Mr. Tony Makuch reports
KIRKLAND LAKE GOLD TARGETS CONTINUED STRONG OPERATING RESULTS IN 2020, COMMENCING THREE NEW PROJECTS TO DRIVE PRODUCTION GROWTH
Kirkland Lake Gold Ltd. has released its full-year guidance for 2020, which includes continued strong operating and financial results, with consolidated production targeted at 950,000 to one million ounces and operating cash costs per ounce sold and all-in sustaining costs per ounce sold expected to average $300 to $330 and $570 to $630, respectively. The company will also continue to invest aggressively in growth, including commencing work on development ramps aimed at establishing two new mining operations, Robbin's Hill at Fosterville and the previously identified high-grade zones near surface along the amalgamated break at Macassa. The company will also continue advanced exploration work in the Northern Territory, a potential third new source of future production. The company expects to produce 100,000 to 120,000 ounces in the Northern Territory in 2020, which is not included in the company's 2020 guidance pending the resumption of commercial operations. All dollar amounts are expressed in U.S. dollars unless otherwise noted.
The company also announced today three-year production guidance for the Macassa and Fosterville mines. Production at Macassa is targeted to increase to over 320,000 ounces by 2022, reflecting initial production from the No. 4 shaft and potential production from the planned Macassa surface ramp. Production at Macassa is expected to grow to well over 400,000 ounces beginning in 2023. Production at Fosterville is expected to maintain the strong growth achieved in 2019 over the next three years as mining continues to advance in the high-grade Swan zone, with the potential for production to commence from Robbin's Hill in 2023.
Highlights of 2020 guidance include:
Production of 950,000 to one million ounces, unchanged from current full-year 2019 guidance (additional 100,000 to 120,000 ounces of production expected in 2020 from Northern Territory, with proceeds to offset planned capital expenditures pending decision to resume commercial operations);
Operating cash costs per ounce sold (1) of $300 to $330, compared with year-to-date 2019 (to Sept. 30, 2019) average of $296;
All-in sustaining costs (AISC) per ounce sold (1) of $570 to $630, compared with year-to-date 2019 average of $584;
Exploration expenditures (2)
targeted at $120-million to $140-million, including capitalized exploration expenditures, unchanged from full-year 2019 guidance;
Sustaining capital expenditures
(1) of $165-million to $175-million, compared with full-year 2019 guidance of $170-million to $190-million;
Growth capital expenditures
(1) of $70-million to $80-million, significantly lower than current full-year 2019 guidance of $175-million to $185-million, reflecting solid progress in advancing major projects during 2019 (2020 guidance includes $50-million to $55-million at Macassa, including approximately $45-million related to the No. 4 shaft project, and $20-million to $25-million at Fosterville).
- Non-IFRS (international financial reporting standards) measures;
- Exploration expenditures include capital expenditures related to infill drilling for Mineral Resource conversion, capital expenditures for extension drilling outside of existing Mineral Resources and expensed exploration.
Highlights of three-year production guidance include:
Macassa's production to total 240,000 to 250,000 ounces in 2020 and 2021, increasing to 320,000 to 340,000 ounces in 2022 with initial production from the No. 4 shaft and potential production for the planned Macassa surface ramp;
Fosterville's production targeted at 590,000 to 610,000 ounces in 2020 and 550,000 to 600,000 ounces for the following two years, with the potential for additional production beginning in 2023 from underground access at Robbin's Hill.
Tony Makuch, president and chief executive officer, commented: "Kirkland Lake Gold is poised to achieve strong operating and financial results in 2020, with both Fosterville and Macassa well positioned to repeat their solid performances in 2019 during the coming year. With target consolidated production of 950,000 to one million ounces and low unit operating costs, we are on track to continue to generate industry-leading earnings and significant free cash flow in 2020, which will contribute to further growth in our balance sheet strength. Going forward, our top priority will remain investing in Fosterville and Macassa, given the substantial opportunities that exist at both operations for continued exploration success and additional growth. We will also look to increase the amount of capital we return to Kirkland Lake Gold shareholders through our dividend program and normal course issuer bid and continue to look for investment opportunities capable of generating attractive returns.
"Looking at growth, we will continue to invest in organic growth in 2020 with the aim of advancing three new potential mining operations, Robbin's Hill at Fosterville, previously identified high-grade zones near surface along the amalgamated break at Macassa and our Northern Territory assets in Australia. The advanced exploration work in the Northern Territory is continuing into 2020 and has the potential to add to our production profile, with 100,000 to 120,000 ounces expected to be produced at the Union Reefs mill during the coming year, which we are not including in our guidance until we reach a decision to resume commercial operations. This decision could come as early as February, 2020, following release of our Dec. 31, 2019, mineral reserve and mineral resource estimates. At Fosterville, we are commencing work on a twin 4.8-kilometre underground ramp to connect Robbin's Hill to the existing mine infrastructure, while at Macassa we will begin driving a ramp to access and explore near-surface, high-grade zones along the amalgamated break. Robbin's Hill and the amalgamated break are key exploration targets for our company, and we believe are two of the most compelling exploration stories in our industry today. Gaining access to these areas underground will allow us to accelerate efforts to fully evaluate their potential and will provide valuable infrastructure to support moving them into production.
"Finally, while not included in our guidance, our agreement to acquire Detour Gold Corp. has the potential to significantly change our outlook for 2020 and beyond in a very positive way. For Kirkland Lake Gold, the transaction adds a third high-quality asset with substantial growth potential. For Detour Gold, the deal provides access to a highly profitable, multiasset portfolio as well as the industry's strongest balance sheet and a dividend program that we expect will grow and return significantly higher levels of capital to shareholders going forward. The agreement is a good deal for the shareholders of both companies and we are looking forward to it closing at the end of January, 2020, with our guidance to be revised following closing of the transaction."
On Oct. 9, 2019, the company announced that the future plans for the Holt complex operations were under review. This review is expected to extend into 2020. As a result, production and operating cash cost per ounce sold for the Holt complex are included in the company's consolidated guidance for 2020. However, the company is not providing three-year production guidance at this time.
The company commenced processing Lantern deposit mineralization at the Union Reefs mill in October, 2019, as part of an advanced exploration program. Approximately 10,000 ounces are expected to have been produced and sold by the end of 2019, with the proceeds from gold sales being accounted for as a reduction in capital expenditures. The advanced exploration program is expected to continue into 2020, with 100,000 to 120,000 ounces of production planned at the Union Reefs mill. The proceeds from gold sales will continue to reduce capital expenditures pending a decision to resume commercial operations. Until commercial operations resume, production, costs and expenditures for the Northern Territory are excluded from the company's 2020 guidance and three-year production guidance. In 2020, the proceeds from gold sales are expected to largely offset capital and exploration expenditures in the Northern Territory.
(in millions of dollars, unless otherwise stated)
Macassa Holt complex (2) Fosterville Consolidated
Gold production (koz) (1) 240 to 250 120 to 140 590 to 610 950 to 1,000
Operating cash costs/ounce sold ($/oz) (2) $470 to $490 $790 to $810 $130 to $150 $300 to $330
AISC/ounce sold ($/oz) (2) $570 to $630
Operating cash costs ($M) (2) $310 to $320
Royalty costs ($M) $58 to $62
Sustaining capital ($M) (2) $165 to $175
Growth capital ($M) (2) $70 to $80
Exploration ($M) (3) $120 to $14
Corporate G&A ($M) (4) $40 to $45
1. Production and unit cost guidance for 2020 does not include results for the Northern Territory.
2. Non-IFRS measures. The most comparable IFRS measure for operating cash costs, operating cash costs per
ounce sold and AISC per ounce sold is production costs, as presented in the consolidated statements of
operations and comprehensive income, and total additions and construction in progress for sustaining
and project capital. Operating cash costs, operating cash cost per ounce sold and AISC per ounce sold
reflect an average U.S.-to-Canadian-dollar exchange rate of 1.30 and a U.S.-to-Australian-dollar
exchange rate of 1.43.
3. Exploration expenditures include capital expenditures related to infill drilling for mineral resource
conversion, capital expenditures for extension drilling outside existing mineral resources and
4. Includes general and administrative costs. Excludes non-cash share-based payment expense.
5. The company's full operating and financial results for full-year 2019 will be released in late
February, 2020. As such, comparisons in this press release involving financial measures included in
the company's 2020 guidance are made with existing full-year 2019 guidance, as well as the company's
nine-month 2019 results.
Review of 2020 guidance
Consolidated gold production in 2020 is targeted at approximately 950,000 to one million ounces, unchanged from full-year 2019 guidance. Production at Fosterville in 2020 is estimated at 590,000 to 610,000 ounces, similar to 2019 guidance of 570,000 to 610,000 ounces. Year-to-date 2019 production at Fosterville (to the end of September, 2019) was 427,472 ounces, an 84-per-cent increase from the same period in 2018, with the ramp-up of production from the high-grade Swan zone largely accounting for the strong year-over-year growth. Production will remain focused on the Swan zone in 2020, with the significant step-up in production in 2019 being sustained throughout the coming year. Production guidance at Macassa in 2020 of 240,000 to 250,000 ounces remains unchanged from current full-year 2019 guidance. A substantial increase in production at Macassa will commence in 2022 with initial production from the new No. 4 shaft and potential production from the Macassa surface ramp, which is being driven to access high-grade zones near surface along the amalgamated break. Production at the Holt complex in 2020 is targeted at 120,000 to 140,000 ounces, similar to current full-year 2019 guidance. The company is currently reviewing the future plans of the Holt complex operations.
Operating cash costs per ounce sold are expected to average $300 to $330, compared with the average for year-to-date 2019 of $296. The company's low unit operating cash costs will again be driven by Fosterville, where operating cash costs per ounce sold are targeted at $130 to $150, unchanged from current full-year 2019 guidance and compared with the year-to-date 2019 average of $126. Operating cash costs per ounce sold at Macassa in 2020 are targeted at $470 to $490, which compares with current full-year 2019 guidance of $400 to $420 and the year-to-date 2019 average of $397. The increase in operating cash costs per ounce sold guidance at Macassa in 2020 compared with the year-to-date 2019 average largely reflects lower planned grades in 2020, with the year-to-date 2019 grade of 24.8 grams per tonne exceeding target levels due mainly to grade outperformance early in the year in stopes around the 5,700 level of the south mine complex (SMC). Operating cash costs per ounce sold guidance for 2020 at the Holt complex is $790 to $810, which compares with current full-year 2019 guidance of $920 to $940 and average operating cash costs per ounce sold of $948 for year-to-date 2019.
AISC per ounce sold is targeted to average $580 to $630 in 2020, compared with the year-to-date 2019 average of $584. The increase compared with the anticipated full-year 2019 AISC per ounce sold level mainly relates to higher operating cash costs, an increase in royalty expense resulting from a new royalty applicable to the Fosterville mine (see the "Royalty costs" section below), and higher corporate general and administrative (G&A) expense.
Operating cash costs for 2020 are estimated at $310-million to $320-million, which compares with the current guidance for full-year 2019 of $290-million to $300-million and year-to-date 2019 operating cash costs of $207.3-million.
Royalty costs in 2020 are estimated at $58-million to $62-million, compared with current guidance for 2019 of $30 to $35-million and total royalty costs of $25.4-million for year-to-date 2019. Of expected royalty payments in 2020, approximately $40-million relates to Fosterville, of which approximately $24-million results from a new 2.75-per-cent royalty being introduced by the Victorian government effective Jan. 1, 2020.
Sustaining capital expenditures in 2020 are targeted at $165-million to $175-million, similar to the current full-year 2019 guidance of $170-million to 190-million (year-to-date 2019 sustaining capital expenditures of $140.0-million).
Growth capital expenditures are estimated at $70-million to $80-million in 2020, a reduction from current full-year 2019 guidance of $175-million to $185-million and year-to-date 2019 growth capital expenditures of $137.1-million. Of planned project capital expenditures in 2020, Macassa is expected to account for $50-million to $55-million, with approximately $45-million relating to the No. 4 shaft project. Project capital expenditures at Fosterville in 2020 are estimated at $20-million to $25-million, which compares with target growth capital expenditures of $55-million in 2019. The reduction reflects the completion, or near completion, of a number of major projects in 2019, including the paste fill plant and water treatment plant, with a new ventilation system well advanced as of the end of 2019 and on track for completion early in 2020. In addition to completing the ventilation project, major components of the 2020 capital program at Fosterville include expenditures for the completion of a transformer station upgrade and new gold room/refinery, the construction of a new surface refrigeration plant, the installation of a second paste fill delivery hole, and the extension of paste fill to Harrier.
Exploration expenditures in 2020 are estimated at $120-million to $140-million, of which approximately 80 per cent to 85 per cent are expected to be capitalized exploration expenditures. Exploration expenditures at Fosterville are targeted at $70-million to $80-million, including $15-million to $20-million related to the underground development for a twin 4.8-kilometre underground exploration drive to connect Robbin's Hill to existing mine infrastructure at Fosterville. The decline is a three-year project that will support underground exploration of Robbin's Hill and other targets and provide valuable infrastructure for future mine operations. In addition, 230,000 metres of underground and surface drilling are planned at Fosterville in 2020, with the primary targets continuing to be the Lower Phoenix system, Cygnet, Harrier, Robbin's Hill and a number of regional targets. At Macassa, total capital and expensed exploration expenditures are targeted at $40-million to $50-million. Significant exploration development is planned at Macassa in 2020, including work on a new exploration decline to access and explore previously identified high-grade zones near surface along the amalgamated break. In addition, development to extend exploration drifts is planned on the 5,150, 5,705 and 5,807 levels, mainly in support of drilling to infill and extend the SMC and to evaluate targets at depth along the amalgamated break. In total, 270,000 metres of underground and surface drilling are planned at Macassa in 2020, with the primary targets being the SMC, the amalgamated break, and select targets along the main and '04 breaks.
Corporate G&A expense in 2020 is targeted at $40-million to $45-million, higher than the current guidance for full-year 2019 of $30-million to $35-million, reflecting the continued growth of the company.
THREE-YEAR PRODUCTION GUIDANCE (1)
2020 (koz) 240 to 250 590 to 610
2021 (koz) 240 to 250 550 to 600
2022 (koz) 320 to 340 550 to 600
1. Three-year production guidance does not
include any production from the Holt
complex or Northern Territory.
Macassa: Production at Macassa in 2020 is expected to be similar to 2019 levels, with 2020 guidance of 240,000 to 250,000 ounces. Production in 2021 is should remain similar to 2020, with significant growth in production expected to commence in 2022, reflecting initial production from the No. 4 shaft and potential production from the planned Macassa surface ramp. Production in 2022 is targeted at 320,000 to 340,000 ounces, with production then expected to grow to over 400,000 ounces in 2023.
Fosterville: After achieving substantial growth in 2019 with the ramp-up of production from the high-grade Swan zone, production at Fosterville is expected to sustain levels at or close to 600,000 ounces per year over the next three years. Production guidance for Fosterville includes 590,000 to 610,000 ounces in 2020 and 550,000 to 600,000 ounces in both 2021 and 2022, with the potential existing for a new source of production at Robbin's Hill commencing in 2023.
Eric Kallio, PGeo, senior vice-president of exploration, is a qualified person as defined in National Instrument 43-101 and has reviewed and approved the technical and scientific data included in this press release. In addition, Ian Holland, vice-president of Australian operations and a qualified person under NI 43-101, has reviewed and approved the technical and scientific data in this press release relating to the Australian operations. Natasha Vaz, PEng, vice-president of technical services and a qualified person under NI 43-101, has reviewed and approved the technical and scientific data in this press release relating to the Canadian operations.
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 in 2019, to a range of 950,000 to one million ounces. The production profile of the company is anchored by two high-grade, low-cost operations, including the Macassa mine in Northern Ontario and the Fosterville mine in the state of Victoria, Australia. Kirkland Lake Gold's solid base of quality assets is complemented by district-scale exploration potential and supported by a strong financial position with extensive management expertise.
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