Kirkland Lake Gold Ltd Annual Shareholders Meeting
May 04, 2017 AM CEST
NMI.TO - Kirkland Lake Gold Ltd
Kirkland Lake Gold Ltd Annual Shareholders Meeting
May 04, 2017 / 08:30PM GMT
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Corporate Participants
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* Anthony Paul Makuch
Kirkland Lake Gold Ltd. - CEO, President and Executive Director
* Jennifer Laura Wagner
Kirkland Lake Gold Ltd. - Corporate Legal Counsel and Corporate Secretary
* Philip Chow Yee
Kirkland Lake Gold Ltd. - CFO and EVP
* Ryan King
Kirkland Lake Gold Ltd. - VP of IR
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Presentation
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [1]
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Kirkland Lake Gold, and in accordance with the bylaws of the company, I will act as Chairman of the meeting. This is the Annual and Special Meeting of Shareholders of Kirkland Lake Gold Ltd., call pursuant to notice dated April 7, 2017. It is being held in the offices of Cassels Brock & Blackwell LLP, Suite 2100, 40 King Street West, Toronto, Ontario, M5H 3C2, this Tuesday, May 4, 2017, at 4:30 p.m. Toronto time.
Before we begin with the formalities of the meeting, I am pleased to introduce some of the Kirkland Lake's management and Board members that are here with us today. From our executive management team, Phil Yee, Chief Financial Officer; Tony Makuch, CEO; Darren Hall, Chief Operating Officer. Darren here? No? Right. Oh sorry. Right, Darren. Alasdair Federico, Executive Vice President, back here, Corporate Affairs; and Tina Ouellette, hi, Tina, Executive Vice President, Human Resources.
In addition, we have various members of our senior management team with us here today. The directors of the company present today are Jon Gill, if you could just stand or show -- thank you. Arnold Klassen, Pamela Klessig, Barry Olson, Jeff Parr, and unfortunately, Ray Threlkeld could not be here today.
Following the meeting, Tony Makuch will deliver a presentation on the company and we'll be happy to take your questions following the presentation.
Please be advised that this meeting is being recorded for our webcast, which will be available on the company's website.
The meeting will now come to order, and with your approval, I shall ask Jennifer Wagner to act as Secretary of the meeting and Lori Winchester of TSX Trust Company to act as scrutineer.
I now instruct the secretary to table the meeting the following documents: Notice of Meeting; Former Proxy; Management Information Circular; the Audited Financial Statements of the company for the year ended December 31, 2016; and the Statutory Declaration regarding delivery of the above materials to the requisite shareholders of the company.
I also confirm that the above material was sent to each Director and the company's auditors as well as to all shareholders on record as of the record date.
The bylaws of the company provide that at least 2 persons present in person or represented by proxy holding no less than 10% of the issued and outstanding common shares of the company, who are entitled to vote at the meeting constitute a quorum for this shareholders' meeting.
At this time, I would ask the secretary to please report the number of shareholders present in person and the total number of shares they represent, together with the number of shares represented by proxy.
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Jennifer Laura Wagner, Kirkland Lake Gold Ltd. - Corporate Legal Counsel and Corporate Secretary [2]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [3]
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Thank you. There is a quorum present and proof of notice calling this meeting has been given in accordance with the company's bylaws and applicable corporate laws.
I now declare that the meeting is regularly called and properly constituted for the transaction of business and instruct the secretary to annex the declaration of mailing and the formal report of the scrutineer to the minutes of the meeting.
I'd like to take a moment to comment on the voting procedures to be used at today's meeting. Voting for the election of directors, Long-Term Incentive Plan, deferred share unit plan and stock option plan amendments will proceed by way of ballot, while all other matters will proceed by way of show of hands.
If you are a registered shareholder or proxy holder, you should have received 4 ballots upon checking in with TSX Trust Company. If you are a registered shareholder or proxy holder and do not have such ballots, please raise your hand now and a representative from the TSX Trust will deliver them to you.
Okay, everyone accounted for. The first item of business is the presentation of the financial statement of the company for the year ended December 31, 2016, together with the auditor's report thereon. A copy of the financial statements have been mailed to each shareholder who has requested receipt in accordance with applicable law.
Given that these shareholders has had an opportunity to review the annual report, I will dispense with the reading of the financial statements to this meeting.
Next item of business is a resolution appointing KPMG LLP as auditors of the company for the ensuing year and authorizing the directors to fix their remuneration.
Would someone move therefore to appoint auditors and to authorize directors to fix their remuneration?
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Unidentified Company Representative, [4]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [5]
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Thank you, [Phil]. All those in favor, signify by raising their hand.
(Voting)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [6]
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Contrary, if any?
(Voting)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [7]
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I declare KMPG (sic)[KPMG] LLP be and they are hereby appointed as auditors of the company for the ensuing year to serve as such remuneration as may be fixed by the Board of Directors.
The next item of business to pass is special resolution to fix the number of directors to be elected to hold office until the next annual meeting or until their successors are elected or appointed at 8 in accordance with the articles and bylaws of the company. Would someone move therefore to fix the number of directors at 8?
All those in favor, signify by raising their hand.
(Voting)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [8]
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Contrary, if any?
(Voting)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [9]
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Motion is passed unanimously. I declare the number of directors to be elected to hold the office until next annual meeting or until their successors are elected or appointed, be and is hereby fixed at 8.
The next item of business is the election of directors for the ensuing year. 8 directors who are to be elected will hold the office until the next annual meeting or until their successors are elected or appointed.
I declare the meeting open for nominations. The company's bylaws provide for an advance notice requirement for the nomination of directors by shareholders in certain circumstances. The company did not receive notice of any director nominations in connection with the meeting within the time periods prescribed. Accordingly, at the meeting, the only persons eligible to be nominated for election of the board are the management nominees as disclosed in the management information circular.
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Jennifer Laura Wagner, Kirkland Lake Gold Ltd. - Corporate Legal Counsel and Corporate Secretary [10]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [11]
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May I have a motion to approve the election of the directors of director nominees?
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Unidentified Company Representative, [12]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [13]
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It's necessary to vote by ballot on this resolution. If you have not already done so, please now take the time to mark your vote on the ballot and I would ask that the scrutineer collect the ballots.
I've been advised by the scrutineer that the proxies deposited for the meeting have been overwhelmingly voted for the election of each of the directors nominee.
I therefore declare that Eric Sprott, Anthony Makuch, Jonathan Gill, Arnold Klassen, Pamela Klessig, Barry Olson, Jeffrey Parr and Raymond Threlkeld be and are hereby elected as directors of the company for the ensuing year or until their successors are elected or appointed.
Rather than hold up the business of this meeting for the final calculations of vote cast, I direct that the results of the poll be included with the minutes of this meeting and filed on SEDAR.
The next item of business is to consider and, if thought fit, pass a resolution approving the Long-Term Incentive Plan for employees, directors, officers and consultants of the company, as more particularly described in the management information circular.
I would ask someone to move that the ordinary resolution found at Page 18 of the management information circular, which shall be taken as read.
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Unidentified Company Representative, [14]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [15]
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Thank you. It is necessary to vote by ballot on this resolution. If you have not already done so, please now take the time to mark your vote on the ballot. And I would ask the scrutineer to collect the ballots.
I've been advised by the scrutineer that the proxies deposited for the meeting have been overwhelmingly voted for the resolution approving the Long-Term Incentive Plan.
I therefore declare that the Long-Term Incentive Plan resolution approving the Long-Term Incentive Plan of the company as more particularly set out in the management information circular, has been carried.
Rather than hold up the business of this meeting for the final calculation of votes cast, I direct that the results of the poll be included with the minutes of this meeting and filed on SEDAR.
The next item of business is to consider and, if thought fit, pass a resolution approving the deferred shared unit plan for nonemployee directors of the company as more particularly set out in the management information circular.
I'll now ask someone to move the ordinary resolutions found at Page 19 to 20 of the management information circular which shall be taken as read.
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Unidentified Company Representative, [16]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [17]
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It's necessary to vote by ballot on this resolution. If you have not already done so, please take the time to mark your vote in the ballot. And I would ask the scrutineer to collect the ballots.
I've been advised by the scrutineer that the proxies deposited for the meeting have been overwhelmingly voted for the resolution approving the deferred share unit plan.
I therefore declare that the deferred share unit plan resolution approving the deferred share unit plan of the company as more particularly set out in the management information circular, has been carried.
Rather than hold up the business of this meeting to the final calculation of the votes cast, I direct that the results of the poll be included with the minutes of this meeting and filed on SEDAR.
The next item of business to consider and, if thought fit, pass a resolution approving the stock option plan amendments and authorizing and approving all unallocated options issuable under stock option plan, all as more particularly set out in the management information circular.
I'll now ask someone to move the ordinary resolutions found at Page 23 of the management information circular, which shall be taken as read.
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Unidentified Company Representative, [18]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [19]
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It is necessary to vote by ballot on this resolution. If you not have already done so, please take the time to mark your ballot. And I would ask the scrutineer to collect the ballots.
I've been advised by the scrutineer that the proxies deposited for the meeting have been overwhelmingly voted for the resolution approving the stock option plan amendments and authorizing and approving all unallocated options issuable under the stock option plan.
I therefore declare that the stock option plan amendments resolution approving the stock option plan amendments and authorizing and approving all unallocated options issuable in the stock option plan, all as more particularly set out in the management information circular, has been carried.
Rather than hold up the business of this meeting for the final calculation of votes, I can direct the results of the poll be included with the minutes of this meeting and filed on SEDAR.
Unless there is any further business to come before this meeting, I'll now call for a motion to terminate this meeting.
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Jennifer Laura Wagner, Kirkland Lake Gold Ltd. - Corporate Legal Counsel and Corporate Secretary [20]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [21]
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All in favor?
(Voting)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [22]
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Against, if any?
(Voting)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [23]
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Carried unanimously.
Okay, I think it's time now that Tony Makuch is going to come up and address the meeting. Tony?
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [24]
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Anyways, thanks for having us. It's nice to have a great turn out. And it's -- it was not quite a year ago that I did sit at the previous AGM at Kirkland Lake Gold and I can say that, I don't know what you guys think and maybe I'll give you some sense, but this is a very good company, probably a have very special company. We've made a lot of inroads over the last while.
There's this thing about forward-looking statements. Maybe I'll make some forward-looking statements inside. We have a lot of exciting things happening, okay.
And somebody pointed out to me maybe we don't need to talk too much about what happened last year. We can maybe just get a couple of highlights of what happened last year, we can spend more time talking about where we are and where we're going. But just some simple highlights that the company changed significantly in 2016, started off as a single asset company beginning of the year, between the merger with St Andrews and then a merger with Newmarket, went from being a small single asset junior producer to probably one of the most exciting mid-tier gold producers in the world. And I would say, with 2 of the highest-grade underground gold deposits in the world. And we'll talk about how big we think these deposits are and where we think they're going to go.
One of the strength that we have as a company is the financial resources to exploit these assets we have, both to develop the Macassa Mine and to develop the Fosterville Mine in Australia. And the other mine, you shouldn't talk about the other poor cousins, I had a lot of brothers and sisters, they're all important to us. We just have 2 that are really special at this point in time.
But we started the year with $234 million cash. We mentioned to you, we have $280 million cash now in U.S. and we're working to grow that cash. We did pay down the 1 royalty on the Macassa side. We'd like to buy out all the royalties on our properties, if we could.
And I think one of the exciting parts, and what's being -- really being demonstrated lately at Fosterville is the exploration upside on what we have in Kirkland Lake Gold.
This slide here again is just -- maybe the only thing I want to take away -- you to take away from this slide, is just giving you a sense on performance and where the performance was. We did have record gold production in the year. Record gold production in the second half of the year, 2 quarters in a row at Macassa; there was record quarter -- for gold production at Fosterville. The -- in our production results, we only have 1 month of the Australian operations, but you can see in terms of performance, there was significant overachievement both in production and in terms of cost. In terms of both the cash cost at Macassa or at all operations and cash cost collectively for the company.
Some of the things that's really important and the value that we're trying to create with building Kirkland Lake Gold is a profitable, responsible gold mining company that's sustainable. We had demonstrated last year there's some significant earnings in the year. We had record revenue because some of that is driven by gold price, that part we don't necessarily control but we can control what we can produce. And we had -- did have strong production in the year.
One of the most important things is generating cash flow. We had operating cash flow was $107 million. That's what built up our cash. And as I talked to you about, we grew the cash. There's over $235 million starting the year, but it's $280 million today and growing, right.
In terms of where we are now and where we see ourselves, we did give out guidance at the beginning of the year. I've talked about 525,000 ounces. Last year, these mines produced 540,000 ounces. We shut down 2 of them, right off the bat, Stawell and Holloway. Some people might question why we took 60,000 ounces of production off the table. We really didn't -- we decreased production a little bit, but with our revised guidance we just came out with yesterday or this morning, you can see that we actually shut these 2 mines down and actually we announced the suspension of operations also at Cosmo, so 3 mines closed down, but we're increasing production.
What's really driving that increase in production is what's happening at Fosterville. And we believe with -- and what's at Macassa and Fosterville really is driving significant production increase. And with that production increase and good grade, and grade is really, really important in this business, the value of what you mine is there and we have significant high grade. And it puts us one of the -- we'll demonstrate one of the lowest cash cost mines in the world.
And this slide here is just showing you what our revised guidance is for 2017. We -- I want -- you can see where -- you can judge our guidance for the year based on our performance in Q1. But we came along and we've increased production at Macassa from -- Macassa produced 171,000 ounces in 2016. Half of that was produced in the second half of 2016. Going into 2017, we said we were going to increase that to 180,000 to 185,000 ounces. Now we're telling you we're going to increase that again to 190,000 to 195,000 ounces after 1 quarter. And we're going to work towards even improving that. We've lowered our cash cost expectations USD 520 to USD 550 an ounce at Macassa.
At Fosterville, this is where we really -- one of the exciting developments in the company. We started the year. Last year was a record year production for Fosterville, 151,000 ounces last year in production. The years before, all the years up to 2016, the grade at the mine was 4.5 grams to 5 grams. People worked really hard to make money there. 2016, a step change in grades and ending the year at over 8 grams. And coming into this year, I think we -- the naysayers who had any kind of questions on why we were doing this transaction, what was the value at Fosterville that maybe everybody else didn't see, it's come into fruition. And I can tell you, we haven't even demonstrated the true value at Fosterville yet. But you can see in 1 quarter, we've increased our guidance from 140,000 to 145,000 ounces to 200,000 to 225,000 ounces this year. That, the grade there, without spending another dollar, has taken our cash cost from -- down to USD 310 to USD 330 an ounce, one of the lowest-cost gold mines in the world. It's definitely a very safe mine and significant long-term production. And we -- just with the grade difference at Fosterville, we've already -- we don't have to do anything as Darren Hall, mentioned, I mean, we don't have to drill another hole. We more than doubled our reserve grade -- sorry, our reserves at Fosterville, already. So to give you a sense of the excitement we should have in terms of what this company is and what this company can be.
Then we have the Cosmo Mine, which we did put into -- now into care and maintenance. So it's -- we're trying not to be serial mine closers, but we're focused on value. We're not here to just mine gold for the sake of mining gold, we want to demonstrate that we can do it long term, responsible, sustainable and fundamentally profitable. We have to make money doing this, if not, then maybe we should be making hamburgers. So collectively, we've increased production and the -- our guidance of 530,000 to 570,000 ounces this year, so that's with 3 mines removed and really only 4 mines out of 7 now operating. The cash cost, $475 to $525 an ounce, that's again, one of the lowest companies. And that's pure gold; we have no credits from anything in our production. Responsible investment back in the mines, $850 to $900 an ounce. All-in sustaining cost, that's important. We want to make sure we're spending the money on development. We're spending the money on exploration and we're spending the money on buying equipment because we think there's more upside. We can reduce cost, we can increase production and we're going to find a lot more gold on -- at Macassa and Fosterville and Taylor, by drilling and so we need to do that.
You can see from our operating -- both our operating costs, et cetera, it's going to go down. Because we're producing more gold, we got to pay more royalties. That's -- I don't know, that's something, I guess, we've got to live with, for now. But I guess the royalties are there and we'll have to figure out what to do with that. But maybe that's somewhat of a good problem to have. I guess same as paying taxes. But I don't know if that's a good problem.
Anyway, I won't go through too many of these slides, because I don't know if I need to. Everybody has seen a lot of things and seen good performance, such as Macassa. In terms of performance quarter-over-quarter, as I talked to you about Q3, Q4 and even now, coming into this year, you see the grade improving at Macassa.
And we're not doing anything at Macassa. The grade is going to get better at Macassa, as we get deeper. We got to get deeper and it's going to come up and now we're going to go deeper, we're going to get the grade up and we've got to get the tonnes up and we're going to get the -- we got to get cost down. A 10% reduction in cost, a 10% improvement in grade -- sorry, improvement in grade and a 10% improvement in production creates a lot of value for shareholder in Kirkland Lake. Do the math on the numbers I just gave you, that's $25 million to $40 million.
There's significant exploration upside and a very large deposit underground at Macassa. And it overshadows -- Fosterville is overshadowing the potential Macassa. What we got to do is over the next while, we'll come back and demonstrate to people that Macassa is a great asset, too. 2 million ounces of 21 grams per ton, not too many people have that, that's why Gold Fields was really trying to buy this company and trying to steal this from the shareholders. We see this as a very valuable asset, and we're going to work to responsibly develop this and build this into a really nice mine; not that it isn't one already, but we think there's a lot of upside potential.
And then we got Fosterville, which is probably one of -- got to be one of the -- from an operation story, it's got to be one of the most exciting operation story. You got a mine that produced 4.5, 5 grams, financially just hanging on its edge for years up to 2015. Well-built mine. Well-built mine by previous operators, a well-built mill. All of a sudden, the grade in the rock. And somehow, whatever God put there, we, the people finally, found it. And so grades went from -- they doubled in 2016, and you can see they've gone up again another order of magnitude in 2017. And possibly, they're going to double again.
So the upside at Fosterville, is going -- you look at the 46,000 ounces in Q1. We're saying, based on the revised guidance that we just gave today, that that's not even a run rate. Our run rate is going to be higher than that, as we go forward.
This is just a slide showing Fosterville, showing you some of the drill results. And maybe as the excitement you get when you talk to Eric is -- there's not too -- I've seen a lot of triple digit and quadruple digit drill holed intercepts in the past. But when have you seen one after another, after another, after another, and there are just multiple high-grade triple-digit drill intercepts. Where we're mining now is not where the highest-grade intercepts are. They're coming. They're coming in next year and the year after. We're working our way down to those. So this is only going to get better and besides the fact that we're spending a lot of money exploring here.
We're drilling both down plunge. We're -- at Fosterville, we're drilling Harrier, we're drilling the other zones. We're getting some significant success in terms of how many Fosterville or Eagle or Lower Phoenix deposits are available on -- along this property. And then how many more of these Fostervilles are there, between Robin's Hill and Sugarloaf and what the true excitement is. Remember, I talked about the forward-looking statement at the beginning. I think there's -- Bendigo next door produced 20 million ounces, at 0.5 ounce per tonne, this hasn't been a 0.5 ounce per tonne yet, it's getting there now. You're seeing Fosterville. Well, okay, so we finally, got the grade, now we have to demonstrate the number of ounces, right? So we've got the grade now and we'll see how many ounces are at Fosterville, okay?
And we are -- we have started a more regional exploration program at Fosterville. As John Landmark is here, our VP of Exploration Australia. They call it a large ore body discovery, right? That's what we're looking for. The next big ore bodies. And if they're there, we're going to find them. And based on the geology and based on what we're seeing, they are there. So just wait until we drill the holes, figure it all out and things are going to happen. So we see this as a long life very exciting asset.
So maybe I'll just finish up because I don't want to take too much of people's time. But just summarizing again, concluding, what we see as some of the accomplishments. Coming through 2016, to where we are today, we've done a lot of things with Kirkland Lake Gold, ended 2016 strong, coming into 2017, continued strong operating performance. Increasing our production to say 530,000 to 570,000 ounces in the mid-tier peer group. We think we single ourselves out.
In terms of cost, we've decreased the cost guidance that we had in the outlook. We reduced it down to $475 to $525 an ounce, that's $150 an ounce less than what we originally came out with at the beginning of the year and $150 an ounce, almost less than what was last year on these assets. All-in sustaining cost on $850 to $900 an ounce. That's, again, $100 an ounce. So significant reduction in cash cost and operating costs.
We've added $45 million, so we generated about -- well over $35 million, $36 million of free cash, generated into the business, and the company is financially, very strong. We do have some convertible debentures on the balance sheet. We got the money to pay them off, right?
We announced a dividend. The dividend rate now is structured at the same level as what the interest we've been paying on the debt holders. It's not going to -- we don't want to give debt holders money anymore, we're going to give that money to our shareholders as a start and we'll see where things go in the future.
And we rationalized the business as we talked about having a disciplined approach to mining. We're not socialists. We're responsible catalysts. We're going to look at the business of what we do. We're going to try to do better at what we mine and do it profitably for our shareholders. And we're going to continue to do that. And so that the company is made to be here for a long time, generates value. And with that, we get that -- if you want to get a social license and the currency to operate continued into the future as we -- I can see Kirkland Lake as being a company that's going to be around here for a long time, going to continue to set records and continue to do a lot of good things.
Anyway, thanks for the support we have. Thanks to the Board of Directors and all the shareholders and the management team. We've got a really good group of people in Kirkland Lake Gold. A very exciting company and people in Australia, people in Canada. We've meshed a lot of good things together, some great assets. And just I suppose what you should do is say, just keep your eyes open, keep watching, because we're going to continue to try to tell good stories.
And we got to do -- one thing that we have to do is we don't want be surprising people. We want to make sure that we tell people exactly what we're doing, so that the market gets this story and we get the price and the share price.
People should not be selling their stock at this price. People should be looking at Kirkland Lake Gold as being one of the best investments in anything that they have in this space. So thank you very much.
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [25]
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Why don't you stay here, Tony. There's probably some questions. Anybody got any questions they'd like to ask of Tony or other management people there. Yes sir?
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Unidentified Participant, [26]
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So what do we see as a major challenge for the coming year?
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [27]
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I don't know. We want to go faster than we are. I mean we just got lots of things to do. I don't think there's any challenge that's right in front of us right now, that we're not going to be overcoming. I think the only challenge we have is maybe to how fast -- how much faster we can go, right, in terms of demonstrating the value that's here. So if there's one thing that we need to do, we need to make sure that our share price is a lot higher than it is today.
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Unidentified Participant, [28]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [29]
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Okay. So the question is, what are we doing in terms of reducing operating costs? And what's happening to our…
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Unidentified Participant, [30]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [31]
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Well, I can tell you, we see a lot of opportunity for lowering costs -- lowering unit cost. And we got to get a strong focus on cost per tonne, cost per meter, cost per hour for equipment and productivity for people. We're focused on working on that. A big driver for our cost is grade and throughput right now, okay?
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Unidentified Participant, [32]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [33]
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No. We're waiting now, our mining methods are we do cut-and-fill, overhand cut-and-fill, underhand cut-and-fill. We do long haul, open long haul, uppers, long. We're not, at this point in time, changing mining methods. We're trying to really get better at what -- with the current mining methods that we have. We do have some very, very good mining methods. We've got to improve development performance. We got to get the things -- get there on time a little bit faster, a little bit quicker. And we've got to focus on grade control and really focus on only mining what we need to mine and bring it to the mill.
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Unidentified Participant, [34]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [35]
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I think you got to look at all areas. We got to -- we want to be and we have opportunity to improve productivity in all aspects, right? Whether we're cut-and-fill mining, whether underhand cut-and-fill mining, whether we're long haul mining. There's no one of these methods that's incorrect and there's no one of these methods that when -- in the overall scheme of things, when you bring in development, et cetera, that's any worse than the other, depending on the ore body. If the ore body is shallow dipping and we need to mine and cut-and-fill, we're going to continue to mine and cut-and-fill; we're not going to compromise grade, et cetera by changing mining method. So the focus is on improvements in productivity, improvements in methods, less waste and fundamentally, improve grade. Grade makes us all really, really good; does a really good job. Yes.
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Unidentified Participant, [36]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [37]
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Yes. I mean, and we also mentioned about the -- when we talk about the sustaining cost, we're investing back in the operations, buying new equipment, putting in infrastructure, whether -- such as shops or improved electrical systems, which is going to not only help in terms of making things operation better currently but takes out long-term cost into the future.
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [38]
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Anybody else? Yes sir?
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Unidentified Participant, [39]
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(inaudible) about (inaudible) but I want to go back to Fosterville (inaudible) to elaborate, like are you going to do a lot of fundamental -- are you doing any major (inaudible)?
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [40]
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Okay. Well the question is, in terms of the -- what are we doing from a regional exploration point of view or a drilling point of view to really demonstrate and get the -- understand this ore body?
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Unidentified Participant, [41]
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Yes, (inaudible) yes.
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [42]
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Well, again, I started off with that forward-looking statement. I said right now, that in terms of what we think we have at -- what we have currently at Fosterville, that's in our mine plan, we see a mine plan, where maybe I would have told you 6 months ago, we see in our mine plan that was going to produce 140,000 to 150,000 ounces a year for 10 years plus. Right now, we're saying that we gave guidance of 200,000, 225,000. So as a minimum, we've probably got that many ounces of production for the next 10 years plus. We've got to prove it, right? But we're going to demonstrate that. That's just for Fosterville. What we know now in terms of drills and in terms of what's there. John Landmark is here, he can always explain exactly how many drills are but we're drilling underground at -- for Harrier, so we can open it up daily sales. So we're drilling underground and trying to get a sense on the future. And the future mining fronts, we have 3 or 4 drills, drilling for either Eagle or Lower Phoenix and we have surface drills, trying to test long-term potential both with deep extensions over Phoenix, plus checking Robin's Hill. And we're doing -- we're planning on -- we're doing the 2D seismic, we're doing a large -- a more reasonable seismic survey to support a more regional exploration program. They're going to be starting to do a lot of prospecting in the region, following up on a lot of targets. So we've added, this year, it's a $9 million exploration program, which is part of this year and into next year just on regional exploration. At this point, I'm not drilling a lot of holes really, just trying to get a sense and looking around and seeing how many more Fostervilles are at Fosterville. So exploration is like in any kind of business, if you don't drill any holes, don't spend any money, you're not going to find nothing. Unless you win the lottery but buying lottery tickets isn't really a good business model. But we think we put effort into exploring in this area where it's a highly prospective area. Bendigo is next-door, not very far, 20 million ounce, 0.5 ounce per tonne. I don't know if that possible, it looks like we're getting close to the 0.5 ounce per tonne. Now we got to demonstrate to 20 million ounces, I guess.
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [43]
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Any other questions? Thank you Tony, by the way. Yes?
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Unidentified Participant, [44]
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(inaudible)
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [45]
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[Tom] asked a question, how big does it get?
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [46]
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Any question -- if you all got any questions, you should ask -- well, how about before -- that's sort of a good ending question, how about I'll get his question first.
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Unidentified Participant, [47]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [48]
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Are we in a position to back -- buy back any shares? We -- it's something that we look at and we've been looking at. I would say that at our current share price, we should all be buying our shares. And so as a company, we're looking at it. This stock is very much undervalued. So we have to do what we need to do to look at buying back our shares if that's something. And I could say right now, if we buy back our shares, that's something Eric's taught me, we'd be stealing them from another shareholder. So yes, we're going to look at that. Is that fair to say?
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Philip Chow Yee, Kirkland Lake Gold Ltd. - CFO and EVP [49]
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We're probably a little further beyond what Tony said, okay. We don't have an approved buyback. But we are aggressively looking at entering into that process -- entering into the process. Beg your pardon?
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Unidentified Participant, [50]
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(inaudible)
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Philip Chow Yee, Kirkland Lake Gold Ltd. - CFO and EVP [51]
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We're in blackout right now. I think we have one more day to pass by. Yes good. You should watch.
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Unidentified Participant, [52]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [53]
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What are our plans at Metanor, I mean, at this point in time, we see Metanor as being a very interesting investment and potential growth strategy into the future. We think Metanor is -- I mean it's a small investment. But if you're looking at what's been going on, both in that region and in Urban-Barry and what's been -- the success that's been happening there and what we can see geologically happening along that trend, and I think the Bachelor Lake mine and that Bachelor Lake deposit, is only going to start to get understood. So we think it's a good -- if positioned in that at an early stage, I likened it to, again, it's a forward-looking statement, a few years ago what I'd seen happen at the Seabee mine, up in northern Saskatchewan, and what Richmont did and I think there's some significant upside at Bachelor and definitely at Urban-Barry. And if you people aren't familiar with that region, it's -- there's some significant discoveries going to happen up there.
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Unidentified Participant, [54]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [55]
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No. I think we've made a friendly investment. We're friendly supportive shareholders. We think that we want to support the management in terms of what you're trying to build there, what they can't.
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [56]
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I might also point out that, 2 people to your right, is the new CEO of Metanor, Mr. Greg Gibson. So if you really want to get genned up on what's happening there, speak to him after the meeting. Anybody else?
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [57]
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Well, we got the question about…
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [58]
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Were there any questions that should have been asked?
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [59]
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That haven't been asked.
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [60]
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That haven't been asked. You asked that question last year, too? You ask that every year, right? Okay, [Tom] has one more question, here.
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Unidentified Participant, [61]
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It's been a little bit over-styled, (inaudible) but what (inaudible)?
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [62]
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Yes, well -- I don't see that we have 3 drills underground on the -- testing the drilling within the South Mine Complex, both testing and continuing to work to upgrade the existing resource or drilling extensions of the existing resource, drilling the -- and testing at depth. We have 4 or 5 drills on surface, drilling out towards Lake Shore testing. What's happening, try to identify South Mine Complex, tie mineralization to the east in front of Lake Shore and to Wright-Hargreaves mine. Those are deep holes. Each hole is 8,000, 10,000 feet, take a long time. A lot of interpretation. We're doing mapping, et cetera. I would say we are -- we do intend to try to get information out to the market as we understand what we're finding there. We -- I mean, put it to you this way. We have enough things going on there to say we want to keep drilling, and we're still drilling. So the things will come in time and we'll be able to demonstrate what's at Macassa.
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [63]
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The answer to your question is $2,000.
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Unidentified Participant, [64]
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(inaudible)
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Anthony Paul Makuch, Kirkland Lake Gold Ltd. - CEO, President and Executive Director [65]
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We -- more of what we pay. Yes, we do have time and use on energy. We also, though, one bigger thing we need to do is we need to -- we do have time and use on energy, in terms of what happens to us. I think the biggest area though, from a time and use of energy is, we got to make sure that because we're as an industrial user, we got -- you got to manage your peak days. So you got to manage within Ontario, the days that you need power, when the whole province needs power and if you need a lot of power that day, then that day sets what you're going to pay next year. So that has more of a driver in terms of what our -- how we manage our power cost. Power cost in Ontario is one thing in Ontario that we're losing competitive advantage, it's hydro in terms of where hydro is going, and we've got to learn to manage hydro, significantly. But I can tell you that as a whole, energy prices are going up but as an underground mine, our reliance on energy, which is electricity, diesel fuel, et cetera, is still only about 30% of what the -- what an open pit mine would use.
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Ryan King, Kirkland Lake Gold Ltd. - VP of IR [66]
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Okay, if there's no one else, we thank you all for your time. I think the management and some of the directors will be here, so we'll invite you to ask them questions individually, if you'd like to. And obviously, as Tony said, we feel very vindicated by the merger with the Newmarket. I think people will find out that, that was a very, very appropriate transaction that we entered into and Tony suggested stand by and to see how it goes this year. It could be quite exciting. Thank you all very much.
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