Kirkland Lake Gold Ltd. (“Kirkland Lake Gold” or
the “
Company”) (TSX:KL) (NYSE:KL) (ASX:KLA) today
announced the Company’s financial and operating results for the
second quarter (“Q2 2018”) and first six months (“YTD 2018”) of
2018. Q2 2018 results include strong earnings growth, record cash
flow from operations1 and a significant increase in the Company’s
cash position. The Company also announced improvements to full-year
2018 consolidated guidance, with production for the year now
targeted at over 635,000 ounces with operating cash costs per ounce
sold expected to average $400 – $425. Full-year guidance for the
Fosterville and Macassa mines was also improved. The Company’s full
financial statements and management discussion & analysis are
available on SEDAR at www.sedar.com and on the Company’s website at
www.klgold.com. All dollar amounts are in U.S. dollars, unless
otherwise noted.
Key highlights of Q2 2018 results include:
- Strong growth in net
earnings: Net earnings totaled $61.5 million ($0.29 per
basic share “/share”), 78% increase from $34.6 million
($0.17/share) in Q2 2017 and 23% higher than $50.0 million
($0.24/share) in Q1 2018.
- Adjusted net
earnings: Adjusted net earnings totaled $63.4 million
($0.30/share) versus $39.3 million ($0.19/share) in Q2 2017 and
$52.6 million ($0.25/share).
- Record quarterly cash flow
from operations: Record cash flow from operating
activities1 of $120.9 million, 56% higher than $77.5 million in Q2
2017 and 35% increase from $89.6 million in Q1 2018.
- Substantial free cash
flow: Free cash flow1,2 growth to $60.7 million, 18%
increase from $51.2 million in Q2 2017 and 21% higher than $50.2
million in Q2 2018.
- Record quarterly
EBITDA:1,2,3 Record EBITDA of $123.7 million, 30% higher
than 95.1 million in Q2 2017 and 17% increase from previous
quarterly record of $105.9 million in Q1 2018.
- Strong cash
position: Cash increased $43.1 million or 16% to $318.4
million at June 30, 2018 from $275.3 million at March 31, 2018, and
$86.8 million or 37% from $231.6 million at the end of 2017.
- Low unit costs:
Production costs totaled $66.5 million in Q2 2018.
Operating cash costs per ounce sold2 averaged $404, 16%
improvement from $482 in Q2 2017 and 10% better than $447 in Q1
2018. All-in sustaining cost (“AISC”) per ounce sold2 averaged $757
compared to $729 in Q2 2017 and $833 in Q1 2018.
- Production ahead of
plan: Production totaled 164,685 ounces, 3% increase from
160,305 ounces in Q2 2017 and 12% higher than 147,644 ounces in Q1
2018.
- Capital
expenditures: Sustaining capital expenditures2 totaled
$44.1 million ($86.2 million for YTD 2018), while growth capital
expenditures totaled $11.1 million ($15.7 million for YTD 2018),
excluding capitalized exploration expenditures. Work related
to key projects to ramp up in second half of 2018.
- Exploration
expenditures: Exploration expenditures totaled $25.3
million ($43.9 million for YTD 2018), including capitalized
exploration expenditures, with recent results including the
continued intersection of high-grade mineralization outside
existing Mineral Resources at Macassa, as well as additional
high-grade, visible-gold bearing intersections at the Swan Zone at
Fosterville in support of further growth Swan Zone Mineral
Reserves.
- Quarterly dividend
increased on May 2, 2018 to $0.03/share effective the second
quarter 2018 quarterly dividend payment, paid on July 13, 2018 (Q1
2018 quarterly dividend of $0.02/share paid on April 13,
2018).
(1) Of continuing
operations. (2) See “Non-IFRS Measures” later in
this press release and starting on page 32 of the Company’s
MD&A for the three and six months ended June 20,
2018. (3) Refers to Earnings before Interest,
Taxes, Depreciation, and Amortization.
Key highlights of YTD 2018 results
include:
- Record first-half financial
results:
- Net earnings of $111.5 million ($0.53/share), 134% increase
from $47.7 million ($0.23/share) for YTD 2017
- Cash flow from operating activities of $210.5 million, 45%
growth from $145.3 million for YTD 2017
- Free cash flow totaling $110.9 million, 24% higher than $89.7
million for YTD 2017
- EBITDA of $224.3 million, 38% increase from $162.0 million for
YTD 2017.
- Strong YTD production and unit cost performance versus
full-year 2018 guidance
- Production of 312,329 ounces, 7%
increase from YTD 2017. Based on YTD 2018 results, improved
full-year 2018 production guidance was announced today including:
- Consolidated production guidance increased to over 635,000
ounces from over 620,000 ounces previously
- Fosterville production guidance increased to 275,000 – 300,000
ounces from 260,000 – 300,000 ounces previously (YTD 2018: 141,305
ounces)
- Macassa production guidance improved to 220,000 – 225,000
ounces from 215,000 – 225,000 ounces previously (YTD 2018: 114,609
ounces).
- Operating cash cost per ounce sold
of $424, 19% better than YTD 2017. Based on YTD 2018 results,
improved full-year 2018 operating cash cost per ounce guidance was
announced today, including:
- Consolidated guidance improved to $400 – $425 from $425 –
$450
- Fosterville operating cash cost per ounce sold guidance
improved to $250 – $270 from $270 – $290 previously (YTD 2018:
$261)
- Macassa operating cash cost per ounce sold guidance improved to
$460 – $480 from $475 – $500 (YTD 2018: $453).
- AISC per ounce sold of $793,
similar to YTD 2017 and in line with guidance of $750 – $800.
Tony Makuch, President and Chief Executive
Officer of Kirkland Lake Gold, commented: “Positive grade
performance at Fosterville and Macassa was a key driver of our
strong second quarter performance and record first-half financial
results. At Fosterville, our average grade for Q2 2018 of 20.6
grams per tonne was well ahead of expected levels, with the mine
benefiting from a record month in June, producing 31,710 ounces at
30.4 grams per tonne. At Macassa, our stopes around the 5,700-foot
level, the deepest mining done to date in the South Mine Complex,
are high-grade stopes that have outperformed, which resulted in
record quarterly production in Q2 2018 of 60,571 ounces at an
average grade of 21.5 grams per tonne. Based on the strong results
at both mines in the first half of the year, we have improved the
full-year 2018 guidance for production and operating cash costs per
ounce sold for both Fosterville and Macassa, as well as on a
consolidated basis.
“Turning to our growth plans, as expected, the
level of work at our key projects is picking up and will continue
to accelerate over the balance of the year. At Macassa, surface
excavation for the #4 shaft is advancing and we are on track to
commence shaft collaring, headframe construction and hoist
installation during the second half of the year. We remain on track
to commence full-face shaft sinking by the second quarter of 2019
and to achieve completion of phase one of the shaft project by
early in 2022. At Fosterville, the rate of underground development
related to our ventilation project increased during Q2 2018, while
construction of our new water treatment plant continued to
progress, as did the drilling of the surface holes for our new
paste plant, with plant construction to commence shortly. We have
also completed installation of a second gravity circuit at our
Fosterville mill, with the circuit becoming operational as of the
end of July. Our growth projects at Fosterville remain on track for
completion on or close to the original target dates, in support of
our goal to reach over 400,000 ounces of annual gold production at
Fosterville by 2020.” Review of Financial and
Operating Performance
The following discussion provides key summarized
consolidated financial and operating information for the three and
six months ended June 30, 2018 and 2017. Results for the three and
six months ended June 30, 2017 include production and costs related
to the Northern Territory operations in Australia, which were
placed on care and maintenance effective June 30, 2017. Also,
results for Q2 and YTD 2017 have been restated to exclude
discontinued operations, related to the sale of the Stawell
Mine.
Table 1. Financial Highlights
(in thousands of dollars, except per share
amounts) |
Three months endedJune 30,
2018 |
Three months endedJune 30,
2017(Restated)(1) |
Six months endedJune 30,
2018 |
Six months endedJune 30,
2017(Restated)(1) |
Revenue |
|
$214,653 |
|
|
$189,894 |
|
|
$412,890 |
|
|
$358,422 |
|
Production
costs |
|
66,494 |
|
|
72,926 |
|
|
137,977 |
|
|
153,535 |
|
Earnings
before income taxes |
|
90,109 |
|
|
56,103 |
|
|
161,997 |
|
|
84,256 |
|
Loss from
discontinued operations |
|
— |
|
|
(3,790 |
) |
|
— |
|
|
(6,025 |
) |
Net
earnings |
|
$61,486 |
|
|
$34,571 |
|
|
$111,523 |
|
|
$47,704 |
|
Basic
earnings per share from continuing operations |
|
$0.29 |
|
|
$0.18 |
|
|
$0.53 |
|
|
$0.26 |
|
Diluted
earnings per share from continuing operations |
|
$0.29 |
|
|
$0.17 |
|
|
$0.52 |
|
|
$0.26 |
|
Total basic
earnings per share |
|
$0.29 |
|
|
$0.17 |
|
|
$0.53 |
|
|
$0.23 |
|
Total
diluted earnings per share |
|
$0.29 |
|
|
$0.16 |
|
|
$0.52 |
|
|
$0.23 |
|
Cash flow
provided by operating activities of continuing operations |
|
$120,912 |
|
|
$77,471 |
|
|
$210,549 |
|
|
$145,345 |
|
Cash
investment in mine development and PPE |
|
$60,260 |
|
|
$26,270 |
|
|
$99,688 |
|
|
$55,596 |
|
(1) To reflect the sale of Stawell in December 2017
as a discontinued operation.
Table 2. Operating Highlights
|
Three months endedJune 30,
2018 |
Three months endedJune 30,
2017(Restated)(1) |
Six months endedJune 30,
2018 |
Six months endedJune 30,
2017(Restated)(1) |
Tonnes
milled |
|
406,185 |
|
|
550,057 |
|
|
823,541 |
|
|
1,070,944 |
|
Grade (g/t
Au) |
|
13.1 |
|
|
9.5 |
|
|
12.3 |
|
|
8.8 |
|
Recovery
(%) |
|
96.4 |
% |
|
95.5 |
% |
|
96.3 |
% |
|
95.5 |
% |
Gold
produced (oz) |
|
164,685 |
|
|
160,305 |
|
|
312,329 |
|
|
290,733 |
|
Gold Sold
(oz) |
|
164,305 |
|
|
151,208 |
|
|
312,068 |
|
|
289,109 |
|
Averaged
realized price ($/oz sold)(2) |
|
1,301 |
|
|
1,257 |
|
|
1,316 |
|
|
1,242 |
|
Operating
cash costs per ounce ($/oz sold)(2) |
|
404 |
|
|
482 |
|
|
424 |
|
|
521 |
|
AISC ($/oz
sold)(2) |
|
757 |
|
|
729 |
|
|
793 |
|
|
794 |
|
Adjusted
net earnings from continuing operations(2) |
|
$63,441 |
|
|
$39,290 |
|
|
$116,002 |
|
|
$56,778 |
|
Adjusted
net earnings per share from continuing operations(2) |
|
$0.30 |
|
|
$0.19 |
|
|
$0.55 |
|
|
$0.27 |
|
(1) To reflect the sale of Stawell in December 2017
as a discontinued operation.(2) Non-IFRS - the
definition and reconciliation of these Non-IFRS measures are
included on pages 32-37 of the MD&A for the three and six
months ended June 30, 2018.
Revenue
Revenue in Q2 2018 totaled $214.7 million, an
increase of 13% from $189.9 million in Q2 2017. Compared to Q2
2017, higher gold sales in Q2 2018 increased revenue by $16.5
million, with a total of 164,305 ounces sold in Q2 2018 versus
151,208 ounces being sold in Q2 2017. The increase is gold sales
was largely attributable to Macassa, where ounces sold grew by 35%,
to 62,725 ounces, driven by record quarterly production of 60,571
ounces in Q2 2018. Gold sales at Fosterville increased 8%, to
75,100 ounces from 69,337 ounces in Q2 2017. A $44 per ounce or 4%
increase in the average realized gold price per ounce, to $1,301 in
Q2 2018 from $1,257 in Q2 2017, contributed $7.2 million to the
growth in revenue in Q2 2018 from a year earlier, with there also
being a $1.1 million favourable impact from foreign exchange rate
changes.
Q2 2018 revenue increased 8% from $198.2 million
in Q1 2018. An 11% increase in gold sales, from 147,763 ounces in
Q1 2018, had a $22.0 million favourable impact on revenue compared
to the previous quarter. This favourable impact was only partially
offset by a $5.3 million negative impact on revenue from a 2%
reduction in the average realized gold price per ounce ($1,301 in
Q2 2018 versus $1,333 in Q1 2018), as well as a $0.3 million
reduction related to changes in foreign exchange.
Revenue for YTD 2018 totaled $412.9 million, an
increase of $54.5 million or 15% from $358.4 million for the same
period in 2017. Of the $54.5 million increase in revenue, $28.6
million resulted from an 8% increase in gold sales, to 312,068
ounces for YTD 2018 from 289,109 ounces for YTD 2017. An
additional $23.1 million of the growth in revenue related to a $74
per ounce increase in the average realized gold price per ounce, to
$1,316 for YTD 2018 versus $1,242 for YTD 2017, while changes to
foreign exchange rates had a $2.7 million favourable impact on YTD
revenue year over year. The increase in gold sales for YTD
2018 mainly resulted from strong production growth at both Macassa
and Fosterville. Production at Macassa for YTD 2018 totaled 114,609
ounces compared to 94,422 ounces for YTD 2017. At Fosterville, YTD
2018 production totaled 141,305 ounces versus 123,153 ounces for
the same period in 2017. The increases in production at both
Macassa and Fosterville reflected a significant improvement in
average grades at both mines, reflecting the mining of higher grade
stopes, as well as the benefit of favourable grade reconciliations
and improved grade control practices.
Earnings from Mine Operations
Earnings from mine operations in Q2 2018 totaled
$109.5 million, an increase of 45% from $75.7 million in Q2 2017
and 12% higher than $98.2 million the previous quarter. The
increase from the same period in 2017 reflected strong revenue
growth, as well as lower production costs, largely due to the
inclusion of $15.7 million of production costs for the Northern
Territory operations in Q2 2017 prior to the mine being placed on
care and maintenance effective June 30, 2017. Also contributing to
the year-over-year improvement in earnings from mine operations was
a $3.4 million or 9% reduction in depletion and depreciation costs,
as the impact of higher gold production was more than offset by a
significant increase in the level of Mineral Reserves and Mineral
Resources at the Company’s operations following the release of the
Company’s December 31, 2017 Mineral Reserve and Mineral Resource
estimates on February 20, 2018. Royalty expense in Q2 2018 totaled
$6.2 million versus $5.4 million in Q2 2017, with the increase
mainly reflecting higher sales volumes. The increase in earnings
from mine operations from the previous quarter related to revenue
growth, the impact of which was partially offset by higher levels
of depletion and depreciation costs in line with greater production
volumes during Q2 2018.
For YTD 2018, earnings from mine operations
totaled $202.2 million, a $78.7 million or 64% increase from $123.5
million for the same period in 2017. The increase reflected revenue
growth of 15%, as well as lower production costs and depletion and
depreciation costs. Lower production costs for YTD 2018 reflected
the inclusion of $31.5 million of production costs related to the
Northern Territory operations in the first half of 2017. A $10.9
million or 15% reduction in depletion and depreciation costs
resulted from the increase in Mineral Reserves and Mineral
Resources included in the December 31, 2017 Mineral Reserve and
Mineral Resource estimates. Royalty expense for YTD 2018 totaled
$12.2 million compared to $10.1 million for YTD 2017, with the
increase reflecting higher sales volumes in YTD 2018.
Unit Cost Performance (See Non-IFRS
measures)
Operating cash costs per ounce sold averaged
$404 in Q2 2018, a 16% improvement from $482 in Q2 2017 largely
reflecting a 55% improvement in the average grade at Macassa
compared to the second quarter a year earlier. Operating cash costs
per ounce sold at Macassa averaged $414, a 19% improvement from
$512 in Q2 2017. Q2 2018 operating cash costs per ounce improved
10% from $447 in Q1 2018 mainly due to improvements of 23% and 8%,
respectively, in the average grades at Fosterville and Macassa,
compared to Q1 2018. AISC per ounce sold in Q2 2018 averaged $757
compared $729 in Q2 2017, with the increase related to higher
levels of sustaining capital expenditures and G&A expenses in
Q2 2018 versus Q2 2017 on a per ounce basis. Sustaining capital
expenditures in Q2 2018 totaled $44.1 million or $268 per ounce
sold, compared to sustaining capital expenditures of $26.7 million
or $176 per ounce sold in Q2 2017. Q2 2018 AISC per ounce sold
improved 9% from $833 in Q1 2018, mainly due to the impact of
higher grades at Macassa and Fosterville on operating cash costs
per ounce sold, as well as lower sustaining capital expenditures on
a per ounce sold basis, with the reduction mainly at Macassa, and
lower G&A expense and royalties on a per ounce sold basis.
Sustaining capital expenditures in Q1 2018 totaled $42.1 million or
$285 per ounce sold.
For YTD 2018, operating cash costs per ounce
sold averaged $424, a 19% improvement from $521 for YTD 2017, with
the improvement mainly reflecting higher average grades at Macassa
and Fosterville. AISC per ounce sold for YTD 2018 averaged $793,
similar to the AISC per ounce sold of $794 for YTD 2017. The
favourable impact of lower operating cash costs per ounce sold was
largely offset by a $76 per ounce sold increase in sustaining
capital expenditures over YTD 2017, as well as higher G&A and
royalty expenses on a per ounce sold basis. Sustaining capital
expenditures for YTD 2018 totaled $86.2 million or $276 per ounce
sold, which compared to $57.8 million or $200 per ounce sold for
YTD 2017.
Additional Expenses
Exploration and evaluation expenditures in Q2
2018 were $15.8 million, 45% higher than $10.9 million in Q2 2017.
The year-over-year increase reflected the Company’s significant
commitment to aggressive organic growth through continued
exploration success. Exploration and evaluation expenditures in Q2
2018 compared to $16.7 million in Q1 2018. Exploration and
evaluation expenditures for YTD 2018 totaled $32.5 million, a 66%
increase from $19.6 million for YTD 2017. Exploration and
evaluation expenditures in 2018 are heavily weighted to Australia,
with YTD 2018 expenditures including $15.2 million in the Northern
Territory and $11.7 million at Fosterville, with the remaining $5.6
million at Taylor and Macassa in Canada.
G&A expense (excluding share-based payments
expense and transaction costs) totaled $5.8 million in Q2 2018,
which compared to $4.1 million in Q2 2017 and $6.9 million the
previous quarter. For YTD 2018, G&A expense totaled $12.8
million versus $8.5 million for the same time in 2017. The level of
G&A expense for YTD 2018 largely reflected the weighting of
legal and audit fees and incentive compensation expense to the
first half of the year.
Share based payment expense in Q2 2018 totaled
$1.7 million, compared to $1.1 million in Q2 2017 and $1.8 million
the previous quarter. The level of share based payment expense in
Q1 2018 reflected a higher volume of restricted-share units
(“RSUs”) and performance-share units (“PSUs”) granted during the
first quarter of the year. YTD 2018 share based payment expense
totaled $3.6 million versus $2.5 million for YTD 2017.
Other income in Q2 2018 totaled $4.3 million
compared to other income of $0.6 million in Q2 2017 and $5.4
million the previous quarter. The main factors contributing to the
increase in other income (loss) from Q2 2017 were unrealized and
realized foreign exchange gains of $6.5 million, which resulted
largely from the Australian dollar weakening against the US dollar
during the quarter, increasing the value of US-dollar cash held in
Australia. These gains were only partially offset by the impact of
a $2.7 million pre-tax mark-to-market loss on fair valuing the
Company's common share purchase warrants. The change in other
income from Q1 2018 mainly related to the loss on the fair valuing
of the Company's warrants in Q2 2018, which compared to a pre-tax
mark-to-market gain of $1.7 million in Q1 2018. Unrealized and
realized foreign exchange gains in Q1 2018 totaled $3.9 million
compared to the $6.5 million of gains recorded in Q2 2018.
For YTD 2018, other income totaled $9.7 million versus $0.7 million
for YTD 2017. The increase reflected $10.4 million of unrealized
and realized foreign exchange gains resulting from the Australian
and Canadian currencies weakening against the US dollar during the
first half of 2018, which increased the value of US-dollar cash in
both countries. Unrealized and realized foreign exchange gains for
YTD 2017 totaled $0.1 million. Partially offsetting the favourable
impact on YTD 2018 other income of unrealized and realized foreign
exchange gains versus YTD 2017 were $1.1 million of other income
for YTD 2017 related to recognition of deferred premium on flow
through shares and a pre-tax market-to-market loss of $1.0 million
related to the fair valuing of the Company’s warrants in the first
half of 2018.
Finance costs in Q2 2018 totaled $1.1 million
versus $3.1 million in Q2 2017 and $0.8 million in Q1 2018. The
change in finance costs from Q2 2017 mainly related to the maturity
of two series of convertible debentures in 2017. The first series,
the Company’s C$56.8 million 6% unsecured convertible debentures
("6% convertible debentures"), matured and were repaid form
existing cash on June 30, 2017, while the C$62.1 million 7.5%
unsecured convertible debentures ("7.5% convertible debentures")
matured on December 31, 2017, with over 99% of the debentures being
converted into Kirkland Lake Gold common shares. The level of
finance costs in Q2 2017 largely related to interest payments on
both series of debentures. The increase in finance costs from the
previous quarter was due to increased interest on finance leases
and other bank charges.
The Company's total income tax expense in Q2
2018 increased from Q2 2017 and the previous quarter due to higher
taxable income. Current income tax expense totaled $10.5 million in
Q2 2018, along with deferred tax expense of $18.1 million. The
deferred tax expense in Q2 2018 resulted from the utilization of
$16.3 million of deferred tax assets to reduce current income tax
expense. In Q2 2017, current income tax expense totaled $12.8
million, while deferred income tax expense totaled $5.0 million.
For the previous quarter, the Company reported current income tax
expense of $5.1 million and deferred tax expense of $18.3 million.
The $18.3 million of deferred tax expense reflected the utilization
of $12.4 million of deferred tax assets to reduce current income
tax expense during the quarter. YTD 2018 current income tax expense
totaled $15.7 million, while deferred tax expense totaled $34.8
million. Income tax expense for YTD 2017 included $19.4 million of
current income tax expense and deferred income tax expense of $11.1
million.
Net Earnings in Q2 2018 total $61.5 million or
$0.29 per basic share
Net earnings in Q2 2018 totaled $61.5 million
($0.29 per basic share), an increase of $26.9 million or 78% from
$34.6 million ($0.17 per basic share) in Q2 2017. Net earnings in
Q2 2018 were entirely from continuing operations. Net earnings in
Q2 2017 included earnings from continuing operations of $38.4
million ($0.18 per basic share) and loss from discontinued
operations of $3.8 million ($0.01 per basic share), related to the
Company’s Stawell Mine, which was placed on care and maintenance in
December 2016 and sold on December 21, 2017. The 60% increase in
net earnings in Q2 2018 from earnings from continuing operations in
2017 reflected the impact of a 13% increase in revenue, due to both
higher gold sales and realized gold prices, lower production costs,
higher levels of other income, mainly due to unrealized and
realized foreign exchange gains on investments, reduced depletion
and depreciation costs and lower finance costs. These favourable
factors more than offset the impact of higher exploration and
evaluation expenses, as well as increased G&A expenses.
Q2 2018 net earnings increased 23% from $50.0
million ($0.24 per basic share) in Q1 2018. Net earnings for both
periods were entirely from continuing operations. Revenue in Q2
2018 increased 8% to $214.7 million, reflecting strong growth in
gold sales quarter over quarter, which more than offset a reduction
in the average selling price of gold. Other factors contributing to
higher net earnings compared to Q1 2018 included improved operating
cash costs per ounce sold, as well as lower G&A and exploration
and evaluation expenses. The factors more than offset the impact of
increased depletion and depreciation costs, reflecting higher
volumes in Q2 2018, and lower other income. The reduction in other
income largely reflected a loss being recorded on fair valuing the
Company’s warrants in Q2 2018 versus a gain in Q1 2018, with the
impact partially offset by a higher level of unrealized and
realized foreign exchange gains in Q2 2018.
Net earnings for YTD 2018 totaled $111.5 million
($0.53 per basic share), an increase of $67.6 million or 142% from
net earnings of $47.7 million ($$0.23 per basic share) for YTD
2017. Net earnings for YTD 2018 were entirely from continuing
operations, whereas net earnings for YTD 2017 included earnings
from continuing operations of $53.7 million ($0.26 per basic share)
and loss from discontinued operations of $6.0 million ($0.03 per
basic share) related to the Company’s Stawell Mine. The increase in
net earnings compared to YTD 2017 earnings from continuing
operations reflected a 15% increase in revenue, due to both higher
volumes and realized gold prices, lower production costs, reduced
depletion and depreciation expense, higher levels of other income,
and lower finance costs.
Adjusted net earnings (Non-IFRS) in Q2 2018
total $63.4 million or $0.30 per basic share
The Company’s adjusted net earnings from
continuing operations for Q2 2018 totaled $63.4 million ($0.30 per
basic share), which compared to adjusted net earnings from
continuing operations of $39.3 million ($0.19 per basic share) in
Q2 2017. The difference between net earnings and adjusted net
earnings from continuing operations in Q2 2018 mainly reflected the
exclusion of a $2.7 million pre-tax mark-to-market loss on the fair
valuing the Company’s warrants from adjusted net earnings from
continuing operations ($2.0 million on an after-tax basis). The
difference between adjusted net earnings from continuing operations
and net earnings in Q2 2017 related to the exclusion from adjusted
net earnings from continuing operations of $1.1 million of pre-tax
severance payments made during the quarter ($0.8 million on an
after-tax basis).
Adjusted net earnings from continuing operations
in Q2 2018 compared adjusted net earnings from continuing
operations of $52.6 million ($0.25 per basic share) in Q1 2018. The
difference between adjusted net earnings from continuing operations
and net earnings in Q1 2018 mainly reflected the exclusion of a
$1.7 million pre-tax mark-to-market gain on the fair valuing the
Company’s warrants from adjusted net earnings from continuing
operations during the first quarter of the year ($1.2 million on an
after-tax basis).
For YTD 2018, adjusted net earnings from
continuing operations totaled $116.0 million ($0.55 per basic
share), which compared to adjusted net earnings from continuing
operations of $56.8 million ($0.27 per basic share) for YTD 2017.
The difference between adjusted net earnings from continuing
operations and net earnings for YTD 2018 reflected the exclusion of
the $1.0 million pre-tax mark-to-market loss ($0.7 million on an
after-tax basis) on the fair valuing the Company’s warrants from
adjusted net earnings from continuing operations. The difference
between adjusted net earnings from continuing operations for YTD
2017 and net earnings for the same period mainly related to the
exclusion from adjusted net earnings from continuing operations of
$2.6 million of pre-tax purchase-price allocation adjustments on
inventories ($1.7 million on an after-tax basis) and $1.1 million
of pre-tax severance payments ($0.8 million on an after-tax
basis).
Q2 2018 cash flow from operating activities of
continuing operations of $120.9 million, free cash flow from
continuing operations (Non-IFRS) totals $60.7 million
Cash totaled $318.4 million at June 30, 2018
compared to $275.3 million at March 31, 2018. The $43.1 million or
16% increase in cash in Q2 2018 was largely related to strong cash
flow from operating activities, the timing of capital and
exploration expenditures, as well as the release of $19.8 million
of previously-restricted cash (reflecting changes to security
requirements related to rehabilitation performance guarantees) and
the impact of utilizing tax losses on the level of cash taxes paid.
These factors were partially offset by the use of $16.1 million
(C$20.0 million) of cash to acquire four million common shares of
Novo, $10.4 million to fund finance lease obligations and $3.3
million for dividend payments.
Cash flow from operating activities of
continuing operations in Q2 2018 was a record $120.9 million, a 56%
increase from $77.5 million in Q2 2017 and 35% higher than $89.6
million in Q1 2018. Free cash flow from continuing operations in Q2
2018 totaled $60.7 million, an 18% increase from $51.2 million in
Q2 2018 and 20% from $50.2 million in Q1 2018.
The Company’s cash position of $318.4 million at
June 30, 2018 compared to total cash of $231.6 million at December
31, 2017. The 37% increase in cash over the first six months of
2018 was driven by strong cash flow from operations, the timing of
capital and exploration expenditures in 2018, with growth capital
expenditures expected to be weighted to the second half of the
year, as well as the impact of the release of previously-restricted
cash and the impact of utilizing tax losses on the level of cash
taxes paid. These factors were partially offset by cash used to
acquire Novo common shares as well as for financing activities such
as funding finance lease obligations and making dividend
payments. Cash flow from operating activities of continuing
operations for YTD 2018 totaled $210.5 million, a 45% increase from
$145.3 million for YTD 2017. Free cash flow from continuing
operations for YTD 2018 grew 24% from YTD 2017, to $110.9 million
from $89.7 million for the same period in 2017.
Table 3. Review of Financial Performance
(in thousands except per share
amounts) |
Three months endedJune 30,
2018 |
Three months endedJune 30,
2017(Restated)(1) |
Six months endedJune 30,
2018 |
Six months endedJune 30,
2017(Restated)(1) |
|
|
|
|
|
|
|
|
|
Revenue |
|
$214,653 |
|
$189,894 |
|
$412,890 |
|
$358,422 |
|
|
|
|
|
|
|
|
|
Production
costs |
|
(66,494) |
|
(72,926) |
|
(137,977) |
|
(153,535) |
Royalty
expense |
|
(6,217) |
|
(5,409) |
|
(12,235) |
|
(10,076) |
Depletion
and depreciation |
|
(32,484) |
|
(35,889) |
|
(60,432) |
|
(71,348) |
Earnings from mine operations |
|
109,458 |
|
75,670 |
|
202,246 |
|
123,463 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
General and
administrative(2) |
|
(7,468) |
|
(6,262) |
|
(16,228) |
|
(11,827) |
Transaction
costs |
|
— |
|
(19) |
|
— |
|
(397) |
Exploration
and evaluation |
|
(15,763) |
|
(10,908) |
|
(32,466) |
|
(19,632) |
Care and maintenance |
|
(230) |
|
(508) |
|
(1,039) |
|
(2,909) |
Earnings
from operations |
|
$85,997 |
|
$57,973 |
|
$152,513 |
|
$88,698 |
Other
income, net |
|
4,290 |
|
590 |
|
9,654 |
|
714 |
|
|
|
|
|
|
|
|
|
Finance and
other items |
|
|
|
|
|
|
|
|
Finance
income |
|
943 |
|
621 |
|
1,661 |
|
1,193 |
Finance costs |
|
(1,121) |
|
(3,081) |
|
(1,831) |
|
(6,349) |
Earnings
before taxes |
|
90,109 |
|
56,103 |
|
161,997 |
|
84,256 |
Current
income tax expense |
|
(10,526) |
|
(12,776) |
|
(15,672) |
|
(19,382) |
Deferred tax expense |
|
(18,097) |
|
(4,966) |
|
(34,802) |
|
(11,145) |
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations |
|
$61,486 |
|
$38,361 |
|
$111,523 |
|
$53,729 |
Loss from discontinued operations |
|
— |
|
(3,790) |
|
— |
|
(6,025) |
Net earnings |
|
$61,486 |
|
$34,571 |
|
$111,523 |
|
$47,704 |
|
|
|
|
|
|
|
|
|
Basic
earnings per share |
|
$0.29 |
|
$0.17 |
|
$0.53 |
|
$0.23 |
Diluted earnings per share |
|
$0.29 |
|
$0.16 |
|
$0.52 |
|
$0.23 |
(1) These figures are restated due
to the sale of Stawell in December 2017.(2) G&A
expense for Q2 2018 (Q2 2017) include G&A of $5.8 million ($4.1
million in Q2 2017), severance payment of $nil ($1.1 million in Q2
2017) and share based payment expense of $1.6 million ($1.1
million in Q2 2017). G&A expense for YTD 2018 (YTD 2017)
include G&A expenses of $12.8 million ($8.5 million in YTD
2017), severance payment of $nil ($1.1 million in YTD 2017) and
share based payment expense of $3.5 million ($2.2 million in YTD
2017).
YTD Performance Against 2018 Guidance
In 2017, Kirkland Lake Gold achieved all of the
Company’s consolidated production and unit cost guidance. On
January 17, 2018, the Company announced its guidance for full-year
2018, which includes increased production levels compared to 2017,
improved unit costs and higher levels of capital and exploration
expenditures. Following completion of the first half of 2018, the
Company's full-year 2018 guidance remained unchanged. The increase
in capital and exploration expenditures is in support of achieving
the Company’s longer-term objective of growing annual gold
production over the next five to seven years to approximately a
million ounces.
Table 4. 2018 Guidance (Announced January 17, 2018)1
($ millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
Consolidated |
Gold production (kozs) |
215 - 225 |
60 - 70 |
65 - 75 |
260 - 300 |
+620 |
Operating cash costs/ounce sold ($/oz)
(2) |
475 - 500 |
625 - 650 |
625 - 650 |
270 - 290 |
$425 - $450 |
AISC/ounce sold ($/oz) (2) |
|
|
|
|
$750 - 800 |
Operating cash costs (2) |
|
|
|
|
$260 - $270 |
Royalty costs |
|
|
|
|
$22 - $27 |
Sustaining capital(2) |
|
|
|
|
$150 - $170 |
Growth capital(2) |
|
|
|
|
$85 - $95 |
Exploration |
|
|
|
|
$75 - $90 |
Corporate G&A (3) |
|
|
|
|
$20 - $22 |
(1) Represents the Company’s
guidance for which the three and six months ended June 30, 2018 was
measured against, first announced on January 17, 2018.(2)
See “Non-IFRS Measures” set out starting on page 32 of the
MD&A for the three and six months ended June 30, 2018 for
further details. The most comparable IFRS Measure for operating
cash costs, operating cash costs per ounce sold and AISC per ounce
sold is production costs, as presented in the Consolidated
Statements of Operations and Comprehensive Income, and total
additions and construction in progress for sustaining and growth
capital. Operating cash costs, operating cash cost per ounce sold
and AISC per ounce sold reflect an average US$ to C$ exchange rate
of 1.2983 and a US$ to A$ exchange rate of 1.3047.(3)
Includes general and administrative costs and severance payments.
Excludes non-cash share-based payment expense.
Table 5. YTD 2018 Results
($ millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
Consolidated(1) |
Gold production (kozs) |
114,609 |
25,995 |
30,387 |
141,305 |
312,329 |
Operating cash costs/ounce sold ($/oz)
(2) |
$453 |
$760 |
$731 |
$261 |
$424 |
AISC/ounce sold ($/oz) (2) |
|
|
|
|
$793 |
Operating cash costs (2) |
|
|
|
|
$132.4 |
Royalty costs |
|
|
|
|
$12.2 |
Sustaining capital(2) |
|
|
|
|
$86.2 |
Growth capital(2) |
|
|
|
|
$15.7 |
Exploration and evaluation |
|
|
|
|
$43.9 |
Corporate G&A expense(3) |
|
|
|
|
$12.8 |
(1) Consolidated 2018 production
includes 33 ounces processed from the Holloway Mine.(2)
See “Non-IFRS Measures” set out starting on page 32 of the
MD&A for the three and six months for further details. The most
comparable IFRS Measure for operating cash costs, operating cash
costs per ounce sold and AISC per ounce sold is production costs,
and total additions and construction in progress for sustaining and
growth capital as presented in the Consolidated Statements of
Operations and Comprehensive Income. Operating cash costs,
operating cash cost per ounce sold and AISC per ounce sold reflect
an average US$ to C$ exchange rate of 1.2780 and a US$ to A$
exchange rate of 1.2968.(3) Includes general and
administrative costs and severance payments. Excludes non-cash
share-based payment expense.
Key Highlights of YTD 2018 Performance Compared
to Guidance
Consolidated gold production of
312,329 ounces for YTD 2018 surpassed target levels for the first
half of the year and compared favourably well to the Company’s
full-year 2018 guidance of over 620,000 ounces of gold production.
Production for YTD 2018 was driven by record half-year production
at both Fosterville and Macassa. The Macassa mine produced 114,609
ounces and ended the second quarter well positioned to achieve its
full-year 2018 production guidance. Production at Fosterville
totaled 141,305 ounces, also in line with full-year 2018 guidance.
Production at both Holt and Taylor is expected to increase during
the second half of 2018, with the production guidance for full-year
2018 remaining unchanged for both mines.
Production costs for YTD 2018
totaled $138.0 million. Operating cash costs for YTD 2018 of $132.4
million were in line with the Company’s 2018 guidance range of $260
- $270 million, and compared to $150.6 million for YTD 2017.
Operating cash costs for YTD 2017 included $31.5 million of
production costs in the Northern Territory prior to the operation
being place on care and maintenance effective June 30, 2017.
Operating cash costs per ounce
sold for YTD 2018 of $424 were at the low end of the
Company's guidance for full- year 2018 of $425 - $450. Operating
cash costs per ounce sold at Fosterville for YTD 2018 averaged
$261, better than the target range of $270 - $290 reflecting higher
than planned grades due to increased mining activity in high-grade
parts of the Eagle Zone near the contact with the Swan Zone and the
impact of positive grade reconciliations. Operating cash costs per
ounce sold at Macassa were also better than full-year 2018
guidance, averaging $453 versus full-year guidance of $475 - $500,
mainly due to the impact of favourable grade reconciliations and
improvements in grade control practices. Operating cash costs per
ounce sold at the Holt and Taylor mines averaged $731 and $760,
respectively, above each mine’s guidance for full-year 2018. Both
Holt and Taylor are targeting higher levels of production and
improved unit costs during the second half of 2018, with their
current targets for operating cash costs per ounce sold remaining
unchanged.
AISC per ounce sold of $793 for
YTD 2018 was within the Company’s full-year 2018 guidance of $750 -
$800, with further improvement anticipated during the second half
of 2018.
Royalty costs totaled $12.2
million for YTD 2018, in line with full-year 2018 guidance of $22 -
$27 million.
Sustaining capital expenditures
for YTD 2018 totaled $86.2 million. The Company remains on track to
achieve full-year 2018 guidance of $150 - $170 million.
Growth capital expenditures for
YTD 2018 totaled $15.7 million, excluding capitalized exploration
expenditures. These expenditures were lower than anticipated,
largely due to the timing for permitting and procurement. Included
in growth capital expenditures were $7.6 million at Macassa, $6.5
million of expenditures at Fosterville, $0.9 million in the
Northern Territory and $0.7 million split between the Holt and
Taylor mines. Increased capital expenditures related to
construction and procurement for the Macassa #4 shaft project are
expected during the second half of 2018, with the project remaining
on track for the commencement of full-face shaft sinking by the
second quarter of 2019 and for completion of phase one of the
project by the second quarter of 2022. At Fosterville, expenditures
related to the mine’s three key growth projects, a new ventilation
system, construction of a paste-fill plant and a new water
treatment plant, are also expected to increase during the second
half of 2018, as the rate of development advance related to the
ventilation raises accelerates, surface construction of the paste
fill plant commences following the completion of permitting and
procurement and continued progress is achieved with the new water
treatment plant. The target completion dates for the three projects
remains largely unchanged. The Company continues to target
full-year 2018 growth capital expenditures of $85 - $95
million.
Exploration expenditures
totaled $43.9 million for YTD 2018. Included in YTD exploration
expenditures were $32.5 million of expensed exploration
expenditures and $11.4 million of capitalized exploration
expenditures. At Fosterville, exploration work focused on infill
and extension drilling at a number of in-mine targets, as well as
work to evaluate district targets in close proximity to the mine.
In addition, development commenced on an exploration drift at
Harrier South at Fosterville Mine, where concentrations of quartz
veining with a high occurrence of visible gold have been
intersected similar to those found at the Lower Phoenix system near
the high-grade Swan Zone. In the Northern Territory, drilling
continued at both the Lantern Deposit at the Cosmo mine and below
the Prospect and Crosscourse open pits at Union Reefs. Also, two
exploration drifts from the existing Cosmo ramp into the Lantern
Deposit were approximately 50% complete at June 30, 2018 and are
expected to be completed in the third quarter. Drilling from the
920 Level drift is in progress, with drilling from the 610 Level
drift to commence in early August. In Canada, underground drilling
at Macassa continued to generate encouraging results in support of
future growth in mineral resource and mineral reserves, while
drilling at Taylor continued to target additional expansion of
mineralization around the Shaft and West Porphyry deposits. The
Company continues to target total exploration expenditures for
full-year 2018 of $75 - $90 million.
Corporate G&A expense
totaled $12.8 million for YTD 2018, reflecting a weighting of these
expenditures to the early part of the year. Corporate G&A
expense is expected to end the year in line with full-year guidance
of $20 - $22 million.
Improvements to Full-Year 2018
Guidance
Based on the Company’s performance for YTD 2018,
as well as expectations for the remainder of the year, the Company
has improved the full-year 2018 guidance for production and
operating cash costs per ounce sold on a consolidated basis, as
well as for the Fosterville and Macassa mines. Consolidated
full-year production is now targeted at over 635,000 ounces,
compared to the previous guidance of over 620,000 ounces. Full-year
2018 guidance for consolidated operating cash costs per ounce sold
is improved to $400 – $425, which compared to the previous guidance
of $425 – $450. At Fosterville, the Company is now targeting
full-year 2018 production of 275,000 – 300,000 ounces, which
compares to the previous guidance of 260,000 - 300,000 ounces.
Guidance for operating cash costs per ounce sold at Fosterville is
improved to $250 - $270 from the previous target range of $270 -
$290. At Macassa, full-year 2018 guidance for production is revised
to 220,000 – 225,000 ounces from the previous guidance of 215,000 -
225,000 ounces, while the mine’s full-year 2018 guidance for
operating cash costs per ounce sold is improved to $460 – $480 from
$475 - $500 previously. Other components of the Company’s full-year
2018 guidance remained unchanged from the targets first released in
the Kirkland Lake Gold News Release dated January 17, 2018.
Table 6. Improved 2018 Guidance (as at August 1, 2018)1
($ millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
Consolidated |
Gold production (kozs) |
220 – 225 |
60 - 70 |
65 - 75 |
275 - 300 |
+635 |
Operating cash costs/ounce sold ($/oz)
(2) |
460 – 480 |
625 - 650 |
625 - 650 |
250 - 270 |
$400 - $425 |
AISC/ounce sold ($/oz) (2) |
|
|
|
|
$750 - 800 |
Operating cash costs (2) |
|
|
|
|
$260 - $270 |
Royalty costs |
|
|
|
|
$22 - $27 |
Sustaining capital(2) |
|
|
|
|
$150 - $170 |
Growth capital(2) |
|
|
|
|
$85 - $95 |
Exploration |
|
|
|
|
$75 - $90 |
Corporate G&A (3) |
|
|
|
|
$20 - $22 |
(1) Full-year 2018 guidance as at
August 1, 2018, following improvements to consolidated production
and operating cash costs per ounce sold guidance, as well as to
production and operating cash costs per ounce sold guidance for
Macassa and Fosterville.(2) See “Non-IFRS Measures”
set out starting on page 32 of the MD&A for the three and six
months ended June 30, 2018 for further details. The most comparable
IFRS Measure for operating cash costs, operating cash costs per
ounce sold and AISC per ounce sold is production costs, as
presented in the Consolidated Statements of Operations and
Comprehensive Income, and total additions and construction in
progress for sustaining and growth capital. Operating cash costs,
operating cash cost per ounce sold and AISC per ounce sold reflect
an average US$ to C$ exchange rate of 1.28 and a US$ to A$ exchange
rate of 1.31.(3) Includes general and administrative
costs and severance payments. Excludes non-cash share-based payment
expense.
Q2 2018 Financial Results and Conference Call
Details
A conference call to discuss the Q2 and YTD 2018
results will be held by senior management on Wednesday, August 1,
2018, at 1:30 pm ET. Call-in information is provided below. The
call will also be webcast and accessible on the Company’s website
at www.klgold.com.
Date: |
WEDNESDAY, AUGUST 1, 2018 |
Conference ID: |
8986758 |
Time: |
1:30 pm ET |
Toll-free number: |
1 (866) 393-4306 |
International callers: |
1 (734) 385-2616 |
Webcast URL: |
https://event.on24.com/wcc/r/1772072/71EDE740C03CE70A2D11FB00652CC45A |
Qualified Persons
Pierre Rocque, P.Eng., Vice President, Canadian
Operations and Ian Holland, FAusIMM, Vice President Australian
Operations are “qualified persons” as defined in National
Instrument 43-101 and have reviewed and approved disclosure of the
technical information and data in this news release.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a mid-tier gold
producer that in 2018 is targeting over 635,000 ounces of gold
production from mines in Canada and Australia. The production
profile of the company is anchored from two high-grade, low-cost
operations, including the Macassa Mine located in Northeastern
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 and
operational expertise.
Non-IFRS Measures
The Company has included certain non-IFRS
measures in this document, as discussed below. The Company
believes that these measures, in addition to conventional measures
prepared in accordance with IFRS, provide investors an improved
ability to evaluate the underlying performance of the
Company. The non-IFRS measures are intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with IFRS. These measures do not have any standardized
meaning prescribed under IFRS, and therefore may not be comparable
to other issuers. For a reconciliation of the Non-IFRS Measures
described below, please see the Non-IFRS Measures section of the
MD&A for three and six months ended June 30, 2018 beginning on
page 32. Non-IFRS reconciliations for Q1 2018 are provided in the
MD&A for the three months ended March 31, 2018, beginning on
page 27.
Free Cash Flow
In the gold mining industry, free cash flow is a
common performance measure with no standardized meaning. Free cash
flow is calculated by deducting capital cash spending (capital
expenditures for the period, net of expenditures paid through
finance leases) from cash flows from operations.
The Company discloses free cash flow from
continuing operations as it believes the measures provide valuable
assistance to investors and analysts in evaluating the Company’s
ability to generate cash flow. The most directly comparable measure
prepared in accordance with IFRS is cash flows generated from
operations and net cash used in investing activities of continuing
operations.
Operating Cash Costs and Operating Cash Costs
per Ounce Sold
Operating cash costs and operating cash cost per
ounce sold are non-IFRS measures. In the gold mining
industry, these metrics are common performance measures but do not
have any standardized meaning under IFRS. Operating cash costs
include mine site operating costs such as mining, processing and
administration, but exclude royalty expenses, depreciation and
depletion and share based payment expenses and reclamation
costs. Operating cash costs per ounce sold is based on ounces
sold and is calculated by dividing operating cash costs by volume
of ounces sold.
The Company discloses operating cash costs and
operating cash cost per ounce sold as it believes the measures
provide valuable assistance to investors and analysts in evaluating
the Company’s operational performance and ability to generate cash
flow. The most directly comparable measure prepared in
accordance with IFRS is total production expenses. Operating cash
costs and operating cash cost per ounce of gold sold should not be
considered in isolation or as a substitute for measures prepared in
accordance with IFRS.
Sustaining and Growth Capital
Sustaining capital and growth capital are
Non-IFRS measures. Sustaining capital is defined as capital
required to maintain current operations at existing levels.
Growth capital is defined as capital expenditures for major growth
projects or enhancement capital for significant infrastructure
improvements at existing operations.
AISC and AISC per Ounce Sold
AISC and AISC per ounce sold are Non-IFRS
measures. These measures are intended to assist readers in
evaluating the total costs of producing gold from current
operations. While there is no standardized meaning across the
industry for this measure, the Company’s definition conforms to the
definition of AISC as set out by the World Gold Council in its
guidance note dated June 27, 2013.
The Company defines AISC as the sum of operating
costs (as defined and calculated above), royalty expenses,
sustaining capital (capital required to maintain current operations
at existing levels), corporate expenses, underground exploration
expenses and reclamation cost accretion related to current
operations. Corporate expenses include general and
administrative expenses, net of transaction related costs,
severance expenses for management changes and interest
income. AISC excludes growth capital, reclamation cost
accretion not related to current operations, interest expense, debt
repayment and taxes.
Average Realized Price per Ounce Sold
In the gold mining industry, average realized
price per ounce sold is a common performance measure that does not
have any standardized meaning. The most directly comparable
measure prepared in accordance with IFRS is revenue from gold
sales. Average realized price per ounces sold should not be
considered in isolation or as a substitute for measures prepared in
accordance with IFRS. The measure is intended to assist
readers in evaluating the total revenues realized in a period from
current operations.
Adjusted Net Earnings and Adjusted Net Earnings
per Share
Adjusted net earnings from continuing operations
and adjusted net earnings per share from continuing operations are
used by management and investors to measure the underlying
operating performance of the Company.
Adjusted net earnings from continuing operations
is defined as net earnings adjusted to exclude the after-tax impact
of specific items that are significant, but not reflective of the
underlying operations of the Company, including transaction costs
and executive severance payments, purchase price adjustments
reflected in inventory, and other non-recurring items.
Adjusted net earnings per share from continuing operations is
calculated using the weighted average number of shares outstanding
for adjusted net earnings per share from continuing operations.
Earnings before Interest, Taxes, Depreciation,
and Amortization (“EBITDA”)
EBITDA from continuing operations represents net
earnings before interest, taxes, depreciation and
amortization. EBITDA is an indicator of the Company’s ability
to generate liquidity by producing operating cash flow to fund
working capital needs, service debt obligations, and fund capital
expenditures.
Working Capital
Working capital is a Non-IFRS measure. In
the gold mining industry, working capital is a common measure of
liquidity but does not have any standardized meaning.
The most directly comparable measure prepared in
accordance with IFRS is current assets and current
liabilities. Working capital is calculated by deducting
current liabilities from current assets. Working capital
should not be considered in isolation or as a substitute from
measures prepared in accordance with IFRS. The measure is
intended to assist readers in evaluating the Company’s
liquidity.
Risks and Uncertainties
The exploration, development and mining of
mineral deposits involves significant risks, which even a
combination of careful evaluation, experience and knowledge may not
eliminate. Kirkland Lake Gold is subject to several financial
and operational risks that could have a significant impact on its
cash flows and profitability. The most significant risks and
uncertainties faced by the Company include: the price of gold; the
uncertainty of production estimates, including the ability to
extract anticipated tonnes and successfully realizing estimated
grades; changes to operating and capital cost assumptions; the
inherent risk associated with project development and permitting
processes; the uncertainty of the mineral resources and their
development into mineral reserves; the replacement of depleted
reserves; foreign exchange risks; regulatory; tax as well as
health, safety, and environmental risks. For more extensive
discussion on risks and uncertainties refer to the “Risks and
Uncertainties” section in the December 31, 2017 Annual Information
Form and the Company’s MD&A for the period ended December 31,
2017 filed on SEDAR.
Cautionary Note Regarding Forward-Looking
Information
This press release contains statements which
constitute "forward-looking information" within the meaning of
applicable securities laws, including statements regarding the
plans, intentions, beliefs and current expectations of Kirkland
Lake Gold with respect to future business activities and operating
performance. Forward-looking information is often identified by the
words "may", "would", "could", "should", "will", "intend", "plan",
"anticipate", "believe", "estimate", "expect" or similar
expressions and include information regarding: (i) the amount of
future production over any period; (ii) assumptions relating to
revenues, operating cash flow and other revenue metrics set out in
the Company's disclosure materials; and (iii) future exploration
plans.
Investors are cautioned that forward-looking
information is not based on historical facts but instead reflect
Kirkland Lake Gold's management's expectations, estimates or
projections concerning future results or events based on the
opinions, assumptions and estimates of management considered
reasonable at the date the statements are made. Although Kirkland
Lake Gold believes that the expectations reflected in such
forward-looking information are reasonable, such information
involves risks and uncertainties, and undue reliance should not be
placed on such information, as unknown or unpredictable factors
could have material adverse effects on future results, performance
or achievements of the combined company. Among the key factors that
could cause actual results to differ materially from those
projected in the forward-looking information are the following: the
future development and growth potential of the Canadian and
Australian operations; the future exploration activities planned at
the Canadian and Australian operations and anticipated effects
thereof; liquidity risk; risks related to community relations;
risks relating to equity investments; risks relating to first
nations and Aboriginal heritage; the availability of
infrastructure, energy and other commodities; nature and climactic
conditions; risks related to information technology and
cybersecurity; timing and costs associated with the design,
procurement and construction of the Company’s various capital
projects, including but not limited to the #4 Shaft project at the
Macassa Mine and the ventilation and paste fill plant project at
the Fosterville Mine; permitting; currency exchange rates (such as
the Canadian dollar and the Australian dollar versus the United
States dollar); risks associated with dilution; labour and
employment matters; risks in the event of a potential conflict of
interest; changes in general economic, business and political
conditions, including changes in the financial markets; changes in
applicable laws; and compliance with extensive government
regulation. This forward-looking information may be affected by
risks and uncertainties in the business of Kirkland Lake Gold and
market conditions. This information is qualified in its entirety by
cautionary statements and risk factor disclosure contained in
filings made by Kirkland Lake Gold, including its annual
information form and financial statements and related MD&A for
the financial year ended December 31, 2017 and 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 information prove incorrect, actual results may
vary materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although Kirkland
Lake Gold 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. Kirkland Lake Gold does not intend, and do
not assume any obligation, to update this forward-looking
information except as otherwise required by applicable law.
FOR FURTHER INFORMATION PLEASE CONTACT
Anthony Makuch, President, Chief Executive
Officer & DirectorPhone: +1 416-840-7884E-mail:
tmakuch@klgold.com
Mark Utting, Vice-President, Investor Relations Phone: +1
416-840-7884 E-mail: mutting@klgold.com
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