Kirkland Lake Gold Inc.
TSX : KGI

Kirkland Lake Gold Inc.

August 04, 2016 18:17 ET

Kirkland Lake Gold Reports Strong Earnings for the Second Quarter of 2016 and Free Cash Flow Generation of $31.9 Million

TORONTO, ONTARIO--(Marketwired - Aug. 4, 2016) - Kirkland Lake Gold Inc. (TSX:KGI) -

H1 and Q2 2016 Highlights

  • Pre-released gold production of 130,613 ounces (68,338 in Q2/16);
  • Sold 141,453 ounces of gold (72,144 ounces in Q2/16);
  • Realized an average price per ounce of gold sold of US$1,211 (US$1,271 in Q2/16);
  • Operating costs per ounce of gold sold(1) of US$641 (based on total production expenses(1) of C$159,482) (US$667 based on total production expenses(1) of C$81,740 during Q2/16);
  • All-in sustaining costs per ounce of gold sold(1) ("AISC") of US$925 (US$990 in Q2/16);
  • Generated $227.9 million in revenue ($118.1 million in Q2/16);
  • Realized net and comprehensive income of $26.3 million ($13.8 million in Q2/16) and $26.6million ($14.0 million in Q2/16) respectively, or $0.24 per share ($0.12 per share in Q2/16);
  • Generated free cash flow(1) of $57.3 million ($31.9 million in Q2/16);
  • Ended the quarter with a cash balance of $157.5 million;
  • Subsequent to quarter end, closed a flow-through financing for proceeds of $15 million;
  • The Company remains on track to meet its production guidance of between 270,000 to 290,000 ounces for 2016.

Kirkland Lake Gold Inc. ("Kirkland Lake Gold" or the "Company"), an intermediate gold producer with operations in Ontario, Canada, today announces second quarter financial results for the three ("Q2/16") and six months ("H1/16") ended June 30, 2016. All figures in this release are in Canadian dollars unless stated otherwise.

"Kirkland Lake delivered another quarter with positive earnings, free cash flow and a strengthened balance sheet," said Anthony Makuch, President & CEO. "With the recently closed flow-through financing of $15 million, we will become more aggressive in exploring our highly prospective land position in both the Kirkland Lake camp and along the Porcupine-Destor Fault Zone. We look forward to providing an update on our exploration programs as they become available."

Financial Summary

The Company changed its fiscal year from an April 30th year-end to a December 31st calendar year end effective January 1, 2016. As such, for comparative purposes, the current quarter results will be compared to a similar period in the previous year (see table below). The Company also reminds readers that since Q1/16, all measurements are in metric as opposed to its previous form of imperial measurements. The conversions are 1 short ton = 0.9072 tonnes; and 1 troy ounce per ton = 34.2857 grams per metric tonne ("g/t").

The following abbreviations are used to describe the periods under review throughout this press release.

Abbreviation Period Abbreviation Period
H1/16 January 1, 2016 - June 30, 2016 Q1/SY15 May 1, 2015 - July 31, 2015
Q2/16 April 30, 2016 - June 30, 2016 Q4/15 February 1, 2015 - April 30, 2015
Q1/16 January 1, 2016 - March 31, 2016 Q3/15 November 1, 2014 - January 31, 2015
Q3/SY15 November 1, 2015 - December 31, 2015 Q2/15 August 1, 2014 - October 31, 2014
Q2/SY15 August 1, 2015 - October 31, 2015

The Company reported net and comprehensive income for the quarter of approximately $13.8 million and $14.0 million respectively, or $0.12 per share compared to $4.2 million or $0.05 per share for the quarter ended July 31, 2015 (Q1/SY15).

Free cash flow for the quarter was $31.9 million compared to $3.1 million during Q1/SY15, reflecting higher realized gold prices, lower AISC, and increased production and sales subject to the additional production from the Holt-Holloway and Taylor mines. With the free cash flow generation during the quarter, the Company had $157.5 million in cash and cash equivalents at quarter end compared to $81.14 million at July 31, 2015 (Q1/SY15).

*Comparative figures and consolidated results do not include results from the Holloway-Holt and Taylor mines prior to close of the transaction with St Andrew Goldfields Ltd. ("St Andrew"), on January 26, 2016.

*All figures in CAD$ unless otherwise stated Q2/16 Q1/SY15 6 months
ended
Jun 30/16
6 months
ended
Jul 31/15
Average CAD/USD for the period 1.2886 1.2481 1.3302 1.2483
Gold Sales (ounces) 72,144 39,109 141,453 80,313
Average Realized Price (US$ per Oz Sold)(1) 1,271 1,187 1,211 1,194
Revenue (000's) 118,143 61,723 227,931 119,657
Production Expense 81,740 45,463 159,482 89,013
General and Administrative 6,433 1,541 10,675 3,717
Exploration 4,129 2,196 6,710 3,995
Finance Expense 5,172 6,094 10,720 10,033
Finance Income (1,309 ) (1,016 ) (1,549 ) (2,808 )
Income before Income Taxes 21,978 7,445 41,893 15,707
Provision for Income Taxes 8,214 3,216 15,610 3,604
Operating Cost per tonne(1) 208 407 234 400
Operating Cost (US$ per Oz Sold)(1) 667 678 641 676
Capital Development Investment 18,755 9,498 35,482 20,395
Purchase of Property, Plant and Equipment 2,266 1,366 5,633 3,368
AISC (US$ per Oz Sold)(1) 990 956 925 991

Operations Overview

Kirkland Lake Gold pre-released production results with a total of 68,338 ounces of gold production In Q2/16 and a total of 130,613 ounces for H1/16. The operations performed well during the quarter with grades, recoveries, and throughput all in line with expectations.

The cost per tonne of $208 achieved during the quarter was positively impacted by higher throughput which was mainly driven by the contribution of the Holt-Holloway and Taylor mines and higher tonnes from Macassa, as well as additional tonnes from the low grade stockpiles. As such, the cost per tonne was substantially lower when compared to a cost per tonne of $407 for the similar period in the previous year (Q1/SY15). The operating cost per ounce sold of US$667 was lower in Q2/16 when compared to an operating cost per ounce sold of US$691 in Q1/SY15 as a result of the Holt-Holloway and Taylor mines contribution.

For H1/16, the operating costs were slightly higher than the top end of guidance, but are expected to decrease in the second half of the year as production at Macassa moves into higher grade stopes, and throughput continues to increase at both Holt and Taylor.

A breakdown of operational performance at each operation is summarized in the table below.

*H1/16 results do not include results from the Holloway-Holt and Taylor mines prior to close of the transaction with St Andrew Goldfields Ltd. ("St Andrew"), on January 26, 2016.

Financial KPIs Q2/16 Macassa Holt Holloway Taylor Consolidated
Gold Sold (ounces) 41,344 13,407 5,080 12,313 72,144
Operating cost per tonne milled 302 125 174 125 208
Operating cost per gold ounce sold (US$) 645 877 1,204 476 667
Capital Spending (000s) 13,091 5,171 631 2,114 21,007
AISC per ounce Sold (US$) 1,003 1,147 1,343 638 990
Financial KPIs 6 months ended Jun 30/16 ("H1/16") Macassa Holt Holloway Taylor Consolidated
Gold Sold (ounces) 82,159 26,815 10,139 22,340 141,453
Operating cost per tonne milled 327 124 174 127 234
Operating cost per gold ounce sold (US$) 589 817 1,128 472 641
Capital Spending (000s) 27,206 8,707 1,010 4,192 41,115
AISC per ounce Sold (US$) 923 1,047 1,240 640 925

Exploration

During Q2/16 exploration programs continued to focus on underground drilling at the Macassa Mine Complex, regional surface drilling testing the easterly strike extension of the South Mine Complex ("SMC"), as well as underground drilling from the 4250' Level testing the up-dip extension of the '04 Break mineralization.

The Company released results from underground drilling from the 5300' Level exploration drift testing the SMC further to the south, which expanded the known zone of mineralization. Infill drilling was able to join two previous zones (the Hanging Wall Zone and the New South Zone) with three new intersections which returned similar grades and widths (see press release dated May 24, 2016, available on the Company website www.klgold.com).

Exploration drilling commenced at the Taylor and Holloway mines during the quarter. At Taylor drilling targeted both the easterly and westerly strike extension of the West Porphyry Zone (which includes the 1004 lens; the area currently being mined). At Holloway drilling commenced west of the mine property, which will test for mineral potential associated with the mafic volcanic / ultramafic contact. A second drill is active on the Holloway property to test the easterly strike extension of the Deep Thunder Zone, which lies approximately 1 kilometre east of the Smoke Deep Zone.

Subsequent to quarter end, the Company closed a non-brokered flow-through financing for proceeds of approximately $15 million, to be spent before December 31, 2017. As such, the Company plans to increase its previous budget of $18 million to $24 million, which will include $6 million flow-through dollars. The focus will be to increase the Company's efforts on the regional exploration program in the Kirkland Lake Camp, and to drill test targets along the Porcupine-Destor Fault Zone.

H1/16 Key Performance Indicators

The 2016 guidance metrics issued on April 14, 2016, are summarized against the results for the six months ended June 30, 2016. The AISC(1) have been positively affected in Q2/16 due to the lower spend on Property, Plant & Equipment ("PP&E") which is attributable to the timing in the delivery of equipment. As such, the AISC(1) is expected to be higher over the next two quarters.

2016 Guidance Guidance Metrics H1/16 Results
270,000 - 290,000 Gold Production (ounces) 130,613
7.7 Head Grade (g/t Au) 8.2
US$600 - $650 Operating Costs(1) (US$/Oz Sold) US$641
US$1,000 - $1,050 All-In Sustaining Costs(1) (US$/Oz Sold) US$925

For a description of risk factors affecting the Company and 'Forward Looking Information', see the Company's Annual Information Form for the year ended December 31, 2015, and the Company's MD&A for the period ended June 30, 2016, filed with certain securities regulatory authorities in Canada and available on SEDAR at www.sedar.com. For a description and reconciliation of Non-GAAP measures please see below and refer to Appendix B of the Company's MD&A for period ended June 30, 2016, as filed on SEDAR at www.sedar.com, or at the end of this release.

Q2/16 Earnings Call and Webcast (August 5, 2016)

The Company will hold a conference call to discuss these results tomorrow, Friday August 5, 2016, at 11:00am EDT. The Company invites you to participate via teleconference, the details of which are outlined below and are available on the Company's website at www.klgold.com.

Participant Dial-In Numbers

Toll-Free North America: +1 (877) 201-0168; Local and International: +1 (647) 788-4901

Conference ID: 56310259

Replay Dial-In Numbers

Local and International: +1 (404) 537-3406

Toll Free North America: +1 (855) 859-2056 / +1 (800) 585-8367

Conference ID: 93207658

Replay Available Until: November 5, 2016 at 11:59PM ET

Qualified Persons

Production at the various operations and processing at the Company's milling facilities are under the supervision of Mr. Chris Stewart, P.Eng, the Vice President of Operations. The Company's exploration programs are under the supervision of Mr. Doug Cater, P.Geo, the Vice President of Exploration.

Messrs. Stewart and Cater are 'qualified persons' for the purpose of National Instrument 43-101, Standards of Disclosure for Mineral Projects, of the Canadian Securities Administrators, and have reviewed and approved this news release. As the Vice President of Operations and Vice President of Exploration, Messrs. Stewart and Cater are not considered independent.

Selected Financial Information & Review of Overall Performance

*Comparative figures and consolidated results do not include results from the Holloway-Holt and Taylor mines prior to close of the transaction with St Andrew Goldfields Ltd. ("St Andrew"), on January 26, 2016.

Financial Highlights
(All amounts in 000's of Canadian Dollars, except gold price per ounce, shares and per share figures)
3 months
ended
Jun 30,
2016
3 months
ended
Mar 31,
2016
3 months
ended
Jul 31,
2015
6 months
ended
Jun 30,
2016
6 months
ended
Jul 31,
2015
Gold Sales (ounces) 72,144 69,309 41,204 141,453 80,313
*Average Realized Gold Price (per ounce) 1,638 1,584 1,498 1,611 1,490
Revenue 118,143 109,788 61,723 227,931 119,658
Production Expenses 81,740 77,742 45,463 159,482 89,014
Exploration Expenditure 4,129 2,581 2,196 6,710 3,995
Other Expenses 10,296 9,550 6,619 19,846 10,943
Income before Income Taxes 21,978 19,915 7,445 41,893 15,707
Comprehensive Income 14,016 12,601 4,229 26,617 12,103
Comprehensive Income per share (basic & diluted) 0.12 0.12 0.05 0.24 0.15
Cash flow from operations 52,958 43,712 14,920 96,660 35,646
Cash flow (used in) from financing activities (4,676 ) (7,581 ) (3,391 ) (3,609 ) 25,365
Cash flow from (used in) investing activities (21,023 ) 1,057 (10,865 ) (28,604 ) (23,764 )
Net increase in cash 27,018 36,784 797 63,802 37,100
Total cash resources 157,529 130,511 81,119 157,529 81,119
Other Current Assets 38,146 46,568 28,454 38,146 28,454
Current Liabilities 111,435 56,172 31,974 111,435 31,974
*Working Capital 82,240 120,907 77,601 82,240 77,601
Total Assets 735,251 713,063 471,593 735,251 471,593
Total Liabilities 227,731 221,962 164,563 227,731 164,563
Basic weighted average number of shares outstanding 115,571,565 105,281,126 80,366,408 110,481,088 79,499,011
Dividends per share NIL NIL NIL NIL NIL

Non-GAAP Financial Measures

The Company has included non-GAAP performance measures throughout this document. These include: cash inflows from operations per share, free cash flow, free cash flow per share, operating cost per tonne of ore produced, operating cost and AISC per ounce of gold sold, average realized sales price and working capital. Operating cost per tonne of ore produced and operating cost and AISC per ounce of gold sold are common performance measures in the mining industry but do not have any standardized meaning. The guidance provided by the World Gold Council for calculating AISC was reviewed and followed. Total operating costs include mine site operating costs (mining, processing and refining, in-mine drilling expenditures, administration, and production taxes), but are exclusive of other costs (royalties, depreciation and depletion, off-site corporate costs, reclamation, capital, long-term development and exploration). The Company considers all capital spending to be sustaining in nature with the exception of development towards the Ghost zone at the Holt mine. During Q2/16, $1.0 million in development costs ($1.1 million in H1/16) were related to development towards Ghost and as such have been removed from AISC. These measures, along with sales, are considered by the Company to be indicators of the Company's ability to generate operating earnings and free cash flows from its mining operations. The Company believes that certain investors use this information to evaluate the Company's performance and ability to generate cash flows. These should not be considered in isolation as a substitute for measures of performance prepared in accordance with IFRS and are not necessarily indicative of production costs presented under IFRS. The following tables provide reconciliation of such costs to the Company's financial statements for the periods as noted:

Free Cash Flow
(All amounts in 000's of Canadian Dollars, except shares and per share figures)
Three months ended Three months ended Six months ended Six months ended
30-Jun-16 31-Jul-15 30-Jun-16 31-Jul-15
Cash Inflows from Operations $ 52,958 $ 13,982 $ 96,660 $ 35,761
Mineral Property Additions (18,755 ) (9,499 ) (35,482 ) (20,395 )
Property, Plant & Equipment (2,254 ) (1,366 ) (3,882 ) (3,369 )
Free Cash Flow $ 31,949 $ 3,117 $ 57,296 $ 11,997
Operating Costs
All amounts in 000s of Canadian Dollars except tons ore produced, ounces of gold sold and unit costs or unless otherwise stated
Three months ended Three months ended Six months ended Six months ended
30-Jun-16 31-Jul-15 30-Jun-16 31-Jul-15
Production Expense $ 81,740 $ 45,463 $ 159,482 $ 89,013
Amortization and Depletion (14,937 ) (8,962 ) (29,645 ) (17,830 )
Stock-based compensation (60 ) (113 ) (129 ) (293 )
Royalties (4,730 ) (1,512 ) (9,062 ) (3,083 )
Operating Costs $ 62,013 $ 34,876 $ 120,646 $ 67,807
Tonnes of Ore Produced 297,645 85,671 520,959 169,616
Ounces of Gold Sold 72,144 39,109 141,453 80,313
Operating Cost per Tonne $ 208 $ 407 $ 232 $ 400
Operating Cost per Ounce $ 860 $ 846 $ 853 $ 844
Average CAD/USD exchange rate 1.2886 1.2481 1.3302 1.2483
Operating Cost per Ounce (US) US$ 667 US$ 678 US$ 641 US$ 676
AISC per Ounce Sold
All amounts in 000s of Canadian Dollars except ounces sold and unit costs or unless otherwise stated
Three months ended Three months ended Six months ended Six months ended
30-Jun-16 31-Jul-15 30-Jun-16 31-Jul-15
Operating Costs $ 62,013 $ 34,876 $ 120,646 $ 67,807
PPA Inventory Fair Value Adjustment - - (4,426 ) -
Royalties Expense 4,730 1,512 9,062 3,083
Stock Based Compensation 971 393 1,314 1,353
Exploration Expense (no Surface) 1,377 581 2,279 1,320
Corporate Expense (no financing costs) 3,017 918 5,048 2,000
Capital Development (Sustaining) 17,717 9,499 34,444 20,395
Property, Plant & Equipment Purchases 2,254 1,366 5,633 3,368
AISC $ 92,079 $ 49,145 $ 174,000 $ 99,326
Gold Sales (Ounces) 72,144 $ 39,109 141,453 80,313
AISC per Ounce Sold $ 1,276 $ 1,257 $ 1,230 $ 1,237
Average CAD/USD exchange rate 1.2886 1.2481 1.3302 1.2483
AISC per Ounce Sold (US) US$ 990 US$ 1,007 US$ 925 US$ 991

About the Company

Kirkland Lake Gold Inc. is a Canadian focused, intermediate gold producer with assets in the historic Kirkland Lake gold camp, and east of the Timmins gold camp along the Porcupine-Destor Fault Zone, both in northeastern Ontario. The Company is currently targeting annual gold production of between 270,000 to 290,000 ounces from its cornerstone asset, the Macassa Mine Complex and the recently acquired East Timmins Operations.

The Company is committed to building a sustainable mining company that is recognized as a safe and responsible gold producer with quality assets in safe mining jurisdictions.

The Toronto Stock Exchange has neither reviewed nor 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" within the meaning of applicable securities laws, 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. 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, including but not limited to; the continued development of the operations (Macassa, Holt-Holloway and Taylor) and the anticipated timing thereof, estimated production results including ounces and head grade, the ability to lower costs and gradually increase production across all the operations; and the anticipated timing and commencement of exploration programs along the Porcupine-Destor Fault Zone. 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 reserves and 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 December 31, 2015, and the Company's Management's Discussion and Analysis for the interim period ended June 30, 2016, 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.

(1) The Company has included the following non-GAAP performance measures in this press release; average realized price per ounce of gold sold, operating cost per tonne and operating cost per ounce sold, AISC per ounce sold, and free cash flow. These are common performance measures in the mining industry but do not have any standardized meaning. Refer to the end of this press release or Appendix B of the MD&A for a reconciliation of these measures to the accompanying financial statements.

Contact Information

  • Kirkland Lake Gold Inc.
    Anthony (Tony) Makuch
    Chief Executive Officer
    +1 416-840-7884 or Toll Free: 1-866-384-2924
    tmakuch@klgold.com

    Kirkland Lake Gold Inc.
    Suzette N Ramcharan, CPIR
    Director of Investor Relations
    Direct: +1 647-361-0200; Mobile: +1 647-284-5315
    sramcharan@klgold.com
    www.klgold.com