Kirkland Lake Gold Ltd. (KL) Q3 2021 Earnings Call Transcript

Kirkland Lake Gold Ltd. (KL)
Q3 2021 Earnings Call
Nov 04, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Kirkland Lake Gold third quarter 2021 conference call and Webcast. [Operator instructions] Mark Utting, senior vice president, investor relations, you may begin.

Mark Utting -- Senior Director, Investor Relations

Thanks very much, operator and welcome, everyone, to our third quarter 2021 conference call and webcast. With the timing of our planned merger with Agnico Eagle, which we're very excited about. This will likely be our last conference call. And I think if you looked at our results, you'll agree with me that we're finishing with the bang.

We've got record earnings, extremely low unit cost and a continuation of industry-leading and industry-leading track record over the last five years for returning value to shareholders. We're going to talk about all these things on today's call. With me today are most of the members of the Kirkland Lake senior executive team. Speaking today will be Tony Makuch, our president and CEO; David Soares, our chief financial officer; Natasha Vaz, our chief operating officer; Ian Holland, our vice president, Australian operations; Larry Lazeski, our vice president, Detour Lake; and Evan Pelletier, our vice president of mining Kirkland Lake; as well as Eric Kallio, our senior vice president of exploration.

Slides accompanying today's presentation are available on our website and through the webcast. Following the presentation, we'll open up the call for questions and answers. I will draw your attention to Slides 2 and 3 of the presentation, which contains our forward-looking information and other cautionary language. We will be making forward-looking statements in today's call, so I ask you to give that information due consideration.

We will also be referring to non-IFRS measures during the course of the call. Reconciliations involving those measures is provided starting on Page 37 of the MD&A we filed late yesterday. Finally, all dollar amounts mentioned today will be in U.S. dollars unless otherwise stated.

With that, I'll turn the call over to Tony Makuch, president and CEO.

Tony Makuch -- President and Chief Executive Officer

OK. Thanks, Mark and thanks, everybody, for being on the call. It's not necessarily our last quarterly call, because it would just have a different name, maybe when we're talk about it in future quarters, but we have had lots of significant lots of success at Kirkland Lake Gold over the last few years. And definitely a very, very strong Q3 and we'll go through the results.

And you can see a lot and lots of other performance in a number of areas, particularly Fosterville out in Australia, where at the end of three quarters already achieved the full year guidance and continues to -- and it's not just grade. It's tonnes and grade coming out out of Fosterville, plus a very high levels of safety performance and operational performance, high attention to detail in terms of the social issues there. We're doing a very great job in terms of environmental cleanup that's going on up in the Northern Territory in Australia and will attribute to the -- with the leadership with all the people and the whole number -- the whole people that are working for us in Australia do an exceptionally good job of reading, we need to thank them for what they do. And then over in Canada, we have a significant success in Q3.

And again, Detour tended to have a very exceptional record in Q3, but we had a very exceptional Q4 as well. And again, the demonstration of strong leadership in the company with rate -- from corporate breakdown through the operations and fundamentally the people driving the trucks, that people are doing the work in Macassa and at Detour, made a big difference. And again, we really thank them for what they've worked on to achieve in the quarter. And as I say, we're looking at a very strong Q4 as well as finish off the year.

And I'll start on Slide 4 here. And then just highlight a few things. We did have our recent announcement of an agreement to combine the merger bees with Agnico Eagle Mines. From our perspective, it's a very exciting development for our company and believe and our shareholders.

And big thing is this merger creates a new leader in the global gold mining industry. And we create a gold mining camp that can definitely be a leader in terms of transforming the -- not only transform in the industry, but also transforming changing the perception number industry as we move forward. Moving to Slide 5. Just basically give some of the highlights of our merger with Agnico.

But basically, we're creating the highest quality Senior Producer with the lowest unit cost, less risk profile. Leading in key areas of ESG and an inexpensive approach in pipeline to drive future growth. The combined companies have significant very strong financial strength and an extensive pipeline of projects to -- and combined with a strong balance sheet, good or solid operations that are performing well and profitable. We definitely see the opportunity to fund future growth internally.

Merger will bring consolidation, a big thing in consolidation of Abitibi region of Northeastern Ontario, Northwestern Quebec, require significant value creation and opportunity through synergies. And we see some other business improvement initiatives. And I think that one of the biggest things from our perspective is the development of the new offer and the Kirkland property. So I'm automating that into the Macassa operations in Kirkland and a significant benefit to Northeastern Ontario and definitely for the shareholders of the Agnico Eagle.

We see the new Agnico Eagle and we got to demonstrate it, but we warrant a premium valuation. And fundamentally, what will drive that combination of increased scale costs and low-risk operations, but I think fundamentally superior financial performance and continued strong balance sheet, strengthen good execution of results will be a key for driving that value that want a premium valuation. And we see it as a right deal for our company and our people at the time and as well as our shareholders, communities and all the stakeholders group to the content that we deal with. Moving to Slide No.

6 in talking about our third quarter results. Slide 6 here is really focusing here and maybe give a quick update on the responsible mining efforts. For us, responsible mining integrate thing we do, it is engraved in our culture. All of our Canadian operations participated in the First National Day for Truth and Reconciliation with learnings seminars for all employees supporting -- we do things as more local indigenous company through entrepreneur programs and of our 795 trucks that Detour.

Additionally, all trust business were painting green to support mental health awareness with seminars and employee training programs being held in both Canada and Australia. In Australia, we committed $600,000 to Gobbé Wellness Center and Cancer Wellness Program to assist with the sustainability of the program and expanding wellness services and improving access for regional patients. Building on our leadership and minimizing and reducing corporate admissions, we took additional steps in Q3 in 2021 to achieve further reductions, including testing and building an energy storage system from entirely recycled components, including the battery case and battery from our. Turning to our financial and operating results on Slide 7.

As mentioned, Q3 2021 was a quarter of financial progress. Highlights as Mark alluded to some at the beginning that record quarterly earnings, solid year-over-year production growth, unit costs significantly better than full year guidance and strong cash flow generation. Our record performance was driven by strong operating results, including quarterly production, throughput and all-in sustaining costs at Detour Lake. Q3 was a tremendous quarter for Detour Lake production was 189,000 ounces that beat the previous record of 166,000 ounces in Q2 of this year by 23,000 ounces or 14% in -- And as I said, we're on track for a new record in Q4 this year.

Fosterville also was a very strong quarter and a strong contributor to our record results. And it was a combination of great outperformance as well as higher levels of throughput to the mill of the operation we been very successful in terms of moving forward at Fosterville. And the derivative driving our -- having achieving record production performance, they also help in terms of our unit costs and in our unit cost in Q3 met our full year guidance ranges. We are also being impacted by -- we are being impacted by the exchange rates and inflation pressures in certain areas, but our operations are doing very well in managing these costs and we're in very good shape to meet our guidance for the year.

In terms of cash flow, we had operating cash flow of $323 million and free cash flow of $141 million, David Soares will give a little bit more color on those areas. Turning to Slide 8. We continue to have a very strong balance sheet with cash at September 30 of $822 million, again, a very clean balance sheet and no debt. We also continued on our very successful track record of returning capital to shareholders.

During Q3, we returned $175.3 million, $50 million through Q2 d1ividends paid on July 14 and $125.3 million to that we purchased 3.1 million shares through our NCIB. Turning to Slide 9, a significant component of our successful track record with capital allocation was investing capital for future value creation. We released encouraging exploration results of all three of our cornerstone assets remain on track with our key growth projects. Eric Kallio will give a little bit more in color on that.

But maybe I'll just talk a few things here as you know, you don't see exploration, a lot of success in vaccination program at Detour. When we -- within early September, we announced the 10.1 million ounce increase in open pit measured and indicated resources [Inaudible] that tripled the open pit M&A resources. And it was -- at Detour we see it as -- was definitely a milestone in terms of being able to support strong growth in mineral reserves in the future. And that's going to come out next year as we complete our studies this year.

And earlier this week, we announced additional new drill results. And all these continue to highlight the fact that, 10 million ounces increase in resources is not the end of it all. We still see the potential to continue to grow the resource at Detour before the end of this year. And then 3D supports what we were we what we give in terms of our view and the view we put out of the door when we acquired it back in -- made the acquisition announcement back in 2019.

Beside the exploration success at Detour, we are making very good progress with a lot of other projects at the mine in terms of value creation, and optimizing the operation, and that included -- we increasing the throughput in the mill. Actually the mill in July and August of Q3 actually was running at a rate at almost 20 million tons per year. We had that significant improvements in grade management at Detour. And we have a lot of other infrastructure that we are installing at Detour that really helps in terms of build the operation for the long-term and really support future improvements both in operating performance, but also in safety and care and consideration for people and for the [Inaudible]. At Macassa, the No.

4 shaft being ahead of schedule on track for completion later this year. We also had -- or sorry, that I could say completion of the sinking later this year, the actual -- the actual installation of loading pockets and getting the ore handling system and the changeover from a sinking plant to a production plant will be started and we expect that shaft come into full production or be ready for production in Q4 -- in the Q3 and Q4 of 2022. We also had significant net rate on success at Macassa that expanding the South Mine Complex and identifying new areas of high grade mineralization on both the Amalgamated and Main Breaks. And looking at Fosterville, we did come up with some very new and interesting exploration results that released at the end of August.

And I guess what it tells you there's potential for continued kind of discovery of new high-grade intercepts and our goal at Fosterville possibility to demonstrate an operation of 300,000 to 425,000 ounces a year on an annual basis for 7 to 10 years upon production. I think we're -- definitely we have lots of work to do, but we definitely feel confident that we'll be able to achieve that and demonstrate that to the shareholders. Now, moving on to Slide 10, let's look at our year-to-date results. We had a solid year-to-date operating versus our full year guidance.

Production of just under 1.1 million ounces, a 5% increase from year-to-date 2020. We achieved a very solid unit cost performance, record earnings and strong cash flow generation. You can also see that on the slide that so far this year, we have repurchased 4.5 million shares for close to $184 million. We returned about $334 million to shareholders, which represents $1.28 per share and $317 per ounce produced in year-to-date 2021.

Now on Slide 11, let's look a bit closer to our track record of returning capital to shareholders. We have now returned a total of $1.36 billion to shareholders since we first introduced our NCIB in May 2017 and our dividend policy in March 2017. Of this amount, just over $1 billion was used to repurchase 31.5 million common shares and $315 million was used to make 17 quarterly dividend payments. Those dividend payments have increased 7x since we began issuing them in 2017.

In addition, since mid-2016, we have eliminated $190 -- over $190 million of debt. This includes paying $98 million of debt held by Detour Gold Corporation acquired in January 31, 2020. $30 million was also used to close out Detour's gold hedge position. We had a very good return on that $30 million given the changes in gold in commodity prices and FX rates have fallen in 2020 and into 2021.

We also repurchased or 1% NSR at Macassa from Franco Nevada in 2016 for almost $36 million. Adding it all up in aggregate, we have provided $1.1 billion of value to shareholders since mid-2016. And we've done all this while also building the industry's strongest and cleanest valuations. Looking at Slide 12, it shows our performance against guidance.

As you can see, we are very well positioned to achieve our guidance entering the last quarter of the year. We are targeting the top end of our production guidance and on track to achieve our operating cash cost per ounce guidance. We are doing very well in terms of all-in sustaining costs per ounce sold at $785 a year-to-date all-in sustaining costs is better than our guidance. We definitely expect to meet potentially beat our all-in sustaining cost guidance for the year.

And that's in spite of inflationary pressures related to fuel and power energy costs and the change in the FX rates without an impact. Looking at our expenditures, if we take sustaining and growth capital expenditures together, total capex guidance is $530 million to $585 million for the year and we are tracking to be in line with that range. Also, exploration spending should be at the low end of our guidance of $170 million to $190 million for the year. And that's at the lower end of achieving the exploration guidance,may be a function of lack of -- we can get access to drills.

We can get access to a lot of equipment to do the work, but we can't get people to manage controls. And that's been a challenge and I think the challenge for our industry going into 2022. Anyway, with that, I'll turn the call over to David Soares, our CFO.

David Soares -- Chief Financial Officer

Thank you, Tony and good morning, everyone. I will start on Slide 13. In Q3 2021, we achieved record net earnings of $254.9 million or $0.96 per share. This represented a 26% increase from $202 million in Q3, 2020 and 4% increase from $244.2 million from the previous quarter.

The increase from both prior year -- prior quarter and prior year resulted mainly from higher revenues. Adjusted net earnings totaled $241.3 million or $0.91 per share. The main difference between adjusted net earnings per share of $0.91 and net earnings per share of $0.96 in Q3 2021 was mainly related to the exclusion of $15.6 million net tax recoveries resulting from the optimization of discretionary reductions for Ontario mining tax on filing the 2020 tax returns. Foreign exchange gains, costs attributed to non-operating assets, mainly in Northern Territory, system implementation costs as well as COVID-19-related costs.

Turning to Slide 14. In Q3 2021, revenue totaled $667 million. The change from Q2 2021 is mainly driven by an 8,000-ounce increase in sales volume, which was partially offset by lower realized gold price in the quarter. Compared with Q3 2020, revenue increased by $34 million or 5% year over year, mainly due to a higher gold sales volume, which increased from 332,000 ounces in Q3 2020 to 372,100 ounces in Q3 2021 with the increase largely reflecting record gold production at Detour Lake and strong production at Fosterville, partly offset by unfavorable impacts from the lower average gold price.

Moving to the next slide and looking at EBITDA on Slide 15. Q3 2021 EBITDA totaled $451.6 million which was comparable to Q2 EBITDA of $451.3 million. Compared with the same period in 2020, EBITDA increased by $67 million, mainly as a result of higher revenues. Looking at income taxes.

Our Q3 2021 net earnings benefited from a lower effective tax rate of 25.3% versus 31.6% in Q3 2020 mainly as a result of the $15.6 million net tax recovery related to the optimization of the eligible tax deductions for Ontario mining tax following a restructuring of the company's Canadian entities early in 2021. Moving on to Slide 16. We look at the Q3 cash flows, you can see that the largest contributor to growth in cash was from our operations, which generated about $396 million of cash. This is before income tax paid of $78 million, gross capital investment of $88.5 million and exploration spending of $39.4 million in the quarter.

Other cash outflows include costs incurred at our non-operating sites, mainly the NT & Holt Complex of $15 million and corporate G&A of $14.3 million. During the quarter, $175.3 million was returned to shareholders, including $125.3 million used to repurchase shares through the company's NCIB and $50 million of dividend payments. Turning to Slide 17 to look at our cash balance and cash flow on a year-to-date basis, we generated nearly $1.1 billion of cash flows from our mining operations after sustaining capital. We paid $298 million of income taxes.

We adjusted, in our key assets, $217 million in growth capital and $128 million in exploration expenditures. We would have accumulated any cash balance of nearly $1.2 billion before returning $334 million of capital to shareholders, comprising of $184 million used to repurchase shares and $150 million in dividends paid on a year-to-date basis, ending the quarter with $822.4 million in cash. Next, I'll turn it over to our CFO, Natasha Vaz, to discuss our operating results.

Natasha Vaz -- Chief Operating Officer

Thank you, David and good morning, everyone. I'm on Slide 18, which outlines our consolidated production results for the quarter and year-to-date. So overall, as Tony mentioned earlier, we achieved solid operating results in the quarter with production just over 370,000 ounces compared to 339,584 ounces in Q3 2020 and a quarterly record production of 379,195 ounces in the previous quarter. Our operating cash cost per ounce sold was $438 an ounce, which is well below our full year guidance.

And then as for our ASIC per ounce sold, it was also very strong at $740 an ounce. This is a 16% improvement from Q3 2020 and 5% better than the previous quarter. The $740 an ounce also compares very favorably to our full year guidance range of $790 to $810 an ounce. And then when we look at our year-to-date operating results, they too are very strong.

Year-to-date production totaled 1.05 million ounces, which is a 5% increase from year-to-date 2020. Our operating cash of per ounce sold was $466 an ounce compared to $407 in year-to-date 2020. And finally, our ASIC sold was $785 an ounce announced $804 in year-to-date 2020. So with that, we'll now get into a little more detail on the operations.

And I'll turn the call over to Ian Holland, our vice president of Australian Operations, to provide an update on Fosterville.

Ian Holland -- Vice President, Australian Operations

Thanks, Natasha. I'll start with Fosterville on Slide 19. As you have heard, Fosterville had a very strong Q3. Fosterville produced 135,000 ounces in Q3 2021 based on processing just over 180,000 tonnes at an average grade of 23.6 grams a tonne and average mill recoveries of 98.7%.

Production in Q3 2021 exceeded expected levels mainly due to continued grade outperformance in the Swap Zone. For the year-to-date, we produced 41,400 ounces, significantly higher than target levels, largely reflecting great outperformance in the multiple Swan Zone stopes during year-to-date as well as some changes in segmenting, involving moving high-grade states from Q4 into Q2 earlier in the year. Production year-to-date 2021 compared to production of 476,000 ounces for year-to-date 2020. The reduction reflecting a lower average grade consistent with our previously stated plan to reduce production with the intention of creating a more sustainable operation while we continue our extensive exploration programs.

Partially offsetting the impact of a planned reduction in the average grade was a 28% increase in tonnes processed to just under 525,000 tonnes year-to-date 2021. Turning to costs. Again, we achieved a very strong performance for both Q3 and year-to-date. For Q3, we had operating cash costs of $170 an ounce and all-in sustaining costs of $337 an ounce.

For the year-to-date, operating cash costs averaged $184 an ounce, with all-in sustaining costs of $367 an ounce. I'll now turn the call over to Larry Lazeski, General Manager and vice president of Detour Lake Mine.

Larry Lazeski -- Vice President, Detour Lake

Thanks, Ian. We'll start on Slide 20. As Tony mentioned earlier, quarter three was an outstanding quarter for Detour Lake. We achieved record quarterly production in Q3 of 189,000 ounces based on processing 6.2 million tonnes an average grade of 1.04 grams per tonne and average recoveries of 91.6%.

This is an increase of 35% from Q3 2020 and an increase of 14% from the previous quarterly record of 166,000 ounces in Q2. The quarter-over-quarter increase was largely due to a 5% increase in tons processed as well as an 8% improvement in the average grade. Mining during the quarter focused largely on high-grade areas as part of the Phase 2 mining plan. For year-to-date 2021, we produced 501,800 ounces, which is 38% higher than the eight months after the acquisition last year and a 22% increase from the full nine months of year-to-date 2020.

Looking at our operating cash costs averaged $601 in Q3 and $647 per ounce for the year to date. Very importantly, the mine achieved a record all-in sustaining costs of $937 per ounce sold. Our strong cost performance was achieved despite some inflationary pressures we have seen on diesel, fuel and energy and in a few other areas. We continue to work on mitigating the impact of those cost pressures.

Going to Slide 21. As Tony mentioned earlier, we have a significant number of projects on the go at Detour Lake. Our growth capital expenditures at Detour for the first nine months of the year totaled $137 million. Of that amount, $66 million was for deferred stripping and $70 million was for the procurement of mobile equipment and projects involving tailings management area, process plants as well as construction of a new Assay Lab and Airfield.

With that, I'll turn the call over to Evan Pelletier, vice president, Mining, Kirkland Lake.

Evan Pelletier -- Vice President, Mining Kirkland Lake

Thanks, Larry. I'm starting on Slide 22. Production at Macassa in Q3 totaled 46,000 ounces at an operating cash cost of $657 million and an all-in sustaining cost of $859. The increase in production from Q3 2020 mainly reflected a higher average grade in Q3 2021 compared to the same period a year earlier.

The reduction in production from Q2 2021 reflected lower tonnes processed due to largely to higher levels of underground maintenance and reduced equipment availability as well as the impact of the lower than planned average grade due to mainly due mainly to mining sequencing. Looking at year-to-date production at Macassa totaled 148,854 ounces based on processing 243,615 tonnes and at an average grade of 19.4 grams per tonne and average recoveries of 98%. Production year to date is lower than planned with the underperformance being due largely to reduced equipment availability caused by increased maintenance requirements,poor battery performance and delay in receiving new batteries. Moving to Slide 23, where we are doing very well at Macassa is advancing our key projects, mainly the four shaft as well as with exploration, which I know Eric talked about in last quarter's call.

Looking at four shaft during Q3 2021, the shaft advanced approximately 500 feet and had reached a depth of 6,100 feet as of September 30, 2021, with development of the 6,100 level station also being completed. We also have made good progress with other projects, such as our ventilation expansion involving completing of the two vent raises. With that, I'll turn the call back to Natasha Vaz.

Natasha Vaz -- Chief Operating Officer

So to wrap up the operating review, look at the outlook for the full year. I'm on Slide 24. On a consolidated basis, Tony has already touched on it. And as you mentioned, we are on track to achieve the top of our production guidance of 1.3 million to 1.4 million ounces.

Operating cash cost per ounce is on track to achieve guidance. And we are positioned to either meet or potentially we all are all-in sustaining cost per ounce guidance. OK. So just looking at the individual operations, Fosterville achieved its full year guidance in the first nine months of the year.

So we're now expecting Fosterville to produce around 500,000 ounces for the year or higher. Also with respect to operating cash cost per ounce, we should easily beat the guidance range of $230 to $250 an ounce. Over at Detour, we're targeting another record quarter in Q4 with production to exceed the Q3 level of 189,000 ounces. So we now expect production for the year of at least 700,000 ounces, with operating cash cost at the top end of our guidance range or slightly higher.

And then over at Macassa, we are already seeing improved results in Q4. Having said that, we're now expected to achieve our guidance with production now planning to be within 190,000 and 210,000 ounces at operating cash costs above the guidance range. With that, I'll turn the call over to Eric Kallio, our senior vice president of Exploration.

Eric Kallio -- Senior Vice President, Exploration

Thanks, Natasha and good morning, everyone. My first slide today is No. 25 from Detour Lake project, where we continue to have tremendous success with both drilling and advancement of the resource with a key product being an updated resource and substantial increase in ounces from our latest year-end. Per information from the estimates shown on the current slide, which is a long section looking northwards across the project area, containing Pit Shells from both the new and the older work.

As indicated, the updated resources added approximately 10.1 million ounces of the overall total and bringing the new total to about 14.7 million ounces, exclusive of reserves, which at year-end were about $15 million. All this material lies in a Pit Shell, which is measuring about 4 kilometers long and extending to about the maximum depth of 600 meters from surface, with all reserves located at the top shaded in the dark green and all the resources lying below was stated in yellow and lighter green, which is essentially covering the whole settles and Western areas is being focus of our recent drilling. It's important to note that all this increase was accomplished with only about 180,000 meters of drilling or two-thirds of the planned 270,000 meter program started last year. And the limits of the test are really close to the limits of drillings and we are still seeing goodwill at those limits.

So now turning to my next slide, No. 26. What we see here is another image of Detour Drills detailing, additional details from the resource model along with new drill results released just two days ago and already demonstrating additional upside potential here. As announced, new results include an additional 39 holes and six wedge holes targeting mainly toward the West pit and in our view, containing a lot of very good positive messages, including reinforcement of our overall geological model of Westport plunging shoots.

That's a very positive drill intercepts. Some of the key hold to note from Detour include a remind you with the hold on the west side of the current pit shell, where there was very limited drilling in the past and now containing the wide, wider and higher-grade intercepts as well as whole 300, which you see more in the central part of the West pit, which is actually drilled under the north wall of the pit and also having good intercepts. The other good goal I'd like to point out is number 295 located in the eastern part of, which intersected 20 grams over 25 meters, so just in the uniques wall of the main pit. [Inaudible] all above is the fact that we still have 11, 12 drills on site, continuing the program.

And we actually are feeling very confident about the project and our possibilities to give more ounces by the time we need to the next update. Now, turning to my next slide, that's No. 27. We see the first four slides running the Fosterville, where we also saw some very good success in Q3, including multiple high-grade intercepts for both the Lower Phoenix and raw material areas.

In terms of the slide ahead, what we see is a long section across the mine area and showing the location of these two main targets as well as some details for our '21 exploration program. indicated to lower Phoenix is on the left-hand slide has two main targets. Within the Swan and Cygnet and most of the work at this time being focused on Swan and down-plunge extension of mineralization from current reserves. Working Cygnet the second zone located 100 meters in the footwall and it's also an important target here -- it's important to note until early part of this year, most of the work at Swan was not really available to us but only became more available when a new drill was finished in June.

And now we have five drills at this location and able to do a lot of drilling in this area. Additional to this, we also now have a lot of drilling happening at Robbin's Hill. And Azimut Swan area, the main target is down plunge from the reserves. Most of the work to date is -- has been done for surface.

But as you can see, we are still continuing to advance the underground deep line and getting very close to be able to start drilling from underground. Turning to the next slide, we can see some additional details for the work that is happening at the Swan Zone, the Lower Phoenix area. And key things to note here would be we're starting to get a large number of holes, 109 holes were actually released in early -- in our last press release here. And the following holes are showing a fairly consistent trend down plunge from the reserve.

We're also seeing some very high-grade intercepts right near the limits of the reserve including 51.7 grams over 2.6 meters, 12.8 over 4.6, 9.6 over 6.4. So -- and in addition to that, what we've seen is higher grade intercepts within the trend, 14.1 over 7.5, 10 over 10.4, 13.2 over 3.2. So in our view, offering special potential for high-grade lenses within the overall trend. So turning to my next slide.

This is just showing a little bit more detail for the drilling, which is happening in the Cygnet area. And as indicated -- as with the Swan drilling, we've got quite a few new holes located within this area now. And from the new drilling in a lot of new high-grade intercepts. Some of the key ones being 258 grams over 1.8, 142 over two meters, 49.4 over 4.1.

Key part of this drilling goal has been not only the IV results, but identification, I think, of parallel of plays coming from the splay sub-parallel structures, which we identified in the past, but the Q1 being dependent the target. And these are defined -- these are shown on the left side of the slide. And as you can see, these are more directly aligned with the Swan and containing some of the higher-grade intercepts. So very important development, I think.

Turning to my next slide, which is for the Robbin's Hill area. As you can see here, we are also starting to get quite a few drill intercepts and now holes extending down to about 1,000 meters down plunge-deep and as announced in our last press release, seeing some very variable results right near the limits of the trend. Here's a 1,000-meter level, very close to the elevation where Swan started to look better. We're seeing holes that have ports visible gold and numbers, which are much higher grade than the average as we saw at higher elevations, including 28 grams over 1.1, 23 over 1.4, 19 over 3.4.

As Swan, we've also seen some very high good numbers within the trend such as 81 grams over 2.5 meters, which again suggests the possibility of high-grade lenses. So all in all, we believe that the work at Fosterville, come along very well and a lot of possibilities for not only replacing ounces by coming up with new high grade material. And now I'll request to pass it over to Tony.

Tony Makuch -- President and Chief Executive Officer

OK. Thanks, Eric. And I'm turning now to Slide 31. I'll find a slide or deck.

And then to conclude, as you can see, we had an excellent quarter in Q3, 2021. And we talk besides operating results, we also had a highlight in the quarter in terms of the merger announcement with Agnico Eagle, which will create a new leader in the gold mining industry. And again, as we talked about, the lowest cost, highest margin, best jurisdictions and an extensive pipeline and development and exploration projects to drive sustainable low-risk growth and with a very, very strong balance sheet. And strong corporate, which people to create that value for shareholders.

Q3 was a record quarter, both earnings and earnings per share for Kirkland Lake Gold. And as outlined Detour Lake had a truly outstanding quarter, record earnings throughput and all-in sustaining costs, possible continued out performance we continue to out perform. And the nutshot number for quarter at Macassa remains on track for completion in late 2022 and that will really help in terms of that. And combined with that, plus the new ventilation system at Macassa plus a new fleet of equipment as we move into 2023, we'll retransform Macassa into gold mine.

Eric outlined by our success to drill bit that continues to be part of all of our value creation and you can see doing that in each one of our assets, each one of our mines. And looking ahead, as Natasha gave some color to, we're on track to finish 2021 strong and achieve all of our 2021 guidance. We're also looking forward to moving into 2022 as part of a new world's leading growth in great gold mining companies and it's one that's well positioned to generate superior long-term value for shareholders. But before I finish, I want to say it's not the fourth where -- as we talk about, we are having a strong production success coming into Q4, but we are also at the start of the whole of the Christmas season.

During the period of time, maybe a saver within Kirkland Gold, our suppliers, contractors, those on the call, please remain diligent for your own personal safety and safety of others as we end the year. We don't really want anybody to get hurt. No ounce of gold produced, no dollar in cash flow, no penny in earnings is more important than personal safety and personal safety of the people you work with. Everybody at the end the year, you're being able to do with your families over the Christmas season.

Anyway, with that, be happy to take some questions and thanks.

Questions & Answers:

Operator

[Operator instructions] And our first question is from Tyler Langton with JPMorgan. Your line is open.

Tyler Langton -- JPMorgan Chase and Company -- Analyst

Good morning. Thanks for taking my questions. Maybe just to start, if you talk about sort of the levels of cost inflation that you're seeing right now and sort of what you're seeing in areas for materials and labor and fuel. And then just kind of talk a little bit about your expectations heading into 2022.

Tony Makuch -- President and Chief Executive Officer

So the first part, just sort of missed a little bit of the first part of the question, but it was you are asking about what we're seeing in terms of labor as well. Is that correct?

Tyler Langton -- JPMorgan Chase and Company -- Analyst

Yes, cost -- yes, sorry, the cost inflation you're seeing now and just from -- whether it's from materials, consumables, labor, fuel, just kind of sort of the different buckets?

Tony Makuch -- President and Chief Executive Officer

Yes. Well, I mean, we don't see anything un earned labor. I mean labor follows tracks that we come see year over year in terms of labor cost, but again, part of it all is as we train and develop people, as people earn more, they become more productive and create more value. So all of that gets offset.

So people earn the pay that they get the increase that they had. It's always money well spent in those areas. We're happy to do it. In terms of commodity prices, I mean, I think some of the big areas and that you can get a Natasha and Ian and Larry to give a little more color.

But some of the big areas as we talked about is in our forecast where as was at the beginning of the year to where diesel prices have gone, some energy pricing cost, where we see that in a few other commodities. Definitely, the FX rates have had some impact on us. But as you can see, our operations behave weather that and perform well and probably we would have had to see commodity prices would have stayed the same, we probably would have been had a significant beat in our cost guidance. Natasha, you have any color there?

Natasha Vaz -- Chief Operating Officer

Yes. Basically, Tyler, in Q3 2021, yes, we have seen some inflationary cost pressures. As Tony mentioned, mainly in diesel and electricity and things like grinding media. It has mainly impacted us at Detour.

There have been some supply chain issues, as Evan mentioned, particularly with batteries and battery power equipment. But through effective cost management and higher-than-planned gold sales largely at Fosterville, our operating cash cost grounds and also our AISC sold in 2021 were significantly better than the full year 2021 guidance ranges, right? And then so looking forward into 2022, we expect inflationary pressures for energy and consumables to continue. And while difficult to predict, I guess, we can safely say that we're focusing on working to mitigate that and focusing on cost management as we go through.

Tyler Langton -- JPMorgan Chase and Company -- Analyst

Great. And just as a final question at Macassa, you kind of imagined -- you mentioned some of the issues that impacted production in Q3 and you said they were getting -- you're seeing improvement now in Q4. I mean -- so these issues largely be resolved in Q4? Or could they sort of slip into Q1 of next year?

Natasha Vaz -- Chief Operating Officer

Sure. Well, yes, so the underperformance we've seen at Macassa is again mainly related to equipment availability caused by increased maintenance requirements and also poor battery performance and delays in receiving the new batteries. So the battery truck industry is relatively new, as you know and what's demand storing, we are seeing tightness in the market as well as some issues with quality. So the battery like we're getting at our mobile equipment is down in some cases to six months instead of years.

We are seeing some better results in Q4 so far. So it is encouraging. We are working with our suppliers hand-in-hand to try and resolve these issues as soon as possible. So it doesn't impact us as much going into future quarters.

Tony Makuch -- President and Chief Executive Officer

Yes. If you went back a few years ago, Macassa was a leader in battery technology, battery equipment. I saw it underground. We were really the only consumer batteries.

And so we were getting the quality and timely delivery and effectiveness of them. But now as the industry is picking up and more of the industry is asking for this equipment, the supply -- the supply industry is not able to match and all of a sudden now that you're seeing a drop in quality as well as timing is on delivery and even availability is exceeded and we need to rate further supply in this to catch up and we're going to be working on. We're working on a number of initiatives to support that.

Tyler Langton -- JPMorgan Chase and Company -- Analyst

Great. That's it for me. Thanks.

Operator

Our next question is from Ovais Habib with Scotiabank. Your line is open.

Ovais Habib -- Scotiabank -- Analyst

Thanks, operator. Hi, Tony and Kirkland team and congrats on a strong quarter. And really, thanks for taking my questions. Couple of questions for me and I apologize in advance if you've already touched upon these.

Several companies have reported updates this morning and I'm kind of multitasking as best as I can. So my first question is regards to Fosterville. Now obviously, Fosterville has had a fantastic year. Q3 production beat as Fosterville kind of continues to -- on the grade outperformance.

You have made changes to the mine sequencing essentially bringing higher grade forward. But at the same time, you've seen some -- seem to be getting some significant positive grade reconciliation as well. Are you expecting this to continue into 2022? And are you modeling this great reconciliation in Q4?

Tony Makuch -- President and Chief Executive Officer

How about Ian, you evolving here have a real good answer to this question. Is that fair?

Ian Holland -- Vice President, Australian Operations

Yes. Sure, Tony. It's a good question. So -- the grade at performance so far we've seen this year has really only come from three stopes mainly.

And those three stopes account for essentially about 60,000 ounces of the over performance so far this year. So we don't see the broad range of stopes in Swan are modeled really well and reconcile really well. We do have the odd really, really extreme grade areas that are really difficult to model, to be honest. And it takes a very small variation in physical size of vein to add significant ounces into the equation for the stope.

So do we see it continuing? We have seen a little bit of our performance already in Q4. But having said that, over the year, we're really only talking about three main states. As for the sequencing changes, driven by mine seeing at the start of the year. So these decisions were made in Q1 leading into Q2.

So it had the effect of dragging some higher grade stopes from Q4 into Q2 as compared to the original plan. But really, the main contributor for the year has been those sort of three stopes that outperformed significantly. Does that answer the question?

Ovais Habib -- Scotiabank -- Analyst

Yes, it does. And just to kind of follow up on that. Are you looking to kind of tighten up drilling or do some additional grade control ring to kind of tighten up that model? Or is this positive reconciliation you're just taking it as it comes?

Ian Holland -- Vice President, Australian Operations

Yes. Good question. The drilling that we'd need to be able to really pinpoint the very -- what are really very small physical changes in vein with and/or gradation, we'll be talking about five by five sort of drilling. So we don't intend to do that.

And we understand the geological setting where these types of really extreme outperformance is Canaca and we'll be looking to try and model that as best we can going forward. But I'll tell reiterate the vast majority of this one reconciles really well to model. It's just the odd stope, where we tend to have a bit of a footwall splay to it that significantly outperform.

Ovais Habib -- Scotiabank -- Analyst

Got it.

Tony Makuch -- President and Chief Executive Officer

That, though, you still are expecting a pretty solid 2022 coming into it, right?

Ian Holland -- Vice President, Australian Operations

Certainly. Certainly, Tony. Yes. We see 2022 still been a very strong year for Fosterville.

Ovais Habib -- Scotiabank -- Analyst

Perfect. That's great. And just shifting gears to Detour. It was great to see throughput moving higher in Q3 to 67,000 tonnes per day and really to meet the target of that 24.5 million tonnes for the year, you need to kind of process around that 70,000 to 73,000 tonnes per day in Q4.

Now do you need any additional equipment or any addition to the plan to achieve this? Or are you on track? Any color you can provide in how October is progressing?

Tony Makuch -- President and Chief Executive Officer

You can answer that question,Eric or Natasha?

Natasha Vaz -- Chief Operating Officer

Sure, I can start and then Eric I can finish. But yes, overall, Ovais, good shape in Q4 from a line perspective, we have good material and we're on target to have less in the quarter. The mill is shaping up to be very good. We have a small shutdown unplanned in the quarter, but nothing material.

So from a plant perspective and from a mine perspective, we're in good shape to hit our target. Eric, do you want to add some more color?

Eric Kallio -- Senior Vice President, Exploration

Yes, sure. In fact, it's -- we're very optimistic that we're going to finish strong in Q4. We've already got a good start in October. As we mined through some higher grade zones in Phase 2, that's going to continue not just this quarter but into the next year.

So from the mining end, we're in pretty good shape. And actually, as we haven't even seen the benefits of the growth projects at the front end of the mill yet. So things are looking at pretty strong for TIM to finish the year. So the team has worked really hard to make some operational improvements.

So the increase in throughput is actually not through a growth project yet as they come online this quarter and into next year should only help us and derisk those tonnage.

Tony Makuch -- President and Chief Executive Officer

Yes. A lot of the success from a throughput point of view, if you haven't seen, it's a lot of initiatives, it's a lot of small initiatives. It's like a lot of the big projects are still to come in 2022, right?

Ovais Habib -- Scotiabank -- Analyst

Perfect. That's a great update. And just to confirm, in terms of the grade, I mean, grade moved up over a gram tonne in Q3. And is that expected to remain around the ground per tonne going into Q4 as well?

Tony Makuch -- President and Chief Executive Officer

Go ahead, Eric.

Eric Kallio -- Senior Vice President, Exploration

Yes. Absolutely. And again, the Phase 2, we're kind of right in the heart of the ore body right now going to the underground areas and we expect to be in and around underground gram a ton may be a little better.

Ovais Habib -- Scotiabank -- Analyst

Perfect. And that's great, and really appreciate the color. That's it for me. Thank you.

Operator

Our next question is from John Tumazos with John Tumazos Independent Research. Your line is open.

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

Thank you. I know you provided some explanation. I wanted to give you a chance to explain a little more the tremendous 67,368 tonnes a day through the mill at Detour. I'm assuming that it wasn't softer rock and that part of it was a significant increase in uptime due to better maintenance practices and infrastructure improvements and that some of it was due to specific relatively small capital improvements that don't stand out on the cash flow statement, but obviously had a big impact.

Please tell us how you did such a great job?

Tony Makuch -- President and Chief Executive Officer

Natasha?

Natasha Vaz -- Chief Operating Officer

Yes. I'll let Larry speak to the details as well. But John, so there are some initiatives that we have been working on with respect to drill blast and getting higher fragmentation. We did have -- we did see some opportunity where we cover some work within the areas of the area.

So better material. There's some work being done on the -- on the mill side, with respect to the choke feeding and filling that up. Larry, do you want to add any more details associated with that?

Larry Lazeski -- Vice President, Detour Lake

Yes, sure. I think Natasha, you had most of it there. It's really focused around optimizing our high-intensity feed. -- high-intensity blast fed.

So we are producing more mines. And yes, it is just as hard as as it ever has been. But -- so you got that, the choke feeding and really just the team working together between the mine and the mill and making sure that the feed is consistent. And actually, on the uptime, we did have two plant shutdowns in Q3 with only one in Q4.

So we...

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

The up time was not a factor. You actually have more downtime.

Larry Lazeski -- Vice President, Detour Lake

Yes, that's correct.

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

Congratulations.

Operator

Our next question is from Mark Parkin with National Bank Financial. Your line is open.

Mark Parkin -- National Bank Financial -- Analyst

Thanks, guys. Congrats on the good quarter. It's certainly been the focus of the call. But on Detour, can you just give us an idea of like where you're seeing -- what's the bottleneck currently? Is it more the mine is hungrier or it's more on the mining side? Is it mine or mill that you're kind of focused on near term in terms of unlocking the next step of throughput upside?

Tony Makuch -- President and Chief Executive Officer

Go ahead, Natasha.

Natasha Vaz -- Chief Operating Officer

Sure. So I think the mine is producing in a pretty good rate. The mill is doing the front end is doing very well. I would say if we wanted to increase throughput going forward into the future, even further, I would say it would be the back end in terms of the CIP circuit, the bottlenecking that and that's part of the projects that Larry and his team are working on to get established and commissioned later next year.

Larry, any more color on that?

Larry Lazeski -- Vice President, Detour Lake

No, that's good. That's where our focus will be in the first half of next year, for sure, is in the back end of the plant.

Tony Makuch -- President and Chief Executive Officer

Yes and then -- but in terms of mine throughput, I mean, if you look at the updated mine plan that Andre -- let group put up, I mean as we progress into next year, we increase mine throughout. My plan is that we're going to be adding trucks to support adding trucks. We're going to -- we need shops and things on site. So there's a -- we're looking at in new infrastructure in terms of putting a private LTE network partnership or Broadridge Communications to do that and then retake advantage of technology and site.

So a lot of those initiatives that will help in terms of increasing throughput plus as we go into the larger pit concept, it gives you more geography to work with and a lot more and more flexibility in terms of less delays in terms of equipment moving around, etc. So there's a lot of these things that are going to come and as Natasha and Larry mentioned, in terms of the plant, we're working on the front end throughput, through the pressures into the site mill. And that's -- part of that is the screened and refit system. And then -- and then getting more tonnes to the mill is good, but we don't -- not at the expense of recovery and that's where, as Natasha mentioned, we're working on improvements in our expansion of our leach circuit, our CIP circuit, as well as the new gravity circuit that additional gravity circuit being added to the mill over the next one.

Mark Parkin -- National Bank Financial -- Analyst

All right. Thanks for those details. Two other things historically, we saw loading rates in terms of what a truck could actually be loaded to versus what it was actually being loaded to. That was kind of a historical issue pre your management time.

How has that kind of shifted to where you're kind of operating today? Are the trucks kind of right in line with maximum capacity? And then historically, also there was a fair bit of rehandled. Now that the open pit continues to mature. Are you seeing relative to historical years, the amount of rehandle all? Or is that still kind of something that the West, it really unlocks the potential of showing significant improvement on that front?

Natasha Vaz -- Chief Operating Officer

Go ahead, Larry.

Larry Lazeski -- Vice President, Detour Lake

OK. Sorry, I can speak to the truck payloads it's something actually that's been ongoing for a couple of years now is we've looked at the bodies that we had originally with the 795s and looked at the kind of right weighting the trays and to get a bit of an increased payload. So we've always been focused on maximizing GPW and keeping within a fairly tight range. But with these -- as we continue to add the truck bodies, we've increased payload by almost 2%, 2.5% here over the last maybe four quarters or so.

So that probably gives you a bit of -- and we ask our shelf operators at some we monitor very closely. I ask them to make sure that that we're paying close attention to maximizing payloads as well so...

Mark Parkin -- National Bank Financial -- Analyst

OK, excellent. And just on the rehandle?

Larry Lazeski -- Vice President, Detour Lake

Oh, sorry, yes. within the pit, there's very little rehandle. We really focus on establishing a good haulage and ramp system right off the bat. However, we do still have kind of historic levels of rehandle with ore up on the room.

And that's actually been fairly important for us to achieve these levels of mill throughput. So when we focus on our high intensity blasting in the ore zones. We can't do it everywhere. It's only in the areas that are kind of safe with respect to minimizing dilution.

So we have to stockpile a fair bit of ore, so that we can maintain that consistent blend going through the mill.

Mark Parkin -- National Bank Financial -- Analyst

And is that something that if you have West pit opened up, you can kind of balance that off by doing ore in one while waste in the other? Or is that not how you guys see, you'll still be something to like what you're kind of running at now?

Larry Lazeski -- Vice President, Detour Lake

Yes, we foresee a rehab levels, could be kind of in line with where we are currently.

Mark Parkin -- National Bank Financial -- Analyst

OK. All right. That's it for me, guys. Thanks very much and congrats again.

Operator

Our next question is from Fahad Tariq with Credit Suisse. Your line is open.

Fahad Tariq -- Credit Suisse -- Analyst

Hi, good morning. Thanks for taking my question. I'm just trying to get a sense of what will be incorporated into the next year's life of mine plan at Detour. So it sounds like, obviously, the year-end reserves will be part of that.

earlier in this call, there was something mentioned about potentially de bottlenecking the back of the plant. Are those efforts or that optimization? Is that going to be factored into the plan as well? Or is that just potential further upside?

Tony Makuch -- President and Chief Executive Officer

Well, in terms of the -- all the effort we talked about de bottlenecking in the plant, this is all part of the -- what's going into the mine plan, which is being used in dry value, there's a lot of lot of those initiatives I alluded to you've got to be increasing size of truck fleet and increased maintenance capabilities, a lot of other initiatives in terms of excuse me, like sort of tying in great control improvements that we're working on. Natasha mentioned above blasting improvements. That's been an initiative for quite some time at Detour. Natasha, maybe you can give more color?

Natasha Vaz -- Chief Operating Officer

Yes. Yes. So yes, everything -- everything we see tells us that we had for a strong growth in mine reserve. -- and that we're well on the road to transform Detour into one of the largest and most profitable home lines.

But in terms of what next year's reserve increase will look like, the new mine plan will look like. Yes, we'll factor in all the improvements that we are working on, what Tony mentioned the CIP-bottlenecking was part of this past life of mine update as well. So that will all get factored in to get that mill running at the higher throughputs that we anticipate. But there's still a lot of work to do from a life-of-mine perspective and we'll get through that in early next year.

Tony Makuch -- President and Chief Executive Officer

But I mean in the CIP plant, I mean, if I -- if we could go back, we would have built a different style CIP plant that was there, but we looked at what we thought we the people at the site have done a great job into identifying the areas that can be done for moving any bottlenecks there.

Fahad Tariq -- Credit Suisse -- Analyst

OK. OK. Got it. So it sounds like all of that is being factored in.

OK. OK. And then just switching gears to Fosterville just quickly. You already spoke about grades, but just on throughput.

Obviously, throughput this quarter was quite strong. I'm just trying to figure out for Q4 because even if I keep throughput even flat or slightly down, you're going to be well ahead of even above 500,000 ounces for the year. So is that throughput level sustainable into Q4?

Tony Makuch -- President and Chief Executive Officer

Go ahead, Natasha.

Natasha Vaz -- Chief Operating Officer

Yes. There's -- with Fosterville, we're expecting to see some pretty decent throughput levels. We do have a shutdown coming up. But overall, I believe that we're projecting the grades in some of these areas that we're mining to be somewhat lower.

Ian, do you want to provide any more color on that?

Ian Holland -- Vice President, Australian Operations

Yes, sure, Natasha. Look, the mines are really well sequenced at the moment. The guys are on top of the development and that flows through the stoping. I think what we've seen so far is that with the impact of price bill coming on last year and then really embedded this year.

And a lot of the work on site has gone into the production sequences themselves and we're seeing the benefit of that now with the increased productivity of our stoping. And we expect that to continue on. And in fact, we would see ourselves improving our tonnage productivity over the coming years.

Tony Makuch -- President and Chief Executive Officer

And I guess the other part in terms of the plant itself, I mean, you still have not -- the plant is up 850 to -- 800,000 to 850,000 tons a year or plus planned right it's not mill, that's holding it back into its mine productivity. And that's basically the [Inaudible]

Fahad Tariq -- Credit Suisse -- Analyst

Got it. OK, that's it for me. Thank you. 

Operator

We have no further questions at this time. I'll turn the call back over to Mr. Utting for any closing remarks.

Tony Makuch -- President and Chief Executive Officer

Well, thanks, everyone, again, for taking part in our call today. As you heard, we had a very strong third quarter and a very strong first nine months to 2021. And even more important, we're positioned for a very strong finish and to finish the year very well relative to our guidance. Looking further ahead, as I said when I started, we're very excited about the upcoming merger with Agnico Eagle and we're looking forward in 2022 as really a new leader in the gold mining industry.

Thanks, very much.

Operator

[Operator signoff]

Duration: 68 minutes

Call participants:

Mark Utting -- Senior Director, Investor Relations

Tony Makuch -- President and Chief Executive Officer

David Soares -- Chief Financial Officer

Natasha Vaz -- Chief Operating Officer

Ian Holland -- Vice President, Australian Operations

Larry Lazeski -- Vice President, Detour Lake

Evan Pelletier -- Vice President, Mining Kirkland Lake

Eric Kallio -- Senior Vice President, Exploration

Tyler Langton -- JPMorgan Chase and Company -- Analyst

Ovais Habib -- Scotiabank -- Analyst

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

Mark Parkin -- National Bank Financial -- Analyst

Fahad Tariq -- Credit Suisse -- Analyst

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