaudible] resequencing that we did in Q2. Looking at resequencing and it involved an area in Swan called audit.

We plan to start taking the stocks from the top again, however, once optimized we will changed that sequence and then we click that on its head and did it from bottom up. The result of that was bringing some higher grade stopes from Q4 into the Q2 [Inaudible]. Turning to costs, again, very strong for both Q2 and year-to-date. For Q2, we had operating cash costs of $162 an ounce, and all-in sustaining costs of $353 an ounce.

For the year-to-date operating cash cost averaged $192 an ounce with all-in sustaining costs of $385 an ounce and these are very low numbers. Entering the second half of the year we're very well-positioned to achieve their production bonds, and potentially it could be better. We're also well-positioned relative to our cost guidance. I'll now past the presentation over to Larry Lazeski, General Manager of the Lake Mine.

Tony Makuch -- President and Chief Executive Officer

Hey, Larry, just before you come on here, Ian, I don't know if the qualify I don't need, that was a slip at the beginning. It wasn't just the first six months of solid performance, but Fosterville is probably is on a trunk cracker – that's six years of solid performance. And I think there's a point in time when we all have to believe that it's a very good mine, very well-run, led by some exceptional people and the people working there is an exceptional workforce and exceptional carrier to be in. We are just lucky to have in our portfolio.

So anyway, thanks and sorry about that, Larry.

Larry Lazeski -- General Manager for Detour Lake Mine

Thanks, Tony. Hey, no problem, and thanks again. Starting on Slide 17, Detour Lake achieved as Tony mentioned, record quarterly production in quarter two of 2021 of 166,000 ounces based on processing 5.8 million times, at an average grade of 0.96 grams per tonne, with a recovery of 91.5%. This is an increase of 26% from quarter two last year and an increase of 13% from the previous quarter.

The quarter-over-quarter increase is largely due to significant improvement in the average grade that are sequencing into higher grade areas as part of our Phase 2 mining plan. We've indicated that the market that you would start to see the ramp-up in grade, starting in quarter two and we certainly did. The average of 0.96 grams per tonne was in line with our reserve grade. We all had increases in tonnes processed since the first quarter.

Throughput is typically the lowest of the year. Having said that you may recall it Q1 this year was a record for first quarter throughput levels. Year-to-date we produced 312,000 ounces that's 40% higher than the five months after the acquisition last year, and 16% increase from the full six months of year-to-date 2020. Looking at our operating cash costs we average $610 an ounce in quarter two to $674 an ounce for the year-to-date.

Excluding the impact of FX rates, our Q2 operating costs per ounce improved from last year second quarter with much of the increase reflecting higher grades and increased sales momentum. All in sustaining costs per ounce sold average $996 per ounce in quarter two and $1,090 per ounce for the year-to-date. Looking ahead, we expect continued improvement in grade for the remainder of the year above the Q2 level, and are well positioned to achieve our full-year 2021 guidance. Moving to Slide 18.

Again, as Tony had mentioned earlier, we have significant number of projects on the Detour Lake. Our growth capital expenditures of Detour for the first half of the year totaled $80 million of that amount, $44 million was for deferred stripping and 37 million was to support ongoing work to expand capacity. We continue with processing plant expansion is on track with good progress on the crushable improvements through their capacity. Air strip had significant progress.

We anticipate not being complete by the end of Q3. The tailings facility is progressing well with a favorable weather conditions and an early start-up, so maintenance facility expansion is nearing completion for the field maintenance area. And finally as pictured, we're expanding our camp, which will be completed by the end of quarter three. It's just to note that this camp once complete will be the largest hotel in Ontario.

So you can imagine the size of it. With that, I'll turn the call over to Evan Pelletier, vice president, Mining for Kirkland Lake.

Evan Pelletier -- Vice President of Mining for Kirkland Lake

Thanks, Larry. I'm starting on Slide 19; production at Macassa in Q2 totaled 55,300 ounces, at an operating cash costs of $586 and all-in sustaining costs of $848. Q2 2021 production was 32% higher from Q2 2020 an increase 17% from the previous quarter. Higher tonnes were processed in Q2 2021, mainly due to better than anticipated widths and strike lengths from stopes in the South Mine Complex.mOperating cash costs per ounce sold average $586 million versus $547 for the same period in 2020 and $699 for the previous quarter.

With the increase from Q2 2020, reflecting a stronger Canadian dollar in Q2 2021. The 16% improvement from Q1 2021 largely reflected the favorable impact of higher ounces sold, as well as lower maintenance costs and reduce expenditures related to operating development compared to the previous quarter. All in sustaining cost per ounce, sold was largely unchanged in Q2 2020. The impact of a stronger Canadian dollar was offset by higher sales volumes.

When you include the impact of the exchange rates, all in sustaining cost per ounce sold improved from Q2 2020, reflecting the favorable impact of higher sale volumes, as well as lower operating cash costs and sustaining capital expenditures. Looking at the year-to-date production at Macassa totaled 103,000 ounces based on processing 167,000 tonnes. And then an average grade of 19.5 grams per tonne with recoveries in the 97.9%. Year-to-date production increased 11% for the same period in 2020, effecting a higher average grade and increased tonnes processed.

Turning to Slide 20, we look at our growth projects that are helping us build the future. Our growth capital expenditure for the first half of the year was 43 million, 30 million in Q2 2021. Our total growth expenditure so far in 2021, 22 million were related to the No.4 Shaft project. During the quarter, the shaft advanced approximately 600 feet and had reached a depth of 5,600 feet as of June 30th, 2021.

The project ended Q2 2021 ahead of schedule and on track for completion in late 2022. An additional 10 million, 4.7 million in Q2 21 of growth capital expenditure in year-to-date of 2021 were related to the ventilation expansion project, involving the development of two new ventilation raises. The two new raises will add significant to ventilation into the mine, which have already improved from the level this time last year. The remaining growth capital expenditure in Q2 2021 mainly relates to the number of underground projects, including lateral development from the mine toward No.4 Shaft.

I'll now pass the presentation over to Eric Kallio, senior vice president of exploration.

Eric Kallio -- Senior Vice President of Exploration

Thanks, Kevin, and good morning, everyone. My first Slide today is number 21 and related to Detour, where we're continuing to advance the large-scale drill program commenced in 2020 to evaluate the potential surrounding the main and future West tips. As previously announced, the program includes a minimum of 250,000 meters and aiming for an updated resource and potentially extended mine plan for announcement in early 2022. In terms of progress to-date, we believe it's still continuing to track very well with 64,000 meters in Q2, and now close to 200,000 meters since starting in early 2020.

Additional to this, we've now already seen quite a large number of assets return and had six press releases including the one in July with results continued to be very, very encouraging. Summarizing some of the results is the current slide, which is a long section from the latest release and continued color coded pierce point to highlight holes from different areas. Also shown in the image is a series of black dots, which are the pierce points for all holes drilled since the start of drilling in early 2020. As indicated now starting to really fill in the page, especially, in the central and east part of the Saddle.

Syndicated on the image, results from the a new work continues to look very promising in all areas with some of the best continuing to come from the central part of the Saddle highlighted by pink and green dots, including new intercepts, such as 1.7, over 80 meters and 1.31 over 87. In addition to several other good intercepts we've already reported in the same area. Additional to recover, we also had some very good results from below and to the west of the future west pit; we're drilling to date as much for limited. Key intercepts in the west pit are marked with blue and orange dots and include 1.09 over 70.5 and 1.62 over 77.8 from near the lower limit of the resource pit, as well as 6 grams over 14 meters, including 25 grams over three near the 550 meter level.

Key intercepts to the west, include 1.63 over 32, including 13.35 over 2 meters from approximately 250 meters below into the west of the current resource kit, so continuing to demonstrate expansion potential in that direction. In summary, work-to-date at Detour continues to adapt along very well. Turning now for my next slide, which is number 22. You see an image for Macassa, where we continue to advance our large exploration program to confirm and expand resources.

Key targets for the program include the direct extensions of guest and see nominated in main breaks between the 53 and 58 level, but with additional work now in progress to access targets below into the west of the main break on 51 and 58, as well as on the SMC on 34. So in terms of our drilling, our aim for the year is about 200,000 meters and tracking a little bit lower at this time, but in our view, still achieving some good success, but the main highlight being shown on the screen at this time from the east part of the 53 level. As shown on the image, we work with focus mainly on testing of areas of lost right to the east of the SMC, as well as up and down of the current resource and reserves. And there are a number of good intercepts in the release.

Looking at the area to the east, we saw drilling reaching almost 180 meters in this direction, and is affecting a number of good values, including a highlight of 589 grams per tonne over 2 meters place near the limit of drilling. And look into the areas up and down dip, we saw an intercepts almost 100 meters in each of these directions. But those down dip being near the junction of the SMC with the amalgamated, where we have announced success in other areas before. And those drills up dip identifying significant new blocks with very little testing and which we will continue to try and expand on from platforms on 53 and 58.

Additional limits, we saw some good advancement of the expiration drifts toward the new targets on 34, 51 and 58, keeping us on track for drilling to start on the most likely later this year. As mentioned earlier, these meters will provide access to areas the deep and west parts of the main break and as well above the SMC, where we have not really worked on before, but we think have a lot of potential. I'll now turning to my next slide, which is number 23. We see an image outlining expiration plan in recent progress at Fosterville.

Whereas in the [Inaudible], we have a very large exploration program in place with the vast majority being directed toward lower part of the Fosterville mine and the Robin's Hill Area. And the remainder toward a series of promising targets, both of which are mainly on to mine property. As indicated on the image, work at Fosterville is designed to focus pretty much entirely on the area down plan of the current reserve to this Swan Zone, includes both development and drilling to convert and extend mineralization to death. But the vast majority of drilling being from the new 39, 12 hanging wall, which is shown here small guideline, that's we have been working on over the first half this year.

And now I'm happy to say that the drift has just been completed in June, and we have drills in progress, five in total and situated along the zone. So although certainly still work, it's still fairly early in this program, you can say that things are proceeding very well and have expect to have a lot of new drilling done and information to talk to both. As we proceed later into this year and into early 2022. Turning to Robin's Hill, the plan here again is to focus on the area down ponds of the existing reserves, but we continue to believe that we can not only extend the realization that we have the potential to identify high-grade zones similar to this Swan Zone.

Achieve this, we put together what we think is a very good program, including continued advancement of the Robin's Hill decline and drilling from both surface and underground. [Inaudible] work is continuing to progress very well with significant investments in achieving the duty. The new decline, bringing it to more than halfway to Robbin's Hill now, and a substantial amount of service drilling, preparations in place for underground drilling to start in Q3 to test the very south side of the Robbin's Hill structure. So from all indications today, project advancing very well.

We look forward to delivering an increasing amount of information on this in the near future. And with that, I'll pass the call back to Tony.

Tony Makuch -- President and Chief Executive Officer

Thanks, Eric, and thanks to David, Larry and Evan and Ion for your presentations. As you can see, Kirkland Lake Gold is really – a very awesome company. We've had a significant success this year, but if you really break it down, as I mentioned, possibilities, six years of industry leading and one of the lowest cost gold mines in the world and the profitable gold mines in the world with significant exploration, success and significant motivation, people going forward to continue on that track record. We have Macassa in its current forms of producing one of the – from the historical gold Kirkland Lake camp to be continuing to deliver the solid production results it is and where it can be.

And it's not quite where we want it to be yet, but we're investing in a new shaft and investing in new ventilation systems that will significantly improve Macassa and we're patient and diligently working forward there. And once Macassa is – by 2023 until 2024, we expect Macassa to be one of the largest underground and most profitable gold mines in Canada. And as we see with Detour and the growth coming at Detour, Detour has the potential to be the largest gold mine in Canada. And then growing from that to be one among the largest gold mines in North America and get definitely in the top quartile in the world.

So, a very solid company we have. And then if you go by that and you tied into the excellent results in Q2 2021, we had record earnings and earnings per share, strong revenue growth, cash flow generation and as we talked about the progress with both our exploration programs and our investment into our assets. And by the way, when we talk about record earnings and earnings per share, it's not only record earnings and earnings per share, but industry leading earnings, industry leading earnings per share. And we're committed to responsible mining.

We're committed to recognize uniting and supporting the community where we are and being in terms of doing what we can to ensure the sustainability in the regions and that we can make things better for the – in the local communities and friends of the local indigenous communities in the areas where we are. And we recognize and support a strong and honorable and trusting partnership as we move forward into the future. And also as we look ahead, from 2021, we're well-positioned to achieve our guidance and we're – and again when you look – going out – coming out of 2021 into 2022, we expect to achieve some very important value-creating catalysts at all three of our mines. And there's still a lots of exciting things coming up ahead for us.

So anyway, thanks to everybody for listening and happy to take any questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Fahad Tariq with Credit Suisse.

Fahad Tariq -- Credit Suisse -- Analyst

Hi, good morning. Thanks for taking my question. I'm just going back to the 2021 guidance. You mentioned now expecting the high-end of the production guide.

Can you talk a bit about just the puts and takes on the cost side, because on the one hand, the higher production presumably would lead to lower cost per ounce, but at the same time, we're hearing about inflation expectations from some of your peers and for you specifically more of an FX impact. So I just want to get kind of a net effect on cost this year. Thanks.

Tony Makuch -- President and Chief Executive Officer

Well, I mean, I'll let David kind of answer the question, but definitely we've got FX rates that are having an impact, but that's an impact on unit costs. We spent a lot of our money in Canadian Australian dollars, and I think in Canadian Australian dollar terms where we are seeing some inflation such as in fuel prices and steel and a few things, but I think the biggest impact is on FX. But David, maybe you can give a little bit of color to this.

David Soares -- Chief Financial Officer

Yes, no problem, Tony. Yes, we are seeing inflation in specific areas, as Tony mentioned, diesel and steel, for example, but overall costs in local currencies are pretty much in line with what we had in the budget and what we were seeing even last year. And that's really doing part to very good cost management from the sites, our reach at our operations. You're absolutely right.

Obviously, there are offsets there. Higher production will lead to lower costs. And some of these pressures that Tony mentioned with regards to FX are offset by some of that. But basically on the full-year cost and expenditure, our guidance was based on Canadian to U S exchange rates of 1.3 to 1 and Australian to U.S.

exchange rate of 1.39 versus what we currently did to date with this exchange rate of approximately Canadian 1.25 and Australia 1.35, and year-to-date 1.25 and 1.30. So, you know, current exchange – if the current exchange rates continues for the remainder of the year, you know, the expected impacted over that period would be to see a bit of an increase in cash costs and AISC. But having said that, we're well below the budget levels, both measures in the first half of the year and based on strong cost performance in each of our three operating operations. And if we achieve higher than planned production and sales, we're going to work hard to continue that trend.

And based on that, we'll continue to target our existing guidance, right. So we've done well so far, and we plan on continuing that trend through to the end of the year.

Fahad Tariq -- Credit Suisse -- Analyst

OK. So it sounds like the midpoint, it's still kind of achievable on the cost side. My only other question just on Fosterville exploration, of course we've received pretty detailed updates on Macassa and Detour Lake. I'm just wondering on Fosterville is it just a function of the drilling is more second half weighted, or I'm just wondering if when to really expect more detailed results in Fosterville.

Thanks.

Tony Makuch -- President and Chief Executive Officer

Eric or Ion, you want to answer that?

Eric Kallio -- Senior Vice President of Exploration

Yes. I think – Keep going, Ion and I'll hop off.

Ion Hann -- Vice President of Australian Operations

Sorry. I'll go and you can help me, yes. Look that the exploration, if is at Fosterville, certainly, but first we have been doing some drills. However, the focus really has been on the development of the exploration groups.

So the Phoenix 31 – 3912 grid it's really going to open up drilling for the second half of the year into the lowest one area. And we expect, and we've got five drills on that now, and we speak in a lot of results that come to the back half of the year. And likewise with the Robbin's Hill now we've had excellent project price advance on the – between groups all the way toward Robbin's Hill. And we'll start to see some drilling in Q3 and certainly to Q4 at the really severally and take on the Robbin's Hill and Tony really expand that resource.

But that's really been the focus for the first half has been a development sort of thing. So Eric, if you wanted to add any more color there.

Eric Kallio -- Senior Vice President of Exploration

I just think that we have to keep in mind that the distance below surface that Robbin's Hill targets, there we're aiming for areas that are up to a 1,000 meters on strike and to depth, very hard to drill from surface with any detail. Now as we get the new platform in on the decline we're going to start to get a lot more information quickly from that area. So that's yes, any of that I like to add.

Fahad Tariq -- Credit Suisse -- Analyst

OK, great. That's it from me. Thank you.

Operator

Your next question comes from the line of Josh Wolfson with RBC Capital Markets.

Josh Wolfson -- RBC Capital Markets -- Analyst

Thanks. Just sort of continuing some of the questions on Fosterville, obviously the quarter was very strong partially from that positive reconciliation and partially from sequencing. Is there any sort of ability to give us some better insight onto what the sort of – what the outlook is the second half of the year or – and specifically the sequencing changes that impact the fourth quarter now.

Tony Makuch -- President and Chief Executive Officer

Sure. I mean Natasha or Ion just I think that could be up to you guys.

Natasha Vaz -- Chief Operating Officer

Sure. I'll start Ion and then you can fill in. Hi Josh, so if I can really moved a couple of the higher grades that from Q4 into Q2. So I would say move about 20,000 or 30,000 ounces forward into Q2.

So it will affect our Q4. You will see that we have maintained our guidance for 400,000 and 420,000 ounces to be there. But having said that and looking at our plan, we are well-positioned to potentially do better than that. But we want to just see how the grades perform for the rest of Q3, as we discussed in our results, we had a significant grade out performance at Fosterville in the first six months.

We're not going to assume that we will – that that will continue. January at Fosterville it's a very complex ore body. So when you have some of that outperformed, there is an also offset somewhere down the line. So we just want to see how the mine performs over the next few months before we really look at our guidance.

But to say the least we are very comfortable with the 400,000 to 425,000 ounces that we've provided.

Josh Wolfson -- RBC Capital Markets -- Analyst

OK. Thank you. And then one other question for Detour for the – for guidance this year, there's a, I guess, an imply improvement in both grades, which it sounds like you're pretty comfortable on, as well as improvement in throughput probably toward that 70,000 kind of day rate that's expected next year. Is there any sort of detail that can be provided in terms of how that gap going to be bridged from that 64.5 that you're running it today to that 70,000 tonnes a day toward year end.

Tony Makuch -- President and Chief Executive Officer

Larry, I mean, I think you can read the question fairly quickly.

Larry Lazeski -- General Manager for Detour Lake Mine

Yes, for sure. Really, it's just to continuing to focus on the things that we've been working on. We're going to see – by September, we'll see the – by we have the system repeat the system in place that'll allow us to continue to keep inside that capacity and there is any downtime in the crushing circuit so that offers, and with the initiatives that we've already had in place, like the changing the technology vertex in period, those are showing performance and really focusing on fragmentation and then getting very find in the feed. So and as far as the mine goes, we're really starting to get to the heart of the ore body as Phase 2 develops that depth.

We are working more and more around the other things, and that's really where the better grade is. We do anticipate kind of grade there, we also have more confident to which helps very quickly. So kind of a combination what we are seeing.

Josh Wolfson -- RBC Capital Markets -- Analyst

OK. So just your comment about the September delivery on some of those processing items, should we see the bigger step up in throughput more geared toward the fourth quarter in that case?

Larry Lazeski -- General Manager for Detour Lake Mine

Yes. It'd be a gradual ramp up throughout the year, for sure. Yes.

Josh Wolfson -- RBC Capital Markets -- Analyst

OK. That's all my questions. Thank you.

Tony Makuch -- President and Chief Executive Officer

But you've had some significant – you've been concerning keep the records all the time and they're keeping higher levels off consistently, right, Larry?

Larry Lazeski -- General Manager for Detour Lake Mine

Yes. I mean, even in July here we've already – we've – since that's our limit of 75,000 tonnes a day has been removed, we're 11 days this month, we've already completed that averages is when we're adding in July.

Tony Makuch -- President and Chief Executive Officer

Any more questions there?

Operator

Certainly. Your next question comes from the line of Ovais Habib with Scotiabank.

Ovais Habib -- Scotiabank -- Analyst

Thanks, operator. Hi Tony and Kirkland Lake team and congrats on a strong quarter and thanks for taking my questions. Couple of my questions have already been answered but just a quick follow-up on Josh's questions regarding the changes in mind sequencing at festival. You talked about what the grade is kind of looking toward like going into the second half, but does this kind of bottom approach sequencing change impact to me sort of longer-term guidance?

Tony Makuch -- President and Chief Executive Officer

Ion?

Ion Hann -- Vice President of Australian Operations

Yes. I can take that one, Tony. Sure, and it's a good question. So fortunately the team that taught to go constantly optimizing the mine, and we found this out in a situation where with the development ahead of ourselves and we would expect, it gives them some flexibility.

So we're not seeing any downside to the changing, and it's only a certain part of the overall Swan Zone in the Audax area. We're not seeing any downside to changing the sequence. And in fact, we've seen some upside particularly when it comes to the mine ability and a few things like that. So it's been a really good down sequence change in it, part of the mine from the mining.

Ovais Habib -- Scotiabank -- Analyst

And just able, was this kind of in the works for a while now or this is the first decision that you've taken just recently and made those changes?

Ion Hann -- Vice President of Australian Operations

Our plans, our role as you can appreciate. So the engineering teams are constantly looking at what we've got down here as new information comes in, as we see how the ground behaves as taking advances and we adjust to suit. And I suppose the fortunate position we find ourselves in is that we are on top of our development and that gives us the flexibility to make these adjustments as we go. And in this particular case in this part of the audit, it was seen that we stood to have a better mine ability of that part of the audit by starting lower down than originally planned.

So that was a decision that was made.

Ovais Habib -- Scotiabank -- Analyst

Perfect, Ian. Guys, that's it for me. Thanks so much.

Operator

Your next question comes from the line of John Tumazos, and please state your company name.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you. It's John Tumazos Very Independent Research. Congratulations on the big upturn in results both from the Swan Zone and the Harrier out of Fosterville. Could you just refresh us as to how tightly the drill whole patterns are for those reserves, and as you develop them in mine, it stops the potential for variances, which were so wonderful this current quarter?

Tony Makuch -- President and Chief Executive Officer

Go ahead, Ian or Eric.

Eric Kallio -- Senior Vice President of Exploration

Ian can maybe start on that.

Ion Hann -- Vice President of Australian Operations

Thanks, Eric. And another good question, look the drill spacing and look you have to appreciate that the high – an extremely high grade areas of the Swan Zone unique and quite possibly you could drill that down to the degree and still not get a proper handle on it, but, our drilling is then to at times 12 by 25 sort of sentence, 25 by 25. And in a broad range we have a very good handle and very good reconciliations that means models, which we are constantly updating. However, there are specific extreme high grade areas of that complex Swan vein itself that is very difficult to now down.

What we have been accused of possibly being slightly conservative at times. And, and to be fair, one of the world's highest ore body, it is tough to not be maybe slightly conservative at times. So we see some swings and roundabouts. However, on the long run reconciliation these model is pretty good and in fact it's very good, and we get very close to that.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you. If I could ask one more on the detour west – deep west saddles on extensions, and I know all the technical studies are done, the current reserves appear to carry your production two decades forward. It had trend near 800,000 ounces expanded a few years, should in the big picture we be thinking of these new drill successes as a third decade of 800,000 ounces a year, or possibly a fourth decade of 800,000 ounces a year? Or do you think it's possible that the output could be expanded above 1 million ounces?

Tony Makuch -- President and Chief Executive Officer

I would say you have both of those scenarios, sorry, they're both – so your No.2 and your No.3, I think for a decade and another decade of 800,000 ounce, I think it's easy to see that there's potential to add and grow for another potential two decades and/or at those levels and/or work toward increasing production again further at Detour. If you do look at the plan though show, Detour growing up to 900,000 ounces a year as we progress, right. So there's that to look at that, but at the same time just a lot of moving parts to Detour and we have a lot of things to work on. We talked about initiatives gained 28 million tonnes per year, but also putting an act in that continues to process internally combined that we're trying to understand the size of the minimizing envelope there and the resource.

And then how are you going to mine it, right. I think the thing that we should all take away is the mine that Detour is today is going to be a much – is a much better mine than it was a few years ago. And it's going to be a much better mine in a couple of years from now, and potentially as tends to be a much better mine, even beyond that and a very long lifeline. And then I'll even say, only talking about saddle and the west extension, to the west, it doesn't stop.

We just – there's a line – west drilling. So it could go further to the west and we have any new drill, any holes there must flow 700 meters. And in the current main pit, there's indicated resource at the bottom of the pit. So the big, the other part is we focus on getting costs down as you increase the overall sites.

And there's a lot of exciting catalysts that could come out of Detour over the next few years.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you and congratulations.

Operator

Your next question comes from the line of Cosmos Chiu from CIBC.

Cosmos Chiu -- CIBC -- Analyst

Hi, thanks, Tony and team. I guess I can ask a question on Macassa here. Good to see you're your transitioning or adding even more battery powered trucks to your fleet. Could you remind me how much more key transition over from diesel powered equipment or battery powered equipment.

And what percentage is that right now in terms of the total fleet in terms of battery powered equipment?

Tony Makuch -- President and Chief Executive Officer

I think, Evan Pelletier, a good person to answer that.

Evan Pelletier -- Vice President of Mining for Kirkland Lake

Sure, I can speak to it. Hey, Cosmo. Currently, we're sitting around 75% of our fleet at that battery equipment and the plan is definitely to increase that moving forward for numerous reasons. The trucking fleet has improved tremendously as well.

And regardless of some of the ventilation improvements, we still plan on moving forward with carrying on with the battery here.

Cosmos Chiu -- CIBC -- Analyst

And that was the purpose for my question. I know that you're adding the two ventilation raises, which we're at about 200,000 cfm of capacity. But could you remind me in terms of with a battery powered equipment with the current fleet right now. What's your draw on the ventilation and what's the capacity here.

Evan Pelletier -- Vice President of Mining for Kirkland Lake

So the current drawn ventilation that we're pulling from surface, Cosmos. So the plan is to have about 300,000 come down the No.3 Shaft and then 230 of that – sorry, 200 of that is going to go toward the FMC with the current ventilation plan and 30,000 from one of the raise mores and 100,000 of that 300,000 going to the lower north. And obviously as we move ahead, things are going to improve with the second raise bore. There's one more lake, we're in the last lake of the four lakes of the raise bore breakthrough on surface.

And obviously with No.4 Shaft reaching at depth and commissioning that will improve things drastically in the lower part of the mine. It's to bring the temperatures pretty well down cooling off the mine as well. And if we – if you think about it, your main arteries right now are feeding your ventilation, if you start putting diesel gear in the main arteries, you're just going to keep the mind back up, right? So the point is, and the plan is to stick with the battery. It's much more healthier for our employees and for the environment.

Tony Makuch -- President and Chief Executive Officer

Yes, Cosmo, just to clarify, so it would be a doubling or more than double ventilation air to the mine, which is a big part of it. We want to reduce the heat and the humidity in the mine and improve the working conditions in the workplace. I mean, there you would have some flexibility for diesel gear, because we are working at the leading edge of battery powered equipment underground, but our commitment is to battery powered equipment. And in the fund man, the big part of increase in ventilation, it was not, we – I think, the logic to send to battery powered equipment, so we don't have to ventilate to the same level, I think is wrong.

We should – we need to ventilate to the level, whether it was diesel equivalent or battery equipment in order to deal with heat and another conditions in the workplace that affect people. And that's our main motivation here.

Cosmos Chiu -- CIBC -- Analyst

Yeah. And that's good that you brought it up Tony and I seem to recall last year, there were some issues in terms of seat during the summer months. It's been fairly hard in Ontario once again this year. Has it been OK so far into the summer of 2021?

Tony Makuch -- President and Chief Executive Officer

Go ahead, Evan.

Evan Pelletier -- Vice President of Mining for Kirkland Lake

Yes, so absolutely. We've definitely seen a positive impact on the ventilation upgrades. In the FMC alone, you're looking at a drop of three to four degrees from current year. And the things that are definitely improving throughout the mine on the ventilation aspect.

So yes, it is cooler down there compared to what it and last year summer was rather quite hotter than this year. So yes.

Cosmos Chiu -- CIBC -- Analyst

Great. And I know one last question just to follow-up, in Northern Ontario; we've seen some forest flyers. I track it. I think there's an Ontario website that tracks it.

I don't think there's anything close to Kirkland Lake or Timmins or Cochrane or anything like that. Is that – could you confirm that and are you at all worried about what's happening.

Evan Pelletier -- Vice President of Mining for Kirkland Lake

So I can speak to that too. Yes, we do track it daily calls, we have an app called Windy.com, which, which helps us out. They track us to your level in forest fires and wind directions. So we're in pretty good shape here so far and we've been getting quite a bit of rain up north.

So things are looking great.

Cosmos Chiu -- CIBC -- Analyst

Great. Those are the questions I have. Thanks again.

Operator

And there are no further questions at this time.

Mark Utting -- Senior Vice President, Investor Relations

Great. Well, listen, it's Mark here. And thanks everybody for participating in the call. As you heard, we had a record quarter in terms of earnings, not just record; we had industry leading earnings and very strong cash flow, two things we've been known for over the last several years as being at the forefront of the industry.

We're making a lot of progress moving toward some pretty big catalyst for our company from a value creation standpoint. And we look forward to our next quarterly call to update you on how much more progress with me. Thanks a lot and have a great week. Take care.

Operator

[Operator signoff]

Duration: 68 minutes

Call participants:

Mark Utting -- Senior Vice President, Investor Relations

Tony Makuch -- President and Chief Executive Officer

David Soares -- Chief Financial Officer

Ion Hann -- Vice President of Australian Operations

Larry Lazeski -- General Manager for Detour Lake Mine

Evan Pelletier -- Vice President of Mining for Kirkland Lake

Eric Kallio -- Senior Vice President of Exploration

Fahad Tariq -- Credit Suisse -- Analyst

Josh Wolfson -- RBC Capital Markets -- Analyst

Natasha Vaz -- Chief Operating Officer

Ovais Habib -- Scotiabank -- Analyst

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Cosmos Chiu -- CIBC -- Analyst

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