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Home > News > Kirkland Lake Gold earnings...

Kirkland Lake Gold earnings up year over year and quarter over quarter

Nov 5, 2020


“During Q3 2020, we continued to achieve solid operating results and ended the quarter well positioned to achieve our consolidated 2020 guidance," said Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold.

Kirkland Lake Gold Ltd. has announced the company’s financial and operating results for the third quarter and first nine months of 2020.

"We also continued to generate industry-leading earnings and cash flows. With increasing financial strength, we have made further progress with our key strategic priorities. First and foremost, we are investing in our three cornerstone assets, Detour Lake, Macassa and Fosterville, all of which are high-quality operations which have substantial growth potential. We are on track to invest around $130 million in exploration this year and, based on work to date, we have reported very encouraging drill results at all three assets. We are also making excellent progress with key growth projects. For example, our #4 shaft project at Macassa is advancing very well with the project currently ahead of schedule and on track for completion late in 2022. Following completion of the shaft, we will begin transitioning Macassa into a much improved mine, with production targeted to ramp up to 400,000 ounces per year at much lower unit costs.

“Another key component of our strategy is returning capital to shareholders. In February, we announced our goal to repurchase 20.0 million shares over a 12 to 24-month period and have already reached 14.0 million shares so far in 2020 for well over half a billion dollars. We have also increased our quarterly dividend twice this year, doubling it in Q1 2020 and recently announcing a 50% increase, to US$0.1875 per share, beginning in Q4 2020. At the new level, we will be providing over $200 million annually to shareholders through our dividend policy. Taking share repurchases and dividend payments together, so far in 2020 we have returned $643 million of capital to shareholders, representing $2.35 per share and $468 per ounce based the mid-point of our 2020 production guidance. As our financial strength continues to grow, rewarding shareholders for their investment in our company will remain a top priority for management and the Board.

“Finally, the third component of our strategy is investing in companies and projects where we see potential to add significant value by bringing our balance sheet and our commitment to drilling. The acquisition of Detour Gold Corporation on January 31, 2020 is a clear example of this part of our strategy in action, as was the acquisition of Newmarket Gold, to obtain Fosterville, in November 2016. We are extremely pleased with the contribution already being made by Detour Lake Mine, which generated $231.0 million of free cash flow(1) in the first eight months since the transaction, representing over 40% of our total free cash flow1 for YTD 2020. Even more important, the exploration results we are achieving early in our $50 million drilling program are very encouraging and support our view that Detour Lake, like Fosterville and even Macassa with the new shaft, has the potential to be transformed into something much more valuable than the mine we acquired.”

 

The Q3 2020 results include strong year-over-year growth in production, revenue, net earnings and cash flow. 

Q3 2020 Highlights

  • Net earnings of $202.0 million. Adjusted net earnings(1) of $249.3 million or $0.91 per share: Net earnings totalled $202.0 million or $0.73 per share. Adjusted net earnings(1) totalled $249.3 million or $0.91 per share, an increase of 49% from Q3 2019 and 14% from Q2 2020.
  • Record free cash flow(1): Net cash provided by operating activities totalled $431.1 million with record free cash flow1 of $275.7 million, a 52% increase from Q3 2019 and 22%2 higher than the previous quarter.
  • Increased balance sheet strength: Cash at September 30, 2020 totalled $848.5 million, a $311.1 million or 58% increase from $537.4 million at June 30, 2020.
  • Progress with key growth projects: Total growth capital expenditures1 totalled $28.1 million, including $11.5 million related to Macassa ($8.3 million to #4 shaft project); #4 Shaft project ended the quarter approximately one month ahead of schedule and on track for completion in late 2022.
  • Continued exploration success: The ramp up of exploration drilling continued during Q3 2020, with total expenditures of $27.4 million; At September 30, 2020, there were five surface and eight underground drills at Fosterville, one surface and eight underground drills at Macassa and five surface drills at Detour Lake; Considerable exploration success achieved, including:

 ºDetour Lake: Results in Saddle Zone support the Company’s view that a much larger deposit exists around the Main Pit and West Pit locations than is currently included in Mineral Reserves;

 ºFosterville: Infill drilling in the Swan Zone intersected higher than expected grades; Drilling confirmed substantial scale and growth potential of mineralized systems at Cygnet, Robbin’s Hill and Harrier;

 ºMacassa: New results included exceptional grades being intersected near contact of South Mine Complex (“SMC”) and high-grade mineralized zones vertically stacked along Amalgamated Break.

  • Over half billion dollars in share repurchases in 2020: During Q3 2020, $107.4 million (C$143.0 million) was used to repurchase 2,139,300 common shares; As at November 4, 2020, 14,029,500 shares had been repurchased year to date for $526.6 million (C$709.5 million).
  • Continued dividend growth: Quarterly dividend increased 50%, to US$0.1875 per share, effective Q4 2020; Increase follows doubling of dividend in Q1 2020 to US$0.125 per share from US$0.06 per share (dividend more than tripled during 2020); $34.5 million used in Q3 2020 to pay quarterly dividend on July 13, 2020 to shareholders of record June 30, 2020.
  • Solid operating results:

 ºProduction of 339,584 ounces, a 37% increase from 248,400 ounces in Q3 2019 and 3% higher than 329,770 ounces the previous quarter;

 ºProduction costs of $136.0 million versus $73.7 million in Q3 2019 and $141.4 million in Q2 2020;

 ºOperating cash costs per ounce sold(1) averaged $406 compared to $287 in Q3 2019 and $374 in Q2 2020; $245 in Q3 2020 and $241 in Q2 2020 excluding Detour Lake; 

 ºAll-in sustaining costs (“AISC”) per ounce sold(1) averaged $886 ($622 excluding Detour Lake) versus $562 in Q3 2019 and $751 ($526 excluding Detour Lake) in Q2 2020.

  • Detour Lake – The right deal at the right time: Detour Lake continued to make a substantial contribution to the Company’s results in Q3 2020, with production of 140,067 ounces, revenue of $262.5 million and free cash flow(1) totalling $64.0 million; From January 31, 2020 to September 30, 2020, Detour Lake produced 363,614 ounces with revenue of $674.9 million and free cash flow1 totalling $231.0(3) million, representing 41% of the Company’s total free cash flow(1),(3) for YTD 2020; The acquisition on January 31, 2020 added 14.8 million ounces to the Company’s Mineral Reserve base with potential for significant growth over the next few years with continued exploration success.
  • Solid return from strategic investment: During Q3 2020, $107.7 million (C$143.2 million) was received from the sale of the Company’s 32.6 million shares of Osisko Mining Inc. (“Osisko”), resulting in a realized gain of $60.6 million recognized through other comprehensive income (not included in net earnings).
  • Strategic alliance with Newmont Canada FN Holdings ULC (“Newmont”): $75 million (not included in net earnings) was received through a strategic alliance agreement with Newmont with respect to exploration and development opportunities around the Holt Complex and Newmont’s properties in Timmins; Through agreement, Newmont acquired an option on mining and mineral rights related to the Holt Mine property.
  • Environmental rehabilitation program launched: Reflecting the Company’s commitment to responsible mining, a three-year rehabilitation program was launched in the Northern Territory during Q3 2020 to address environmental issues caused by prior owners of the assets; Program involves managing the Howley Streak waste dumps, rehabilitation of dams and treatment of site water inventory; $32.6 million of rehabilitation costs included in Q3 2020 net earnings.


Tags: Northern Ontario / Deals & Financial / Gold / All Articles