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Kirkland Lake earns $176.6-million (U.S.) in Q3 2019

2019-11-06 12:41 ET - News Release

Mr. Anthony Makuch reports

KIRKLAND LAKE GOLD REPORTS RECORD EARNINGS PER SHARE OF $0.84 IN THIRD QUARTER 2019, COMPANY ANNOUNCES 50% INCREASE IN COMMON DIVIDEND

Kirkland Lake Gold Ltd. has released its financial and operating results for the third quarter and first nine months of 2019. All dollar amounts are in United States dollars, unless otherwise noted. The Q3 2019 results include record earnings and cash flows driven largely by strong growth in gold production and improved unit costs. The company's cash position increased $146.6-million, or 31 per cent, during Q3 2019, totalling $615.8-million at Sept. 30, 2019. On Nov. 6, 2019, the company announced a two-cent-per-share increase to the quarterly dividend to six cents per share, commencing with the fourth quarter 2019 dividend payment to be paid in January, 2020. The company's full consolidated financial statements and management discussion and analysis are available on SEDAR and on the company's website.

Key highlights of Q3 2019 results include:

  • Record net earnings: Net earnings of $176.6-million (84 cents per basic share) more than triple net earnings of $55.9-million (27 cents per basic share) in Q3 2018 and 69 per cent higher than $104.2-million (50 cents per basic share) the previous quarter; adjusted net earnings in Q3 2019 were the same as net earnings and increased 188 per cent from $61.4-million (29 cents per basic share) in Q3 2018 and 67 per cent from $105.5-million (50 cents per basic share) in Q2 2019.
  • Revenue grows 71 per cent: Revenue totalled $381.4-million, 71-per-cent increase from $222.7-million in Q3 2018 and 36 per cent higher than $281.3-million the previous quarter.
  • Significant growth in EBITDA: EBITDA of $296.4-million, 148 per cent higher than $119.6-million in Q3 2018 and 60-per-cent increase from $185.8-million in Q2 2019.
  • Operating cash flow increases 145 per cent: Net cash provided by operating activities of $316.8-million, 145-per-cent growth from $129.3-million in Q3 2018 and 76 per cent higher than $179.7-million the previous quarter.
  • Record free cash flow: Free cash flow of $181.3-million, more than triple the Q3 2018 and Q2 2019 levels of $53.1-million and $54.4-million, respectively, with substantial growth in free cash flow being achieved at the same time that capital expenditures increased in support of advancing key growth projects.
  • Growth projects ramp-up: Growth capital expenditures totalled $50.2-million in Q3 2019 (excluding capitalized exploration), including $33.8-million at Macassa and $11.3-million at Fosterville; full-face sinking at Macassa No. 4 shaft project commenced in August, 2019, and was advanced more than 600 feet by Nov. 6, 2019.
  • Continued focus on exploration: Exploration and evaluation expenditures in Q3 2019 totalled $43.6-million ($5.9-million expensed and $37.7-million capitalized), with $32.4-million relating to continuing advanced exploration work in the Northern Territory.
  • The company had continued strong operating results:
    • Production of 248,400 ounces, 38-per-cent increase from 180,155 ounces in Q3 2018 and 16 per cent higher than 214,593 ounces the previous quarter;
    • Production costs of $73.7-million, compared with $64.9-million in Q3 2018 and $66.2-million in Q2 2019;
    • Operating cash costs per ounce sold averaged $287, 18-per-cent improvement from $351 in Q3 2018 and 8 per cent better than $312 in Q2 2019;
    • All-in sustaining cost (AISC) per ounce sold averaged $562, 13 per cent better than $645 in Q3 2018 and 12-per-cent improvement from $638 the previous quarter.
  • Cash at Sept. 30, 2019, totalled $615.8-million, 31-per-cent increase from $469.4-million at June 30, 2019, and 85 per cent higher than $332.2-million at Dec. 31, 2018.

Key highlights of year-to-date (YTD) 2019 results include:

  • Record nine-month financial results:
    • Net earnings of $390.9-million ($1.86 per basic share), 134-per-cent increase from $167.4-million (79 cents per basic share) for first nine months of 2018;
    • Adjusted net earnings of $394.2-million ($1.88 per basic share), 122 per cent higher than $177.6-million (84 cents per basic share) for YTD 2018;
    • Net cash provided by operating activities of $672.3-million, 97-per-cent growth from $341.5-million for YTD 2018;
    • Free cash flow totalling $330.2-million, double the YTD 2018 level of $163.1-million;
    • Revenue of $967.6-million, 52-per-cent growth from $635.6-million for YTD 2018;
    • EBITDA of $683.8-million, 99-per-cent increase from $343.9-million for YTD 2018;
  • Strong YTD 2019 operating results:
    • Production of 694,873 ounces, 41-per-cent increase from 492,484 ounces for YTD 2018;
    • Operating cash cost per ounce sold of $296, 25-per-cent improvement from $397 for the same period in 2018;
    • AISC per ounce sold of $584, 21 per cent better than $738 for YTD 2018;
  • Strong focus on shareholder returns in YTD 2019:
    • Common share price increased 67 per cent for YTD 2019 to $59.35 (Canadian) per share (on Toronto Stock Exchange) at Sept. 30, 2019, from $35.60 (Canadian) per share at Dec. 31, 2018 ($59.92 (Canadian) per share at Nov. 5, 2019);
    • Quarterly dividend increased to four cents per share (from four Canadian 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 United States dollars increases value of dividend by approximately 30 per cent; Q3 2019 dividend of four cents per share paid on Oct. 11, 2019, to shareholders of record on Sept. 30, 2019;
    • Additional dividend increase of two cents per share, or 50 per cent, to six cents per share, commencing with Q4 2019 dividend payment to be paid in January, 2020, to shareholders of record as of Dec. 31, 2019.

Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: "Q3 2019 was our best quarter to date, driven by exceptional results at Fosterville and a solid quarter of performance at Macassa. At Fosterville, production increased by almost 70,000 ounces from Q3 2018, largely reflecting a 75-per-cent improvement in the average grade, to 41.8 g/t. Grades of this level are rarely seen in our industry and resulted from the ramp-up in production of the high-grade Swan zone. We mined our first Swan stope during last year's third quarter, which contributed about 7,500 ounces of production. We have ramped up production since then and, in Q3 2019, mined 11 Swan zone stopes, which contributed about 94 per cent of the 158,327 ounces produced for the quarter. Substantially higher grades resulted in further improvement in unit costs which, combined with rising gold prices, led to significant margin expansion at Fosterville during the quarter. Turning to Macassa, the mine had a strong quarter in Q3 2019, with tonnes processed increasing 18 per cent and the average grade improving to 23.3 g/t from 21.5 g/t in Q2 2019. We expect Fosterville and Macassa to finish 2019 with strong fourth quarters, which will position both mines to easily achieve their full-year 2019 production guidance of 570,000 to 610,000 ounces and 240,000 to 250,000 ounces, respectively. At the Holt complex, we have lowered our production guidance for full-year 2019 based on results to date and are now assessing a future strategy for this operation.

"Turning to our growth programs, full-face sinking at the Macassa No. 4 shaft project commenced during August, with the shaft now having advanced to a depth of over 600 feet. Work is progressing well, with the project remaining on track for phase 1 completion during the second quarter of 2022. At Fosterville, our key growth projects are either complete or nearing completion. Our new water treatment plant was commissioned during the third quarter and is now in operation. Construction of our new paste fill plant is largely finished with commissioning to be completed by the end of the year. Work related to our new ventilation system is continuing and should be completed around year-end, with commissioning to follow in early 2020. In the Northern Territory, advanced exploration work continues to accelerate, with initial processing of Lantern deposit material at the Union Reefs mill commencing in October. We continue to work towards a potential restart of operations in the Northern Territory as early as the beginning of next year."

Q3 2019 financial results and conference call details

A conference call to discuss the Q3 2019 results will be held by senior management on Wednesday, Nov. 6, 2019, at 4 p.m. ET (Thursday, Nov. 7, 2019, at 8 a.m. AEDT). Call-in information is provided below. The call will also be webcast and accessible on the company's website.

Date:  Wednesday, Nov. 6, 2019, ET/Thursday, Nov. 7, 2019, AEDT

Conference ID:  2475217

Time:  4 p.m. ET/8 a.m. AEDT

Toll-free number:  833-241-7254

International callers:  647-689-4218

Australian toll-free number:  1800287011

Australian local number:  0283798020

Qualified persons

Natasha Vaz, professional engineer, vice-president of 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 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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