Mr. Anthony Makuch reports
KIRKLAND LAKE GOLD REPORTS SOLID SECOND QUARTER 2019 FINANCIAL AND OPERATING RESULTS
Kirkland Lake Gold Ltd. has released the company's financial and operating results for the second quarter and first half of 2019. The second quarter 2019 results include strong growth in production, net earnings and operating cash flow compared with the second quarter of 2018, as well as significant improvement in unit costs. The company's full consolidated financial statements and management's discussion and analysis are available on SEDAR and on the company's website.
All dollar amounts are in U.S. dollars, unless otherwise noted.
Key highlights of second quarter 2019 results include:
Strong net earnings: Net earnings of $104.2-million (50 cents per basic share) increased 69 per cent from $61.5-million (29 cents per basic share) in second quarter 2018 and compared with record net earnings of $110.1-million (52 cents per basic share) the previous quarter. Adjusted net earnings in second quarter 2019 totalled $105.5-million (50 cents per basic share), 66 per cent higher than $63.4-million (30 cents per basic share) in second quarter 2018 and versus record adjusted net earnings of $112.1-million (53 cents per basic share) in first quarter 2019.
Revenue increases 31 per cent: Revenue totalled $281.3-million, a 31-per-cent increase from $214.7-million in second quarter 2018 and compared with record revenue of $304.9-million in first quarter 2019. Second quarter 2019 gold sales were 212,091 ounces compared with 164,305 ounces in second quarter 2018 and 232,929 ounces the previous quarter.
Significant growth in EBITDA (generally accepted accounting principles): EBITDA (net earnings before interest, taxes, depreciation and amortization) of $185.8-million, 50 per cent higher than $123.7-million in second quarter 2018 and compared with record EBITDA of $201.6-million in first quarter 2019.
Operating cash flow increases 52 per cent: Net cash provided by operating activities was$178.4-million, 48-per-cent growth from $120.9-million in second quarter 2018 and 2 per cent higher than $174.4-million in first quarter 2019.
Continued solid free cash flow: Free cash flow was $53-million compared with $60.7-million in second quarter 2018, and record free cash flow was $93.1-million the previous quarter, with the change from both prior periods reflecting increased capital expenditures in support of advancing key growth projects.
Growth projects ramp up: Growth capital expenditures (1) totalled $48.5-million in second quarter 2019 (excluding capitalized exploration), including $32.7-million at Macassa and $14.1-million at Fosterville. Full-face sinking at Macassa No. 4 shaft project is on track to commence in August, 2019.
Continued focus on exploration: Exploration and evaluation expenditures in second quarter 2019 totalled $44.4-million ($6.2-million expensed and $38.2-million capitalized), with $29.4-million relating to the acceleration of advanced exploration work in the Northern Territory.
Continued strong operating results:
Production of 214,593 ounces, 30-per-cent increase from 164,685 ounces in second quarter 2018 and compared with record quarterly production of 231,879 ounces the previous quarter;
Production costs of $66.2-million compared with $66.5-million in second quarter 2018 and $70-million in first quarter 2019;
Operating cash costs per ounce sold
averaged $312, 23-per-cent improvement from $404 in second quarter 2018 and versus $290 the previous quarter;
AISC (all-in sustaining cost) per ounce sold
averaged $638, 16 per cent better than $757 in second quarter 2018 and compared with $560 in first quarter 2019 (change from previous quarter reflects reduced sales volumes and timing of sustaining capital expenditures).
Cash at June 30, 2019, totalled $469.4-million, a 13-per-cent increase from $416.1-million at March 31, 2019, and a 41-per-cent increase from $332.2-million at Dec. 31, 2018.
Key highlights of year-to-date 2019 results include:
Record half-year financial results:
Net earnings of $214.3-million ($1.02 a share), 92-per-cent increase from $111.5-million (53 cents a share) for year-to-date 2018;
Adjusted net earnings of $217.7-million ($1.04 a share), 88 per cent higher than $116.0-million (55 cents a share) for YTD 2018;
Net cash provided by operating activities of $352.7-million, 68-per-cent growth from $210.5-million for YTD 2018;
Free cash flow totalling $146.1-million, 32 per cent higher than $110.9-million for same period in 2018;
Revenue of $586.2-million, 42-per-cent growth from $412.9-million for YTD 2018;
EBITDA of $387.4-million, 73-per-cent increase from $224.3-million for YTD 2018;
Strong YTD 2019 operating results:
Production of 446,472 ounces, 43-per-cent increase from 312,329 ounces for YTD 2018;
Operating cash cost per ounce sold of $301, 29-per-cent improvement from $424 for the same period in 2018;
AISC per ounce sold of $597, 25 per cent better than $793 for YTD 2018;
Strong focus on shareholder returns in YTD 2019:
Common share price increased 58 per cent (on Toronto Stock Exchange), to $56.42 per share at June 30, 2019, from $35.60 per share at Dec. 31, 2018 ($60.09 per share at July 30, 2019);
Quarterly dividend increased to four cents per share (from four cents per share) for second quarter 2019 dividend, paid on July 12, 2019, to shareholders of record on June 28, 2019; change to paying dividend in U.S. dollars increases value of dividend by approximately 30 per cent;
Repurchased 400,000 common shares in second quarter 2019 through normal course issuer bid for total cost of $12.8-million ($17.1-million (Canadian)).
(1) See "Non-IFRS Measures" on pages 27 to 33 of management's discussion and analysis for the three and six months ended June 30, 2019.
Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: "During second quarter 2019, we continued to generate strong growth in production, earnings and cash flows compared with the same period in 2018. Fosterville achieved a record quarter and exceeded target production levels driven by higher-than-expected grades. Even more encouraging, we are now positioned to significantly grow production at Fosterville during the second half of the year. In Canada, tonnage at Macassa was affected by water in the mine from the spring runoff, and we had lower-than-planned grades at the Holt complex. We have already seen higher production levels at Macassa in July, with the mine remaining on track to achieve its full-year guidance of over 240,000 ounces. At the Holt complex, we are ramping up production at Holloway, and continue to target approximately 20,000 ounces for the year. We are also expecting higher levels of mill throughput at the Holt mine and expect to achieve increased production from the mine in the final two quarters of 2019. Based on our results to date, and expectations for the remainder of the year, we remain well positioned to achieve our full-year 2019 consolidated operating guidance, which includes production of 950,000 to one million ounces with operating cash costs per ounce sold averaging $285 to $305 and AISC per ounce sold averaging $520 to $560.
"Turning to our growth programs, we will be commencing full-face sinking at the Macassa No. 4 shaft project during August, which will mark a major milestone for the project. The project remains on track for phase 1 completion by the second quarter of 2022. At Fosterville, we continued to advance our key growth projects, including construction of a new ventilation system, paste-fill plant and new water treatment plant. The water treatment plant is expected to be in operation during the third quarter, with the ventilation and paste-fill projects also targeted for completion during the second half of the year. In the Northern Territory, we have accelerated advanced exploration work and are progressing with underground development aimed at supporting a potential resumption of operations."
Review of financial and operating performance
(in thousands of dollars, except per-share amounts)
Three months ended Six months ended
June 30, June 30,
2019 2018 2019 2018
Revenue $281,267 $214,653 $586,179 $412,890
Production costs 66,161 66,494 136,201 137,977
Earnings before income taxes 152,432 90,109 312,021 161,997
Net earnings 104,195 61,486 214,341 111,523
Basic earnings per share 0.50 0.29 1.02 0.53
Diluted earnings per share 0.49 0.29 1.01 0.52
Cash flow from operating activities 178,378 120,912 352,742 210,549
Cash investment on mine development and PPE 125,341 60,260 206,655 99,688
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Full-year 2019 guidance
(as at May 7, 2019) (1)
($ millions unless otherwise stated)
Macassa Holt complex (2) Fosterville Consolidated
Gold production (koz) 240-250 140-150 570-610 950-1,000
Operating cash costs/ounce sold ($/oz) (3) $400-$420 $660-$680 $130-$150 $285-$305
AISC/ounce sold ($/oz) (3) $520-$560
Operating cash costs (3) $290-$300
Royalty costs $25-$30
Sustaining and growth capital (3) $150-$170
Growth capital (3) (4) $155-$165
Exploration and evaluation (5) $100-$120
Corporate G&A (6) $26-$28
(1) Full-year 2019 guidance as at May 7, 2019.
(2) Production and operating cash cost guidance for the Holt complex for full-year 2019
includes results for the Holloway mine, which resumed operations during first quarter
2019, as one of three mines included in the Holt complex.
(3) The most comparable international financial reporting standard measure for operating
cash costs is production costs, as presented in the consolidated statements of operations
and comprehensive income, and total additions and construction in progress for sustaining
and growth capital. Operating cash costs per ounce and AISC per ounce sold are comparable
with production costs on a unit basis. Operating cash costs, operating cash cost per
ounce sold and AISC per ounce sold reflect an average U.S.-dollar-to-Canadian-dollar
exchange rate of 1.33 and a U.S.-dollar-to-Australian-dollar exchange rate of 1.41.
(4) Growth capital expenditure guidance as at May 7, 2019, excluded $18.4-million of
capital expenditures related to the Macassa No. 4 shaft project, which are expected to be
recorded as capital expenditures in 2019, but were paid in cash on an advanced basis in
(5) Exploration and evaluation expenditure guidance for full-year 2019 includes both
expensed and capitalized exploration expenditures. All capitalized expenditures related
to the Northern Territory are included in exploration and evaluation expenditures
consistent with the advanced exploration program being carried out in the Northern
Territory in 2019.
(6) Includes general and administrative costs and severance payments. Excludes non-cash
share-based payment expense.
Second quarter 2019 financial results and conference call details
A conference call to discuss the second quarter 2019 results will be held by senior management on July 31, 2019, at 10 a.m. ET. Call-in information is provided herein. The call will also be webcast and accessible on the company's website.
Date: July 31, 2019
Conference ID: 7986489
Time: 10 a.m. ET
Toll-free number: 833-241-7254
International callers: 647-689-4218
Natasha Vaz, PEng, vice-president, technical services, is a qualified person as defined in National Instrument 43-101, and has reviewed and approved disclosure of the technical information and data in this news release.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold is a growing gold producer operating in Canada and Australia that produced 723,701 ounces in 2018 and is on track to achieve significant production growth over the next three years, including target production of 950,000 to one million ounces in 2019, 930,000 to 1.01 million ounces in 2020 and 995,000 to 1,055,000 ounces in 2021. The production profile of the company is anchored by two high-grade, low-cost operations, including the Macassa mine located in Northern Ontario and the Fosterville mine located in the state of Victoria, Australia. Kirkland Lake Gold's solid base of quality assets is complemented by district-scale exploration potential, supported by a strong financial position with extensive management and operational expertise.
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