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 (“Q1 2019”) of 2019, which included a significant
increase in the Company’s cash position, driven by strong operating
results and record quarterly net earnings and free cash flow. 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.klgold.com. All dollar amounts are in U.S.
dollars, unless otherwise noted.
Key highlights of Q1 2019 results
include:
- Cash increases $83.9 million or 25%: Cash at March 31,
2019 totalled $416.1 million, increase of $83.9
million or 25% during Q1 2019
- Operating cash flow increases 95% from Q1
2018: Net cash provided by operating activities of
$174.4 million compared to $89.6
million in Q1 2018 and $204.1 million the previous quarter
- Record free cash flow1: Free cash flow of
$93.1 million, 85% increase from Q1 2018 and 8%
higher than Q4 2018
- Revenue growth of 54%: Revenue of
$304.9 million, 54% increase from Q1 2018 and 9%
higher than Q4 2018; record gold sales of 232,929 ounces, 58%
higher than Q1 2019 and 3% increase from previous quarter (average
realized price of $1,307/oz versus $1,333/oz in Q1 2018 and
$1,237/oz in Q4 2018)
- Record EBITDA1,2: EBITDA of $201.6
million, 101% increase from Q1 2018 and 7% higher than
previous quarter
- Record net earnings: Net earnings of
$110.1 million ($0.52/share) increased 120% from
Q1 2018, with adjusted net earnings2 of $112.1 million
($0.53/share) increasing 114% from Q1 2018; Q1 2019
net earnings and adjusted net earnings compared to Q4 2018 net
earnings and adjusted net earnings of $106.5 million ($0.51/share)
and $109.6 million ($0.52/share)
- Record operating
results° Production of
231,879 ounces, 57% increase from 147,644 ounces
in Q1 2018 and slightly higher previous quarterly record of 231,217
ounces in Q4 2018° Production costs of
$70.0 million versus $71.5 million in Q1 2018 and
$64.6 million in Q4 2018° Operating cash costs
per ounce sold1 averaged $290, 35% improvement from Q1
2018 and largely unchanged from $286 in Q4
2018° AISC per ounce sold1 averaged
$560, 33% better than Q1 2018 and 1% improvement
from Q4 2018
- Strong growth in Mineral Reserves:
Consolidated Mineral Reserved increased 1.1 million ounces or 24%
to 5,750,000 ounces @ 15.8 grams per tonne at December 31, 2018
versus 4,640,000 ounces @ 11.1 grams per tonne at December 31, 2017
(announced February 21, 2019)° Fosterville
Mineral Reserves increase 60% to 2,720,000 ounces @ 31.0
grams per tonne at December 31, 2018° Macassa
Mineral Reserves increase 11% to 2,250,000 ounces @ 21.9
g/t at December 31, 2018
- Quarterly dividend raised 34%: The Company
announced on May 7, 2019 that the Q2 2019 dividend payment will
total $0.04 in US funds (formerly $0.04 in Canadian funds) and will
be paid on July 12, 2019 to shareholders of record on June
28, 2019. The change in the quarterly dividend to US funds
represents an increase in value of approximately 34% based on
current exchange rates.
- See “Non-IFRS Measures” later in this press release and on
pages 23 – 28 of the MD&A for the three months ended March 31,
2019.
- Refers to Earnings before Interest, Taxes, Depreciation, and
Amortization.
In addition to releasing Q1 2019 results,
Kirkland Lake Gold today announced the appointment of Jeff Parr as
the Chair of the Company’s board of directors effective immediately
following the Company’s annual and special meeting on May 7, 2019.
Mr. Parr has been a director of the Company since November 2016 and
was previously a director of Kirkland Lake Gold Inc. from October
2014.
Tony Makuch, President and Chief Executive
Officer of Kirkland Lake Gold, commented: “We are off to a strong
start in 2019, with record gold production and sales and very low
unit costs in Q1 2019. Macassa had an outstanding quarter,
achieving record production, operating cash costs per ounce and
AISC per ounce. The mine’s strong results were mainly related to
continued grade outperformance from stopes around the 5700 Level of
the South Mine Complex. Given that we will be mining in this
general area for the balance of the year, we are optimistic that we
will continue to see very strong results from Macassa. At
Fosterville, we continued to develop on, and increase production
from, the Swan Zone in Q1 2019, with stope production advancing on
multiple levels. As we develop deeper into the zone, we are
targeting higher levels of production from Swan, particularly in
the second half of the year, which is expected to drive higher
levels of consolidated production in the third and fourth quarters.
Based on the strong results at Macassa and Fosterville in Q1 2019
and the outlook for the remainder of the year, we have raised the
lower end of our consolidated production guidance for the year, and
now expect to produce at least 950,000 ounces, and improved our
operating cash cost per ounce sold guidance, which we are now
targeting at $285 – $305.
“Turning to our financial results, we achieved
record net earnings and free cash flow in Q1 2019. Our cash
position grew 25% in one quarter, ending March 2019 at $416.1
million. Our operating earnings were very strong and our net
earnings beat the previous record in Q4 2018 even though we had
unfavourable foreign exchange movements this quarter as well as a
higher effective tax rate. Looking ahead, with production and sales
levels expected to increase in the second half of the year, we are
well positioned for increased levels of profitability and cash flow
going forward, assuming existing business plans and gold
prices.”
Review of Financial and Operating
Performance
|
Table 1.
Financial Highlights |
|
(in thousands of
dollars, except per share amounts) |
Three Months EndedMarch 31, 2019 |
Three
Months EndedMarch 31, 2018 |
Revenue |
$304,912 |
$198,237 |
Production costs |
70,040 |
71,483 |
Earnings before income
taxes |
159,589 |
71,888 |
Net earnings |
$110,146 |
$50,037 |
Basic earnings per
share |
$0.52 |
$0.24 |
Diluted earnings per
share |
$0.52 |
$0.23 |
Cash flow from
operating activities |
$174,364 |
$89,637 |
Cash
investment on mine development and PE |
$81,314 |
$39,428 |
|
|
Table 2.
Operating Highlights |
|
|
Three Months EndedMarch 31, 2019 |
Three
Months EndedMarch 31, 2018 |
Tonnes milled |
418,960 |
417,356 |
Grade (g/t Au) |
17.6 |
11.5 |
Recovery (%) |
97.9% |
96.3% |
Gold produced (oz) |
231,879 |
147,644 |
Gold Sold (oz) |
232,929 |
147,763 |
Average realized price
($/oz sold)(1) |
$1,307 |
$1,333 |
Operating cash costs
per ounce ($/oz sold)(1) |
$290 |
$447 |
AISC ($/oz
sold)(1) |
$560 |
$833 |
Adjusted net
earnings(1) |
$112,132 |
$52,337 |
Adjusted
net earnings per share(1) |
$0.53 |
$0.25 |
|
- Non-IFRS - the definition and reconciliation of these Non-IFRS
measures are included on pages 23-28 of the MD&A for the three
months ended March 31, 2019.
|
|
Revenue
Revenue in Q1 2019 totaled $304.9 million, an
increase of $106.7 million or 54% from Q1 2018 revenue of $198.2
million. The increase in revenue from Q1 2018 reflected a 58%
increase in gold sales, to a quarterly record of 232,929 ounces,
which had a $113.5 million favourable impact on revenue compared to
the same period in 2018. Partially offsetting the impact of higher
volumes was a $6.1 million unfavourable variance related to a 2%
reduction in the average realized gold price, to $1,307 per ounce
from $1,333 per ounce in Q1 2018. The increase in gold sales
was largely attributable to Fosterville, where ounces sold more
than doubled, to 132,048 ounces from 61,500 ounces in Q1 2018. Also
contributing to higher volumes was a 26% increase in sales at
Macassa, to 67,305 ounces from 53,363 ounces a year earlier.
Increased production levels, largely reflecting improved average
grades, mainly accounted for the higher sales volumes at both
Fosterville and Macassa.
Q1 2019 revenue increased $24.6 million or 9%
from Q4 2018 revenue of $280.3 million. Of the increase,
$16.3 million related to a 6% increase in the average realized
price from $1,237 per ounce the previous quarter to $1,307 per
ounce in Q1 2019. A 3% increase in gold sales from 225,692 ounces
in Q4 2018 contributed $8.9 million to the growth in revenue
quarter over quarter. The growth in gold sales reflected a 11%
increase in sales at Fosterville from the 118,955 ounces sold the
previous quarter, which more than offset reduced gold sales from
Macassa and Taylor in Q1 2019.
Earnings from Mine Operations
Earnings from mine operations in Q1 2019 totaled
$185.3 million, double the $92.8 million of earnings from mine
operations in Q1 2018 and 8% higher than $170.8 million the
previous quarter. The increase from both prior periods
resulted from higher levels of revenue in Q1 2019. Production costs
in Q1 2019 totaled $70.0 million, which compared to $71.5 million
in Q1 2018 and $64.6 million in Q4 2018. The increase in production
costs compared to the previous quarter is primarily due to higher
sales volumes in Q1 2019. Depletion and depreciation costs in Q1
2019 totaled $41.3 million, which compared to $27.9 million in Q1
2018 and $37.3 million the previous quarter. The increase from the
same period in 2018 reflected significant growth in production
volumes, which was only partially offset by a small reduction in
depletion and depreciation expense on a per ounce produced basis
resulting from an increase in the level of Mineral Reserves at the
Company’s operations following the release of the Company’s
December 31, 2018 Mineral Reserve and Mineral Resource estimates on
February 21, 2019. Royalty expense in Q1 2019 totaled $8.3 million
compared to $6.0 million in Q1 2018 and $7.6 million the previous
quarter. Higher sales volumes mainly accounted for the increase in
royalty expense compared to both prior periods.Unit Cost
Performance (See Non-IFRS measures)
Operating cash costs per ounce sold averaged
$290, a $157 per ounce or 35% improvement from Q1 2018 mainly
resulting from a 53% improvement in the average consolidated grade
to 17.6 g/t from 11.5 g/t for the same period a year ago. Operating
cash costs at Fosterville averaged $144 per ounce sold, a 50%
improvement from $287 per ounces sold in Q1 2018. Macassa’s
operating cash costs per ounce sold averaged $332 in Q1 2019, 33%
better than $499 during the prior year’s first quarter. Average
grades at Fosterville and Macassa improved 73% and 49%,
respectively, from Q1 2018, to 29.0 g/t and 29.6 g/t, respectively
in Q1 2019. AISC per ounce sold averaged $560 in Q1 2019,
$273 or 33% better than Q1 2018. The improvement mainly reflected
lower operating cash costs per ounce sold, as well as a reduction
in sustaining capital expenditures on a per ounce sold basis.
Sustaining capital expenditures totaled $42.0 million, unchanged
from Q1 2018. On a per ounce sold basis, sustaining capital
expenditures averaged $180 in Q1 2019 versus $285 for the same
period a year ago. Fosterville and Macassa were the key drivers of
the improvement in AISC per ounce sold. AISC per ounce sold at
Fosterville averaged $315, 45% better than $576 in Q1 2018, while
Macassa’s AISC per ounce sold in Q1 2019 averaged $602, a 26%
improvement from $818 in Q1 2018.
Compared to the previous quarter, operating cash
costs per ounce sold were largely unchanged from $286 the previous
quarter, while AISC per ounce sold improved 1% from $567. The
improvement in AISC per ounce sold from Q4 2018 reflected lower
sustaining capital expenditures compared to Q4 2018, both in total
dollars and on an ounce sold basis. Sustaining capital expenditures
in Q4 2018 totaled $46.4 million or $206 per ounce sold versus
$42.0 million or $180 per ounce sold in Q1 2019.
Additional Expenses
Corporate G&A expense (excluding share-based
payments expense and transaction costs) totaled $8.7 million
compared to $6.9 million in Q1 2018 and $8.0 million the previous
quarter. The increase from the previous year was mainly due to
higher incentive compensation payments, as well as increased
professional and consulting fees. Share based payment expense in Q1
2019 totaled $3.4 million versus $1.8 million for the same period
in 2018 and $1.3 million in Q4 2018, with the increase from both
prior periods largely related to share-price appreciation,
resulting in greater mark-to-market values for the Company’s
outstanding deferred-share units.
Exploration and evaluation expenditures
(expensed) in Q1 2019 totaled $12.0 million compared to $16.7
million in Q1 2018 and $13.8 million the previous quarter.
Exploration and evaluation expenditures in Q1 2019 included $9.5
million in Australia ($6.6 million at Fosterville and $2.8 million
in the Northern Territory), and $2.5 million in Canada,
approximately half of which related to exploration drilling and
development at Macassa, with the other half at Taylor.
Other loss in Q1 2019 totaled $2.1 million,
which compared to other income of $5.4 million in Q1 2018. Other
loss in Q1 2019 resulted from an unrealized and realized foreign
exchange loss of $2.1 million. The unrealized and realized foreign
exchange loss in Q1 2019 resulted from the Australian and Canadian
dollars strengthening against the US dollar during the quarter.
Other income in Q1 2018 mainly related to unrealized and realized
foreign exchange gains of $3.9 million, reflecting the weakening of
the Australian and Canadian dollars against the US dollar, and a
$2.3 million mark-to-market gain on fair valuing the Company's
warrants. Other income in Q4 2018 totaled $1.2 million, which
largely resulted from an unrealized and realized foreign exchange
gain of $5.9 million, partially offset by a $3.5 million
marked-to-market loss on fair valuing the Company’s warrants.
Finance costs in Q1 2019 totaled $0.7 million,
mainly reflecting interest expense on financial leases and other
loans. Finance costs totaled $0.7 million in Q1 2018 and $1.1
million the previous quarter.
Finance income, mainly related to interest
income on bank deposits, totaled $1.4 million in Q1 2019 versus
$0.7 million for the same period in 2018 and $3.1 million in Q4
2018.
Income tax expense in Q1 2019 included current
income tax expense of $40.9 million and deferred income tax expense
of $8.5 million. In Q1 2018, current income tax expense totaled
$3.5 million, while deferred tax expense totaled $18.3 million. The
deferred tax expense in Q1 2018 resulted from the utilization of
$12.4 million of deferred tax assets in respect of loss carry
forwards to reduce current income tax expense. Income tax expense
in Q4 2018 included current income tax expense of $17.1 million and
deferred income tax expense of $25.7 million. The Company’s
effective tax rate in Q1 2019 was 31.0%, which compared to 30.4% in
Q1 2018 and 28.7% the previous quarter. The Q4 2018 effective tax
rate was lower than either Q1 2019 or Q1 2018 largely due to income
tax benefits related to corporate reorganizations involving the
Company’s Australian operations that were completed in the final
quarter of 2018.
Net earnings in Q1 2019 total $110.1 million or $0.52 per basic
share
Net earnings in Q1 2019 totaled $110.1 million
($0.52 per basic share), an increase of $60.1 million or 120% from
$50.0 million ($0.24 per basic share) in Q1 2018. The $53.3 million
increase in net earnings from Q1 2018 largely reflected a 54%
increase in revenue and improved unit costs compared to the same
period in 2018. Partially offsetting these factors were higher
depletion and depreciation costs, increased corporate G&A and
royalty expenses, as well as the impact of an other loss of $2.1
million versus other income of $5.4 million in Q1 2018, with the
change mainly related to movements in foreign exchange rates. Q1
2019 net earnings compared to net earnings of $106.5 million ($0.51
per basic share) in Q4 2018 as an 8% increase in earnings from mine
operations, reflecting higher revenue, more than offset the impact
of higher corporate G&A costs, an increase in the effective tax
rate, as well as the impact of the $2.1 million other loss in Q1
2019 versus other income of $1.2 million in Q4 2018.
Adjusted net earnings (Non-IFRS) in Q1 2019 total $112.1 million
or $0.53 per basic share
The Company's adjusted net earnings in Q1 2019
totaled $112.1 million ($0.53 per basic share), compared to $52.3
million ($0.25 per basic share) in Q1 2018 and $109.6 million
($0.52 per basic share) in Q4 2018. The difference between adjusted
net earnings and net earnings in Q1 2019 mainly related to the
exclusion from adjusted net earnings of $2.3 million ($1.6 million
after income tax) of certain purchase price allocation adjustments,
as well as $0.4 million ($0.3 million after income tax) of
severance costs. The difference between net earnings and adjusted
net earnings in Q1 2018 related to the exclusion from adjusted net
earnings of $5.4 million ($3.8 million after income tax) of certain
purchase price allocation adjustments, as well as a $1.7 million
($1.5 million after income tax) of mark-to-market gains on the fair
valuing of the Company’s warrants. The difference between adjusted
net earnings and net earnings in Q4 2018 related to the fair
valuing of the Company's warrants, with a $3.5 million ($3.1
million after income tax) mark-to-market loss being excluded from
adjusted net earnings for the quarter.
Q1 2019 net cash provided by operating activities of $174.4
million, free cash flow (Non-IFRS) totals $93.1 million
Cash totaled $416.1 million at March 31, 2019,
an increase of $83.9 million or 25% from $332.2 million at December
31, 2018. The increase in cash during Q1 2019 mainly reflected the
$174.4 million of net cash from operating activities for the
quarter less $86.0 million used for investing activities and $8.3
million used for financing activities. Net cash from operating
activities in Q1 2019 compared to net cash from operating
activities of $89.6 million and $204.1 million in Q1 2018 and Q4
2018, respectively. The change from the previous quarter mainly
reflected the impact of changes in non-cash working capital, and a
higher level of cash income taxes paid in Q1 2019. Among the main
uses of cash during Q1 2019 was $86.0 million of net cash used for
investing activities, mainly related to capital expenditures in
support of both current operations and the continued advancement of
the Company’s growth projects. The $86.0 million of net cash used
for investing activities in Q1 2019 compared to net cash used for
investing activities of $38.7 million for the same period in 2018
and $112.6 million the previous quarter. The change from Q4 2018
reflected reduced cash invested in additions to mineral properties
and property, plant and equipment compared to the previous quarter
largely reflecting the timing of payments related to the Company’s
growth projects. Net cash used for financing activities in Q1 2019
totaled $8.3 million, including $6.3 million for dividend payments
and $3.7 million for payment of finance lease obligations,
partially offset by $1.0 million of interest received during the
quarter. Net cash used in financing activities in Q1 2018 totaled
$6.3 million, while net cash used in financing activities for the
previous quarter totaled $5.0 million. The increase from both prior
periods largely reflected increased dividend payments, with the
Company increasing the quarterly dividend to C$0.04 per share
effective the Q4 2018 dividend payment, which was paid early in Q1
2019. The increase in the quarterly dividend for the Q4 2018
payment was the third increase to the quarterly dividend since the
Company’s dividend policy was introduced in March 2017.
Free cash flow in Q1 2019 totaled $93.1 million,
an increase of $42.8 million or 85% from $50.2 million in Q1 2018.
The change in free cash flow from the previous year’s first quarter
mainly resulted from the 95% increase in net cash from operating
activities in Q1 2019, to $174.4 million. Partially offsetting the
impact of significant growth in net cash from operating activities
were $40.5 million of cash used for mineral property additions, 34%
higher than $30.2 million in Q1 2018, and $38.7 million of cash
used for additions to property, plant and equipment, which compared
to $9.2 million in Q1 2018. The Company also had additions to other
long-term assets in Q1 2019 of $2.1 million versus nil for the same
period a year earlier. Free cash flow in Q1 2019 compared to free
cash flow of $86.4 million the previous quarter. Free cash flow in
Q4 2018 resulted from net cash provided by operating activities of
$204.1 million, less cash used for mineral property additions of
$59.9 million, additions to property, plant and equipment of $52.6
million and additions to other long-term assets of $5.2
million.
Table 3. Review of Financial Performance
The following discussion provides key summarized
consolidated financial and operating information for the three
months ended March 31, 2019 and 2018.
|
(in
thousands except per share amounts) |
Three Months EndedMarch 31, 2019 |
Three
Months EndedMarch 31, 2018 |
|
|
|
Revenue |
$304,912 |
$198,237 |
|
|
|
Production costs |
(70,040) |
(71,483) |
Royalty expense |
(8,284) |
(6,018) |
Depletion and
depreciation |
(41,300) |
(27,948) |
Earnings from mine operations |
185,288 |
92,788 |
|
|
|
Expenses |
|
|
General and
administrative(1) |
(12,099) |
(8,760) |
Exploration and
evaluation |
(12,022) |
(16,703) |
Care and
maintenance |
(196) |
(809) |
Earnings from
operations |
160,971 |
66,516 |
|
|
|
Finance and other
items |
|
|
Other income (loss),
net |
(2,117) |
5,364 |
Finance income |
1,438 |
718 |
Finance
costs |
(703) |
(710) |
|
|
|
Earnings before
taxes |
159,589 |
71,888 |
Current income tax
expense |
(40,921) |
(3,530) |
Deferred
tax expense |
(8,522) |
(18,321) |
|
|
|
Net earnings |
$110,146 |
$50,037 |
|
|
|
Basic earnings per
share |
$0.52 |
$0.24 |
Diluted
earnings per share |
$0.52 |
$0.23 |
|
- General and administrative expense for Q1 2019 (Q1 2018)
include general and administrative expenses of $8.7 million ($6.9
million in Q1 2018) and share based payment expense of $3.4 million
($1.8 million in Q1 2018).
|
|
Full-Year 2019 Guidance
On December 11, 2018, Kirkland Lake Gold
released full-year guidance for 2019 (see News Release dated
December 11, 2018). Compared to the Company’s full-year 2018
results, the Company’s 2019 guidance included strong production
growth, improved unit costs and a continued strong commitment to
exploration and growth. On February 21, 2019, the Company increased
its production guidance for 2019, on a consolidated basis, as well
as for the Fosterville mine. Consolidated production guidance was
increased to 920,000 - 1,000,000 ounces from 740,000 - 800,000
ounces, previously, while Fosterville’s production guidance was
increased to 550,000 - 610,000 ounces from 390,000 - 400,000 ounces
previously. The increase in production guidance at Fosterville
resulted from revisions to the mine plan to provide access to
high-grade stopes in the Swan Zone earlier than previously
expected, as well as the impact of incorporating the December 31,
2018 Mineral Reserve into the life of mine. The December 31, 2018
Mineral Reserve estimate includes 2,720,000 ounces at an average
grade of 31.0 grams per tonne, with the average grade being 34%
higher than the previous Mineral Reserve grade for the mine. In
addition, the Company announced a resumption of operations at the
Holloway mine, which is expected to add approximately 20,000 ounces
of production in 2019.
A number of other components of the Company’s
full-year 2019 guidance were revised as a result of the increase in
target production. Operating cash costs per ounce sold guidance for
2019 was improved to $300 – 320 from $360 – $380 previously.
Fosterville’s operating cash costs per ounce sold guidance were
revised to $170 - $190 from $200 – $220 in the December 11, 2018
guidance. New full-year 2019 guidance for operating cash costs per
ounce sold at Holloway was introduced at $760 - $780 as a result of
the restart of operations at the mine. Full-year 2019 operating
cash costs on a consolidated basis was revised to $290 - $300
million from $270 - $280 to reflect the addition of close to $20
million of operating cash costs related to production at the
Holloway mine. AISC per ounce sold guidance for full-year
2019 was also improved, to $520 - $560 compared to $630 - $680 in
the initial guidance released on December 11, 2018. The significant
improvement in AISC per ounce guidance mainly reflected the
increase in target consolidated production at Fosterville.
Effective Q1 2019, the Company revised its
reporting segments to report the Holt Complex as one reporting
segment. As a result, production, costs and expenditures for the
Holt, Holloway and Taylor mines, all of which utilize the Holt Mill
for processing, are combined into one segment. Previously,
production, costs and expenditures from these mines were reported
separately, with processing costs allocated based on the proportion
of production coming from each mine in each reporting period.
|
Table 4. 2019 Guidance (as at February 21,
2019)(1) |
|
|
($
millions unless otherwise stated) |
Macassa |
Holt Complex |
Fosterville |
Consolidated |
|
|
Gold production (kozs) |
230 - 240 |
140 – 150 |
550 - 610 |
920 - 1,000 |
|
|
Operating cash costs/ounce sold ($/oz) (2) |
440 - 460 |
660 – 680 |
170 - 190 |
$300 - $320 |
|
|
AISC/ounce sold ($/oz) (2) |
|
|
|
$520 - $560 |
|
|
Operating cash costs (2) |
|
|
|
$290 - $300 |
|
|
Royalty costs |
|
|
|
$25 - $30 |
|
|
Sustaining and growth capital(2) |
|
|
|
$150 - $170 |
|
|
Growth capital(2)(3) |
|
|
|
$155 - $165 |
|
|
Exploration and evaluation |
|
|
|
$100 - $120 |
|
|
Corporate G&A(4) |
|
|
|
$26 - $28 |
|
|
- Production and unit-cost guidance for 2019 does not include
results for the Northern Territory.
- See “Non-IFRS Measures” set out starting on page 23 of the
MD&A for the three months ended March 31, 2019 for further
details. The most comparable IFRS Measure for operating cash costs
is production costs, as presented in the Consolidated Statements of
Operations and Comprehensive Income, and total additions and
construction in progress for sustaining and growth capital.
Operating cash costs per ounce and AISC per ounce sold are
comparable to production costs on a unit basis. Operating cash
costs, operating cash cost per ounce sold and AISC per ounce sold
reflect an average US$ to C$ exchange rate of 1.33 and a US$ to A$
exchange rate of 1.39.
- Growth capital expenditure guidance as at February 21, 2019
included planned expenditures for the Northern Territory and
Holloway Mine during the first half of 2019, with additional
expenditures for the second half of the year to be determined based
on the results of current programs and other developments. Growth
capital expenditure guidance as at February 21, 2019 excluded $18.4
million of capital expenditures related to the Macassa #4 shaft
project, which are expected to be recorded as capital expenditures
in 2019, but were paid in cash on an advanced basis in 2018.
- Includes general and administrative costs and severance
payments. Excludes non-cash share-based payment expense.
|
|
|
Table 5. Q1 2019 Results |
|
|
($
millions unless otherwise stated) |
Macassa |
Holt Complex |
Fosterville |
Consolidated |
|
Gold production (kozs) |
72,776 |
30,658 |
128,445 |
231,879 |
|
Operating cash costs/ounce sold ($/oz)(1) |
$332 |
$780 |
$144 |
$290 |
|
AISC/ounce sold ($/oz)(1) |
|
|
|
$560 |
|
Operating cash costs (1) |
|
|
|
$67.7 |
|
Royalty costs |
|
|
|
$8.3 |
|
Sustaining capital(1) |
|
|
|
$42.0 |
|
Growth capital (excluding capitalized
exploration)(1)(2) |
|
|
|
$50.1 |
|
Exploration (including capitalized
exploration) |
|
|
|
$17.6 |
|
Corporate G&A expense(3) |
|
|
|
$8.7 |
|
- See “Non-IFRS Measures” set out starting on page 23 of the
MD&A for the three months ended March 31, 2019 for further
details. The most comparable IFRS Measure for operating cash costs
is production costs, as presented in the Consolidated Statements of
Operations and Comprehensive Income, and total additions and
construction in progress for sustaining and growth capital.
Operating cash costs per ounce and AISC per ounce sold are
comparable to production costs on a unit basis. Operating cash
costs, operating cash cost per ounce sold and AISC per ounce sold
reflect an average US$ to C$ exchange rate of 1.33 and a US$ to A$
exchange rate of 1.40.
- Production, cost and expenditure results in Q1 2019 include
results for the Holloway Mine, which resumed operations during the
quarter, as one of three mines included in the Holt
Complex.
- Includes general and administrative costs and severance
payments. Excludes non-cash share based payment expense.
|
|
- Gold production in Q1 2019 totaled 231,879
ounces, a 57% increase from Q1 2018 driven by record production at
both Macassa and Fosterville. The Company ended Q1 2019 well
positioned to achieve its improved full-year 2019 production
guidance of 920,000 - 1,000,000 ounces of gold, with production at
Fosterville expected to be weighted to the second half of 2019 as
development advances to depth into the high-grade Swan Zone.
- Production costs for Q1 2019 totaled $70.0
million. Operating cash costs for the quarter of $67.7 million, in
line with target levels. Quarterly operating cash costs are
expected to be higher at Fosterville as production increases in the
second half of the year. Operating cash costs will also increase at
Holloway as production ramps up over the balance of 2019.
- Operating cash costs per ounce sold for Q1
2019 averaged $290, better than the Company’s full-year 2019
guidance of $300 - $320. The outperformance on consolidated
operating cash costs per ounce sold was driven by Macassa and
Fosterville, where operating cash costs per ounce sold were below
their respective full-year 2019 guidance ranges. At Macassa,
operating cash costs averaged $332 per ounce sold in Q1 2019 versus
full-year guidance of $440 - $460, reflecting significantly higher
than expected grades during the first quarter. Operating cash costs
per ounce sold at Fosterville averaged $144 compared to full-year
2019 guidance of $170 - $190. Average operating cash costs per
ounce sold at the Holt Complex exceeded full-year guidance levels,
with improvement being targeted over the balance of 2019 at all
three of the Holt Complex mines. In particular, operating cash
costs per ounce sold at Holloway, which averaged $2,484 in Q1 2019
based on sales of 1,267 ounces, are expected to improve as the mine
ramps up production, with a total of approximately 20,000 ounces
expected to be produced for full-year 2019.
- AISC per ounce sold in Q1 2019 averaged $560,
in line with full-year 2019 guidance of $520 -
$560. AISC per ounce sold is expected to improve
as quarterly production increases at Fosterville during the second
half of the 2019.
- Royalty costs in Q1 2019 totaled $8.3 million.
The Company continues to target total royalty expense for full-year
2019 of $25 - $30 million.
- Sustaining capital expenditures in Q1 2019
totaled $42.0 million, in line with full-year 2019 guidance of $150
- $170 million.
- Growth capital expenditures totalled $50.1
million in Q1 2019 (excluding capitalized exploration
expenditures), which compared to full-year 2019 guidance of $155 -
$165 million. Of total growth capital expenditures in Q1 2019,
Macassa accounted for $26.1 million, with approximately $22.3
million relating to the #4 shaft project and the remainder largely
funding a thickened tails project and the construction of a new
tailings impoundment area. Fosterville accounted for $11.7 million
of growth capital expenditures in Q1 2019, mainly related to the
mine’s three key projects, including the new ventilation system,
the paste fill plant and a new water treatment plant. $10.3 million
of growth capital expenditures in Q1 2019 related to the Northern
Territory, where advanced exploration work in support of a
potential resumption of operations decision continued during the
first quarter. The Company’s full-year 2019 guidance for growth
capital expenditures assumes growth capital expenditures for the
Northern Territory for only the first half of the year.
- Exploration expenditures in Q1 2019 totaled
$17.6 million (including capitalized exploration), which compared
to full-year 2019 guidance of $100 - $120 million. Of total
exploration expenditures, approximately $14.6 million were in
Australia, including $7.9 million at Fosterville and $6.7 million
in the Northern Territory. Drilling at Fosterville focused on
underground drilling in the Lower Phoenix and Harrier systems,
surface drilling at Robbin’s Hill, as well as exploration work at a
number of regional targets. In the Northern Territory, exploration
expenditures during Q1 2019 focused on infill and extension
drilling at the Lantern and Cosmo deposits and the continued
evaluation of targets at Union Reefs. In Canada, exploration
expenditures in Q1 2019 totaled $3.0 million and mainly focused
drilling at Macassa and Taylor in support of growing and converting
Mineral Resources as well as identifying new areas of high-grade
mineralization.
- Corporate G&A expense in Q1 2019 totaled
$8.7 million. The Company continues to target total corporate
G&A expense for 2019 of $26 - $28 million.
Improvements to Full-Year 2019 Guidance
Following completion of Q1 2019, the Company
announced on May 7, 2019 improvements to full-year 2019 guidance.
Based on production levels in Q1 2019 and the expectations
for production levels over the balance of the year, which includes
higher levels of production at Fosterville in the third and fourth
quarters of 2019, the Company’s consolidated production guidance is
increased to 950,000 – 1,000,000 ounces from the previous target
range of 920,000 – 1,000,000 ounces. Consolidated operating cash
costs per ounce sold guidance for full-year 2019 is improved to
$285 - $305 from $300 - $320.
At the operational level, production and
operating cash cost per ounce guidance is improved for both
Fosterville and Macassa. At Fosterville, production for full-year
2019 is now targeted at 570,000 – 610,000 ounces versus 550,000 –
610,000 ounces previously, while operating cash cost per ounce sold
guidance is improved to $130 – $150 from $170 – $190. At Macassa,
production for full-year 2019 in now targeted at 240,000 – 250,000
ounces compared to the previous target of 230,000 – 240,000 ounces.
Operating cash cost per ounce sold guidance at Macassa is improved
to 400 – 420 from 440 – 460 previously.
|
Table 7. Full-Year 2019 Guidance (as at May 7,
2019) |
|
|
($
millions unless otherwise stated) |
Macassa |
Holt Complex |
Fosterville |
Consolidated |
|
|
Gold production (kozs) |
240 - 250 |
140 – 150 |
570 - 610 |
950 - 1,000 |
|
|
Operating cash costs/ounce sold ($/oz) (2) |
400 - 420 |
660 – 680 |
130 - 150 |
$285 - $305 |
|
|
AISC/ounce sold ($/oz) (2) |
|
|
|
$520 - $560 |
|
|
Operating cash costs (2) |
|
|
|
$290 - $300 |
|
|
Royalty costs |
|
|
|
$25 - $30 |
|
|
Sustaining and growth capital(2) |
|
|
|
$150 - $170 |
|
|
Growth capital(2)(3) |
|
|
|
$155 - $165 |
|
|
Exploration and evaluation |
|
|
|
$100 - $120 |
|
|
Corporate G&A(4) |
|
|
|
$26 - $28 |
|
|
- Production and unit-cost guidance for 2019 does not include
results for the Northern Territory.
- See “Non-IFRS Measures” set out starting on page 23 of the
MD&A for the three months ended March 31, 2019 for further
details. The most comparable IFRS Measure for operating cash costs
is production costs, as presented in the Consolidated Statements of
Operations and Comprehensive Income, and total additions and
construction in progress for sustaining and growth capital.
Operating cash costs per ounce and AISC per ounce sold are
comparable to production costs on a unit basis. Operating cash
costs, operating cash cost per ounce sold and AISC per ounce sold
reflect an average US$ to C$ exchange rate of 1.33 and a US$ to A$
exchange rate of 1.41.
- Growth capital expenditure guidance includes planned
expenditures for the Northern Territory during the first half of
2019, with additional expenditures for the second half of the year
to be determined based on the results of current programs and other
developments. Growth capital expenditure guidance excludes $18.4
million of capital expenditures related to the Macassa #4 shaft
project, which are expected to be recorded as capital expenditures
in 2019, but were paid in cash on an advanced basis in 2018.
- Includes general and administrative costs and severance
payments. Excludes non-cash share-based payment expense.
|
|
Q1 2019 Financial Results and Conference
Call Details
A conference call to discuss the Q1 2019 results
will be held by senior management on Wednesday, May 8, 2019, at
8:00 am ET. Call-in information is provided below. The call will
also be webcast and accessible on the Company’s website at
www.klgold.com.
DATE: |
WEDNESDAY, MAY 8, 2019 |
CONFERENCE ID: |
6794915 |
TIME: |
8:00 am ET |
TOLL-FREE NUMBER: |
(833) 241-7254 |
INTERNATIONAL CALLERS: |
(647) 689-4218 |
Qualified Persons
Henry Heidrich, P.Eng., Director, Technical Services 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 growing gold
producer operating in Canada and Australia that produced 723,701
ounces in 2018 and is on track to achieve significant production
growth over the next three years, including target production of
920,000 – 1,000,000 ounces in 2019, 930,000 – 1,010,000 ounces in
2020 and 995,000 – 1,055,000 ounces in 2021. The production profile
of the Company is anchored by two high-grade, low-cost operations,
including the Macassa Mine 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 and operational
expertise.
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
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 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, 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 ounces 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 transaction costs and executive severance
payments, purchase price adjustments reflected in inventory and
other non-recurring 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 from 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.
Risks and Uncertainties
The exploration, development and mining of
mineral deposits involves significant risks, which even a
combination of careful evaluation, experience and knowledge may not
eliminate. Kirkland Lake Gold is subject to several financial and
operational risks that could have a significant impact on its cash
flows and profitability. The most significant risks and
uncertainties faced by the Company include: the price of gold; the
uncertainty of production estimates, including the ability to
extract anticipated tonnes and successfully realizing estimated
grades; changes to operating and capital cost assumptions; the
inherent risk associated with project development and permitting
processes; the uncertainty of the mineral resources and their
development into mineral reserves; the replacement of depleted
reserves; foreign exchange risks; regulatory; tax as well as
health, safety, and environmental risks. For more extensive
discussion on risks and uncertainties refer to the “Risks and
Uncertainties” section in the December 31, 2018 Annual Information
Form and the Company’s MD&A for the period ended December 31,
2018 filed on SEDAR.
Cautionary Note Regarding Forward-Looking
Information
This press release contains statements which
constitute "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; the future exploration activities planned at
the Canadian and Australian operations and anticipated effects
thereof; liquidity risk; risks related to community relations;
risks relating to equity investments; risks relating to first
nations and Aboriginal heritage; the availability of
infrastructure, energy and other commodities; nature and climactic
conditions; 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 the #4 Shaft project at the
Macassa Mine and the ventilation, water treatment and paste fill
plant project at the Fosterville Mine; permitting; exploration and
mining licences; currency exchange rates (such as the Canadian
dollar and the Australian dollar versus the United States dollar);
risks associated with dilution; labour and employment matters;
risks in the event of a potential conflict of interest; 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 and financial statements and related MD&A for
the financial year ended December 31, 2018 and 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.
Cautionary Note to U.S. Investors -
Mineral Reserve and Resource Estimates
All resource and reserve estimates included in
this news release or documents referenced in this news release have
been prepared 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"). NI 43-101 is a rule developed by the Canadian
Securities Administrators, which established standards for all
public disclosure an issuer makes of scientific and technical
information concerning mineral projects. The terms "mineral
reserve", "proven mineral reserve" and "probable mineral reserve"
are Canadian mining terms as defined in accordance with NI 43-101
and the CIM Standards. These definitions differ materially from the
definitions in SEC Industry Guide 7 ("SEC Industry Guide 7") under
the United States Securities Act of 1933, as amended, and the
Exchange Act.
In addition, the terms "Mineral Resource",
"measured Mineral Resource", "indicated Mineral Resource" and
"Inferred Mineral Resource" are defined in and required to be
disclosed by NI 43-101 and the CIM Standards; however, these terms
are not defined terms under SEC Industry Guide 7 and are normally
not permitted to be used in reports and registration statements
filed with the U.S. Securities and Exchange Commission (the "SEC").
Investors are cautioned not to assume that all or any part of
mineral deposits in these categories will ever be converted into
reserves. "Inferred Mineral Resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an Inferred Mineral Resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of Inferred
Mineral Resources may not form the basis of feasibility or
pre-feasibility studies, except in very limited circumstances.
Investors are cautioned not to assume that all or any part of a
Mineral Resource exists, will ever be converted into a Mineral
Reserve or is or will ever be economically or legally mineable or
recovered.
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
Kirkland Lake Gold (NYSE:KL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Kirkland Lake Gold (NYSE:KL)
Historical Stock Chart
From Sep 2023 to Sep 2024