Kirkland Lake Gold Ltd. (“Kirkland Lake Gold” or the “Company”)
(TSX:KL) (NYSE:KL) (ASX:KLA) today announced the Company’s
financial and operating results for the first quarter of 2021 (“Q1
2021”). The results for the quarter exceeded target levels in a
number of key areas, including production and all-in sustaining
costs (“AISC”) per ounce sold(1), which reflected stronger than
expected production and sales at Fosterville and Detour Lake, as
well as lower than planned sustaining capital expenditures. The
Company’s full financial statements and management discussion &
analysis are available on SEDAR at www.sedar.com and on the
Company’s website at www.kl.gold. All dollar amounts are in U.S.
dollars, unless otherwise noted.
- Q1 2021 PRODUCTION BEATS GUIDANCE Production
of 302,847 exceeded guidance of 270 – 290 kozs reflecting higher
than planned production at Fosterville and Detour Lake
- UNIT COSTS BETTER THAN PLANNED Operating cash
costs(1) of $542/oz sold, AISC(1) of $846/oz ($667 in March
2021)
- ON TRACK TO ACHIEVE 2021 GUIDANCE Poised for
three strong quarters over balance of 2021; on track to achieve all
2021 guidance
- SOLID EARNINGS & CASH FLOW IN Q1 2021 Net
earnings of $161.2M ($0.60/share), adjusted net earnings of $167.8M
($0.63/share), Op. cash flow of $208.2M; free cash flow(1) of
$42.7M
- RETURNED $96.6M TO SHAREHOLDERS Paid $50.3M in
dividends and used $46.3M to repurchase 1,074,100 shares during Q1
2021
- CONTINUED EXPLORATION SUCCESS Additional
drilling success in Saddle Zone at Detour Lake between existing
Main Pit and planned West pits
- EXCELLENT PROGRESS WITH GROWTH PROJECTS
Including #4 Shaft at Macassa over a month ahead of schedule
and projects supporting expansion at Detour Lake advancing on
plan
- NEW NI 43-101 REPORT AT DETOUR LAKE Production
expansion, low unit costs and long production life; Significant
exploration success to be included in new mine plan expected in
2022
- 2021 SUSTAINABILITY REPORT FILED Includes
increased ESG disclosures, greater inclusion of Sustainable
Accounting Standards Board (“SASB”) disclosures and metrics for
Metals and Mining
Tony Makuch, President and Chief Executive Officer of Kirkland
Lake Gold commented: “We benefited from strong results in March,
which was the key driver for higher than expected production and
materially better than planned AISC in Q1 2021. We have had a solid
start to 2021 and are poised for three strong quarters of operating
results over the remainder of the year. Assuming current gold
prices, we are also well positioned for improved financial
performance beginning in the second quarter and expect to finish
2021, once again, as among the most profitable companies in our
sector.
Looking at key highlights of Q1 2021, we had solid grade
outperformance at Fosterville, achieved record first-quarter
throughput at Detour Lake, including record daily throughput of
80,339 tonnes on March 24, 2021, and reached 5,000 feet of advance
at the #4 Shaft project at Macassa, with the project remaining over
a month ahead of schedule. In addition, we continued to achieve
exploration success, with new drilling results at Detour Lake
confirming the continuity of a large mineralized corridor in the
Saddle Zone connecting the Main and West pit locations and further
extending the mineralization west of existing Mineral Reserves. We
issued a new technical report for Detour Lake, outlining a very
attractive operation that has potential to get even better once we
factor the considerable drilling success we are achieving into a
further updated mine plan, expected in 2022. Finally, we issued our
2021 Sustainability Report in March highlighting the significant
progress we have made through our commitment to net-zero emissions
by 2050 or earlier, demonstrating that, for Kirkland Lake Gold,
responsible mining is integral to everything we do and is part of
our culture.”
SUMMARY OF PERFORMANCE
Q1 2021
- Net
earnings of $161.2 million or $0.60 per share; Adjusted
net earnings(1) of $167.8 million or $0.63 per share.
-
Cash flows including net cash provided by
operating activities of $208.2 million and free cash flow(1) of
$42.7 million.
-
Revenue of $551.8 million, reflecting gold sales
of 308,029 ounces and an average realized gold price(1) of $1,788
per ounce.
-
EBITDA(1)(2) of
$340.9 million.
-
Capital expenditures totalled $106.8 million, with
sustaining capital expenditures(1) accounting for $60.5 million and
growth capital expenditures(1) for $46.3 million (excluding
capitalized exploration expenditures).
-
Exploration and evaluation expenditures totalled
$42.4 million, including $36.9 million of capitalized expenditures
and $5.5 million of expensed exploration expenditures.
-
Cash at March 31, 2021 of $792.2 million versus
$847.6 million at December 31, 2020 with no debt; Change in cash
reflects distribution of production in 2021, timing of capital
expenditures, including capitalized exploration expenditures, and
impact of dividends and share repurchases.
-
$96.6 million returned to shareholders including
$50.3 million used for dividends, reflecting 50% increase to
quarterly dividend, to $0.1875 per share, effective the Q4 2020
dividend (paid on January 14, 2021 to shareholders of record on
December 31, 2020) as well as $46.3 million used to repurchase
1,074,100 shares in early January through normal course issuer bid
(“NCIB”).
-
Solid operating results – Consolidated guidance
achieved:
-
Production of 302,847 ounces (Q1 2021 guidance:
270,000 – 290,000 ounces; 2021 guidance: 1,300,000 – 1,400,000
ounces)
-
Production costs of $170.1
million
-
Operating cash costs per ounce
sold(1) of
$542 (2021 guidance: $450 – $475)
- AISC
per ounce sold(1)
of $846 (Q1 2021 guidance: $1,000; 2021 guidance:
$790 – $810).
(1) See
“Non-IFRS Measures” in this press release and on pages 26 – 32 of
the MD&A for the three months ended March 31,
2021.(2) Refers to Earnings before Interest, Taxes,
Depreciation, and Amortization.
KEY DEVELOPMENTS
Responsible Mining
A key component of the Kirkland Lake Gold’s
business is its commitment to responsible mining. Consistent with
this commitment, the Company is an industry leader in reducing
greenhouse gas emissions, has made significant investments to
enhance the safety and minimize the impacts of tailings facilities;
and has increased the effectiveness of its reclamation programs,
with Detour Lake having recently been awarded the Tom Peters
Memorial Mine Reclamation Award in recognition of its Progressive
Reclamation Program. In Q1 2021, the Company pledged to achieve
net-zero carbon emissions by 2050 or earlier and followed that
pledge with a commitment to invest $75 million per year for five
years on technology, innovation and in providing community support.
Key areas of focus for these investments is advancing and
commercializing alternative fuels and energies, creating the mines
of the future through greater use of digitization, automation,
connectivity, and investing in communities in such key areas as
mental health, homelessness, addiction, senior care and youth
training and development.
COVID-19 Response
The Company’s health and safety protocols
related to the COVID-19 pandemic remained in place throughout Q1
2021 and were enhanced with the introduction of mandatory rapid
testing for anyone traveling to Detour Lake. During Q1 2021, eight
of the Company’s workers (employees and contractors) tested
positive for the COVID-19 virus. Of the eight workers, five were
employees at Macassa, who all tested positive in early March. The
event was classified as an outbreak under the criteria followed by
the local health unit. In response, the Company sent 64 rapid test
kits and approximately 1,200 swab kits to Kirkland Lake, with the
entire Macassa workforce (nearly 1,200 people) being tested in less
than a week. Following the five positive test results, there was no
further transmission of the virus and the local health unit
declared the outbreak resolved within two weeks. The remaining
three cases were contractors from Detour Lake, one of which tested
positive which at site, another tested positive after leaving the
mine, with the third case being identified through the rapid
testing protocols at the Cochrane Bus Terminal designed to prevent
cases from entering the site. In all three cases, the individuals
had recovered from the virus by quarter end and there was no
additional transmission within the Company’s workforce.
Subsequent to the end of Q1 2021, a second
outbreak occurred at Macassa involving its near-surface exploration
ramp project, with a total of seven workers testing positive. Work
on the exploration ramp was suspended for approximately seven days
while the entire project workforce was tested using rapid testing
kits. Work had resumed at the project as of May 2, 2021 with no
additional transmissions being reported.
Early in Q1 2021, the Company was advised that
it was eligible to receive up to C$20.0 million in COViD-19 relief
payments from the Government of Canada related to its extensive
efforts to protect workers and provide wage protection during
periods of reduced operations. The Company elected to decline the
relief funds believing that the purpose of the program is designed
to assist individuals and businesses experiencing hardship during
the pandemic and is not intended for companies like Kirkland Lake
Gold.
Detour Lake National Instrument 43-101 (“NI
43-101”) Report(2)
A new technical report (“2021 Detour Lake
Technical Report”), including a new life-of-mine plan (“2021
LOMP”), for Detour Lake was filed on March 30, 2021. The new report
supports the scientific and technical disclosure in the new Mineral
Resource and Mineral Reserve estimates as at December 31, 2020 and
confirms the multi-year production guidance (2021 – 2023) and unit
cost and capital expenditure guidance for 2021 included in the
Company’s press release dated December 10, 2020. Highlights of the
report include production of 680,000 – 720,000 ounces from 2021 to
2024, increasing to approximately 800,000 ounces in 2025, with AISC
per ounce sold(1) averaging $775 over the next five years and $821
over the 22-year production life. The 2021 Detour Lake Technical
Report does not include any of the exploration success achieved
since Detour Lake was acquired on January 31, 2020, nor does it
include the full impact of business improvement initiatives
undertaken since the acquisition. The 2021 Detour Lake Technical
Report and 2021 LOMP are expected to be superseded by a new
technical report and life-of-mine plan to be issued in 2022, which
the Company expects will lead to significant value enhancement
opportunities for the Detour Lake operation.
Mineral Reserve and Mineral Resource estimates
as at December 31, 2020(2)
Mineral Reserve and Mineral Resource estimates
as at December 31, 2020 were released on February 25, 2021.
Included in the new estimates was a 3% increase in Mineral Reserves
at operating mines, to 20,118,000 ounces, despite significant
disruptions to the Company’s drilling programs in 2020 due to the
COVID-19 pandemic. The increase in Mineral Reserves mainly related
to the addition of 1,954,000 ounces (at 0.41 grams per tonne) of
low-grade Mineral Reserves at Detour Lake, most of which will be
processed at the end of the mine life (expected to be mined as
waste under previous mine plans).
2021 Sustainability Report
The 2021 Sustainability Report was published on
March 30, 2021, the first time the Company’s annual sustainability
report has been published during the first quarter. The report
includes increased disclosures on Environment, Social and
Governance (“ESG”) topics and provides further inclusion of
Sustainable Accounting Standards Board (“SASB”) disclosures and
metrics for Metals and Mining, in addition to embracing the
Responsible Gold Mining Principles of the World Gold Council and
the Mining Association of Canada’s Towards Sustainable Mining. (to
view
report: https://s23.q4cdn.com/685814098/files/doc_downloads/sustainability/2021/KLGold_2021-GSR.pdf).
(1) See
“Non-IFRS Measures” in this press release and on pages 26 – 32 of
the MD&A for the three months ended March 31, 2021.
(2) Readers are
referred to the Company’s Press Release dated February 25, 2021 and
the Company’s NI 43-101 Technical Report entitled “Detour Lake
Operation, Ontario, Canada, NI 43-101 Technical Report” effective
December 31, 2020 as filed with the applicable regulatory
authorities and the detailed Mineral Reserve and Mineral Resource
estimates and footnotes set out therein.
DISTRIBUTION OF PRODUCTION IN 2021
In a press release dated December 10, 2020, the
Company announced guidance for 2021, including production of
1,300,000 – 1,400,000 ounces, operating cash costs per ounce
sold(1) of $450 – $475 and all-in sustaining costs (“AISC”) per
ounce sold(1) of $790 – $810. As part of this announcement, the
Company indicated that its expected production in 2021 would be
weighted to the second half of the year largely reflecting mine
sequencing, with lower grades expected at all three cornerstone
assets early in the year, particularly in the first quarter. At
that time, production guidance for the first and second halves of
the year was provided, including 600,000 – 650,000 ounces for the
first half of 2021 and 700,000 – 750,000 ounces for the final six
months of the year. The Company also indicated that, based on the
weighting of production, as well as the timing for sustaining
capital expenditures, AISC per ounce sold(1) was expected to
average over $900 in the first six months of 2021, and be highest
in Q1 2021, improving to approximately $700 during the second half
of the year. In a press release dated February 25, 2021, the
Company reiterated this guidance and provided additional
information on expected production in the first half of 2021,
indicating that production was expected to total 270,000 – 290,000
ounces in Q1 2021 and 330,000 – 360,000 ounces in the second
quarter of the year (“Q2 2021”). Also included in the February 25,
2021 press release, the Company indicated that AISC per ounce
sold(1) was expected to average approximately $1,000 in Q1 2021 and
approximately $900 in Q2 2021.
(1) See
“Non-IFRS Measures” in this press release and on pages 26 – 32 of
the MD&A for the three months ended March 31, 2021.
REVIEW OF FINANCIAL AND
OPERATING PERFORMANCE
Table 1. Financial and Operating
Performance
(in
thousands of dollars, except per share amounts) |
Three Months EndedMarch 31, 2021 |
Three Months EndedMarch 31, 2020 |
Three Months EndedDecember 31, 2020 |
Revenue |
$ |
551,846 |
$ |
554,738 |
$ |
691,548 |
Production
costs |
|
170,081 |
|
161,592 |
|
148,276 |
Earnings before
income taxes |
|
235,983 |
|
294,525 |
|
337,586 |
Net earnings |
$ |
161,193 |
$ |
202,878 |
$ |
232,573 |
Basic earnings per
share |
$ |
0.60 |
$ |
0.79 |
$ |
0.86 |
Diluted earnings
per share |
$ |
0.59 |
$ |
0.77 |
$ |
0.85 |
Cash flow from
operating activities |
$ |
208,174 |
$ |
241,506 |
$ |
420,932 |
Cash
investment on mine development and PPE |
$ |
165,475 |
$ |
110,637 |
$ |
188,507 |
|
|
Three Months Ended March 31, 2021 |
Three Months EndedMarch 31, 2020 |
Three Months EndedDecember 31, 2020 |
Tonnes
milled |
|
5,952,141 |
|
4,118,105 |
|
6,087,218 |
Grade (g/t
Au) |
|
1.7 |
|
2.6 |
|
2.0 |
Recovery (%) |
|
95.1 % |
|
95.9 % |
|
95.7 % |
Gold produced
(oz) |
|
302,847 |
|
330,864 |
|
369,434 |
Gold Sold
(oz) |
|
308,029 |
|
344,586 |
|
371,009 |
Average realized
price ($/oz sold)(1) |
$ |
1,788 |
$ |
1,586 |
$ |
1,875 |
Operating cash
costs per ounce ($/oz sold)(1) |
$ |
542 |
$ |
440 |
$ |
396 |
AISC ($/oz
sold)(1) |
$ |
846 |
$ |
776 |
$ |
790 |
Adjusted net
earnings(1) |
$ |
167,768 |
$ |
179,169 |
$ |
265,769 |
Adjusted net
earnings per share(1) |
$ |
0.63 |
$ |
0.70 |
$ |
0.98 |
Free
cash flow(1) |
$ |
42,699 |
$ |
130,869 |
$ |
232,425 |
(1) Non-IFRS - the definition and
reconciliation of these Non-IFRS measures are included on pages
26-32 of this MD&A.
Table 2. Review of Earnings Performance
(in thousands except per share amounts) |
Three Months Ended March 31, 2021 |
Three Months Ended March 31, 2020 |
Three Months Ended December 31, 2020 |
|
|
|
|
Revenue |
$ |
551,846 |
|
$ |
554,738 |
|
$ |
691,548 |
|
|
|
|
|
Production costs |
|
(170,081 |
) |
|
(161,592 |
) |
|
(148,276 |
) |
Royalty expense |
|
(18,394 |
) |
|
(21,249 |
) |
|
(23,497 |
) |
Depletion and depreciation |
|
(104,100 |
) |
|
(92,839 |
) |
|
(120,920 |
) |
Earnings from mine operations |
|
259,271 |
|
|
279,058 |
|
|
398,855 |
|
|
|
|
|
Expenses |
|
|
|
General and
administrative(1) |
|
(12,343 |
) |
|
(12,562 |
) |
|
(7,382 |
) |
Impairment loss |
|
0 |
|
|
0 |
|
|
— |
|
Transaction costs |
|
0 |
|
|
(33,838 |
) |
|
— |
|
Exploration |
|
(5,486 |
) |
|
(5,931 |
) |
|
(3,602 |
) |
Care and maintenance |
|
(4,196 |
) |
|
(2,890 |
) |
|
(9,288 |
) |
Rehabilitation costs |
|
760 |
|
|
0 |
|
|
1,344 |
|
Earnings from operations |
|
238,006 |
|
|
223,837 |
|
|
379,927 |
|
|
|
|
|
Finance and other items |
|
|
|
Other income (loss), net |
|
(1,424 |
) |
|
72,205 |
|
|
(41,077 |
) |
Finance income |
|
247 |
|
|
2,596 |
|
|
(1,696 |
) |
Finance
costs |
|
(846 |
) |
|
(4,113 |
) |
|
432 |
|
|
|
|
|
Earnings before income
taxes |
|
235,983 |
|
|
294,525 |
|
|
337,586 |
|
Current income tax
expense |
|
(42,971 |
) |
|
(70,130 |
) |
|
(81,698 |
) |
Deferred income tax expense |
|
(31,819 |
) |
|
(21,517 |
) |
|
(23,315 |
) |
|
|
|
|
Net earnings |
$ |
161,193 |
|
$ |
202,878 |
|
$ |
232,573 |
|
|
|
|
|
Basic earnings per share |
$ |
0.60 |
|
$ |
0.79 |
|
$ |
0.86 |
|
Diluted
earnings per share |
$ |
0.59 |
|
$ |
0.77 |
|
$ |
0.85 |
|
|
|
|
|
Weighted average number of common shares outstanding (in
000's) |
|
|
|
Basic |
|
267,111 |
|
|
257,418 |
|
|
271,770 |
|
Diluted |
|
267,907 |
|
|
258,360 |
|
|
272,703 |
|
(1) General and
administrative expense for Q1 2021 (Q1 2020 and Q4 2020) include
general and administrative expenses of $13.5 million ($15.0 million
and $11.6 million) and share based payment expense (recovery) of
$(1.1) million (($2.5) million and ($4.2) million).
Foreign Exchange Rates
After weakening sharply against the US dollar in
Q1 2020, concurrent with the emergence of the COVID-19 pandemic,
the Canadian and Australian dollars began strengthening against the
US dollar starting in Q2 2020 with this trend continuing through
the remainder of 2020 and into Q1 2021. As a result, the average
exchange rates for Q1 2021 included C$ to US$ of 1.27 and A$ to US$
of 1.29. These exchange rates compared to 1.34 and 1.52,
respectively, in Q1 2020 and 1.30 and 1.37, respectively, in Q4
2020. Compared to Q1 2020, changes in exchange rates in Q1 2021
resulted in an increase in operating cash costs(1) of approximately
$10 million, operating cash costs per ounce sold(1) of $35, and
AISC per ounce sold(1) of $50. Compared to Q4 2020, exchange rate
changes increased operating cash costs(1) by approximately $4.0
million, operating cash costs per ounce sold(1) by $13 and AISC per
ounce sold(1) by $20.
(1) The Foreign Exchange Rates discussion
includes references to Non-IFRS measures. The definition and
reconciliation of these Non-IFRS measures are included on pages
26-32 of the MD&A for the three months ended March 31,
2021.
Review of Financial
Performance
Revenue
Revenue in Q1 2021 totalled $551.8 million,
similar to revenue of $554.7 million in Q1 2020. Contributing to
the change in revenue from Q1 2020 was a $55 million favourable
impact from rate factors*, mainly reflecting a $202 per ounce or
13% increase in the average realized gold price(1), to $1,788 per
ounce from $1,586 per ounce for the same period in 2020. The
benefit of a higher average realized gold price(1) was offset by an
unfavourable volume impact of $58 million reflecting a 11%
reduction in total gold sales, to 308,029 ounces from 344,586
ounces in Q1 2020. Detour Lake contributed revenue of $252.6
million in Q1 2021, which compared to $179.4 million for the two
months of Q1 2020 following its acquisition on January 31, 2020.
Revenue at Macassa totalled $88.7 million, 10% higher than $80.6
million in Q1 2020. The increase in revenue at Macassa resulted
from the higher average realized gold price(1) in Q1 2021, with
gold sales for the quarter of 49,467 ounces largely unchanged from
50,765 ounces in Q1 2020. Fosterville contributed revenue of $210.6
million in Q1 2021 versus $247.3 million for the same period in
2020, with the reduction resulting from lower gold sales (117,450
ounces in Q1 2021 versus 153,752 ounces in Q1 2020) in line with
the transition to a lower-grade production profile. Also
contributing to revenue in Q1 2020 was $47.4 million from Holt
Complex, based on sales for the quarter of 29,613 ounces, prior to
these operations being suspended on April 2, 2020.
The $551.8 million of revenue in Q1 2021
compared to revenue of $691.5 million the previous quarter.
Contributing to the $139.7 million reduction in revenue versus Q4
2020 was $118 million resulting from lower volumes, with gold sales
of 308,029 ounces in Q1 2021 compared to 371,009 ounces the
previous quarter, as well as $22 million related to rate factors,
reflecting a 5% reduction in the average realized gold price(1)
from $1,875 per ounce in Q4 2020. Revenue at all three operations
were lower in Q1 2021 versus the previous quarter reflecting the
reduction in the average realized gold price(1) and lower gold
sales versus the final quarter of 2020, with gold sales of 371,009
ounces in Q4 2020 comprised of 165,893 ounces at Fosterville,
153,296 ounces at Detour Lake and 51,174 ounces at Macassa.
* Rate factors include the impact of changes in
the average realized gold price(1) as well as any impact related to
changes in foreign exchange rates. In Q1 2021, rate factors
increased revenue by $55 million, which included a $62 million
favourable impact from an increase in the average realized gold
price(1), offset by a $7 million reduction related to a weaker US
dollar compared to the Canadian and Australian dollars. Compared to
Q4 2020, rate factors reduced revenue in Q1 2021 by $22 million,
which included a $27 million unfavourable impact related to a lower
average realized gold price(1) partially offset by a $5 million
increase in revenue resulting from a stronger US dollar.
Net Earnings and Adjusted Net
Earnings(1)
Net Earnings
Net earnings in Q1 2021 totalled $161.2 million
($0.60 per share) compared to $202.9 million ($0.79 per share) in
Q1 2020 and $232.6 million ($0.86 per share) the previous quarter.
Compared to Q1 2020, the most significant factor contributing to
the change in net earnings was a $73.6 million ($50.8 million after
tax or $0.19 per share) reduction related to other income in Q1
2020 of $72.2 million versus other loss of $1.4 million in Q1 2021.
Other income in Q1 2020 reflected $72.9 million of foreign exchange
gains during the quarter resulting from a significant strengthening
of the US dollar. Other factors impacting net earnings compared to
the same period a year ago were an $11.3 million increase in
depletion and depreciation expense ($8.0 million after tax or $0.03
per share) and $8.5 million increase in production costs ($5.3
million after tax or $0.02 per share), with both increases largely
reflecting the impact of only two months of results for Detour Lake
in Q1 2020, from the acquisition date of January 31, 2020 to March
31, 2020, partially offset by depletion and depreciation expense
and production costs at Holt Complex prior to operations being
suspended effective April 2, 2020. Having a favourable impact on
the change in net earnings from Q1 2020 was $33.8 million ($24.9
million or $0.09 per share) of transaction fees in last year’s
first quarter related to the Detour Gold acquisition. In addition,
earnings per share versus Q1 2020 was reduced by $0.03 due to a
higher number of share outstanding in Q1 2021 (267.1 million
shares) versus Q1 2020 (257.4 million shares). The higher number of
shares in Q1 2021 reflected the issuance of 77,217,129 shares as
consideration for the acquisition of Detour Gold on January 31,
2020 (outstanding for two months of Q1 2020), offset by the impact
of shares repurchased through the Company’s NCIB since the end of
Q1 2020.
Net earnings in Q1 2021 compared to net earnings
of $232.6 million ($0.86 per share) the previous quarter. The
$139.7 million or 20% reduction in revenue was the primarily driver
of lower earnings compared to Q4 2020, reducing net earnings by
$96.2 million after tax or $0.36 per share. Also contributing to
lower net earnings compared to the previous quarter was a $21.8
million ($16.0 million after tax or $0.06 per share) increase in
production costs, mainly reflecting higher milling and consumable
costs at Detour Lake as well as the impact of increased mining
rates and milling costs at Macassa. Partially offsetting these
factors was a $39.7 million ($26.7 million or $0.10 per share)
favourable impact from a reduction in other loss in Q1 2021 versus
Q4 2020, with other loss in Q4 2020 of $41.1 million largely
related to $35.0 million of foreign exchanges losses resulting from
a weakening of the US dollar during the quarter. Lower depletion
and depreciation costs compared to the previous quarter ($104.1
million versus $120.9 million in Q4 2020) had a $16.8 million
($10.7 million after tax or $0.04 per share) benefit and largely
reflected inclusion of approximately $10.0 million of depletion and
depreciation expense at Detour Lake in Q4 2020 related to revisions
to depletion and depreciation expense during the first three
quarters of 2020. The Company expects depletion and depreciation
expense to average slightly higher than the Q1 2021 total of $104.1
million over the remaining quarters of 2021.
Adjusted Net Earnings(1)
Adjusted net earnings(1) in Q1 2021 totalled
$167.8 million ($0.63 per share) versus $179.2 million ($0.70 per
share) in Q1 2020 and $265.8 million ($0.98 per share) in Q4 2020.
The difference between net earnings and adjusted net earnings in Q1
2021 mainly reflected the exclusion from adjusted net earnings of
write offs related to property, plant and equipment at Holt Complex
of $6.5 million ($4.5 million after tax) and $5.7 million of
foreign exchange gains ($4.0 million after tax), both of which are
included in other loss/income, care and maintenance costs of $4.2
million ($2.9 million after tax) and $2.9 million ($2.0 million
after tax) of COVID-19 costs mainly at Detour Lake. The difference
between net earnings and adjusted net earnings in Q1 2020 related
to the exclusion from adjusted net earnings of the $72.9 million
pre-tax ($52.5 million after tax) of foreign exchange gains,
partially offset by the exclusion of $33.8 million ($24.9 million
after tax) of transaction costs related to the Detour Gold
acquisition, $3.7 million ($2.6 million after tax) of severance
costs and $1.5 million ($1.3 million after tax) related to a
mark-to-market loss on fair valuing the Company’s warrant
investments. The difference between net earnings and adjusted net
earnings(1) in Q4 2020 mainly related to the exclusion from
adjusted net earnings(1) of $35.0 million ($22.8 million after tax)
of foreign exchange losses relating to a weakening of the US dollar
against the Canadian and Australian dollars during the quarter.
Cash and Cash Flow
The Company’s cash balance at March 31, 2021
totalled $792.2 million, which compared to cash of $847.6 million
at December 31, 2020. Net cash provided by operating activities
totalled $208.2 million, which compared to net cash provided by
operating activities of $241.5 million in Q1 2020 and $420.9
million the previous quarter. The change from both prior periods
largely related to reduce net earnings, the impact of changes in
non-cash working capital and a higher cash income taxes paid as a
proportion of total income expense largely reflecting the timing of
tax instalment payments. Net cash used in investing activities in
Q1 2021 totalled $164.2 million, reflecting additions to mining
interests and plant and equipment totalling $165.5 million during
the quarter. Contributing to the $98.2 million of net cash used in
financing activities in Q1 2021 was $50.3 million used for
dividends, mainly reflecting a 50% increase in the quarterly
dividend, to $0.1875 per share, effective the Q4 2020 dividend
payment on January 14, 2021 to shareholders of record on December
31, 2020 as well as $46.3 million used to repurchase 1,074,100
shares in early January through the Company’s NCIB.
Free cash flow(1)
Free cash flow(1) in Q1 2021 totalled $42.7
million, which compared to free cash flow(1) of $130.9 million in
Q1 2020 and $232.4 million the previous quarter. The change in free
cash flow compared to both prior periods mainly reflected lower net
cash provided by operating activities. In addition, the change from
Q1 2020 also reflected an increase in mineral property additions
and additions to property, plant and equipment to $165.5 million in
Q1 2021 versus $110.6 million for the same period in 2020. Mineral
property additions and additions to property, plant and equipment
in Q4 2020 totalled $188.5 million.
(1) The Review of Financial Performance section includes a
number of Non-IFRS measures. The definition and reconciliation of
these Non-IFRS measures are included on pages 26 – 32 of the
MD&A for the three months ended March 31, 2021.
Review of Operating Mines
Detour Lake
Production at Detour Lake in Q1 2021 totalled
146,731 ounces, which involved processing 5,701,704 tonnes at an
average grade of 0.87 g/t and average recoveries of 92.2%.
Production in Q1 2021 was above target levels and compared to
production for the two months in Q1 2020 following the acquisition
of Detour Lake on January 31, 2020 of 91,555 ounces, which resulted
from processing 3,708,022 tonnes at an average grade of 0.84 g/t
and average recoveries of 90.9%. For the full three months of Q1
2020, production totalled 138,051 ounces reflecting the processing
of 5,612,618 tonnes at an average grade of 0.84 g/t and average
recoveries of 91.1%. Production in Q1 2021 compared to production
in Q4 2020 of 153,143 ounces, which involved processing 5,829,230
tonnes at an average grade of 0.89 g/t and average recoveries of
91.8%. The change in production from the previous quarter reflected
reduced mill throughput with first quarter processing rates
typically the lowest of the year due to seasonal factors. The
5,701,704 tonnes processed in Q1 2021 was a record level for
first-quarter processing. Also during Q1 2021, the Detour Lake
processing plant achieved a new daily throughput record of 80,339
tonnes on March 24, 2021.
Production costs at Detour Lake in Q1 2021
totalled $108.3 million (including $2.6 million of COVID-19 related
costs), which compared to $87.8 million for two months in Q1 2020,
from January 31, 2020 to March 31, 2020, and $95.1 million
(including $1.2 million of COVID-19 related costs) in Q4 2020.
Operating cash costs per ounce sold(1) averaged $748 in Q1 2021
versus $696 in Q1 2020 and $612 the previous quarter. The increase
in operating cash costs per ounce sold(1) compared to Q1 2020
largely related to a stronger Canadian dollar in Q1 2021, as well
as higher stripping and milling costs, while the increase from Q4
2020 mainly reflected higher mill maintenance costs and higher
costs for consumables, mainly diesel. AISC per ounce sold(1)
averaged $1,064 in Q1 2021 compared to $1,108 in Q1 2020 and $1,207
in Q4 2020. During Q1 2021, sustaining capital expenditures(1) at
Detour Lake totalled $37.5 million versus $42.4 million for two
months Q1 2020 and $80.7 million the previous quarter. The
reduction in sustaining capital expenditures compared to the
previous quarter mainly reflected lower deferred stripping costs,
with the majority of these expenditures in 2021 being included in
growth capital expenditures, as well as lower expenditures related
to the tailings management area. On a per ounce sold basis,
sustaining capital expenditures(1) totaled $266 in Q1 2021 versus
$384 in Q1 2020 and $527 the previous quarter.
Growth projects: Growth capital expenditures at
Detour Lake in Q1 2021 totalled $27.8 million, including $14.9
million related to deferred stripping with the remaining $12.9
million related to the procurement of mobile equipment and projects
involving the tailing management area, process plant as well as
construction of a new assay lab and airfield. As indicated in the
Company’s press release dated December 10, 2020, deferred stripping
costs at Detour Lake in 2021 are expected to be largely included in
growth capital expenditures and relate to a significant stripping
campaign as part of Phase 4, which will support production in
future years.
Macassa
Production at Macassa in Q1 2021 totalled 47,437
ounces compared to production of 50,861 ounces in Q1 2020 and
52,283 ounces the previous quarter. Production in Q1 2021 resulted
from processing 76,231 tonnes at an average grade of 19.8 g/t and
average recoveries of 97.9%, which compared to 82,256 tonnes
processed in Q1 2020 at an average grade of 19.7 g/t and average
recoveries of 97.7% and 74,353 tonnes at an average grade of 22.4
g/t and average recoveries of 97.7% in Q4 2020. The change in
production from Q1 2020 reflected lower tonnes processed, while the
change from Q4 2020 was mainly due to lower planned grades during
Q1 2021 due to mine sequencing.
Production costs in Q1 2021 totalled $35.0
million versus $26.4 million in Q1 2020 and $27.2 million the
previous quarter. Operating cash costs per ounce sold(1) averaged
$699 in Q1 2021 compared to $536 for the same period in 2020 and
$534 in Q4 2020. The increase in operating costs compared to both
prior periods largely reflected higher operating tonnes mined in Q1
2021 (ore and waste), increased maintenance costs related to mobile
mine equipment and processing, as well as the impact of a stronger
Canadian dollar (mainly versus Q1 2020). AISC per ounce sold(1)
averaged $947 in Q1 2021 compared to $850 in Q1 2020 and similar to
AISC per ounce sold(1) of $941 the previous quarter. The change
from both prior periods reflected higher levels of operating cash
costs offset by reduced sustaining capital expenditures. Sustaining
capital expenditures(1) totalled $9.3 million ($189 per ounce
sold), which compared to sustaining capital expenditures of $14.4
million ($284 per ounce sold) in Q1 2020 and $17.3 million ($338
per ounce sold) in Q4 2020, with reduced sustaining capital
expenditures in Q1 2021 reflecting the completion, or near
completion, of a number of projects in the mine and mill during Q4
2020, lower than planned levels of capital development and revised
timing for delivery of new mobile equipment, with the delivery of
some equipment planned in Q1 2021 now expected in Q2 2021.
Growth projects: Growth capital(1) expenditures
at Macassa for Q1 2021 totalled $16.1 million. Of total growth
expenditures for the quarter, $8.9 million related to the #4 Shaft
project. During Q1 2021, the shaft advanced approximately 750 feet
and had reached a depth of 5,000 feet as of March 31, 2021. The
project ended Q1 2021 more than one month ahead of schedule on
track for completion in late 2022. An additional $5.3 million of
growth capital expenditures in Q1 2021 related to a ventilation
expansion project, involving the development of two new ventilation
raises. The first raise is targeted for completion by the end of Q2
2021, with the second expected to be completed in the first half of
2022. The two new raises will add approximately 200,000 cubic feet
per minute (“cfm”) of additional ventilation into the mine. The
remaining growth capital expenditures in Q1 2021 mainly related to
a number of underground projects, including lateral development
from the mine towards the #4 Shaft and construction of a new
underground truck shop, which was completed around the end of
March.
Fosterville Mine
The Fosterville Mine produced 108,679 ounces in
Q1 2021 based on processing 174,206 tonnes at an average grade of
19.8 g/t and average mill recoveries of 98.2%. Q1 2021 production
compared to production of 159,864 ounces in Q1 2020, when the mine
processed 118,701 tonnes at an average grade of 42.4 g/t and
average recoveries of 98.8%. Q1 2021 production compared to
production of 164,008 ounces the previous quarter when the mine
processed 183,635 tonnes at an average grade of 28.1 g/t and
average recoveries of 98.9%. The change from both prior periods
reflected a lower average grade consistent with the Company’s
previously-stated plan to reduce production in the Swan Zone by
increasing mining activities in other, lower-grade, areas of the
mine, with the intention of creating a more sustainable operation
over a longer period while the Company continues its extensive
exploration program. Production in Q1 2021 exceeded planned levels
mainly reflecting grade outperformance in the Swan Zone in March.
The Swan Zone accounted for 42% of tonnes milled and 72% of ounces
produced in Q1 2021, which compared to 62% and 93%, respectively,
in Q1 2020.
Production costs were $26.8 million in Q1 2021
versus $18.9 million in Q1 2020 and $25.9 million the previous
quarter, with the increase from the same period in 2020 largely
resulting from significantly higher business volumes with tonnes
mined and milled considerably higher than in Q1 2020, as well as
the impact of a significantly stronger Australian dollar in Q1 2021
versus Q1 2020. Operating cash costs per ounce sold(1) averaged
$228, compared to operating cash costs per ounce sold(1) of $126 in
Q1 2020 and $156 the previous quarter. The change compared to Q1
2020 reflected a lower average grade in Q1 2021, higher operating
costs and the impact of a stronger Australian dollar. The lower
average grade was the primary driver of higher operating cash costs
per ounce sold(1) compared to Q4 2020. AISC per ounce sold(1)
averaged $423 versus $313 in Q1 2020 and $314 in Q4 2020.
Sustaining capital expenditures in Q1 2021 totalled $12.4 million,
or $106 per ounce sold, which compared to sustaining capital
expenditures of $16.1 million or $105 per ounce sold in Q1 2020 and
$11.5 million or $69 per ounce in Q4 2020.
Growth projects: Growth capital expenditures(1)
at Fosterville for Q1 2021, excluding capitalized exploration,
totalled $1.6 million, which was mainly related to land
procurement.
(1) The Review of Operating Mines section includes a number
of Non-IFRS measures. The definition and reconciliation of these
Non-IFRS measures are included on pages 26 – 32 of the MD&A for
the three months ended March 31, 2021.PERFORMANCE AGAINST
FULL-YEAR 2021 GUIDANCE
The Company’s full-year guidance for 2021 was
announced in a press release dated December 10, 2020. Included in
the guidance for the year was production of 1,300,000 – 1,400,000
ounces (1,369,652 ounces produced in 2020), operating cash costs
per ounce sold(1) of $450 – $475 ($404 in 2020) and AISC per ounce
sold(1) of $790 – $810 ($800 in 2020). Continued solid operating
results in 2021 are expected to be driven by strong production
growth and lower AISC per ounce sold(1) at Detour Lake, largely
reflecting higher average grades and increased mill throughput, as
well as improved results at Macassa after operations were
significantly impacted by COVID-19 and excessive heat in the mine
during parts of 2020. These factors are expected to offset lower
production and higher unit costs at Fosterville as the mine
transitions to a lower-grade, higher-tonnage production profile
reflecting efforts by the Company to create a more sustainable
operation by extending the production life of the Swan Zone. Also
included in full-year 2021 guidance are higher growth capital
expenditures(1), with the increase mainly at Detour Lake reflecting
a shift in deferred stripping costs from sustaining capital
expenditures(1) to growth capital expenditures(1) as well as plans
to complete a number of growth capital projects, including
investments in mill improvements, increased tailings capacity,
completion of an assay lab (construction commenced in 2020) and
other enhancements to site infrastructure. Exploration and
evaluation expenditures are expected to reach a record level of
$170 – $190 million, with extensive exploration programs planned at
all three of the Company’s cornerstone assets. Both Corporate
G&A and royalty costs are expected to remain largely unchanged
from 2020 levels.
As part of the press release issued on December
10, 2020, the Company indicated that production in 2021 would be
weighted to the second half of the year largely reflecting mine
sequencing, with lower grades expected at all three cornerstone
assets early in the year, particularly in the first quarter. At
that time, production guidance for the first and second halves of
the year was provided, including 600,000 – 650,000 ounces for the
first half of 2021 and 700,000 – 750,000 ounces for the final six
months of the year. The Company also indicated that, based on the
weighting of production, as well as the timing for sustaining
capital expenditures(1), AISC per ounce sold(1) was expected to
average over $900 in the first six months of 2021, and be highest
in Q1 2021, improving to approximately $700 during the second half
of the year. In a press release dated February 25, 2021, the
Company reiterated this guidance and provided additional
information on expected production in the first half of 2021,
indicating that production was expected to total 270,000 – 290,000
ounces in Q1 2021 and 330,000 – 360,000 ounces in Q2 2021. The
Company also indicated that AISC per ounce sold(1) was expected to
average approximately $1,000 in Q1 2021 and approximately $900 in
Q2 2021.
Full-Year 2021 Guidance – Issued on December 10,
2020
($ millions unless otherwise stated)(1) |
Macassa |
Detour Lake |
Fosterville |
Consolidated |
Gold production (kozs) |
220 – 255 |
680 – 720 |
400 – 425 |
1,300 - 1,400 |
Operating cash costs/ounce sold
($/oz)(2) |
$450 - $470 |
$580 - $600 |
$230 - $250 |
$450 - $475 |
AISC/ounce sold
($/oz)(2) |
|
|
|
$790 - $810 |
Operating cash costs
($M)(2) |
|
|
|
$600 - $630 |
Royalty costs ($M) |
|
|
|
$82 - $88 |
Sustaining capital
($M)(2)(3) |
|
|
|
$280 - $310 |
Growth capital
($M)(2)(3) |
|
|
|
$250 - $275 |
Exploration
($M)(4) |
|
|
|
$170 - $190 |
Corporate G&A
($M)(5) |
|
|
|
$50 - $55 |
(1) The Company’s 2021 guidance assumes an
average gold price of $1,800 per ounce as well as a US$ to C$
exchange rate of 1.31 and a US$ to A$ exchange rate of 1.39.
Assumptions used for the purposes of guidance may prove to be
incorrect and actual results may differ from those
anticipated.(2) See “Non-IFRS Measures” set out starting on
page 26 of this MD&A for further details. The most comparable
IFRS Measure for operating cash costs, operating cash costs per
ounce sold and AISC per ounce sold is production costs, as
presented in the Consolidated Statements of Operations and
Comprehensive Income, and total additions and construction in
progress for sustaining and growth capital. (3) Capital
expenditures exclude capitalized depreciation.(4) Exploration
expenditures include capital expenditures related to infill
drilling for Mineral Resource conversion, capital expenditures for
extension drilling outside of existing Mineral Resources and
expensed exploration. Also includes capital expenditures for the
development of exploration drifts. (5) Excludes share-based
payment expense (including expense related to share price
changes).Q1 2021 Results
($ millions unless otherwise stated)(1) |
Macassa |
Detour Lake |
Fosterville |
Consolidated |
Gold production (kozs) |
47,437 |
146,731 |
108,679 |
302,847 |
Operating cash costs/ounce sold
($/oz)(2) |
$699 |
$748 |
$228 |
$542 |
AISC/ounce sold
($/oz)(2) |
|
|
|
$846 |
Operating cash costs
($M)(2) |
|
|
|
$167.0 |
Royalty costs ($M) |
|
|
|
$18.4 |
Sustaining capital
($M)(2)(3) |
|
|
|
$60.5 |
Growth capital
($M)(2)(3) |
|
|
|
$46.3 |
Exploration
($M)(4) |
|
|
|
$42.4 |
Corporate G&A
($M)(5) |
|
|
|
$13.5 |
(1) Average exchange rates in Q1 2021
included a US$ to C$ exchange rate of 1.27 and a US$ to A$ exchange
rate of 1.29.(2) See “Non-IFRS Measures” set out starting on
page 26 of this MD&A for further details. The most comparable
IFRS Measure for operating cash costs, operating cash costs per
ounce sold and AISC per ounce sold is production costs, as
presented in the Consolidated Statements of Operations and
Comprehensive Income, and total additions and construction in
progress for sustaining and growth capital.(3) Capital
expenditures exclude capitalized depreciation.(4) Exploration
expenditures include capital expenditures related to infill
drilling for Mineral Resource conversion, capital expenditures for
extension drilling outside of existing Mineral Resources and
expensed exploration. Also includes capital expenditures for the
development of exploration drifts. (5) Excludes share-based
payment expense (including expense related to share price
changes).
Gold production in Q1 2021
totalled 302,847 ounces, which exceeded the guidance range of
270,000 – 290,000 ounces issued on February 25, 2021. The
outperformance versus guidance largely resulted from higher than
expected production at both Fosterville and Detour Lake in March,
with Fosterville benefiting from significant grade outperformance
and Detour Lake achieving higher than planned grades and tonnes
processed. At the end of Q1 2021, the Company was on track to
achieve the full-year 2021 production guidance of 1,300,000 –
1,400,000 ounces. Production at Fosterville totalled 108,679
ounces, above target levels and compared to 159,864 ounces in Q1
2020 and 164,008 ounces the previous quarter. The change from both
prior periods mainly reflected the transition to a lower-grade,
higher-tonnage production profile in order to extend the production
life of the Swan Zone by increasing production in other,
lower-grade, areas of the mine. Production at Detour Lake in Q1
2021 of 146,731 also exceeded expected levels and compared to
production of 91,555 ounces for two months in Q1 2020 following the
completion of the Detour Gold acquisition on January 31, 2020
(138,051 ounces for the full quarter) and 153,143 ounces in Q4
2020. Production at Macassa totalled 47,437 ounces versus 50,861
ounces for the same period in 2020 and 52,283 ounces in Q4 2020.
Production at Macassa is expected to exceed the Q1 2021 level in
the remaining three quarters of 2021, with the mine continuing to
target 220,000 – 255,000 ounces for the full year.
Production costs for Q1 2021
totalled $170.1 million, while operating cash costs(1) totalled
$167.0 million, in line with target levels.
Operating cash costs per ounce
sold(1) for Q1 2021 averaged $542, better
than expected levels for the quarter mainly due to the favourable
impact on sales volumes of grade outperformance at Fosterville and
both higher than planned grades and tonnes processed at Detour
Lake. As quarterly sales volumes increase over the balance of the
year, operating cash costs per ounce sold(1) are expected to
improve, with the Company continuing to target average operating
cash costs per ounces sold(1) for full-year 2021 of $450 –
$475.
AISC per ounce
sold(1) for Q1 2021
averaged $846, significantly better than guidance for the quarter
of approximately $1,000. The better than expected AISC per ounce
sold(1) in Q1 2021 resulted from higher than planned sales volumes
and lower than expected sustaining capital expenditures during
March, when AISC per ounce sold(1) averaged $667. The Company
remains on track to achieve the full-year 2021 guidance for AISC
per ounce sold(1) of $790 – $810, with AISC per ounce sold(1) in
the second half of 2021 targeted at approximately $700.
Royalty costs for Q1 2021
totalled $18.4 million, reflecting sales volumes during Q1 2021.
Royalty costs are expected to increase as gold sales increase
during the year, with the Company continuing to target total
royalty costs for the 2021 of $82 – $88 million.
Sustaining capital
expenditures(1) for Q1
2021 totalled $60.5 million, excluding capitalized depreciation,
below target levels, largely reflecting lower than planned capital
development and mobile equipment procurement at both Macassa and
Fosterville during Q1 2021. Sustaining capital expenditures(1) are
expected to increase in Q2 2021 with the Company continuing to
target $280 – $310 for full-year 2021.
Growth capital
expenditures(1) totalled
$46.3 million for Q1 2021 (excluding capitalized exploration), in
line with target levels for the quarter and compared to full-year
2021 guidance of $250 – $275 million. Of growth capital
expenditures(1) in Q1 2021, $27.8 million were at Detour Lake,
including $14.9 million related to deferred stripping with the
remaining $12.9 million related to the procurement of mobile
equipment and projects involving the tailing management area,
process plant as well as construction of a new assay lab and
airfield. Growth capital expenditures(1) at Macassa totalled $16.1
million, with $8.9 million related to the #4 Shaft project, which
reached 5,000 feet of advance as at March 31, 2021 and ended the
quarter over a month ahead of schedule, and $5.3 million for a
ventilation expansion project involving development of two
ventilation raises. Growth capital expenditures(1) at Fosterville
totaled $1.6 million largely related to land procurement.
Exploration and evaluation
expenditures for Q1 2021 totalled $42.4 million (including
capitalized exploration). Of the $42.4 million of exploration
expenditures in Q1 2021, $20.6 million was at Fosterville where
drilling and development continued in the Lower Phoenix System, as
well as at Robbin’s Hill, Cygnet and Harrier. Exploration
expenditures at Macassa in Q1 2021 totalled $11.9 million with
drilling mainly targeting the continued expansion of the South Mine
Complex (“SMC”) and testing targets along the Amalgamated Break.
Detour Lake accounted for $8.4 million of exploration expenditures
in Q1 2021, with remaining exploration expenditures mainly related
to drilling regional targets in Northern Ontario.
Corporate G&A expense for
Q1 2021 totalled $13.5 million, with the Company continuing to
target full-year 2021 Corporate G&A costs of $50 – $55
million.
(1) The Performance Against Full-Year 2021
Guidance section includes references to Non-IFRS measures. The
definition and reconciliation of these Non-IFRS measures are
included on pages 26-32 of the MD&A for the three months ended
March 31, 2021.Q1 2021 Financial Results and Conference
Call Details
A conference call to discuss the Q1 2021 results
will be held by senior management today, Thursday, May 6, 2021, at
2:00 pm ET. Call-in information is provided below. The call will
also be webcast and accessible on the Company’s website at
www.kl.gold.
Date: |
Thursday, May 6, 2021 |
Conference ID: |
4145117 |
Time: |
2:00 pm ET |
Toll-free number: |
(833) 968-2183 |
International callers: |
+1 2363892444 |
Webcast URL: |
https://event.on24.com/wcc/r/3081991/D726963DC943C16176BDB9AB6BD7CD47 |
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a senior gold
producer operating in Canada and Australia that is targeting
1,300,000 – 1,400,000 ounces of production in 2021. The production
profile of the Company is anchored by three high-quality
operations, including the Macassa Mine and Detour Lake Mine, both
located in Northern Ontario, and the Fosterville Mine located in
the state of Victoria, Australia. Kirkland Lake Gold’s solid base
of quality assets is complemented by district scale exploration
potential, supported by a strong financial position with extensive
management expertise.
For further information on Kirkland Lake Gold and to receive
news releases by email, visit the website www.kl.gold.
Qualified Persons
The technical contents related to Kirkland Lake
Gold Ltd. mines and properties in this press release, have been
reviewed and approved by Natasha Vaz, P.Eng., Senior Vice
President, Technical Services and Innovation, Eric Kallio, P.Geo,
Senior Vice President, Exploration and Andre Leite, P.Eng., AUSIMM
CP (MIN), MEng., Technical Services Manager. Ms. Vaz, Mr. Kallio
and Leite are “qualified persons” as defined in NI 43-101 and have
reviewed and approved disclosure of the technical information and
data in this press release.
Non-IFRS Measures
The Company has included certain non-IFRS
measures in this document, as discussed below. The Company believes
that these measures, in addition to conventional measures prepared
in accordance with IFRS, provide investors an improved ability to
evaluate the underlying performance of the Company. The non-IFRS
measures are intended to provide additional information and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. These measures do not
have any standardized meaning prescribed under IFRS, and therefore
may not be comparable to other issuers.
Free Cash Flow and Adjusted Free Cash Flow
In the gold mining industry, free cash flow is a
common performance measure with no standardized meaning. The
Company calculates free cash flow by deducting cash capital
spending (capital expenditures for the period, net of expenditures
paid through finance leases) from net cash provided by operating
activities.
The Company discloses free cash flow as it
believes the measure provides valuable assistance to investors and
analysts in evaluating the Company’s ability to generate cash flow
after capital investments and build the cash resources of the
Company. The Company also discloses and calculates adjusted free
cash flow by excluding items from free cash flow. The most directly
comparable measure prepared in accordance with IFRS is net cash
provided by operating activities less net cash used in investing
activities.
Operating Cash Costs and Operating Cash Costs
per Ounce Sold
Operating cash costs and operating cash cost per
tonne and per ounce sold are non-IFRS measures. In the gold mining
industry, these metrics are common performance measures but do not
have any standardized meaning under IFRS. Operating cash costs
include mine site operating costs such as mining, processing and
administration, but exclude royalty expenses, depreciation and
depletion and share based payment expenses and reclamation costs.
Operating cash cost per ounce sold is based on ounces sold and is
calculated by dividing operating cash costs by volume of gold
ounces sold.
The Company discloses operating cash costs and
operating cash cost per tonne and per ounce as it believes the
measures provide valuable assistance to investors and analysts in
evaluating the Company’s operational performance and ability to
generate cash flow. The most directly comparable measure prepared
in accordance with IFRS is total production expenses. Operating
cash costs and operating cash cost per ounce of gold should not be
considered in isolation or as a substitute for measures prepared in
accordance with IFRS.
Sustaining and Growth Capital
Sustaining capital and growth capital are
Non-IFRS measures. Sustaining capital is defined as capital
required to maintain current operations at existing levels. Growth
capital is defined as capital expenditures for major growth
projects or enhancement capital for significant infrastructure
improvements at existing operations. Both measurements are used by
management to assess the effectiveness of investment programs.
AISC and AISC per Ounce Sold
AISC and AISC per ounce are Non-IFRS measures.
These measures are intended to assist readers in evaluating the
total costs of producing gold from current operations. While there
is no standardized meaning across the industry for this measure,
the Company’s definition conforms to the definition of AISC as set
out by the World Gold Council in its guidance note dated June 27,
2013.
The Company defines AISC as the sum of operating
costs (as defined and calculated above), royalty expenses,
sustaining capital, corporate expenses and reclamation cost
accretion related to current operations. Corporate expenses include
general and administrative expenses, net of transaction related
costs, severance expenses for management changes and interest
income. AISC excludes growth capital expenditures, growth
exploration expenditures, reclamation cost accretion not related to
current operations, interest expense, debt repayment and taxes.
Average Realized Price per Ounce Sold
In the gold mining industry, average realized
price per ounce sold is a common performance measure that does not
have any standardized meaning. The most directly comparable measure
prepared in accordance with IFRS is revenue from gold sales.
Average realized price per ounce sold should not be considered in
isolation or as a substitute for measures prepared in accordance
with IFRS. The measure is intended to assist readers in evaluating
the total revenues realized in a period from current
operations.
Adjusted Net Earnings and Adjusted Net Earnings
per Share
Adjusted net earnings and adjusted net earnings
per share are used by management and investors to measure the
underlying operating performance of the Company.
Adjusted net earnings is defined as net earnings
adjusted to exclude the after-tax impact of specific items that are
significant, but not reflective of the underlying operations of the
Company, including foreign exchange gains and losses, transaction
costs and executive severance payments, purchase price adjustments
reflected in inventory and other items. Adjusted net earnings per
share is calculated using the weighted average number of shares
outstanding for adjusted net earnings per share.
Earnings before Interest, Taxes, Depreciation,
and Amortization (“EBITDA”)
EBITDA represents net earnings before interest,
taxes, depreciation and amortization. EBITDA is an indicator of the
Company’s ability to generate liquidity by producing operating cash
flow to fund working capital needs, service debt obligations, and
fund capital expenditures.
Working Capital
Working capital is a Non-IFRS measure. In the
gold mining industry, working capital is a common measure of
liquidity, but does not have any standardized meaning.
The most directly comparable measure prepared in
accordance with IFRS is current assets and current liabilities.
Working capital is calculated by deducting current liabilities from
current assets. Working capital should not be considered in
isolation or as a substitute from measures prepared in accordance
with IFRS. The measure is intended to assist readers in evaluating
the Company’s liquidity.
Cautionary Note Regarding
Forward-Looking Statements
Certain statements in this press release
constitute ‘forward looking statements’, including statements
regarding the plans, intentions, beliefs and current expectations
of the Company with respect to the future business activities and
operating performance of the Company. The words “may”, “would”,
“could”, “will”, “intend”, “plan”, “anticipate”, “believe”,
“estimate”, “expect” and similar expressions, as they relate to the
Company, are intended to identify such forward-looking statements.
Investors are cautioned that forward-looking statements are based
on the opinions, assumptions and estimates of management considered
reasonable at the date the statements are made, and are inherently
subject to a variety of risks and uncertainties and other known and
unknown factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements.
These factors include, among others, the development of the
Company’s properties and the anticipated timing thereof, expected
production from, and the further potential of the Company’s
properties, the potential to increase the levels of mineral
resources and mineral reserves and potential conversion of mineral
resources; the anticipated timing and commencement of exploration
programs on various targets within the Company’s land holdings and
the implication of such exploration programs (including but not
limited to any potential decisions to proceed to commercial
production), the anticipated overall impact of the Company’s
COVID19 response plans, including measures taken by the Company to
reduce the spread of COVID19, including but not limited to the
rapid testing implemented at the Company’s sites, the ability to
lower costs and gradually increase production, the ability of the
Company to successfully achieve business objectives, the ability of
the Company to achieve its longer-term outlook and the anticipated
timing and results thereof, the performance of the Company’s equity
investments and the ability of the Company to realize on its
strategic goals with respect to such investments, the effects of
unexpected costs, liabilities or delays, the potential benefits and
synergies and expectations of other economic, business and or
competitive factors, including the ability of the Company to
realize on certain planned synergies associated with the
acquisition of Detour Gold Corporation, the Company's expectations
in connection with the projects and exploration programs being met,
the impact of general business and economic conditions, global
liquidity and credit availability on the timing of cash flows and
the values of assets and liabilities based on projected future
conditions, fluctuating gold prices, currency exchange rates (such
as the Canadian dollar versus the US dollar), mark-to-market
derivative variances, possible variations in ore grade or recovery
rates, changes in accounting policies, changes in the Company's
corporate mineral resources, changes in project parameters as plans
continue to be refined, changes in project development,
construction, production and commissioning time frames, the
possibility of project cost overruns or unanticipated costs and
expenses, higher prices for fuel, power, labour and other
consumables contributing to higher costs and general risks of the
mining industry, failure of plant, equipment or processes to
operate as anticipated, unexpected changes in mine life,
seasonality and unanticipated weather changes, costs and timing of
the development of new deposits, success of exploration activities,
permitting time lines, risks related to information technology and
cybersecurity, timing and costs associated with the design,
procurement and construction of the Company’s various capital
projects, including but not limited to potential future impacts and
effects of COVID19, including but not limited to potential future
delays and unanticipated suspension or interruption of operations,
the #4 Shaft project at the Macassa Mine, the ventilation, paste
plant, transformer and water treatment facility at the Fosterville
Mine, the ability to obtain all necessary permits associated with
Detour Lake, the ability to obtain the necessary permits in
connection with all of its various capital projects, including but
not limited to the rehabilitation of the Macassa tailings facility
and the development of a new tailings facility and the anticipated
results associated therewith, the West Detour project, processing
plant expansion at the Detour Lake Mine, the ability to obtain
renewals of certain exploration licences in Australia, native and
aboriginal heritage issues, including but not limited to ongoing
negotiations and consultations with the Company’s First Nations
partners, risks relating to infrastructure, permitting and
licenses, exploration and mining licences, government regulation of
the mining industry, risks relating to foreign operations,
uncertainty in the estimation and realization of mineral resources
and mineral reserves, quality and marketability of mineral product,
environmental regulation and reclamation obligations, including but
not limited to risks associated with reclamation and closure
obligations and current rehabilitation work relating to the
Northern Territory projects, risks relating to the Northern
Territory wet season, risks relating to litigation and
unanticipated costs to assume the defence of such litigation, risks
relating to applicable tax and potential reassessments thereon,
risks relating to changes to tax law and regulations and the
Company's interpretation thereof, foreign mining tax regimes and
the potential impact of any changes to such foreign tax regimes,
competition, currency fluctuations, government regulation of mining
operations, environmental risks, unanticipated reclamation
expenses, title disputes or claims, and limitations on insurance,
as well as those risk factors discussed or referred to in the AIF
of the Company for the year ended December 31, 2020 filed with the
securities regulatory authorities in certain provinces of Canada
and available at www.sedar.com. Should one or more of these risks
or uncertainties materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results may vary
materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although the Company
has attempted to identify important risks, uncertainties and
factors which could cause actual results to differ materially,
there may be others that cause results not be as anticipated,
estimated or intended. The Company does not intend, and does not
assume any obligation, to update these forward-looking statements
except as otherwise required by applicable law.
Mineral resources are not mineral reserves, and
do not have demonstrated economic viability, but do have reasonable
prospects for eventual economic extraction. Measured and indicated
resources are sufficiently well defined to allow geological and
grade continuity to be reasonably assumed and permit the
application of technical and economic parameters in assessing the
economic viability of the resource. Inferred resources are
estimated on limited information not sufficient to verify
geological and grade continuity or to allow technical and economic
parameters to be applied. Inferred resources are too speculative
geologically to have economic considerations applied to them to
enable them to be categorized as mineral reserves. There is no
certainty that Measured or Indicated mineral resources can be
upgraded to mineral reserves through continued exploration and
positive economic assessment.
Information Concerning Estimates Of
Mineral Reserves And Measured, Indicated And Inferred
Resources
This press release has been prepared in
accordance with the requirements of the securities laws in effect
in Canada, which differ in certain material respects from the
disclosure requirements of United States securities laws. The terms
“mineral reserve”, “proven mineral reserve” and “probable mineral
reserve” are Canadian mining terms as defined in accordance with
Canadian National Instrument 43-101 – Standards of Disclosure for
Mineral Projects (“NI 43-101”) and the Canadian Institute of
Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition
Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council, as amended (the “CIM Standards”). These definitions
differ significantly from the definitions in the disclosure
requirements promulgated by the Securities and Exchange Commission
(the “SEC”) applicable to domestic reporting companies. Investors
are cautioned that information contained in this Annual Information
Form may not be comparable to similar information made public by
United States companies subject to the reporting and disclosure
requirements under the United States federal securities laws and
the rules and regulations of the SEC thereunder.
FOR FURTHER INFORMATION PLEASE
CONTACT
Anthony Makuch, President, Chief Executive
Officer & DirectorPhone: +1 416-840-7884E-mail:
tmakuch@kl.gold
Mark Utting, Senior Vice President, Investor RelationsPhone: +1
416-840-7884E-mail: mutting@kl.gold
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