04:07:58 EDT Thu 01 Oct 2020
Enter Symbol
or Name
USA
CA



Login ID:
Password:
Save

Kirkland Lake earns $150.23-million (U.S.) in Q2

2020-07-30 07:45 ET - News Release

Mr. Tony Makuch reports

KIRKLAND LAKE GOLD REPORTS STRONG FINANCIAL AND OPERATING RESULTS IN Q2 2020

Kirkland Lake Gold Ltd. has provided the company's financial and operating results for the second quarter and first six months of 2020. The Q2 2020 results include strong growth in production, revenue, earnings and cash flow despite disruptions caused by the company's COVID-19 response. 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 developments impacting Q2 2020

  • Detour Gold acquisition: completed acquisition of Detour Gold on Jan. 31, 2020, adding a third cornerstone asset; first full quarter of results from Detour Lake in Q2 2020 (two months of results in Q1 2020);
  • COVID-19 response: implemented extensive health and safety protocols to protect workers from COVID-19 virus; transitioned Detour Lake and Macassa mines to reduced operations, suspended operations at Holt complex, suspended all non-essential work company-wide; company commenced recall of workers at Detour Lake and Macassa in early May with work forces reaching pre-COVID levels by end of Q2 2020;
  • Company reissues full-year 2020 guidance: Full-year 2020 guidance was reissued on June 30, 2020, recognizing progress achieved in ramping up business activities after impact of COVID-19 measures; previous full-year 2020 guidance was withdrawn on April 1, 2020, based on uncertainties related to COVID-19 virus and company's extensive response to the pandemic;
  • Non-core assets: On Feb. 19, 2020, the company designated its assets in the Northern Territory and the Holt complex as non-core. In March, the company discontinued test mining and processing and all exploration work in the Northern Territory with no plans to resume operations; also in March, the company placed the Holloway mine, part of the Holt complex, on care and maintenance; effective April 2, 2020, the company suspended operations at the remainder of the Holt complex as part of its COVID-19 response and while it conducted a strategic review of the assets, these operations remained suspended throughout Q2 2020; on July 16, 2020, the company announced that the suspension of operations at Holt complex will be extended until further notice, with over 220 workers being reassigned to new roles in the company's Canadian operations or being offered new roles and declining to pursue other opportunities; workers not reassigned to receive severance packages.

Highlights of Q2 2020 performance

  • Adjusted net earnings of 79 cents per share: Net earnings in Q2 2020 totalled $150.2-million (54 cents per share); adjusted net earnings in Q2 2020 totalled $219.3-million (79 cents per share), double Q2 2019 level of $109.8-million (52 cents per share) and 22 per cent higher than $179.2-million (70 cents per share) the previous quarter.
  • Revenue more than doubles: Revenue totalled $581.0-million, 107-per-cent increase from $281.3-million in Q2 2019 and 5 per cent higher than $554.7-million the previous quarter (revenue from Detour Lake of $233.0-million in Q2 2020, $179.4-million in Q1 2020, nil in Q2 2019); gold sales totalled 341,390 ounces, 61-per-cent increase from 212,091 ounces in Q2 2019 and similar to 344,586 ounces in Q1 2020; average realized gold price of $1,716 per ounce versus $1,320 per ounce in Q2 2019 and $1,586 per ounce in Q1 2020.
  • EBITDA (earnings before interest, taxes, depreciation and amortization) increases 67 per cent: EBITDA totalled $309.7-million, a 67-per-cent increase from $185.8-million in Q2 2019 and compared with $391.5-million the previous quarter.
  • Strong cash flow generation: Net cash provided by operating activities of $222.2-million and free cash flow of $94.1-million. Excluding impact of $132.6-million tax payment made in Australia in Q2 2020 as final tax instalment for 2019 tax year, net cash provided by operating activities totalled $354.8-million, with free cash flow totalling $226.7-million. Detour Lake generated $89.0-million of free cash flow in Q2 2020 (excluding transaction and restructuring costs related to acquisition).
  • Significant financial strength: Cash at June 30, 2020, totalled $537.4-million with no debt 1,345,600 shares repurchased (11,059,100 shares repurchased year to date): 1,345,600 shares repurchased in Q2 2020 for $49.9-million, with total YTD 2020 repurchases of 11,059,100 shares for $379.8-million.
  • Quarterly dividend doubled: Q1 2020 dividend doubled to 12.5 cents per share, paid on April 13, 2020, to shareholders of record on March 31, 2020 (Q2 2020 dividend of 12.5 cents per share paid on July 13, 2020, to shareholders of record on June 30, 2020).
  • Progress with key growth projects despite COVID-19: Growth capital expenditures, excluding capitalized exploration expenditures, totalled $9.4-million, of which $7.7-million related to Macassa No. 4 shaft project; Macassa No. 4 shaft advanced 617 feet during Q2 2020 despite suspension of work for approximately one month due to COVID-19, with shaft reaching depth of 2,577 feet as at June 30, 2020.
  • Significant exploration success: Total exploration expenditures totalled $25.0-million, including $2.4-million of expensed expenditures and $22.6-million of capitalized expenditures; significant exploration success achieved in Q2 2020 despite disruptions caused by COVID-19, including identification of new corridor of high-grade mineralization at Macassa near No. 4 shaft location and intersection of mineralization with attractive grades at multiple locations at Detour Lake outside of existing mineral resources.
  • Solid operating results
    • Production of 329,770 ounces, a 54-per-cent increase from 214,593 ounces in Q2 2019 and similar to 330,864 ounces the previous quarter (131,992 ounces from Detour Lake in Q2 2020, 91,555 ounces in Q1 2020);
    • Production costs totalled $141.4-million ($55.6-million excluding Detour Lake) versus $66.2-million in Q2 2019 and $161.6-million ($73.8-million excluding Detour Lake) the previous quarter;
    • Operating cash costs per ounce averaged $374 ($241 excluding Detour Lake) compared with $312 in Q2 2019 and $440 in Q1 2020 ($319 excluding Detour Lake);
    • All-in sustaining costs (AISC) per ounce sold averaged $751 ($526 excluding Detour Lake) versus $638 in Q2 2019 and $776 ($619 excluding Detour Lake) in Q1 2020.

Highlights of year to date 2020 results include:

  • Solid growth in net earnings: Net earnings totalled $353.1-million ($1.32 per share), a 65-per-cent increase from $214.3-million ($1.02 per share) for first six months of 2019 (year to date 2019);
  • Revenue close to double year to date 2019 level: Revenue for year to date 2020 totalled $1,135.7-million, 94-per-cent growth from $586.2-million for year to date 2019 (gold sales increased 54 per cent to 685,976 ounces from 445,020 ounces for the same period in 2019).
  • Strong year to date 2020 operating results
    • Production totalled 660,634 ounces, a 48-per-cent increase from 446,472 ounces for year to date 2019 (Detour Lake produced 223,547 ounces from Jan. 31, 2020, date of acquisition, to June 30, 2020).
    • Production costs totalled $303.0-million ($129.4-million excluding Detour Lake) versus $136.2-million for year to date 2019.
    • Operating cash cost per ounce sold averaged $407 ($283 excluding Detour Lake) compared with $301 for the same period in 2019.
    • AISC per ounce sold averaged $763 ($575 excluding Detour Lake) versus $597 for year to date 2019.

Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: "We achieved solid results in Q2 2020 despite significant disruptions related to COVID-19. Compared to last year's second quarter, production increased 54 per cent, our adjusted net earnings doubled and we generated strong free cash flow. Once again, Fosterville was a key driver of our results, increasing production by 10 per cent year over year and generating AISC of $273 per ounce. With year-to-date production of 314,970 ounces, Fosterville entered the second half of the year well positioned to achieve its full-year 2020 guidance of 590,000 to 610,000 ounces. Detour Lake is already making a significant contribution to our performance and to value creation. The mine generated $89.0-million of free cash flow in Q2 2020, and $167.0-million from Jan. 31, 2020, to June 30, 2020. We are expecting even better results from Detour Lake in the second half of the year, with the work force back to pre-COVID levels and mining rates ramping up, which should lead to improved grades. Detour Lake's performance has already exceeded our expectations and with the current gold price environment, the timing of the Detour Gold transaction could not have been better. At Macassa, there was a significant impact in year to date 2020 from the move to reduced operations and our COVID-19 protocols. Having said that, as with Detour Lake, work force levels at Macassa are now back to normal levels and we are positioned for stronger results in the second half of 2020, from both higher tonnes processed and improved average grades.

"Turning to exploration, despite extensive disruptions caused by COVID-19, we are having a successful year in terms of exploration results. In April, we announced encouraging drill results at Macassa, including the identification of a new, large corridor of high-grade mineralization along the Main/'04 Break close to the location of our No. 4 shaft. The corridor is at depth on the Kirkland mineral property, where there is very little previous drilling, and is open both along strike and vertically. In June, we announced that initial drill results at Detour Lake had intersected mineralization with attractive grades outside of existing mineral resources at three locations, west of the Main pit, at the 58 North zone and at the North pit location. The potential to significantly grow mineral reserves at Detour Lake was an important factor in our decision to acquire Detour Gold and the June drill results are extremely encouraging in supporting our view that there are many more ounces to be found at Detour Lake. At Fosterville, we are making good progress ramping up our drilling program, with exploration work targeting the Lower Phoenix, Cygnet, Robbin's Hill and Harrier systems. We expect to announce results to the market in the near future."

Review of financial and operating performance

 
                                       FINANCIAL AND OPERATING HIGHLIGHTS

                                                                                 Three
                                                                                months
                                                       Three months ended        ended          Six months ended
                                                                  June 30,    March 31,                  June 30, 
                                                        2020         2019         2020         2020         2019

Revenue                                             $580,975     $281,267     $554,738   $1,135,713     $586,179
Production costs                                     141,415       66,161      161,592      303,007      136,201
Earnings before income taxes                         225,282      152,432      294,525      519,807      312,021
Net earnings                                        $150,232     $104,195     $202,878     $353,110     $214,341
Basic earnings per share                              $ 0.54        $0.50        $0.79        $1.32        $1.02
Diluted earnings per share                            $ 0.54        $0.49        $0.77        $1.32        $1.01
Cash flow from operating activities                 $222,234     $179,735     $241,506     $463,740     $355,537
Cash investment on mine development and PPE         $128,155     $125,341     $110,637     $238,792     $206,655

                                                                               Three
                                                                              months
                                                      Three months ended       ended        Six months ended
                                                                 June 30,   March 31,                June 30, 
                                                        2020        2019        2020        2020        2019

Tonnes milled                                      5,863,282     369,359   4,118,105   9,981,386     788,319
Average grade (g/t Au)                                   1.8        18.4         2.6         2.1        18.0
Recovery (%)                                            95.8%       98.1%       95.9%       95.8%       98.0%
Gold produced (oz)                                   329,770     214,593     330,864     660,634     446,472
Gold sold (oz)                                       341,390     212,091     344,586     685,976     445,020
Average realized price ($/oz sold)                    $1,716      $1,320      $1,586      $1,651      $1,313
Operating cash costs per ounce ($/oz sold)              $374        $312        $440        $407        $301
AISC ($/oz sold)                                        $751        $638        $776        $763        $597
Adjusted net earnings                               $219,345    $109,814    $179,169    $398,514    $223,578
Adjusted net earnings per share                        $0.79       $0.52       $0.70       $1.49       $1.06
Free cash flow                                       $94,079     $54,394    $130,869    $224,948    $148,882


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

                                                                           Three
                                                                          months
                                              Three months ended           ended                Six months ended
                                                         June 30,       March 31,                        June 30, 
                                            2020            2019            2020            2020            2019


Revenue                                 $580,975        $281,267        $554,738      $1,135,713        $586,179
Production costs                        (141,415)        (66,161)       (161,592)       (303,007)       (136,201)
Royalty expense                          (19,258)         (6,716)        (21,249)        (40,507)        (15,000)
Depletion and depreciation               (82,586)        (33,064)        (92,839)       (175,425)        (74,364)
Earnings from mine operations            337,716         175,326         279,058         616,774         360,614
Expenses
General and administrative               (20,137)        (12,131)        (12,562)        (32,699)        (24,230)
Transaction costs                              0               -         (33,838)        (33,838)              -
Exploration                               (2,384)         (6,214)         (5,931)         (8,315)        (18,236)
Care and maintenance                      (9,018)           (215)         (2,890)        (11,908)           (411)
Earnings from operations                 306,177         156,766         223,837         530,014         317,737
Finance and other items
Other income (loss), net                 (80,164)         (5,384)         72,205          (7,959)         (7,501)
Finance income                             1,119           1,357           2,596           3,715           2,795
Finance costs                             (1,850)           (307)         (4,113)         (5,963)         (1,010)

Earnings before income taxes             225,282         152,432         294,525         519,807         312,021
Current income tax expense               (59,020)        (35,291)        (70,130)       (129,150)        (76,212)
Deferred income tax expense              (16,030)        (12,946)        (21,517)        (37,547)        (21,468)
Net earnings                            $150,232        $104,195        $202,878        $353,110        $214,341
Basic earnings per share                   $0.54           $0.50           $0.79           $1.32           $1.02
Diluted earnings per share                 $0.54           $0.49           $0.77           $1.32           $1.01

Revenue

Revenue in Q2 2020 totalled $581.0-million, an increase of $299.7-million, or 107 per cent, from Q2 2019, with Detour Lake contributing $233.0-million of the increase. The addition of revenue from Detour Lake more than offset the impact of suspending operations at Holt complex effective April 2, 2020, which resulted in revenue at Holt complex of only $4.6-million in Q2 2020 versus $31.0-million for the same period in 2019. Of the growth in revenue versus Q2 2019, $171-million related to a 61-per-cent increase in sales volumes (341,390 ounces in Q2 2020 versus 212,091 ounces in Q2 2019), while $135-million reflected a $396-per-ounce increase in the average realized gold price ($1,716 per ounce in Q2 2020 versus $1,320 per ounce in Q2 2019). Revenue in Q2 2020 was $26.3-million or 5 per cent higher than $554.7-million the previous quarter. The increase reflected a $44-million favourable impact from an 8-per-cent increase in the average realized gold price, from $1,586 per ounce in Q1 2020, which more than offset a $5.0-million reduction in revenue resulting from slightly lower gold sales (341,390 ounces versus 344,586 ounces the previous quarter). The reduction in gold sales from Q1 2020 largely reflected the suspension of operations at Holt complex effective April 2, 2020, the impact of reduced operations at Macassa on gold production and sales for the quarter, as well as the sale in Q1 2020 of 20,855 ounces of gold that was held in inventory at the closing of the Detour Gold acquisition on Jan. 31, 2020. These factors were partially offset by an additional month of results at Detour in Q2 2020 versus the previous quarter. Revenue at Detour Lake of $233.0-million in Q2 2020 increased from $179.4-million in Q1 2020, while revenue at Holt complex of $4.6-million in Q2 2020 compared with $47.4-million the previous quarter.

For year to date 2020, revenue totalled $1,135.7-million, an increase of $549.5-million or 94 per cent from $586.2-million in year to date 2019. The increase in revenue from year to date 2019 reflected a 54-per-cent increase in gold sales, to 685,976 ounces, which had a $316-million favourable impact on revenue compared with year to date 2019. The average realized gold price in year to date 2020 was $1,651 per ounce, a $338 or 26-per-cent increase from $1,313 per ounce in year to date 2019. The increase in the average realized gold price contributed $232-million of the revenue growth in year to date 2020 versus year to date 2019. Revenue at Detour Lake for the five months ended June 30, 2020, accounted for $412.4-million or 36 per cent of the company's total revenue for year to date 2020. Revenue from Holt complex in year to date 2020 totalled $52.0-million versus $74.9-million in year to date 2019, reflecting the suspension of operations effective April 2, 2020.

Net earnings and earnings per share

Net earnings in Q2 2020 totalled $150.2-million (54 cents per share) compared with $104.2-million (50 cents per share) in Q2 2019. The increase in net earnings and net earnings per share mainly reflected strong revenue growth compared with the same period in 2019. The 107-per-cent increase in revenue, to $581.0-million, was driven by both higher gold sales, largely reflecting the contribution from Detour Lake mine in Q2 2020, as well as an improvement in the average realized gold price. Also contributing to higher net earnings and earnings per share compared with Q2 2019 were lower expensed exploration and evaluation costs, which largely reflected disruptions to the company's exploration programs in Q2 2020 due to the company's COVID-19 response, including the suspension of all non-essential work.

Partially offsetting these favourable factors contributing to earnings growth were the impact of higher production costs and depletion and depreciation expense, both of which mainly reflected the inclusion of Detour Lake in the company's results effective Jan. 31, 2020. In addition, there was a significant unfavourable impact from non-cash, foreign exchange losses in Q2 2020 versus Q2 2019. During Q2 2020, both the Canadian and Australian dollars strengthened against the U.S. dollar (see the external performance drivers section in the MD&A for the three and six months ended June 30, 2020, for more information), which resulted in non-cash, foreign exchange losses of $72.8-million (pretax) for the quarter. The non-cash, foreign exchanges losses accounted for an 18-cent-per-share reduction in Q2 2020 net earnings per share compared with Q2 2019 from other loss. Net earnings and net earnings per share in Q2 2020 were also reduced by a $12.6-million pretax increase in royalty expense, which resulted mainly from a $6.9-million impact from the new 2.75-per-cent royalty imposed by the Victorian government on revenues from Fosterville effective Jan. 1, 2020, and $4.5-million of royalty expense at Detour Lake mine. Higher corporate general and administrative costs, reflecting the company's continued growth, and increased care and maintenance expense related to the suspension of operation in the Northern Territory and at Holt complex, also reduced net earnings and net earnings per share compared with Q2 2019.

In addition to the level of expenditures in Q2 2020 versus Q2 2019, higher average shares outstanding also had an unfavourable impact on the change in earnings per share, with average shares outstanding in Q2 2020 increasing 32 per cent, to 277.1 million, from 210.1 million in Q2 2019. The increase in average shares outstanding related to the 77,217,129 shares issued as consideration for the acquisition of Detour Gold on Jan. 31, 2020.

Net earnings in Q2 2020 of $150.2-million (54 cents per share) compared with $202.9-million (79 cents per share) the previous quarter. Non-cash, foreign exchange gains and losses had a significant impact on the change in net earnings and net earnings per share compared with Q1 2020, accounting for the 38-cent-per-share reduction in net earnings per share from other income (loss) quarter over quarter. This unfavourable impact resulted from the company's $72.8-million of non-cash, foreign exchange losses in Q2 2020, which compared with non-cash, foreign exchange gains in Q1 2020 of $72.9-million, reflecting a significant weakening of the Canadian and Australian dollars against the U.S. dollar during the first three months of the year. Other factors reducing net earnings and net earnings per share compared with Q1 2020 were higher corporate G&A costs, increased care and maintenance expense, due to higher costs in Northern Territory and the suspension of operations at Holt complex in Q2 2020, as well as an increase in the effective tax rate (33.3 per cent in Q2 2020 versus 31.1 per cent the previous quarter) with the increase reflecting the tax benefit of non-cash, foreign exchange loss recorded at lower effective tax rate in Canada.

Partially offsetting these factors were the favourable impact of a 5-per-cent increase in revenue, resulting from an 8-per-cent improvement in the average realized gold price quarter over quarter, $33.8-million of transaction costs in Q1 2020 related to the Detour Gold acquisition, and lower production costs and depletion and depreciation expense, mainly reflecting the suspension of operations at the Holt complex effective April 2, 2020.

The comparison of net earnings per share in Q2 2020 versus Q1 2020 was also affected by higher average shares outstanding in the second quarter (277.1 million versus 257.4 million the previous quarter), with the increase reflecting the addition to shares outstanding of the 77,217,129 shares issued as consideration for the acquisition of Detour Gold for the full quarter in Q2 2020 versus for only two months in Q1 2020.

Net earnings for year to date 2020 totalled $353.1-million ($1.32 per basic share), an increase of $138.8-million or 65 per cent from $214.3-million ($1.02 per basic share) for year to date 2019. The increase as compared with year to date 2019 mainly reflected a 94-per-cent increase in revenue, resulting from strong growth in gold sales and a higher average realized gold price, as well as lower expensed exploration and evaluation costs due to disruptions to the company's exploration programs in year to date 2020 caused by COVID-19. These factors were partially offset by higher production costs and increased expenses for depreciation and depletion, mainly reflecting the addition of Detour Lake mine on Jan. 31, 2020, the impact of $33.8-million of transaction costs related to the Detour Gold acquisition in year to date 2020, higher royalty expense, resulting from the Victorian government's new 2.75-per-cent royalty on revenue at Fosterville and royalties paid by Detour Lake, as well as increased corporate G&A and higher care and maintenance expense. The increase in care and maintenance expense reflected the discontinuation of test production and exploration work in the Northern Territory in March, 2020, and the suspension of operations at the Holt complex effective April 2, 2020.

In addition, net earnings per share were reduced year over year by an increase in average shares outstanding, to 267.2 million from 210.1 million, due to the issuance of 77,217,129 shares as consideration for the acquisition of Detour Gold on Jan. 31, 2020.

Review of operating mines

Macassa mine

Production at Macassa in Q2 2020 totalled 41,865 ounces compared with production of 49,196 ounces in Q2 2019. Production in Q2 2020 resulted from processing 77,624 tonnes at an average grade of 17.2 grams per tonne and average recoveries of 97.6 per cent, which compared with 72,681 tonnes processed in Q2 2019 at an average grade of 21.5 g/t and average recoveries of 97.9 per cent. The change in production from Q2 2019 largely reflected a lower average grade and the impact of reduced operations due to COVID-19, which resulted in lower than planned tonnes processed in Q2 2020. Production in Q2 2020 compared with production of 50,861 ounces the previous quarter when the mine processed 82,256 tonnes at an average grade of 19.7 g/t and average recoveries of 97.7 per cent. The reduction in tonnes processed compared with Q1 2020 largely reflected a greater impact from the transition to reduced operations due to COVID-19 in Q2 2020 compared with the previous quarter.

Production costs in Q2 2020 totalled $24.4-million (excluding $3.3-million related to the company's COVID-19 response) versus $24.6-million in Q2 2019 and $26.4-million the previous quarter. Operating cash costs per ounce sold averaged $547 in Q2 2020 versus $446 in Q2 2019 and $536 in Q1 2020. The increase in operating cash costs per ounce sold compared with both prior periods largely reflected lower sales volumes in Q2 2020 (44,328 ounces versus sales of 55,010 ounces in Q2 2019 and 50,765 ounces the previous quarter) largely reflecting the impact of reduced operations due to COVID-19 during Q2 2020. AISC per ounce sold averaged $841 in Q2 2020 compared with $788 in Q1 2019 and $850 in Q1 2020, with lower sales mainly accounting for the increase from Q2 2019. Sustaining capital expenditures totalled $10.5-million ($236 per ounce sold) in Q2 2020 versus $16.6-million ($302 per ounce sold) in Q2 2019 and $14.4-million ($297 per ounce sold) the previous quarter. The reduction in sustaining capital expenditures compared with both prior periods largely reflected disruptions to projects caused by COVID-19 as well as lower levels of capital development and a deferral of equipment purchases.

Production at Macassa in year to date 2020 totalled 92,726 ounces, which resulted from processing 159,880 tonnes at an average grade of 18.5 g/t and at average recoveries of 97.6 per cent. Year to date 2020 production compared with production of 121,972 ounces for year to date 2019, which resulted from processing 150,671 tonnes at an average grade of 25.7 g/t and at average recoveries of 98.1 per cent. Year to date 2020 production was below expected levels largely reflecting lower than planned tonnes processed as a result of the transition to reduced operations due to COVID-19, as well as lower than expected grades. Both tonnes processed and average grades are expected to increase in the second half of 2020.

Production costs for year to date 2020 totalled $50.9-million (excluding $3.3-million related to the company's COVID-19 response) versus $47.0-million for year to date 2019. Operating cash costs per ounce sold averaged $541 compared with $384 for the same period in 2019 with the increase largely reflecting lower sales volumes due to the impact of COVID-19. AISC per ounce sold averaged $846 for year to date 2020 versus $686 a year earlier. The change from year to date 2019 resulted from lower sales volumes and higher operating costs. Sustaining capital expenditures totalled $24.9-million ($262 per ounce sold) in year to date 2020 versus $32.1-million ($263 per ounce sold) in year to date 2019 with disruptions to projects caused by COVID-19, deferred equipment procurement and reduced capital development largely accounting for the reduction.

Growth projects: Growth capital expenditures at Macassa for year to date 2020 totalled $21.7-million ($5.9-million in Q2 2020). Of total growth expenditures for year to date 2020, $18.8-million related to the No. 4 shaft project. Sinking of the No. 4 shaft was suspended for approximately one month, with this work resuming near the end of April. During Q2 2020, the shaft advanced 617 feet and had reached a depth of 2,577 feet as of June 30, 2020. On May 6, 2020, the company announced that, based on progress to date and the results of a review of the No. 4 shaft project earlier in the year, the project scope and schedule for the No. 4 shaft were revised. The project is now expected to be completed in one phase, to a depth of 6,400 feet, with project completion targeted for late 2022, over one year sooner than the initial project schedule. The capital cost for the project is under review and is expected to be less than the existing estimate of $320-million.

COVID-19 update: The Macassa mine began operating with a reduced work force in March due to concerns over the COVID-19 virus. Based on high levels of absenteeism caused in part by the introduction of travel restrictions between Ontario and Quebec, the mine was placed on reduced operations effective April 2, 2020, until April 30, 2020. Essential work that continued during this period related mainly to production, though at reduced levels, as well as water and environmental management. All non-essential activities were suspended, including exploration drilling, sinking work on the No. 4 shaft project, work on a new surface ramp and mill upgrades. Sinking of the No. 4 shaft resumed near the end of April. During the period of reduced operations, Macassa operated with approximately 65 per cent of its normal work force. In early May, the company began a gradual ramp-up of operations at Macassa, with mine's work force returning to pre-COVID levels by late June. The company's extensive COVID-19 health and safety protocols remain in effect and are expected to be followed at Macassa for the foreseeable future.

Detour Lake mine

Production at Detour Lake in Q2 2020 totalled 131,992 ounces, which involved processing 5,655,992 tonnes at an average grade of 0.79 g/t at average recoveries of 91.7 per cent. Production in Q2 2020 compared with production for the two months from Jan. 31, 2020, the date the acquisition of Detour Gold was completed, to March 31, 2020, of 91,555 ounces, which resulted from processing 3,708,022 tonnes at an average grade of 0.84 g/t and at average recoveries of 90.9 per cent. Tonnes processed in Q2 2020 averaged 62,154 tonnes per day, largely unchanged from the average in February and March. The lower average grade in Q2 2020 compared with the two months ended March 31, 2020, was mainly due to feeding lower grade stockpiled material to the mill during reduced operations. Production at Detour Lake for the five months ended June 30, 2020, totalled 223,547 ounces, which resulted from processing 9,364,014 tonnes at an average grade of 0.81 g/t and at average recoveries of 91.4 per cent.

Production costs at Detour Lake mine in Q2 2020 totalled $78.1-million, excluding $7.7-million of COVID-19 related costs. Operating cash costs per ounce sold averaged $573 in Q2 2020, better than the company's reissued guidance range of $610 to $630 reflecting lower mining rates deferred during the period of reduced operations due to COVID-19, as well as the impact of lower fuel prices. AISC per ounce sold averaged $1,090, in line with expected levels. Sustaining capital expenditures at Detour Lake in Q2 2020 totalled $65.8-million or $483 per ounce sold. All capital expenditures at Detour Lake mine were reported as sustaining capital expenditures during Q2 2020.

Production at Detour Lake for the five months ended June 30, 2020, totalled 223,547 ounces, which resulted from processing 9,364,014 tonnes at an average grade of 0.81 g/t and at average recoveries of 91.4 per cent. Production costs for the five months ended June 30 totalled $165.9-million, excluding the $7.7-million of non-recurring COVID-19-related costs. Operating cash costs per ounce sold averaged $628 per ounce sold, while AISC per ounce sold averaged $1,098. The mine's sustaining capital expenditures totalled $108.2-million ($439 per ounce sold).

COVID-19 update: The company transitioned Detour Lake mine to reduced operations in response to the COVID-19 pandemic effective March 23, 2020. Continuing activities at the mine include mill processing of reduced feed from the open pit and stockpiled ore, management of water levels during the spring runoff and environmental management activities. During this time, the mine operated with one shovel and eight trucks, which compares with normalized operations of five shovels and approximately 34 trucks. All personnel not essential for the performance of essential activities were off work until April 30, 2020. Approximately 300 workers were on site during the period of reduced operations, approximately 30 per cent of the normal work force during full operations. In addition to company-wide health and safety protocols, a number of additional measures applicable to a remote camp operation have been added to Detour Lake's efforts to protect workers, including processes for the assessment, isolation and ambulatory evacuation of employees showing any kind of symptoms and increased food and camp accommodation hygiene safety. In early May, the company commenced a gradual ramp-up of operations at Detour Lake with the mine achieving pre-COVID work force levels in June, 2020. The company's extensive list of COVID-19 health and safety protocols remain in effect and are expected to be followed for the foreseeable future.

Holt mine complex

On Feb. 19, 2020, the company designated the Holt complex as a non-core asset with plans to review options for maximizing value. In mid-March, the company placed the Holloway mine on care and maintenance, with no plans for a future resumption of operations. On April 1, 2020, the company announced that operations were being suspended at the Taylor mine and Holt mine and mill as part of the company's response to the COVID-19 pandemic. At the beginning of May, 2020, the company further extended the suspension of operations at the Holt and Taylor mines and Holt mill reflecting continuing developments related to the COVID-19 virus and while the company continued the strategic review of the Holt complex assets involving the consideration of all options for the maximizing of value.

Subsequent to the end of Q2 2020, on July 16, 2020, the company announced that the suspension of operations at the Holt complex was being extended until further notice. As a result, employees at the complex have either been reassigned to new roles at other locations within the company's Canadian operations, or were provided severance packages. As of July 16, 2020, more than 220 workers from Holt complex had either assumed new roles in the company or had been offered new positions. Cost related to the further suspension of operations at Holt complex, and the termination of workers is estimated at approximately $7.4-million, which is expected to be included in the company's Q3 2020 financial results. As a result of the suspension of operations throughout Q2 2020, Holt complex produced only 807 ounces, which resulted from processing stockpiled material. Q2 2020 production compared with production of 24,696 ounces in Q2 2019 and 28,584 ounces the previous quarter. Production costs in Q2 2020 totalled $5.2-million (excluding $2.4-million of COVID-19-related costs), while operating cash costs per ounce sold averaged $1,373 and AISC per ounce sold averaged $1,717. Sustaining capital expenditures during Q2 2020 were $0.4-million ($122 per ounce sold) versus sustaining capital expenditures of $10.2-million ($434 per ounce sold) in Q2 2019 and $8.6-million ($306 per ounce sold) the previous quarter.

Year to date 2020, the Holt complex produced 29,391 ounces, which compared with production of 55,355 ounces for the same period in 2019. Production costs for year to date 2020 totalled $33.6-million (excluding $2.4-million of COVID-19-related costs) versus $51.9-million for year to date 2019. Operating cash costs per ounce sold averaged $1,000 in year to date 2020, while AISC per ounce sold averaged $1,406. Sustaining capital expenditures for year to date 2020 totalled $9.1-million ($273 per ounce sold) compared with $17.8-million ($311 per ounce sold) for year to date 2019.

Fosterville mine

The Fosterville mine produced 155,106 ounces in Q2 2020 based on processing 123,473 tonnes at an average grade of 39.5 g/t and average mill recoveries of 99.0 per cent. Q2 2020 production increased 10 per cent from 140,701 ounces in Q2 2019, when the mine processed 111,280 tonnes at an average grade of 39.9 g/t and average recoveries of 98.7 per cent. The increase in production compared with the same period in 2019 resulted from higher tonnes processed due to a greater number of mining fronts in the Lower Phoenix system. Q2 2020 production compared with production of 159,864 ounces the previous quarter when the mine recorded an average quarterly grade of 42.4 g/t at average recoveries of 98.8 per cent. The higher average grade in Q1 2020 reflected mine sequencing in the Lower Phoenix system.

Production costs were $20.3-million in Q2 2020 versus $16.0-million in Q2 2019 and $18.9-million the previous quarter. Operating cash costs per ounce sold averaged $129, similar to $120 in Q2 2019 and $126 the previous quarter. The change compared with Q2 2019 reflected increased mining rates and higher levels of operating development in Q2 2020, the impact of which was mostly offset by higher sales volumes in Q2 2020. AISC per ounce sold averaged $273 versus $318 in Q2 2019 and $313 in Q1 2020. The change from both prior periods resulted from a reduction in sustaining capital expenditures, with these expenditures being lower than planned in Q2 2020 due to reduced capital development and the disruptions to project work caused by the impact of COVID-19 protocols. Sustaining capital expenditures totalled $10.8-million ($69 per ounce sold), versus $22.9-million ($172 per ounce sold in Q2 2019) and $16.1-million ($113 per ounce sold) in Q1 2020.

Commencing Jan. 1, 2020, Fosterville mine began paying a new 2.75-per-cent royalty introduced by the Victorian government. The new royalty contributed $6.9-million or $44 per ounce sold to AISC per ounce sold in Q2 2020 ($7.2-million or $47 per ounce sold in Q1 2020). Excluding the impact of the new royalty in both Q2 and Q1 2020, AISC per ounce sold in Q2 2020 was $229, 28 per cent better than $318 in Q2 2019 and a 14-per-cent improvement from $266 per ounce sold the previous quarter.

Production at Fosterville for year to date 2020 totalled 314,970 ounces, a 17-per-cent increase from 269,145 ounces for year to date 2019. Year to date 2020 production resulted from processing 242,174 tonnes at an average grade of 40.9 g/t and average recoveries of 98.9 per cent. The increase from year to date 2019 was mainly due to a 21-per-cent improvement in the average grade, to 40.9 g/t for year to date 2020, largely reflecting higher levels of production and increased grades from the Swan zone. Mill throughput in year to date 2020 averaged 1,331 tonnes per day compared with 1,390 tonnes per day for year to date 2019.

Production costs were $39.2-million for year to date 2020 versus $37.3-million for the same period in 2019. Operating cash costs per ounce sold averaged $127, 4 per cent better than $132 in year to date 2019. The improvement mainly resulted from higher sales volumes, reflecting a 21-per-cent year-over-year improvement in the average grade, which more than offset the impact of higher levels of operating development in year to date 2020 compared with year to date 2019. AISC per ounce sold averaged $293, a 7-per-cent improvement from $316 for year to date 2019. The improvement reflected higher sales volumes and lower sustaining capital expenditures in year to date 2020. Sustaining capital expenditures totalled $26.9-million ($87 per ounce sold), versus $41.9-million ($158 per ounce sold) for year to date 2019, with the reduction in year to date 2020 largely due to disruptions resulting from the company's COVID-19 protocols, including the suspension of projects and reduced capital development.

Growth projects: Growth capital expenditures at Fosterville for year to date 2020, excluding capitalized exploration, totalled $9.6-million ($3.5-million in Q2 2020). Work during the first half of the year focused on construction of a new transformer station, completion of the mine's new ventilation system and new refinery and gold room, as well as advancement of the mine's paste fill expansion project and new Aster plant.

COVID-19 update: Fosterville mine continued to operate throughout Q2 2020, with production largely achieving target levels. The company's COVID-19 health and safety protocols were implemented at Fosterville in March, 2020, including remote work, social distancing, increased cleaning and hygiene, and the suspension of all non-essential work, including work on key projects and exploration drilling, as well as visits to site. Work on key projects and exploration drilling resumed in April, 2020, with the ramp-up of exploration work to continue through the end of Q3 2020. The company's extensive list of COVID-19 health and safety protocols remain in effect and are expected to be followed for the foreseeable future.

Northern Territory

The Cosmo mine and Union Reefs mill were placed on care and maintenance effective June 30, 2017. Following this move, the company undertook extensive exploration programs at Cosmo, Union Reefs and, more recently, other selected targets. In addition, the company's advanced exploration work at both the Cosmo mine and Union Reefs mill, which resulted in the commencement of test mining of mineralization in the Lantern deposit at Cosmo and test processing of this material at the Union Reefs mill in October, 2019.

On Feb. 19, 2020, the company announced that the Northern Territory assets had been designated as non-core with the company planning to consider strategic options for maximizing the value of these assets. In March, 2020, the company announced the suspension of test mining and processing in the Northern Territory and also the suspension of exploration activities. The decision reflected results of the test production to date, as well as other priorities within the company. A small work force remains in the Northern Territory to complete continuing rehabilitation work. During Q2 2020, $6.2-million of care and maintenance costs were recorded at the company's Northern Territory assets ($9.1-million for year to date 2020) with $1.5-million of expensed and capitalized exploration expenditures also being recorded ($17.3-million for year to date 2020).

Performance against guidance

On April 1, 2020, the company withdrew its 2020 guidance, which had originally been released on Dec. 18, 2019, and was updated on Feb. 19, 2020, to reflect the acquisition of Detour Gold. The company's 2020 guidance was withdrawn due to uncertainties related to the COVID-19 pandemic. On May 6, 2020, the company also withdrew its three-year production guidance while it assessed the long-term effects of COVID-19 and while it works to incorporate Detour Lake into the company's long-term business plans.

On June 30, 2020, the company reissued guidance for 2020 recognizing the progress achieved in ramping up business activities that had been impacted by the company's COVID-19 response. Included among the reissued guidance was production of 1.35 million to 1.4 million ounces, approximately 90 per cent of the withdrawn 2020 production guidance, as well as improved unit costs, lower expected sustaining capita1l expenditures and higher target growth capital expenditures resulting from new growth projects at Detour Lake mine. Changes from previous guidance were largely driven by the removal of production, unit cost and expenditure guidance for the Holt complex as of April 2, 2020, the date that operations were suspended at the complex. The Holt complex's results to April 2, 2020, are included in the company's reissued 2020 guidance.

                                             REISSUED 2020 GUIDANCE
                                      ($ millions unless otherwise stated)

                                               Macassa   Detour Lake   Holt complex   Fosterville   Consolidated 

Gold production (koz)                          210-220       520-540             29       590-610    1,350-1,400
Operating cash costs/ounce sold ($/oz) (1)   $490-$510     $610-$630           $955     $130-$150      $410-$430 
AISC/ounce sold ($/oz) (1)                                                                             $790-$810 
Operating cash costs ($M) (1)                                                                          $560-$580 
Royalty costs ($M)                                                                                       $80-$85  
Sustaining capital ($M)                                                                                $390-$400 
Growth capital ($M) (2)                                                                                 $95-$105  
Exploration ($M) (3) (4)                                                                               $130-$150 
Corporate G&A ($M) (5)                                                                                   $50-$55  

(1) COVID-19-related costs of $13.4-million for year to date 2020 are excluded from operating cash costs, AISC 
    and capital expenditures in reissued 2020 guidance.

(2) Capital expenditures exclude capitalized depreciation.
   
(3) 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. Also includes capital expenditures for the development of exploration drifts.
   
(4) Reissued exploration expenditure guidance includes $17.3-million related the Northern Territory assets (no 
    production, costs or expenditures related to the Northern Territory were included in the previous 2020 
    guidance).
   
(5) Includes general and administrative costs and severance payments. Excludes share-based payment expense.
 

                                           YEAR TO DATE 2020 RESULTS
                                      ($ millions unless otherwise stated)
 
                                             Macassa   Detour Lake   Holt complex   Fosterville  Consolidated 

Gold production (koz)                         92,726       223,547         29,391       314,970       660,634   
Operating cash costs/ounce sold ($/oz) (1)       $541         $628         $1,000          $127          $407    
AISC/ounce sold ($/oz) (1)                                                                               $763    
Operating cash costs ($M) (1)                                                                          $279.2   
Royalty costs ($M)                                                                                      $40.5   
Sustaining capital ($M)                                                                                $170.2   
Growth capital ($M) (2)                                                                                 $31.3   
Exploration ($M) (3) (4)                                                                                $59.6   
Corporate G&A ($M) (5)                                                                                  $27.5   

(1) COVID-19-related costs of $13.4-million for year to date 2020 are excluded from operating cash costs, AISC 
    and capital expenditures in reissued 2020 guidance.

(2) Capital expenditures exclude capitalized depreciation.
   
(3) 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. Also includes capital expenditures for the development of exploration drifts.
   
(4) Reissued exploration expenditure guidance includes $17.3-million related the Northern Territory assets (no 
    production, costs or expenditures related to the Northern Territory were included in the previous 2020 
    guidance).
   
(5) Includes general and administrative costs and severance payments. Excludes share-based payment expense.

Gold production for year to date 2020 totalled 660,634 ounces, representing 48 per cent of the mid-range of the company's reissued 2020 production guidance. Entering the second half of the year, the company was well positioned to achieve the reissued full-year 2020 guidance with production expected to increase at Macassa and Detour Lake, both of which were transitioned to reduced operations during the first half of the year as part of the company's COVID-19 response. Both mines began recalling workers off due to the transition to reduced operations in early May and, as at June 30, 2020, work force levels at both Macassa and Detour had returned to pre-COVID levels. Production at Macassa totalled 92,726 ounces in year to date 2020, which compares with full-year guidance of 210,000 to 220,000 ounces. Production at Macassa in the second half of the year is expected to increase reflecting higher tonnes processed as mining rates ramp up, as well as an improvement in the average grade from 18.5 g/t in the first half of the year. Production at Detour Lake for year to date 2020 totalled 223,547 ounces, representing output for the five-month period from Jan. 31, 2020, to June 30, 2020. The company will benefit from a full six months of results from Detour Lake in the second half of 2020, with grades expected to improve as mining rates increase from year to date 2020 levels. During year to date 2020, a significant proportion of mill feed at Detour Lake came from stockpiles, where grades are typically lower than from mine production. Detour Lake continues to target full-year production of 520,000 to 540,000 ounces. Production at Fosterville for year to date 2020 totalled 314,970 ounces, with the mine on track to meet its full-year production guidance of 590,000 to 610,000 ounces.

Production costs for year to date 2020 totalled $303.0-million. Operating cash costs for the first half of the year totalled $279.2-million, in line with target levels.

Operating cash costs per ounce sold for year to date 2020 averaged $407, better than the reissued full-year 2020 guidance of $410 to $430. Entering the second half of the year, both Fosterville and Detour Lake were tracking well against reissued full-year guidance. Fosterville's operating cash costs per ounce sold for year to date 2020 averaged $127, which compared favourably with full-year guidance of $130 to $150. At Detour Lake, operating cash costs per ounce sold averaged $628 in year to date 2020, in line with guidance of $610 to $630. Macassa's operating cash costs per ounce sold averaged $541 versus guidance of $490 to $510. Operating cash costs per ounce sold at Macassa are expected to improve in the second half of 2020 as averaged grades and production levels increase.

AISC per ounce sold for year to date 2020 averaged $763, better than full-year 2020 guidance of $790 to $810, largely reflecting lower than expected levels of sustaining capital expenditures during year to date 2020.

Royalty costs for year to date 2020 totalled $40.5-million, in line with the company's reissued guidance of $80-million to $85-million.

Sustaining capital expenditures for year to date 2020 totalled $170.2-million, excluding capitalized depreciation, which compared with full-year 2020 guidance of $390-million to $400-million. The level of sustaining capital expenditures during year to date 2020 was lower than planned due largely to disruptions caused by the company's COVID-19 response, which included the suspension of a number of projects and reduced work in areas such as capital development. Sustaining capital expenditures are expected to increase during the second half of the year.

Growth capital expenditures totalled $31.3-million for year to date 2020 (excluding capitalized exploration), which compared with reissued full-year 2020 guidance of $95-million to $105-million. The level of growth capital expenditures in year to date 2020 was significantly impacted by disruptions caused to COVID-19, with work on most major projects suspended for at least one month. Of total growth capital expenditures for year to date 2020, Macassa accounted for $21.7-million, with $18.8-million relating to the No. 4 shaft project. Fosterville accounted for the remaining $9.6-million of growth capital expenditures in year to date 2020, with work largely focused on construction of a new transformer station, completion of the mine's new ventilation system and new refinery and gold room, as well as advancement of the mine's paste fill expansion project and new Aster plant.

Exploration and evaluation expenditures for year to date 2020 totalled $59.6-million (including capitalized exploration), which compared with reissued full-year 2020 guidance of $130-million to $150-million. The company's exploration programs during year to date 2020 were suspended near the end of March as part of its COVID-19 response. The resumption of work on exploration programs commenced in April with the ramp-up of drilling activities to continue through the end of the third quarter of 2020. Exploration expenditures are expected to increase in the second half of the year.

Of total exploration expenditures in year to date 2020, approximately $42.9-million were in Australia, including $25.6-million at Fosterville and $17.3-million in the Northern Territory, almost all of which was incurred in Q1 2020 prior to the company decision to discontinue all test production and exploration work at the Northern Territory assets. Drilling at Fosterville focused on underground and surface drilling at the mine's key exploration targets, including down-plunge at the Lower Phoenix system, Cygnet, Robbin's Hill and Harrier. In Canada, exploration expenditures for year to date 2020 totalled $16.7-million, with $13.7-million being incurred at Macassa, where the company is drilling to further extend the SMC, as well as to explore high-potential targets along the Main/'04 break and the Amalgamated break. Remaining exploration expenditures in Canada were at Detour Lake, where the company achieved encouraging results with initial drilling, including intersecting high-grade mineralization outside of existing mineral resources around the Main pit and the North pit and at the 58 North target.

Corporate G&A expense for year to date 2020 totalled $27.5-million, in line with reissued full-year 2020 guidance of $50-million to $55-million.

Q2 2020 financial results and conference call details

A conference call to discuss the Q2 2020 results will be held by senior management today, Thursday, July 30, 2020, at 2 p.m. ET. Call-in information is provided below. The call will also be webcast and accessible on the company's website.

Date:  Thursday, July 30, 2020

Conference ID:  3582178

Time:  2 p.m. ET

Toll-free number:  833-968-2183

International callers:  825-312-2102

Webcast URL:  available on-line

Qualified persons

The technical contents related to Kirkland Lake Gold mines and properties, have been reviewed and approved by Natasha Vaz, PEng, senior vice-president, technical services and innovation, and Eric Kallio, PGeo, senior vice-president, exploration. Ms. Vaz and Mr. Kallio 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. 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.

We seek Safe Harbor.

© 2020 Canjex Publishing Ltd. All rights reserved.