The Globe and Mail reports in its Wednesday edition that Canaccord analyst Tom Gallo calls Kirkland Lake Gold's proposed $4.9-billion acquisition of Detour Gold "a head scratcher." The Globe's David Leeder writes in the Eye On Equities column that Mr. Gallo believes Detour adds an "aspect of operational uncertainty" and decreases its margins. Mr. Gallo lowered his rating for Kirkland Lake shares to "hold" from "buy."
He was one of three equity analysts on the Street to lower the Toronto-based miner on Tuesday.
Mr. Gallo adds: "In addition to operational turbulence in the past, margins remain tight at Detour and will significantly increase Kirkland Lake's consolidated cash costs and all-in sustaining costs in the near term. Based on [Canaccord] analyst Carey MacRury's model, Detour's cash costs average $729 (U.S.) per ounce from 2020 to 2025. This is significantly higher than the $342 (U.S.) per ounce we model for Kirkland Lake over the same period of time."
Mr. Gallo says:
"Detour adds approximately 600,000 ounces per year to Kirkland's production profile. This keeps production well above 1 million ounces per year into 2025 even if the company fails to find additional productive ounces at Fosterville."
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