U.S. Markets close in 2 hrs 38 mins

Kirkland Lake Gold Ltd. (KL) Q1 2019 Earnings Call Transcript

Motley Fool Transcription, The Motley Fool
Logo of jester cap with thought bubble with words 'Fool Transcripts' below it

Image source: The Motley Fool.

Kirkland Lake Gold Ltd. (NYSE: KL)
Q1 2019 Earnings Call
May 8, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Casey and I will be your conference operator today. At this time, I would like to welcome everyone to the Kirkland Lake Gold first quarter 2019 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press * then the number 1 on your telephone keypad. If you would like to withdraw your question, you may press the # key.

Thank you. Mark Utting, Vice President of Investor Relations, you may begin your conference.

Mark Utting -- Vice President of Investor Relations

Thank you, Operator and good morning, everyone. With me today are most of the members of Kirkland Lake Gold's senior management team, including Tony Makuch, our President and Chief Executive Officer, David Soares, our Chief Financial Officer, Ian Holland, Vice President of Australian Operations, Duncan King, our Vice President of Mining for Kirkland Lake, and Eric Kallio, our Senior Vice President of Exploration. Other members of the team are here as well.

Today, we'll be providing comments on our results for the first quarter of 2019. We'll then open the call to questions. The slide deck we will be referencing for this call is available on our website at www.klgold.com under the investor relations and events sections and on the homepage.

More From The Motley Fool

Before we get started, I'd like to draw your attention to the forward-looking statements slide, which is slide two in the deck. Our remarks and answers to your questions today may contain forward-looking information about future events and the company's future performance. Please refer to the detailed cautionary note on slide two as well as the forward-looking information set out in our news release set out May 7th, 2019, and in the MD&A for the three months ended March 31st, 2019, which is on our website and on SEDAR.

Also, during today's call, we'll be making reference to non-IFRS performance measures. A reconciliation of these measures is available within our Q1 press release and our MD&A. finally, please note that all figures discussed today are in US dollars unless otherwise indicated.

With that, I'd like to turn the call over to Tony Makuch, our President and Chief Executive Officer.

Tony Makuch -- President and Chief Executive Officer

Thanks, Mark. Thanks, everyone for being on the call this morning. It looks like we're trying to get spring come to see us in Canada. We're fighting between Mother Nature and Father Winter, whatever you want to call it. Thanks for being on the call. We did have our results out for over a day now. We had our AGM yesterday and we saw most of our analysts there. As a result, we really want to keep this a very short presentation today and then we'll allow time for questions.

I'll start on slide number three. I've got a couple highlights on this slide. In terms of Q1 2019, very solid quarter for the company, had record production of almost 232,000 ounces. In the quarter, from an earnings per share perspective, we're at record net earnings, $112 million or $0.53 a share and record free cash flow of $93.1 million.

Turning to slide four, again, when you look at how we performed against our guidance, you can see we had some strong results. Mostly, we had record results at Macassa, over 72,000 ounces produced at cash cost of $332.00 an ounce and then Fosterville really had an exceptional record performance of 128,000 ounces produced in the quarter and cash cost $144.00 an ounce.

Definitely, if we're not industry-leading if not first or second, we're definitely in the top ten in terms of the lowest-cost producers in the industry. I think the other thing that bodes well is we expect to see a real pick up in production at Fosterville in Q3 and Q4 and to continue solid performance from Macassa operations.

With that, when you go over to slide five, based on these results and the expectations we have for the rest of the year, we improved our 2019 guidance yesterday. This is actually our second guidance improvement in 2019. We've raised the lower end of our production guidance to 950,000 ounces. So, we went from 920,000 to 1 million to 950,000 to 1 million in terms of production guidance and we've also improved our cash cost guidance for a second time and now expect to see cash cost between $285.00 and $305.00 an ounce for the year.

Turning to slide six, again, just driven by our strong performance in the profitability and cash flow generation and our focus on returning capital shareholders, we announced our Q2 2019 dividend would be increased over 30% to $0.04 per share and be equated in US dollars. This is our first dividend increase since we introduced the dividend in March of 2017 and as our cash position grows, we'll continue to look for ways to return capital to shareholders and that will include continuing to review our dividend policy, but also continue to be aggressive with our NCIB and continue bringing value to shareholders.

With that, I'll turn the call over to David Soares, our CFO.

David Soares -- Chief Financial Officer

Thank you, Tony. Q1 2019 saw record net earnings. We closed the quarter at $110 million and $0.52 a share. That's 120% increase from Q1 2018 and an increase from Q4 2018. In terms of adjusted net earnings, we saw similar growth of 114% from Q1 2018 and we closed the quarter in 2019 at $112 million and $0.53 a share.

Turning now to slide seven, looking at revenue -- again, record revenue in Q1 2019, closing the quarter at $304.9 million, a 54% growth from Q1 2018 and a 9% from Q4 2018, mainly driven by higher gold sales and also higher gold price. So, we closed the quarter in Q1 2019 at 232,900 ounces and realized an ounce gold price of $1,307.00.

Moving on to the next slide, looking at cash, we saw quarter over quarter a 25% increase in cash, cash increase of $83.9 million and 25% over the Q4 2018 and closed the quarter at $416 million, again, mainly driven by strong net cash from operating activities of $174.4 million, more than offsetting net cash used for investing in financing activities.

I'll hand over the call now to Ian Holland, our VP of Australian operations.

Ian Holland -- Vice President of Australian Operations

Thanks, David. Referring to slide 10, I want to give some color to the strong performance at Fosterville for the year and for the quarter. It was a record quarter in terms of gold production with 128,000 ounces recovered for the quarter coming from the processing of 140,000 tons at 29 grams per ton and a little over 98% mill recovery.

The image on the rigth of this slide is a section through Lower Phoenix, which highlights where this material came from. There was a significant contribution from Swan during the quarter with eight stopes mined in total over a number of levels, which can be seen as the yellow stopes dipping to the left on the lower levels of the section. IN total, Swan comprised around 40% of the tons mined for the quarter with great performance in line with modeled expectations.

Fosterville also saw strong financial performance for the quarter with exception cost metrics, really, operating cash cost of $144.00 per ounce and a sustaining cost of $315.00. With the strong quarter and the outlook for the remainder of the year, yesterday, we announced an improved full year guidance of 570,000 to 610,000 ounces of gold production at operating cash costs of $130.00 to $150.00 an ounce. It's really on the back of anticipated increased production in the second half of the year.

The investment program out of Fosterville continues to pace with sustaining capital expenditure at $18.9 million and growth capital expenditure of $11.7 million. The sustaining capital program includes a significant component of underground capital development as well as mobile plant equipment and infrastructure. The growth capital program was dominated by the key major projects, which remain on track to be completed during the course of 2019.

With that, I'll now pass over to Duncan King for the Canadian operations.

Duncan King -- Vice President of Mining for Kirkland Lake

Thanks, Ian. Moving to slide 11, I'll focus on Macassa. We had a record quarter of production at Macassa, a production of 73,000 ounces. The key to the quarter was the grade, which averaged to 30 grounds to the ton. The higher grade resulted from outperformance in stopes on the 57 and 56-level areas. Cash costs for the quarter were very low at $332.00, while sustaining costs were $602.00. Grade and a reduction in sustaining capital mainly accounted for the low although sustaining costs.

Over the balance of the year, we are pushing to new zones on the 5,700 level, which we expect to have similar grades. Based on our outlook, as you have heard, we increased our production guidance for 2019 to 240,000 to 250,000 ounces. We also improved our cash and cost guidance from $400.00 to $420.00.

Turning to slide 12, turning to the shaft projects -- we remain on track to commence full-stage sinking during the summer. This puts us on track for phase one completion by Q2 2022. During Q1, we filed our technical report for Macassa. Included in the report, it shows that it had full production. Following completion of the shaft, we reached well over 400,000 ounces of production at cash cost below $300.00 per ounce and a sustaining cost below $400.00 per ounce.

A key finding in the report is that the payback will be very quick, basically immediately following the completion of Phase 2 at the end of 2023. I'll now turn it over to Eric Kallio.

Eric Kallio -- Senior Vice President of Exploration

Thanks, Duncan. Good morning, everyone. My first slide today will be number 13, which is Macassa, where we announced some very positive drill sales this week. As announced, the results are from 30,000 meters of drilling, which is focused on extensions of the South Mine Complex, SMC, but also a small amount on the Amalgamated Break.

The slide shown on the screen is a 3D view across the mine. It gives you a better idea of the overall target and key areas tested. As indicated, it's really just to the east, west, and depth of the SMC as well as the Amalgamated Break in the central portion of the mine.

Although we had quite a few very good results in the release, some of the more interesting from my perspective would be the ones in bold drilled to the west, which tested up to about 250 meters west of the current resource and intersected some very high grades, with some of the key highlights including 436 grams over 2 meters, 168 over 2.4 and even 4,000 over 2 meters in the new zone, which is located between the main structures.

Also, encouraging about the area is that although holes are very widely spaced, the intersections seem to line up generally well with existing resources. We see some similarities in style to the [inaudible] in the current resource. You also notice the holes that are near the west of the map also have some reasonably good results, implying good potential for further expansion even further to the west.

Looking at holes to the east, we saw drilling was designed to test outward for the resource in various directions and also producing very good results, with some of the better ones, from my perspective, being a value of 2,458 grams over 1.8 meters that extended the zone's depth and another value of 118 grams over 2 meters, which expanded to the south and east.

We saw some very interesting results from the Amalgamated Break, which is another major structure at the mine which occurs south of the SMC and actually has been tested in many other parts of the mine, but surprisingly showing some very positive results on this new round of drilling.

The results are from two different areas of the Amalgamated Break, which are roughly 300 meters apart and have some very high-grade assays that, as I mentioned, have not often been seen. Given that we still see a number of gaps between the two areas and along strikes, we're still very optimistic about being able to find additional zones of this type. So, in summary, progress with the drilling at Macassa is coming along very well in point number one.

Turning to my next slide, we go to Australia and the Fosterville mine, where we continue to advance targets, with the Key areas being at Robbin's Hill, Lower Phoenix, and Harrier. Unfortunately, progress in all areas was not quite progressing as quickly as we would hope at this point, but for various reasons.

At Harrier, drilling was focused on downtime with the current resources and mostly on the upper incline targets. We did have a lot of success here, but we are unable to test the deeper targets where it's believed most of the potential could lie, the reason being mostly due to an adjustment of interpretation placing targets slightly deeper into the west, requiring a new drill platform. We also had some slight delays caused by waiting for amendments to the mining license.

We feel very confident about the targets and even seeing the quartz with visible gold in some of the deeper holes of the upper incline drilling. Looking at the Lower Phoenix, drilling also targets the resource down plunge. With most of this being done from the new [inaudible], but it just takes a little bit longer than expected due to the length of holes, difficulties with hole deviations, and ground conditions.

Looking at Robbin's Hill, the story is much the same as Lower Phoenix, with the main targets being plunged at the current resource but with drilling being done from surface and just taking a little longer due to the length of the holes involved.

Despite all of the above, we now have the permits resolved at Harrier and a plan in place for this year. We also are working on a similar rift at Lower Phoenix to help this area go faster as well. We're also looking at adding more drills at Robbin's Hill and possibly underground, which should speed up those processes. Given these [inaudible] results can be delivered from these areas within the not too distant future.

With that, I will pass the call back to Tony.

Tony Makuch -- President and Chief Executive Officer

Okay. Thanks, Eric and thanks, everyone in terms of giving our guidance or comments for the quarter. I'll just finalize from slide 15. You can see from the results we've had for Q1, we had industry-leading performance, the company well on track to achieve its new guidance for the year of 950,000 to 1 million ounces. If you look at the low end of 950,000 you'll get the sense that our next quarters are going to be substantially improved from Q1. I will say that maybe Q2 will be a lot similar to Q1 and then Q3 and Q4 are really going to be strong quarters.

The other part is our operating cash costs. We reduced our guidance or improved their guidance at 285 or 305 per ounce. We feel well on our way to achieving those numbers and potentially even beating those numbers as the year progresses and all on sustaining costs of $520.00 to $560.00 an ounce.

Similarly, we have industry-leading earnings and earnings per share. As outlined previously, we had strong free cash flow during the quarter and substantial growth in our cash and the company continues to be focused on rewarding shareholders. We did increase our dividend by 34% in the quarter and now equating it in $0.04 per share in US dollars. We're also focused on return to shareholders in a number of other ways too. We do have our NCIB and we'll continue to use that to provide value to shareholders.

As well, we're investing very heavily in exploration. Our targets are 100 million to 120 million this year. We expect to be at the top end of that. We really feel exploration is investment for the shareholders. We're also investing in infrastructure. You can see the investment at Macassa for the new shaft and the benefits that's going to pay in terms of what that's going to do for adding value for the company as it gets completed. Similarly, we have some capital approach experiences taking place at Fosterville both for ventilation and pace build, which are going to have significant value creation for the shareholders.

On top of that, we focus on cost management. You can see where the costs are. Our operating costs are coming down in terms of a per ounce basis. That means we've got higher margin ounces, more value. There are a lot of areas where we're focused on creating value for our shareholders.

I guess I would be remiss without -- in finalizing, I should say thank you. None of us in this room had much say in the performance in the quarter. It really is the people at our mines in both Australia and Canada, the people working on the diamond drills and doing the work. We have to thank them for all their efforts in the quarter and to continue to be diligent and work hard and safe the rest of the year. I think there are more things to come in terms of value creation for Kirkland Lake, but it's because of the 2,000+ people that are really focused and hardworking.

With that, I'll end the presentation and we'll be happy to take any questions we can.

Questions and Answers:

Operator

Great. Thank you. As a reminder, if you would like to ask a question at this time, please press * followed by the number 1 on your telephone keypad. Once again, that's * then 1 if you'd like to ask a question.

Your first question comes from Cosmos Chiu with CIBC. Please go ahead. Your line is open.

Cosmos Chiu -- CIBC World Markets -- Analyst

Thanks, Tony, David, Ian, Duncan, Eric, and Mark. Thanks for the call. My first question is on the exploration. Eric, you kind of touched on it. There were some issues in terms of drilling. It seems like a lot of it has now been resolved. You spent about $18 million in Q1. Your full year budget is $100 million to $120 million. Are you still expected to hit those budgeted numbers?

Eric Kallio -- Senior Vice President of Exploration

We're still planning to do the budget pretty well when we're looking at the areas that are in-mine. We had the exploration lease expire, so, it will affect some of the work potentially on the exploration. The loan program seems to be more regional, but areas inside the mien, we plan to complete those.

Cosmos Chiu -- CIBC World Markets -- Analyst

The expiration of the exploration lease, that's at Harrier?

Eric Kallio -- Senior Vice President of Exploration

This would be in lands that surround the mining lease. So, outside of the Harrier.

Ian Holland -- Vice President of Australian Operations

Just to expand on that, one of the successful things we had over the quarter was the granting of a significant increase to the mining lease at Fosterville. It was 17 square kilometers. It's now in excess of 28 square kilometers, including a significant expansion to the south. That really covers a significant amount of the potential for Harrier and other systems as they're pushed to the south. It was granted in March. That has affected some of our ability to drill in Q1 itself. But it's actually a really significant outcome because it secures that tenure going forward.

Duncan King -- Vice President of Mining for Kirkland Lake

On the other side to clarify from our exploration programs as well, some of our exploration is classified into capital as opposed to exploration. So, we are on track to spend $120 million on exploration.

Cosmos Chiu -- CIBC World Markets -- Analyst

Maybe focus a little bit more on Harrier itself -- you started drilling there in Q4 2018. Myself and I think some of the investors as well would have expected some results to have been released by now and some have even expected a reserve or more like a resource update or inaugural resource. Once again, I know you've had issues, but could we expect some results to come out within the next several quarters or sometime soon?

Eric Kallio -- Senior Vice President of Exploration

We are drilling at Harrier, but mostly on the upper incline targets. To do the deeper testing on the deeper anticline targets, we need to do the hanging well drift, which is actually scheduled to start very shortly and should be completed sometime in mid-summer. So, we're looking at probably drilling as soon as the drift is done. We may be able to get some done from angles that aren't ideal prior to that, but we need to do the most effective drilling on the anticline and we have to get the hanging well drift done.

Ian Holland -- Vice President of Australian Operations

Yeah, Cosmos. We don't want to tell a hot story here. It's important that we fully test and understand the target.

Cosmos Chiu -- CIBC World Markets -- Analyst

Then maybe switching gears a little bit -- you're running a bit ahead on growth capex. You spent about $50 million in Q1, budgeting $155 million, $165 million for the year. It looks like you spent quite a bit of your budget in Q1 for the number four shaft. Could you maybe talk a bit more about that? Are you expecting to still spend $55 million to $60 million at the number four shaft for 2019? Is that still a number? Are we going to expect it to go past in terms of what you're spending.

David Soares -- Chief Financial Officer

We're on target. There was some there that was carry forward from last year and working to start to sink. As far as concurrent, there's quite a bit of work in the front end as we start to sink. We'll see that gauge down as we move ahead, but we are on track.

Tony Makuch -- President and Chief Executive Officer

This is the setup stage for the overall shaft. A big part of it, some of the costs coming in this quarter was the hoisting plants, which we did the pre-pays in 2018 and that's almost like $19 million at all the sights because the hoists are getting installed. Once you get into sinking, costs go in a different area. This is where we're putting all the investment in for the surface infrastructure.

Cosmos Chiu -- CIBC World Markets -- Analyst

Maybe related to capex as well, you spent about $10 million in the northern territories. I believe, if I can confirm with you, there's still some money to be spent in Q2. I guess my question is what is the final decision -- when are you expecting to make a final decision in terms of a potential restart at those assets?

Tony Makuch -- President and Chief Executive Officer

We're working diligently on that. I would expect over the next few quarters that we'll be in a better position to say what we want to do. Ultimately, we're getting to the point where we're fairly close to have some confidence in what we want to do. It's an exploration effort. When we do restart operations there, we want to start operations at both the meaningful level of production and a meaningful cost and margin for us. We're trying to put it together.

We don't want to start at a 30,000 or 40,000-ounce a year operation. We're looking at 100,000+ ounces with potential to grow to 200,000 to 250,000 ounces. It's coming together, but we need to get that. In order to do that, we need multiple mining fronts, which we're working on at the Cosmo Lantern area as well as the Union Reefs area.

Cosmos Chiu -- CIBC World Markets -- Analyst

Maybe one last question for me, if I may -- you spent about $12 million in Q1 for Fosterville for growth capex, including ventilation, pace, fill, and a new water treatment plant or whatever. Could you remind me, Tony, does that add to throughput in any way? How does it work? I remember at one point in time, you were talking about upgrading the gold room that would have -- I think that's been completed. I think that adds to throughput. How about these other projects here?

Tony Makuch -- President and Chief Executive Officer

In terms of a project for this year, the last year, we put in the gravity circuit, but this year, a big project we have now is our refinery. We're building a whole new refinery to allow us to handle the amount that we're pouring. We do have limitations in terms of how many ounces that can be poured there. That's one part of the project. The pace fill is going to have impacts, which we haven't really expressed it yet in terms of improvements of productivity in the mine and also in turnaround time from a back-filling point of view and improving working conditions. The ventilation is there.

Again, a part of increasing the amount of air in the mine, which should improve working conditions and allow us to put more pieces of equipment in certain strategic areas of the mine. Right now, we're limited in terms of how many pieces of equipment we can run. So, those benefits will come from that infrastructure from the ventilation. Ultimately, this is all part of a plan, which in future years can be the future potential growth from Fosterville as we mine some other areas tied into our aggressive exploration program too.

Cosmos Chiu -- CIBC World Markets -- Analyst

Thanks, Tony and team and congrats on a very good start to 2019.

Operator

Your next question comes from Ovais Habib from Scotiabank. Please go ahead. Your line is open.

Ovais Habib -- Scotiabank -- Analyst

Good morning, guys. Congrats on the quarter. A lot of questions have already been asked by Cosmos. Just a couple of quick questions from me -- at Macassa, you guys obviously had a very good quarter there. Was this kind of a one-off quarter or should we see this performance going into the year?

Duncan King -- Vice President of Mining for Kirkland Lake

We expect it to continue through the year.

Ovais Habib -- Scotiabank -- Analyst

Will you be mining at this current level or is this another level you're going to be moving toward?

Duncan King -- Vice President of Mining for Kirkland Lake

We're expanding the 5,700 level. So, we expect to be in a new stope at the end of next month and expecting similar grades from there. That will give us four pretty good grade stopes all at once.

Ovais Habib -- Scotiabank -- Analyst

Perfect. Then moving on to Fosterville, obviously, you guys had a good quarter there as well and it's expected to get better in the second half. Is the improvement -- this is more of a question for Ian -- is the improvement expected from improved grids or throughput? How should we look at the second half?

Ian Holland -- Vice President of Australian Operations

Yeah. It's largely grade, Ovais. So, we would expect Q2 to be broadly similar to the last two quarters. So, Q4 last year and Q1 this year and then expect to see some improvement in Q3 and Q4 on the back of some higher grade. It's really sequencing Swan control. So, it's a grade-driven increase.

Ovais Habib -- Scotiabank -- Analyst

And then just Ian, in terms of the percentage of Swan in the second half, can you give me a little bit of color on how much you're expected to take from Swan in the second half?

Ian Holland -- Vice President of Australian Operations

So, broadly similar to our last quarter. It was about 40% of the material in the last quarter. That's about the proportion of Swan by tons in our reserve base. So, we expect it to be in line with that sort of number.

Ovais Habib -- Scotiabank -- Analyst

That's it for me, guys. Thanks so much again.

Operator

Your next question comes from John Tumazos from Very Independent Research. Please go ahead. Your line is open.

John Tumazos -- Very Independent Research -- Analyst

Thank you. Congratulations on a 33.3% ROE this quarter and 22.6% last year. Tony, as you look at potential capital projects in the company, it's a big bar to match your recent rates of return. Going beyond the big exploration outlays and the Macassa number for shaft, do you have any other projects that require significant cash if you're building cash up and have returns at least half of the rate you've been generating as a company?

I'm thinking of if there are any little details in the Macassa Mill for 2022-2023 when the tons rise. Could there be a shaft in one of the zones some day at Fosterville? Do you have any big projects that would help you use cash and generate similar or at least half as good a return as you're doing now?

Tony Makuch -- President and Chief Executive Officer

Good questions, John. We talk about Macassa, definitely the shaft in that infrastructure is important. We do have our tailings expansion that we're doing, putting a whole new tailings area there. This is in our capital program in 2019. We've also taken a position that our tailings definition is high-density tailings in Kirkland Lake.

We're installing high-density tailings. Going into 2020, some of the things we're really going to look at is improvements in our pace fill productivity at Macassa by doubling the capacity of our pace fill plant and improvements in terms of bore hole locations to reduce the delays in terms of delivering pace from surface. Automating some parts a little bit better should help us in terms of reducing costs and improving productivity in the mine.

Over at Fosterville, we are at a point where we have a mill. We have this first stage of these programs coming in. We do want to look at there's a larger resource base there. How do we deal with that to bring that into the mill to increase mill throughput? Similarly, we're doing the exploration as we get exploration success, being prepared. We've got the capital programs to bring these new areas into production as well. Those are some of the things we're looking at. It could result in a shaft at some point in time in Fosterville if we need to. We're still some time away from that.

We are looking at now a development program potentially to go out and do a more advanced exploration program at our Robbin's Hill project, which would require some development. Those are some things we're spending time looking at, which all would be tied into improving our mill throughput at Fosterville similarly to what we're trying to do at Macassa to go to the next level of growth and production that will happen from these assets.

As we talk about, we're looking hard at what we're doing at Holloway and Taylor and what we're doing at the northern territories in terms of bringing those into meaningful levels of production. So, over time, going from cold complex of 150,000 ounces a year currently to well over 200,000 ounces a year in the next few years and as I mentioned, at the Northern Territory, similar types of levels.

So, we do have a lot of other things we're looking at investing in terms of bringing growth and more value creation for the shareholders in the company.

John Tumazos -- Very Independent Research -- Analyst

Thank you. Now, when I go around Toronto, I ask the other companies, "Kirkland does over 20% ROE. Can you guys at least get 5%?" Thank you.

Operator

Your next question comes from Craig Stanley with Eight Capital. Please go ahead. Your line is open.

Craig Stanley -- Eight Capital -- Analyst

Thank you. Three very quick questions from me -- what's the budget in the second half of this year for the Northern Territory?

Tony Makuch -- President and Chief Executive Officer

We're probably going to be pretty much similar to what we did in Q1 in terms of a quarter by quarter basis. That's a combined exploration and development program that we're doing there.

Craig Stanley -- Eight Capital -- Analyst

Secondly, Macassa, I noticed the MD&A, previously you were talking about over 400,000 ounces per year in 2022. This MD&A said almost 500,000 in 2022. I'm just curious if that was a typo or something changed there.

Tony Makuch -- President and Chief Executive Officer

Maybe that's a Freudian slip, but there's potential at Macassa for growth.

Craig Stanley -- Eight Capital -- Analyst

Just finally, the drill results you had last year for Macassa, amalgamated break, is this to be the next South Mine complex?

Eric Kallio -- Senior Vice President of Exploration

We're still assessing that. We're moving into an area that there has been very little testing. We know that it's a big structure. It's always been thought to be the south limit of the mine and it hasn't had good results in a lot of areas, but we're in a whole new area here and we've got two new lenses not very far apart from each other. So, we still have a lot of drilling to do, but we are optimistic about being able to find more.

Tony Makuch -- President and Chief Executive Officer

Realize the South Mine Complex is basically filled with conjugates or shares between the main break or the 04 break at Macassa and the Amalgamated Break. So, what's happening here, definitely there's some interaction and more significant is the Amalgamated Break as we're getting here because you've seen the South Mine Complex being caught between those two breaks. We don't know yet.

But as Eric mentioned, the drill results are demonstrating that things are there. We've talked about that for quite some time. If there's a point in time when we get a chance to drill it, we'll get a drill platform, and it's starting to happen.

Craig Stanley -- Eight Capital -- Analyst

Thank you.

Operator

And there are no further questions at this time. I will turn the call back over to Mark Utting for any closing remarks.

Mark Utting -- Vice President of Investor Relations

Thanks very much, Operator, and thanks very much, everyone for participating in today's call. We understand it's a very busy day for analysts and investors with a lot of companies reporting. As you've heard, we expect going forward to have continued strong operating and financial results, continue to make progress with our exploration. You've heard we had very good results with Macassa and our high priority targets in the SMC and along the Amalgamated Break.

We remain very optimistic about Fosterville and our NRT targets where we've intercepted the quartz veining in multiple locations. We've done the work we've been needing to do and should be reporting on that as we go through the year. So, you can see there's a lot going on, a lot of progress being made. We look forward to our next conference call for the Q2 results. Thanks very much.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Duration: 39 minutes

Call participants:

Mark Utting -- Vice President of Investor Relations

Tony Makuch -- President and Chief Executive Officer

David Soares -- Chief Financial Officer

Ian Holland -- Vice President of Australian Operations

Duncan King -- Vice President of Mining for Kirkland Lake

Eric Kallio -- Senior Vice President of Exploration

Cosmos Chiu -- CIBC World Markets -- Analyst

Ovais Habib -- Scotiabank -- Analyst

John Tumazos -- Very Independent Research -- Analyst

Craig Stanley -- Eight Capital -- Analyst

More KL analysis

All earnings call transcripts

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

More From The Motley Fool

Motley Fool Transcription has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .