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Kirkland Lake Gold reports strong Q4 & 2020 Production, repurchases shares

Jan 12, 2021

Kirkland Lake Gold Ltd. today announced production results for the fourth quarter and full-year of 2020. Q4 2020 production totaled 369,434 ounces, a 32% increase from the fourth quarter of 2019 (“Q4 2019”) and 9% higher than the previous quarter. All three of the Company’s cornerstone assets achieved their highest quarterly production levels of the year in Q4 2020. For FY 2020, the Company produced 1,369,652 ounces, a 41% increase from 2019 (“FY 2019”) and in line with full-year 2020 guidance of 1,350,000 – 1,400,000 ounces. All dollar amounts are expressed in U.S. dollars, unless otherwise noted. Per share amounts are based on a total of 268,097,877 shares outstanding at December 31, 2020.

$847.6 million returned to shareholders in 2020

A total of $847.6 million of cash was returned to shareholders through share repurchases and dividend payments in FY 2020 ($280.1 million in Q4 2020), representing $3.16 per share outstanding and $619 per ounce of FY 2020 production. A total of $731.6 million (C$974.6 million) of cash was used to repurchase 18,925,900 shares during the year through the Company’s normal course issuer bid (“NCIB”), of which 5,727,500 shares were repurchased during Q4 2020 for $245.9 million (C$319.4 million). With additional repurchases of 1,074,100 shares during the first week of January 2021, for $46.3 million (C$58.8 million), the Company has now achieved its goal of repurchasing 20.0 million shares over a 12 to 24-month period, which was announced in February 2020 following the completion of the Detour Gold Corporation (“Detour Gold”) acquisition. Dividend payments in 2020 totaled $116.0 million, including $34.2 million being used in Q4 2020 for a dividend payment of US$0.125 per share on October 14, 2020 to shareholders of record on September 30, 2020. The Company increased the quarterly dividend twice in 2020, doubling it to US$0.125 per share effective the Q1 2020 payment, with an additional 50% increase, to US$0.1875 per share, introduced effective the Q4 2020 payment, to be paid on January 14, 2021 to shareholders of record on December 31, 2020.

Significant financial strength maintained

At December 31, 2020, the Company had cash of $848 million (with no debt), an increase of $141 million or 20% from $707 million at December 31, 2019. Cash at December 31 ,2020 was unchanged from the previous quarter end, mainly reflecting the significant capital returned to shareholders during Q4 2020.

Highlights of Q4 2020 and FY 2020 Production Results

  • Consolidated production in Q4 2020 of 369,434 ounces, 32% increase from 279,742 ounces in Q4 2019 and 9% higher than 339,584 ounces in Q3 2020 (1,369,652 ounces for FY 2020 versus 974,615 ounces for FY 2019)
  • Gold poured of 373,284 ounces versus 279,054 ounces in Q4 2019 and 325,811 ounces in Q3 2020 (FY 2020 gold poured of 1,364,601 ounces compared to 978,455 ounces for FY 2019)
  • Gold sales totaling 371,009 ounces at an average realized price of $1,875 per ounce compared to gold sales of 278,438 ounces ($1,481 per ounce) in Q4 2019 and 331,959 ounces ($1,907 per ounce) in Q3 2020 (FY 2020 gold sales of 1,388,944 ounces ($1,772 per ounce) versus gold sales of 979,733 ounces ($1,405 per ounce) for FY 2019)
  • Production from Detour Lake Mine of 153,143 ounces, 9% increase from 140,067 ounces in Q3 2020 (Production from date of acquisition on January 31, 2020 to December 31, 2020 totaled 516,757 ounces)
  • Strong production at Fosterville totalling 164,008 ounces compared to record quarterly production of 191,894 ounces in Q4 2019 and 161,489 ounces the previous quarter (record production of 640,467 ounces in FY 2020 versus 619,366 ounces a year earlier)
  • Production at Macassa totaling 52,283 ounces versus 56,379 ounces in Q4 2019 and 38,028 ounces in Q3 2020 (FY 2020 production of 183,038 ounces versus 241,297 ounces for FY 2019; production in FY 2020 was impacted by reduced operations and health and safety protocols related to COVID-19, as well as reduced workforce productivity and equipment availability resulting from excessive heat in the mine during the third quarter of the year).

Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold, commented: “Our most significant achievement in 2020 was our extensive response to the COVID-19 pandemic, which clearly demonstrated that, at Kirkland Lake Gold, nothing is more important than the health and safety of our people and the responsible operation of our business. Looking at our operating performance, in many respects our team had its best year ever in 2020. Faced with unprecedented challenges, we generated solid results, with production of 1,369,652 ounces achieving our full-year 2020 guidance. Our strong performance was driven by Fosterville, which generated record production of 640,467 ounces, including better than expected results during Q4 2020. Detour Lake and Macassa were significantly impacted by COVID-19, including being placed on reduced operations at the end of the first quarter. Both operations bounced back later in the year, achieving their best quarter of production in Q4 2020. Looking at Detour Lake, we are extremely pleased with our acquisition of the mine on January 31, 2020, which was clearly a case of the right deal at the right time. Detour Lake is a tremendous asset with substantial upside that is already making a significant contribution to our operating and financial results. In 2021, the mine is poised for strong production growth and improved unit costs, with there being considerable potential for additional growth as we continue to have success with our extensive exploration program.

“Turning to exploration, we achieved very encouraging drill results at all three of our cornerstone assets, which support our view that Detour Lake, Macassa and Fosterville are not just three very profitable operations, they are also three of the most exciting exploration stories in the industry. We also made excellent progress with our key growth projects, including our #4 Shaft project at Macassa which was advancing ahead of schedule at year end, with target completion in late 2022. At Fosterville, a twin exploration drive being developed to Robbin’s Hill advanced over 3,200 metres, with underground drilling from the drive to commence late this year. We also commenced several key projects at Detour Lake during 2020 in support of the significant production growth we are targeting in the years ahead, with these projects focused on mill enhancements, tailing capacity expansion, and construction of new site infrastructure.

“Finally, one of our key strategic priorities is returning capital to shareholders and, in this critical area of value creation, 2020 was an extremely successful year. In total, we returned $847.6 million to shareholders during the year, including $731.6 million through share repurchases and $116.0 million in dividend payments. In February of 2020, we announced a target to repurchase 20.0 million shares through our NCIB within a 12 to 24-month period as part of completing the Detour Gold acquisition and, as of January 8, 2021, we have achieved that goal. We also increased our dividend twice in 2020, growing the quarterly dividend from $0.06 per share when 2020 began to $0.1875 per share effective the Q4 2020 dividend ($0.75 per share annualized). With three cornerstone assets like Detour Lake, Macassa and Fosterville, we expect to continue to generate strong earnings and cash flows, which will support our ongoing efforts to return substantial amounts of capital to shareholders going forward.”

Key Developments in FY 2020

Proactive and effective response to COVID-19 pandemic

  • Implemented extensive health and safety protocols to protect workers from COVID-19, including suspension of all non-essential work, remote work where possible, and protocols in support of social distancing, medical testing and cleaning and sanitizing; COVID-19 protocols are expected to remained in effect for the foreseeable future; As part of the COVID-19 response, reduced operations were introduced at Detour Lake (March 23rd) and Macassa (April 2nd) with operations suspended at Holt Complex (April 2nd); Gradual recall of workers commenced at Detour Lake and Macassa in early May with workforces returning to pre-COVID levels by June 30, 2020.

Significant achievements in Environment, Social and Governance (“ESG”) performance

  • Adopted World Gold Council’s Responsible Gold Mining Principles; Completed Year One External Assurance
  • Finalized policies and standards on Human Rights, Supplier Code of Conduct and Grievance Resolution
  • Verified that all active tailings facilities meet or exceed all MAC/CDA and ANCOLD guidelines
  • Received Tom Peters Memorial Mine Reclamation Award in recognition of Detour Lake Mine’s Progressive Reclamation Program aimed at reclaiming 10 hectares of land per year commencing in 2019
  • Achieved greenhouse gas (“GHG”) emissions well below industry averages, with Macassa continuing to have among the lowest GHG intensity rates in the industry
  • Macassa purchased industry’s first 50-tonne battery-powered underground haul truck in 2020, with delivery scheduled for Q1 2021
  • Launched $20 million donation program to support local health care agencies and community support groups in areas where the Company operates; A$1.0 million donated to support Australian bush fire relief and prevention.

Acquisition of Detour Gold Corporation

  • Acquired Detour Gold Corporation on January 31, 2020 adding a large-scale, open-pit gold mine (Detour Lake Mine) in Northern Ontario with a large base of Mineral Reserves and significant potential for growth through exploration success; Detour Lake is poised for significantly stronger results in 2021 with production targeted to grow to 680,000 – 720,000 ounces at all-in sustaining costs1 better than $900 per ounce sold.
    1. See the ”Non-IFRS Measures” section of the MD&A for the three and nine months ended September 30, 2020 for more information.

Drilling results demonstrate substantial exploration upside at all three cornerstone assets

  • Detour Lake: Broad zones of mineralization intersected in the Saddle Zone between the Main and West pits with high grades at depth supporting potential underground mining operations; Results provide increasing evidence that a much larger and higher-grade deposit exists than is currently included in Mineral Reserves
  • Macassa: Drilling continued to expand the South Mine Complex (“SMC”), intersected exceptional grades near the contact of the SMC and Amalgamated Break, expanded mineralization along the Amalgamated Break and identified a new high-grade corridor along the Main Break close to the #4 Shaft (currently under development)
  • Fosterville: Drilling returned higher than expected grades from infill drilling in the Swan Zone, confirmed the scale of mineralized systems at Robbin’s Hill, Cygnet and Harrier and demonstrated the potential for discovering new high-grade zones.

Significant progress with key growth capital projects

  • #4 Shaft project (Macassa): Sinking advanced approximately 3,040 feet during 2020, reaching 4,240 feet by year end; Project advancing ahead of schedule on track for completion in late 2022, with production at Macassa to grow to 400,000 – 425,000 ounces in 2023
  • Robbin’s Hill exploration decline at Fosterville: Twin exploration drive advanced 3,292 metres in 2020; Drive to support underground drilling at Robbin’s Hill and other targets with drilling to commence in Q4 2021 and completion of the drive targeted for mid-2022
  • Multiple projects at Detour Lake: Multiple projects undertaken in support of future production growth, including investments in mill improvements, expansion of tailings capacity, construction of an assay lab and improvements to other site infrastructure.

Operations suspended at non-core assets

  • Holt Complex: Operations suspended effective April 2nd and extended until further notice on July 16th; Strategic alliance agreement announced with Newmont Canada FN Holdings ULC (“Newmont”) in August through which the companies committed to work together to identify regional exploration opportunities around the Holt Complex and Newmont’s properties in Timmins, Ontario; Kirkland Lake Gold received $75 million from Newmont with Newmont acquiring an option on mining and mineral rights related to the Holt Mine property
  • Northern Territory: Test mining and milling, as well as all exploration drilling, suspended in March 2020; Three-year, $60 – $65 million rehabilitation program was launched in Q3 2020, intended to address environmental issues caused by prior owners with objective of restoring approximately 360ha to grazing land quality, removing waste rock dumps and filling open pits.

Significant proceeds from sale of strategic investments

  • During FY 2020, $174.4 (C$230.1) million was received from the sale of strategic investments, including $107.7 (C$143.2) million from the sale of 32.6 million shares of Osisko Mining Inc. in Q3 2020; $38.9 (C$50.7) million from the sale of 20,605,100 shares and 9,225,000 warrants of Novo Resources Corp., most of which was sold in Q4 2020, and $27.8 (C$36.2) million related to the sale of 35,656,084 shares of De Grey Mining Ltd. in Q4 2020.

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