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 2019”) and first nine months of 2019 (“YTD
2019”). The Q3 2019 results include record earnings and cash flows
driven largely by strong growth in gold production and improved
unit costs. The Company’s cash position increased $146.6 million or
31% during Q3 2019, totaling $615.8 million at September 30, 2019.
On November 6, 2019 the Company announced a $0.02 per share
increase to the quarterly dividend, to $0.06 per share, commencing
with the fourth quarter 2019 dividend payment to be paid in January
2020. 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 Q3 2019 results
include:
- Record net earnings: Net earnings of
$176.6 million ($0.84 per basic share) more than
triple net earnings of $55.9 million ($0.27 per basic share) in Q3
2018 and 69% higher than $104.2 million ($0.50 per basic share) the
previous quarter; adjusted net earnings in Q3 2019
were the same as net earnings and increased 188% from $61.4 million
($0.29 per basic share) in Q3 2018 and 67% from $105.5 million
($0.50 per basic share) in Q2 2019.
- Revenue grows 71%: Revenue totaled
$381.4 million, 71% increase from $222.7 million
in Q3 2018 and 36% higher than $281.3 million the previous
quarter;
- Significant growth in EBITDA1,2: EBITDA of
$296.4 million, 148% higher than $119.6 million in
Q3 2018 and 60% increase from $185.8 million in Q2 2019
- Operating cash flow increases 145%: Net cash
provided by operating activities of $316.8
million, 145% growth from $129.3 million in Q3 2018 and
76% higher than $179.7 million the previous quarter
- Record free cash flow1: Free cash flow of
$181.3 million, more than triple the Q3 2018 and
Q2 2019 levels of $53.1 million and $54.4 million, respectively,
with substantial growth in free cash flow being achieved at the
same time that capital expenditures increased in support of
advancing key growth projects
- Growth projects ramp up: Growth capital
expenditures1 totaled $50.2 million in Q3 2019
(excluding capitalized exploration), including $33.8 million at
Macassa and $11.3 million at Fosterville; full-face sinking at
Macassa #4 shaft project commenced in August 2019 and was advanced
more than 600 feet by November 6, 2019
- Continued focus on exploration: Exploration
and evaluation expenditures in Q3 2019 totaled $43.6
million ($5.9 million expensed and $37.7 million
capitalized), with $32.4 million relating to ongoing advanced
exploration work in the Northern Territory.
- Continued strong operating
results º Production of
248,400 ounces, 38% increase from 180,155 ounces
in Q3 2018 and 16% higher than 214,593 ounces the previous
quarter º Production costs of
$73.7 million compared to $64.9 million in Q3 2018
and $66.2 million in Q2 2019 º Operating
cash costs per ounce sold1 averaged $287,
18% improvement from $351 in Q3 2018 and 8% better than $312 in Q2
2019 º AISC per ounce sold1
averaged $562, 13% better than $645 in Q3 2018 and
12% improvement from $638 the previous quarter.
- Cash at September 30, 2019 totaled $615.8
million, 31% increase from $469.4 million at June 30, 2019 and 85%
higher than $332.2 million at December 31, 2018.
Key highlights of YTD 2019 results
include:
- Record nine-month financial
results º Net earnings
of $390.9 million ($1.86 per basic share), 134%
increase from $167.4 million ($0.79 per basic share) for first nine
months of 2018 (“YTD 2018”) º Adjusted net
earnings of $394.2 million ($1.88 per basic
share), 122% higher than $177.6 million ($0.84 per basic
share) for YTD 2018 º Net cash provided by
operating activities of $672.3 million,
97% growth from $341.5 million for YTD 2018
º Free cash flow totaling $330.2
million, double the YTD 2018 level of $163.1
million º Revenue of
$967.6 million, 52% growth from $635.6 million for
YTD 2018 º EBITDA of
$683.8 million, 99% increase from $343.9 million
for YTD 2018.
- Strong YTD 2019 operating
results º Production of
694,873 ounces, 41% increase from 492,484 ounces
for YTD 2018 º Operating cash cost per
ounce sold of $296, 25% improvement from
$397 for the same period in 2018 º AISC
per ounce sold of $584, 21% better than
$738 for YTD 2018.
- Strong focus on shareholder returns in YTD
2019 º Common share price
increased 67% for YTD 2019 to C$59.35 per share (on TSX)
at September 30, 2019 from C$35.60 per share at December 31, 2018
(C$59.92 per share at November 5, 2019)
º Quarterly dividend increased to $0.04/share
(from C$0.04/share) for second quarter 2019 dividend, paid on July
12, 2019 to shareholders of record on June 28, 2019; change to
paying dividend in US dollars increases value of dividend by
approximately 30%; Q3 2019 dividend of $0.04 per share paid on
October 11, 2019 to shareholders of record on September 30,
2019 º Additional dividend
increase of $0.02 per share or 50%, to $0.06 per share,
commencing with Q4 2019 dividend payment to be paid in January 2020
to shareholders of record as of December 31, 2019.
__________1. See “Non-IFRS Measures” later in this press
release and in the MD&A for the three and nine months ended
September 30, 2019.2. Refers to Earnings before Interest,
Taxes, Depreciation, and Amortization.
Tony Makuch, President and Chief Executive
Officer of Kirkland Lake Gold, commented: “Q3 2019 was our best
quarter to date driven by exceptional results at Fosterville and a
solid quarter of performance at Macassa. At Fosterville, production
increased by almost 70,000 ounces from Q3 2018 largely reflecting a
75% improvement in the average grade, to 41.8 g/t. Grades of this
level are rarely seen in our industry and resulted from the ramp up
in production of the high-grade Swan Zone. We mined our first Swan
stope during last year’s third quarter, which contributed about
7,500 ounces of production. We have ramped up production since then
and, in Q3 2019, mined 11 Swan Zone stopes, which contributed about
94% of the 158,327 ounces produced for the quarter. Substantially
higher grades resulted in further improvement in unit costs which,
combined with rising gold prices, led to significant margin
expansion at Fosterville during the quarter. Turning to Macassa,
the mine had a strong quarter in Q3 2019 with tonnes processed
increasing 18% and the average grade improving to 23.3 g/t from
21.5 g/t in Q2 2019. We expect Fosterville and Macassa to finish
2019 with strong fourth quarters, which will position both mines to
easily achieve their full-year 2019 production guidance of 570,000
– 610,000 ounces and 240,000 – 250,000 ounces, respectively. At the
Holt Complex, we have lowered our production guidance for full-year
2019 based on results to date and are now assessing a future
strategy for this operation.
“Turning to our growth programs, full-face
sinking at the Macassa #4 shaft project commenced during August,
with the shaft now having advanced to a depth of over 600 feet.
Work is progressing well, with the project remaining on track for
phase one completion during the second quarter of 2022. At
Fosterville, our key growth projects are either complete or nearing
completion. Our new water treatment plant was commissioned during
the third quarter and is now in operation. Construction of our new
paste fill plant is largely finished with commissioning to be
completed by the end of the year. Work related to our new
ventilation system is continuing and should be completed around
year end, with commissioning to follow in early 2020. In the
Northern Territory, advanced exploration work continues to
accelerate, with initial processing of Lantern Deposit material at
the Union Reefs Mill commencing in October. We continue to work
towards a potential restart of operations in the Northern Territory
as early as the beginning of next year.”
REVIEW OF FINANCIAL
PERFORMANCE
Table 1. Financial Highlights
(in thousands of dollars, except per share amounts) |
Three Months EndedSeptember 30, 2019 |
|
Three Months Ended September 30, 2018 |
|
Nine Months Ended September 30, 2019 |
|
Nine Months Ended September 30, 2018 |
|
Revenue |
$ |
381,430 |
|
$ |
222,701 |
|
$ |
967,609 |
|
$ |
635,591 |
|
Production costs |
|
73,664 |
|
|
64,851 |
|
|
209,865 |
|
|
202,828 |
|
Earnings before income taxes |
|
254,119 |
|
|
82,977 |
|
|
566,140 |
|
|
244,974 |
|
Net earnings |
$ |
176,604 |
|
$ |
55,885 |
|
$ |
390,945 |
|
$ |
167,408 |
|
Basic earnings per share |
$ |
0.84 |
|
$ |
0.27 |
|
$ |
1.86 |
|
$ |
0.79 |
|
Diluted earnings per share |
$ |
0.83 |
|
$ |
0.26 |
|
$ |
1.85 |
|
$ |
0.79 |
|
Cash flow from operating activities |
$ |
316,753 |
|
$ |
129,297 |
|
$ |
672,290 |
|
$ |
341,507 |
|
Cash investment on mine development and PPE |
$ |
135,449 |
|
$ |
76,190 |
|
$ |
342,104 |
|
$ |
175,878 |
|
Table 2. Operating Highlights
|
Three Months Ended September 30, 2019 |
|
Three Months Ended September 30, 2018 |
|
Nine Months Ended September 30, 2019 |
|
Nine Months Ended September 30, 2018 |
|
Tonnes milled |
|
419,787 |
|
|
435,600 |
|
|
1,208,106 |
|
|
1,259,142 |
|
Grade (g/t Au) |
|
18.8 |
|
|
13.3 |
|
|
18.3 |
|
|
12.6 |
|
Recovery (%) |
|
97.9 |
% |
|
96.9 |
% |
|
98.0 |
% |
|
96.5 |
% |
Gold produced (oz) |
|
248,400 |
|
|
180,155 |
|
|
694,873 |
|
|
492,484 |
|
Gold Sold (oz) |
|
256,276 |
|
|
184,517 |
|
|
701,296 |
|
|
496,585 |
|
Average realized price ($/oz sold)(1) |
$ |
1,482 |
|
$ |
1,204 |
|
$ |
1,375 |
|
$ |
1,275 |
|
Operating cash costs per ounce ($/oz sold)(1) |
$ |
287 |
|
$ |
351 |
|
$ |
296 |
|
$ |
397 |
|
AISC ($/oz sold)(1) |
$ |
562 |
|
$ |
645 |
|
$ |
584 |
|
$ |
738 |
|
Adjusted net earnings(1) |
$ |
176,621 |
|
$ |
61,421 |
|
$ |
394,289 |
|
$ |
177,552 |
|
Adjusted net earnings per share(1) |
$ |
0.84 |
|
$ |
0.29 |
|
$ |
1.88 |
|
$ |
0.84 |
|
- Non-IFRS – the definition and reconciliation of these Non-IFRS
measures are included in the Company’s MD&A for the three and
nine months ended September 30, 2019.
Table 3. Review of Financial Performance
(in thousands except per share amounts) |
Three Months Ended September 30, 2019 |
Three Months Ended September 30, 2018 |
Nine Months Ended September 30, 2019 |
Nine Months EndedSeptember 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
381,430 |
|
$ |
222,701 |
|
$ |
967,609 |
|
$ |
635,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs |
|
(73,664 |
) |
|
(64,851 |
) |
|
(209,865 |
) |
|
(202,828 |
) |
Royalty expense |
|
(10,430 |
) |
|
(6,600 |
) |
|
(25,430 |
) |
|
(18,835 |
) |
Depletion and depreciation |
|
(41,692 |
) |
|
(35,968 |
) |
|
(116,056 |
) |
|
(96,400 |
) |
Earnings from mine operations |
|
255,644 |
|
|
115,282 |
|
|
616,258 |
|
|
317,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative(1) |
|
(10,559 |
) |
|
(6,021 |
) |
|
(34,789 |
) |
|
(22,249 |
) |
Exploration and evaluation |
|
(5,897 |
) |
|
(20,341 |
) |
|
(24,133 |
) |
|
(52,807 |
) |
Care and maintenance |
|
(541 |
) |
|
(416 |
) |
|
(952 |
) |
|
(1,455 |
) |
Earnings from operations |
|
238,647 |
|
|
88,504 |
|
|
556,384 |
|
|
241,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance and other items |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss), net |
|
13,850 |
|
|
(5,759 |
) |
|
6,349 |
|
|
3,895 |
|
Finance income |
|
2,198 |
|
|
914 |
|
|
4,993 |
|
|
2,575 |
|
Finance costs |
|
(576 |
) |
|
(682 |
) |
|
(1,586 |
) |
|
(2,513 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before taxes |
|
254,119 |
|
|
82,977 |
|
|
566,140 |
|
|
244,974 |
|
Current income tax expense |
|
(50,946 |
) |
|
(8,001 |
) |
|
(127,158 |
) |
|
(23,673 |
) |
Deferred tax expense |
|
(26,569 |
) |
|
(19,091 |
) |
|
(48,037 |
) |
|
(53,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ |
176,604 |
|
$ |
55,885 |
|
$ |
390,945 |
|
$ |
167,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.84 |
|
$ |
0.27 |
|
$ |
1.86 |
|
$ |
0.79 |
|
Diluted earnings per share |
$ |
0.83 |
|
$ |
0.26 |
|
$ |
1.85 |
|
$ |
0.79 |
|
- General and administrative expense for Q3 2019 include general
and administrative expenses of $7.9 million ($5.6 million in Q3
2018 and $9.8 million in Q2 2019) and share based payment expense
of $2.7 million ($0.5 million in Q3 2018 and $2.4 million in Q2
2019).
Revenue
Revenue in Q3 2019 totaled $381.4 million, an
increase of $158.7 million or 71% from $222.7 million in Q3 2018.
Of the increase in revenue, $86 million related to a 71,759 ounce
or 39% increase in total gold sales, to 256,276 ounces. The primary
factors driving the increase in sales were higher grades and
increased mill throughput at Fosterville, where gold sales grew by
70,364 ounces or 73%, to 166,903 ounces. The realized gold price in
Q3 2019 averaged $1,482 per ounce, a 23% improvement from $1,204
per ounce for the same period in 2018. The higher gold price had an
$71 million favourable impact on the change in revenue versus Q3
2018.
Q3 2019 revenue increased $100.1 million or 36%
from $281.3 million the previous quarter, with $58 million related
to a 44,185 ounce or 21% increase in gold sales from Q3 2019 from
212,091 ounces the previous quarter. Gold sales increased quarter
over quarter at all three mining operations, with Fosterville’s
gold sales growing 33,422 ounces or 25% reflecting increased
production levels. Gold sales at Macassa of 62,583 ounces were
7,573 ounces or 14% higher, while gold sales from the Holt Complex
increased 3,190 ounces or 14% quarter over quarter, to 26,790
ounces. Contributing $42 million to the increase in revenue was a
higher average realized gold price, which increased 12% to $1,482
per ounce from $1,320 per ounce in Q2 2019.
Revenue in YTD 2019 totaled $967.6 million, an
increase of $332.0 million or 52% from $635.6 million in YTD 2018.
The increase in revenue from YTD 2018 reflected a 41% increase in
gold sales, to 701,296 ounces, which had a $261 million favourable
impact on revenue compared to YTD 2018. The average realized gold
price in YTD 2019 was $1,375 per ounce, an 8% increase from $1,275
per ounce for YTD 2018. The change in the gold price increased
revenue by $70 million for YTD 2019 compared to the first nine
months of 2018. The strong growth in gold sales was driven by
Fosterville, where gold sales rose 85% to 432,432 ounces. Gold
sales at Macassa increased 9%, to 184,898 ounces due to a higher
average grade, which more than offset lower tonnes processed. Gold
sales at Holt Complex for YTD 2019 totaled 83,966 ounces versus
93,255 ounces for the same period in 2018.
Click to view Revenue
charts: https://www.globenewswire.com/NewsRoom/AttachmentNg/053f3e51-061e-4929-a474-3051c6c9dbf1
Earnings from Mine
Operations
Earnings from mine operations in Q3 2019 totaled
$255.6 million, an increase of 122% from $115.3 million in Q3 2018.
The increase mainly reflected higher levels of revenue versus the
same period in 2018. Production costs in Q3 2019 totaled $73.7
million compared to $64.9 million in Q3 2018, with the increase
largely related to the resumption of operations at the Holloway
Mine in Q1 2019. Depletion and depreciation costs totaled $41.7
million, which compared to $36.0 million in Q3 2018, as the impact
of higher production volumes in Q3 2019 more than offset a
reduction in depletion and depreciation expense on a per ounce
produced basis driven by a larger depletion and depreciation base.
Royalty expense in Q3 2019 totaled $10.4 million versus $6.6
million in Q2 2018, mainly reflecting the significant growth in
gold sales versus Q3 2018.
Q3 2019 earnings from mine operations of $255.6
million compared to earnings from mine operations of $175.3 million
the previous quarter, with the increase reflecting higher levels of
revenue in Q3 2019. Production costs, depletion and depreciation
costs and royalty expense were all higher in Q3 2019 compared to
the previous quarter, mainly reflecting higher production and sales
volumes.
For YTD 2019, earnings from mine operations
totaled $616.3 million, an increase of 94% from $317.5 million for
YTD 2018. The year-over-year increase mainly resulted from strong
revenue growth. Production costs totaled $209.9 million compared to
$202.8 million for YTD 2018. Depletion and depreciation costs
increased to $116.1 million from $96.4 million for YTD 2018, while
royalty expense totaled $25.4 million versus $18.8 million for YTD
2018, with higher sales volumes accounting for the increase.
Unit Cost Performance (See Non-IFRS
measures)
Click to view Op. Cash Costs and Gold Sales
charts: https://www.globenewswire.com/NewsRoom/AttachmentNg/56b8e893-62a9-4f22-aa38-e6f44bfb2c3a
Operating cash costs per ounce sold averaged
$287, a $64 or 18% improvement from $351 in Q3 2018 and 8% better
than $312 the previous quarter. Compared to Q3 2018, the
improvement largely reflected increased sales volumes resulting
from a 41% increase in the Company's average grade, to 18.8 g/t
from 13.3 g/t for the same period, with average grades at
Fosterville and Macassa increasing 63% and 21%, respectively. The
improvement from the previous quarter was mainly due to higher gold
sales driven by both improved grades and increased mill throughput
at Fosterville and Macassa. The average grade of 18.8 g/t in Q3
2019 compared to an average grade of 18.4 g/t the previous quarter
with the impact of higher grades at Fosterville and Macassa being
partially offset by significantly higher tonnes processed at lower
average grades at the Holt Complex.
Operating cash costs per ounce sold for YTD 2019
improved 8% year over year, to $296 for YTD 2019 versus $397 for
YTD 2018. The increase resulted from the favourable impact on sales
of a 45% increase in the average grade (18.3 g/t versus 12.6 g/t in
YTD 2018), which more than offset the higher operating cash costs
in Q3 2019, $207.3 million versus $197.2 million the previous
quarter. Increases of 74% and 23%, respectively, in the average
grades at Fosterville and Macassa drove the increase in the
consolidated average grade in Q3 2019.
Click to view AISC Q3 2019
charts: https://www.globenewswire.com/NewsRoom/AttachmentNg/6d7943ab-0993-417b-a47d-9ced3f5237dd
AISC per ounce sold in Q3 2019 averaged $562,
$83 or 13% better than Q3 2018, with lower operating cash costs per
ounce sold largely accounting for the improvement. In addition,
while sustaining capital expenditures increased to $48.3 million in
Q3 2019 from $41.4 million in Q3 2018, they improved on a per ounce
sold basis, to $188 per ounce sold in Q3 2019 from $224 per ounce
sold for the same period in 2018 reflecting the favourable impact
of higher sales volumes. Partially offsetting the favorable impact
of lower operating costs and sustaining capital expenditures per
ounce sold were higher royalty, share-based compensation and
general and administrative expenses. Compared to the previous
quarter, AISC per ounce sold of $562 in Q3 2019 improved 12% from
$638 in Q2 2019, reflecting improved operating cash costs per ounce
sold as well as lower sustaining capital expenditures on a
quarter-over-quarter basis. Sustaining capital expenditures in Q3
2019 of $48.3 million or $188 per ounce sold compared to sustaining
capital expenditures of $49.8 million or $235 per ounce sold the
previous quarter.
Click to view AISC YTD
chart: https://www.globenewswire.com/NewsRoom/AttachmentNg/9d4fafa1-3430-42b1-880c-07584679f140
For YTD 2019, AISC per ounce sold averaged $584,
21% better than $738 for YTD 2018, largely reflecting the
favourable impact of higher average grades on production and sales
levels for YTD 2019 versus the same period in 2018. In addition to
the $101 or 25% improvement in operating cash costs per ounce, the
change in AISC also reflected a $57 per ounce or 22% reduction in
sustaining capital expenditures per ounce sold for YTD 2019, to
$200 per ounce from $257 per ounce for YTD 2018.
Additional Expenses
Corporate G&A expense (excluding share-based
payments expense and transaction costs) totaled $7.9 million
compared to $5.6 million in Q3 2018 and $9.8 million the previous
quarter. The increase from Q3 2018 largely related to the expansion
of corporate capabilities in both Canada and Australia in support
of the Company's continued growth. Share based payment expense in
Q3 2019 totaled $2.7 million versus $0.5 million for the same
period in 2018 and $2.4 million the previous quarter. The increase
in share-based payment expense from Q3 2018 largely related to
share-price appreciation, resulting in greater mark-to-market
values for the Company’s outstanding deferred-share units. YTD
corporate G&A expense totaled $26.3 million compared to $18.3
million for YTD 2018. Share based payment expense for YTD 2019
totaled $8.5 million versus $3.9 million for YTD 2018.
Exploration and evaluation expenditures
(expensed) in Q3 2019 totaled $5.9 million versus $20.3 million in
Q3 2018 and $6.2 million the previous quarter. As a result of a
review of the Company's drilling programs during Q2 2019, and the
extent to which drilling is being completed contiguous to, and for
the purpose of extending existing mining areas, a greater
proportion of exploration expenditures beginning in Q2 2019 and
continuing through Q3 2019 were capitalized compared to previous
quarters. YTD 2019 exploration and evaluation expenditures
(expensed) totaled $24.1 million versus $52.8 million for YTD
2018.
Other income in Q3 2019 totaled $13.9 million,
which compared to other loss of $5.8 million in Q3 2018 and other
loss of $5.4 million the previous quarter. Other income in Q3 2019
mainly resulted from a $13.7 million unrealized and realized
foreign exchange gain, due mainly to the weakening of the
Australian dollar against the US dollar during Q3 2019. Other loss
in Q3 2018 resulted from a $6.4 million mark-to-market loss on fair
valuing the Company’s warrant investments, partially offset by a
$0.6 million unrealized and realized foreign exchange gain. Other
loss in Q2 2019 reflected a $4.5 million unrealized and realized
foreign exchange loss, largely reflecting the strengthening of the
Canadian dollar relative to the US and Australian dollars during Q2
2019, as well as a $0.9 million mark-to-market loss on fair valuing
warrants. For YTD 2019, other income totaled $6.3 million as an
unrealized and realized foreign exchange gain of $7.1 million was
only partially offset by a $0.9 million mark-to-market loss related
to fair valuing of the Company’s warrant investments. For YTD 2018,
other income totaled $3.9 million, as an unrealized and realized
foreign exchange gain of $11.0 million was only partially offset by
a $7.3 million market-to-market loss on the fair valuing of
warrants.
Finance costs in Q3 2019 totaled $0.6 million,
mainly reflecting interest expense on financial leases and other
loans. Finance costs totaled $0.7 million in Q3 2018 and $0.3
million the previous quarter. YTD 2019 finance costs totaled $1.6
million versus $2.5 million for YTD 2018.
Finance income, mainly related to interest
income on bank deposits, totaled $2.2 million in Q3 2019 versus
$0.9 million for the same period in 2018 and $1.4 million the
previous quarter. YTD 2019 finance income totaled $5.0 million
compared to $2.6 million for YTD 2018, with the increase reflecting
higher cash balances during the first nine months of 2019 versus
the same period in 2018.
Income tax expense in Q3 2019 included current
income tax expense of $50.9 million and deferred income tax expense
of $26.6 million. In Q3 2018, current income tax expense totaled
$8.0 million, with deferred income tax expense totaling $19.1
million with the high level of deferred income tax expense
resulting from the utilization of $24.6 million of deferred tax
assets in respect of loss carry-forwards during Q3 2018 to reduce
current income tax expense. Q2 2019 included current income tax
expense of $35.3 million and deferred income tax expense of $12.9
million. The Company’s effective tax rate in Q3 2019 was 30.5%,
which compared to 32.7% in Q3 2018 and 31.6% in the previous
quarter. For YTD 2019, current income tax expense totaled $127.2
million versus $23.7 million for YTD 2018, while deferred income
tax expense for YTD 2019 was $48.0 million compared to $53.9
million for the same period in 2018. The higher levels of deferred
income tax expense compared to current income tax expense for YTD
2018 resulted from the utilization of $53.3 million of deferred tax
assets in respect of loss carry-forwards during the first three
quarters of 2018 to reduce current income tax expense. The
Company’s effective tax rate for YTD 2019 was 30.9% compared to
31.7% for YTD 2018.
Net earnings in Q3 2019 total $176.6
million or $0.84 per basic share
Net earnings in Q3 2019 totaled $176.6 million
($0.84 per basic share) an increase of $120.7 million or 216% from
$55.9 million ($0.27 per basic share) in Q3 2018 and $72.4 million
or 69% from $104.2 million ($0.50 per basic share) the previous
quarter. The increase in net earnings and earnings per share from
Q3 2019 largely resulted from a 71% increase in revenue, reflecting
both higher volumes and gold prices, lower expensed exploration and
evaluation expenditures, the impact of a $13.7 million pre-tax
unrealized and realized foreign exchange gain ($9.5 million after
income taxes), which was included in other income and a reduction
in the effective tax rate. Partially offsetting these factors were
higher production costs, increased depletion and depreciation
costs, higher corporate G&A expense and increased royalty
expense. The increase in net earnings from Q2 2019 reflected the
favourable impact of higher gold sales and gold prices on revenue,
the contribution of foreign exchange gains to other income, lower
corporate G&A and a lower effective tax rate. These factors
were partially offset by higher depletion and depreciation expense,
production costs and royalty expense.
Click to view Basic Earnings Per Share Q3 2019
vs Q3 2018
chart: https://www.globenewswire.com/NewsRoom/AttachmentNg/72ebc4e9-cccf-4c49-9f26-4dea944dac9c
Click to view Basic Earnings Per Share Q3 2019
vs Q2 2019
chart: https://www.globenewswire.com/NewsRoom/AttachmentNg/d2b931db-b884-4405-8c04-6aae3b7847fb
Net earnings for YTD 2019 totaled $390.9 million
($1.86 per basic share), an increase of $223.5 million or 134% from
$167.4 million ($0.79 per basic share) in YTD 2018. The increase in
net earnings and earnings per share was driven by strong revenue
growth and lower exploration and evaluation expense. Partially
offsetting these favourable factors were higher depletion and
depreciation costs, corporate G&A costs and higher royalty
expense resulting from increased sales volumes.
Click to view Basic Earnings Per Share YTD
chart: https://www.globenewswire.com/NewsRoom/AttachmentNg/9de9e806-5005-4cb7-b139-22a72cb6a1c5
Adjusted net earnings (Non-IFRS) in Q3
2019 total $176.6 million or $0.84 per basic share
The Company's adjusted net earnings in Q3 2019
totaled $176.6 million ($0.84 per basic share), $115.2 million or
188% higher than $61.4 million ($0.29 per basic share) in Q3 2018
and an increase of $71.1 million or 67% from $105.5 million ($0.50
per basic share) the previous quarter. There was no difference
between net earnings and adjusted net earnings in Q3 2019. The
difference between net earnings and adjusted net earnings in Q3
2018 mainly reflected the exclusion of a $6.4 million ($5.5 million
after income tax) mark-to-market loss on the fair valuing the
Company’s warrant investments. The difference between net earnings
and adjusted net earnings in Q2 2019 related to the exclusion from
adjusted net earnings of a $0.9 million ($0.8 million after income
tax) mark-to-market loss on fair valuing the Company’s warrants and
$0.8 million ($0.6 million after income tax) of severance
costs.
Adjusted net earnings for YTD 2019 totaled
$394.3 million ($1.88 per basic share), which compared to $177.6
million ($0.84 per basic share) for YTD 2018. The difference
between net earnings and adjusted net earnings for YTD 2019 mainly
reflected the exclusion from adjusted net earnings of a $2.3
million ($1.6 million after income tax) loss related to purchase
price allocation adjustments on inventories, $1.2 million ($0.9
million after income tax) of severance costs, and $0.9 million
($0.8 million after income tax) of mark-to-market losses on the
fair valuing of the Company’s warrants. The difference between
adjusted net earnings and net earnings for YTD 2018 reflected the
exclusion from adjusted net earnings of a $7.3 million ($6.4
million after income tax) mark-to-market loss on fair valuing the
Company’s warrants, as well as the unfavourable impact of $5.4
million ($3.8 million after income tax) of purchase price
allocation adjustments on inventories.
FULL-YEAR 2019 GUIDANCE
On December 11, 2018, Kirkland Lake Gold
released full-year guidance for 2019 (see News Release dated
December 11, 2018). Compared to the Company’s full-year 2018
results, the Company’s 2019 guidance included strong production
growth, improved unit costs and a continued strong commitment to
exploration and growth. Since December 11, 2018, there are have
been two improvements to the Company’s full-year 2019 guidance, the
first being included in the Company’s fourth quarter and full-year
2019 financial and operating results, issued on February 21, 2019,
and the second being issued on May 7, 2019 as part of the Company's
first quarter 2019 results. There were no revisions to guidance as
part of the second quarter 2019 financial results, which were
released on July 30, 2019. The Company's full-year 2019 guidance as
at July 30, 2019, is provided in the table below.
Table 4. 2019 Guidance (as at July 30,
2019)(1)
($ millions unless otherwise stated) |
Macassa |
Holt Complex(2) |
Fosterville |
Consolidated |
Gold production (kozs) |
240 - 250 |
140 - 150 |
570 - 610 |
950 - 1,000 |
Operating cash costs/ounce sold ($/oz) (3) |
$400 - $420 |
$660 - $680 |
$130 - $150 |
$285 - $305 |
AISC/ounce sold ($/oz) (3) |
|
|
|
$520 - $560 |
Operating cash costs (3) |
|
|
|
$290 - $300 |
Royalty costs |
|
|
|
$25 - $30 |
Sustaining and growth capital(3) |
|
|
|
$150 - $170 |
Growth capital(3)(4) |
|
|
|
$155 - $165 |
Exploration and evaluation(5) |
|
|
|
$100 - $120 |
Corporate G&A(6) |
|
|
|
$26 - $28 |
- Full-year 2019 guidance as at July 30, 2019
- Production and operating cash cost guidance for the Holt
Complex for full-year 2019 includes results for the Holloway mine,
which resumed operations during Q1 2019, as one of three mines
included in the Holt Complex.
- See the “Non-IFRS Measures” section of the MD&A for the
three and nine months ending September 30, 2019. The most
comparable IFRS Measure for operating cash costs is production
costs, as presented in the Consolidated Statements of Operations
and Comprehensive Income, and total additions and construction in
progress for sustaining and growth capital. Operating cash costs
per ounce and AISC per ounce sold are comparable to production
costs on a unit basis. Operating cash costs, operating cash cost
per ounce sold and AISC per ounce sold reflect an average US$ to C$
exchange rate of 1.33 and a US$ to A$ exchange rate of 1.41.
- Growth capital expenditure guidance for full-year 2019 excludes
$19.8 million of capital expenditures related to the Macassa #4
shaft project, which are being recorded as capital expenditures in
2019, but were paid in cash on an advanced basis in 2018.
- Exploration and evaluation expenditures guidance for full-year
2019 include both expensed and capitalized exploration
expenditures. All capitalized expenditures related to the Northern
Territory are included in exploration and evaluation expenditures
consistent with the advanced exploration program being carried out
in the Northern Territory in 2019.
- Includes general and administrative costs and severance
payments. Excludes non-cash share-based payment expense.
Effective Q1 2019, the Company combined the
Holt, Holloway and Taylor mines into one segment, the Holt Complex,
for the purpose of establishing and reporting performance against
guidance. As a result, production, costs and expenditures for the
Holt, Holloway and Taylor mines, all of which utilize the Holt Mill
for processing, have been combined into one segment. Previously,
production, costs and expenditures from these mines were reported
separately, with processing costs allocated based on the proportion
of production coming from each mine in each reporting period.
Table 5. YTD 2019 Results
($ millions unless otherwise stated) |
Macassa |
Holt Complex(2) |
Fosterville |
Consolidated |
Gold production (kozs) |
184,918 |
82,483 |
427,472 |
694,873 |
Operating cash costs/ounce sold ($/oz)(1) |
$397 |
$948 |
$126 |
$296 |
AISC/ounce sold ($/oz)(1) |
|
|
|
$584 |
Operating cash costs (1) |
|
|
|
$207.3 |
Royalty costs |
|
|
|
$25.4 |
Sustaining capital(1) |
|
|
|
$140.0 |
Growth capital (excluding capitalized
exploration)(1)(3) |
|
|
|
$137.1 |
Exploration (including capitalized
exploration)(4) |
|
|
|
$115.9 |
Corporate G&A expense(5) |
|
|
|
$26.3 |
- See the “Non-IFRS Measures” section of the MD&A for the
three and nine months ended September 30, 2019. The most comparable
IFRS Measure for operating cash costs is production costs, as
presented in the Consolidated Statements of Operations and
Comprehensive Income, and total additions and construction in
progress for sustaining and growth capital. Operating cash costs
per ounce and AISC per ounce sold are comparable to production
costs on a unit basis. Operating cash costs, operating cash cost
per ounce sold and AISC per ounce sold reflect an average US$ to C$
exchange rate of 1.32 and a US$ to A$ exchange rate of 1.43.
- Production, cost and expenditure results in YTD 2019 include
results for the Holloway mine, which resumed operations during Q1
2019, as one of three mines included in the Holt Complex.
- 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 YTD 2019, but were paid in
cash on an advanced basis in 2018.
- 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.
- Includes general and administrative costs and severance
payments. Excludes non-cash share-based payment expense.
- Gold production
for YTD 2019 totaled 694,873 ounces, a 41% increase from YTD 2018
driven by record production at both Fosterville and Macassa. The
Company ended the first nine months of 2019 well positioned to
achieve its improved full-year 2019 consolidated production
guidance of 950,000 - 1,000,000 ounces of gold, with production at
both Fosterville and the Holt Complex expected to increase in the
fourth quarter from Q3 2019 levels. At Fosterville, production in
the final quarter of 2019 is expected to increase from the 158,327
ounces produced in Q3 2019 due to continued improvement in average
grades from production in the Swan Zone, with the mine remaining on
track to easily achieve full-year 2019 guidance. Production at the
Holt Complex is expected to increase in the fourth quarter, with
higher levels of production compared to Q3 2019 expected to come
from all three mines. Macassa ended YTD 2019 with production of
184,918 ounces, with the mine entering the final quarter of 2019 on
track to achieve full-year 2019 guidance of 240,000 - 250,000
ounces.
- Production costs
for YTD 2019 totaled $209.9 million. Operating cash costs for the
first half of the year totaled $207.3 million, in line with target
levels.
- Operating cash costs per
ounce sold for YTD 2019 averaged $296, in line with
full-year 2019 guidance of $285 - $305. For YTD 2019, both
Fosterville and Macassa achieved operating cash costs per ounce
sold better than the respective target ranges, in both cases due to
higher than planned average grades. At Fosterville, operating cash
costs per ounce sold averaged $126 compared to guidance of $130 -
$150, while Macassa’s operating cash costs per ounce sold averaged
$397 versus a target range of $400 - $420. Operating cash costs per
ounce sold at the Holt Complex averaged $948, well above the target
range of $660 - $680. While unit costs are expected to improve at
the Holt Complex in the fourth quarter, the operation is not
expected to achieve the full-year 2019 operating cash cost guidance
as at July 30, 2019 (see section entitled “Revisions to Full-Year
2019 Guidance”).
- AISC per ounce
sold for YTD 2019 averaged $584, above full-year 2019
guidance of $520 - $560, reflecting higher than planned sustaining
capital expenditures at all three of the Company’s operations,
mainly related to additional investments for capital development,
equipment purchases and infrastructure projects, largely involving
enhancements to milling facilities.
- Royalty costs for YTD 2019 totaled $25.4
million compared to full-year 2019 guidance of $25 - $30
million.
- Sustaining capital
expenditures for YTD 2019 totaled $140.0 million and was
tracking ahead of the existing full-year 2019 guidance of as at
July 30, 2019 of $150 - $170 million. The level of sustaining
capital expenditures during YTD 2019 reflected higher than planned
sustaining capital expenditures at Macassa, Fosterville and the
Holt Complex.
- Growth capital
expenditures totalled $137.1 million for YTD 2019
(excluding capitalized exploration), which compared to full-year
2019 guidance of $155 - $165 million. Of total growth capital
expenditures for YTD 2019, Macassa accounted for $91.1 million,
with approximately $57.4 million relating to the #4 shaft project
and the remainder largely funding a thickened tails project and the
construction of a new tailings impoundment area. Fosterville
accounted for $37.1 million of growth capital expenditures for YTD
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 YTD 2019 totaled $115.9 million
(including capitalized exploration), which compared to full-year
2019 guidance of $100 - $120 million. Of total exploration
expenditures, approximately $108.4 million were in Australia,
including $82.0 million in the Northern Territory and $26.4 million
at Fosterville. During Q3 2019, the Company continued to progress
with advanced exploration work in the Northern Territory, including
increasing underground development and drilling in support of a
potential resumption of operations. Subsequent to the end of Q3
2019, the Company commenced test processing of Lantern Deposit
material at the Union Reefs mill as part of the advanced
exploration program. Drilling at Fosterville focused on underground
drilling in the Lower Phoenix and Harrier systems, surface drilling
at Robbin’s Hill, as well as exploration work at a number of
regional targets. In Canada, exploration expenditures for YTD 2019
totaled $7.5 million and mainly focused on drilling at Macassa as
well as regional exploration around the Holt Complex.
- Corporate G&A expense for YTD 2019 totaled
$26.3 million compared to full-year 2019 guidance of $26 - $28
million.
REVISIONS TO FULL-YEAR 2019
GUIDANCE
Following completion of Q3 2019, the Company
announced on November 6, 2019 a number of revisions to full-year
2019 guidance. The Company consolidated production and operating
cash cost per ounce sold guidance for full-year 2019 remain
unchanged as continued strong results at Fosterville and Macassa
are expected to offset changes in production and operating cash
cost per ounce sold guidance at the Holt Complex. Full-year 2019
production guidance at the Holt Complex was revised from 140,000 –
150,000 ounces to 120,000 – 130,000 ounces largely reflecting a
slower than planned ramp up at the Holloway mine as well as lower
than planned production levels at both Holt Mine and Taylor Mine
for YTD 2019. Operating cash cost per ounce sold guidance for the
Holt Complex was revised to $920 – $940 from $660 – $680
previously. On October 9, 2019, the Company announced that the
future plans for the Holt Complex are currently under review.
The Company’s sustaining capital expenditure
guidance has increased to $170 - $190 million from $150 - $170
million, with the increase mainly reflecting additional capital
development at both Fosterville and Macassa, including new
equipment and infrastructure enhancements. Growth capital
expenditure guidance was increased from $155 - $165 million to $175
- $185 million, reflecting higher levels of investment at Macassa,
primarily related to the #4 shaft project. At the #4 shaft, the
Company has taken over from the general contractor and, as a
result, has purchased the sinking plant and related equipment now
as opposed to spreading these costs out over the life of the
project. The project remains on track for phase 1 completion during
the second quarter of 2022 at a capital cost of approximately $240
million. Full-year 2019 guidance for exploration and evaluation
expenditures, including capitalized exploration expenditures, was
increased to $120 - $140 million from $100 - $120 million, with the
increase reflecting an acceleration of the advanced exploration
program in the Northern Territory. Subsequent to the end of Q3
2019, the Company commenced test processing at the Union Reefs
Mill, with plans to produce over 10,000 ounces before the end of
2019, with proceeds from gold sales to be accounted for as a
reduction in capital. Results of this work could lead to a
resumption of operations in the Northern Territory as early as the
beginning of 2020. Full-year 2019 guidance for royalty costs was
revised to $30 - $35 million from $25 - $30 million reflecting
higher than planned sales and gold prices over the first nine
months of the year. Corporate G&A cost guidance for full-year
2019 was revised to $30 - $35 million from $26 - $28 million
previously. The Company’s guidance for full-year 2019 as at
November 6, 2019 is provided below.
Table 6. 2019 Guidance (as at November 6,
2019)(1)
($ 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 and growth capital(3) |
|
|
|
$170 - $190 |
Growth capital(3)(4) |
|
|
|
$175 - $185 |
Exploration and evaluation(5) |
|
|
|
$120 - $140 |
Corporate G&A(6) |
|
|
|
$30 - $35 |
- Full-year 2019 guidance as at November 6, 2019
- Production and operating cash cost guidance for the Holt
Complex for full-year 2019 includes results for the Holloway mine,
which resumed operations during Q1 2019, as one of three mines
included in the Holt Complex.
- See the “Non-IFRS Measures” section of the MD&A for the
three and nine months ended September 30, 2019. The most comparable
IFRS Measure for operating cash costs is production costs, as
presented in the Consolidated Statements of Operations and
Comprehensive Income, and total additions and construction in
progress for sustaining and growth capital. Operating cash costs
per ounce and AISC per ounce sold are comparable to production
costs on a unit basis. Operating cash costs, operating cash cost
per ounce sold and AISC per ounce sold reflect an average US$ to C$
exchange rate of 1.32 and a US$ to A$ exchange rate of 1.43.
- 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.
- 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.
- Includes general and administrative costs and severance
payments. Excludes non-cash share-based payment expense.
Q3 2019 Financial Results and Conference
Call Details
A conference call to discuss the Q3 2019 results
will be held by senior management on Wednesday, November 6, 2019,
at 4:00 pm ET (Thursday, November 7, 2019 at 8:00 am AEDT). 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, NOV. 6, 2019 (ET), THURSDAY, NOV. 7, 2019
(AEDT) |
CONFERENCE ID: |
2475217 |
TIME: |
4:00 pm ET (8:00 am AEDT) |
TOLL-FREE NUMBER: |
(833) 241-7254 |
INTERNATIONAL CALLERS: |
(647) 689-4218 |
AUSTRALIAN TOLL-FREE NUMBER |
1800287011 |
AUSTRALIAN LOCAL NUMBER |
0283798020 |
Qualified Persons
Natasha Vaz, P.Eng., Vice President, Technical
Services is a “qualified person” as defined in National Instrument
43-101 and has reviewed and approved disclosure of the technical
information and data in this News Release.
About Kirkland Lake Gold
Ltd.
Kirkland Lake Gold Ltd. is a growing gold
producer operating in Canada and Australia that produced 723,701
ounces in 2018 and is on track to achieve significant production
growth over the next three years, including target production of
950,000 – 1,000,000 ounces in 2019, 930,000 – 1,010,000 ounces in
2020 and 995,000 – 1,055,000 ounces in 2021. The production profile
of the Company is anchored by two high-grade, low-cost operations,
including the Macassa Mine located in Northern Ontario and the
Fosterville Mine located in the state of Victoria, Australia.
Kirkland Lake Gold's solid base of quality assets is complemented
by district scale exploration potential, supported by a strong
financial position with extensive management and operational
expertise.
Non-IFRS Measures
The Company has included certain non-IFRS
measures in this document, as discussed below. The Company believes
that these measures, in addition to conventional measures prepared
in accordance with IFRS, provide investors an improved ability to
evaluate the underlying performance of the Company. The non-IFRS
measures are intended to provide additional information and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. These measures do not
have any standardized meaning prescribed under IFRS, and therefore
may not be comparable to other issuers. Please the Company’s
MD&A for the three and nine months ended September 30, 2019 for
a reconciliation of non-IFRS measures.
Free Cash Flow
In the gold mining industry, free cash flow is a
common performance measure with no standardized meaning. The
Company calculates free cash flow by deducting cash capital
spending (capital expenditures for the period, net of expenditures
paid through finance leases) from net cash provided by operating
activities.
The Company discloses free cash flow as it
believes the measure provides valuable assistance to investors and
analysts in evaluating the Company’s ability to generate cash flow
after capital investments and build the cash resources of the
Company The most directly comparable measure prepared in accordance
with IFRS is net cash provided by operating activities less net
cash used in investing activities.
Operating Cash Costs and Operating Cash Costs
per Ounce Sold
Operating cash costs and operating cash cost per
tonne and per ounce sold are non-IFRS measures. In the gold mining
industry, these metrics are common performance measures but do not
have any standardized meaning under IFRS. Operating cash costs
include mine site operating costs such as mining, processing and
administration, but exclude royalty expenses, depreciation and
depletion and share based payment expenses and reclamation costs.
Operating cash cost per ounce sold is based on ounces sold and is
calculated by dividing operating cash costs by volume of gold
ounces sold.
The Company discloses operating cash costs and
operating cash cost per tonne and per ounce as it believes the
measures provide valuable assistance to investors and analysts in
evaluating the Company’s operational performance and ability to
generate cash flow. The most directly comparable measure prepared
in accordance with IFRS is total production expenses. Operating
cash costs and operating cash cost per ounce of gold should not be
considered in isolation or as a substitute for measures prepared in
accordance with IFRS.
Sustaining and Growth Capital
Sustaining capital and growth capital are
Non-IFRS measures. Sustaining capital is defined as capital
required to maintain current operations at existing levels. Growth
capital is defined as capital expenditures for major growth
projects or enhancement capital for significant infrastructure
improvements at existing operations. Both measurements are used by
management to assess the effectiveness of investment programs.
AISC and AISC per Ounce Sold
AISC and AISC per ounce are Non-IFRS measures.
These measures are intended to assist readers in evaluating the
total costs of producing gold from current operations. While there
is no standardized meaning across the industry for this measure,
the Company’s definition conforms to the definition of AISC as set
out by the World Gold Council in its guidance note dated June 27,
2013.
The Company defines AISC as the sum of operating
costs (as defined and calculated above), royalty expenses,
sustaining capital, corporate expenses and reclamation cost
accretion related to current operations. Corporate expenses include
general and administrative expenses, net of transaction related
costs, severance expenses for management changes and interest
income. AISC excludes growth capital, reclamation cost accretion
not related to current operations, interest expense, debt repayment
and taxes.
Total cash costs and AISC Reconciliation
The Company has not restated the 2018 AISC
comparatives to reflect the impact of IFRS 16, Leases ("IFRS 16")
consistent with the modified retrospective approach adopted by the
Company for financial statement purposes upon transition to the new
leasing standard effective January 1, 2019. If the Company had
applied IFRS 16 in the comparative periods, it would not have
resulted in a material impact to the 2018 consolidated or
site-by-site AISC comparatives.
Average Realized Price per Ounce Sold
In the gold mining industry, average realized
price per ounce sold is a common performance measure that does not
have any standardized meaning. The most directly comparable measure
prepared in accordance with IFRS is revenue from gold sales.
Average realized price per ounces sold should not be considered in
isolation or as a substitute for measures prepared in accordance
with IFRS. The measure is intended to assist readers in evaluating
the total revenues realized in a period from current
operations.
Adjusted Net Earnings and Adjusted Net Earnings
per Share
Adjusted net earnings and adjusted net earnings
per share are used by management and investors to measure the
underlying operating performance of the Company.
Adjusted net earnings is defined as net earnings
adjusted to exclude the after-tax impact of specific items that are
significant, but not reflective of the underlying operations of the
Company, including transaction costs and executive severance
payments, purchase price adjustments reflected in inventory and
other non-recurring items. Adjusted net earnings per share is
calculated using the weighted average number of shares outstanding
for adjusted net earnings per share.
Earnings before Interest, Taxes, Depreciation,
and Amortization (“EBITDA”)
EBITDA 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
Certain statements in this press release
constitute ‘forward looking statements’, including statements
regarding the plans, intentions, beliefs and current expectations
of the Company with respect to the future business activities and
operating performance of the Company. The words “may”, “would”,
“could”, “will”, “intend”, “plan”, “anticipate”, “believe”,
“estimate”, “expect” and similar expressions, as they relate to the
Company, are intended to identify such forward-looking statements.
Investors are cautioned that forward-looking statements are based
on the opinions, assumptions and estimates of management considered
reasonable at the date the statements are made, and are inherently
subject to a variety of risks and uncertainties and other known and
unknown factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements.
These factors include, among others, the development of the
Company’s properties and the anticipated timing thereof, expected
production from, and the further potential of, the Company’s
properties, the anticipated timing and commencement of exploration
programs on various targets within the Company’s land holdings and
the implication of such exploration programs (including but not
limited to any potential decisions to proceed to commercial
production), the ability to lower costs and gradually increase
production, the ability of the Company to successfully achieve
business objectives, the ability of the Company to achieve its
longer-term outlook and the anticipated timing and results thereof,
the performance of the Company’s equity investments and the ability
of the Company to realize on its strategic goals with respect to
such investments, the effects of unexpected costs, liabilities or
delays, the potential benefits and synergies and expectations of
other economic, business and or competitive factors, the Company's
expectations in connection with the projects and exploration
programs being met, the impact of general business and economic
conditions, global liquidity and credit availability on the timing
of cash flows and the values of assets and liabilities based on
projected future conditions, fluctuating gold prices, currency
exchange rates (such as the Canadian dollar versus the US dollar),
mark-to-market derivative variances, possible variations in ore
grade or recovery rates, changes in accounting policies, changes in
the Company's corporate mineral resources, changes in project
parameters as plans continue to be refined, changes in project
development, construction, production and commissioning time
frames, the possibility of project cost overruns or unanticipated
costs and expenses, higher prices for fuel, power, labour and other
consumables contributing to higher costs and general risks of the
mining industry, failure of plant, equipment or processes to
operate as anticipated, unexpected changes in mine life,
seasonality and unanticipated weather changes, costs and timing of
the development of new deposits, success of exploration activities,
permitting time lines, risks related to information technology and
cybersecurity, timing and costs associated with the design,
procurement and construction of the Company’s various capital
projects, including but not limited to the #4 Shaft project at the
Macassa Mine, the ventilation, paste plant, transformer and water
treatment facility at the Fosterville Mine, the ability to obtain
the necessary permits in connection with all of its various capital
projects, including but not limited to the the rehabilitation of
the Macassa tailings facility and the development of a new tailings
facility and the anticipated results associated therewith, the
ability to obtain renewals of certain exploration licences in
Australia, native and aboriginal heritage issues, risks relating to
infrastructure, permitting and licenses, exploration and mining
licences, government regulation of the mining industry, risks
relating to foreign operations, uncertainty in the estimation and
realization of mineral resources and mineral reserves, quality and
marketability of mineral product, environmental regulation and
reclamation obligations, risks relating to the Northern Territory
wet season, risks relating to litigation, risks relating to
applicable tax and potential reassessments thereon, risks relating
to changes to tax law and regulations and the Company's
interpretation thereof, foreign mining tax regimes and the
potential impact of any changes to such foreign tax regimes,
competition, currency fluctuations, government regulation of mining
operations, environmental risks, unanticipated reclamation
expenses, title disputes or claims, and limitations on insurance,
as well as those risk factors discussed or referred to in the AIF
of the Company for the year ended December 31, 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 statements prove incorrect, actual results may vary
materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although the Company
has attempted to identify important risks, uncertainties and
factors which could cause actual results to differ materially,
there may be others that cause results not be as anticipated,
estimated or intended. The Company does not intend, and does not
assume any obligation, to update these forward-looking statements
except as otherwise required by applicable law.
Mineral resources are not mineral reserves, and
do not have demonstrated economic viability, but do have reasonable
prospects for eventual economic extraction. Measured and indicated
resources are sufficiently well defined to allow geological and
grade continuity to be reasonably assumed and permit the
application of technical and economic parameters in assessing the
economic viability of the resource. Inferred resources are
estimated on limited information not sufficient to verify
geological and grade continuity or to allow technical and economic
parameters to be applied. Inferred resources are too speculative
geologically to have economic considerations applied to them to
enable them to be categorized as mineral reserves. There is no
certainty that Measured or Indicated mineral resources can be
upgraded to mineral reserves through continued exploration and
positive economic assessment.
Cautionary Note to U.S. Investors -
Mineral Reserve and Resource Estimates
This press release has been prepared in
accordance with the requirements of the securities laws in effect
in Canada, which differ from the requirements of United States
securities laws. The terms “mineral reserve”, “proven mineral
reserve” and “probable mineral reserve” are Canadian mining terms
as defined in accordance with Canadian National Instrument
43-101-Standards of Disclosure for Mineral Projects (“NI 43-101”)
and the Canadian Institute of Mining, Metallurgy and Petroleum (the
“CIM”)-CIM Definition Standards on Mineral Resources and Mineral
Reserves, adopted by the CIM Council, as amended. These definitions
differ from the definitions in SEC Industry Guide 7 under the
United States Securities Act of 1993, as amended (the “Securities
Act”).
Under SEC Industry Guide 7 standards, a “final”
or “bankable” feasibility study is required to report reserves, the
three-year historical average price is used in any reserve or cash
flow analysis to designate reserves and the primary environmental
analysis or report must be filed with the appropriate governmental
authority.
In addition, the terms “mineral resource”,
“measured mineral resource”, “indicated mineral resource” and
“inferred mineral resource” are defined in and required to be
disclosed by NI 43-101; however, these terms are not defined terms
under SEC Industry Guide 7 and are normally not permitted to be
used in reports and registration statements filed with the SEC.
Investors are cautioned not to assume that any part or all of
mineral deposits in these categories will ever be converted into
reserves. “Inferred mineral resources” have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Investors are
cautioned not to assume that all or any part of an inferred mineral
resource exists or is economically or legally mineable. Disclosure
of “contained ounces” in a resource is permitted disclosure under
Canadian regulations; however, the SEC normally only permits
issuers to report mineralization that does not constitute
“reserves” by SEC Industry Guide 7 standards as in place tonnage
and grade without reference to unit measures.
Accordingly, information contained in this
Management’s Discussion and Analysis contain descriptions of our
mineral deposits that may not be comparable to similar information
made public by U.S. companies subject to the reporting and
disclosure requirements under the United States federal securities
laws and the rules and regulations thereunder.
This document uses the terms “Measured”,
“Indicated” and “Inferred” Resources. US investors are advised that
while such terms are recognized and required by Canadian
regulations, the U.S. Securities and Exchange Commission does not
recognize them. “Inferred Mineral Resources” have a great amount of
uncertainty as to their existence, and as to their economic and
legal feasibility. It cannot be assumed that all or any part of an
Inferred Mineral Resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of pre-feasibility, feasibility or
other economic studies. U.S. investors are cautioned not to assume
that all or any part of Measured or Indicated Mineral Resources
will ever be converted into Mineral Reserves. U.S. investors are
also cautioned not to assume that all or any part of an Inferred
Mineral Resource exists, or is economically or legally
mineable.
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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