Mr. Anthony Makuch reports
KIRKLAND LAKE GOLD ANNOUNCES RECORD QUARTERLY AND FULL-YEAR PRODUCTION
Kirkland Lake Gold Ltd. had record production for the fourth quarter and full year 2019. Production in Q4 2019 totalled 279,742 ounces, an increase of 21 per cent from 231,217 ounces for the same period in 2018, with the increase driven by record quarterly production at the Fosterville mine of 191,893 ounces. For FY 2019, consolidated production totalled 974,615 ounces, 35 per cent higher than 723,701 for full year 2018. FY 2019 production at Fosterville of 619,366 ounces beat the mine's FY 2019 guidance of 570,000 to 610,000 ounces. Production at Macassa mine in FY 2019 totalled 241,297 ounces, in line with FY 2019 guidance of 240,000 to 250,000 ounces. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.
The company's cash position increased $90-million or 15 per cent during Q4 2019, with total cash and equivalents at Dec. 31, 2019, totalling $705-million. During Q4 2019, $30.0-million was used to repurchase 727,200 common shares through the company's normal course issuer bid (NCIB), with an additional $25.0-million used for a strategic investment. For FY 2019, cash and equivalents increased $373-million or 112 per cent from $332-million at Dec. 31, 2018.
Highlights of Q4 2019 and FY 2019 production results:
Record consolidated production of 279,742 ounces, 21-per-cent increase from 231,217 ounces in Q4 2018 and 13 per cent higher than 248,400 ounces the previous quarter (FY 2019 consolidated production of 974,615 ounces, 35-per-cent increase from 723,701 ounces for FY 2018);
Gold poured in Q4 2019 of 279,054 ounces, with consolidated gold sales of 278,438 ounces (FY 2019 gold poured of 978,455 ounces, with total gold sales of 979,733 ounces);
Record quarterly production at Fosterville totalling 191,893 ounces in Q4 2019, 54-per-cent increase from 124,307 ounces in Q4 2018 and 21 per cent higher than 158,327 ounces in Q3 2019 (FY 2019 production of 619,366 ounces, 74-per-cent increase from 356,230 ounces in FY 2018);
Production at Macassa in Q4 2019 totalling 56,379 ounces compared with 69,936 ounces in Q4 2018 and 62,945 ounces in Q3 2019 (FY 2019 production of 241,297 ounces, largely unchanged from 240,126 ounces in FY 2018);
Production at Holt complex of 31,469 ounces in Q4 2019 compared with 36,974 ounces in Q4 2018 and 27,128 ounces the previous quarter (FY 2019 production of 113,952 ounces compared with 127,344 ounces in FY 2018).
Other key developments during Q4 2019, include:
Continued exploration success:
Fosterville: High-grade Swan zone mineralization extended 80 metres down plunge of current mineral reserves, with continuity of Phoenix gold system confirmed 950 metres down plunge of Swan zone; mineralization in Cygnet zone identified over 650-metre strike length; 550 m down-plunge extension at Robbin's Hill with intersections containing visible gold, results demonstrate potential of Robbin's Hill to become second mining front to feed Fosterville mill.
Macassa: Drilling continues to confirm and extend high-grade mineralization to the east and west of existing mineral resources in South mine complex; expands high-grade zones along Amalgamated break.
Northern Territory: Intersection of high-grade mineralization at Lantern deposit, Union Reefs and Pine Creek supports potential for long-term, profitable production at 2.4-million-tonne-per-annum Union Reefs mill; 8,733 ounces produced at Union Reefs mill during Q4 2019 as part of continuing advanced exploration program.
- Continued focus on shareholder value:
50-per-cent increase in quarterly dividend, to six cents per share, effective Q4 2019 dividend payment, to be paid on Jan. 13, 2020, to shareholders of record on Dec. 31, 2019;
727,200 shares repurchased through NCIB in Q4 2019 for $30.0-million ($39.5-million (Canadian)) (total share repurchases in FY 2019 of 1,127,000 shares for total of $42.8-million ($56.7-million (U.S.)));
Strategic investment totalling $25.0-million ($32.5-million (Canadian)) made in Q4 2019 to acquire 57 million shares of Wallbridge Mining Co. Ltd. (57 Canadian cents per share), representing 9.9 per cent of issued and outstanding common shares (84 Canadian cents per share closing price on Jan. 8, 2020).
Agreement to acquire Detour Gold Corp.:
- Company announced agreement to acquire all common shares of Detour Gold Corp. on Nov. 25, 2019; acquisition will add third cornerstone asset, Detour Lake mine, located in Ontario, Canada, increase company's free cash flow, mineral reserves and production, offer opportunities for synergies, and other value creation opportunities totalling $75-million to $100-million per year and combine Kirkland Lake Gold's industry-leading balance sheet strength with Detour Lake's exceptional growth, expansion and exploration potential. (Meeting of Kirkland Lake Gold shareholders to be held on Jan. 28, 2020.)
Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: "Kirkland Lake Gold had its best year ever in 2019. We increased production 35 per cent, more than doubled our cash position and continued to achieve significant exploration success. We also raised our dividend twice, repurchased 1,127,000 shares through our NCIB and increased our share price by 60 per cent for the year. Both Fosterville and Macassa had excellent years in 2019, with Fosterville easily beating full-year production guidance and Macassa producing over 240,000 ounces, in line with target levels. Looking at exploration, recently released drill results at Fosterville and Macassa are very encouraging and support our view that these mines are not only among the world's most profitable operations, they also represent two of the most exciting exploration projects in the gold industry today. Also contributing to our organic growth potential is our work in the Northern Territory of Australia, where advanced exploration work is progressing with a goal of resuming commercial operations as early as next month when we release our updated mineral reserve and mineral resource estimates. Providing additional upside for the future is our recent agreement to acquire Detour Gold, where we see opportunities for substantial value creation through investment in Detour Lake mine's considerable growth, expansion and exploration potential.
"Turning to Q4 2019, we achieved a record quarter, producing close to 280,000 ounces, well above the previous quarterly record of 248,400 ounces set in Q3 2019. The record performance resulted from an outstanding quarter at Fosterville, where grades averaged just under 50 grams per tonne, the mine's highest average quarterly grade ever by a wide margin. The average grade at Fosterville was better than expected, mainly due to grade outperformance at a number of stopes in the high-grade Swan zone. In Canada, we had a solid performance during the quarter at Macassa, as higher throughput levels largely offset the impact lower than expected grades, and achieved improved results at the Holt complex, with Q4 2019 being the strongest quarter of the year at these operations.
"Finally, we have watched with great concern and empathy the devastating impact of recent bush fires along the Eastern Seaboard of Victoria and New South Wales in Australia. As a result, Kirkland Lake Gold is donating $1.0-million (Australian) to support relief and recovery efforts. In addition, we are also initiating a program with CFA (Country Fire Authority) units to assist in funding new projects aimed at improving fire readiness. Our operations in Australia have not been affected by the fires, but clearly the impact in many areas has been severe and we are pleased to be contributing to the massive relief and recovery effort required in the aftermath of the fires."
Q4 AND FY 2019 PRODUCTION RESULTS
Q4 2019 Q4 2018 Q3 2019 FY 2019 FY 2018
Ore milled (tonnes) 121,998 98,797 119,412 492,874 456,909
Grade (g/t Au) 49.3 39.7 41.8 39.6 24.9
Recovery (%) 99.2 98.6 98.6 98.8 97.3
Gold production (oz) 191,893 124,307 158,327 619,366 356,230
Ore milled (tonnes) 87,573 85,523 85,834 324,077 354,469
Grade (g/t Au) 20.5 25.9 23.3 23.6 21.6
Recovery (%) 97.8 98.0 97.8 97.9 97.7
Gold production (oz) 56,379 69,936 62,945 241,297 240,126
Ore milled (tonnes) 252,801 227,940 214,542 853,528 860,022
Grade (g/t Au) 4.1 5.3 4.2 4.4 4.9
Recovery (%) 94.1 94.7 94.2 94.7 94.7
Gold production (oz) 31,469 36,974 27,128 113,952 127,344
Total consolidated production (oz) 279,742 231,217 248,400 974,615 723,701
Total consolidated gold sales (oz) 278,438 225,692 256,276 979,733 722,277
Numbers may not add due to rounding.
The Holt complex includes the Holt mine, Taylor mine and Holloway mine, which all feed the Holt mill. On Feb. 21, 2019, the company announced plans to resume operations at Holloway following completion of a revised and updated royalty agreement. Production from Holloway is included in the company's commercial production effective that date.
PERFORMANCE AGAINST FULL-YEAR 2019 PRODUCTION GUIDANCE
Macassa Holt complex Fosterville Consolidated
2019 guidance (000 oz) 240-250 120-130 570-610 950-1,000
FY 2019 production (oz) 241,297 113,952 619,366 974,615
FY 2019 production achieved the company's guidance of 950,000 to one million ounces, totalling 974,615 ounces. FY 2019 production increased 35 per cent from 723,701 ounces in FY 2018. The main contributor to the strong growth compared with FY 2018 was record production at Fosterville, mainly due to a significant improvement in the average grade reflecting the ramp-up of production from the high-grade Swan zone. Production from Fosterville in FY 2019 of 619,366 was better than the guidance range of 570,000 to 610,000 ounces due to a higher-than-expected average grade, largely during Q4 2019. Macassa produced 241,297 ounces in FY 2019, in line with FY 2019 guidance of 240,000 to 250,000 ounces and largely unchanged from FY 2018. The Holt complex produced 113,952 ounces in FY 2019 compared with 127,344 ounces in FY 2018 and below revised guidance of 120,000 to 130,000 ounces. The company continues to review the future plans for the Holt complex operations.
Review of operating mines
The Fosterville mine produced 191,893 ounces in Q4 2019, an increase of 54 per cent from 124,307 ounces in Q4 2018 and 21 per cent higher than 158,327 ounces the previous quarter. Production in Q4 2019 resulted from processing 121,998 tonnes at a record average grade of 49.3 g/t and with record average mill recoveries of 99.2 per cent. The growth in production from both prior periods reflected higher average grades, increased tonnes processed and improved recoveries. The average grade increased 24 per cent from Q4 2018 and 18 per cent from the previous quarter, with the increase from both prior periods largely due to grade outperformance in a number of Swan zone stopes during Q4 2019. Higher levels of production from the Swan zone also contributed to the increase in average grade compared with Q4 2018.
Production at Fosterville for FY 2019 totalled 619,366 ounces, a 74-per-cent increase from 356,230 ounces in FY 2018. FY 2019 production resulted from processing 492,874 tonnes at an average grade of 39.6 g/t and average recoveries of 98.8 per cent. The increase from FY 2018 was largely due to a 59-per-cent improvement in the average grade, largely reflecting the ramp-up of production from the Swan zone, which commenced in Q3 2018. Mill throughput levels also contributed to the increase, with an average of 1,350 tonnes per day being processed in FY 2019, in line with expected levels and higher than the 1,250 tonnes per day processed in FY 2018. Average recovery rates also improved year over year.
The Macassa mine produced 56,379 ounces in Q4 2019 compared with 69,936 ounces in Q4 2018 and 62,945 ounces the previous quarter. Production in Q4 2019 resulted from processing 87,573 tonnes at an average grade of 20.5 g/t with average recoveries of 97.8 per cent. The change in production from both prior periods resulted from a lower average grade in Q4 2019, largely reflecting grade underperformance in certain stopes, which more than offset the impact of higher tonnes processed. Tonnes processed in Q4 2019 averaged 952 tonnes per day versus 930 tonnes per day in Q4 2018 and 933 tonnes per day the previous quarter.
Production at Macassa in FY 2019 totalled 241,297 ounces, largely unchanged from 240,126 ounces in FY 2018. Production in FY 2019 resulted from processing 324,077 tonnes at an average grade of 23.6 g/t with average recoveries of 97.9 per cent, which compared with processing 354,469 tonnes at an average grade of 21.6 g/t with average recoveries of 97.7 per cent during FY 2018. The impact of a higher average grade in FY 2019 compared with FY 2018 was largely offset by reduced tonnes processed compared to FY 2018. The increase in the average grade in FY 2019 largely resulted from grade outperformance in a number of stopes around the 5700 level of the South mine complex, largely in the first quarter of the year. Tonnes processed in FY 2019 averaged 888 tonnes per day compared with 971 tonnes per day for the same period in 2018. Contributing to the reduction in tonnes processed in FY 2019 were lower-than-expected processing rates during the second quarter of 2019, largely reflecting the impact of excessive water in the mine during the spring runoff, which limited the use of the lower loading pocket at the No. 3 shaft.
During Q4 2019, the Holt complex produced 31,469 ounces based on processing 252,801 tonnes at an average grade of 4.1 g/t with average recoveries of 94.1 per cent. Production in Q4 2019 compared with production of 36,974 ounces in Q4 2018 when a total of 227,940 tonnes were processed at an average grade of 5.3 g/t with average recoveries of 94.7 per cent. The change from Q4 2018 largely reflected a lower average grade at both Holt mine and Taylor mine, which more than offset the impact of 5,797 ounces of production at Holloway mine in Q4 2019 following the resumption of commercial operation at Holloway during the first quarter of 2019 (895 ounces produced in Q4 2018 resulting from the processing of stockpiled material). Production in Q4 2019 of 31,469 ounces compared with production of 27,128 ounces the previous quarter when a total of 214,542 tonnes were processed at an average grade of 4.2 g/t with average recoveries of 94.2 per cent. The increase from Q3 2019 reflected higher production at the Holt mine, reflecting both increased mill throughput and an increase in the average grade, as well as increased production from Holloway, where 3,792 ounces were produced in Q3 2019.
In 2019, the Holt complex produced 113,952 ounces from processing 853,528 tonnes at an average grade of 4.4 g/t with average recoveries of 94.7 per cent. FY 2019 production compared with 127,344 ounces of production for FY 2018 when a total of 860,022 tonnes at an average grade of 4.9 g/t with average recoveries of 94.7 per cent. The reduction versus YTD 2018 reflected lower tonnes processed and average grades at Holt mine and significantly reduced tonnes processed at Taylor. The Holloway mine produced 12,210 ounces in YTD 2019 compared with 942 ounces for the same period in 2018.
Test processing of low-grade mineralization from the Lantern deposit at the Cosmo mine commenced in early October, 2019. A total of 8,733 ounces were produced at the Union Reefs mill during Q4 2019, with the proceeds from gold sales being accounted for as a reduction in capital expenditures. The processing of Lantern mineralization is being undertaken as part of an advanced exploration program aimed at evaluating a potential resumption of operations in the Northern Territory of Australia. The advanced exploration program is expected to continue into 2020, with proceeds from gold sales continuing to reduce capital expenditures pending a decision to resume commercial operations, which could be made as early as February, 2020, following release of the company's mineral reserve and mineral resource estimates as at Dec. 31, 2019.
On Nov. 25, 2019, the company announced that it has entered into a definitive agreement to acquire all issued and outstanding common shares of Detour pursuant to a plan of arrangement.
The Kirkland Lake Gold board of directors unanimously recommends that Kirkland Lake Gold shareholders vote
the transaction. The terms of the transaction and the potential benefits to the company's shareholders are further described in the company's management information circular, which is available on the on the company's website and on SEDAR and EDGAR.
For shareholders with questions or requiring assistance voting their shares, please contact Kingsdale Advisors, the company's strategic shareholder adviser and proxy solicitation agent, by telephone at 1-877-659-1821 toll-free in North America (1-416-867-2272 for collect calls outside of North America) or by e-mail at email@example.com, or your professional adviser.
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 in 2019. 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 expertise.
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