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
third quarter (“Q3 2018”) and first nine months (“YTD 2018”) of
2018. During Q3 2018, the Company achieved strong growth in
revenue, net earnings and cash flow compared to the third quarter
of 2017 (“Q3 2017”), and made significant progress with its key
growth projects. The Company also announced today revisions to
full-year 2018 guidance, including improved consolidated guidance
for full-year 2018 production of 655,000 – 670,000 ounces,
operating cash costs per ounce sold of $385 – $410 and all-in
sustaining cost (“AISC”) per ounce sold of $735 – $760. 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 Q3 2018 results include:
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• |
Strong year-over-year earnings growth: Net
earnings totaled $55.9 million ($0.27 per basic share “/share”),
while adjusted net earnings1 were $60.6 million ($0.29/share).
(Adjusted net earnings exclude non-cash, mark-to-market loss
related to fair valuing warrants.) Net earnings in Q3 2018
increased 28% from $43.7 million ($0.21/share) in Q3 2017 and
compared to $61.5 million ($0.29/share) the previous quarter. |
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• |
Increased free cash flow:1 Free cash flow of
$52.2 million increased 41% from $37.1 million in Q3 2017 and
compared to $60.7 million in Q2 2018. |
|
• |
Record quarterly cash flow from operations: Record
cash provided by operating activities2 of $128.4 million, 77%
increase from $72.4 million in Q3 2017 and 6% higher than $120.9
million the previous quarter. |
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• |
Record gold sales drive revenue growth: Revenue
totaled $222.7 million, 26% increase from $176.7 in Q3 2017 and 4%
higher than $214.7 million in Q2 2018, reflecting record gold sales
of 184,517 ounces, which more than offset reductions of $78/ounce
and $97/ounce in the average realized gold price versus Q3 2017 and
Q2 2018, respectively. |
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• |
Solid year-over-year increase in EBITDA:1,2,3
EBITDA of $119.6 million, 20% increase from $99.7 million in Q3
2017 and compared to record EBITDA of $123.7 million in Q2
2018. |
|
• |
Record low unit costs: Production costs totaled
$64.9 million in Q3 2018. Operating cash costs per ounce sold1
averaged $351, a 27% improvement from $482 in Q3 2017 and 13%
better than $404 in Q2 2018. AISC per ounce sold1 averaged $645,
24% better than $845 in Q3 2017 and 15% improvement from $757 the
previous quarter. |
|
• |
Growth projects ramp up: Growth capital
expenditures totaled $33.2 million, excluding capitalized
exploration expenditures, compared to $7.5 million in Q3 2017 and
$11.1 million the previous quarter. Of total growth capital
expenditures, $21.5 million were incurred at Macassa, where work on
the #4 Shaft project included shaft collaring and advancing hoist
and headframe construction. |
|
• |
Continued exploration success: Exploration
expenditures totaled $25.6 million ($69.5 million for YTD 2018),
including capitalized exploration expenditures. Recent exploration
results include exceptionally high-grade intersections from
drilling in the Swan Zone at Fosterville and the South Mine Complex
at Macassa, highlighting the potential for continued growth in
Mineral Reserves and Mineral Resources. |
|
• |
Cash at September 30, 2018 of $257.2 million, 11%
increase from $231.6 million at December 31, 2017. |
|
• |
Quarterly dividend increased on May 2, 2018 to
C$0.03/share effective the second quarter 2018 quarterly dividend
payment, paid on July 13, 2018, Q3 2018 quarterly dividend payment
paid October 12, 2018. |
|
|
- See “Non-IFRS Measures” later in this press release and
starting on page 35 of the Company’s MD&A for the three and
nine months ended September 30, 2018.
- Of continuing operations.
- Refers to Earnings before Interest, Taxes, Depreciation, and
Amortization.
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Key highlights of YTD 2018 results include:
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• |
Record nine-month financial results: |
|
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o |
Net earnings of $167.4 million ($0.79/share), 83% increase from
$91.4 million ($0.44/share) for YTD 2017 |
|
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o |
Adjusted net earnings of $176.6 million ($0.84/share), 92%
increase from $92.0 million ($0.44/share) for YTD 2017 |
|
|
o |
Net cash provided by operating activities of $338.9 million,
56% growth from $217.7 million for YTD 2017 |
|
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Free cash flow totaling $163.1 million, 29% higher than $126.8
million for YTD 2017 |
|
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Revenue of $635.6 million, 19% growth from YTD 2017, reflecting
both higher sales and gold prices |
|
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EBITDA of $343.9 million, 31% increase from $261.7 million
for YTD 2017. |
|
• |
Strong consolidated YTD production and unit-cost performance
leads to improved full-year 2018 guidance |
|
|
o |
YTD 2018 production of 492,484 ounces, 15% increase from YTD
2017 |
|
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Operating cash cost per ounce sold averaged $397, 22%
improvement from YTD 2017 |
|
|
o |
AISC per ounce sold averaged $738, 9% improvement from same
period in YTD 2017 |
|
|
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Improvements to full-year 2018 guidance for consolidated
production and unit costs were announced today and are listed
below. Additional revisions to full-year 2018 guidance are reviewed
in the section, “Revisions to Full-Year 2018 Guidance,” later in
this press release. |
|
|
|
- Consolidated production guidance increased to 655,000 – 670,000
ounces from over 635,000 ounces
- Operating cash cost per ounce sold guidance improved to $385 to
$410, from $400 – $425
- Consolidated AISC per ounce sold guidance improved to $735 –
$760 from $750 – $800.
|
Tony Makuch, President and Chief Executive
Officer of Kirkland Lake Gold, commented: “During Q3 2018, our team
turned in a strong performance and our mines continued to show
their quality and ability to generate profitability and cash flow.
Based on our performance year to date, we have been able to
announce significant improvements to our 2018 consolidated
production and unit cost guidance for a second time during the
year. In addition, Q3 2018 provided a clear demonstration of our
company’s ability to internally fund the growth projects needed to
reach our goal of a million ounces per year of production. We
generated over $50 million of free cash flow during the quarter at
the same time that gold prices declined and we ramped up growth
capital expenditures. At Macassa, work on our #4 shaft project
included sinking the shaft collar and completing the headframe
foundation in preparation for the concrete work to establish the
215-foot headframe, which commenced in early October and was
completed later in the month. We remain on track to commence
full-face shaft sinking of the #4 shaft by the second quarter of
next year. We also advanced the ventilation, paste-fill plant and
water treatment projects at Fosterville during Q3 2018, which
resulted in higher growth capital expenditures compared to the
previous quarter. In addition, we installed and commissioned a new
gravity circuit at the Fosterville Mill during Q3 2018 and have
since seen our recovery of gravity gold increase to well over 50%
of total ounces produced.
“Entering the fourth quarter, we are positioned
for a strong finish to 2018. Our operations are poised to deliver
another quarter of solid production, cost and financial results. We
will also continue our exploration programs and anticipate
releasing additional drill results before year end, building on the
encouraging results we have already announced from Fosterville,
Macassa, the Northern Territory and Taylor. While still finalizing
our budgets, we can look ahead to 2019 as another year of strong
results and progress, including higher levels of production,
continued low unit costs and solid financial performance. We also
expect additional growth in Mineral Reserves and Mineral Resources,
particularly at Fosterville, and will continue to accelerate
progress with our growth projects.”
Q3 2018 production of 180,155 ounces was a
quarterly record, increasing 30% from 139,091 ounces in Q3 2017 and
9% from 164,685 ounces in Q2 2018. The increase in production was
driven by Fosterville, which produced a record 90,618 ounces in Q3
2018, based on processing 113,101 tonnes at an average grade of
25.6 gram per tonne and average mill recoveries of 97.5%. Q3 2018
production increased 47% from 61,535 ounces in Q3 2017 and 17% from
77,462 ounces in Q2 2018. In early August 2018, a second gravity
circuit was commissioned at Fosterville, which resulted in a spike
in the flotation concentrate grade reflecting the recovery of
coarse-grain gold from low velocity zones of the grinding circuit.
Production from the Company’s Canadian operations in Q3 2018 was a
record 89,537 ounces. Macassa produced 55,582 ounces, a 15%
increase from 48,206 ounces in Q3 2017 and compared to record
quarterly production of 60,571 ounces the previous quarter. Holt
and Taylor produced 20,609 ounces and 13,333 ounces, respectively,
in Q3 2018, representing increases of 21% and 20% from Q3 2017 and
50% and 3%, respectively, from Q2 2018.
Review of Financial and Operating
Performance
The following discussion provides key summarized
consolidated financial and operating information for the three and
nine months ended September 30, 2018 and 2017. Results for the
three and nine months ended September 30, 2017 include production
and costs related to the Northern Territory operations in
Australia, which were placed on care and maintenance effective June
30, 2017. Also, results for Q3 and YTD 2017 have been restated to
exclude discontinued operations, related to the sale of the Stawell
Mine.
Table 1. Financial Highlights
(in
thousands of dollars, except per share amounts) |
Three months endedSeptember 30,
2018 |
Three months endedSeptember 30, 2017(Restated)(1) |
Nine months endedSeptember 30,
2018 |
Nine months endedSeptember 30, 2017(Restated)(1) |
Revenue |
$ |
222,701 |
|
$ |
176,709 |
|
$ |
635,591 |
|
$ |
535,131 |
|
Production costs |
|
64,851 |
|
|
66,497 |
|
|
202,828 |
|
|
220,032 |
|
Earnings before income
taxes |
|
82,977 |
|
|
65,735 |
|
|
244,974 |
|
|
149,991 |
|
Loss from discontinued
operations |
|
— |
|
|
(1,725 |
) |
|
— |
|
|
(7,750 |
) |
Net earnings |
$ |
55,885 |
|
$ |
43,742 |
|
$ |
167,408 |
|
$ |
91,446 |
|
Basic earnings per
share from continuing operations |
$ |
0.27 |
|
$ |
0.22 |
|
$ |
0.79 |
|
$ |
0.48 |
|
Diluted earnings per
share from continuing operations |
$ |
0.26 |
|
$ |
0.21 |
|
$ |
0.79 |
|
$ |
0.47 |
|
Total basic earnings
per share |
$ |
0.27 |
|
$ |
0.21 |
|
$ |
0.79 |
|
$ |
0.44 |
|
Total diluted earnings
per share |
$ |
0.26 |
|
$ |
0.20 |
|
$ |
0.79 |
|
$ |
0.44 |
|
Net cash provided by
operating activities of continuing operations |
$ |
128,383 |
|
$ |
72,360 |
|
$ |
338,932 |
|
$ |
217,705 |
|
Cash investment in mine
development and PPE |
$ |
76,190 |
|
$ |
35,298 |
|
$ |
175,878 |
|
$ |
90,894 |
|
(1) To reflect the sale of Stawell in December 2017 as a
discontinued operation.
Table 2. Operating Highlights
|
Three months ended September 30,
2018 |
Three months endedSeptember 30, 2017(Restated)(1) |
Nine months endedSeptember 30,
2018 |
Nine months endedSeptember 30, 2017 (Restated)(1) |
Tonnes milled |
|
435,600 |
|
|
448,251 |
|
|
1,259,142 |
|
|
1,519,196 |
|
Grade (g/t Au) |
|
13.3 |
|
|
10.1 |
|
|
12.6 |
|
|
9.2 |
|
Recovery (%) |
|
96.9 |
% |
|
95.6 |
% |
|
96.5 |
% |
|
95.5 |
% |
Gold produced (oz) |
|
180,155 |
|
|
139,091 |
|
|
492,484 |
|
|
429,822 |
|
Gold Sold (oz) |
|
184,517 |
|
|
137,908 |
|
|
496,585 |
|
|
427,017 |
|
Average realized price
($/oz sold)(2) |
$ |
1,204 |
|
$ |
1,282 |
|
$ |
1,275 |
|
$ |
1,255 |
|
Operating cash costs
per ounce ($/oz sold)(2) |
$ |
351 |
|
$ |
482 |
|
$ |
397 |
|
$ |
508 |
|
AISC ($/oz
sold)(2) |
$ |
645 |
|
$ |
845 |
|
$ |
738 |
|
$ |
811 |
|
Adjusted net earnings
from continuing operations(2) |
$ |
60,576 |
|
$ |
35,366 |
|
$ |
176,578 |
|
$ |
92,020 |
|
Adjusted net earnings
per share from continuing operations(2) |
$ |
0.29 |
|
$ |
0.17 |
|
$ |
0.84 |
|
$ |
0.44 |
|
(1) |
To reflect the sale of
Stawell in December 2017 as a discontinued operation. |
(2) |
Non-IFRS - the
definition and reconciliation of these Non-IFRS measures are
included on pages 35-40 of this MD&A. |
Revenue
Revenue in Q3 2018 totaled $222.7 million, an
increase of $46.0 or 26% from $176.7 million in Q3 2017. Compared
to Q3 2017, higher gold sales in Q3 2018 increased revenue by $59.8
million, with a total of 184,517 ounces sold in Q3 2018 versus
137,908 ounces being sold in Q3 2017. The increase is gold sales
was largely attributable to Fosterville, where ounces sold grew by
53%, to 96,539 ounces from 62,998 ounces in Q3 2017, driven by
record quarterly production of 90,618 ounces in Q3 2018. Gold sales
at Macassa increased 22%, to 54,103 ounces from 44,456 ounces in Q3
2017, while ounces sold at the Holt and Taylor mines increased 24%
and 18%, to 20,212 and 13,655 ounces, respectively. Partially
offsetting the favourable impact of higher gold sales was a $78 per
ounce or 6% decline in the average realized gold price per ounce,
to $1,204 in Q3 2018 from $1,282 in Q3 2017, which reduced revenue
by $14.3 million in Q3 2018 compared to Q3 2017. There was also a
$0.5 million favourable impact on revenue from foreign exchange
rate changes year over year.
Q3 2018 revenue increased $8.0 million or 4%
from $214.7 million in Q2 2018. A 12% increase in gold sales, from
164,305 ounces in Q2 2018 to 184,517 ounces in Q3 2018, had a $26.3
million favourable impact on revenue compared to the previous
quarter. This favourable impact was largely offset by a $17.9
million negative impact on revenue from a 7% reduction in the
average realized gold price per ounce ($1,204 in Q3 2018 versus
$1,301 in Q2 2018). There was also a $0.4 million reduction related
to foreign exchange rate changes.
Revenue for YTD 2018 totaled $635.6 million, an
increase of $100.5 million or 19% from $535.1 million for the same
period in 2017. Contributing to the $100.5 million increase in
revenue was a $87.3 million favourable impact from a 16% increase
in gold sales, to 496,585 ounces from 427,017 ounces for the same
period in 2017. In addition, a $20 per ounce or 2% increase in the
average realized gold price per ounce, to $1,275 for YTD 2018
versus $1,255 for YTD 2017, increased revenue by $10.0 million for
YTD 2018 versus YTD 2017. There was also a $3.2 million favourable
impact from changes to foreign exchange rates on YTD revenue year
over year. The increase in gold sales for YTD 2018 mainly resulted
from strong sales growth at both Fosterville and Macassa. Gold
sales at Fosterville totaled 233,139 ounces, a 31% increase from
178,315 ounces for YTD 2017. At Macassa YTD 2018 gold sales totaled
170,191 ounces versus 143,254 ounces for the same period in 2017.
The increases in gold sales at both Fosterville and Macassa
reflected strong production growth at both mines due to significant
improvement the average grades for YTD 2018 versus YTD 2017.
Earnings from Mine Operations
Earnings from mine operations in Q3 2018 totaled
$115.3 million, an increase of $41.9 million or 57% from $73.4
million in Q3 2017 and $5.8 million or 5% higher than $109.5
million the previous quarter. The increase from the same period in
2017 mainly reflected strong revenue growth. Production costs in Q3
2018 totaled $64.9 million, compared to production costs of $66.5
million in Q3 2017, which included $5.8 million of production costs
for the Northern Territory operations, which were placed on care
and maintenance effective June 30, 2017. Depletion and depreciation
costs in Q3 2018 totaled $36.0 million, which compared to $31.7
million in Q3 2017 as the impact of higher gold production was
partially offset by a significant increase in the level of Mineral
Reserves and Mineral Resources at the Company’s operations
following the release of the Company’s December 31, 2017 Mineral
Reserve and Mineral Resource estimates on February 20, 2018.
Royalty expense in Q3 2018 totaled $6.6 million versus $5.1 million
in Q3 2017, with the increase mainly reflecting higher sales
volumes. The increase in earnings from mine operations from the
previous quarter related to revenue growth as well as lower
production costs, with the reduction in production costs mainly at
Macassa, reflecting the increased use of long-hole stoping mining
methods and reduced maintenance expenses. These favourable factors
were partially offset by higher levels of depletion and
depreciation expense and royalty costs in line with greater
production and sales volumes during Q3 2018.
For YTD 2018, earnings from mine operations
totaled $317.5 million, a $120.6 million or 61% increase from
$196.9 million for the same period in 2017. The increase reflected
revenue growth of 19%, as well as lower production costs and
depletion and depreciation costs. Lower production costs for YTD
2018 reflected the inclusion of $37.4 million of production costs
related to the Northern Territory operations in the first nine
months of 2017. A $6.6 million reduction in depletion and
depreciation expense resulted from the increase in Mineral Reserves
and Mineral Resources included in the December 31, 2017 Mineral
Reserve and Mineral Resource estimates. Royalty costs for YTD 2018
totaled $18.8 million compared to $15.2 million for YTD 2017, with
the increase reflecting higher sales volumes in YTD 2018.
Unit Cost Performance (See Non-IFRS measures)
Operating cash costs per ounce sold averaged
$351 in Q3 2018, a 27% improvement from $482 in Q3 2017 largely
reflecting an 82% improvement in the average grade at Fosterville
compared to the third quarter a year earlier. Operating cash costs
per ounce sold at Fosterville were $189 per ounce, a 36%
improvement from $295 per ounce in Q3 2017. At Macassa, operating
cash costs per ounce in Q3 2018 averaged $439, a 16% improvement
from $521 for the same period in 2017, with a 16% improvement in
the average grade largely accounting for the lower operating cash
costs per ounce. Compared to the previous quarter, operating cash
costs per ounce sold improved 13% from $404 in Q2 2018, with the
quarter-over-quarter improvement mainly reflecting the impact of a
higher average grade at Fosterville on the mine’s operating cash
costs. Fosterville’s operating cash costs per ounce sold in Q3 2018
was 21% better than the previous quarter ($239 in Q2 2018).
AISC per ounce sold in Q3 2018 averaged $645
compared $845 in Q3 2017, with the significant improvement largely
resulting from the 27% improvement in operating cash costs per
ounce sold compared to Q3 2017. Also contributing to the
improvement were lower sustaining capital expenditures on a per
ounce sold basis, reflecting higher sales volumes in Q3 2018
compared to the same period a year earlier. Sustaining capital
expenditures totaled $41.4 million or $224 per ounce sold in Q3
2018, which compared to $38.3 million or $278 per ounce sold in Q3
2017. Q3 2018 AISC per ounce sold improved 15% from $757 the
previous quarter. In addition to the improvement in operating cash
costs per ounce sold, the increase related mainly to lower levels
of sustaining capital expenditures, which in Q2 2018 totaled $44.1
million or $268 per ounce.
For YTD 2018, operating cash costs per ounce
sold averaged $397, a 22% improvement from $508 for YTD 2017, with
the improvement mainly reflecting higher average grades at
Fosterville and Macassa. AISC per ounce sold for YTD 2018
averaged $738, 9% better than AISC per ounce sold of $811 for
YTD 2017. Sustaining capital expenditures for YTD 2018 totaled
$127.6 million or $257 per ounce sold, which compared to $96.1
million or $225 per ounce sold for YTD 2017. Higher sustaining
capital expenditures were included in the Company’s 2018 budget and
related mainly to planned investments at Fosterville intended to
support multiple years of production, including extensive
underground development to establish new sources of production and
purchases of new mobile equipment.
Additional Expenses
Exploration and evaluation expenditures
(expensed) in Q3 2018 were $20.3 million, 22% higher than $16.7
million in Q3 2017. The year-over-year increase reflected the
Company’s significant commitment to organic growth through
continued exploration success. Exploration and evaluation
expenditures in Q3 2018 compared to $15.8 million in Q2 2018.
Exploration and evaluation expenditures (expensed) for YTD 2018
totaled $52.8 million, a 45% increase from $36.4 million for YTD
2017. Exploration and evaluation expenditures for YTD 2018 included
$44.8 million in Australia, including $26.1 million in the Northern
Territory and $18.6 million at Fosterville, and $8.0 million in
Canada, divided between Taylor and Macassa.
Corporate G&A expense (excluding share-based
payments expense and transaction costs) totaled $5.6 million in Q3
2018, unchanged from Q3 2017 and compared to $5.8 million for the
previous quarter. For YTD 2018, corporate G&A expense totaled
$18.3 million versus $15.6 million for the same time in 2017. The
level of corporate G&A expense for corporate YTD 2018 largely
reflected the weighting of legal and audit fees and incentive
compensation expense to the first half of the year.
Share based payment expense in Q3 2018 totaled
$0.5 million, compared to $1.0 million in Q3 2017 and $1.6 million
the previous quarter. YTD 2018 share based payment expense totaled
$3.9 million versus $3.3 million for YTD 2017.
Other loss/income had a significant impact on
the comparison of net earnings in Q3 2018 to Q3 2017 and Q2 2018.
Other loss in Q3 2018 totaled $5.8 million compared to other income
of $21.3 million in Q2 2017 and other income of $4.3 million the
previous quarter. The main factor contributing to other loss in Q3
2018 was a $6.4 million pre-tax mark-to-market loss on the fair
valuing of the Company’s common share purchase warrants, with most
of the loss relating to the Company’s 14.0 million Novo warrants.
Partially offsetting the impact of the mark-to-market loss were
unrealized and realized foreign exchange gains of $0.6 million,
mainly resulting from the Australian dollar weakening against the
US dollar during the quarter. Q3 2017 other income of $21.3 million
largely reflected a $19.5 million pre-tax mark-to-market gain on
fair valuing the Company warrants. Other income for the previous
quarter of $4.3 million mainly reflected unrealized and realized
foreign exchange gains of $6.5 million, which was partially offset
by a $2.7 million pre-tax mark-to-market loss on fairing valuing
the Company’s warrants. For YTD 2018, other income totaled $3.9
million, as realized and unrealized foreign exchange gains of $11.0
million were only partially offset by a $7.3 million pre-tax
market-to-market loss on the fair valuing of warrants. YTD 2017
other income of $22.0 million mainly related to a $19.7 million
pre-tax mark-to-market gain on the fair valuing of warrants.
Finance costs in Q3 2018 totaled $0.7 million
versus $2.3 million in Q3 2017 and $1.1 million in Q2 2018. The
change in finance costs from Q3 2017 mainly related to the maturity
of the Company’s C$62.1 million 7.5% unsecured convertible
debentures ("7.5% convertible debentures") on December 31, 2017
(99% of the debentures were converted into Kirkland Lake Gold
common shares). Finance costs in Q3 2017 included interest payments
on the 7.5% convertible debentures prior to their maturity. The
reduction in finance costs from the previous quarter was due to
lower interest on finance leases and other bank charges. YTD 2018
finance costs totaled $2.5 million, which compared to $8.7 million
for YTD 2017. The year-to-date reduction related mainly to interest
payments in 2017 related to the 7.5% convertible debentures, as
well as the Company’s C$56.8 million 6% convertible debentures,
which matured and were repaid with existing cash on June 30,
2017.
Income tax expense in Q3 2018 included current
income tax expense of $8.0 million and deferred income tax expense
of $19.1 million. The deferred tax expense in Q3 2018 resulted from
the utilization of $24.6 million of deferred tax assets to reduce
current income tax expense, which was offset by $4.5 million of tax
recovery. In Q3 2017, current income tax expense totaled $12.0
million, while deferred income tax expense totaled $8.3 million.
For the previous quarter, the Company reported current income tax
expense of $10.5 million and deferred tax expense of $18.1 million.
The $18.1 million of deferred tax expense reflected the utilization
of $16.3 million of deferred tax assets to reduce current income
tax expense during Q2 2018. YTD 2018 current income tax expense
totaled $23.7 million, while deferred tax expense totaled $53.9
million. Deferred income tax expense for YTD 2018 reflected the
utilization of $53.3 million of deferred tax assets to reduce
current income tax expense. Income tax expense for YTD 2017
included $31.4 million of current income tax expense as well as
deferred income tax expense of $19.4 million.
Net Earnings in Q3 2018 total $55.9 million or $0.27 per basic
share
Net earnings in Q3 2018 totaled $55.9 million
($0.27 per basic share), an increase of $12.2 million or 28% from
$43.7 million ($0.21 per basic share) in Q3 2017. Net earnings in
Q3 2018 were entirely from continuing operations. Net earnings in
Q3 2017 included earnings from continuing operations of $45.5
million ($0.22 per basic share) and loss from discontinued
operations of $1.7 million ($0.01 per basic share), related to the
Company’s Stawell Mine, which was placed on care and maintenance in
December 2016 and sold on December 21, 2017. The 23% increase in
net earnings in Q3 2018 compared to earnings from continuing
operations in Q3 2017, mainly resulted from the impact of a $46.0
million or 26% increase in revenue, due to higher gold sales, which
more than offset a reduction in the average realized price. Also
contributing to the increase were lower finance costs and care and
maintenance expense. Partially offsetting these favourable factors
was other loss of $5.8 million in Q3 2018 versus other income of
$21.3 million in Q3 2017, with the $27.0 million variance mainly
related to fair valuing the Company’s warrants in both periods. The
Company also had higher depletion and depreciation expense in Q3
2018 compared to Q3 2017, reflecting higher production volumes, and
an increase in exploration and evaluation expense, consistent with
the Company’s ongoing commitment to organic growth through
exploration success.
Q3 2018 net earnings compared to net earnings
for the previous quarter of $61.5 million ($0.29 per basic share).
As with Q3 2018 net earnings, Q2 2018 net earnings were entirely
from continuing operations. The comparison of net earnings in Q3
2018 to Q2 2018 was significantly influenced by the change in the
average realized gold price, with the $97 per ounce or 7% reduction
quarter over quarter having a negative impact of $17.8 million on
the Company’s revenue and largely offsetting the favourable impact
of higher gold sales. Also contributing to the change in net
earnings in Q3 2018 versus Q2 2018 was the Q3 2018 other loss of
$5.8 million, which compared to other income of $4.3 million in Q2
2018, with the latter mainly due to unrealized and realized foreign
exchange gains. The Company also recorded an increase in
exploration and evaluation expense as well as depletion and
depreciation costs in Q3 2018 compared to the previous quarter.
Net earnings for YTD 2018 totaled $167.4 million
($0.79 per basic share), an increase of $76.0 million or 83% from
net earnings of $91.4 million ($0.44 per basic share) for YTD 2017.
Net earnings for YTD 2018 were entirely from continuing operations,
whereas net earnings for YTD 2017 included earnings from continuing
operations of $99.2 million ($0.48 per basic share) and loss from
discontinued operations of $7.8 million ($0.04 per basic share)
related to the Company’s Stawell Mine. The increase in net earnings
compared to YTD 2017 earnings from continuing operations reflected
a $100.5 million or 19% increase in revenue, due to both higher
volumes and realized gold prices. Also contributing to the increase
in net earnings from continuing operations were lower production
costs, reduced depletion and depreciation expense, as well as
reductions in care and maintenance and finance costs. Partially
offsetting these factors were lower other income, increased
exploration and evaluation expense and higher corporate G&A
expense.
Adjusted net earnings (Non-IFRS) in Q3 2018 total $60.6 million
or $0.29 per basic share
The Company’s adjusted net earnings for Q3 2018
totaled $60.6 million ($0.29 per basic share), which compared to
adjusted net earnings of $35.4 million ($0.17 per basic share) in
Q3 2017. The difference between adjusted net earnings and net
earnings in Q3 2018 mainly reflected the exclusion of a $6.4
million pre-tax mark-to-market loss ($4.7 million on an after-tax
basis) on the fair valuing the Company’s warrants. The difference
between adjusted net earnings and net earnings in Q3 2017 related
to the exclusion from adjusted net earnings of $14.1 million of
pre-tax mark-to-market gains ($10.4 million on an after-tax basis)
on the fair valuing of the Company’s warrants, as well as the
exclusion of a $1.7 million loss from discontinued operations and
severance payments made during the quarter of $0.4 million ($0.3
million on an after-tax basis).
Adjusted net earnings in Q3 2018 compared
adjusted net earnings in Q2 2018 of $63.4 million ($0.30 per basic
share). The difference between adjusted net earnings and net
earnings in Q2 2018 mainly reflected the exclusion of a $2.7
million pre-tax mark-to-market loss ($2.0 million on an after-tax
basis) on fair valuing the Company’s warrants from adjusted net
earnings.
For YTD 2018, adjusted net earnings totaled
$176.6 million ($0.84 per basic share), which compared to adjusted
net earnings of $92.0 million ($0.44 per basic share) for YTD 2017.
The difference between adjusted net earnings and net earnings for
YTD 2018 reflected the exclusion from adjusted net earnings of the
$7.3 million pre-tax mark-to-market loss ($5.4 million on an
after-tax basis) related to fair valuing the Company’s warrants, as
well as $5.4 million related to pre-tax purchase price allocation
adjustments on inventories ($3.8 million after tax). The difference
between adjusted net earnings for YTD 2017 and net earnings for the
same period mainly resulted from the exclusion of $14.1 million of
pre-tax gains ($10.4 million after tax) related to fair valuing the
Company’s warrants, loss from discontinued operations of $7.8
million (after-tax), $2.6 million of pre-tax purchase-price
allocation adjustments on inventories ($1.8 million on an after-tax
basis), $1.5 million of pre-tax severance payments ($1.1 million on
an after-tax basis) and $0.4 million ($0.3 million on an after-tax
basis) of transaction costs related to acquisitions in 2016.
Q3 2018 net cash provided by operating activities of continuing
operations of $128.4 million, free cash flow (Non-IFRS) totals
$52.2 million
In the Company’s Q2 2018 MD&A and condensed
consolidated financial statements, issued on August 1, 2018,
reported cash totaled $318.4 million and included the release of
$19.8 million of previously-restricted cash related to security
requirements for rehabilitation performance guarantees in
Australia. The Company’s Q3 2018 MD&A, as well as the condensed
consolidated financial statements for the three and nine months
ended September 30, 2018, report the $20.3 million (revised amount
reflects foreign exchange and other items) as restricted cash for
the full nine months of YTD 2018, recognizing that the amount
continues to be required as collateral for letters of credit
related to rehabilitation performance guarantees. The Company is
currently considering other forms of collateral and, should they be
obtained, would be in a position to release the $20.3 million from
restricted cash. As a result, cash at June 30, 2018 is reported as
$298.5 million in the Company’s Q3 2018 MD&A and the condensed
consolidated interim financial statements for the three and nine
months ended September 30, 2018.
Cash totaled $257.2 million at September 30,
2018, which compared to $298.5 million at June 30, 2018. The
reduction in cash in Q3 2018 reflected a number of uses of cash
that more than offset the impact of record quarterly cash flow from
operating activities from continuing operations, as well as the
utilization of tax losses to reduce the level of current income
taxes paid. Among the main uses of cash during Q3 2018, a total of
$130.3 million was used for investing activities, which included
increased capital expenditures as progress with the Company’s
growth projects ramped up during Q3 2018, and the use of $47.8
(C$62.5) of cash to acquire 32.6 million common shares of Osisko.
An additional $37.9 million was used for financing activities,
including $29.8 (C$38.9) million to repurchase 1,570,600 common
shares through the Company’s normal course issuer bid, $4.8 million
for quarterly dividend payments and $4.0 million used to meet
finance lease obligations. There was also a $1.5 million use of
cash related to foreign exchange changes.
Net cash provided by operating activities of
continuing operations in Q3 2018 of $128.4 million was $56.0
million or 77% higher than net cash provided by operating
activities of continuing operations of $72.4 million in Q3 2017 and
increased $7.5 million or 6% from cash provided by operating
activities of continuing operations of $120.9 million in Q2 2018.
Free cash flow in Q3 2018 totaled $52.2 million, an increase of
$15.1 million or 40% from Q3 2017. Q3 2018 free cash flow compared
to Q2 2018 free cash flow of $60.7 million, with the change mainly
related to higher levels of growth capital expenditures in Q3 2018,
reflecting progress with the Company’s key growth projects,
partially offset by increased levels of cash flow from operating
activities of continuing operations in Q3 2018.
The Company’s cash position of $257.2 million at
September 30, 2018 compared to total cash of $231.6 million at
December 31, 2017. Contributing to the 11% increase in cash was
cash provided by operating activities of $338.9 million, mainly
reflecting the impact of strong revenue growth, as well as the
utilization of tax losses which reduced current income taxes paid
during the first nine months of 2018. These factors were partially
offset by cash used for investing activities of $244.8 million,
which reflected increased capital expenditures as the Company
invested to advance its growth projects, as well as the investment
of $47.8 million of cash to acquire 32.6 million common shares of
Osisko in Q3 2018 and $16.1 (C$20.0) million of cash to acquire
four million common shares of Novo in Q2 2018. The Company also
used $58.3 million for financing activities, including $30.8
(C$40.3) million to repurchase 1,640,000 of the Company’s common
shares, $19.5 million for the payment of finance lease obligations
and $11.5 million for quarterly dividend payments. There was also a
$10.2 million use of cash related to foreign exchange changes
during the first nine months of 2018.
Net cash provided by operating activities of
continuing operations for YTD 2018 totaled $338.9 million, a 56%
increase from $217.7 million for YTD 2017, with strong revenue
growth and improved unit costs being the key drivers of the
increase compared to YTD 2017. Free cash flows for YTD 2018 grew
29% from YTD 2017, to $163.1 million from $126.8 million for the
same period in 2017. The increase in free cash flow reflected the
growth in net cash provided by operating activities of continuing
operations, partially offset the impact of significantly higher
capital expenditures, mainly reflecting the commencement of a
number of key growth projects at Macassa and Fosterville in
2018.
Table 3. Review of Financial Performance
(in thousands except per share amounts) |
Three months endedSeptember 30,
2018 |
Three months endedSeptember 30, 2017(Restated)(1) |
Nine months endedSeptember 30,
2018 |
Nine months endedSeptember 30, 2017(Restated)(1) |
|
|
|
|
|
Revenue |
$ |
222,701 |
|
$ |
176,709 |
|
$ |
635,591 |
|
$ |
535,131 |
|
|
|
|
|
|
Production costs |
|
(64,851 |
) |
|
(66,497 |
) |
|
(202,828 |
) |
|
(220,032 |
) |
Royalty expense |
|
(6,600 |
) |
|
(5,120 |
) |
|
(18,835 |
) |
|
(15,196 |
) |
Depletion and
depreciation |
|
(35,968 |
) |
|
(31,686 |
) |
|
(96,400 |
) |
|
(103,034 |
) |
Earnings from mine operations |
|
115,282 |
|
|
73,406 |
|
|
317,528 |
|
|
196,869 |
|
|
|
|
|
|
Expenses |
|
|
|
|
General and
administrative(2) |
|
(6,021 |
) |
|
(6,980 |
) |
|
(22,249 |
) |
|
(18,807 |
) |
Transaction costs |
|
— |
|
|
— |
|
|
— |
|
|
(397 |
) |
Exploration and
evaluation |
|
(20,341 |
) |
|
(16,737 |
) |
|
(52,807 |
) |
|
(36,369 |
) |
Care and
maintenance |
|
(416 |
) |
|
(3,290 |
) |
|
(1,455 |
) |
|
(6,199 |
) |
Earnings from
operations |
$ |
88,504 |
|
$ |
46,399 |
|
$ |
241,017 |
|
$ |
135,097 |
|
Other income, net |
|
(5,759 |
) |
|
21,252 |
|
|
3,895 |
|
|
21,966 |
|
|
|
|
|
|
Finance and other
items |
|
|
|
|
Finance income |
|
914 |
|
|
403 |
|
|
2,575 |
|
|
1,596 |
|
Finance
costs |
|
(682 |
) |
|
(2,319 |
) |
|
(2,513 |
) |
|
(8,668 |
) |
Earnings before
taxes |
|
82,977 |
|
|
65,735 |
|
|
244,974 |
|
|
149,991 |
|
Current income tax
expense |
|
(8,001 |
) |
|
(11,976 |
) |
|
(23,673 |
) |
|
(31,358 |
) |
Deferred
tax expense |
|
(19,091 |
) |
|
(8,292 |
) |
|
(53,893 |
) |
|
(19,437 |
) |
|
|
|
|
|
Earnings from
continuing operations |
$ |
55,885 |
|
$ |
45,467 |
|
$ |
167,408 |
|
$ |
99,196 |
|
Loss from
discontinued operations |
|
— |
|
|
(1,725 |
) |
|
— |
|
|
(7,750 |
) |
Net
earnings |
$ |
55,885 |
|
$ |
43,742 |
|
$ |
167,408 |
|
$ |
91,446 |
|
|
|
|
|
|
Basic earnings per
share |
$ |
0.27 |
|
$ |
0.21 |
|
$ |
0.79 |
|
$ |
0.44 |
|
Diluted
earnings per share |
$ |
0.26 |
|
$ |
0.20 |
|
$ |
0.79 |
|
$ |
0.44 |
|
(1) |
These
figures are restated due to the sale of Stawell in December
2017. |
(2) |
G&A
expense for Q3 2018 (Q3 2017) include G&A of $5.6 million ($5.6
million in Q3 2017), severance payment of $nil ($0.4 million in Q3
2017) and share based payment expense of $0.5 million ($1.0 million
in Q3 2017). G&A expense for YTD 2018 (YTD 2017) include
G&A expenses of $18.3 million ($14.1 million in YTD 2017),
severance payment of $nil ($1.5 million in YTD 2017) and share
based payment expense of $3.9 million ($3.3 million in YTD
2017). |
YTD Performance Against 2018 Guidance
On January 17, 2018, Kirkland Lake Gold
announced its guidance for full-year 2018, which, compared to 2017,
included increased production levels, improved unit costs and
higher levels of capital and exploration expenditures. The increase
in capital and exploration expenditures was planned in support of
achieving the Company’s longer-term objective of growing annual
gold production over the next five to seven years to approximately
a million ounces. Based on the Company’s performance during the
first six months of 2018, full-year 2018 guidance was improved for
a number of key measures on August 1, 2018. Included in the
improvements to guidance were the following: consolidated
production guidance was increased to over 635,000 ounces from over
620,000 ounces; consolidated operating cash costs per ounce sold
guidance was improved to $400 - $425 from $425 - $450; production
and operating cash costs per ounce sold guidance for Fosterville
was improved to 275,000 - 300,000 ounces from 260,000 - 300,000 and
$250 - $270 from $270 - $290, respectively; and production and
operating cash costs per ounce sold guidance from Macassa was
improved to 220,000 - 225,000 ounces from 215,000 - 225,000 ounces
and to $460 - $480 from $475 - $500, respectively. Following
completion of the first nine months of 2018, the Company was well
positioned to achieve its consolidated production, cost and
expenditures guidance.
Table 4. 2018 Guidance (August 1, 2018)(1)
($ millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
Consolidated |
Gold production (kozs) |
220 - 225 |
60 - 70 |
65 - 75 |
275 - 300 |
+635 |
Operating cash costs/ounce sold
($/oz)(2) |
460 - 480 |
625 - 650 |
625 - 650 |
250 - 270 |
$400 - $425 |
AISC/ounce sold
($/oz)(2) |
|
|
|
|
$750 - $800 |
Operating cash costs(2) |
|
|
|
|
$260 - $270 |
Royalty costs |
|
|
|
|
$22 - $27 |
Sustaining capital(2) |
|
|
|
|
$150 - $170 |
Growth capital(2) |
|
|
|
|
$85 - $95 |
Exploration |
|
|
|
|
$75 - $90 |
Corporate G&A(3) |
|
|
|
|
$20 - $22 |
(1) |
Represents
the Company’s guidance for which the Company’s performance for the
three and nine months ended September 30, 2018 was measured
against, announced on August 1, 2018. |
(2) |
See
“Non-IFRS Measures” set out starting on page 35 of the MD&A for
the three and nine months ended September 30, 2018 for further
details. The most comparable IFRS Measure for operating cash costs,
operating cash costs per ounce sold and AISC per ounce sold is
production costs, as presented in the Consolidated Statements of
Operations and Comprehensive Income, and total additions and
construction in progress for sustaining and growth capital.
Operating cash costs, operating cash cost per ounce sold and AISC
per ounce sold reflect an average US$ to C$ exchange rate of 1.28
and a US$ to A$ exchange rate of 1.31. |
(3) |
Includes
general and administrative costs and severance payments. Excludes
non-cash share-based payment expense. |
Table 5. YTD 2018 Results
($
millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
Consolidated(1) |
Gold
production (ozs) |
170,190 |
39,328 |
50,996 |
231,923 |
492,484 |
Operating cash costs/ounce sold ($/oz)(2) |
$449 |
$767 |
$681 |
$231 |
$397 |
AISC/ounce sold ($/oz)(2) |
|
|
|
|
$738 |
Operating cash costs(2) |
|
|
|
|
$197.2 |
Royalty costs |
|
|
|
|
$18.8 |
Sustaining capital(2) |
|
|
|
|
$127.6 |
Growth capital(2) |
|
|
|
|
$48.9 |
Exploration |
|
|
|
|
$69.5 |
Corporate G&A expense(3) |
|
|
|
|
$18.3 |
(1) |
Consolidated 2018 production includes 47 ounces processed from the
Holloway Mine |
(2) |
See
“Non-IFRS Measures” set out starting on page 35 of this MD&A
for further details. The most comparable IFRS Measure for operating
cash costs, operating cash costs per ounce sold and AISC per ounce
sold is production costs, and total additions and construction in
progress for sustaining and growth capital as presented in the
Consolidated Statements of Operations and Comprehensive Income.
Operating cash costs, operating cash cost per ounce sold and AISC
per ounce sold reflect an average US$ to C$ exchange rate of 1.2875
and a US$ to A$ exchange rate of 1.3194. |
(3) |
Includes
general and administrative costs and severance payments. Excludes
non-cash share-based payment expense. |
Key Highlights of YTD 2018 Performance Compared to Guidance
Consolidated gold production of
492,484 ounces for YTD 2018 surpassed target levels for the first
nine months of the year and compared favourably to the Company’s
full-year 2018 guidance of over 635,000 ounces of gold production.
Production for YTD 2018 was driven by record nine-month production
at both Fosterville and Macassa. For YTD 2018, production at
Fosterville and Macassa totaled 231,923 ounces and 170,190 ounces,
respectively, representing growth of 26% and 19%, respectively,
from the comparable nine-month period in 2017. At the Holt Mine,
total production for YTD 2018 was 50,996 ounces, an 8% increase
from YTD 2017 and in line with target levels for the first nine
months of 2018. The Taylor Mine produced 39,328 ounces in YTD 2018,
a 15% improvement from the first nine months of 2017. Production at
Taylor is expected to increase in the fourth quarter from average
levels in the first three quarters of the year, but is unlikely to
achieve the full-year 2018 guidance as at August 1, 2018 of 60,000
- 70,000 ounces.
Production costs for YTD 2018
totaled $202.8 million. Operating cash costs for YTD 2018 of $197.2
million were in line with the Company’s 2018 guidance range of $260
- $270 million and compared to $217.0 million for YTD 2017.
Operating cash costs for YTD 2017 included $37.4 million of
production costs for the Northern Territory, of which $31.5 million
were incurred prior to the operation being place on care and
maintenance effective June 30, 2017, with the remainder being
incurred in Q3 2017.
Operating cash costs per ounce
sold for YTD 2018 of $397 were better than the Company's
guidance for full- year 2018 of $400 - $425. Operating cash costs
per ounce sold at Fosterville for YTD 2018 averaged $231, better
than the improved target range of $250 - $270 reflecting higher
than planned grades throughout much of the year to date. Operating
cash costs per ounce sold at Macassa were also better than
full-year 2018 guidance, averaging $449 versus full-year guidance
of $460 - $480. Operating cash costs per ounce sold at the Holt and
Taylor mines averaged $681 and $767, respectively, above each
mine’s guidance for full-year 2018.
AISC per ounce sold of $738 for
YTD 2018 was better than the Company’s full-year 2018 guidance of
$750 - $800, and a 9% improvement from $811 for YTD 2017. AISC per
ounce sold at Fosterville for YTD 2018 averaged $498, while AISC
per ounce sold at Macassa averaged $739.
Royalty costs totaled $18.8
million for YTD 2018, in line with full-year 2018 guidance of $22 -
$27 million.
Sustaining capital expenditures
for YTD 2018 totaled $127.6 million, which compared to sustaining
capital expenditures of $96.1 for YTD 2017. The Company remains on
track to achieve full-year 2018 guidance of $150 - $170
million.
Growth capital expenditures for
YTD 2018 totaled $48.9 million, excluding capitalized exploration
expenditures. Of total year-to-date growth capital expenditures as
at September 30, 2018, $33.2 million or 68% of the total were
incurred during Q3 2018 as work ramped up at a number of projects.
Included in YTD 2018 growth capital expenditures were $29.1 million
at Macassa ($21.5 million in Q3 2018), $14.3 million of
expenditures at Fosterville ($7.5 million in Q3 2018), $4.0 million
in the Northern Territory ($3.6 million in Q3 2018) and $1.5
million ($0.6 million in Q3 2018) split between the Holt and Taylor
mines. A significant contributor to increased growth capital
expenditures in Q3 3018 was significant work on the Macassa #4
shaft project, with work during the quarter including completing
the shaft collar, constructing the hoist room foundations and
preparing the foundations and installing the winch in advance of
pouring concrete for the headframe construction early in Q4 2018.
At Fosterville, expenditures related to the mine’s three key growth
projects, a new ventilation system, construction of a paste-fill
plant and a new water treatment plant, also increased during Q3
2018. In addition, in August, the Fosterville Mine completed and
commissioned a second gravity gold circuit in the Fosterville Mill,
which resulted in an immediate and significant impact on the amount
of coarse gold being recovered through the mill.
Exploration expenditures
totaled $69.5 million for YTD 2018. Included in YTD exploration
expenditures were $52.8 million of expensed exploration
expenditures and $16.7 million of capitalized exploration
expenditures. Of YTD exploration expenditures, $61.5 million, or
88% of the total, have been incurred in Australia, with the
remaining $8.0 million being incurred at the Macassa and Taylor
mines in Canada. At Fosterville, exploration work focused on infill
and extension drilling at a number of in-mine targets, as well as
work to evaluate district targets in close proximity to the mine.
In addition, development of an exploration drift at Harrier South
at Fosterville commenced during Q2 2018, and was largely completed
by the end of Q3 2018. Drilling from the new drift began in
October, in order to test the depth potential of the Harrier South
system, where concentrations of quartz veining with high
occurrences of visible gold have previously been intersected
similar to those found at the Lower Phoenix system near the
high-grade Swan Zone. In the Northern Territory, drilling and
development continued at the Lantern Deposit at the Cosmo mine,
with drilling programs also ongoing at the Prospect and Crosscourse
open pits at Union Reefs. In Canada, underground drilling at
Macassa continued to generate encouraging results in support of
future growth in Mineral Resources and Mineral Reserves, while
drilling at Taylor continued to target additional expansion of
mineralization around the Shaft and West Porphyry deposits.
Corporate G&A expense
totaled $18.3 million for YTD 2018, which compared to full-year
2018 guidance of $20 - $22 million.
Revisions to Full-Year 2018 Guidance
The Company reviews full-year guidance once a
quarter, as part of the preparation and approval of its
consolidated financial statements and MD&A for the quarterly
financial and operating results. Based on the Company’s
year-to-date 2018 results as at September 30, 2018, as well as
expectations for the remainder of the year, the Company has made a
number of revisions to full-year 2018 guidance, both at the
consolidated and operational level. Consolidated full-year 2018
production guidance has improved for the second time during 2018
and is now targeted at 655,000 - 670,000 ounces compared to the
August 1, 2018 target of over 635,000 ounces and the initial
target, effective January 17, 2018, of over 620,000 ounces.
Likewise, full-year 2018 guidance for consolidated operating cash
costs per ounce sold has also improved for the second time during
the year, to $385 - $410 from $400 - $425 as at August 1, 2018. The
Company’s full-year 2018 guidance for AISC per ounce sold has
improved to $735 - $760 from $750 - $800. In addition, consolidated
full-year 2018 guidance for growth capital expenditures has been
increased to $110 - $115 million from $85 - $95 million. The
increase reflects the anticipation of significant growth capital
expenditures during Q4 2018 at Macassa, reflecting the accelerated
delivery of the hoists, and other large components, for the #4
shaft project during the quarter, as well as capital expenditures
for new projects, including investment in a new thickened tailings
facility. Full-year 2018 guidance for exploration expenditures has
been revised to approximately $90 million from $75 – $90 million,
while corporate G&A guidance has also been revised to
approximately $25 million from $20 - $22 million.
At the operational level, revisions to full-year
2018 guidance have been made for three of the Company’s operating
mines. At Fosterville, full-year 2018 guidance for production has
been improved for the second time in 2018, to 300,000 - 310,000
ounces from 275,000 - 300,000 ounces as at August 1, 2018. The
mine’s operating cash cost per ounce sold guidance has also
improved for the second time during the year, to $230 - $250 from
the August 1, 2018 guidance of $250 - $270. Macassa’s operating
cash costs per ounce guidance has also improved for a second time
in 2018, to $450 - $470 from the August 1, 2018 target of $460 -
$480. At Taylor, full-year 2018 production guidance has been
revised to 50,000 - 55,000 ounces from the January 17, 2018
guidance of 60,000 -70,000 ounces, while operating cash cost per
ounce sold guidance has been revised to $750 - $775 from the
January 17, 2018 guidance of $625 - $650. The revisions to
production and operating cash cost per ounce sold guidance at
Taylor largely reflects reduced stope sizes and lower than expected
grades in 2018. Other components of the Company’s full-year 2018
guidance remain unchanged from the targets released in the Kirkland
Lake Gold News Release dated August 1, 2018.
Revised 2018 Guidance (as at September 30,
2018)(1)
($
millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
Consolidated |
Gold production (kozs) |
220 – 225 |
50 – 55 |
65 – 75 |
300 – 310 |
655 – 670 |
Operating cash costs/ounce sold ($/oz)(2) |
450 – 470 |
750 - 775 |
625 – 650 |
230 – 250 |
$385 – $410 |
AISC/ounce sold ($/oz)(2) |
|
|
|
|
$735 – $760 |
Operating cash costs(2) |
|
|
|
|
$260 – $270 |
Royalty costs |
|
|
|
|
$22 – $27 |
Sustaining capital(2) |
|
|
|
|
$150 – $170 |
Growth capital(2) |
|
|
|
|
$100 – $115 |
Exploration |
|
|
|
|
$90 |
Corporate
G&A(3) |
|
|
|
|
$25 |
(1) |
Full-year 2018 guidance as at September 30, 2018, following
revisions to consolidation production, AISC per ounce sold and
corporate G&A guidance; revisions to operating cash costs per
ounce sold guidance for each of the Company’s four operating mines;
and revisions to full-year 2018 production guidance for the Taylor
Mine. |
(2) |
See
“Non-IFRS Measures” set out starting on page 35 of the MD&A for
the three and nine months ended September 30, 2018 for further
details. The most comparable IFRS Measure for operating cash costs,
operating cash costs per ounce sold and AISC per ounce sold is
production costs, as presented in the Consolidated Statements of
Operations and Comprehensive Income, and total additions and
construction in progress for sustaining and growth capital.
Operating cash costs, operating cash cost per ounce sold and AISC
per ounce sold reflect an average US$ to C$ exchange rate of 1.29
and a US$ to A$ exchange rate of 1.34. |
(3) |
Includes
general and administrative costs and severance payments. Excludes
non-cash share-based payment expense. |
Q3 2018 Financial Results and Conference
Call Details
A conference call to discuss the Q3 and YTD 2018
results will be held by senior management on Wednesday, October 31,
2018, 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, October 31,
2018 |
Conference ID: |
6592814 |
Time: |
8:00 am ET |
Toll-free number: |
(833) 241-7254 |
International callers: |
(647) 689-4218 |
Webcast URL: |
https://event.on24.com/wcc/r/1822279/6028C5351514369158F95452E33B0C1D |
Qualified Persons
Pierre Rocque, P.Eng., Vice President, Canadian
Operations and Ian Holland, FAusIMM, Vice President, Australian
Operations are “qualified persons” as defined in National
Instrument 43-101 and have reviewed and approved disclosure of the
technical information and data in this news release.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a mid-tier gold
producer that in 2018 is targeting 655,000 – 670,000 ounces of gold
production from mines in Canada and Australia. The production
profile of the company is anchored from two high-grade, low-cost
operations, including the Macassa Mine located in Northeastern
Ontario and the Fosterville Mine located in the state of Victoria,
Australia. Kirkland Lake Gold's solid base of quality assets is
complemented by district scale exploration potential, supported by
a strong financial position with extensive management and
operational expertise.
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. Refer to the Q2 2018
MD&A for the three months ended June 30, 2018 for the Q2 2018
non-IFRS reconciliations.
Free Cash Flow
In the gold mining industry, free cash flow is a
common performance measure with no standardized meaning. Free cash
flow is calculated by deducting capital cash spending (capital
expenditures for the period, net of expenditures paid through
finance leases) from cash flows from operations.
The Company discloses free cash flow from
continuing operations as it believes the measures provide valuable
assistance to investors and analysts in evaluating the Company’s
ability to generate cash flow. The most directly comparable measure
prepared in accordance with IFRS is cash flows generated from
operations and net cash used in investing activities of continuing
operations.
Operating Cash Costs and Operating Cash Costs
per Ounce Sold
Operating cash costs and operating cash cost 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 costs
per ounce sold is based on ounces sold and is calculated by
dividing operating cash costs by volume of ounces sold.
The Company discloses operating cash costs and
operating cash cost per ounce sold 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 sold 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.
AISC and AISC per Ounce Sold
AISC and AISC per ounce sold 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 from continuing operations
and adjusted net earnings per share from continuing operations 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, the
impact of discontinued operations 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 continuing operations represents net
earnings before interest, taxes, depreciation and amortization.
EBITDA from continuing operations 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, 2017 Annual Information
Form and the Company’s MD&A for the period ended December 31,
2017 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, 2017 and 2016 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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