Kirkland Lake Gold Reports Strong Earnings and Cash Flow in Q3 2020
November 05, 2020
Q3 2020 Highlights
Net earnings of $202.0 million. Adjusted net earnings(1) of $249.3 million or $0.91 per share: Net earnings totalled $202.0 million or $0.73 per share. Adjusted net earnings(1) totalled $249.3 million or $0.91 per share, an increase of 49% from Q3 2019 and 14% from Q2 2020.
Record free cash flow(1): Net cash provided by operating activities totalled $431.1 million with record free cash flow1 of $275.7 million, a 52% increase from Q3 2019 and 22%2 higher than the previous quarter.
Increased balance sheet strength: Cash at September 30, 2020 totalled $848.5 million, a $311.1 million or 58% increase from $537.4 million at June 30, 2020.
Progress with key growth projects: Total growth capital expenditures1 totalled $28.1 million, including $11.5 million related to Macassa ($8.3 million to #4 shaft project); #4 Shaft project ended the quarter approximately one month ahead of schedule and on track for completion in late 2022.
Continued exploration success: The ramp up of exploration drilling continued during Q3 2020, with total expenditures of $27.4 million; At September 30, 2020, there were five surface and eight underground drills at Fosterville, one surface and eight underground drills at Macassa and five surface drills at Detour Lake; Considerable exploration success achieved, including:
º Detour Lake: Results in Saddle Zone support the Company’s view that a much larger deposit exists around the Main Pit and West Pit locations than is currently included in Mineral Reserves;
º Fosterville: Infill drilling in the Swan Zone intersected higher than expected grades; Drilling confirmed substantial scale and growth potential of mineralized systems at Cygnet, Robbin’s Hill and Harrier;
º Macassa: New results included exceptional grades being intersected near contact of South Mine Complex (“SMC”) and high-grade mineralized zones vertically stacked along Amalgamated Break.
Over half billion dollars in share repurchases in 2020: During Q3 2020, $107.4 million (C$143.0 million) was used to repurchase 2,139,300 common shares; As at November 4, 2020, 14,029,500 shares had been repurchased year to date for $526.6 million (C$709.5 million).
Continued dividend growth: Quarterly dividend increased 50%, to US$0.1875 per share, effective Q4 2020; Increase follows doubling of dividend in Q1 2020 to US$0.125 per share from US$0.06 per share (dividend more than tripled during 2020); $34.5 million used in Q3 2020 to pay quarterly dividend on July 13, 2020 to shareholders of record June 30, 2020.
Solid operating results:
º Production of 339,584 ounces, a 37% increase from 248,400 ounces in Q3 2019 and 3% higher than 329,770 ounces the previous quarter;
º Production costs of $136.0 million versus $73.7 million in Q3 2019 and $141.4 million in Q2 2020;
º Operating cash costs per ounce sold(1) averaged $406 compared to $287 in Q3 2019 and $374 in Q2 2020; $245 in Q3 2020 and $241 in Q2 2020 excluding Detour Lake;
º All-in sustaining costs (“AISC”) per ounce sold(1) averaged $886 ($622 excluding Detour Lake) versus $562 in Q3 2019 and $751 ($526 excluding Detour Lake) in Q2 2020.
Detour Lake – The right deal at the right time: Detour Lake continued to make a substantial contribution to the Company’s results in Q3 2020, with production of 140,067 ounces, revenue of $262.5 million and free cash flow(1) totalling $64.0 million; From January 31, 2020 to September 30, 2020, Detour Lake produced 363,614 ounces with revenue of $674.9 million and free cash flow1 totalling $231.0(3) million, representing 41% of the Company’s total free cash flow(1),(3) for YTD 2020; The acquisition on January 31, 2020 added 14.8 million ounces to the Company’s Mineral Reserve base with potential for significant growth over the next few years with continued exploration success.
Solid return from strategic investment: During Q3 2020, $107.7 million (C$143.2 million) was received from the sale of the Company’s 32.6 million shares of Osisko Mining Inc. (“Osisko”), resulting in a realized gain of $60.6 million recognized through other comprehensive income (not included in net earnings).
Strategic alliance with Newmont Canada FN Holdings ULC (“Newmont”): $75 million (not included in net earnings) was received through a strategic alliance agreement with Newmont with respect to exploration and development opportunities around the Holt Complex and Newmont’s properties in Timmins; Through agreement, Newmont acquired an option on mining and mineral rights related to the Holt Mine property.
Environmental rehabilitation program launched: Reflecting the Company’s commitment to responsible mining, a three-year rehabilitation program was launched in the Northern Territory during Q3 2020 to address environmental issues caused by prior owners of the assets; Program involves managing the Howley Streak waste dumps, rehabilitation of dams and treatment of site water inventory; $32.6 million of rehabilitation costs included in Q3 2020 net earnings.
YTD 2020 Financial and Operating Highlights
Net earnings of $555.1 million ($2.06 per basic share), an increase of $164.2 million or 42% from $390.9 million ($1.86 per basic share) for YTD 2019; Adjusted net earnings(1) of $647.8 million ($2.40 per share), $256.7 million or 66% higher than $391.1 million ($1.86 per share) for the same period in 2019.
Net cash provided by operating activities of $894.9 million, a 33% increase from YTD 2019; Excluding $60.5 million of restructuring costs and $132.6 million tax instalment payment in Australia related to 2019 tax year, net cash provided by operating activities totalled $1,088.0 million.
Free cash flow(1) totalled $500.6 million, 52% higher than YTD 2019; Excluding restructuring costs and the $132.6 million tax payment, free cash flow totaled $693.7 million.
Production of 1,000,218 ounces, a 44% increase from 694,873 ounces for YTD 2019.
Operating cash cost per ounce sold(1) of $407 ($271 excluding Detour Lake) versus $296 for YTD 2019.
AISC per ounce sold(1) of $804 ($590 excluding Detour Lake) versus $584 in YTD 2019.