Kirkland Lake Gold Inc.
TSX : KGI
AIM : KGI

Kirkland Lake Gold Inc.

July 09, 2014 02:00 ET

Kirkland Lake Gold Inc.: Fiscal 2014 Full Year Financial and Operational Results

KIRKLAND LAKE, ONTARIO--(Marketwired - July 9, 2014) - Kirkland Lake Gold Inc. (the "Company") (TSX:KGI)(AIM:KGI), an operating and exploration gold mining company, today announces operational and financial results for the fourth quarter (February, March, April 2014) and fiscal year 2014. All figures in the release are stated in Canadian dollars unless explicitly stated.

Mr. Harry Dobson, Chairman commented, "Fiscal year 2014 was a year of change for the Company. Following the appointment of George Ogilvie, P. Eng into the Chief Executive role, operational changes were made immediately. A new lower tonnage, higher grade mine plan was put in place along with a concurrent cost-cutting program to reduce the rate of cash burn as well as to lower the Company's cost per ounce on a sustainable basis. The effects of these changes were demonstrated in the fourth quarter results, where All-In Sustaining Cash costs (AISC's) were further reduced to CAD$1,776 per ounce, with AISC's for just the month of April lowered to CAD$1,466 per ounce. The average sales price realized in April was CAD$1,422 per ounce, so the Company is now operating at very close to breakeven rate and expects at current gold prices to become consistently profitable and cash flow positive during the second fiscal quarter 2015. Grades have also significantly improved with a calendar year to date grade of 0.39 ounces per ton (opt) (13.3 grams per tonne (gpt), and fiscal year to date grades of 0.42 opt (14.4 gpt) as announced on June 24. The Company is on track to meets its fiscal year 2015 guidance of 140,000 - 155,000 ounces and we are seeing further reductions in the AICC/AISC for the year so far. Fiscal 2015 is poised to be a turnaround year for the Company as production and grades increase, further cost reductions are realized, and as we advance our near surface ounces to a preliminary economic study by the end of the calendar year."

KEY HIGHLIGHTS OF THE YEAR

  • Production for the year totalled 385,837 tons at a head grade of 0.33 opt (11.3 gpt) and a recovery rate of 95% to produce 122,309 ounces, an increase of 34% from previous fiscal year.

  • Gold sales for the year were 125,273 ounces, an increase of 37% over the previous year (91,771 ounces). Cash operating cost per ton produced1 increased; however, all-in cash cost (AICC) or all-in sustaining costs (AISC) per ounce produced decreased 18% compared to the previous fiscal year. AICC/AISC for Q4/14 decreased 9% to CAD$1,776, compared to the previous quarter (Q3/14: CAD$1,923) and 22% compared to the same quarter in fiscal 2013 (Q4/13: CAD$2,277. All-in costs for the April, the last month of the 2014 fiscal year were CAD$1,466 per ounce, and costs continue to trend down further in the first 2-months of fiscal year 2014.

  • Cash operating costs for the year were CAD$1,078 per ounce. During the fourth quarter when the effects of the mine optimization plan were full realized, operating costs were lowered to CAD$1,000 per ounce with April cash costs being CAD$836 per ounce.

  • Cash flow from operating activities for the year was CAD$27.3M. This was mainly due to items not affecting cash and changes in working capital offsetting the reported CAD$11.1M loss.

  • Net loss and comprehensive loss for fiscal year 2014 was CAD$11.1M (CAD$0.16 per share). Revenue of CAD$173.3M for the year increased 14% from the previous fiscal year (CAD$151.6M) with 33,503 more ounces being sold compared to the previous year, offset with a 16% (CAD$270 per ounce) decrease in the average sale price of gold year over year. The Company operated at a close to breakeven rate in the last month of Q4/14, and expects to operate at a cash flow positive rate during the second quarter of its current fiscal year 2015 as further improvements from the mine optimization plan and cost cutting programs are realized.

  • At the start of Q3/14, following operational management changes, a mine optimization plan was introduced, along with a concurrent cost-cutting program. The new mine plan is focused on a lower tonnage, higher grade strategy, therefore cut off grades were increased from 0.18 opt (6.2 gpt) to 0.22 opt (7.5 gpt). As a result, head grades increased from an average of 0.31 opt (10.6 gpt) in the first and second quarter to 0.34 opt (11.6 gpt) in the third and fourth quarter of fiscal 2014. The full consequences of the new mine plan were realized in Q4/14 with production margins rising 10% from -2% in Q3/14 to 8% in Q4/14. Head grade has continued to significantly improve with 0.42 opt (14.4 gpt) head grade realized during the first 51 days of the current fiscal year 2015.

  • Consistent with the new mine plan that shifts away from the lower grade Main Break areas and focuses more heavily on the higher grade South Mine Complex ("SMC"), underground capital development remains focused on new zones in the SMC, in particular the development of new high grade workplaces on the 5,400' and 5,600' levels. Over the course of fiscal year 2014, the ratio of tons being mined in the SMC increased from 53% in Q1/14 to 63% in Q3/14 and 60% in Q4/14. In fiscal 2015, it is planned that 66% of tons will be mined from the SMC.

  • The cost-cutting initiatives were introduced to slow the level of cash burn the business was experiencing while the mine optimization plan was being implemented. The Company made a number of policy changes and reduced headcount (from 1,250 to 1,059 employees) to reduce costs and better align the cost structure of the business to the anticipated revenues from the new mine plan. The cost saving initiatives, and estimated go-forward annual savings totalled CAD$24.7M. With the exception of the elimination of non-essential spending in Property Plant & Equipment, these savings will be sustained.

  • The CAD$95.0M Mine Expansion Project was completed on budget during the fiscal year. Key expansion projects that were completed include the hoist upgrade, mill expansion, plant equipment purchases (including battery powered scoops and trucks) and underground capital development. The final element of the project was the dry commissioning of a new ball mill in February, 2014.

  • Following the completion of the Mine Expansion Project spending, together with the adoption of a new mine plan and the cost reductions announced by the Company, total cash resources (including short-term investments) as at April 30, 2014 were CAD$38.9M.

  • The Company entered into a 2.5% net smelter return (NSR) royalty with Franco-Nevada Corporation ("FNV") on October 31, 2013 for proceeds of US$50.0M (CAD$51.2M). The Company also made the final payment of $30.0M to Osisko Mining Corp in Q1/14 ('Osisko') for the remaining 50% share in the former joint venture properties acquired in fiscal 2013. The funds have been and will continue to be used for development of the Company's properties.

  • Exploration spending was cut by CAD$9.7M to CAD$7.5M during the year to reduce expenses. At year end, eight diamond drills were active including one on surface. Despite the reduction in spending, the Company announced on April 28, 2014 a first-time NI 43-101 calculation on its near-surface ounces (surface to -1,000 feet). The Company plans to add two additional diamond drills to the surface program in the current fiscal year 2015. Two drills will concentrate on delineation and infill drilling while the other will focus on exploration.

1 The Company has reported non GAAP performance measures: Cash operating cost per ton and per ounce produced and AICC per ounce produced throughout this document. These are common performance measures in the mining industry. Please refer to Appendix B in our MD&A which shows a reconciliation to reported production expenses.

The Company will be hosting a conference call on Thursday July 10 at 10:00 am EST to discuss these results. Please see below dial in formation:
Participant Dial-In Number(s):
Toll-Free North America: (877) 223-4471
Local and International: (647) 788-4922
Conference ID: 70737057
Replay Dial In:
Local and International: (416)-621-4642
Toll Free North America: (800)-585-8367
Conference ID: 70737057
Replay Available Until: July 24, 2014 23:59 ET
Financial Highlights
(All amounts in 000's of Canadian Dollars, except gold price per ounce, shares and per share figures)

Year ended April 30,
2014 2013 2012
Gold Sales (ounces) 125,273 91,771 97,888
Average Gold Price (per ounce) 1,385 1,653 1,633
Revenue 173,258 151,692 159,824
Production Expenses 162,755 124,002 98,328
Exploration Expenditure 7,537 17,097 14,241
Other Expenses 18,593 13,366 4,927
Net (Loss) Income before Income Taxes (15,627 ) (2,773 ) 42,328
Net and Comprehensive (Loss) Income (11,077 ) (3,646 ) 41,270
Per share (basic and diluted) (0.16 ) (0.05 ) 0.58, 0.57
Cash Flow from operating activities 27,258 33,959 51,200
Cash Flow (used in) from financing activities (5,461 ) 106,235 11,812
Cash Flow used in investing activities (60,650 ) (106,235 ) (63,907 )
Net (decrease) increase in cash (38,853 ) 51,770 (895 )
Total cash resources 38,897 76,966 30,172
Other Current Assets 23,732 30,719 22,086
Current Liabilities 45,361 71,565 25,013
Working Capital 17,268 36,120 27,245
Total Assets 409,385 448,782 270,329
Total Liabilities 126,363 201,423 37,674
Weighted average number of shares outstanding 70,150,912 70,150,912 71,528,490
Dividends per share NIL NIL NIL

About the Company

Kirkland Lake Gold's corporate goal is to create a self-sustaining and long-lived intermediate gold mining company based in the historic Kirkland Lake Gold Camp. The Company plans to do this by mining to the reserve grade, generating profits and free cash flow for the shareholders. The Company will also look to take advantage of its increased infrastructure capacity in the appropriate gold price environment. At the same time, the Company is committed to maintaining a significant exploration program aimed at developing and maintaining a property wide reserve and resource base sufficient to sustain a mine life of more than ten years. Over the last several years the Company has invested significant capital to improve the infrastructure of the business including upgrading the production hoist, skips, mill, underground mobile equipment and capital development. From initial discovery to present day there have been over 24 million ounces of gold mined from the Kirkland Lake camp while the current reserve and resource provides for more than 10 years of mining with significant exploration upside.

Neither the Toronto Stock Exchange nor the AIM Market of the London Stock Exchange has reviewed and neither accepts responsibility for the adequacy or accuracy of this news release.

Cautionary Note Regarding Forward Looking Statements

This Press Release contains statements which constitute "forward-looking statements", including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to the future business activities and operating performance of the Company. The words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to the Company, are intended to identify such forward-looking statements. Forward-looking statements used in this Press Release include, but may not be limited to, statements regarding the Company's production capacity and its exploration program. Investors are cautioned that forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made such as, without limitation, opinion, assumptions and estimates of management regarding the Company's business, its ability to increase its production capacity and decrease its production cost. Such opinions, assumptions and estimates, are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the Company's expectations in connection with the projects and exploration programs being met, the impact of general business and economic conditions, global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future conditions, fluctuating gold prices, currency exchange rates (such as the Canadian dollar versus the United States Dollar), possible variations in ore grade or recovery rates, changes in accounting policies, changes in the Company's corporate mineral resources, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, the possibility of project cost overruns or unanticipated costs and expenses, higher prices for fuel, power, labour and other consumables contributing to higher costs and general risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, unexpected changes in mine life, seasonality and unanticipated weather changes, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims, and limitations on insurance, as well as those risk factors discussed or referred to in the Company's annual Management's Discussion and Analysis and Annual Information Form for the year ended April 30, 2013 filed with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements except as otherwise required by applicable law.

Contact Information

  • Kirkland Lake Gold Inc.
    George Ogilvie, P.Eng
    CEO
    +1 709 532 5716
    +1 705 568 6444 (FAX)
    gogilvie@klgold.com

    Kirkland Lake Gold Inc.
    Lindsay Dunlop
    Director of Investor Relations
    +1 416-840-7884
    +1 705 568 6444 (FAX)
    ldunlop@klgold.com
    www.klgold.com

    NOMAD: Panmure Gordon (UK) Limited
    Callum Stewart / Adam James
    +44 (0) 20 7886 2500

    Blytheweigh
    Tim Blythe / Halimah Hussain / Camilla Horsfall
    +44 (0) 20 7138 3204