Kirkland Lake Gold Ltd. (“
Kirkland Lake
Gold” or the “
Company”) (TSX:KL)
(NYSE:KL) today announced the Company’s financial and operating
results for the full-year (“2017”) and fourth quarter (“Q4 2017”)
of 2017. 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
in this news release are expressed in U.S. dollars, unless
otherwise noted.
Key highlights of the 2017 results include:
- Record production: 596,405 ounces produced in
2017, 90% increase from 2016 and better than improved guidance of
580,000 – 595,000 ounces.
- Improved unit costs: Operating cash cost
averaged $481/oz sold(1), achieved improved guidance of $475 – $500
and 16% better than 2016; all-in sustaining costs (“AISC”)(1)
averaged $812/oz sold, in line with improved guidance of $800 –
$825 and 13% improvement from 2016. (Total production costs in 2017
totaled $288.3 million compared to $192.8 million in 2016 due to
higher business volumes.)
- Strong free cash flow: Cash flow from
operating activities in 2017 totaled $309.8 million, 66% increase
from 2016, while free cash flow(1) totaled $178.0 million, 56%
higher than previous year.
- Solid earnings performance: 2017 net earnings
totaled $132.4 million ($0.64 per basic share) versus $42.1 million
($0.35 per basic share) in 2016. Net earnings in 2017 consisted of
earnings from continuing operations of $157.3 million ($0.76 per
basic share) including a loss from discontinued operations of $24.9
million ($0.12 per basic share) related to the 2017 care and
maintenance expenses and sale of the Company’s Stawell mine on
December 21, 2017.
- Adjusted net earnings from continuing
operations(1) in 2017 totaled $149.1 million ($0.72 per
share), a 120% increase from 2016. The exclusion from adjusted net
earnings from continuing operations in 2017 of the loss from
discontinued operations of $24.9 million ($0.12 per share) as well
as a net deferred tax recovery of $10.0 million ($0.05 per basic
share) were the main differences between net earnings and adjusted
net earnings from continuing operations.
- Significant exploration success: Drilling
extends high-grade zones at Fosterville, Macassa and Cosmo and
intersects new areas of gold mineralization at Taylor (total
exploration and evaluation expenditures of $48.4 million in 2017
versus $15.8 million the prior year).
- Solid financial position: Cash at December 31,
2017 totaled $231.6 million with no debt following repayment or
conversion at maturity of two series of convertible debentures
($44.0 million paid in cash, 4,505,393 common shares issued on
conversion of 7.5% Debentures).
- Share repurchases: 5.4 million common shares
repurchased for $60.1 million (C$76.5) million through a normal
course issuer bid (“NCIB”) initiated in May 2017.
- Dividend: Quarterly dividend introduced with
first payment of $0.01 per share in July 2017 (dividend increased
to $0.02 per share effective January 15, 2018 payment).
Key highlights of Q4 2017 results include:
- Record quarterly production: Q4 2017
production totaled 166,579 ounces, 56% increase from Q4 2016 and
20% higher than Q3 2017.
- Low unit costs: Operating cash costs per
ounces sold in Q4 2017 averaged $412, 23% improvement from $533 in
Q4 2016 and 15% better than $482 the previous quarter; AISC per
ounce sold averaged $816, 9% better than $900 in Q4 2016 and an 3%
improvement from $845 in Q3 2017 (total production costs of $68.3
million compared to production costs of $60.5 million in Q4 2016
and $66.5 million in Q3 2017).
- Solid cash flow generation: Cash flow from
operating activities of continuing operations totaled $103.4
million compared to $68.5 million in Q4 2016 and $66.8 million in
Q3 2017; free cash flow in Q4 2017 totaled $64.5 million, 42% and
105% higher than $45.3 million in Q4 2016 and $31.5 million in Q3
2017, respectively.
- Solid earnings growth: Net earnings in Q4 2017
totaled $41.0 million ($0.20 per basic share), which compared to
net earnings of $3.1 million ($0.02 per basic share) in Q4 2016 and
$43.8 million ($0.21 per basic share) the previous quarter.
Included in net earnings for Q4 2017 were earnings from continuing
operations totaling $65.9 million ($0.32 per basic share) and a
loss from discontinued operations of $24.9 million ($0.12 per basic
share) related to the 2017 care and maintenance and sale of the
Company’s Stawell Mine on December 21, 2017.
- Adjusted net earnings from continuing
operations in Q4 2017 totaled $71.2 million ($0.34 per
share) versus $22.8 million ($0.16 per share) in Q4 2016 and $27.4
million ($0.14 per share) in Q3 2017. Adjusted net earnings from
continuing operations in Q4 2017 excludes the $24.9 million loss on
discontinued operations ($0.12 per share), a $17.6 million pre-tax
mark-to-market loss on fair valuing the Company’s 14.0 million
common share purchase warrants in Novo Resources Corp. (“Novo”)
($0.08 per share) and the $10.0 million ($0.05 per share) net
deferred tax recovery.
- Continued exploration success: Exploration and
evaluation expenditures in Q4 2017 totaled $10.7 million compared
to $6.0 million in Q4 2016 and $16.9 million the previous quarter.
Key drill results released during the quarter included a 120 metre
down-plunge extension of the Swan Zone at the Fosterville mine, a
significant expansion of the Lantern Deposit at the Cosmo mine in
the Northern Territory of Australia and the intersection of a new
gold zone 350 metres below the West Porphyry Deposit at the Taylor
mine.
- Share repurchases: A total of 1,553,500 common
shares were repurchased for $20.7 million (C$26.3) million through
the NCIB.
- Dividend payment: The Company’s second
quarterly dividend of $1.7 million or C$0.01 per share was made on
October 16, 2017.
(1) See “Non-IFRS Measures” set out later in this press
release and starting on page 37 of the Company’s MD&A for the
year and three months ended December 31, 2017 and 2016.
2017 Mineral Reserve and Mineral
Resource Update
On February 20, 2018 the Company released
Mineral Reserve and Mineral Resource estimates for December 31,
2017 (see news release dated February 20, 2018). Included in the
results, were an increase in Mineral Reserves at Fosterville to
1,700,000 ounces at an average grade of 23.1 grams per tonne, with
the Mineral Reserve estimate for the Swan Zone more than doubling
from the June 30, 2017 mid-year estimate to 1,160,000 ounces at an
average grade of 61.2 grams per tonne. In addition to Mineral
Reserves, Mineral Resources at Fosterville at December 31, 2017
included Measured and Indicated Mineral Resources of 2,150,000
ounces at an average grade of 4.8 grams per tonne (exclusive of
Mineral Reserves) and Inferred Mineral Resources of 1,900,000
ounces at an average grade of 7.1 grams per tonne. Based on the
significant growth in depreciable Mineral Reserves and Mineral
Resources at Fosterville, the Company expects a reduction in
depreciation and depletion expenses related to the Fosterville mine
in 2018.
At Macassa, after identifying a significant
eastern extension of the South Mine Complex (“SMC”) in mid-2017,
the Company focused drilling activities on establishing Mineral
Resources in this new area. Significant success was achieved
growing Mineral Resources in 2017, with Measured and Indicated
Mineral Resources increasing 58%, to 2,090,000 ounces at an average
grade of 17.1 grams per tonne, and Inferred Mineral Resources
increasing 48%, to 1,370,000 ounces at an average grade of 22.2
grams per tonne. The increase in Mineral Resources highlights the
potential that exists for future growth in Mineral Reserves at the
Macassa mine. Total Mineral Reserves at Macassa at December
31, 2017, totaled 2,030,000 ounces at an average grade of 21.0
grams per tonne.
Tony Makuch, President and Chief Executive
Officer of Kirkland Lake Gold, commented: “In 2017, Kirkland Lake
Gold performed extremely well against our three key pillars of
value creation: operational excellence, disciplined organic growth
and a focus on shareholder returns. Operationally, we improved our
guidance multiple times and still beat our target range for
production and were well within the improved guidance for operating
cash cost and AISC per ounce sold. We also clearly
demonstrated an ability to generate cash flow, with free cash flow
for the year totaling $178.0 million. In terms of organic growth,
we increased production by 90% in 2017, 10% on a pro forma basis,
even after placing three mines on care and maintenance. We also set
the stage for continued year-over-year production growth, with our
longer-term goal being to reach a million ounces of annual
production from existing mines within five to seven years. In terms
of shareholder returns, we were the top performing stock on the
S&P/TSX Composite Index on a full-year basis in 2017. We also
took steps to support increased shareholder value, including buying
back 5.4 million shares, introducing a quarterly dividend and
making strategic investments with future value potential.
“Looking at Q4 2017, we achieved record
production and generated strong earnings and free cash flow.
Leading the way was Fosterville, where Q4 2017 production totaled
79,157 ounces, operating cash costs were $226 per ounce sold, and
AISC averaged $471 per ounce sold. We also achieved strong results
from our Canadian operations, with both Taylor and Holt achieving
record quarterly production and Macassa recording its second-best
quarter ever. Free cash flow for the quarter was $64.5 million,
more than double the level of the previous quarter.
“Turning to exploration, we finished the year
with very encouraging exploration results during Q4 2017, including
announcing major extensions of the Swan Zone at Fosterville and
Lantern Deposit at the Cosmo mine, as well as intersecting a new
zone of gold mineralization 350 metres below the Taylor mine. The
exploration success we achieved in 2017 was a testament to the
growth potential of our existing operations, and is the key reason
that we have been able to announce a 36% increase in consolidated
Mineral Reserves from December 31, 2016, including a 247% increase
at Fosterville, where the Mineral Reserve now totals 1.7 million
ounces at an average grade of 23.1. g/t. Equally encouraging, our
base of Mineral Resources has also shown strong growth, with
Macassa’s Measured and Indicated Mineral Resources increasing 58%
and the mine’s Inferred Mineral Resources growing 48%, something
that bode well for future growth in Mineral Reserves.”
Review of Financial and Operating
Performance
The following discussion provides key summarized
consolidated financial and operating information for the three
months and year ended December 31, 2017. For the three months and
year ended December 31, 2017, the information includes the
consolidated financial and operating information for the Company’s
Canadian and Australian operations. The financial and operating
information for the three months and year ended December 31, 2016
includes the Australian operations from November 30, 2016,
following the completion of the Newmarket Arrangement on November
30, 2016. In addition, information for the year ended December 31,
2016 includes the St Andrew assets from January 26, 2016, the date
the St Andrew Arrangement was completed. In addition, results for
2016 and Q4 2016 presented below have been restated to exclude
discontinued operations, related to the sale of Stawell Mine.
(in
thousands of dollars, except per share amounts) |
Three MonthsEnded December31,
2017 |
Three MonthsEnded December31, 2016 |
Year EndedDecember 31,2017 |
Year EndedDecember 31,2016 |
Revenue |
$212,364 |
$130,901 |
$747,495 |
$403,340 |
Production costs |
$68,283 |
$60,625 |
$288,315 |
$192,842 |
Earnings before income
taxes |
$54,799 |
$17,698 |
$196,079 |
$79,767 |
Loss from discontinued
operations |
($24,904) |
($4,627) |
($24,904) |
($4,627) |
Net earnings |
$40,980 |
$3,076 |
$132,426 |
$42,107 |
Basic earnings per
share from continuing operations |
$0.32 |
$0.05 |
$0.76 |
$0.39 |
Basic earnings per
share |
$0.20 |
$0.02 |
$0.64 |
$0.35 |
Diluted earnings per
share |
$0.20 |
$0.02 |
$0.63 |
$0.34 |
Cash flow from
operations |
$103,351 |
$68,456 |
$309,812 |
$186,981 |
Cash investment on mine
development and PPE |
$38,832 |
$23,111 |
$131,840 |
$73,051 |
|
|
|
|
|
|
|
|
|
|
|
Three MonthsEnded December31,
2017 |
Three MonthsEnded December31, 2016 |
Year EndedDecember 31,2017 |
Year EndedDecember 31,2016 |
Tonnes milled |
454,897 |
437,601 |
1,974,093 |
1,271,670 |
Grade (g/t Au) |
11.8 |
7.5 |
9.8 |
7.9 |
Recovery (%) |
96.3% |
93.6% |
95.7% |
95.1% |
Gold produced (oz) |
166,579 |
105,575 |
596,405 |
313,653 |
Gold Sold (oz) |
165,715 |
111,690 |
592,674 |
326,687 |
Production costs |
$68,283 |
$60,625 |
$288,315 |
$192,842 |
Averaged realized price
($/oz sold) (1) |
$1,282 |
$1,202 |
$1,261 |
$1,234 |
Operating cash costs
per ounce sold ($/oz sold) (1) |
$412 |
$533 |
$481 |
$571 |
AISC ($/oz sold)
(1) |
$816 |
$900 |
$812 |
$930 |
Adjusted net
earnings(1) |
$71,153 |
$22,806 |
$149,133 |
$67,851 |
Adjusted basic earnings
per share(1) |
$0.34 |
$0.16 |
$0.72 |
$0.56 |
(1) See “Non-IFRS Measures” set out later in this press
release and starting on page 37 of the Company’s MD&A for the
year and three and months ended December 31, 2017 and 2016.
Production, Sales and Revenue
The Company produced 596,405 ounces in 2017, an
increase of 90% from 2016 when consolidated production included the
Australian operations from November 30, 2016, and the St Andrew
assets from January 26, 2016. The increase in production compared
to 2016 largely reflected the full-year contribution of the
Company’s Australian operations, which included production of
284,440 ounces in 2017 compared to 18,657 ounces in the final month
of 2016. Production from the Company’s Canadian operations totaled
311,965 ounces, which compared to production of 295,838 ounces in
2016. Excluding the impact of the Holloway mine, which was placed
on care and maintenance on December 31, 2016 and produced 27,129
ounces in 2016 versus 287 ounces in 2017, production from the
Company’s Canadian operations increased 16% from the previous year.
Production at Macassa of 194,237 ounces in 2017 increased 19,070
ounces or 11% from the previous year, reflecting both a higher
average grade and increased run-of-mine tonnes processed compared
to 2016. Production from Holt increased 25% to 66,677 ounces year
over year, reflecting a 11% increase in tonnes processed.
Production at Taylor totaled 50,764 ounces, an increase of 25% from
2016, reflecting significantly higher tonnes processed during the
year.
Gold sales in 2017 totaled 592,674 ounces, an
80% increase from 329,489 ounces in 2016. Higher gold sales were
the primarily factor leading to an 85% increase in revenue for the
year, to $747.5 million from $403.3 million in 2016. The main
contributor to the increase in both gold sales and revenue was
increased production related to the full-year contribution from the
Company’s Australian operations in 2017. The realized gold price in
2017 averaged $1,261 per ounce, 3% higher than the average price of
$1,224 per ounce the previous year.
For Q4 2017, consolidated production totaled
166,579 ounces, a 56% increase from Q4 2016. The increase from the
prior year mainly reflected a full quarter of results from the
Company’s Australian operations, which compared to results from
November 30, 2016 to the end of the year in Q4 2016 following
completion of the Newmarket Arrangement. For Q4 2017, the
Fosterville mine, being the only operating mine in Australia during
the quarter, contributed 79,157 ounces, which compared to total
production from the Company’s Australian operations of 18,657
ounces in Q4 2016, including 13,196 ounces from Fosterville, 4,609
ounces from the Cosmo Mine and 852 ounces from the Stawell mine.
Production from Canadian operations in Q4 2017 totaled 87,426
ounces, which compared to production of 87,952 ounces in Q4 2016.
Excluding production from the Holloway mine, which produced 9,825
ounces in Q4 2016, but was placed on care and maintenance effective
December 31, 2016, production from the Canadian operations
increased 12% compared to Q4 2016.
Q4 2017 production increased 27,490 ounces or
20% from 139,091 ounces the previous quarter. Each of the Company’s
operating mines increased production in Q4 2017 compared to Q3
2017. The largest increase was at Fosterville, where production
rose 17,622 ounces or 29% quarter over quarter, reflecting a
significant increase in the average grade, to 21.5 grams per tonne.
Production from the Canadian operations increased 11,160 ounces or
15% from the previous quarter, reflecting both higher tonnes
processed and average grades at the Holt and Taylor mines, and
increased run-of-mine tonnes processed at Macassa.
Q4 2017 gold sales totaled 165,715 ounces, 48%
and 20% higher than in Q4 2016 and Q3 2017, respectively. The
realized gold price for the quarter averaged $1,282 per ounce, an
increase of 7% from $1,202 per ounce in Q4 2016 and $1 increase
from the previous quarter. Revenue for Q4 2017 totaled $212.4
million, a $82.3 million or 63% increase from Q4 2016 and $35.7
million or 20% higher than in Q3 2017.
Earnings from Mine Operations
Earnings from mine operations in 2017 totaled
$289.1 million, more than double the $136.0 million from 2016. The
increase in earnings from mine operations in 2017 reflected the
significant revenue growth achieved on a year-over-year basis.
Partially offsetting the impact of higher revenue were increased
levels of production costs, depletion and depreciation expense and
royalty expense, with all three increases mainly related to growth
in production, gold sales and revenue stemming from the addition of
the Company’s Australian operation on November 30, 2016. Production
costs in 2017 totaled $288.3 million, which compared to $192.8
million in 2016. Depletion and depreciation expense rose to $148.7
million from $59.0 million in 2016. The increase in depletion and
depreciation expense in 2017 was a result of the purchase price
allocation exercise of assigning fair values to mining interest and
plant and equipment acquired in the Newmarket Arrangement on
November 30, 2016, which are being amortized over the life of mine
and over the life of the underlying assets. Royalty expense in 2017
totaled $21.4 million compared to $15.6 million in 2016. The
increase resulted from the addition of the Company’s Australian
operations, which include a 2% NSR on all gold production at the
Fosterville mine.
Earnings from mine operations in Q4 2017 totaled
$92.3 million, more than double the level of $41.6 million achieved
in Q4 2016 and 26% higher than $73.4 million the previous quarter.
The increase from both prior periods resulted from the solid growth
in revenue, both on a year-over-year and quarter-over-quarter
basis. Total production costs in Q4 2017 were $68.3 million versus
$60.6 million in Q4 2016 and $66.5 million in Q3 2017. Depletion
and depreciation expense in Q4 2017 totaled $45.6 million compared
to $24.5 million in Q4 2016 and $31.7 million the previous quarter.
Royalty expense totaled $6.2 million in Q4 2017 versus $4.2 million
for the same period in 2016 and $5.1 million in Q3 2017. The higher
expenditure levels in Q4 2017 reflected increased production and
sales volumes during the quarter, with the inclusion of the
Company’s Australian operations for the full quarter in Q4 2017
versus only one month in Q4 2016 mainly accounting for the increase
compared to a year ago, and improved results at all four of the
Company’s operating mines in Q4 2017 accounting for the increases
quarter over quarter.
Additional Expenses
Exploration and evaluation expenditures in 2017
rose substantially from the previous year, increasing 206% to $48.4
million from $15.8 million in 2016. The increase reflected the
Company’s growing asset base, significant commitment to production
growth at existing mines, as well as exploration success achieved
as the year progressed (see Growth and Exploration section starting
on page 23). Exploration and evaluation expenditures in Q4 2017
totaled $10.7 million, which compared to $6.0 million in Q4 2016
and $16.9 million the previous quarter. Growth from Q4 2016 mainly
reflected the inclusion of the Company’s Australian operation for
the full quarter in Q4 2017, as well as the significant exploration
activities ongoing at and around both the Fosterville and Cosmo
Mines during Q4 2017. The reduction from the previous quarter
reflected the timing for completing exploration activities and
incurring the related expenditures during 2017.
General and administrative expense (excluding
share-based payments expense and transaction costs) totaled $21.7
million in 2017 and $6.1 million in Q4 2017. General and
administrative expense for these periods compared to $10.8 million
and $2.6 million, respectively in 2016 and Q4 2016. High levels of
general and administrative expense both on a full-year and fourth
quarter basis compared to 2016, reflected growth in the Company’s
business portfolio and the full-year contribution to revenue and
costs of the Australian operations in 2017 compared to one month in
2016. General and administrative expense in Q4 2017 was similar to
the previous quarter’s level of $5.9 million.
Share-based payment expense for 2017 of $3.9
million compared to $1.2 million in 2016. The increase was
reflective of the granting of restricted-share units (“RSUs”) and
performance-share units (“PSUs”) starting in Q3 2016 and going
forward. Share- based payment expense in Q4 2017 totaled $0.7
million, which compared to $0.1 million in Q4 2016 and $1.0 million
the previous quarter.
Transaction costs totaled $0.4 million in 2017
and nil in Q4 2017. In 2016, transaction costs totaled $17.7
million for the full year and $14.4 million for the fourth quarter.
Most of the transaction costs in 2016 and Q4 2016 related to the
completion of the Newmarket Arrangement on November 30, 2016.
Care and maintenance expense related to the
suspension of operations and placement on care and maintenance of
the Stawell mine (as of December 13, 2016), the Holloway mine (as
of December 31, 2016) and the Cosmo mine and Union Reefs mill (as
of June 30, 2017). Care and maintenance expense in 2017 totaled
$11.9 million versus $0.1 million in 2016, with the increase
largely related to the Cosmo mine and Union Reefs mill, where care
and maintenance expense in 2017 totaled $9.6 million. In Q4 2017,
the Company recorded a recovery on care and maintenance expense of
$2.2 million, which compared to care and maintenance expense of
$0.1 million in Q4 2016 and $4.9 million in Q3 2017. The recovery
in Q4 2017 reflected the reclassification to discontinued
operations of year-to-date and 2016 expenses for the Stawell mine
following the sale of the mine on December 21, 2017.
On December 21, 2017, the Company completed a
transaction to sell to an affiliate of Arete Capital Partners Ltd.
(“Arete”) all the issued and outstanding common shares of its
indirectly held wholly owned subsidiary, Stawell Gold Mines Pty
Ltd., which held the Stawell mine. Pursuant to the terms of the
transaction, the Company received $6.25 million in cash
consideration upon closing and retains a 2.5% net smelter return
royalty on the Stawell mine. The components of revenue and expense
were separated from continuing operations following completion of
the sale and are reported as discontinued operations, with a loss
from discontinued operations of $24.9 million being included in the
Company’s 2017 and Q4 2017 financial results and a loss from
discontinued operations of $4.6 million being included in the
results for both 2016 and Q4 2016.
Finance costs in 2017 totaled $12.2 million
versus $11.7 million in 2016. Q4 2017 finance costs totaled $3.5
million compared to $3.1 million in Q4 2016 and $2.4 million the
previous quarter. Finance costs for each period relate to the
various financial instruments held by the Company. The increase
from the previous quarter mainly related to the timing for
incurring finance fees and bank charges. Convertible debenture
interest for 2017 totaled $8.2 million, compared to $10.2 million
for 2016. Finance income relates primarily to interest earned on
excess cash held on account. The increase in finance income in 2017
to $2.1 million from $0.8 million in 2016 resulted from the
significant increase in cash during 2017 compared to the previous
year. Finance income in Q4 2017 totaled $0.5 million, which
compared to $0.3 million in Q4 2016 and $0.4 million in Q3
2017.
The Company's current income tax expense totaled
$44.2 million for 2017 along with deferred income tax recovery of
$5.5 million, for an effective tax rate of 19.8%, which compared to
current and deferred income tax expense of $2.8 million and $30.2
million, respectively, in 2016 for an effective tax rate of 42.5%.
The deferred tax recovery was was primarily due to the recognition
of $40.5 million of previously unrecognized deferred tax assets in
the period that were acquired in a previous business combination.
These deferred tax assets are recognized as a result of a change in
expected future profits to be realized after a reorganization of
the acquired corporate structure. In addition, the Company
recognized a deferred tax asset recovery of $12.1 million related
to the offset of current year income taxes.
For Q4 2017, the current income tax expense
totaled $13.8 million, while the Company recorded deferred tax
recovery of $24.9 million, mainly related to the previously
unrecognized deferred tax assets in the period that were acquired
in a previous business combination. In Q4 2016, the Company had
current income tax recovery of $0.3 million and deferred income tax
expense of $10.3 million, while Q3 2017 reported current and
deferred income tax expense totaling $12.0 million and $8.3
million, respectively.
Other income in 2017 totaled $3.4 million
compared to $0.2 million in 2016, with the increase due to a higher
amount of premiums recognized on the flow through shares. For Q4
2017, the Company recorded other loss of $18.9 million, mainly
reflecting a $17.6 million pre-tax, mark-to-market loss in the
quarter on fair valuing the Company’s 14.0 million common share
purchase warrants of Novo, which were acquired on September 6,
2017. The other loss in Q4 2017 compared to other income of $2.2
million in Q4 2016 and other income of $21.3 million the previous
quarter. The $21.3 million of other income in Q3 2017 was the
result of a $19.2 million pre-tax mark-to-market gain on fair
valuing the Company’s 14.0 million Novo common share purchase
warrants.
Unit Cost Performance
Operating cash costs per ounce sold for 2017
averaged $481, a 16% improvement from $571 in 2016 mainly
reflecting a higher average mill grade in 2017 compared to the
previous year (9.8 grams per tonne versus 7.9 grams per tonne in
2016). Contributing to the improved average grade in 2017 was a the
full-year contribution from the Fosterville mine in Australia,
where the average mill grade in 2017 was 15.8 grams per tonne, as
well as improved grades at the Macassa, with an average mill grade
of 15.2 grams per tonne in 2017 compared to 14.1 grams per tonne in
2016. Operating cash costs per ounce sold from the Company’s
Australian operations averaged $376 per ounce sold in 2017,
compared to $714 per ounce from November 30, 2016 to the end of the
year. Operating cash costs per ounce sold from Canadian operation
averaged $576, which compared to $558 in 2016. The year-over-year
increase for the Canadian operations reflected lower operating cash
cost per ounce sold at both Taylor and Holt in 2016.
AISC per ounce sold averaged $812 in 2017, a 13%
improvement from $930 in 2016 reflecting improved operating cash
cost per ounce sold as well as lower levels of sustaining capital
expenditures per ounce sold compared to the same period a year
earlier. Sustaining capital expenditures in 2017 totaled $147.7
million ($249 per ounce sold), which compared to $86.6 million
($263 per ounce sold) in 2016. The full-year contribution of the
Company’s Fosterville mine, where AISC per ounce sold averaged $491
in 2017, was the primary factor accounting for the year-over-year
improvement. AISC per ounce sold for Canadian operations averaged
$911 versus $900 in 2016.
For Q4 2017, operating cash costs per ounce sold
averaged $412, a 23% improvement from $533 in Q4 2016 and 15%
better than $482 the previous quarter. Higher production, largely
due to a significant increase in the average grade at Fosterville,
to 21.5 grams per tonne, was a key factor contributing to the
improvement from both prior periods. AISC per
ounce sold for Q4 2017 averaged $816, a 9% improvement from $900 in
Q4 2016 and 3% better than $845 for Q3 2017. The improvement from
both prior periods resulted from lower operating cash cost per
ounce sold, which more than offset an increase in sustaining
capital expenditures per ounce sold. Sustaining capital
expenditures in Q4 2017 totaled $51.6 million ($312 per ounce sold)
compared to $32.5 million ($291 per ounces) in Q4 2016 and $38.3
million ($278 per ounces sold) in Q3 2017. The increase in
sustaining capital related to the Company’s Canadian operations and
was largely due to the timing of sustaining capital expenditures at
Macassa and Taylor to late in the year.
Net Earnings of $157.3 million or $0.64 per
share in 2017
Net earnings for 2017 totaled $132.3 million
($0.64 per basic share), an increase of $90.3 million or 214% from
$42.1 million ($0.35 per basic share) in 2016. Contributing to net
earnings in 2017 were earnings from continuing operations of $157.3
million and a loss on from discontinued operations of $24.9 million
related to the Stawell mine. In 2016, earnings from continuing
operations totaled $46.7 million, while loss from discontinued
operations totaled $4.6 million.
The increase in earnings from continuing
operations in 2017 was largely the result of significantly higher
revenue due mainly to the full-year contribution from the Company’s
Fosterville mine in 2017 versus one month in 2016. Also
contributing to the year-over-year increase was a lower effective
tax rate in 2017, due largely to the recognition of deferred tax
assets, as well as transaction costs totaling $17.7 million in 2016
related mainly to completion of the Newmarket Arrangement on
November 30, 2016. Offsetting these favourable factors were higher
production and depletion and depreciation costs, as well as
increased exploration and general and administrative expenses. The
increase in basic earnings per share in 2017 was not as significant
as growth in net earnings due to a higher number of average shares
outstanding, resulting mainly from the two acquisitions completed
in 2016.
Adjusted net earnings from continuing operations
in 2017 totaled $149.1 million ($0.72 adjusted net earnings per
share from continuing operations), representing growth of $81.2
million or 120% from $67.9 million in 2016. The exclusion from
adjusted net earnings from continuing operations in 2017 of the
$24.9 million after-tax loss from discontinued operations ($0.12
per share) and net deferred tax recovery of $10.0 million ($0.05
per share) were the most significant differences between net
earnings and adjusted net earnings from continuing operations for
the year. In 2016, adjusted net earnings from continuing operations
were higher than net earnings due to the exclusion of transaction
costs, mainly related to the completion of the Newmarket
Arrangement, the impact of purchase price allocation adjustments on
acquired metal inventory, and a loss from discontinued
operations.
Net earnings in Q4 2017 totaled $41.0 million
($0.20 per basic share), which compared to net earnings of $3.1
million ($0.02 per basic share) in Q4 2016. Included in net
earnings in Q4 2017 were earnings from continuing operations
totaling $65.9 million and a loss from discontinued operations of
$24.9 million related to the sale of the Stawell mine.
The increase in earnings from continuing
operations in Q4 2017 compared to Q4 2016 reflected increased
revenue and improved unit costs, mainly related to the full-quarter
contribution from the Fosterville mine in Q4 2017 versus one month
in Q4 2016. Also contributing to the increase from Q4 2016 was a
$24.9 million deferred tax recovery in Q4 2017, mainly related to
previously unrecognized deferred tax assets, as well as $14.4
million of transaction costs in Q4 2016 related to completion of
the Newmarket Arrangement. Partially offsetting these favourable
factors were higher production costs and depletion and depreciation
expenses in Q4 2017 versus Q4 2016, as well as increased
exploration and general and administrative expenditures. In
addition, Q4 2017 earnings from continuing operations included the
$17.6 million pre-tax marked-to-market loss on fair valuing the
Company’s 14.0 million common share purchase warrants of Novo.
Adjusted net earnings from continuing operations
in Q4 2017 totaled $71.2 million ($0.34 adjusted net earnings per
share from continuing operations) versus $22.8 million in Q4 2016
and $27.4 million in Q3 2017. The difference between net earnings
and adjusted net earnings from continuing operations in Q4 2017
mainly related to the exclusion in adjusted net earnings from
continuing operations of the $24.9 million after-tax loss on
discontinued operations ($0.12 per share), a $17.6 million pre-tax
mark-to-market loss on the fair valuing the Company’s 14.0 million
common share purchase warrants in Novo ($0.08 per share) and net
deferred tax recovery of $10.0 million ($0.05 per share). In Q4
2016, a number of pre-tax expenses were excluded from adjusted net
earnings from continuing operations, including: transaction costs
of $14.4 million and $6.5 million of purchase price allocations
adjustments on acquired metal inventory. In addition, adjusted net
earnings from continuing operations in Q4 2016 also excluded an
after-tax $4.6 million loss from discontinued operations. In Q3
2017, the Company recorded a $19.2 million pre-tax mark-to-market
gain related to the fair value of Novo warrants, which was excluded
from adjusted net earnings from continuing operations.
The $41.0 million of net earnings in Q4 2017
compared to net earnings of $43.8 million in Q3 2017. The Company’s
net earnings in Q3 2017 were entirely related to continuing
operations. Higher sales and improved unit costs contributed to the
$22.4 million or 51% increase earnings from continuing operations
quarter over quarter. Also having a significant impact on earnings
from continuing operations for both quarters was the fair valuing
of the Company’s Novo warrants, with the Q4 2017 earnings from
continuing operations including the $17.6 pre-tax mark-to-market
loss, while earnings from continuing operations in Q3 2017
benefited from a $19.2 million pre-tax mark-to-market gain on the
fair valuing of the warrants. In addition, the $24.9 million
deferred tax recovery in Q4 2017 also contributed to the increase
in earnings from continuing operation compared to the previous
quarter.
The adjusted net earnings in Q4 2017 of $71.2
million increased 160% from $27.4 million in Q3 2017. The
difference between net earnings and adjusted net earnings from
continuing operations in Q3 2017 mainly related to exclusion in
adjusted net earnings from continuing operations of the $24.9
million after-tax loss on discontinued operations and the $19.2
million pre-tax marked-to-market gain on the fair valuing of the
Novo warrants.
2017 Cash flow from operating activities of
$309.8 million, free cash flow totals $178.0 million
Cash at December 31, 2017 totaled $231.6
million, which compared to cash of $234.9 million at December 31,
2016 and cash of $210.5 million at September 30, 2017. Cash flow
from operating activities and free cash flow in 2017 totaled $309.8
million and $178.0 million, respectively, which compared to $187.0
million and $114.0 million, respectively, in 2016. The significant
free cash flow generated by the Company in 2017 was offset by the
use of cash in a number of areas focused on value creation for the
Company’s shareholders, including strategic investments, debt
repayment and elimination and share repurchases.
During 2017, the Company made strategic
investments in a number of junior exploration companies. In August
and September 2017, the Company invested an aggregate of $61.0
(C$74.9) million for the purchase of 25.8 million common shares and
14.0 million common share purchase warrants of Novo. In June 2017,
the Company invested $6.9 (C$8.9) million to acquire 17.9 million
common shares of Bonterra Resources Inc., a TSX Venture
Exchange-listed company with exploration projects in Quebec and
Ontario. Through two transactions (in April and December 2017), the
Company invested $6.7 (C$8.6) million to acquire 12.3 million
common shares and 975,500 common share purchase warrants of Metanor
Resources Inc., a TSX Venture Exchange-listed company with assets
in the Urban-Barry district of Northern Quebec. In November 2017,
the Company invested $3.8 (C$4.9) million to acquire 33.3 common
shares and 33.3 options to acquire common shares of De Grey Mining
Ltd., an ASX-listed company with assets based in Western
Australia.
A total of $44.0 (C$57.2) million of cash was
used to redeem and eliminate the Company’s two series of
convertible debentures during 2017. On June 30, 2017, the Company
paid $43.8 (C$56.8) million to redeem the 6% Debentures (with an
additional $1.3 (C$1.7) million paid for interest accrued at the
maturity date of June 30, 2017). In December 2017, over 99% of the
$62.0 million 7.5% Debentures, which matured on December 31, 2017,
were converted into common shares at a conversion price of C$13.70
per share, being a conversion rate of 72.9927 common shares for
each $1,000 in principal held. As a result, an aggregate of
4,505,393 common shares were issued to the debenture holders. The
Company paid an aggregate amount of $0.2 (C$0.3) million in cash
with respect to the outstanding 7.5% Debentures not converted at
their maturity. In addition, $2.2 (C$2.8) million of cash was paid
to all holders of the 7.5% Debentures with respect to interest
accrued at the maturity date of December 31, 2017.
During 2017, the Company repurchased 5,443,400
common shares for cancellation under the NCIB program introduced in
May 2017. The common shares were repurchased at an average price of
$11.05 (C$14.06) per common share for total cash payment of $60.1
(C$76.5) million. Under the NCIB, a maximum of 15,186,571 Kirkland
Lake Gold common shares can be purchased for cancellation.
Accordingly, the Company may purchase an additional 9,743,171
common shares for cancellation through the NCIB until the program’s
expiry in May 2018.
Performance Against 2017 Guidance
Kirkland Lake Gold achieved all of the Company’s
consolidated production and unit cost guidance for full-year 2017.
A number of revisions were made to the Company’s guidance during
the year. Guidance for consolidated production and AISC per ounce
sold were improved three times. Consolidated production guidance
began the year at 500,000 - 525,000 ounces and was ultimately
improved to 580,000 - 595,000 ounces on November 2, 2017. AISC per
ounce sold guidance commenced 2017 at $950 - $1,000 with the final
improvement resulting in a target range of $800 - $825. Other
revisions to consolidated guidance during 2017 included: two
improvements to operating cash cost per ounce sold guidance, which
began the year at $625 - $675 and was ultimately established at
$475 - $500 on November 2, 2017; a revision to sustaining and
growth capital expenditure guidance from $180 - $200 million to
$160 - $180 million on August 2, 2017, and an increase in the
guidance for corporate G&A expense from $17 million to $20
million on November 2, 2017. (For more information on the revisions
to guidance announced on November 2, 2017, August 2, 2017 and May
4, 2017 see the MD&As for the periods ended September 30, 2017,
June 30, 2017 and March 31, 2017.)
2017 Guidance(1) (as at November 2, 2017)
|
Canadian Mines |
Australian Mines |
|
($
millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
NorthernTerritory (3) |
Consolidated |
Gold production (kozs) |
190 - 195 |
50 - 55 |
65 - 70 |
250 - 260 |
20 |
580 - 595 |
Op. cash costs/ounce sold ($/oz)(2)(5) |
$520 - $550 |
$575 - $625 |
$670 - $725 |
$260 - $280 |
$1,500 - $1,600 |
$475 - $500 |
AISC/ounce sold ($/oz) (2)(5) |
|
|
|
|
|
$800 - $825 |
Operating cash costs (2) |
|
|
|
|
|
$270 - $280 |
Royalty costs |
|
|
|
|
|
$20 - $25 |
Sustaining and growth capital(5) |
|
|
|
|
|
$160 - $180 |
Exploration and evaluation |
|
|
|
|
|
$45 - $55 |
Corporate G&A expense (4) |
|
|
|
|
|
$20 |
(1) Represents the Company’s guidance for which the
three-month period ended December 31, 2017 was measured
against.(2) Operating cash costs, operating cash cost/ounce
sold and AISC/ounce sold reflect an average US$ to C$ exchange rate
of 1.2983 and a US$ to A$ exchange rate of 1.3047. See “Non-IFRS
Measures” set out starting on page 37 of the Company’s MD&A for
the year and three months ended December 31, 2017 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(3) Northern Territory
includes Cosmo mine and Union Reefs mill. The Cosmo mine was placed
on care and maintenance effective June 30, 2017 (see News Release
dated May 4, 2017).(4) Includes general and administrative
costs and severance payments. Excludes non-cash share-based payment
expense.(5) Non-IFRS - the definition and reconciliation of
these Non-IFRS measures are included starting on page 37 of the
Company’s MD&A for the year and three months ended December 31,
2017.
2017 Performance
|
Canadian Mines |
Australian Mines |
|
($
millions unless otherwise stated) |
Macassa |
Taylor |
Holt |
Fosterville |
NorthernTerritory(3) |
Consolidated(2) |
Gold production (ozs) |
194,237 |
50,764 |
66,677 |
263,845 |
20,595 |
596,405 |
Op. cash cost/ounce sold ($/oz) (1)(4) |
$523 |
$610 |
$685 |
$264 |
$1,661 |
$481 |
AISC/ounce sold ($/oz) (1)(4) |
|
|
|
|
|
$812 |
Operating cash costs (1) |
|
|
|
|
|
$285.3 |
Royalty costs |
|
|
|
|
|
$21.4 |
Sustaining and growth capital(4) |
|
|
|
|
|
$164.5 |
Exploration and evaluation |
|
|
|
|
|
$48.4 |
Corporate G&A expense (5) |
|
|
|
|
|
$21.7 |
(1) Operating cash costs, operating cash costs/ounce and
AISC/ounce sold reflect an average US$ to C$ exchange rate of
1.2965 and a US$ to A$ exchange rate of 1.3041.(2)
Consolidated 2017 production includes 287 ounces processed from the
Holloway Mine.(3) Northern Territory includes Cosmo Mine and
Union Reefs Mill. The Cosmo Mine was placed on care and maintenance
effective June 30, 2017 (see News Release dated May 4,
2017).(4) Non-IFRS - the definition and reconciliation of
these Non-IFRS measures are included starting on page 37 of the
Company’s MD&A for the year and three months ended December 31,
2017.(5) Includes general and administrative costs and
severance payments. Excludes non-cash share-based payment
expense.
Key Highlights of 2017 Performance Compared to Guidance
- Consolidated gold production for 2017 of
596,405 ounces exceeded the Company’s improved guidance for the
year of 580,000 - 595,000 ounces. All of the Company’s operating
mines achieved or exceeded their respective production guidance.
The primary factor driving the strong consolidated production
performance and multiple increases in guidance was the performance
at Fosterville, where grades outperformed expected levels for much
of the year, including during Q4 2017 when the mine achieved its
highest ever quarterly average grade of 21.5 grams per tonne.
Fosterville’s production guidance was increased twice during 2017
from 140,000 - 160,000 ounces initially to a final target of
250,000 – 260,000 ounces. Fosterville’s total production of 263,845
ounces exceeded the improved guidance. Macassa’s production of
194,237 ounces achieved the top end of the improved guidance range
of 190,000 - 195,000 ounces. Production guidance for Macassa was
increased on May 4, 2017 from 180,000 - 185,000 ounces on the
anticipation higher run-of-mine tonnage over the
balance of the year. Both run-of-mine tonnes processed and average
grades at Macassa increased from comparable 2016 levels. Guidance
for the Holt mine of 65,000 - 70,000 ounces remained unchanged
throughout 2017, with the mine’s production of 66,677 ounces
achieving the target range. Production at the Taylor mine of 50,764
ounces achieved the revised target range of 50,000 - 55,000 ounces,
which had been revised from 55,000 - 60,000 ounces on August 2,
2017.
- Production costs for the year totaled $288.3
million. Operating cash costs of $285.3 million in 2017 exceeded
the guidance range of $270 – $280 million due mainly to the higher
than expected production volumes during the year.
- Operating cash costs per ounce sold for 2017
averaged $481, in the low end of the improved guidance range of
$475 – $500. Operating cash costs at Fosterville averaged $264 per
ounce sold, achieving guidance of $260 - $280, which
had been improved on August 2, 2017 from $310 - $300. Higher than
expected grades were the main factor contributing to Fosterville’s
low unit operating cash costs during the year. Macassa’s operating
cash costs of $523 per ounce sold were in the low end of the
improved target range of $520 -$550, which had been revised from
$552 - $568 per ounce sold on May 4, 2018 in anticipation of higher
production volumes over the balance of the year. Holt’s operating
cash cost per ounce sold of $685 was near the low end of the
guidance established at the beginning of 2017, while average
operating cash costs at Taylor of $610 per ounce sold achieved the
mine’s guidance of $575 - $625. Operating cash cost guidance for
Taylor had been revised higher from $450 - $525 on November 2,
2017, reflecting the impact of lower than expected production
volumes during the year.
- AISC per ounce sold averaged $812 for 2017, in
line with the improved guidance of $800 - $825. In addition to a
solid operating cash cost performance, discussed above, the
Company’s strong AISC performance also reflected lower than
anticipated levels of sustaining capital expenditures on a per
ounce sold basis.
- Royalty costs totaled $21.4 million for 2017,
which was in the low end of the Company’s full-year 2017 guidance
of $20 - $25 million.
- Sustaining and growth capital(1) expenditures
for 2017 totaled $164.5 million, which was in line compared to the
Company’s revised guidance of $160 - $180 million. Sustaining
capital expenditures for the year totaled $147.7 million, with
growth capital expenditures totaling $16.8 million. The revision of
the Company’s guidance on August 2, 2018 from $180 - $200 million
largely reflected lower than expected levels of capital
development, primarily at Macassa and Holt, due to revisions to
mine sequencing plans and, in some cases, the deferral of
development work.
- Exploration expenditures totaled $48.4
million, consistent with the Company’s full-year 2017 guidance of
$45 - $55 million.
- Corporate G&A expense for 2017 totaled
$21.7 million, which compared to revised guidance of $20.0 million.
The higher than expected corporate G&A expense was mainly due
to additional consulting and legal fees related to initiatives
undertaken during the year.
(1) See “Non-IFRS Measures” set out later in this press
release and starting on page 37 of the Company’s MD&A for the
year and three months ended December 31, 2017 and 2016
2017 and Q4 2017 Financial Results and Conference Call
Details
A conference call to discuss the results will be
held by senior management on Wednesday, February 21, 2018, at 2:00
pm ET. The call will be webcast and accessible on the Company’s
website at www.klgold.com.
Date: |
WEDNESDAY, FEBRUARY 21, 2018 |
Conference Id: |
8274437 |
Time: |
2:00
pm ET |
Toll-free number: |
1
(866) 393-4306 |
International callers: |
1
(734) 385-2616 |
Webcast URL: |
https://event.on24.com/wcc/r/1553559/4CDA4998DC01D4D4BD697C8EC56F8CB9 |
Qualified PersonsPierre 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 620,000 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.
For further information on Kirkland Lake Gold and to receive
news releases by email, visit the website www.klgold.com.
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 the year and three months ended December 31, 2017
beginning on page 32.
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 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.
Operating Cash Costs and Operating Cash Costs
per Tonne and Ounce Sold
Operating cash costs and operating cash cost per
tonne and 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 tonne of ore produced is
calculated by dividing operating cash costs to tonnes milled;
operating cash cost per ounce sold is based on ounces sold and is
calculated by dividing operating cash costs by volume of gold
ounces sold.
The Company discloses operating cash costs and
operating cash cost per tonne and 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 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 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 and adjusted net earnings
per share are used by management and investors to measure the
underlying operating performance of the Company.
Adjusted net earnings 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 basic net earnings per
share 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 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 performance
measure but does not have any standardized meaning under IFRS.
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, 2016 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
ability of Kirkland Lake Gold to successfully integrate the
operations and employees of its Canadian and Australian operations,
and realize synergies and cost savings, and to the extent,
anticipated; the potential impact on exploration activities; the
potential impact on relationships, including with regulatory
bodies, employees, suppliers, customers and competitors; the
re-rating potential following the consummation of the merger;
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 it’s 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
Kirkland Lake Gold (TSX:KL)
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