TORONTO, ONTARIO–(Marketwired – Nov. 3, 2016) –
Q3 and YTD 2016 Highlights (For the three and nine months ended September 30, 2016)
- Realized net income of $24.8 million ($51.0 million YTD) or $0.21 per share ($0.46 per share YTD)
- Adjusted net earnings1 of $27.9 million or $0.24 per share in Q3/16 and $58.2 or $0.52 per share YTD
- Generated $131.6 million in revenue during the quarter ($359.5 million YTD)
- Generated free cash flow1 of $30.2 million during the quarter; and C$87.5 million YTD
- Operating costs per ounce of gold sold1 during the quarter of US$540/oz and US$591/oz YTD
- Q3/16 production expenses of $75.8 million (YTD $235.2 million) which include operating costs, depreciation and depletion, royalties and share based payment expenses
- All-in sustaining costs per ounce of gold sold (“AISC”)1 of US$970/oz ($1,266/oz) during the quarter; and US$940/oz YTD ($1,243/oz)
- Closed a C$15.0 million flow-through financing and released C$10 million from restricted cash
- The Company had cash and cash equivalents as at September 30, 2016 of $211.5 million
- Q3/16 gold sales of 76,339 ounces at an average realized price of US$1,321/oz1 ($1,724/oz); YTD gold sales of 217,792 ounces at an average realized price of US$1,249/oz ($1,651/oz)
- Gold production of 77,274 ounces in Q3/16; and 207,886 ounces YTD
- The Company expects to exceed 280,000 ounces of production in 2016 with operating costs and AISC at or below guidance of US$800/oz and US$1,000/oz, respectively
- Provided notice to Franco Nevada Corporation (“FNV”) of intent to buy back a 1% net smelter return (“NSR”) royalty on the Company’s land holdings in the Kirkland Lake camp for US$30.5 million, reducing the Company’s royalty rate from 2.5% to 1.5%.
- Announced proposed business combination with Newmarket Gold Inc., to create a new low-cost mid-tier gold producer with combined anticipated annual production of +500,000 ounces; cash costs below US$650/oz and AISC below US$1,015/oz
Kirkland Lake Gold Inc. (“Kirkland Lake Gold” or the “Company“) (TSX:KLG), an emerging mid-tier gold producer with operations in Ontario, Canada, today announces third quarter financial results for the three (“Q3/16“) and nine months (“YTD“) ended September 30, 2016. All figures in this release are in Canadian dollars unless stated otherwise.
Anthony (Tony) Makuch, President and CEO of the Company, commented: “I am extremely pleased to report a solid quarter with record earnings and free cash flow generation of approximately $10 million a month. Costs during the quarter were positively impacted by increased productivity and additional tonnes milled at both the Macassa and Holt mills. Our team remains committed to delivering solid results. With the cash flow generation this quarter, we believe we are well positioned to repay the convertible debentures that come due in June and December of next year, while funding our capital investments and development projects.”
Footnotes
- The Company has included non-GAAP performance measures; average realized price per ounce of gold sold, operating cost per tonne produced and operating cost per ounce sold, AISC per ounce sold, free cash flow, adjusted net earnings and adjusted net earnings per share. These are common performance measures in the mining industry but do not have any standardized meaning. Refer to non-GAAP measures in this press release for a reconciliation of these measures to the accompanying financial statements for the period ended September 30, 2016.
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 following abbreviations are used to describe the periods under review throughout this press release.
| Abbreviation | Period | Abbreviation | Period |
| YTD | January 1, 2016 – September 30, 2016 | YTD/15* | February 1, 2015 – October 31, 2015 |
| Q3/16 | July 1, 2016 – September 30, 2016 | Q2/SY15 | August 1, 2015 – October 31, 2015 |
| Q2/16 | April 1, 2016 – June 30, 2016 | Q1/SY15 | May 1, 2015 – July 31, 2015 |
| Q1/16 | January 1, 2016 – March 31, 2016 | Q4/15 | February 1, 2015 – April 30, 2015 |
| Q3/SY15 | November 1, 2015 – December 31, 2015 | Q3/15 | November 1, 2014 – January 31, 2015 |
*YTD/15 is the nine month period from February 1, 2015 ending October 31, 2015 of that calendar year.
Consolidated Financial Information
Figures do not include results from the Holt Mine Complex for the period prior to the acquisition of St Andrew (January 26, 2016).
| (In thousands of C$ except per share amounts) | Three months ended | Nine months ended | ||||||
| Q3/16 | Q2/SY15 | Sep 30, 2016 | Oct 31, 2015 | |||||
| Revenue | $ | 131,586 | $ | 50,570 | $ | 359,517 | $ | 170,227 |
| Production Expenses | $ | 75,750 | $ | 37,466 | $ | 235,166 | $ | 126,431 |
| Income before income taxes | $ | 39,478 | $ | 2,696 | $ | 81,371 | $ | 22,003 |
| Net income | $ | 24,759 | $ | 2,068 | $ | 51,042 | $ | 14,171 |
| Earnings per share (basic) | $ | 0.21 | $ | 0.03 | $ | 0.46 | $ | 0.18 |
| Cash flow from operations | $ | 56,698 | $ | 20,115 | $ | 153,358 | $ | 56,761 |
| Cash spent on mine development & PPE* | $ | 26,455 | $ | 12,237 | $ | 65,819 | $ | 36,001 |
*PPE – purchase of property, plant and equipment and mining interest
Key Performance Indicators1
Figures do not include results from the Holt Mine Complex for the period prior to the acquisition of St Andrew (January 26, 2016).
| (In thousands of C$ unless otherwise noted) | Three months ended | Nine months ended | ||
| Q3/16 | Q2/SY15 | Sep 30, 2016 | Oct 31, 2015 | |
| Tonnes milled | 307,886 | 77,899 | 827,875 | 247,514 |
| Grade (g/t Au) | 8.2 | 13.7 | 8.1 | 14.6 |
| Recovery – % | 95.7% | 97.3% | 95.9% | 96.9% |
| Gold Produced (ounces) | 77,274 | 33,511 | 207,886 | 112,972 |
| Gold Sold (ounces) | 76,339 | 34,606 | 217,792 | 114,919 |
| Average realized price (US$/oz sold) | $ 1,321 | $ 1,110 | $ 1,249 | $ 1,165 |
| Average realized price ($/oz sold) | $ 1,724 | $ 1,461 | $ 1,651 | $ 1,481 |
| Operating Costs (per tonne produced) | $ 175 | $ 358 | $ 205 | $ 387 |
| Operating Costs (US$/oz sold) | $ 540 | $ 613 | $ 591 | $ 656 |
| Operating Costs ($/oz sold) | $ 704 | $ 807 | $ 781 | $ 833 |
| AISC (US$/oz sold) | $ 970 | $ 962 | $ 940 | $ 980 |
| AISC ($/oz sold) | $ 1,266 | $ 1,266 | $ 1,243 | $ 1,245 |
| Adjusted net earnings | $ 27,903 | $ 682 | $ 58,225 | $ 13,790 |
*AISC for the 9 month period ended Sep 30/16 has been restated to reflect the removal from AISC of the $4.4 million fair value adjustment to inventory which was recognized as part of the acquisition of St Andrew.
The Company reported net income for the quarter of approximately $27.9 million, or $0.21 per share compared to $2.1 million or $0.03 per share for Q2/SY15. Adjusted net earnings in Q3/16 were $27.9 million or $0.25 per share and $ 59.2 million or $0.53 per share YTD, reflecting higher production and revenue and lower operating costs. These were partially offset by higher depreciation and depletion expenses (“D&D”), higher general and administrative expenses due to spending for the integration of the acquired St Andrew operations and higher exploration spending and deferred tax expense.
Free cash flow for Q3/16 was $30.2 million compared to $7.9 million during Q2/SY15, reflecting higher realized gold prices, lower AISC, and increased production and sales from the additional production from the Holt Mine Complex. With the free cash flow generated during the quarter combined with the $15 million flow-through financing, and the release of $10 million of restricted cash, the Company had $211.5 million in cash and cash equivalents at quarter end compared to $83.4 million at October 31, 2015 (Q2/SY15).
Operations Overview
Kirkland Lake Gold pre-released production results with a total of 77,274 ounces of gold production for Q3/16 and a total of 207,886 ounces YTD, compared to 33,511 ounces in Q2/SY15 and 112,972 ounces in YTD/15 as a result of the additional production from the Holt Mine Complex, and the additional low grade tonnes milled. The operations performed well during the quarter with grades, recoveries, and throughput all in line with expectations.
The cost per tonne of $175 achieved during the quarter was positively impacted by higher throughput which was mainly driven by the contribution of the Holt Mine Complex 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 $358 for Q2/SY15 (which does not include any contribution from the Holt Mine Complex). The operating cost per ounce of gold sold of US$540 was lower when compared to Q2/SY15 (US$613/oz) as a result of the contribution from the Holt Mine Complex.
On a YTD basis, the operating cost of US$591/oz was lower compared to YTD/15 (US$656/oz) for the same reasons.
A breakdown of operational performance at each operation is summarized in the table below.
| Segmented Financial Key Performance Indicators Q3/16 | Macassa Mine Complex | Holt | Holloway | Taylor | Holt Mine Complex Subtotal | Consolidated |
| Gold Sold (ounces) | 43,283 | 14,735 | 6,989 | 11,332 | 33,057 | 76,339 |
| Operating cost ($/ tonne produced) | 307 | 104 | 125 | 107 | 111 | 175 |
| Operating cost (US$/oz sold) | 546 | 550 | 739 | 379 | 532 | 540 |
| Capital Expenditures ($000’s) | 18,256 | 7,098 | 2,778 | 4,452 | 14,328 | 32,584 |
| AISC (US$/oz sold) | 959 | 1,075 | 1,578 | 732 | 986 | 970 |
| Segmented Financial Key Performance Indicators YTD 2016 | Macassa Mine Complex | Holt | Holloway | Taylor | Holt Mine Complex Subtotal | Consolidated |
| Gold Sold (ounces) | 125,442 | 41,550 | 17,128 | 33,672 | 92,351 | 217,793 |
| Operating cost ($/tonne produced) | 326 | 131 | 165 | 138 | 141 | 205 |
| Operating cost (US$/oz sold) | 568 | 651 | 918 | 433 | 621 | 591 |
| Capital Expenditures ($000’s) | 45,462 | 14,738 | 3,798 | 8,661 | 27,197 | 72,659 |
| AISC (US$/oz sold) | 935 | 1,058 | 1,225 | 670 | 948 | 940 |
*YTD figures do not include results from the Holt Mine Complex for the period prior to the acquisition of St Andrew (January 26, 2016).
Exploration
During the third quarter, three underground exploration rigs were running at the Macassa Mine Complex and continued to test the east strike extension of the SMC, and the Amalgamated Break from the 5300′ level, as well as the ’04 Break from the 4250′ level continued.
Surface exploration (5 rigs) tested the potential easterly extension of the SMC and the ’04 Break at Macassa above the 3000′ level. Drilling also tested the Main Break on the former Kirkland Minerals property as well as the Amalgamated Break at depth.
At the Taylor Mine surface rigs (2) tested the easterly and westerly strike extension of the West Porphyry Zone. As well 3 surface rigs and 1 underground drill continued to test for the extension of known zones at the Holloway Mine, and followed up on previous drill intercepts along the Holloway Mine property.
A helicopter-borne Magnetic / Electromagnetic survey totalling 1,923 line kilometres commenced during the quarter, which will cover numerous Kirkland Lake North claim blocks. Higher resolution magnetics and electro-magnetic data offers significantly deeper depth penetration than historical survey coverage and allows for 3D modelling and data processing which will prioritize future drill target selection.
Proposed Transaction with Newmarket
On September 29, 2016, the Company announced that it had entered into a definitive agreement with Newmarket Gold Inc. (the “Arrangement Agreement”) to merge the two companies, creating an exciting new mid-tier gold company (the “Transaction”) (See press release dated September 29, 2016).
The proposed business combination will be effected by way of a Plan of Arrangement under the Canada Business Corporations Act. At closing, all of the Company common shares will be exchanged at a ratio of 2.1053 Newmarket common shares for each KL Gold share held. Newmarket shareholders will continue to hold their existing common shares. The combined company, to be renamed Kirkland Lake Gold, will trade on the Toronto Stock Exchange (“TSX”). Concurrently with closing the Transaction, the combined company will undertake a 0.475 for 1 share consolidation subject to approval of the Newmarket shareholders.
Existing Kirkland Lake Gold and Newmarket shareholders will own approximately 57% and 43%, respectively, of the combined company on a fully-diluted in-the-money basis.
For Kirkland Lake Gold, the Transaction will require approval by 66 2/3 percent of the votes cast by its shareholders as well as the approval of a simple majority of disinterested shareholders voting at a special shareholders meeting. The special meeting of shareholders will be held on November 25, 2016 at 10:00am ET at the offices of Cassels Brock & Blackwell LLP, Suite 2100, 40 King Street West, Toronto, Ontario M5H 3C2. All information relating to the special meeting of shareholders was mailed on November 2, 2016, and is available under the Company’s profile on www.sedar.com and on the corporate website at www.klgold.com.
FNV Royalty Buy Back
On October 5, 2016, the Company provided notice to Franco-Nevada Canada Holdings Corp. (“FNV”) of the intent to exercise its right to buy back a 1% net smelter return (“NSR”) royalty (the “Royalty”) on its land holdings in the Kirkland Lake camp, reducing the Company’s royalty from 2.5% to 1.5%. As per the terms and conditions of the royalty agreement dated October 28, 2013, the Company will make a payment of US$30.5 million to FNV within the fourth quarter of 2016.
YTD 2016 Key Performance Indicators
The 2016 guidance metrics issued on April 14, 2016, are summarized against the results for the nine months ended September 30, 2016. The AISC was impacted by the additional capital spending incurred during the quarter and is expected to be similar in the fourth quarter.
The Company expects annual production to be in the top half of the production guidance and on the lower end of the operating costs and AISC guidance for the year.
| Guidance Metrics | YTD Results | 2016 Expectations | |
| Gold Production (ounces) | 270,000 – 290,000 | 207,886 | Upper end of range |
| Head Grade (g/t) | 7.7 | 8.2 | In line with guidance |
| Operating Costs per Ounce Sold | US$600 – $650 $800 – $850 |
US$591 $781 |
Lower end of range |
| All-In Sustaining Costs per Ounce Sold | US$1,000 – $1,050 $1,300 – $1,350 |
US$940 $1,243 |
Lower end of range |
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 September 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 September 30, 2016, as filed on SEDAR at www.sedar.com, or at the end of this release.
Q3/16 Earnings Call and Webcast (November 3, 2016)
The Company will hold a conference call to discuss these results today, Thursday November 3, 2016, at 2:00pm 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: 98796514
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: 98796514
Replay Available Until: February 3, 2017 at 11:59PM ET
Qualified Persons
Production at the Company’s operations are under the supervision of Mr. Keyvan Salehi, P.Eng., the Company’s Vice President of Corporate Development & Technical Services. Exploration activities across the Company’s land position as well as all exploration related staff are under the supervision of Mr. Doug Cater, P. Geo., the Company’s Vice President of Exploration, who is qualified person for the purpose of NI 43-101.
Messrs. Salehi and Cater are qualified persons as defined by NI 43-101, and have reviewed and approved this disclosed herein. As executives of the Company, Mr. Cater and Mr. Salehi are not considered independent.
Selected Financial Information
*YTD figures do not include results from the Holt Mine Complex for the period prior to the acquisition of St Andrew (January 1-25, 2016).
| Financial Highlights | Three months ended September 30, 2016 | Three months ended June 30, 2016 | Three months ended October 31, 2016 | Nine months ended September 30, 2016 | Nine months ended October 31, 2016 |
| (All amounts in 000’s of Canadian Dollars, except gold price per ounce, shares and per share figures) | |||||
| Gold Sales (ounces) | 76,339 | 72,144 | 34,606 | 217,792 | 114,919 |
| Average Gold Price (per ounce) | $1,724 | $1,638 | $1,461 | $1,651 | $1,481 |
| Revenue | $131,586 | $118,143 | $50,570 | $359,517 | $170,227 |
| Production Expenses | $75,750 | $81,740 | $37,466 | $235,166 | $126,431 |
| Exploration Expenditure | $6,120 | $4,129 | $1,773 | $12,830 | $5,768 |
| Other Expenses (include other income (expense) | $10,238 | $10,362 | $5,035 | $30,150 | $16,025 |
| Income before Income Taxes | $39,478 | $21,978 | $6,296 | $81,371 | $22,003 |
| Net Income | $24,759 | $13,764 | $2,068 | $51,042 | $14,171 |
| Per share (basic) | $0.21 | $0.12 | $0.03 | $0.46 | $0.18 |
| Per share (diluted) | $0.21 | $0.12 | $0.03 | $0.45 | $0.18 |
| Cash flow from operations | $56,698 | $52,958 | $20,115 | $153,358 | $55,761 |
| Cash flow from (used in) financing activities | $13,223 | ($4,676) | ($4,891) | $9,614 | $20,474 |
| Cash flow used in investing activities | ($16,215) | ($21,023) | ($12,237) | ($44,819) | ($36,001) |
| Net increase in cash | $53,996 | $27,018 | $4,276 | $117,798 | $39,371 |
| Cash and cash equivalents | $211,525 | $157,529 | $83,390 | $211,525 | $83,390 |
| Other Current Assets | $45,167 | $38,146 | $27,196 | $45,167 | $27,196 |
| Current Liabilities | $123,093 | $111,435 | $29,700 | $123,093 | $29,700 |
| Working Capital | $133,599 | $84,240 | $80,886 | $133,599 | $80,886 |
| Total Assets | $796,298 | $735,251 | $476,521 | $796,298 | $476,521 |
| Total Liabilities | $249,829 | $227,731 | $165,405 | $249,829 | $165,405 |
| Basic weighted average number of shares outstanding (000s) | 116,169 | 115,572 | 80,493 | 112,755 | 79,780 |
Non-GAAP Financial Measures
The Company has included in this MD&A certain Non-GAAP (Generally Accepted Accounting Principles) performance measures as detailed below. In the gold mining industry, these are common performance measures but do not have any standardized meaning, and are considered Non-GAAP measures. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such Non-GAAP measures to evaluate the Company’s performance and ability to generate cash flow. Accordingly, they 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 GAAP.
Free Cash Flow
Free cash flow and free cash flow per shares are Non-GAAP measures. In the gold mining industry, free cash flow is a common performance measures but do not have any 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; free cash flow per share is calculated by dividing free cash flow for the period to the weighted average number of outstanding shares for that period.
The Company discloses free cash flow and free cash flow per share 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 GAAP is cash flows generated from operations. Free cash flow and free cash flow per share should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP.
Free cash flow is reconciled to the amounts included in the Consolidated Statements of Cash Flows as follows:
| Free Cash Flow (All amounts in 000’s of Canadian Dollars, except shares and per share figures) |
Three months ended | Three months ended | Nine months ended | Nine months ended | ||||
| 30-Sep-16 | 31-Oct-15 | 30-Sep-16 | 31-Oct-15 | |||||
| Cash Inflows from Operations | $ | 56,698 | $ | 20,115 | $ | 153,358 | $ | 55,761 |
| Mineral Property Additions | (19,234) | (10,893) | (54,716) | (31,288) | ||||
| Property, Plant & Equipment | (7,221) | (1,344) | (11,103) | (4,713) | ||||
| Free Cash Flow | $ | 30,243 | $ | 7,878 | $ | 87,539 | $ | 19,760 |
| Weighted Average Shares outstanding (000’s) | 116,169 | 80,493 | 112,754 | 79,499 | ||||
| Cash flow from Operations per share | 0.49 | 0.25 | 1.36 | 0.70 | ||||
| Free Cash Flow per share | 0.26 | 0.10 | 0.78 | 0.25 | ||||
Operating Costs and Operating Costs per Tonne and Ounce
Operating costs and operating cost per tonne and ounce are Non-GAAP measures. In the gold mining industry, operating costs, operating cost per tonne and operating cost per ounce are common performance measures but do not have any standardized meaning.
Operating costs are derived from amounts included in the Consolidated Statements of Comprehensive Income and 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 costs per tonne of ore produced is calculated by dividing operating costs to tonnes milled; operating cost per ounce is based on ounces sold and is calculated by dividing operating costs by gold ounces sold; US$ operating cost per ounce sold is derived from the operating costs per ounce sold translated using the average Bank of Canada C$/US$ exchange rate for the period.
The Company discloses operating costs and operating cost per ounce 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 GAAP is total production expenses. Operating costs and Operating cost per ore tonne produced and per ounce of gold sold should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP.
Operating costs are reconciled to the amounts included in the Consolidated Statements of Comprehensive Income as follows:
| Operating Costs (All amounts in 000’s of Canadian Dollars except tonnes ore produced, ounces of gold sold and unit costs) |
Three months ended | Three months ended | Nine months ended | Nine months ended | |||||
| 30-Sep-16 | 31-Oct-15 | 30-Sep-16 | 31-Oct-15 | ||||||
| Production Expense | $ | 75,750 | $ | 37,466 | $ | 235,166 | $ | 126,431 | |
| Amortization and Depletion | (15,895) | (8,133) | (45,474) | (25,915) | |||||
| Stock-based compensation | (136) | (65) | (265) | (358) | |||||
| Royalties | (5,943) | (1,348) | (15,005) | (4,431) | |||||
| PPA Inventory Fair Value Adjustment | – | – | (4,426) | – | |||||
| Operating Costs | $ | 53,776 | $ | 27,920 | $ | 169,996 | $ | 95,727 | |
| Tonnes of Ore Produced | 307,886 | 77,899 | 827,875 | 247,514 | |||||
| Ounces of Gold Sold | 76,339 | 34,606 | 217,792 | 114,919 | |||||
| Operating Cost per Tonne Produced | $ | 175 | $ | 358 | $ | 205 | $ | 387 | |
| Operating Cost per Ounce Sold | $ | 704 | $ | 807 | $ | 781 | $ | 833 | |
| Operating Cost per Ounce Sold (US$) | $ | 540 | $ | 613 | $ | 591 | $ | 656 | |
All-In Sustaining Costs and All-In Sustaining Cost Per Ounce
All-in sustaining costs and all-in sustaining cost per ounce are Non-GAAP 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 all-in sustaining costs as set out by the World Gold Council in its guidance note dated June 27, 2013. The Company defines all-in sustaining costs 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. All-in sustaining costs exclude growth capital, reclamation cost accretion not related to current operations, interest expense, debt repayment and taxes. The Company considers all capital spending to be sustaining in nature with the exception of development towards Zone 7 (formerly the Ghost Zone) at the Holt mine. During Q3/16, $0.6 million in development costs ($1.7 million YTD) were related to development towards Zone 7 and as such have been removed from AISC. The costs included in the calculation of all-in sustaining costs are divided by gold ounces sold; US$ all-in sustaining costs per ounce sold are translated using the average Bank of Canada C$/US$ exchange rate for the period.
All-in sustaining costs and all-in sustaining cost per ounce are reconciled to the amounts included in the Consolidated Statements of Comprehensive Income as follows (all dollar amounts, other than per ounce, in 000’s):
| AISC per Ounce Sold (All amounts in 000’s of Canadian Dollars except ounces sold and unit costs) |
Three months ended | Three months ended | Nine months ended | Nine months ended | ||||
| 30-Sep-16 | 31-Oct-15 | 30-Sep-16 | 31-Oct-15 | |||||
| Operating Costs | $ | 53,776 | $ | 27,920 | $ | 169,996 | $ | 95,727 |
| Royalties | 5,943 | 1,348 | 15,005 | 4,431 | ||||
| Stock Based Compensation | 713 | 486 | 2,027 | 1,839 | ||||
| Exploration Expense (no surface) | 1,399 | 557 | 3,677 | 1,773 | ||||
| *Corporate Expense | 2,129 | 1,244 | 6,976 | 3,169 | ||||
| Capital Development (Sustaining) | 18,531 | 10,893 | 52,974 | 31,288 | ||||
| Property, Plant & Equipment Purchases | 14,053 | 1,344 | 19,685 | 4,713 | ||||
| AISC | $ | 96,657 | $ | 43,822 | $ | 270,854 | $ | 143,045 |
| Ounces of Gold Sold | 76,339 | 34,606 | 217,793 | 114,919 | ||||
| AISC per Ounce Sold | $ | 1,266 | $ | 1,266 | $ | 1,243 | $ | 1,245 |
| AISC per Ounce Sold (US$) | $ | 970 | $ | 962 | $ | 940 | $ | 980 |
*Corporate expenses for Q3/16 and YTD 2016 include general and administrative expenses of $5.6 million and $11.1 million, respectively, net of transactions costs of $2.4 million and $4.5 million, severance expense to executives of $0.7 and $2.7 million, and interest income of $0.4 million and $1.0 million, respectively; for similar periods in 2015, corporate expense include $1.5 million and $4.2 million of general and administrative expense, net of interest income of $0.3 million and $1.1 million
Average Realized Price per Ounce Sold
Average realized price per ounce sold is a Non-GAAP measure. In the gold mining industry, average realized price per ounce sold is a common performance measures but does not have any standardized meaning.
The most directly comparable measure prepared in accordance with GAAP is revenue from gold sales. Average realized price per ounce sold should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP. The measure is intended to assist readers in evaluating the total revenues realized in a period from current operations.
Average realized price per ounce sold is reconciled to the amounts included in the Consolidated Statements of Comprehensive Income as follows:
| Average Realized Price per Ounce Sold | Three months ended | Three months ended | Nine months ended | Nine months ended | ||||
| 30-Sep-16 | 31-Oct-15 | 30-Sep-16 | 31-Oct-15 | |||||
| Revenue from Gold Sales (000s) | $ | 131,586 | $ | 50,570 | $ | 359,517 | $ | 170,227 |
| Ounces of Gold Sold | 76,339 | 34,606 | 217,792 | 114,919 | ||||
| Average Realized Sales Price per Ounce Sold | $ | 1,724 | $ | 1,461 | $ | 1,651 | $ | 1,481 |
| Average Realized Price per Ounce Sold (US$) | $ | 1,321 | $ | 1,110 | $ | 1,249 | $ | 1,166 |
Adjusted Net Earnings and Adjusted Net Earnings per share
Adjusted net earnings excludes significant non-recurring items.
Adjusted net earnings are reconciled to the amounts included in the Consolidated Statements of Comprehensive Income as follows (all dollar amounts, other than per share, in 000’s):
| Adjusted Net Earnings | Three months ended September 30, 2016 | Three months ended October 31, 2015 | Nine months ended September 30, 2016 | Nine months ended October 31, 2015 |
| All dollar amounts in 000’s of Canadian Dollars except per share amounts | ||||
| Net income | $24,759 | $2,068 | $51,042 | $14,171 |
| Transaction costs | 2,392 | – | 4,497 | – |
| Executive severance payments | 779 | – | 2,686 | – |
| Adjusted net earnings | $27,930 | $2,068 | $58,225 | $14,171 |
| Weighted Average Shares outstanding (in 000s) | 116,169 | 80,493 | 112,755 | 79,780 |
| Adjusted net earnings per share | $0.24 | $0.03 | $0.52 | $0.18 |
Working capital
Working capital is a Non-GAAP measure. In the gold mining industry, working capital is a common performance measures but does not have any standardized meaning.
The most directly comparable measure prepared in accordance with GAAP 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 for measures prepared in accordance with GAAP. The measure is intended to assist readers in evaluating Company’s liquidity.
Working capital is reconciled to the amounts included in the Consolidated Statements of Financial Position as follows:
| Working Capital (All amounts in 000’s of Canadian Dollars) |
Sep 30, 2016 | Dec 31, 2015 |
| Current Assets | 256,692 | 119,233 |
| Current Liabilities | 123,093 | 32,949 |
| Working Capital | 133,599 | 86,284 |
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 Holt Mine Complex that includes the Holt, Holloway and Taylor mines.
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.
For further information, please contact:
Kirkland Lake Gold Inc.
Toll Free: 1-866-384-2924
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
Certain statements in this press release 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”, “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, and 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, among others, the development of the Macassa Mine Complex and the Holt Mine Complex and the anticipated timing thereof, estimated production results, the anticipated timing and commencement of exploration programs on various targets within the Company’s land holdings, the ability to lower costs and gradually increase production, expectations regarding whether the Transaction will be consummated, as proposed or at all, including whether conditions to the consummation of the Transaction, including but not limited to the receipt of regulatory, shareholder and court approvals, will be satisfied, or the timing for completing the Transaction, expectations regarding the effects of the Transaction or the ability of the combined company to successfully achieve business objectives, including integrating the companies or the effects of unexpected costs, liabilities or delays, the potential benefits and synergies of the Transaction and expectations of other economic, business and or competitive factors, 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),
mark-to-market derivative variances, 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 AIF for the year ended December 31, 2015 and the Company’s information circular dated October 28, 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 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.
Mineral resources are not mineral reserves, and do not have demonstrated economic viability, but do have reasonable prospects for economic extraction. Measured and indicated resources are sufficiently well defined to allow geological and grade continuity to be reasonably assumed and permit the application of technical and economic parameters in assessing the economic viability of the resource. Inferred resources are estimated on limited information not sufficient to verify geological and grade continuity or to allow technical and economic parameters to be applied. Inferred resources are too speculative geologically to have economic considerations applied to them to enable them to be categorized as mineral reserves. There is no certainty that mineral resources of any category can be upgraded to mineral reserves through continued exploration.
Anthony (Tony) Makuch
Chief Executive Officer
Phone: +1 416-840-7884
E-mail: tmakuch@klgold.com
Suzette N Ramcharan, CPIR
Director of Investor Relations
Direct: +1 647-361-0200
Mobile: +1 647-284-5315
E-mail: sramcharan@klgold.com
www.klgold.com