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Kirkland Lake Gold Ltd
Symbol KL
Shares Issued 286,635,908
Close 2020-02-19 C$ 49.58
Recent Sedar Documents

Kirkland Lake's 2019 earnings rise to $560.08M (U.S.)

2020-02-20 06:23 ET - News Release

Mr. Tony Makuch reports

KIRKLAND LAKE GOLD REPORTS RECORD OPERATING AND FINANCIAL RESULTS IN 2019 AND Q4 2019

Kirkland Lake Gold Ltd. has released its financial and operating results for the fourth quarter and full year 2019. For both periods, the company achieved record production, unit costs and adjusted net earnings, driven by strong production growth at Fosterville. The company's full consolidated financial statements and management 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 Q4 2019 results include:

  • Record quarterly production of 279,742 ounces, an increase of 21 per cent from 231,217 ounces in Q4 2018 and 13 per cent higher than 248,400 ounces the previous quarter;
  • Best unit cost performance ever with operating cash costs averaging $255 per ounce compared with $286 per ounce in Q4 2018 and $287 the previous quarter, while all-in sustaining costs (AISC) averaged $512 per ounce, 10 per cent better than $567 per ounce in Q4 2018 and a 9-per-cent improvement from $562 in the third quarter of 2019;
  • Strong revenue growth to $412.4-million, 47 per cent higher than $280.3-million in Q4 2018 and an increase of 8 per cent from $381.4-million the previous quarter; gold sales in Q4 2019 totalled 278,438 ounces, 23 per cent and 9 per cent higher than Q4 2018 and the previous quarter, respectively;
  • Record adjusted net earnings: adjusted net earnings totalling $185.3-million (88 cents per share), a 76-per-cent increase from Q4 2018 and 11 per cent higher than the previous quarter; net earnings in Q4 2019 totalling $169.1-million (81 cents per share) compared with net earnings of $106.5-million (51 cents per share) in Q4 2018 and $176.6-million (84 cents per share) in Q3 2019;
  • Net cash provided by operating activities increased 19 per cent to $247.1-million from $207.3-million in Q4 2018 and compared with $316.8-million the previous quarter with the reduction mainly related to changes in non-cash working capital;
  • Free cash flow increases 48 per cent in Q4 2019 to $132.8-million versus $89.6-million in Q4 2018 and record free cash flow of $181.3-million in Q3 2019;
  • Significant growth in EBITDA (earnings before interest, taxes, depreciation and amortization) to $285.6-million, 52 per cent higher than $187.8-million in Q4 2018 and compared with $296.4-million the previous quarter;
  • Cash at Dec. 31, 2019, of $707.2-million, 113-per-cent increase from $332.2-million at Dec. 31, 2018, and 15 per cent higher than $615.8-million at Sept. 30, 2019;
  • Strong focus on shareholder returns in Q4 2019: dividend increased 50 per cent to six cents per share, which was paid on Jan. 13, 2020, to shareholders of record on Dec. 31, 2019; 727,200 shares repurchased through normal course issue bid (NCIB) in Q4 2019 for $30.0-million ($39.5-million (Canadian)).

Key highlights of 2019 results include:

  • Record full-year operating results:
    • Production of 974,615 ounces, 35-per-cent increase from 2018 (2019 guidance: 950,000 to one million ounces);
    • Production costs in 2019 totalled $281.0-million versus $267.4-million in 2018;
    • Operating cash cost per ounce sold of $284 per ounce, 22-per-cent improvement from 2018 (2019 guidance: $285 to $305 per ounce);
    • AISC per ounce sold of $564, 18 per cent better than 2018 (2018 guidance: $520 to $560);
  • Record full-year financial results:
    • Net earnings of $560.1-million ($2.67/share), 104-per-cent increase from $274.0-million ($1.30/share) in 2018;
    • Adjusted net earnings of $576.4-million ($2.74/share), 110 per cent higher than $273.9-million ($1.30/share) in 2018;
    • Net cash provided by operating activities of $919.4-million, 68 per cent growth from $548.8-million in 2018;
    • Free cash flow totalling $463.0-million, 81 per cent higher than $255.2-million in 2018;
    • Revenue of $1.38-billion, 51 per cent growth from $915.9-million in 2018;
    • EBITDA of $969.4-million, 82 per cent increase from $531.6-million in 2017;
  • Strong focus on shareholder returns in 2019:
    • Quarterly dividend increased twice, to four cents per share (from four cents per share) for second quarter 2019 dividend, then to six cents per share for Q4 2019 dividend;
    • Repurchased 1,127,000 common shares through NCIB during 2019 for total of $42.8-million ($56.7-million);
  • Acquisition of Detour Gold Corp.:
    • Adds 14.8 million ounces in open-pit mineral reserves, 3.9 million ounces of open-pit measured and indicated mineral resources and 1.1 million ounces of open-pit inferred mineral resources;
    • Produced 601,566 ounces in 2019;
    • Significant potential for growth in mineral reserves, increased production and improved unit costs.

Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: "Two thousand nineteen was a year of record operating and financial performance for Kirkland Lake Gold, driven largely by strong production growth at Fosterville at very low unit costs. We also continued to demonstrate an ability to generate substantial amounts of operating and free cash flow, which resulted in a rapid buildup in our cash position. We more than doubled our cash during the year at the same time that we incurred higher growth capital expenditures, reflecting significant progress at a number of key projects, including our No. 4 shaft project at Macassa. The No. 4 shaft project is advancing extremely well and we now have the potential to complete the project early at a lower total capital cost. We also put our cash to use in 2019 to reward shareholders through dividend increases and share repurchases. We plan to substantially increase these efforts, including doubling our quarterly dividend, to 12.5 cents per share, effective the second quarter of 2020, and committing to buying back 20 million shares over the next 12 to 24 months. We will reward our shareholders through these initiatives, while still being able to fund our growth internally given the strength of our balance sheet and the significant cash flow that our operations generate.

"Looking ahead, the addition of Detour is a major milestone for our company. With the completion of the acquisition on Jan. 31, 2020, we now move forward with three highly competitive, free-cash-flow-generating assets, Macassa and Detour Lake in Northern Ontario and Fosterville in Victoria, Australia.

"Collectively, these three operations are expected to produce around 1.4 million ounces this year, at unit costs and on a scale that will position us to generate well over half a billion dollars of free cash flow this year. Given the quality of Macassa, Detour Lake and Fosterville, we have decided to designate our Holt complex in Northern Ontario and assets in the Northern Territory of Australia as non-core and will be considering strategic options to the maximize value of these assets. As a company, we are very committed to value creation. With our three high-quality assets, we expect to combine industry-leading operating and financial results, continued progress with growth projects and ongoing exploration success in order to reverse the recent performance of our shares and once again be a top performing stock as we have been over the last three years."

Review of financial and operating performance

The following discussion provides key summarized consolidated financial and operating information for the three and 12 months ended Dec. 31, 2019, and 2018.

                                             FINANCIAL HIGHLIGHTS
                            (in thousands of dollars, except per-share amounts)

                                                             Three months ended                        Year ended 
                                                 Dec. 31, 2019    Dec. 31, 2018    Dec. 31, 2019    Dec. 31, 2018

Revenue                                               $412,379         $280,320       $1,379,988         $915,911
Production costs                                        71,169           64,604          281,034          267,432
Earnings before income taxes                           232,042          149,336          798,182          394,310
Net earnings                                           169,135          106,535          560,080          273,943
Basic earnings per share                                  0.81             0.51             2.67             1.30
Diluted earnings per share                                0.80             0.50             2.65             1.29
Cash flow from operating activities                    247,100          207,283          919,390          548,790
Cash investment on mine development and PPE            114,319          117,712          456,423          293,590

                                             OPERATING HIGHLIGHTS
 
                                                            Three months ended                        Year ended
                                                Dec. 31, 2019    Dec. 31, 2018    Dec. 31, 2019    Dec. 31, 2018

Tonnes milled                                         462,372          412,260        1,670,478        1,671,401
Grade (g/t Au)                                           19.1             17.8             18.5             13.9
Recovery (%)                                            98.3%            97.8%            98.1%            96.9%
Gold produced (oz)                                    279,742          231,217          974,615          723,701
Gold sold (oz)                                        278,438          225,692          979,734          722,277
Average realized price ($ per ounce sold)              $1,481           $1,237           $1,405           $1,263
Operating cash costs per ounce ($ per ounce sold)         255              286              284              362
AISC ($ per ounce sold)                                   512              567              564              685
Adjusted net earnings                                 185,303          105,010          576,414          273,969
Adjusted net earnings per share                          0.88             0.50             2.74             1.30
Free cash flow                                        132,781           89,571          462,967          255,200

Revenue

Change in revenue for any period is derived from two factors, the increase or decrease in sales volumes (volume impact) and the average realized price of gold (rate impact). In 2019, revenue totalled $1.38-billion, an increase of $464.1-million or 51 per cent from 2018. Of the growth in revenue, $325-million related to a 36-per-cent increase in gold sales to 979,734 ounces, with higher sales levels at Fosterville accounting for the increase. An 11-per-cent increase in the average realized gold price to $1,405 per ounce in 2019 versus $1,263 per ounce in 2018 provided the remaining $139-million of the increase in revenue year over year.

Revenue in Q4 2019 totalled $412.4-million, an increase of $132.1-million or 47 per cent from $280.3-million in Q4 2018. Increases in both gold sales and the average realized price both contribution significantly to the improvement. The average realized price in Q4 2019 was $1,481, a 20-per-cent improvement from the same period in 2018, which resulted in $67-million of additional revenue in Q4 2019. A 23-per-cent increase in gold sales, to 278,438 ounces, driven mainly by the impact of higher grades at Fosterville on production and sales levels, contributed the remaining $65-million of revenue growth in Q4 2019 versus Q4 2018. Compared with the previous quarter, revenue increased $30.9-million or 8 per cent from $381.4-million in Q3 2019. The increase in revenue was entirely from higher sales volumes, which increased 9 per cent from 256,276 ounces in Q3 2019. The average realized gold price in Q4 2019 was unchanged from the previous quarter.

Net earnings and adjusted net earnings

Full year

Net earnings

Net earnings in 2019 totalled $560.1-million or $2.67 per share, which compared with net earnings of $273.9-million or $1.30 per share in 2018. The most significant factor accounting for the 104-per-cent increase in earnings per share was the 51 per cent increase in revenue in 2019, which had a favourable impact on the change in earnings per share of $1.56 ($1.09 related to the increase in sales volumes and 47 cents to the increase in the average realized gold price).

Other factors that contributed to the increase in earnings per share included an 11-cent-per-share favourable impact from a reduction in expensed exploration costs in 2019 versus 2018. The reduction in expensed exploration costs resulted from a review of the company's drilling programs in the second quarter of 2019, which resulted in a determination that, based on the extent to which the company's drilling is being completed contiguous to and for the purpose of extending existing mining areas, a greater proportion of expenditures were evaluation in nature and as should be capitalized rather than expensed. Total exploration and evaluation expenditures in 2019, including both expensed and capitalized expenditures, increased 63 per cent, to $159.2-million from $97.9-million the previous year, with capitalized expenditures accounting for $125.7-million of 2019 exploration and evaluation expenditures versus $31.3-million in 2018.

A reduction in the company's effective tax rate, to 29.8 per cent in 2019 versus 30.5 per cent the previous year, contributed an additional two cents to earnings per share growth year over year. Total income taxes in 2019 were $238.1-million, of which $189.6-million was current income tax expense and $48.5-million was deferred tax expense. During 2018, the company recognized $40.7-million of current income tax expense and $79.6-million of deferred income tax expense. The significant amount of deferred income tax expense in 2018 resulted from the utilization of $53.3-million of deferred tax assets in respect of loss carry forwards to reduce current income tax expense.

Partially offsetting the factors contributing to an increase in earnings were higher operating expenses, an other loss in 2019 versus other income in 2018, and increased corporate G&A costs. Depletion and depreciation costs, production costs, and royalty expense all increased in 2019 compared with 2018. The level of these expenses is linked to production and sales volumes, with higher levels in 2019 largely resulting from growth of 35 per cent and 36 per cent, respectively, in total production and sales year over year.

Other loss of $18.8-million (before income taxes) mainly reflected $16.2-million (before income taxes) of foreign exchange losses in 2019, largely reflecting the strengthening of the Canadian dollar relative to the U.S. and Australian dollars during the year. The primary factor driving other income of $5.1-million (before income taxes) in 2018 resulted from foreign exchange gains of $16.9-million (before income taxes) due to the Australian and Canadian dollars weakening against the U.S. dollar during 2018, which was only partially offset by a pretax $10.9-million mark-to-market loss of fair valuing the company's warrant investments during the year. The $18.8-million other loss in 2019 versus $5.1-million of other income in 2018 had an eight-cent unfavourable on the year-over-year change in earnings per share.

Corporate G&A expense in 2019, on a pretax basis, totalled $45.4-million (including $9.3-million of share-based payment expense) versus $31.6-million (including $5.5-million of share-based payment expense) in 2018. The increase in corporate G&A expense reduced earnings per share by three cents in 2019. Higher corporate G&A expense in 2019 largely reflected related to the expansion of corporate capabilities in both Canada and Australia in support of the company's continued growth. The increase in share-based payment expense in 2019 largely resulted from share price appreciation, resulting in greater mark-to-market values for the company's outstanding deferred share units, restricted share units and performance share units.

Adjusted net earnings

Adjusted net earnings in 2019 totalled $576.4-million or $2.74 per share versus net earnings of $560.1-million or $2.67 per share. The primary difference between adjusted net earnings and net earnings in 2019 related to the exclusion from adjusted net earnings of $16.2-million ($12.9-million after tax) of foreign exchange losses, resulting from fluctuations in the Canadian and Australian dollars against the U.S. dollar. In 2018, adjusted net earnings totalled $274.0-million or $1.30 per share, which compared with net earnings of $273.9-million or $1.30 per share. The difference between adjusted net earnings and net earnings in 2018 resulted from the exclusion from adjusted net earnings of $10.9-million ($9.4-million after tax) of mark-to-market losses on the fair valuing of the company's warrants, $16.9-million ($13.2-million after tax) of foreign exchange gains to align with the foreign exchange adjustment made in 2019 as well as $5.4-million ($3.8-million after income taxes) related to purchase price allocation adjustments on inventory.

Q4 2019

Net earnings in Q4 2019 totalled $169.1-million or 81 cents per share, which compared with net earnings of $106.5-million or 51 cents per share in Q4 2018. Strong revenue growth was the primary factor contributing to the increase in net earnings from Q4 2019. The 47-per-cent increase in revenue, to $412.4-million, increased earnings per share by 46 cents in Q4 2019 versus Q4 2018, with both a higher realized gold price and increased sales volumes each contributing approximately 23 cents per share to the increase. Other factors contributed to higher earnings were a two-cent-per-share favourable contribution from reduced expensed exploration costs and a one-cent-per-share favourable impact from a lower effective tax rate in Q4 2019 compared with the same period in 2018. The Q4 2019 effective tax rate was 27.1 per cent versus 28.7 per cent in Q4 2018, with the reduction largely resulting from a reduced deferred tax expense of $500,000 in Q4 2019, mainly due to revision of estimates in Q4 2019. The company had current income tax expense in Q4 2019 of $62.4-million. In Q4 2018, current income tax expense totalled $17.1-million with deferred income tax expense of $25.7-million.

Factors that reduced net earnings per share in Q4 2019 versus Q4 2018 included a pretax other loss of $25.2-million versus $1.2-million (pretax) of other income for the same period a year earlier, as well as higher levels of operating expenses, including depletion and depreciation, production costs, and royalty expense, as well as increased corporate G&A costs. The other loss in Q4 2019 mainly reflected foreign exchange losses, while higher operating expenses mainly resulted from increased production and sales volumes. Growth in corporate G&A was due to the expansion of corporate capabilities in both Canada and Australia in support of the company's continued growth.

Net earnings in Q4 2019 compared with net earnings of $176.6-million or 84 cents per share in the previous quarter. A significant factor impacting the change in earnings per share quarter over quarter was a 14-cent unfavourable impact from a pretax other loss of $25.2-million in Q4 2019, which compared with $13.9-million of pretax other income in Q3 2019. Both the other loss in Q4 2019 and other income in Q3 2019 related to foreign exchange, with there being $23.3-million ($16.1-million after tax) of foreign exchange gains in Q4 2019, reflecting fluctuations of the Canadian and Australian dollar against the U.S. dollar, and a $13.7-million ($9.1-million after tax) foreign exchange gain the previous quarter. Increases in depletion and depreciation expense, production costs and exploration expense also contributed to lower net earnings and earnings per share versus Q3 2019.

Having a favourable impact on net earnings and earnings per share was the 8-per-cent increase in revenue quarter over quarter, to $412.4-million in Q4 2019, which increased earnings per share by 11 cents from Q3 2019 and was all related to higher sales volumes. A lower effective tax rate also contributed favourably to earnings. The effective tax rate in Q4 2019 of 27.1 per cent compared with an effective tax rate of 30.5 per cent in Q3 2019. The lower effective tax rate had a five-cent positive impact on earnings per share in Q4 2019 compared with Q3 2019.

Adjusted net earnings

Adjusted net earnings in Q4 2019 totalled $185.3-million or 88 cents per share versus net earnings for the same period of $169.1-million or 81 cents per share. The primary difference between adjusted net earnings and net earnings in Q4 2019 related to the exclusion from adjusted net earnings of $23.3-million ($16.1-million after tax) of foreign exchange losses resulting from fluctuations in the Canadian and Australian dollars against the U.S. dollar. In Q4 2018, adjusted net earnings totalled $105.0-million or 50 cents per share, which compared with net earnings of $106.5-million or 51 cents per share. The difference between adjusted net earnings and net earnings in Q4 2018 related to the exclusion from adjusted net earnings of a $3.5-million mark-to-market gain ($3.1-million after tax) related to the fair valuing of the company's warrants and $5.9-million ($4.9-million after tax) of foreign exchange revaluation gains to align with the foreign exchange adjustment made in Q4 2019. Adjusted net earnings in Q3 2019 totalled $167.5-million or 80 cents per share versus net earnings for the same period of $176.6-million or 84 cents per share. The difference between adjusted net earnings and net earnings in Q3 2019 is due to the exclusion of foreign exchange gains of $13.7-million ($9.1-million after tax) to align with the foreign exchange adjustment made in Q4 2019.

                                   REVIEW OF FINANCIAL PERFORMANCE
                               (in thousands except per-share amounts)

                                                  Three months ended                          Year ended
                                      Dec. 31, 2019    Dec. 31, 2018    Dec. 31, 2019      Dec. 31, 2018

Revenue                                    $412,379         $280,320       $1,379,988           $915,911
Production (costs)                          (71,169)         (64,604)        (281,034)          (267,432)
Royalty (expense)                           (11,002)          (7,583)         (36,432)           (26,418)
Depletion and depreciation (loss)           (52,865)         (37,318)        (168,921)          (133,718)
Earnings from mine operations               277,343          170,815          893,601            488,343
Expenses
General and administrative
(expense) (1)                               (10,576)          (9,316)         (45,365)           (31,565)
Transaction (costs)                          (1,236)               -           (1,236)                 -
Exploration (expense)                        (9,336)         (13,807)         (33,469)           (66,614)
Care and maintenance (expense)                 (239)          (1,626)          (1,191)            (3,081)
Earnings from operations                    255,956          146,066          812,340            387,083
Finance and other items
Other income (loss), net                    (25,166)           1,235          (18,817)             5,130
Finance income                                1,948            3,139            6,941              5,714
Finance (costs)                                (696)          (1,104)          (2,282)            (3,617)
Earnings before income taxes                232,042          149,336          798,182            394,310
Current income tax (expense)                (62,414)         (17,070)        (189,572)           (40,743)
Deferred income tax (expense)                  (493)         (25,731)         (48,530)           (79,624)
Net earnings                                169,135          106,535          560,080            273,943
Basic earnings per share                       0.81             0.51             2.67               1.30
Diluted earnings per share                     0.80             0.50             2.65               1.29

(1) General and administrative expense for 2019 and Q4 2019 (2018 and Q4 2018) include general and 
administrative expenses of $36.3-million and $10.1-million ($26.3-million and $8.0-million in 2018) 
and share-based payment expense of $9.0-million and $500,000 ($5.2-million and $1.3-million 2018).

Cash flow

Full year 2019

Cash totalled $707.2-million at Dec. 31, 2019, an increase of $375.0-million or 113 per cent from Dec. 31, 2018. The increase in cash mainly reflected $919.4-million of net cash provided by operating activities for the quarter, which compared with $548.8-million. The increase from 2018 resulted from strong growth in earnings as well as the impact of higher non-cash expenses, such as depletion and depreciation costs. These factors were only partially offset by higher cash income taxes paid and changes in non-cash working capital, which was a use of cash in 2019 and a source of cash the previous year.

Net cash used in investing activities for 2019 totalled $466.9-million, an increase of $109.4-million or 31 per cent from 2018. The increase reflected higher levels of growth and sustaining capital expenditures in FY 2019, partially offset by a $31.7-million reduction in cash used for investments in public and private entities during 2019 versus 2018, as well as the release of $22.2-million of previously restricted cash during the year. During 2019, the company invested $34.4-million in private and public entities, including $24.4-million to acquire 57 million shares (57 Canadian cents per share) of Wallbridge Mining Co. Ltd., representing 9.9 per cent of issued and outstanding common shares, as well as 4.1 million additional shares of Bonterra Resources Inc. for $6.4-million. At Dec. 31, 2019, the company owned a total of 8.5 million shares of Bonterra, representing 11.3 per cent of total issued and outstanding shares.

Net cash used in financing activities for 2019 totalled $85.2-million, which compared with $69.0-million for the same period in 2018. The higher level of net cash used for financing activities reflected increases of $13.1-million and $12.0-million related to dividend payments and shares repurchased through the company's NCIB, respectively. The company increased the quarterly dividend twice during 2019, including a 50-per-cent increase, to six cents per share, effective the Q4 2019 dividend payment. During 2019, the company repurchased 1,127,000 shares through the NCIB for $42.8-million ($56.7-million (Canadian)).

Free cash flow in 2019 totalled $463.0-million, an 81-per-cent increase from 2018, reflecting strong growth in net cash provided by operating activities, which more than offset higher levels of cash used for mineral property additions and additions to property, plant and equipment.

Q4 2019

The company's cash balance of $707.2-million at Dec. 31, 2019, increased $91.4-million or 15 per cent from $615.8-million at Sept. 30, 2019. The increase in cash resulted from $247.1-million of net cash being generated from operating activities, which compared with net cash provided by operating activities of $207.3-million in Q4 2018 and $316.8-million the previous quarter. The reduction from Q3 2019 mainly reflected the impact of changes in non-cash working capital, which was a significant use of cash in Q4 2019 and a source of cash in Q3 2019, as well as higher levels of cash income tax paid in Q4 2019 ($21.0-million versus $5.1-million the previous quarter).

The company's Q4 2019 and Q3 2019 income tax instalments were based upon the taxable income generated in 2018. The company's 2019 taxable income is expected to be significantly higher as compared with 2018 due to increased levels of profitability and the absence of loss carry forwards to shelter the taxable income generated in 2019, as was the case in 2018. As a result, the company anticipates paying tax instalments in the first half of 2020 that are substantially higher than any of the tax instalments made during 2019, with the largest instalment expected to be paid in Q2 2020, which could exceed $166-million.

Net cash used for investing activities in Q4 2019 totalled $139.0-million, which related mainly to growth and sustaining capital expenditures, as well as the $24.4-million of cash used to acquire 57 million shares of Wallbridge Mining Co. Ltd. Net cash used for financing activities totalled $41.8-million, of which $30.0-million ($39.5-million (Canadian)) was used to repurchase 727,200 shares through the NCIB, with an additional $8.4-million used for dividend payments.

Free cash flow in Q4 2019 totalled $132.8-million compared with $89.6-million in Q4 2018 and $181.3-million the previous quarter. The change from Q3 2019 resulted from the reduction in net cash provided by operating activities quarter over quarter.

Performance against full-year guidance:

  • Gold production for 2019 was 974,615 ounces, in the midpoint of the company's consolidated production guidance of 950,000 to one million ounces. Fosterville exceeded its production guidance for the year of 570,000 to 610,000 ounces, producing 619,366 ounces driven largely by grade outperformance in the Swan zone during Q4 2019. Production at Macassa totalled 241,297 ounces in 2019, which achieved the mine's production guidance of 240,000 to 250,000 ounces. Production at the Holt complex totalled 113,952 ounces, below the revised guidance range of 120,000 to 130,000 ounces. Production at Holt complex was below expected levels due to a slower-than-expected ramp-up at the Hollloway mine as well as lower-than-planned production at both the Holt and Taylor mines. The company announced in October, 2019, that it is reviewing the future plans of the Holt complex.
  • Production costs in 2019 totalled $281.0-million. Operating cash costs for the full year were $278.4-million, better than full-year 2019 guidance of $290-million to $300-million.
  • Operating cash costs per ounce sold for 2019 averaged $284, slightly better than in the low end of full-year 2019 guidance of $285 to $305. For 2019, Fosterville's operating cash costs per ounce sold averaged $119, better than the guidance range of $130 to $150. Macassa's operating cash costs per ounce sold averaged $414, in line with full-year guidance of $400 to $420. Operating cash costs per ounce sold at the Holt complex averaged $904, below the revised target range of $920 to $940.
  • AISC per ounce sold for 2019 averaged $564, above full-year 2019 guidance of $520 to $560, but 18 per cent better than the previous year. The level of AISC per ounce sold compared with guidance reflected higher-than-planned sustaining capital expenditures at both Macassa and the Holt complex, mainly related to additional investments for capital development, equipment purchases and infrastructure projects, largely involving enhancements to milling facilities.
  • Royalty costs for 2019 totalled $36.4-million compared to full-year 2019 guidance of $30-million to $35-million.
  • Sustaining capital expenditures for 2019 totalled $192.4-million, slightly higher than revised guidance of $170-million to $190-million. The level of sustaining capital expenditures during 2019 reflected higher-than-planned sustaining capital expenditures at Macassa and the Holt complex.
  • Growth capital expenditures totalled $172.1-million for 2019 (excluding capitalized exploration), which compared with revised 2019 guidance of $175-million to $185-million. Of total growth capital expenditures for 2019, Macassa accounted for $113.8-million, with approximately $76.6-million relating to the No. 4 shaft project and the remainder largely financing a thickened tails project and the construction of a new tailings impoundment area. Two thousand nineteen was the peak year for capital expenditures related to the No. 4 shaft project. Surface set-up and construction were completed around midyear and, by Dec. 31, 2019, the shaft had been sunk to a depth of 1,200 feet. Fosterville accounted for $48.4-million of growth capital expenditures for 2019, mainly related to the mine's three key projects, including the new ventilation system, the paste fill plant and a new water treatment plant.
  • Exploration and evaluation expenditures for 2019 totalled $159.2-million (including capitalized exploration), which compared with revised full-year 2019 guidance of $120-million to $140-million. Of total exploration expenditures, approximately $147.5-million were in Australia, including $109.9-million in the Northern Territory and $37.6-million at Fosterville. Exploration expenditures in the Northern Territory related to a continuing advanced exploration program, including underground development and drilling in support of a potential resumption of operations. In October, 2019, the company commenced test processing of Lantern deposit material at the Union Reefs mill as part of the advanced exploration program. Production during Q4 2019 at the Union Reefs mill totalled 8,700 ounces at an average grade of 2.06 g/t. Exploration expenditures in Canada in 2019 totalled $11.6-million, of which $5.7-million related to drilling at Macassa, largely designed to extend the South mine complex and identify and expand high-grade zones along the Amalgamated break.
  • Corporate G&A expense for 2019 totalled $36.3-million compared with revised full-year 2019 guidance of $30-million to $35-million.

                                 FULL-YEAR 2020 GUIDANCE 
                                  (as at Dec. 18, 2019)
                          (in millions unless otherwise stated)

                                   Macassa     Holt complex    Fosterville   Consolidated

Gold production (koz)              240-250          120-140        590-610      950-1,000
Operating cash costs/ounce
sold ($ per ounce)               $470-$490        $790-$810      $130-$150      $300-$330
AISC/ounce sold ($ per ounce)                                                   $570-$630
Operating cash costs ($M)                                                       $310-$320
Royalty costs ($M)                                                                $58-$62
Sustaining capital ($M)                                                         $165-$175
Growth capital ($M)                                                               $70-$80
Exploration ($M)                                                                $120-$140
Corporate G&A ($M)                                                                $40-$45

  • Consolidated gold production in 2020 as at Dec. 18, 2019, was 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 and actual production for the year of 619,366 ounces. Production guidance at Macassa in 2020 of 240,000 to 250,000 ounces is unchanged from full-year 2019 guidance and compares with total production in 2019 of 241,297 ounces. Production at Holt complex in 2020 is targeted at 120,000 to 140,000 ounces, which compares with 2019 guidance as at Nov. 6, 2019, of 120,000 to 130,000 ounces and total production in 2019 of 113,952 ounces. The company has designated the Holt complex as a non-core asset and plans to consider strategic options for maximizing the value of the Holt complex assets.
  • Operating cash costs for 2020 were estimated at $310-million to $320-million, which compares with the 2019 guidance of $290-million to $300-million and 2019 operating cash costs of $278.4-million.
  • Operating cash costs per ounce sold in 2020 were expected to average $300 to $330 compared with 2019 guidance of $285 to $305 and 2019 operating cash costs per ounce sold of $284. 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 2019 average of $119, which was better than full-year 2019 guidance based on higher-than-expected average grades during the year. Operating cash costs per ounce sold at Macassa in 2020 are targeted at $470 to $490, which compares with full-year 2019 guidance of $400 to $420 and the 2019 average of $414. The increase in operating cash costs per ounce sold guidance at Macassa in 2020 reflects lower planned grades in 2020, with the 2019 grade of 23.7 grams per tonne exceeding target levels due mainly to grade outperformance early in the year in stopes around the 5700 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 2019 guidance of $920 to $940 and average operating cash costs per ounce sold for 2019 of $904, with the improvement expected to reflect the impact of higher grades and increased tonnes processed on sales volumes.
  • AISC per ounce sold were targeted to average $570 to $630 in 2020 compared with the 2019 average of $564. The anticipated change from the 2019 AISC mainly related to higher operating cash costs, an increase in royalty expense resulting from a new royalty applicable to the Fosterville mine (see royalty costs below) and higher expected corporate G&A expense.
  • Royalty costs in 2020 were estimated at $58-million to $62-million compared with guidance for 2019 of $30-million to $35-million and total royalty costs of $36.4-million for 2019. Of expected royalty payments in 2020, approximately $40-million relate to Fosterville, of which approximately $24-million results from a new 2.75-per-cent royalty introduced by the Victorian government effective Jan. 1, 2020.
  • Sustaining capital expenditures in 2020 were targeted at $165-million to $175-million, which compared with 2019 guidance of $170-million to $190-million and below the 2019 total of $192.4-million. Reduced levels of sustaining capital expenditures are expected at both Fosterville and Macassa.
  • Growth capital expenditures were estimated at $70-million to $80-million in 2020, a reduction from current full-year 2019 guidance of $175-million to $185-million and total 2019 growth capital expenditures of $172.1-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 2019 growth capital expenditures of $48.4-million. 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, 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 (including both expensed and capitalized expenditures) in 2020 were estimated at $120-million to $140-million, the same as 2019 guidance and compared with total exploration expenditures for 2019 of $159.2-million. Of expected exploration expenditures in 2020, 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 km 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, a total of 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 5150, 5705 and 5807 levels mainly in support of drilling to infill and extend the SMC and to evaluate targets at depth along the Amalgamated break. A total of 270,000 metres of underground and surface drilling is planned at Macassa in 2020, with the primary targets being the SMC, Amalgamated break and select targets along the Main and 04 breaks.
  • Corporate G&A expense in 2020 were targeted at $40-million to $45-million, higher than 2019 guidance of $30-million to $35-million and total corporate G&A costs for 2019 of $36.3-million, mainly reflecting the expansion of corporate capabilities in both Canada and Australia in support of the company's continued growth.

Addition of Detour Gold production, unit costs and expenditures to full-year 2020 guidance

                                   REVISED FULL-YEAR 2020 GUIDANCE 
                                 (reflects addition of Detour Gold)
                               (in millions unless otherwise stated)

                                   Macassa   Detour Lake   Holt complex    Fosterville   Consolidated

Gold production (koz)              240-250       520-540        120-140        590-610    1,470-1,540
Operating cash costs/ounce
sold ($ per ounce)               $470-$490     $720-$740      $790-$810      $130-$150      $450-$470
AISC/ounce sold ($ per ounce)                                                               $820-$840
Operating cash costs ($M)                                                                   $700-$720
Royalty costs ($M)                                                                            $85-$90
Sustaining capital ($M)                                                                     $420-$430
Growth capital ($M)                                                                           $70-$80
Exploration ($M)                                                                            $150-$170
Corporate G&A ($M)                                                                            $50-$55

As a result of the acquisition of Detour Gold on Jan. 31, 2020, a number of revisions were made to the company's 2020 guidance. Consolidated production guidance for 2020 is increased from 950,000 to one million ounces to 1.47 million to 1.54 million ounces. The change reflects the addition of 520,000 to 540,000 ounces from Detour Lake, representing expected production over the 11 months of 2020 following the closing of the company's acquisition of Detour Gold on Jan. 31, 2020. Operating cash cost and AISC per ounce sold guidance is increased to $450 to $470 from $300 to $330 previously and $820 to $840 from $570 to $630, respectively. Among other revisions, sustaining capital expenditure guidance increases to $420-million to $440-million from $165-million to $175-million reflecting the addition of Detour Lake, where all capital expenditures are recorded as sustaining capital. The increase in exploration expenditure guidance reflects the company's intention to invest aggressively in exploration drilling at Detour Lake over the next year. Corporate G&A guidance increases to $50-million to $55-million from $40-million to $45-million previously due to added costs related to the addition of Detour Lake mine.

Three-year production guidance

On Dec. 18, 2019, the company released 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 production levels 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.

                      THREE-YEAR PRODUCTION GUIDANCE (1)
 
                                            Macassa                  Fosterville

2020 (koz)                                  240-250                      590-610
2021 (koz)                                  240-250                      550-600
2022 (koz)                                  320-340                      550-600
            
(1) Three-year production guidance does not include any production from 
Detour Lake, 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 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 550,000 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.

Q4 and full-year 2019 financial results and conference call details

A conference call to discuss the Q4 and 2019 results will be held by senior management on Thursday, Feb. 20, 2020, at 7:30 a.m. Eastern Time. Call-in information is provided below. The call will also be webcast and accessible on the company's website.

Date:  Thursday, Feb. 20, 2020

Conference ID:  3176967

Time:  7:30 a.m. Eastern Time

Toll-free number:  833-241-7254

International callers:  647-689-4218

Qualified persons

The technical contents related to Kirkland Lake Gold mines and properties have been reviewed and approved by Natasha Vaz, PEng, vice-president, technical services, Eric Kallio, PGeo, senior vice-president, exploration, and Ian Holland, FAusIMM, vice-president, Australian operations. Ms. Vaz, Mr. Kallio and Mr. Holland are qualified persons as defined in National Instrument 43-101 and have reviewed and approved disclosure of the technical information and data in this press release.

About Kirkland Lake Gold Ltd.

Kirkland Lake Gold is a growing gold producer operating in Canada and Australia that produced 974,615 ounces in 2019, with target production for 2020 of 1.47 million to 1.54 million ounces. The production profile of the company is anchored by three high-quality operations, including the Macassa mine and Detour Lake mine, both 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 expertise.

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