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
fourth quarter (“Q4 2019”) and full-year (“2019”) 2019. For both
periods, the Company achieved record production, unit costs and
adjusted net earnings, driven by strong production growth at
Fosterville. The Company’s full consolidated 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 Q4 2019 results
include:
- Record quarterly production of 279,742 ounces,
an increase of 21% from 231,217 ounces in Q4 2018 and 13% higher
than 248,400 ounces the previous quarter
- Best unit cost performance ever with operating
cash costs1 averaging $255/oz compared to $286/oz in Q4 2018 and
$287 the previous quarter, while all-in sustaining costs1 (“AISC”)
averaged $512/oz, 10% better than $567/oz in Q4 2018 and a 9%
improvement from $562 in Q3 2019
- Strong revenue growth to $412.4 million, 47%
higher than $280.3 million in Q4 2018 and an increase of 8% from
$381.4 million the previous quarter; Gold sales in Q4 2019 totaled
278,438 ounces, 23% and 9% higher than Q4 2018 and the previous
quarter, respectively
- Record adjusted net earnings1: Adjusted net
earnings totaled $185.3 million ($0.88 per share), a 76% increase
from Q4 2018 and 11% higher than the previous quarter; Net earnings
in Q4 2019 totaled $169.1 million ($0.81 per share) compared to net
earnings of $106.5 million ($0.51 per share) in Q4 2018 and $176.6
million ($0.84 per share) in Q3 2019
- Net cash provided by operating activities increased
19% to $247.1 million from $207.3 million in Q4 2018 and
compared to $316.8 million the previous quarter with the reduction
mainly related to changes in non-cash working capital
- Free cash flow1 increases 48% in Q4 2019 to
$132.8 million versus $89.6 million in Q4 2018 and record free cash
flow of $181.3 million in Q3 2019
- Significant growth in EBITDA1,2 to $285.6
million, 52% higher than $187.8 million in Q4 2018 and compared to
$296.4 million the previous quarter
- Cash at December 31, 2019 of $707.2 million,
113% increase from $332.2 million at December 31, 2018, and 15%
higher than $615.8 million at September 30, 2019
- Strong focus on shareholder returns in Q4
2019: Dividend increased 50% to $0.06 per share, which was
paid on January 13, 2020 to shareholders of record on December 31,
2019; 727,200 shares repurchased through normal course issue bid
(“NCIB”) in Q4 2019 for $30.0 million (C$39.5 million).
Key highlights of 2019 results include:
- Record full-year operating
results° Production of 974,615
ounces, 35% increase from 2018 (2019 Guidance: 950,000 – 1,000,000
ounces)° Production costs in 2019
totaled $281.0 million versus $267.4 million in
2018° Operating cash cost per ounce
sold1 of $284/oz, 22% improvement from 2018 (2019
Guidance: 285 – $305/oz)° AISC per ounce
sold1 of $564, 18% better than 2018 (2018 Guidance: $520 –
$560).
- Record full-year financial
results° Net earnings of
$560.1 million ($2.67/share), 104% increase from $274.0 million
($1.30/share) in 2018° Adjusted net
earnings1 of $576.4 million ($2.74/share), 110% higher
than $273.9 million ($1.30/share) in 2018° Net
cash provided by operating activities of $919.4 million,
68% growth from $548.8 million in 2018° Free
cash flow1 totaling $463.0 million, 81% higher than $255.2
million in 2018° Revenue of $1,380
million, 51% growth from $915.9 million in
2018° EBITDA1,2 of $969.4 million, 82%
increase from $531.6 million in 2017.
- Strong focus on shareholder returns in
2019° Quarterly dividend increased
twice, to $0.04 per share (from C$0.04 per share) for
second quarter 2019 dividend, then to $0.06 per share for Q4 2019
dividend° Repurchased 1,127,000 common
shares through NCIB during 2019 for total of $42.8 million
(C$56.7 million).
- Acquisition of Detour Gold Corporation °
Adds 14.8 million ounces in open-pit Mineral Reserves, 3.9 million
ounces of open-pit Measured and Indicated Mineral Resources and 1.1
million ounces of open-pit Inferred Mineral Resources°
Produced 601,566 ounces in 2019° Significant potential for
growth in Mineral Reserves, increased production and improved unit
costs.
Tony Makuch, President and Chief Executive
Officer of Kirkland Lake Gold, commented: “2019 was a year of
record operating and financial performance for Kirkland Lake Gold
driven largely by strong production growth at Fosterville at very
low unit costs. We also continued to demonstrate an ability to
generate substantial amounts of operating and free cash flow, which
resulted in a rapid buildup in our cash position. We more than
doubled our cash during the year at the same time that we incurred
higher growth capital expenditures, reflecting significant progress
at a number of key projects, including our #4 shaft project at
Macassa. The #4 shaft project is advancing extremely well and we
now have the potential to complete the project early at a lower
total capital cost. We also put our cash to use in 2019 to reward
shareholders through dividend increases and share repurchases. We
plan to substantially increase these efforts, including doubling
our quarterly dividend, to $0.125 per share, effective the second
quarter of 2020, and committing to buying back 20 million shares
over the next 12 – 24 months. We will reward our shareholders
through these initiatives, while still being able to fund our
growth internally given the strength of our balance sheet and the
significant cash flow that our operations generate.
“Looking ahead, the addition of Detour is a
major milestone for our company. With the completion of the
acquisition on January 31, 2020, we now move forward with three
highly-competitive, free cash flow generating assets, Macassa and
Detour Lake in Norther Ontario and Fosterville in Victoria,
Australia. Collectively, these three operations are expected to
produce around 1.4 million ounces this year, at unit costs and on a
scale that will position us to generate well over half a billion
dollars of free cash flow this year. Given the quality of Macassa,
Detour Lake and Fosterville, we have decided to designate our Holt
Complex in Northern Ontario and assets in the Northern Territory of
Australia as non-core and will be considering strategic options to
the maximize value of these assets. As a company, we are very
committed to value creation. With our three high-quality assets, we
expect to combine industry-leading operating and financial results,
continued progress with growth projects and ongoing exploration
success in order to reverse the recent performance of our shares
and once again be a top performing stock as we have been over the
last three years.”
1. See “Non-IFRS Measures” later in this press
release and starting on page 39 of the MD&A for the three
and twelve months ended December 31, 2019.
2. Refers to Earnings before Interest, Taxes,
Depreciation, and Amortization.
REVIEW OF FINANCIAL AND OPERATING
PERFORMANCE
The following discussion provides key summarized
consolidated financial and operating information for the three and
twelve months ended December 31, 2019 and 2018.
Table 1. Financial Highlights
(in thousands of dollars, except per share amounts) |
Three Months endedDecember 31, 2019 |
Three Months EndedDecember 31, 2018 |
Year EndedDecember 31, 2019 |
Year EndedDecember 31, 2018 |
Revenue |
$412,379 |
$280,320 |
$1,379,988 |
$915,911 |
Production costs |
71,169 |
64,604 |
281,034 |
267,432 |
Earnings before income taxes |
232,042 |
149,336 |
798,182 |
394,310 |
Net earnings |
$169,135 |
$106,535 |
$560,080 |
$273,943 |
Basic earnings per share |
$0.81 |
$0.51 |
$2.67 |
$1.30 |
Diluted earnings per
share |
$0.80 |
$0.50 |
$2.65 |
$1.29 |
Cash flow from operating
activities |
$247,100 |
$207,283 |
$919,390 |
$548,790 |
Cash
investment on mine development and PPE |
$114,319 |
$117,712 |
$456,423 |
$293,590 |
Table 2. Operating Highlights
|
Three Months EndedDecember 31, 2019 |
Three Months EndedDecember 31, 2018 |
Year EndedDecember 31, 2019 |
Year EndedDecember 31, 2018 |
Tonnes milled |
462,372 |
412,260 |
1,670,478 |
1,671,401 |
Grade (g/t Au) |
19.1 |
17.8 |
18.5 |
13.9 |
Recovery (%) |
98.3% |
97.8% |
98.1% |
96.9% |
Gold produced (oz) |
279,742 |
231,217 |
974,615 |
723,701 |
Gold Sold (oz) |
278,438 |
225,692 |
979,734 |
722,277 |
Average realized price ($/oz
sold)(1) |
$1,481 |
$1,237 |
$1,405 |
$1,263 |
Operating cash costs per ounce
($/oz sold)(1) |
$255 |
$286 |
$284 |
$362 |
AISC ($/oz sold)(1) |
$512 |
$567 |
$564 |
$685 |
Adjusted net earnings(1) |
$185,303 |
$105,010 |
$576,414 |
$273,969 |
Adjusted net earnings per
share(1) |
$0.88 |
$0.50 |
$2.74 |
$1.30 |
Free
cash flow(1) |
$132,781 |
$89,571 |
$462,967 |
$255,200 |
(1) Non-IFRS - the definition and reconciliation of these
Non-IFRS measures are included on pages 39-45 of this
MD&A. |
Revenue
Change in revenue for any period is derived from
two factors, the increase or decrease in sales volumes (volume
impact) and the average realized price of gold (rate impact). In FY
2019, revenue totaled $1,380.0 million, an increase of $464.1
million or 51% from FY 2018. Of the growth in revenue, $325 million
related to a 36% increase in gold sales, to 979,734 ounces, with
higher sales levels at Fosterville accounting for the increase. An
11% increase in the average realized gold price, to $1,405 per
ounce in FY 2019 versus $1,263 per ounce in FY 2018, provided the
remaining $139 million of the increase in revenue year over
year.
Revenue in Q4 2019 totaled $412.4 million, an
increase of $132.1 million or 47% from $280.3 million in Q4
2018. Increases in both gold sales and the average realized
price both contribution significantly to the improvement. The
average realized price in Q4 2019 was $1,481, a 20% improvement
from the same period in 2018, which resulted in $67 million of
additional revenue in Q4 2019. A 23% increase in gold sales, to
278,438 ounces, driven mainly by the impact of higher grades at
Fosterville on production and sales levels, contributed the
remaining $65 million of revenue growth in Q4 2019 versus Q4
2018. Compared to the previous quarter, revenue increased
$30.9 million or 8% from $381.4 million in Q3 2019. The increase in
revenue was entirely from higher sales volumes, which increased 9%
from 256,276 ounces in Q3 2019. The average realized gold price in
Q4 2019 was unchanged from the previous quarter.
Net Earnings and Adjusted Net
Earnings
Full-Year
Net Earnings
Net earnings in FY 2019 totaled $560.1 million
or $2.67 per share, which compared to net earnings of $273.9
million or $1.30 per share in FY 2018. The most significant factor
accounting for the 104% increase in earnings per share was the 51%
increase in revenue in FY 2019, which had a favourable impact on
the change in earnings per share of $1.56 ($1.09 related to the
increase in sales volumes and $0.47 to the increase in the average
realized gold price).
Other factors that contributed to the increase
in earnings per share included a $0.11 per share favourable impact
from a reduction in expensed exploration costs in FY 2019 versus FY
2018. The reduction in expensed exploration costs resulted from a
review of the Company's drilling programs in the second quarter of
2019, which resulted in a determination that, based on the extent
to which the Company’s drilling is being completed contiguous to,
and for the purpose of extending existing mining areas, a greater
proportion of expenditures were evaluation in nature and as should
be capitalized rather than expensed. Total exploration and
evaluation expenditures in FY 2019, including both expensed and
capitalized expenditures, increased 63%, to $159.2 million from
$97.9 million the previous year, with capitalized expenditures
accounting for $125.7 million of FY 2019 exploration and evaluation
expenditures versus $31.3 million in FY 2018.
A reduction in the Company’s effective tax rate,
to 29.8% in FY 2019 versus 30.5% the previous year, contributed an
additional $0.02 to earnings per share growth year over year. Total
income taxes in FY 2019 were $238.1 million, of which $189.6
million was current income tax expense and $48.5 million was
deferred tax expense. During FY 2018, the Company recognized $40.7
million of current income tax expense and $79.6 million of deferred
income tax expense. The significant amount of deferred income tax
expense in FY 2018 resulted from the utilization of $53.3 million
of deferred tax assets in respect of loss carryforwards to reduce
current income tax expense.
Partially offsetting the factors contributing to
an increase in earnings were higher operating expenses, an other
loss in FY 2019 versus other income in FY 2018, and increased
Corporate G&A costs. Depletion and depreciation costs,
production costs and royalty expense all increased in FY 2019
compared to FY 2018. The level of these expenses is linked to
production and sales volumes, with higher levels in FY 2019 largely
resulting from growth of 35% and 36%, respectively, in total
production and sales year over year.
Other loss of $18.8 million (before income
taxes) mainly reflected $16.2 million (before income taxes) of
foreign exchange losses in FY 2019, largely reflecting the
strengthening of the Canadian dollar relative to the US and
Australian dollars during the year. The primary factor driving
other income of $5.1 million (before income taxes) in FY 2018
resulted from foreign exchange gains of $16.9 million (before
income taxes) due to the Australian and Canadian dollars weakening
against the US dollar during FY 2018, which was only partially
offset by a pre-tax $10.9 million mark-to-market loss of fair
valuing the Company’s warrant investments during the year. The
$18.8 million other loss in FY 2019 versus $5.1 million of other
income in FY 2018 had a $0.08 unfavourable on the year over year
change in earnings per share.
Corporate G&A expense in FY 2019, on a
pre-tax basis, totaled $45.4 million (including $9.3 million of
share-based payment expense) versus $31.6 million (including $5.5
million of share-based payment expense) in FY 2018. The increase in
Corporate G&A expense reduced earnings per share by $0.03 in FY
2019. Higher Corporate G&A expense in FY 2019 largely reflected
related to the expansion of corporate capabilities in both Canada
and Australia in support of the Company's continued growth. The
increase in share-based payment expense in FY 2019 largely resulted
from share-price appreciation, resulting in greater mark-to-market
values for the Company’s outstanding deferred share units,
restricted share units and performance share units.
Adjusted Net Earnings
Adjusted net earnings in FY 2019 totaled $576.4
million or $2.74 per share versus net earnings of $560.1 million or
$2.67 per share. The primary difference between adjusted net
earnings and net earnings in FY 2019 related to the exclusion from
adjusted net earnings of $16.2 million ($12.9 million after tax) of
foreign exchange losses, resulting from fluctuations in the
Canadian and Australian dollars against the US dollar. In FY 2018,
adjusted net earnings totaled $274.0 million or $1.30 per share,
which compared to net earnings of $273.9 million or $1.30 per
share. The difference between adjusted net earnings and net
earnings in FY 2018 resulted from the exclusion from adjusted net
earnings of $10.9 million ($9.4 million after tax) of
mark-to-market losses on the fair valuing of the Company’s
warrants, $16.9 million ($13.2 million after tax) of foreign
exchange gains to align with the foreign exchange adjustment made
in FY 2019 as well as $5.4 million ($3.8 million of after income
taxes) related to purchase price allocation adjustments on
inventory.
Q4 2019
Net earnings in Q4 2019 totaled $169.1 million
or $0.81 per share, which compared to net earnings of $106.5
million or $0.51 per share in Q4 2018. Strong revenue growth was
the primary factor contributing to the increase in net earnings
from Q4 2019. The 47% increase in revenue, to $412.4 million,
increased earnings per share by $0.46 in Q4 2019 versus Q4 2018,
with both a higher realized gold price and increased sales volumes
each contributing approximately $0.23 per share to the increase.
Other factors contributed to higher earnings were a $0.02 per share
favourable contribution from reduced expensed exploration costs and
a $0.01 per share favourable impact from a lower effective tax rate
in Q4 2019 compared to the same period in 2018. The Q4 2019
effective tax rate was 27.1% versus 28.7% in Q4 2018, with the
reduction largely resulting from a reduced deferred tax expense of
$0.5 million in Q4 2019, mainly due to revision of estimates in Q4
2019. The Company had current income tax expense in Q4 2019 of
$62.4 million. In Q4 2018, current income tax expense totaled $17.1
million with deferred income tax expense of $25.7 million.
Factors that reduced net earnings per share in
Q4 2019 versus Q4 2018 included a pre-tax other loss of $25.2
million versus $1.2 million (pre-tax) of other income for the same
period a year earlier, as well as higher levels of operating
expenses, including depletion and depreciation, production costs
and royalty expense, as well as increased Corporate G&A costs.
The other loss in Q4 2019 mainly reflected foreign exchange losses,
while higher operating expenses mainly resulted from increased
production and sales volumes. Growth in Corporate G&A was due
to the expansion of corporate capabilities in both Canada and
Australia in support of the Company's continued growth.
Net earnings in Q4 2019 compared to net earnings
of $176.6 million or $0.84 per share in the previous quarter. A
significant factor impacting the change in earnings per share
quarter over quarter was a $0.14 unfavourable impact from a pre-tax
other loss of $25.2 million in Q4 2019, which compared to $13.9
million of pre-tax other income in Q3 2019. Both the other loss in
Q4 2019 and other income in Q3 2019 related to foreign exchange,
with there being $23.3 million ($16.1 million after tax) of foreign
exchange gains in Q4 2019, reflecting fluctuations of the Canadian
and Australian dollar against the US dollar, and a $13.7 million
($9.1 million after tax) foreign exchange gain the previous
quarter. Increases in depletion and depreciation expense,
production costs and Exploration expense also contributed to lower
net earnings and earnings per share versus Q3 2019.
Having a favourable impact on net earnings and
earnings per share was the 8% increase in revenue quarter over
quarter, to $412.4 million in Q4 2019, which increased earnings per
share by $0.11 from Q3 2019 and was all related to higher sales
volumes. A lower effective tax rate also contributed favourably to
earnings. The effective tax rate in Q4 2019 of 27.1% compared to an
effective tax rate of 30.5% in Q3 2019. The lower effective tax
rate had a $0.05 positive impact on earnings per share in Q4 2019
compared to Q3 2019.Adjusted Net Earnings
Adjusted net earnings in Q4 2019 totaled $185.3
million or $0.88 per share versus net earnings for the same period
of $169.1 million or $0.81 per share. The primary difference
between adjusted net earnings and net earnings in Q4 2019 related
to the exclusion from adjusted net earnings of $23.3 million ($16.1
million after tax) of foreign exchange losses resulting from
fluctuations in the Canadian and Australian dollars against the US
dollar. In Q4 2018, adjusted net earnings totaled $105.0 million or
$0.50 per share, which compared to net earnings of $106.5 million
or $0.51 per share. The difference between adjusted net earnings
and net earnings in Q4 2018 related to the exclusion from adjusted
net earnings of a $3.5 million mark-to-market gain ($3.1 million
after tax) related to the fair valuing of the Company’s warrants
and $5.9 million ($4.9 million after tax) of foreign exchange
revaluation gains to align with the foreign exchange adjustment
made in Q4 2019. Adjusted net earnings in Q3 2019 totaled $167.5
million or $0.80 per share versus net earnings for the same period
of $176.6 million or $0.84 per share. The difference between
adjusted net earnings and net earnings in Q3 2019 is due to the
exclusion of foreign exchange gains of $13.7 million($9.1 million
after tax) to align with the foreign exchange adjustment made in Q4
2019.
Table 3. Review of Financial Performance
(in thousands except per share amounts) |
Three Months EndedDecember 31, 2019 |
Three Months EndedDecember 31, 2018 |
Year EndedDecember 31, 2019 |
Year EndedDecember 31, 2018 |
|
|
|
|
|
Revenue |
$412,379 |
$280,320 |
$1,379,988 |
$915,911 |
|
|
|
|
|
Production costs |
(71,169) |
(64,604) |
(281,034) |
(267,432) |
Royalty expense |
(11,002) |
(7,583) |
(36,432) |
(26,418) |
Depletion and
depreciation |
(52,865) |
(37,318) |
(168,921) |
(133,718) |
Earnings from mine operations |
277,343 |
170,815 |
893,601 |
488,343 |
|
|
|
|
|
Expenses |
|
|
|
|
General and
administrative(1) |
(10,576) |
(9,316) |
(45,365) |
(31,565) |
Transaction costs |
(1,236) |
— |
(1,236) |
— |
Exploration |
(9,336) |
(13,807) |
(33,469) |
(66,614) |
Care
and maintenance |
(239) |
(1,626) |
(1,191) |
(3,081) |
Earnings from operations |
255,956 |
146,066 |
812,340 |
387,083 |
|
|
|
|
|
Finance and other items |
|
|
|
|
Other income (loss), net |
(25,166) |
1,235 |
(18,817) |
5,130 |
Finance income |
1,948 |
3,139 |
6,941 |
5,714 |
Finance
costs |
(696) |
(1,104) |
(2,282) |
(3,617) |
|
|
|
|
|
Earnings before income
taxes |
232,042 |
149,336 |
798,182 |
394,310 |
Current income tax
expense |
(62,414) |
(17,070) |
(189,572) |
(40,743) |
Deferred income tax expense |
(493) |
(25,731) |
(48,530) |
(79,624) |
|
|
|
|
|
Net earnings |
$169,135 |
$106,535 |
$560,080 |
$273,943 |
|
|
|
|
|
Basic earnings per share |
$0.81 |
$0.51 |
$2.67 |
$1.30 |
Diluted
earnings per share |
$0.80 |
$0.50 |
$2.65 |
$1.29 |
(1) General and administrative expense for 2019 and Q4 2019
(2018 and Q4 2018) include general and administrative expenses of
$36.3 million and $10.1 million ($26.3 million and $8.0
million in 2018) and share based payment expense of $9.0 million
and $0.5 million ($5.2 million and $1.3 million 2018). |
Cash Flow
Full-Year 2019
Cash totaled $707.2 million at December 31,
2019, an increase of $375.0 million or 113% from December 31, 2018.
The increase in cash mainly reflected $919.4 million of net cash
provided by operating activities for the quarter, which compared to
$548.8 million. The increase from FY 2018 resulted from strong
growth in earnings as well as the impact of higher non-cash
expenses, such as depletion and depreciation costs. These factors
were only partially offset by higher cash income taxes paid and
changes in non-cash working capital, which was a use of cash in FY
2019 and a source of cash the previous year.
Net cash used in investing activities for FY
2019 totaled $466.9 million, an increase of $109.4 million or 31%
from FY 2018. The increase reflected higher levels of growth and
sustaining capital expenditures in FY 2019, partially offset by a
$31.7 million reduction in cash used for investments in public and
private entities during FY 2019 versus FY 2018, as well as the
release of $22.2 million of previously restricted cash during the
year. During FY 2019, the Company invested $34.4 million in private
and public entities, including $24.4 million to acquire 57 million
shares (C$0.57 per share) of Wallbridge Mining Company Limited
(“Wallbridge”), representing 9.9% of issued and outstanding common
shares, as well as 4.1 million additional shares of Bonterra
Resources Inc. (“Bonterra”) for $6.4 million. At December 31, 2019,
the Company owned a total of 8.5 million shares of Bonterra,
representing 11.3% of total issued and outstanding shares.
Net cash used in financing activities for FY
2019 totaled $85.2 million, which compared to $69.0 million for the
same period in 2018. The higher level of net cash used for
financing activities reflected increases of $13.1 million and $12.0
million related to dividend payments and shares repurchased through
the Company’s NCIB, respectively. The Company increased the
quarterly dividend twice during FY 2019, including a 50% increase,
to $0.06 per share, effective the Q4 2019 dividend payment. During
FY 2019, the Company repurchased 1,127,000 shares through the NCIB
for $42.8 million (C$56.7 million).
Free cash flow in FY 2019 totaled $463.0
million, an 81% increase from FY 2018, reflecting strong growth in
net cash provided by operating activities, which more than offset
higher levels of cash used for mineral property additions and
additions to property, plant and equipment.
Q4 2019
The Company’s cash balance of $707.2 million at
December 31, 2019 increased $91.4 million or 15% from $615.8
million at September 30, 2019. The increase in cash resulted from
$247.1 million of net cash being generated from operating
activities, which compared to net cash provided by operating
activities of $207.3 million in Q4 2018 and $316.8 million the
previous quarter. The reduction from Q3 2019 mainly reflected the
impact of changes in non-cash working capital, which was a
significant use of cash in Q4 2019 and a source of cash in Q3 2019,
as well as higher levels of cash income tax paid in Q4 2019 ($21.0
million versus $5.1 million the previous quarter).
The Company’s Q4 2019 and Q3 2019 income tax
instalments were based upon the taxable income generated in FY
2018. The Company’s FY 2019 taxable income is expected to be
significantly higher as compared to FY 2018 due to increased levels
of profitability and the absence of loss carry-forwards to shelter
the taxable income generated in FY 2019, as was the case in FY
2018. As a result, the Company anticipates paying tax instalments
in the first half of 2020 that are substantially higher than any of
the tax instalments made during FY 2019, with the largest
instalment expected to be paid in Q2 2020, which could exceed $166
million.Net cash used for investing activities in Q4 2019 totaled
$139.0 million, which related mainly to growth and sustaining
capital expenditures, as well as the $24.4 million of cash used to
acquire 57 million shares of Wallbridge Mining Company Ltd. Net
cash used for financing activities totaled $41.8 million, of which
$30.0 million (C$39.5 million) was used to repurchase 727,200
shares through the NCIB, with an additional $8.4 million used for
dividend payments.
Free cash flow in Q4 2019 totaled $132.8 million
compared to $89.6 million in Q4 2018 and $181.3 million the
previous quarter. The change from Q3 2019 resulted from the
reduction in net cash provided by operating activities quarter over
quarter.
PERFORMANCE AGAINST FULL-YEAR
GUIDANCE
Table 4. 2019 Guidance (as at November 6,
2019)(1)
($ millions unless otherwise stated) |
Macassa |
Holt Complex(2) |
Fosterville |
Consolidated |
Gold production (kozs) |
240 - 250 |
120 - 130 |
570 - 610 |
950 - 1,000 |
Operating cash costs/ounce sold ($/oz) (3) |
$400 - $420 |
$920 - $940 |
$130 - $150 |
$285 - $305 |
AISC/ounce sold ($/oz) (3) |
|
|
|
$520 - $560 |
Operating cash costs (3) |
|
|
|
$290 - $300 |
Royalty costs |
|
|
|
$30 - $35 |
Sustaining capital(3) |
|
|
|
$170 - $190 |
Growth capital(3)(4) |
|
|
|
$175 - $185 |
Exploration and evaluation(5) |
|
|
|
$120 - $140 |
Corporate G&A(6) |
|
|
|
$30 - $35 |
(1) Full-year 2019 guidance as at November 6, 2019 |
(2) Production and operating cash cost guidance for the Holt
Complex for full-year 2019 includes results for the Holloway mine,
which resumed operations during Q1 2019, as one of three mines
included in the Holt Complex. |
(3) See “Non-IFRS Measures” set out starting on page 39 of
this MD&A for further details. The most comparable IFRS Measure
for operating cash costs is production costs, as presented in the
Consolidated Statements of Operations and Comprehensive Income, and
total additions and construction in progress for sustaining and
growth capital. Operating cash costs per ounce and AISC per ounce
sold are comparable to production costs on a unit basis. Operating
cash costs, operating cash cost per ounce sold and AISC per ounce
sold reflect an average US$ to C$ exchange rate of 1.32 and a US$
to A$ exchange rate of 1.43. |
(4) Growth capital expenditure guidance for full-year 2019
excludes $19.8 million of capital expenditures related to the
Macassa #4 shaft project, which are being recorded as capital
expenditures in 2019, but were paid in cash on an advanced basis in
2018. Growth capital expenditures excludes capitalized
exploration. |
(5) Exploration and evaluation expenditures guidance for
full-year 2019 include both expensed and capitalized exploration
expenditures. All capitalized expenditures related to the Northern
Territory are included in exploration and evaluation expenditures
consistent with the advanced exploration program being carried out
in the Northern Territory in 2019. |
(6) Includes general and administrative costs and severance
payments. Excludes non-cash share-based payment expense. |
Table 5. Full-Year 2019 Results
($ millions unless otherwise stated) |
Macassa |
Holt Complex(2) |
Fosterville |
Consolidated |
Gold production (kozs) |
241,297 |
113,952 |
619,366 |
974,615 |
Operating cash costs/ounce sold ($/oz)(1) |
$414 |
$904 |
$119 |
$284 |
AISC/ounce sold ($/oz)(1) |
|
|
|
$564 |
Operating cash costs(1) |
|
|
|
$278.4 |
Royalty costs |
|
|
|
$36.4 |
Sustaining capital(1) |
|
|
|
$192.4 |
Growth capital(1)(3) |
|
|
|
$172.1 |
Exploration and evaluation(4) |
|
|
|
$159.2 |
Corporate G&A(5) |
|
|
|
$36.3 |
(1) See “Non-IFRS Measures” set out starting on page 39 of
this MD&A for further details. The most comparable IFRS Measure
for operating cash costs is production costs, as presented in the
Consolidated Statements of Operations and Comprehensive Income, and
total additions and construction in progress for sustaining and
growth capital. Operating cash costs per ounce and AISC per ounce
sold are comparable to production costs on a unit basis. Operating
cash costs, operating cash cost per ounce sold and AISC per ounce
sold reflect an average US$ to C$ exchange rate of 1.33 and a US$
to A$ exchange rate of 1.44. |
(2) Production, cost and expenditure results in 2019 include
results for the Holloway mine, which resumed operations during Q1
2019, as one of three mines included in the Holt Complex. |
(3) Growth capital expenditures exclude $19.8 million of
capital expenditures related to the Macassa #4 shaft project, which
have been recorded as capital expenditures in 2019, but were paid
in cash on an advanced basis in 2018. Growth capital expenditures
excludes capitalized exploration expenditures. |
(4) Exploration and evaluation expenditures include both
expensed and capitalized exploration expenditures. All capitalized
expenditures related to the Northern Territory are being included
in exploration and evaluation expenditures consistent with the
advanced exploration program being carried out in the Northern
Territory in 2019. |
(5) Includes general and administrative costs and severance
payments. Excludes non-cash share-based payment expense. |
- Gold production for FY 2019 of 974,615 ounces,
in the mid-point of the Company’s consolidated production guidance
of 950,000 - 1,000,000 ounces. Fosterville exceeded its production
guidance for the year of 570,000 - 610,000 ounces, producing
619,366 ounces driven largely by grade outperformance in the Swan
Zone during Q4 2019. Production at Macassa totaled 241,297 ounces
in FY 2019, which achieved the mine’s production guidance of
240,000 - 250,000 ounces. Production at the Holt Complex totaled
113,952 ounces, below the revised guidance range of 120,000 -
130,000 ounces. Production at Holt Complex was below expected
levels due to a slower than expected ramp up at the Hollloway mine
as well as lower than planned production at both the Holt and
Taylor mines. The Company announced in October 2019 that it is
reviewing the future plans of the Holt Complex.
- Production costs in FY 2019 totaled $281.0
million. Operating cash costs for the full-year were $278.4
million, better than full-year 2019 guidance of $290 - $300
million.
- Operating cash costs per ounce sold for FY
2019 averaged $284, slightly better than in the low end of
full-year 2019 guidance of $285 - $305. For FY 2019, Fosterville's
operating cash costs per ounce sold averaged $119, better than the
guidance range of $130 - $150. Macassa’s operating cash costs per
ounce sold averaged $414, in line with full-year guidance of $400 -
$420. Operating cash costs per ounce sold at the Holt Complex
averaged $904, below the revised target range of $920 - $940.
- AISC per ounce sold for FY 2019 averaged $564,
above full-year 2019 guidance of $520 - $560, but 18% better than
the previous year. The level of AISC per ounce sold compared to
guidance reflected higher than planned sustaining capital
expenditures at both Macassa and the Holt Complex, mainly related
to additional investments for capital development, equipment
purchases and infrastructure projects, largely involving
enhancements to milling facilities.
- Royalty costs for FY 2019 totaled $36.4
million compared to full-year 2019 guidance of $30 - $35
million.
- Sustaining capital expenditures for FY 2019
totaled $192.4 million, slightly higher than revised guidance of
$170 - $190 million. The level of sustaining capital expenditures
during FY 2019 reflected higher than planned sustaining capital
expenditures at Macassa and the Holt Complex.
- Growth capital expenditures totalled $172.1
million for FY 2019 (excluding capitalized exploration), which
compared to revised FY 2019 guidance of $175 - $185 million. Of
total growth capital expenditures for FY 2019, Macassa accounted
for $113.8 million, with approximately $76.6 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. FY 2019 was the peak year for capital expenditures related to
the #4 Shaft project. Surface setup and construction was completed
around mid-year and, by December 31, 2019, the shaft had been sunk
to a depth of 1,200 feet. Fosterville accounted for $48.4 million
of growth capital expenditures for FY 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.
- Exploration and evaluation expenditures for FY
2019 totaled $159.2 million (including capitalized exploration),
which compared to revised full-year 2019 guidance of $120 - $140
million. Of total exploration expenditures, approximately $147.5
million were in Australia, including $109.9 million in the Northern
Territory and $37.6 million at Fosterville. Exploration
expenditures in the Northern Territory related to an ongoing
advanced exploration program, including underground development and
drilling in support of a potential resumption of operations. In
October 2019, the Company commenced test processing of Lantern
Deposit material at the Union Reefs mill as part of the advanced
exploration program. Production during Q4 2019 at the Union
Reefs mill totaled 8,700 ounces at an average grade of 2.06 g/t.
Exploration expenditures in Canada in FY 2019 totaled $11.6
million, of which $5.7 million related to drilling at Macassa
largely designed to extend the South Mine Complex and identify and
expand high-grade zones along the Amalgamated Break.
- Corporate G&A expense for FY 2019 totaled
$36.3 million compared to revised full-year 2019 guidance of $30 -
$35 million.
Table 6. Full-Year 2020 Guidance (as at December
18, 2019)
($ millions unless otherwise stated) |
Macassa |
Holt Complex |
Fosterville |
Consolidated |
Gold production (kozs)(1) |
240 - 250 |
120 - 140 |
590 - 610 |
950 - 1,000 |
Operating cash costs/ounce sold ($/oz)(2) |
$470 - $490 |
$790 - $810 |
$130 - $150 |
$300 - $330 |
AISC/ounce sold ($/oz)(2) |
|
|
|
$570 - $630 |
Operating cash costs ($M)(2) |
|
|
|
$310 - $320 |
Royalty costs ($M) |
|
|
|
$58 - $62 |
Sustaining capital ($M)(2) |
|
|
|
$165 - $175 |
Growth capital ($M)(2) |
|
|
|
$70 - $80 |
Exploration ($M)(3) |
|
|
|
$120 - $140 |
Corporate G&A ($M)(4) |
|
|
|
$40 - $45 |
(1) Production and unit-cost guidance for 2020 as issued in a
press release dated December 18, 2019. The guidance does not
include results for the Northern Territory. |
(2) See “Non-IFRS Measures” set out starting on page 39 of the
MD&A for the year ended December 31, 2019 for further details.
The most comparable IFRS Measure for operating cash costs,
operating cash costs per ounce sold and AISC per ounce sold is
production costs, as presented in the Consolidated Statements of
Operations and Comprehensive Income, and total additions and
construction in progress for sustaining and project capital.
Operating cash costs, operating cash cost per ounce sold and AISC
per ounce sold reflect an average US$ to C$ exchange rate of 1.30
and a US$ to A$ exchange rate of 1.43. |
(3) 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. |
(4) Includes general and administrative costs. Excludes
share-based payment expense. |
- Consolidated gold production in 2020 as at
December 18, 2019 was targeted at approximately 950,000 - 1,000,000
ounces, unchanged from full-year 2019 guidance. Production at
Fosterville in 2020 is estimated at 590,000 - 610,000 ounces,
similar to 2019 guidance of 570,000 - 610,000 ounces and actual
production for the year of 619,366 ounces. Production guidance at
Macassa in 2020 of 240,000 - 250,000 ounces is unchanged from
full-year 2019 guidance and compares to total production in FY 2019
of 241,297 ounces. Production at Holt Complex in 2020 is targeted
at 120,000 - 140,000 ounces, which compares to FY 2019 guidance as
at November 6, 2019 of 120,000 - 130,000 ounces and total
production in FY 2019 of 113,952 ounces. The Company has designated
the Holt Complex as a non-core asset and plans to consider
strategic options for maximizing the value of the Holt Complex
assets.
- Operating cash costs for 2020 were estimated
at $310 - $320 million, which compares to the FY 2019 guidance of
$290 - $300 million and FY 2019 operating cash costs of $278.4
million.
- Operating cash costs per ounce sold in 2020
were expected to average $300 - $330 compared FY 2019 guidance of
$285 - $305 and FY 2019 operating cash costs per ounce sold of
$284. The Company’s low unit operating cash costs will again be
driven by Fosterville, where operating cash costs per ounce sold
are targeted at $130 - $150, unchanged from current full-year 2019
guidance and compared to the FY 2019 average of $119, which was
better than full-year 2019 guidance based on higher than expected
average grades during the year. Operating cash costs per ounce sold
at Macassa in 2020 are targeted at $470 - $490, which compares to
full-year 2019 guidance of $400 - $420 and the FY 2019 average of
$414. The increase in operating cash costs per ounce sold guidance
at Macassa in 2020 reflects lower planned grades in 2020, with the
FY 2019 grade of 23.7 grams per tonne exceeding target levels due
mainly to grade outperformance early in the year in stopes around
the 5700 Level of the South Mine Complex (“SMC”). Operating cash
costs per ounce sold guidance for 2020 at the Holt Complex is $790
- $810, which compares to FY 2019 guidance of $920 - $940 and
average operating cash costs per ounce sold for FY 2019 of $904,
with the improvement expected to reflect the impact of higher
grades and increased tonnes processed on sales volumes.
- AISC per ounce sold were targeted to average
$570 - $630 in 2020 compared to the FY 2019 average of $564. The
anticipated change from the FY 2019 AISC mainly related to higher
operating cash costs, an increase in royalty expense resulting from
a new royalty applicable to the Fosterville Mine (see Royalty costs
below) and higher expected corporate G&A expense.
- Royalty costs in 2020 were estimated at $58 -
$62 million compared to guidance for 2019 of $30 - $35 million and
total royalty costs of $36.4 million for FY 2019. Of expected
royalty payments in 2020, approximately $40 million relate to
Fosterville, of which approximately $24 million results from a new
2.75% royalty introduced by the Victorian Government effective
January 1, 2020.
- Sustaining capital expenditures in 2020 were
targeted at $165 - $175 million, which compared to FY 2019 guidance
of $170 - 190 million and below the FY 2019 total of $192.4
million. Reduced levels of sustaining capital expenditures are
expected at both Fosterville and Macassa.
- Growth capital expenditures were estimated at
$70 - $80 million in 2020, a reduction from current full-year 2019
guidance of $175 - $185 million and total FY 2019 growth capital
expenditures of $172.1 million. Of planned project capital
expenditures in 2020, Macassa is expected to account for $50 - $55
million, with approximately $45 million relating to the #4 shaft
project. Project capital expenditures at Fosterville in 2020 are
estimated at $20 - $25 million, which compares to FY 2019 growth
capital expenditures of $48.4 million. The reduction reflects the
completion, or near completion, of a number of major projects in
2019, including the paste fill plant and water treatment plant,
with a new ventilation system well advanced as of the end of 2019
and on track for completion early in 2020. In addition to
completing the ventilation project, major components of the 2020
capital program at Fosterville include expenditures for the
completion of a transformer station upgrade and new gold
room/refinery, construction of a new surface refrigeration plant,
the installation of a second paste fill delivery hole and the
extension of paste fill to Harrier.
- Exploration expenditures (including both
expensed and capitalized expenditures) in 2020 were estimated at
$120 - $140 million, the same as FY 2019 guidance and compared to
total exploration expenditures for FY 2019 of $159.2 million. Of
expected exploration expenditures in 2020, approximately 80% to 85%
are expected to be capitalized exploration expenditures.
Exploration expenditures at Fosterville are targeted at $70 - $80
million, including $15 - $20 million related to the underground
development for a twin 4.8 km underground exploration drive to
connect Robbin’s Hill to existing mine infrastructure at
Fosterville. The decline is a three-year project that will support
underground exploration of Robbin’s Hill and other targets and
provide valuable infrastructure for future mine operations. In
addition, a total of 230,000 metres of underground and surface
drilling are planned at Fosterville in 2020, with the primary
targets continuing to be the Lower Phoenix system, Cygnet, Harrier,
Robbin’s Hill and a number of regional targets. At Macassa, total
capital and expensed exploration expenditures are targeted at $40 -
$50 million. Significant exploration development is planned at
Macassa in 2020, including work on a new exploration decline to
access and explore previously identified high-grade zones near
surface along the Amalgamated Break. In addition, development to
extend exploration drifts is planned on the 5150, 5705 and 5807
levels mainly in support of drilling to infill and extend the SMC
and to evaluate targets at depth along the Amalgamated Break. A
total of 270,000 metres of underground and surface drilling is
planned at Macassa in 2020, with the primary targets being the SMC,
Amalgamated Break and select targets along the Main and ’04
breaks.
- Corporate G&A expense in 2020 were
targeted at $40 - $45 million, higher than FY 2019 guidance of $30
- $35 million and total corporate G&A costs for FY 2019 of
$36.3 million, mainly reflecting the expansion of corporate
capabilities in both Canada and Australia in support of the
Company's continued growth.
ADDITION OF DETOUR GOLD PRODUCTION, UNIT COSTS AND
EXPENDITURES TO FULL-YEAR 2020 GUIDANCE
Table 7. Revised Full-Year 2020 Guidance (Reflects Addition of
Detour Gold)
($ millions unless otherwise stated) |
Macassa |
Detour Lake(1) |
Holt Complex |
Fosterville |
Consolidated |
Gold production (kozs)(1) |
240 - 250 |
520 - 540 |
120 - 140 |
590 - 610 |
1,470 - 1,540 |
Operating cash costs/ounce sold ($/oz)(2) |
$470 - $490 |
$720 - $740 |
$790 - $810 |
$130 - $150 |
$450 - $470 |
AISC/ounce sold ($/oz)(2) |
|
|
|
|
$820 - $840 |
Operating cash costs ($M)(2) |
|
|
|
|
$700 - $720 |
Royalty costs ($M) |
|
|
|
|
$85 - $90 |
Sustaining capital ($M)(2) |
|
|
|
|
$420 - $430 |
Growth capital ($M)(2) |
|
|
|
|
$70 - $80 |
Exploration ($M)(3) |
|
|
|
|
$150 - $170 |
Corporate G&A ($M)(4) |
|
|
|
|
$50 - $55 |
(1) Production and unit-cost guidance for 2020 as issued in a
press release dated December 18, 2019 adjusted for the addition of
Detour Gold effective February 1, 2020. The guidance does not
include results for the Northern Territory. |
(2) See “Non-IFRS Measures” set out starting on page 39 of the
MD&A for the year ended December 31, 2019 for further details.
The most comparable IFRS Measure for operating cash costs,
operating cash costs per ounce sold and AISC per ounce sold is
production costs, as presented in the Consolidated Statements of
Operations and Comprehensive Income, and total additions and
construction in progress for sustaining and project capital.
Operating cash costs, operating cash cost per ounce sold and AISC
per ounce sold reflect an average US$ to C$ exchange rate of 1.30
and a US$ to A$ exchange rate of 1.43. |
(3) 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. |
(4) Includes general and administrative costs. Excludes
non-cash share-based payment expense. |
As a result of the acquisition of Detour Gold on
January 31, 2020, a number of revisions were made to the Company’s
FY 2020 guidance. Consolidated production guidance for 2020 is
increased from 950,000 - 1,000,000 ounces to 1,470,000 - 1,540,000
ounces. The change reflects the addition of 520,000 - 540,000
ounces from Detour Lake, representing expected production over the
11 months of 2020 following the closing of the Company’s
acquisition of Detour Gold on January 31, 2020. Operating cash cost
and AISC per ounce sold guidance is increased to $450 - $470 from
$300 - $330 previously and $820 - $840 from $570 - $630,
respectively. Among other revisions, sustaining capital
expenditure guidance increases to $420 - $440 million from $165 -
$175 million reflecting the addition of Detour Lake, where all
capital expenditures are recorded as sustaining capital. The
increase in exploration expenditure guidance reflects the Company’s
intention to invest aggressively in exploration drilling at Detour
Lake over the next year. Corporate G&A guidance increases to
$50 - $55 million from $40 - $45 million previously due to added
costs related to the addition of Detour Lake mine.
THREE-YEAR PRODUCTION GUIDANCEOn December 18,
2019, the Company released three-year production guidance for the
Macassa and Fosterville mines. Production at Macassa is targeted to
increase to over 320,000 ounces by 2022 reflecting initial
production from the #4 Shaft and potential production from the
planned Macassa surface ramp. Production at Macassa is expected to
grow to well over 400,000 ounces beginning in 2023. Production at
Fosterville is expected to maintain the strong production levels
achieved in 2019 over the next three years as mining continues to
advance in the high-grade Swan Zone, with the potential for
production to commence from Robbin’s Hill in 2023.
Table 8. Three-Year Production Guidance(1)
|
Macassa |
Fosterville |
2020 (kozs) |
240 - 250 |
590 - 610 |
2021 (kozs) |
240 - 250 |
550 - 600 |
2022 (kozs) |
320 - 340 |
550 - 600 |
(1) Three-year production guidance does not include any
production from Detour Lake, the Holt Complex or Northern
Territory. |
Macassa: Production at Macassa in 2020 is expected to be similar
to 2019 levels, with 2020 guidance of 240,000 - 250,000 ounces.
Production in 2021 is should remain similar to 2020, with
significant growth in production expected to commence in 2022
reflecting initial production from the #4 Shaft and potential
production from the planned Macassa surface ramp. Production in
2022 is targeted at 320,000 - 340,000 ounces, with production then
expected to grow to over 400,000 ounces in 2023.
Fosterville: After achieving substantial growth
in 2019 with the ramp up of production from the high-grade Swan
Zone, production at Fosterville is expected to sustain levels at
550,000 - 600,000 ounces per year over the next three years.
Production guidance for Fosterville includes 590,000 - 610,000
ounces in 2020 and 550,000 - 600,000 ounces in both 2021 and 2022,
with the potential existing for a new source of production at
Robbin’s Hill commencing in 2023.
Q4 and Full-Year 2019 Financial Results
and Conference Call Details
A conference call to discuss the Q4 and 2019
results will be held by senior management on Thursday, February 20,
2020, at 7:30 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: |
THURSDAY, FEBRUARY 20, 2020 |
Conference ID: |
3176967 |
Time: |
7:30 am ET |
Toll-free number: |
(833) 241-7254 |
International callers: |
(647) 689-4218 |
Webcast URL: |
https://event.on24.com/wcc/r/2152312/C7CA1F26C1E84F688BEA79BA11137F0B |
Qualified Persons
The technical contents related to Kirkland Lake Gold Ltd. mines
and properties, have been reviewed and approved by Natasha Vaz,
P.Eng., Vice President, Technical Services, Eric Kallio, P.Geo,
Senior Vice President, Exploration and Ian Holland, FAusIMM, Vice
President, Australian Operations. Ms. Vaz, Mr. Kallio and Mr.
Holland are “qualified persons” as defined in National Instrument
43-101 and have reviewed and approved disclosure of the technical
information and data in this press release.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a growing gold
producer operating in Canada and Australia that produced 974,615
ounces in 2019, with target production for 2020 of 1,470,000 –
1,540,000 ounces. 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.klgold.com.
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 CapitalSustaining 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 foreign exchange gains and losses, 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 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 (which assume accuracy of
projected grade, recovery rates, and tonnage estimates and may be
impacted by unscheduled maintenance, labour and other operating,
engineering or technical difficulties with respect to the
development of its projects, many of which may not be within the
control of the Company), 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; changes in applicable laws and regulations
(including tax legislation); regulatory; tax matters and foreign
mining tax regimes, as well as health, safety, environmental and
cybersecurity 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 and paste fill plant project at
the Fosterville Mine; permitting; 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, 2019 and 2018 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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