Kirkland Lake Gold (TSX: KL; NYSE: KL; ASX: KLA) plans to transform its Detour Lake mine in northern Ontario into one of the world’s largest and most profitable good mines, says Tony Makuch, the company’s president and CEO.
There is a much larger and higher-grade deposit at Detour Lake than is reflected in the project’s current mineral resource, he said in an interview. “We see significant growth potential in the project’s mineral endowment, which, combined with a new mining plan, will lead to a significant increase in production and improved unit costs compared with the past operation of the mine.”
At the end of March, a technical report for Detour Lake outlined a new life-of-mine plan that envisages production increasing from 563,253 oz. of gold in 2020 to between 680,000 oz. and 720,000 oz. from 2021-2024, growing to 800,000 oz. in 2025, and reaching over 900,000 oz. in 2032 for an average annual production of 659,000 gold oz. over 22 years of mine life.
The life-of-mine 2021 study estimated operating costs per oz. of gold to average US$619 per oz. over the life of the mine, lower than the US$625 per oz. in 2020, with all-in sustaining costs averaging US$821 per oz., a significant improvement over 2020, which averaged US$1,171 per ounce.
Kirkland Lake Gold president and CEO Tony Makuch
Total capital expenditure runs to US$3.6 billion, which includes US$65 to US$75 million for a mill expansion capable of processing 28 million tonnes per year, up from 22.2 million tonnes last year, additional leach pads to improve metallurgical recovery, and a tailings facility expansion. The after-tax net present value is estimated at US$3.8 billion, based on a gold price of US$1,500 per oz. and using a 5% discount rate.
The new mine-of-life plan is based on a mineral resource estimate of 107.7 million measured and indicated tonnes grading 1.15 grams gold per tonne for 4 million gold oz. and 31.8 million inferred tonnes of 0.82 gram gold for 844,000 ounces.
The current life-of-mine plan does not include the exploration success the company has achieved since acquiring the project in early 2020. These will be incorporated into an updated mine plan slated for release next year.
“One of the key factors behind our decision to acquire the mine was the significant exploration upside we saw in the project, which should further increase production, lower unit costs, and transition it to a much larger pit design than presented in the March report,” said Makuch, who has over 35 years of management, operations, and technical experience in the mining industry. Immediately before taking up the reins at Kirkland Lake, he served as president and CEO of Lake Shore Gold from 2008 until Tahoe Resources acquired the company in 2016.
He added that the expected production growth would be driven by higher mill throughput and mining rates, lower strip ratios, better fragmentation, and improved mill productivity.
Kirkland Lake acquired the Detour Lake mine, about 300 km northeast of Timmins, in January 2020 through an all-share acquisition of Detour Gold Corp. in a deal valued at US$3.7 billion.
Detour Gold owned the mine between 2013 and 2020, producing 3.6 million oz. of gold from approximately 135.5 million tonnes of mineralized material at a grade of 0.9 gram gold per tonne. Before that, Placer Dome Inc. operated the mine as an open-pit and underground operation, producing a total of 1.8 million oz. of gold from 14.3 million tonnes of mineralized material grading 3.82 grams gold between 1983 and 1989.
Since acquiring the mine, Kirkland Lake has conducted an extensive drilling campaign to identify extensions to the mineralisation.
A key focus for the exploration program has been to drill around and near the Detour Lake Main pit.
Drilling in the central portion of the Saddle zone, an underexplored area between the Main pit and the West pit, about 1 km west of the Main pit, intersected broad zones of both shallow and deeper mineralisation. Highlights included drillhole DLM-20-006, which intersected 17 metres grading 1.56 grams gold per tonne from 56 metres downhole, and hole DLM-20-079BW, which cut 13 metres grading 9.02 grams starting from a depth of 509 metres.
Kirkland Lake Gold’s Detour Lake gold mine in Ontario. Credit: Kirkland Lake Gold.
The drill results “confirmed a large, continuous corridor of mineralization that extends from the Main Pit through the Saddle Zone and continues beyond the planned West Pit location,” said Makuch.
A nine-hole (2,796 metre) drill program on the 58 North zone, a satellite deposit 10 km south of the mine, was designed to infill the west portion of the current mineral resource area. Highlights included drillhole DLD-20-504, which returned 5 metres of 14.6 grams gold from 214 metres.
Drilling on an area about one km northwest of the Main Pit, called the North Pit, intersected significant open-pit grades, extending known mineralization to depth and along strike of the current mineral resource area, with hole DLM-20-003 returning 9 metres grading 1.1 grams gold from 274 metres and hole DLM20-001 cutting 3.4 metres of 147 grams gold from 394.6 metres.
Given the limited amount of drilling to date in the Saddle, 58 North, and North Pit areas, Makuch believes there is considerable potential to add new mineral resources through “aggressive drilling.”
“Our exploration has demonstrated that we’re yet to determine the full extent of the mineralisation at the project, which has the potential to support a 30-million-plus ounce mineral reserve base,” he said.
While acknowledging that the technical report released in March was an important milestone for the project, he noted that the company was confident that its drill campaign would add substantially more ounces to the project’s mineral endowment and “establish Detour Lake as one of the world’s top gold mines.”
Kirkland Lake plans to release an updated mine plan for the project in 2022 that incorporates drill results from the 2020 and 2021 drilling campaigns. The updated mine plan, said Makuch, will likely see the project transition to a much larger pit design as the mineral resource grows, leading to further increases in production and better unit costs.
This year, the company plans to complete 270,000 metres of drilling to expand mineralisation to the west of the West pit and follow up on key targets, including 58 North and North Pit. Twelve drill rigs are now turning on the project.
The open pit at Kirkland Lake Gold’s Detour Lake gold mine in Ontario. Credit: Kirkland Lake Gold.
It is also working with Rogers Communications, a Canadian telecommunications and media company, to erect several cell towers onsite to improve connectivity across the region. Powered by wind and solar energy and backup hydrogen generators, the towers will also include a first aid station as well as providing shelter.
Kirkland has around US$800 million in the treasury to fund these activities, said Makuch, adding that the company has no debt. “We have a strong balance sheet and are well funded to support our work program.”
The company’s other gold assets in Ontario include the Macassa underground mine, which, in 2020, produced 183,038 oz. of gold, and the Holt Complex, which comprises the Holt, Holloway, and Taylor mines. In April 2020, operations at the complex were suspended as part of Kirkland Lake’s Covid-19 protocols.
Outside Canada, it owns the Fosterville underground gold mine in Australia, one of the largest gold producers in the state of Victoria. In 2020, the mine produced 640,467 oz. of gold.