George Ogilvie Announced as Kirkland Lake Gold’s New CEO
George Ogilvie Announced as Kirkland Lake Gold’s New CEO
Kirkland Lake Gold announced that George Ogilvie is becoming the new Chief
Executive Officer, after Mark Tessier the Chief Operating Officer resigned.
Brian Hinchcliffe has left the position of CEO and was named to the new
position of Deputy Chairman. Following the changes, Kirkland Lake Gold took
immediate action to trim discretionary spending and preserve cash. Going forward,
management will attempt to raise the mining cut-off grades, stop mining of incremental
tonnage, and there will also be greater scrutiny of onsite productivity and capital
requests. Results for the last two quarters of the fiscal year will reflect these new
policies and procedures."
2013 Highlights from Kirkland Lake Gold
-- Net loss before income taxes for the quarter ended October 31, 2013 was
$6.1 million, which compares to net loss before of $0.8 million for the
previous quarter (Q1/14). Costs associated with increased waste being
hoisted, training, interest and finance expenses related to the
Company's recent financing activities and increased depreciation and
depletion expenses contributed to the reported net loss.
-- Net loss and comprehensive loss for the quarter was $3.9 million ($0.06
per share). This compares to a net and comprehensive loss of $1.8
million ($0.03 per share) for Q1/14. Movements in deferred tax resulting
from changes in deferred tax attributes between reporting periods is the
reason for the material differences between quarterly figures.
-- Cash flows from operations were $0.7 million ($0.01 per share) compared
to $14.7 million in the previous quarter. Year to date cash flows from
operations were $15.4 million compared to $12.9 million in the previous
fiscal year. The fluctuation in cash generated from operations quarter
on quarter was primarily a result of changes in non-cash working capital
items. Revenue for the quarter was $41.3 million.
-- Cash operating costs for the quarter were $328 per ton of ore ($1,105
per ounce of gold) compared with $344 per ton ($1,113 per ounce of gold)
in the previous quarter. Year to date, operating costs were $336 per ton
of ore ($1,109 per ounce of gold). The Company's goal remains to lower
operating costs to less than $250 per ton by completing the expansion
project and increasing production.
-- The overall Mine Expansion budget to complete infrastructure upgrades
and expand production is $95.0 million, of which $92.8 million has been
spent to date. The remainder is expected to be spent in the third
quarter of fiscal year 2014.
-- After meeting all operating costs, spending $22.5 million on
infrastructure and $2.4 million on exploration, total cash resources
(including short-term investments) as at October 31, 2013 were $76.6
million. As at December 11, 2013 this number had decreased to $62.9
million.
-- Ten diamond drills were active on the property doing exploration and
definition drilling, including two surface drills, as at October 31,
2013. As at December 12, 2013, eight diamond drills were active
including one on surface. Exploration spending has been reduced this
year by roughly $10.0 million in order to redirect available resources
to production and Mine Expansion Project activities.
-- The Company entered into a 2.5% net smelter return (NSR) royalty with
Franco-Nevada Corporation (FNV) on October 31, 2013 for proceeds of
US$50.0 million (CAD$51.2 million). Kirkland Lake has a 3 year option to
buy back 1% of the NSR, for total consideration of US$36 million, less
the royalty proceeds attributable to the buy back portion of the NSR
that has been paid to Franco-Nevada prior to the date of the buy back.
-- During the quarter, 105,670 tons of ore were produced at a head grade of
0.31 ounces of gold per ton (opt) and a gold recovery rate of 95.17% to
produce 31,387 ounces of gold. Recovery was slightly lower than the
96.00% targeted due to the installation and bedding of new equipment in
the processing plant. The tonnage increase was attributable to
additional ore mining workplaces coming on line and a larger mining
workforce. Scheduled and unscheduled project and operating related
disruptions resulted in production delays equivalent to approximately
two weeks of production.
-- Gold sold for the quarter was 30,530 ounces, approximately 1% higher
than the previous quarter (30,253 ounces). Gold sold in the fiscal year
to date was 60,783 ounces, 44% higher than the previous year (42,309
ounces).
-- During the quarter, total tons broken (ore and waste) were 162,725 tons
for average daily tons broken of 1,768 tons per day.
-- The number of ore mining workplaces that were active in the production
cycle at the end of the quarter was 68, with 42 additional ore mining
workplaces in the development stage. The activity level in some of the
active ore mining workplaces increased due to additional manpower.
-- Progress made on the processing plant during the quarter included the
commissioning of two new leach tanks, an 8 ton strip vessel, an 8 ton
acid wash vessel, carbon columns and loaded and barren eluate tanks.
Items remaining to be commissioned in order to complete the processing
plant upgrade include the tailings basin and tanks, a larger pump and
pump line for the effluent treatment plant, the paste plant tailings
pump and box and the new primary ball mill.
-- The Company workforce totalled 1,215 employees at October 31, 2013, an
increase of 79 people throughout the quarter. Following the appointment
of a new Chief Executive Officer, a freeze on all new hires was
implemented; however, the intensive focus on training approximately 100
staff to become miners or to become lead miners is ongoing. The Company
has essentially met its workforce requirements.
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Subsequent Events
-- On December 6, 2013, the Company signed an amended credit facility
letter that revised the combined credit facility terms from $40.0
million to $47.5 million. The changes include a cash secured operating
loan of up to $7.5 million, giving access to a total operating loan of
$15.0 million. The amended agreement also lowers the lease component of
the credit facility from $40.0 million to $32.5 million. The remainder
of the terms and rates do not differ from the original credit facility
letter dated May 13, 2013. As at October 31, 2013, the $7.5 million
operating loan had been drawn down and $23.1 million of the lease
facility had been utilised.
-- On November 18, 2013 the Company announced that Mr. Mark Tessier had
resigned as Chief Operating Officer and as a member of the Board of
Directors. The Company also noted that Mr. Brian Hinchcliffe had
accepted a new position as Deputy Chairman, and Mr. George Ogilvie, P.
Eng., would be replacing him as the Chief Executive Officer. For further
information on these executive management changes, please see the Press
Release dated November 18, 2013.
Outlook
-- Subsequent to the quarter and the appointment of the new Chief Executive
Officer, the Company implemented the following costs saving initiatives:
-- Reduction in the number of exploration drills: one surface and one
underground exploration drill were shutdown leaving one surface
drill and two underground exploration drills
-- Reduction of various consulting contracts
-- Termination of some staff employment contracts
-- A freeze on all new hires
-- Greater scrutiny of all capital requests
-- Greater scrutiny and monitoring of site productivity
-- Shutdown of lowest grade stopes to improve head grade
-- The decision to shut down the lowest-grade stopes and redirect manpower
accordingly should raise the mine head grade and, as a consequence, will
result in a fall in the previously reported number of 40% of ore mined
being outside reserve or resources going forward.
-- Mine plans for the balance of fiscal 2014 and 2015 are now being re-
worked and will be reviewed in early calendar 2014. Labour productivity
remains a key area of focus, and ore grade may continue to fluctuate
throughout the remainder of fiscal 2014. The average ore grade is
expected to improve over fiscal 2014. Production for the current year is
likely to be at the lower end of the previously announced 150,000-
180,000 ounce guidance number and any revisions to this estimate, based
on a reworked mine plan, will be available in March 2014. The Company's
strategy remains to gradually increase gold production in future years
whilst focussing on managing costs to achieve clearly identified
targets.
About the Company
Kirkland Lake Gold's corporate goal is to create a self-sustaining and long
lived intermediate gold mining company based in the historic Kirkland Lake
Gold Camp. The Company plans to do this by increasing production capacity
to 2,200 tons of ore per day in several stages, and by decreasing production
costs by realizing the economies of scale associated with that higher production
capacity. At the same time, the Company is committed to maintaining a significant
exploration program aimed at developing and maintaining a property wide reserve
and resource base sufficient to sustain a mine life of more than ten years for as
long as practicable.
Cautionary Note Regarding Forward-Looking Statements
This news story contains statements which 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. 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.
Form for the year ended April 30, 2013 and the Company's Management's Discussion and Analysis for the interim period ended October 31, 2013 Kirkland Lake Gold has filed with the securities regulatory authorities in certain provinces of Canada and are available at www.sedar.com.
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.
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