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Outstanding results for KLGold's 2020 Q2

Jul 30, 2020

By Kevin Vincent. Kirkland Lake Gold has everyone's attention. The company is on the must-have list of nearly every high profile investment firm as it continues to deliver impressive production and profitability. KL Gold has topped more than $1.1 Billion in revenue so far this year to go along with a COVID-busting net earnings report. 

Kirkland Lake Gold released the Company’s financial and operating results for the second quarter and first six months of 2020. The Q2 2020 results include strong growth in production, revenue, earnings and cash flow despite disruptions caused by the Company’s COVD-19 response.

Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold, commented: “We achieved solid results in Q2 2020 despite significant disruptions related to COVID-19. Compared to last year’s second quarter, production increased 54%, our adjusted net earnings doubled and we generated strong free cash flow.  Once again, Fosterville was a key driver of our results, increasing production by 10% year over year and generating AISC of $273 per ounce. With year-to-date production of 314,970 ounces, Fosterville entered the second half of the year well positioned to achieve its full-year 2020 guidance of 590,000 – 610,000 ounces. Detour Lake is already making a significant contribution to our performance and to value creation. The mine generated $89.0 million of free cash flow in Q2 2020, and $167.0 million from January 31, 2020 to June 30, 2020. We are expecting even better results from Detour Lake in the second half of the year, with the workforce back to pre-COVID levels and mining rates ramping up, which should lead to improved grades. Detour Lake’s performance has already exceeded our expectations and with the current gold price environment, the timing of the Detour Gold transaction could not have been better. At Macassa, there was a significant impact in YTD 2020 from the move to reduced operations and our COVID-19 protocols. Having said that, as with Detour Lake, workforce levels at Macassa are now back to normal levels and we are positioned for stronger results in the second half of 2020, from both higher tonnes processed and improved average grades. 

“Turning to exploration, despite extensive disruptions caused by COVID-19, we are having a successful year in terms of exploration results. In April, we announced encouraging drill results at Macassa, including the identification of a new, large corridor of high-grade mineralization along the Main/’04 Break close to the location of our #4 Shaft. The corridor is at depth on the Kirkland Mineral property, where there is very little previous drilling, and is open both along strike and vertically. In June, we announced that initial drill results at Detour Lake had intersected mineralization with attractive grades outside of existing Mineral Resources at three locations, west of the Main Pit, at the 58 North zone and at the North pit location. The potential to significantly grow Mineral Reserves at Detour Lake was an important factor in our decision to acquire Detour Gold and the June drill results are extremely encouraging in supporting our view that there are many more ounces to be found at Detour Lake. At Fosterville, we are making good progress ramping up our drilling program, with exploration work targeting the Lower Phoenix, Cygnet, Robbin’s Hill and Harrier systems. We expect to announce results to the market in the near future.”

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.kl.gold. All dollar amounts are in U.S. dollars, unless otherwise noted.

Key Developments Impacting Q2 2020:

  • Detour Gold acquisition: Completed acquisition of Detour Gold on January 31, 2020, adding a third cornerstone asset; First full quarter of results from Detour Lake in Q2 2020 (two months of results in Q1 2020)
  • COVID-19 response: Implemented extensive health and safety protocols to protect workers from COVID-19 virus; Transitioned Detour Lake and Macassa mines to reduced operations, suspended operations at Holt Complex, suspended all non-essential work company-wide; Company commenced recall of workers at Detour Lake and Macassa in early May with workforces reaching pre-COVID levels by end of Q2 2020
  • Company re-issues full-year 2020 guidance: Full-year 2020 guidance was re-issued on June 30, 2020 recognizing progress achieved in ramping up business activities after impact of COVID-19 measures; Previous full-year 2020 guidance was withdrawn on April 1, 2020 based on uncertainties related to COVID-19 virus and Company’s extensive response to the pandemic
  • Non-core assets: On February 19, 2020, the Company designated its assets in the Northern Territory and the Holt Complex as non-core. In March, the Company discontinued test mining and processing and all exploration work in the Northern Territory with no plans to resume operations; Also in March, the Company placed the Holloway Mine, part of the Holt Complex, on care and maintenance; Effective April 2, 2020, the Company suspended operations at the remainder of the Holt Complex as part of its COVID-19 response and while it conducted a strategic review of the assets, these operations remained suspended throughout Q2 2020; On July 16, 2020 the Company announced that the suspension of operations at Holt Complex will be extended until further notice, with over 220 workers being reassigned to new roles in the Company’s Canadian operations or being offered new roles and declining to pursue other opportunities; Workers not reassigned to receive severance packages. 

Highlights of Q2 2020 Performance 

  • Adjusted net earnings of $0.79 per share: Net earnings in Q2 2020 totalled $150.2 million ($0.54 per share); Adjusted net earnings1 in Q2 2020 totalled $219.3 million ($0.79 per share), double Q2 2019 level of $109.8 million ($0.52 per share) and 22% higher than $179.2 million ($0.70 per share) the previous quarter
  • Revenue more than doubles: Revenue totalled $581.0 million, 107% increase from $281.3 million in Q2 2019 and 5% higher than $554.7 million the previous quarter (revenue from Detour Lake of $233.0 million in Q2 2020, $179.4 million in Q1 2020, nil in Q2 2019); Gold sales totalled 341,390 ounces, 61% increase from 212,091 ounces in Q2 2019 and similar to 344,586 ounces in Q1 2020; Average realized gold price of $1,716 per ounce versus $1,320 per ounce in Q2 2019 and $1,586 per ounce in Q1 2020
  • EBITDA1,2 increases 67%: EBITDA totalled $309.7 million, 67% increase from $185.8 million in Q2 2019 and compared to $391.5 million the previous quarter  
  • Strong cash flow generation: Net cash provided by operating activities of $222.2 million and free cash flow of $94.1 million; Excluding impact of $132.6 million tax payment made in Australia in Q2 2020 as final tax instalment for 2019 tax year, net cash provided by operating activities totalled $354.8 million, with free cash flow totalling $226.7 million; Detour Lake generated $89.0 million of free cash flow in Q2 2020 (excluding transaction and restructuring costs related to acquisition)
  • Significant financial strength: Cash at June 30, 2020 totalled $537.4 million with no debt
  • 1,345,600 million shares repurchased (11,059,100 shares repurchased YTD): 1,345,600 shares repurchased in Q2 2020 for $49.9 million, with total YTD 2020 repurchases of 11,059,100 shares for $379.8 million
  • Quarterly dividend doubled: Q1 2020 dividend doubled to US$0.125 per share, paid on April 13, 2020 to shareholders of record on March 31, 2020 (Q2 2020 dividend of US$0.125 per share paid on July 13, 2020 to shareholders of record on June 30, 2020)
  • Progress with key growth projects despite COVID-19: Growth capital expenditures, excluding capitalized exploration expenditures, totalled $9.4 million, of which $7.7 million related to Macassa #4 Shaft project; Macassa #4 Shaft advanced 617 feet during Q2 2020 despite suspension of work for approximately one month due to COVID-19, with shaft reaching depth of 2,577 feet as at June 30, 2020
  • Significant exploration success: Total exploration expenditures totalled $25.0 million, including $2.4 million of expensed expenditures and $22.6 million of capitalized expenditures; Significant exploration success achieved in Q2 2020 despite disruptions caused by COVID-19, including identification of new corridor of high-grade mineralization at Macassa near #4 Shaft location and intersection of mineralization with attractive grades at multiple locations at Detour Lake outside of existing Mineral Resources 
  • Solid operating results: 
    • Production of 329,770 ounces, 54% increase from 214,593 ounces in Q2 2019 and similar to 330,864 ounces the previous quarter (131,992 ounces from Detour Lake in Q2 2020, 91,555 ounces in Q1 2020)
    • Production costs totalled $141.4 million ($55.6 million excluding Detour Lake) versus $66.2 million in Q2 2019 and $161.6 million ($73.8 million excluding Detour Lake) the previous quarter
    • Operating cash costs per ounce1 averaged $374 ($241 excluding Detour Lake) compared to $312 in Q2 2019 and $440 in Q1 2020 ($319 excluding Detour Lake)
    • All-in sustaining costs (“AISC”) per ounce sold1 averaged $751 ($526 excluding Detour Lake) versus $638 in Q2 2019 and $776 ($619 excluding Detour Lake) in Q1 2020.

Highlights of YTD 2020 Results Include:

  • Solid growth in net earnings: Net earnings totalled $353.1 million ($1.32 per share), 65% increase from $214.3 million ($1.02 per share) for first six months of 2019 (“YTD 2019”)
  • Adjusted net earnings1 increase 78%: Adjusted net income totalled $398.5 million ($1.49 per share), 78% higher than $223.6 million ($1.06 per share) for YTD 2019
  • Strong cash flow generation: Net cash provided by operating activities of $463.7 million with free cash flow1 totalling $224.9 million; Excluding impact of $60.5 million of non-recurring transaction and restructuring costs mainly related to the Detour Gold acquisition in Q1 2020 and a $132.6 million tax payment made in Australia as final tax instalment for the 2019 tax year, net cash provided by operating activities totalled $656.9 million with free cash flow1 of $418.1 million, which compared to net cash provided by operating activities of $355.5 million and free cash flow1 of $148.9 million in YTD 2019 (Detour Lake contributed $167.0 million of YTD 2020 free cash flow1 excluding transaction and restructuring costs related to the Detour Gold acquisition)
  • Revenue close to double YTD 2019 level: Revenue for YTD 2020 totalled $1,135.7 million, 94% growth from $586.2 million for YTD 2019 (gold sales increased 54% to 685,976 ounces from 445,020 ounces for the same period in 2019)
  • EBITDA1,2 increases 81%: EBITDA1,2 totalled $701.2 million, 81% increase from $387.4 million for YTD 2019
  • Strong YTD 2020 operating results
    • Production totalled 660,634 ounces, 48% increase from 446,472 ounces for YTD 2019 (Detour Lake produced 223,547 ounces from January 31, 2020, date of acquisition, to June 30, 2020)
    • Production costs totalled $303.0 million ($129.4 million excluding Detour Lake) versus $136.2 million for YTD 2019
    • Operating cash cost per ounce sold1 averaged $407 ($283 excluding Detour Lake) compared to $301 for the same period in 2019
    • AISC per ounce sold1 averaged $763 ($575 excluding Detour Lake) versus $597 for YTD 2019.

(1) See “Non-IFRS Measures” later in this press release and starting on page 34 of the MD&A for the three and six months ended June 30, 2020. 
(2) Refers to Earnings before Interest, Taxes, Depreciation, and Amortization.


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