Mr. Harry Dobson reports
KIRKLAND LAKE GOLD INC.: FISCAL 2014 FULL YEAR FINANCIAL AND OPERATIONAL RESULTS
Kirkland Lake Gold Inc. has released operational and financial results for the fourth quarter (February, March, April, 2014) and fiscal year 2014.
Harry Dobson, chairman, commented: "Fiscal year 2014 was a year of change for the company. Following the appointment of George Ogilvie, PEng, into the chief executive role, operational changes were made immediately. A new lower-tonnage, higher-grade mine plan was put in place along with a concurrent cost-cutting program to reduce the rate of cash burn as well as to lower the company's cost per ounce on a sustainable basis. The effects of these changes were demonstrated in the fourth-quarter results, where all-in sustaining cash costs were further reduced to $1,776 per ounce, with AISCs for just the month of April lowered to $1,466 per ounce. The average sales price realized in April was $1,422 per ounce, so the company is now operating at very close to break-even rate and expects at current gold prices to become consistently profitable and cash flow positive during the second fiscal quarter 2015. Grades have also significantly improved with a calendar year to date grade of 0.39 ounces per ton (13.3 grams per tonne), and fiscal-year-to-date grades of 0.42 ounces per ton (14.4 grams per tonne) as announced on June 24. The company is on track to meets its fiscal year 2015 guidance of 140,000 to 155,000 ounces and we are seeing further reductions in the AICC/AISC for the year so far. Fiscal 2015 is poised to be a turnaround year for the company as production and grades increase, further cost reductions are realized, and as we advance our near-surface ounces to a preliminary economic study by the end of the calendar year."
Key highlights of the year:
Production for the year totalled 385,837 tons at a head grade of 0.33
ounce per ton (11.3 grams per tonne) and a recovery rate of 95 per cent to produce 122,309 ounces, an
increase of 34 per cent from previous fiscal year.
- Gold sales for the year were 125,273 ounces, an increase of 37 per cent over the
previous year (91,771 ounces). Cash operating cost per ton produced increased; however, all-in cash cost or all-in sustaining costs
per ounce produced decreased 18 per cent compared with the previous fiscal
year. AICC/AISC for the fourth quarter of 2014 decreased 9 per cent to $1,776, compared to the
previous quarter (the third quarter of 2014: $1,923) and 22 per cent compared with the same quarter
in fiscal 2013 (the fourth quarter of 2013: $2,277). All-in costs for the April, the last
month of the 2014 fiscal year, were $1,466 per ounce, and costs
continue to trend down further in the first two months of fiscal year
- Cash operating costs for the year were $1,078 per ounce. During the
fourth quarter when the effects of the mine optimization plan were fully
realized, operating costs were lowered to $1,000 per ounce with April
cash costs being $836 per ounce.
- Cash flow from operating activities for the year was $27.3-million. This was
mainly due to items not affecting cash and changes in working capital
offsetting the reported $11.1-million loss.
- Net loss and comprehensive loss for fiscal year 2014 was $11.1-million
(16 cents per share). Revenue of $173.3-million for the year increased 14 per cent
from the previous fiscal year ($151.6-million) with 33,503 more ounces being
sold compared with the previous year, offset with a 16 per cent ($270 per
ounce) decrease in the average sale price of gold year over year. The
company operated at a close to break-even rate in the last month of
the fourth quarter of 2014, and expects to operate at a cash flow positive rate during the
second quarter of its current fiscal year 2015 as further improvements
from the mine optimization plan and cost-cutting programs are realized.
- At the start of the third quarter of 2014, following operational management changes, a mine
optimization plan was introduced, along with a concurrent cost-cutting
program. The new mine plan is focused on a lower-tonnage, higher-grade
strategy, therefore cut-off grades were increased from 0.18 ounce per ton (6.2
grams per tonne) to 0.22 ounce per ton (7.5 grams per tonne). As a result, head grades increased from an
average of 0.31 ounce per ton (10.6 grams per tonne) in the first and second quarter to 0.34
ounce per ton (11.6 grams per tonne) in the third and fourth quarter of fiscal 2014. The full
consequences of the new mine plan were realized in the fourth quarter of 2014 with production
margins rising 10 per cent from minus 2 per cent in the third quarter of 2014 to 8 per cent in the fourth quarter of 2014. Head grade has
continued to significantly improve with a head grade of 0.42 ounce per ton (14.4 grams per tonne) realized during the first 51 days of the current fiscal year 2015.
- Consistent with the new mine plan that shifts away from the lower-grade
Main break areas and focuses more heavily on the higher-grade South mine
complex, underground capital development remains focused on new
zones in the SMC, in particular the development of new high-grade
workplaces on the 5,400-foot and 5,600-foot levels. Over the course of fiscal
year 2014, the ratio of tons being mined in the SMC increased from 53 per cent
in the first quarter of 2014 to 63 per cent in the third quarter of 2014 and 60 per cent in the fourth quarter of 2014. In fiscal 2015, it is planned
that 66 per cent of tons will be mined from the SMC.
- The cost-cutting initiatives were introduced to slow the level of cash
burn the business was experiencing while the mine optimization plan was
being implemented. The company made a number of policy changes and
reduced head count (from 1,250 to 1,059 employees) to reduce costs and
better align the cost structure of the business to the anticipated
revenues from the new mine plan. The cost-saving initiatives and
estimated go-forward annual savings totalled $24.7-million. With the
exception of the elimination of non-essential spending in property plant
and equipment, these savings will be sustained.
- The $95.0-million mine expansion project was completed on budget during the
fiscal year. Key expansion projects that were completed include the
hoist upgrade, mill expansion, plant equipment purchases (including
battery-powered scoops and trucks) and underground capital development.
The final element of the project was the dry commissioning of a new ball
mill in February, 2014.
- Following the completion of the mine expansion project spending,
together with the adoption of a new mine plan and the cost reductions
announced by the company, total cash resources (including short-term
investments) as at April 30, 2014, were $38.9-million.
- The company entered into a 2.5-per-cent net smelter return royalty with
Franco-Nevada Corp. on Oct. 31, 2013, for proceeds of
$50.0-million (U.S.) ($51.2-million). The company also made the final payment of $30.0-million
to Osisko Mining Corp. in the first quarter of 2014 for the remaining 50-per-cent share in
the former joint venture properties acquired in fiscal 2013. The funds
have been and will continue to be used for development of the company's
- Exploration spending was cut by $9.7-million to $7.5-million during the year to
reduce expenses. At year-end, eight diamond drills were active including
one on surface. Despite the reduction in spending, the company announced
on April 28, 2014, a first-time National Instrument 43-101 calculation on its near-surface
ounces (surface to minus 1,000 feet). The company plans to add two additional
diamond drills to the surface program in the current fiscal year 2015.
Two drills will concentrate on delineation and infill drilling while the
other will focus on exploration.
The company will be hosting a conference call on Thursday, July 10, at
10 a.m. ET, to discuss these results.
Participant dial-in numbers
Toll-free North America: 877-223-4471
Local and international: 647-788-4922
Conference ID: 70737057
Local and international: 416-621-4642
Toll-free North America: 800-585-8367
Conference ID: 70737057
Replay available until: July 24, 2014, 11:59 p.m. ET
(in thousands of dollars, except gold price per ounce and per share figures)
Year ended April 30,
2014 2013 2012
Gold sales (ounces) 125,273 91,771 97,888
Average gold price (per ounce) $ 1,385 $ 1,653 $ 1,633
Revenue $ 173,258 $ 151,692 $ 159,824
Production expenses 162,755 124,002 98,328
Exploration expenditure 7,537 17,097 14,241
Other expenses 18,593 13,366 4,927
---------- ---------- ----------
Net (loss) income before income
taxes (15,627) (2,773) 42,328
---------- ---------- ----------
Net and comprehensive (loss)
income $ (11,077) $ (3,646) $ 41,270
========== ========== ==========
Per share (basic and diluted) $ (0.16) $ (0.05) $0.58, 0.57
We seek Safe Harbor.
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