Kirkland Lake Gold Ltd. (“Kirkland Lake Gold” or
the “
Company”) (TSX:KL) (NYSE:KL) (ASX:KLA) today
announced the Company’s full-year guidance for 2018, which includes
increased production, improved unit costs and higher levels
of capital and exploration expenditures in support of the Company’s
objective of growing annual gold production over the next five to
seven years to approximately a million ounces. Included among
planned investments in 2018, are initial capital expenditures for a
new shaft at the Macassa mine (see section, Macassa Shaft Project).
All dollar amounts are expressed in U.S. dollars unless otherwise
noted.
Highlights of 2018 guidance
include:
- Production growth to over 620,000 ounces
- Improved unit costs, with operating cash costs
and all-in sustaining costs (“AISC”) per ounce sold expected to
average $425 – $450 and $750 – $800, respectively1
- Exploration expenditures estimated at $75 –
$90 million in 2018, with $60 – $75 million targeted for Australia
aimed at achieving continued growth of the Swan Zone and other
high-potential areas at Fosterville, and in support of resuming
operations at the Cosmo mine in the Northern Territory
- Sustaining capital expenditures of $150 – $170
million, with higher sustaining capital expected at Fosterville
related to elevated levels of development in support of mining to
lower depths, establishing additional mining fronts and sustaining
operations over multiple years
- Growth capital expenditures of $85 – $95
million, with key capital requirements including expenditures for a
new shaft (see section, Macassa Shaft Project) and tailings
impoundment area at Macassa, as well as the bulk of growth capital
required at Fosterville to achieve the mine’s target of over
400,000 ounces of annual production by 2020.
Tony Makuch, President and Chief Executive
Officer of Kirkland Lake Gold, commented: “Our 2018 business plan
includes strong performances at each of our operating mines,
leading to higher consolidated production and improved unit costs
compared to 2017. It also outlines an important year of investment,
both to ensure the long-term sustainability of current operations
and for investing to achieve our longer-term objective of reaching
a million ounces of annual gold production. Towards that objective,
we see a clear path to reaching over 400,000 ounces per year from
both Fosterville and Macassa. Fosterville is targeted to reach this
level within three years as we achieve full production at the Swan
Zone and commence production from additional mining fronts.
Macassa’s path to over 400,000 ounces will take longer and will
involve sinking a new shaft. The new shaft will benefit Macassa in
many ways, including de-risking the operation, supporting more
effective underground exploration, improving working conditions, in
addition to increasing production and lowering unit costs. We
also plan to increase production at our Taylor Mine and, with
continued exploration success, are working towards resuming
operations in the Northern Territory2 of Australia. With production
from all sources, we are working to make Kirkland Lake Gold a
million ounce per year gold producer within five to seven
years.
“In support of our growth plans, we are
increasing our commitment to exploration in 2018, with a focus on
Australia. At Fosterville, we are planning extensive exploration
programs aimed at continuing to grow the Swan Zone, expanding
Harrier South, extending the Lower Phoenix and Robbin’s Hill
mineralization and investigating a number of other regional
targets. We will also be completing significant exploration
work in the Northern Territory of Australia, where we will be
developing into, and drilling, the Lantern Deposit at the Cosmo
mine, and drilling several additional high-potential targets in the
region. In Canada, exploration drilling will be mainly focused on
continuing to extend the South Mine Complex at Macassa and
expanding gold mineralization at
Taylor.”
2018 Guidance
|
Macassa |
Taylor |
Holt |
Fosterville |
Consolidated |
Gold production (,000 ozs) |
215 – 225 |
60 – 70 |
65 – 75 |
260 – 300 |
+620 |
Op. cash costs ($/oz)1 |
475 - 500 |
625 – 650 |
625 – 650 |
270 – 290 |
$425 - $450 |
AISC/ounce sold ($/oz)1 |
|
|
|
|
$750 - $800 |
Operating cash costs ($M)1 |
|
|
|
|
$260 - $270 |
Royalty costs ($M) |
|
|
|
|
$22 - $27 |
Sustaining capital ($M) |
|
|
|
|
$150 – $170 |
Growth capital ($M) |
|
|
|
|
$85 – $95 |
Exploration ($M) |
|
|
|
|
$75 – $90 |
Corporate G&A ($M)3 |
|
|
|
|
$20 – $22 |
Review of 2018 Guidance
- Consolidated gold production in 2018 is
targeted at over 620,000 ounces, an increase from the 596,405
ounces produced in 2017. Production is expected to increase at both
Macassa (2017 production of 194,237 ounces) and Taylor (2017
production totaled 50,764). Production at Holt is expected to be
similar to the 2017 production level of 66,677 ounces.
Fosterville is also targeting to have similar production to 2017,
when the mine produced 263,845 ounces, as the impact of mining
lower-grade stopes, due to mine sequencing, is offset by the
benefit of initial stope production from the Swan Zone in the
second half of 2018. The wide target range for production at
Fosterville reflects the potential for production growth to be
achieved in the event that the mine continues to benefit from
positive grade reconciliations, as was the case throughout much of
2017.
- Operating cash costs per ounce sold are
expected to average $425 – $450, which compares to current
full-year 2017 guidance of $475 – $500 and the average for the
first nine months of 2017 of $5084. The improvement is largely
expected to result from higher grades at the Macassa mine in
2018.
- All-in sustaining costs (“AISC”) per ounce
sold are targeted at $750 – $800 in 2018, compared to the
current full-year 2017 guidance of $800 – $825 and the nine-month
2017 average of $8114. The anticipated improvement in AISC per
ounce sold in 2018 mainly reflects the expected improvement in
operating cash costs per ounce sold.
- Operating cash costs for 2018 are estimated at
$260 – $270 million, which compares to the current guidance for
year-end 2017 of $270 – $280 million and total operating cash costs
in the first nine months of the year of $217 million4.
- Royalty costs in 2018 are estimated at $22 –
$27 million compared to current guidance for 2017 of $20 – $25
million4 and total royalty costs of $15.2 million in the first nine
months of the year.
- Sustaining capital expenditures in 2018 are
targeted at $150 – $170 million. The 2018 guidance compares to the
Company’s guidance for total capital expenditures in 2017 of $160 –
$180 million, with all but approximately $15 million related to
sustaining capital4. Higher sustaining capital expenditures are
expected at Fosterville in 2018 reflecting planned investments that
will support multiple years of production. Included in the
investments is extensive underground development to access and
commence production from the Swan Zone in the Lower Phoenix gold
system and from the Harrier South Zone in the Harrier gold system.
Also included in sustaining capital expenditures at Fosterville
will be upgrades to the mine’s mobile equipment fleet and
investments in the grinding, gravity and BIOX® circuits in the
Fosterville mill.
- Growth capital expenditures are estimated at
$85 - $95 million in 2018. Of planned growth capital expenditures,
approximately $45 million are at Macassa, and relate to the
commencement of two key multi-year projects, the sinking of a new
shaft (see section entitled, Macassa Shaft Project, which follows)
and construction of a new tailings impoundment area, with the
latter targeted for completion in 2019. Work on the shaft
project during 2018 is expected to focus primarily on completing
permitting, engineering, procurement, ramp excavation and surface
construction. Growth capital at Fosterville in 2018 is estimated at
approximately $35 million with major projects planned for the year
including a new ventilation system, involving driving two vent
raises, construction of a paste fill plant and establishment of a
new water treatment plant in support of future production growth
and effective environmental management.
- Exploration expenditures in 2018 are expected
to increase4, to $75 – $90 million, with approximately $60 – $75
million to be targeted for the Company’s Australian operations.
Expenditures in Australia will focus on drilling and underground
exploration development activities at Fosterville as well as at the
Cosmo mine in the Northern Territory, where the Company is working
towards resuming mining operations after placing the mine on care
and maintenance in June 2017. At Fostervile, drilling during
the year will focus on extending known mineralized zones at Swan,
Lower Phoenix, Harrier, and Robbin’s Hill, and also test for new
mineralized structures. In addition, approximately $10 million is
being directed to the LODE (“Large Ore Deposit Exploration”)
program at Fosterville, which includes greenfield drilling, surface
soil sampling, gravity and 3-D seismic geophysical surveys, and
reconnaissance exploration on newly granted exploration licenses.In
the Northern Territory of Australia, planned exploration programs
at the Cosmo mine involve underground development and drilling to
improve the understanding of the Lantern Deposit and support
resource definition and expansion. In addition, drill programs are
also planned at the formerly-producing Prospect open pit at Union
Reefs, Maud Creek and other targets on the Northern Territory land
position. Exploration expenditures in 2018 for the Northern
Territory are largely focused on supporting the establishment of a
five-year production plan for the Cosmo mine and Union Reefs mill
that is sufficiently attractive to support a resumption of
operations. Approximately $15 million of the planned exploration
expenditures at Cosmo relate to care and maintenance expenses while
operations remain suspended.Lower levels of exploration
expenditures are planned for the Company’s Canadian operations in
2018. At Macassa, underground drilling will continue to focus on
resource replacement and expansion. Deep surface drilling at
Macassa is being discontinued while the Company sinks the new
shaft, which will support more effective and efficient underground
exploration programs going forward. Drilling at Taylor in 2018 will
continue to target additional expansion of mineralization around
the Shaft and West Porphyry deposits. There is no exploration
drilling planned for the Holt and Holloway mines in 2018
- Corporate G&A3 expense in 2018 is targeted
at $20 – $22 million, similar to the current target for full-year
2017 of $20 million.
Macassa Shaft ProjectAmong
planned investments in 2018 are initial capital expenditures
related to a new shaft at the Macassa mine. The new,
21.5-foot diameter, concrete-lined shaft will offer a number of
important benefits to the Macassa mine, including: de-risking the
operation; enabling more effective underground exploration to the
east of the South Mine Complex; improving ventilation and general
working conditions in the mine; and supporting higher levels of
production and lower unit costs. The new four-compartment shaft
will have a total hoisting capacity of 4,000 tonnes per day (ore
and waste) and is an important component of the Company’s plan to
increase production at Macassa with a goal of reaching over 400,000
ounces per year over the next five to seven years.
Construction of the shaft will be completed in
two phases. The first phase will be to a depth of 5,450 feet and
include a mid-shaft loading pocket. Completion of phase one is
targeted for the second quarter of 2022 at a capital cost estimated
at $240 million (approximately $40 million of expenditures planned
in 2018). Phase two of the project will be undertaken following the
commencement of production from phase one, and will involve
extending the shaft to an ultimate depth of approximately 7,000
feet. Completion of phase two is targeted for the end of 2023 at an
estimated capital cost of approximately $80 million. The Company
has not completed a National Instrument 43-101 level feasibility
study on the shaft project.
Qualified PersonsPierre Rocque,
P.Eng., Vice President, Canadian Operations and Ian Holland,
FAusIMM, Vice President Australian Operations are “qualified
persons” as defined in National Instrument 43-101 and have reviewed
and approved disclosure of the technical information and data in
this news release.
About Kirkland Lake Gold Ltd.Kirkland Lake Gold
Ltd. is a mid-tier gold producer with 2018 production targeted at
over 620,000 ounces of gold from mines in Canada and Australia. The
production profile of the company is anchored from two high-grade,
low-cost operations, including the Macassa Mine located in
Northeastern Ontario and the Fosterville Mine located in the state
of Victoria, Australia. Kirkland Lake Gold's solid base of quality
assets is complemented by district scale exploration potential,
supported by a strong financial position with extensive management
and operational expertise.
For further information on Kirkland Lake Gold
and to receive news releases by email, visit the website
www.klgold.com.
Footnotes
- Operating cash costs, operating cash cost/ounce sold and
AISC/ounce sold are Non-IFRS Measures and reflect an average US$ to
C$ exchange rate of 1.250 and a US$ to A$ exchange rate of 1.250.
See “Non-IFRS Measures” set out starting on page 27 of the
Company’s MD&A for the three and nine months ended September
30, 2017 and 2016 for further details about these Non-IFRS
Measures. 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 Condensed Consolidated
Interim Statements of Operations and Comprehensive Income.
- The Company’s Cosmo mine and Union Reefs mill in the Northern
Territory of Australia was placed on care and maintenance effective
June 30, 2017 (see News Release dated May 4, 2017). A portion of
the Company’s 2018 capital and exploration expenditures will be
incurred in the Northern Territory as the Company works to resume
operations at higher levels of production, higher grades and lower
costs.
- Corporate G&A expense Includes general and administrative
costs and severance payments.
- The Company’s full financial results for full-year 2017 will be
released in late February 2018. As such, comparisons in this press
release involving financial measures included in the Company’s 2018
guidance are made to existing 2017 guidance, as well as the
Company’s nine-month 2017 results.
Cautionary Note Regarding Forward-Looking
InformationThis press release contains “forward looking
statements” and "forward-looking information" within the meaning of
applicable securities laws, including statements regarding the
plans, intentions, beliefs and current expectations of Kirkland
Lake Gold with respect to future business activities and operating
performance. Forward-looking information is often identified by the
words "may", "would", "could", "should", "will", "intend", "plan",
"anticipate", "believe", "estimate", "expect" or similar
expressions and include information regarding: (i) the amount of
future production over any period; (ii) assumptions relating to
revenues, operating cash flow and other revenue metrics set out in
the Company's disclosure materials; and (iii) future exploration
plans.
Investors are cautioned that forward-looking
information is not based on historical facts but instead reflect
Kirkland Lake Gold's management's expectations, estimates or
projections concerning future results or events based on the
opinions, assumptions and estimates of management considered
reasonable at the date the statements are made. Although Kirkland
Lake Gold believes that the expectations reflected in such
forward-looking information are reasonable, such information
involves risks and uncertainties, and undue reliance should not be
placed on such information, as unknown or unpredictable factors
could have material adverse effects on future results, performance
or achievements of the combined company. Among the key factors that
could cause actual results to differ materially from those
projected in the forward-looking information are the following: the
future development and growth potential of the Canadian and
Australian operations and anticipated timing thereof; the future
exploration activities planned at the Canadian and Australian
operations and anticipated effects thereof; the ability to increase
annual production in accordance with the projected timelines; the
timing, costs and benefits associated with the Macassa Shaft
Project and the anticipated effects thereof; changes in general
economic, business and political conditions, including changes in
the financial markets; changes in applicable laws; and compliance
with extensive government regulation. This forward-looking
information may be affected by risks and uncertainties in the
business of Kirkland Lake Gold and market conditions. This
information is qualified in its entirety by cautionary statements
and risk factor disclosure contained in filings made by Kirkland
Lake Gold, including its annual information form, financial
statements and related MD&A for the financial year ended
December 31, 2016 and the financial statements and related MD&A
for the third quarter ended September 30, 2017 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 information prove incorrect, actual results may
vary materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although Kirkland
Lake Gold 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 to be as anticipated,
estimated or intended. Kirkland Lake Gold does not intend, and do
not assume any obligation, to update this forward-looking
information except as otherwise required by applicable
law.
FOR FURTHER INFORMATION PLEASE
CONTACT
Anthony Makuch, President, Chief Executive
Officer & DirectorPhone: +1 416-840-7884E-mail:
tmakuch@klgold.com
Mark Utting, Vice-President, Investor Relations Phone: +1
416-840-7884 E-mail: mutting@klgold.com
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