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Kirkland Lake Gold is a company covered in my Workathon blog many times.Kirkland Lake Gold bought Newmarket Gold in 2016 for about $1 billion and shares.At that time Kirkland Lake Gold was trading at about $12 per share. In 2018 it was trading in the $40 range and had a market cap of $10 billion.At the beginning of 2019 it was trading at about $48- $50 per share.It has steadily moved up in 2019 to today's price at $60 per share And now it has a market capitalization of about $13 billion.My blog in Workathon of March 19 stated that the main reason for this price movement is that investors have gradually seen that the Fosterville mine formerly owned by Newmarket and before that Crocodile Gold is much bigger than stated by the former owners.And this is because one partially explored fault (the Phoenix fault) and two unexplored faults (Lower Phoenix and Eagle fault) were larger and had a much higher grade of ore than in the original mine.Grades of ore in the southern faults were 7 to 10 times richer than in the main Fosterville mine.
History of the Fosterville Mine
Newmarket Gold gave an estimate of the size of the ore deposit in 2015.At that time it was stated that all their Australian gold reserves amounted to 2.5 million ounces.There was only thought to be .5 million ounces in their northern Cosmo mine and almost no deposit left in the Stawell mine.So that means that the Fosterville mine was estimated to contain 2 million ounces.At that time little was known of the 3 large faults to the south;they were thought to be small extensions of the main mine.Later it was discovered that there were 3 major faults.And then exploration revealed that the grade of ore at the new faults was considerably higher than in the main mine.A few samples showed ore with 100 grams per tonne as opposed to more normally 4 to 5 grams per tonne.For example, one gold company in northern Ontario survived and made a profit for years on 2 grams per tonne. The detailed information given by the former owner and by Newmarket Gold lead this blog in an earlier Workathon blog dated 20/01/2018 to give an estimate of 8 million ounces at the Fosterville mine alone.Kirkland Lake Gold now estimates,in their blog, that this ore body contains 6 million ounces.The difference between these estimates depends on the size of extensions from the last fault-- the Eagle fault and the average grade of ore.The fault north of this one called the Lower Phoenix has largely been explored and measured.
KL does not tell shareholders in their quarterly report what production from Fosterville was but does say that total Kirkland Lake production was up 30% from Q2 2018.It also adds that it has made a number of improvements to the mine including a new ventilation system, and a water treatment plant.Much of these expenses have been caused because the mine body and mine entrance come from the old,original mine.This blog has stated before that costs could probably be reduced by making a new mine entrance.
Second Quarter Highlights
KL tells shareholders that Q1 revenues at $281 million were up by 31% from Q2 in 2018.And gold sales at 212,000 ounces compared to 164,000 ounces in 2018.Of course the price of gold rose from $1300 an ounce in 2018 to $1525 an ounce presently.As a result EBITDA grew from $124 million to $185 million.However quarterly free cash flow fell to $53 million from $61 million in 2018.At the same time "all in sustaining costs" dropped 16% to $638 an ounce.While quarterly capital expenditures were $48.5 million with $14 million of this on the Fosterville mine.And $30 million will be spent on advanced exploration in the Northern Territory of Australia.This exploration work is intended to progress underground development and support the resumption of operations at the Cosmo mine - the original Australian mine.
Annual Results
E.p.s. for the 3 months were $.49 compared to $.29 for 2018 and for 6 months $1.01 compared to $.52 for 2018 or almost double the previous year.No information is given on production from the Fosterville mine but this blog estimates that there will be greater production in the second half. And there is room for much greater production with a second mine entrance.With this deposit and continued KL improvements, e.p.s for 2019 could grow by another 50%.This will happen even if the price of gold is constant.
Future Exploration
KL tells shareholders that $14 million will be spent at the Fosterville mine in Q2.They also tell shareholders that $29 million will be spent on the Cosmo mine.Originally the Cosmo mine was estimated to have .5 million ounces but Newmarket Gold (the former owner) did some more exploration and found there were two faults not one.So Kirkland Lake will undoubtedly find one million ounces in their Cosmo mine.
Conclusion
Only a little more exploration needs to be done to finalize the total estimate on the Fosterville mine.But the final estimate is going to be beteween 6 and 8 million ounces. The final estimate for the Cosmo mine is going to be close to 1 million ounces.The problem with both mines is that KL needs greater production from both.But KL is gradually increasing production for each quarter.And in the Fosterville mine there is a lot of room to grow.With this in mind look for the price of KL to hit a new record high in 2019.
https://www.credit-suisse.com/ch/en.html ;https://www.brookfield.com/
On May1,2017 Street Capital Bank became Canada's newest chartered bank;
;this blog described it in a Workathon blog dated 23/01/2018.For the first year as a chartered bank revenues and earnings were gradually rising.And now they were allowed to take deposits (a cheap source of funds) and make mortgages.But ,even with their new features, in late 2018 things started to turn sour.And so RFA Capital, a virtual white knight,emerged in 2019 and made an "acquisition of all of the issued and outstanding shares" of Street Capital Bank.
Second Quarter Results
Separately from the buy-out SCB had a pretty good quarter.Revenues were up by 6% to $18 million.Diluted e.p.s were $.03 consistent with Q2 2018.Mortgages under administration were $27.92 million in line with $27.90 originated in 2018.However the book value per share fell from $1.15 to $.80 per share.As total SCB originations fell from $108 million to $43 million.
RFA Capital
It is true that Street Capital Bank was starting to bleed equity although it had a good quarter.RFA agreed to increase equity capital by a minimum of $50 million.To that end, it has added $25 million of readily available stand by capital.Furthermore " it is RFA's intention to cause the investors to inject up to an additional $100 million of further equity capital into the bank over the next 5 years".According to RFA Capital "approximately 20% of the outstanding common shares have agreed with RFA to vote in favour of the arrangement".
On the Upswing
The first year of business was not a good one for SCB.And 2018 continued this trend.But 2019 was starting to look better as they had a pretty good second quarter.But it would be hard to take back those seven or eight quarters.So Street Capital Bank was acquired by RFA Capital.It will take strong backing for awhile yet because there is stiff competition in the Canadian banking scene.But RFA Capital is seen as a good partner that will provide more than equity capital.And with a little luck Canada will have a new chartered bank.However it has a way to go as their total assets are only $1 billion and the next smallest bank is Canadian Western Bank at $30 billion of assets. http://www.goeasy.com/ https://www.zacks.com/
Chorus Aviation started it's regional leasing business about 18 months ago with a $200 million loan from Fairfax Capital.Chorus repaid it with a $200 million convertible debenture.Many thought they might not be able to pay it back nor redeem the debentures.But this has not been a problem since their regional aircraft leasing has been so successful.Since it's inception Chorus has leased 56 aircraft to smaller airlines.Most of it has been turboprops which Chorus has extensive experience with including a crack maintenance team and strong ties to Bombardier.Although Chorus has also leased some regional jets as well.It's strong relationship with Bombarier helps here also.
Second Quarter Results
Historically speaking Chorus had an average quarter.Adjusted EBITDA increased by $1.6 million to $86 million.Partly because adjusted EBITDA from their leasing segment increased by $10.4 million. Revenue earned from Air Canada had a small decrease.Importantly they added 11 additional aircraft for a total of 56 aircraft in their leasing program. This has been accomplished in less than 2 years.However adjusted net income deceased by $5 million to $25 million.One new item here was a $4.5 million charge for interest costs related to their leasing program. That aside, net income increased from $16 million to $39 million for Q2.
Turboprops or Regional Jets
Chorus uses both turboprops and regional jets in delivering passengers for Air Canada.But it's leasing program is more popular with customers leasing turboprops than regional jets.For short distances turboprops are more efficient but the narrow body jets are more economical for longer distances.This blog believes that in order to increase it's visibility for excellence in regional jets a stronger bond with Bombardier should be forged.As it was Bombardier that created the CRJ series.In fact, just as Air Canada invested in Chorus so should chorus invest in Bombardier.And even with great fanfare hire some Bombardier staff.Its customers will know and hopefully lease more regional jets.Their new visibility aside, this blog sees a total of 65-69 aircraft leased by yearend. https://www.desjardins.com/ca/index.jsp https://www.omers.com/
