Annual Highlights
First, all of the Q4 operational indicators were ahead of the values for Q4 in 2018.Production ahead by 21%,revenues by 47%,EBITDA by 52% and more importantly adjusted net earnings by 76%.But the annual figures were even better.Revenues at $1,380 million were 51% ahead of 2018,net earnings at $560 million or $2.67 /share were 51% better and free cash flow at $463 million was 81% higher than 2018.One of the main reasons for net earning being proportionally higher than production is the high grade of ore at their Fosterville mine in Australia and the increase in gold reserves.
The Detour Gold Addition
It is this blog's opinion that Kirkland Lake Gold has a pretty good system set up now.First the production and net earnings coming from the Fosterville mine(Australia) and the Macassa mine(Ontario) is continuing to increase because of the high grade of gold,especially in their Fosterville mine.KL is also looking at a second mine entrance to their Fosterville mine.Kirkland Lake production is doing so well that they have deemed their Holt Complex mines and the Cosmo mine in Northern Australia as non-core operations. Cosmo was the original mine for their predecessor Crocodile Gold ;the mine was thought ot have about 500,000 ounces.But exploration by the second owner Newmarket Gold here found a second major vein so that the ore body may be as much as 1 million ounces now.Kl has other former Crocodile Gold assets like the Union Reefs mill and the Maud Creek mine which had a positive NPV in 2013 with gold prices at $1200/ounce. Kirkland Lake could make a small Australian subsidiary based around the Cosmo mine and sell it off.As KL may need more cash to help pay for Detour Gold.
Kl also strengthened it's share price by buying back 20 million shares which will be equal to about $750 million.And lastly it will invest $25-$30 million into Detour Gold to increase production.Amazingly Kirkland Lake has not had a new equity issue to help acquire Detour Gold.But the increase in the price of gold has certainly given it some additional support.
Summary
It is very difficult at this time to predict the price of KL for the rest of 2020.The stock market is highly irregular and the price of gold has moved up.Kirkland Lake's stock price has now factored in the Detour Gold acquisition.However there may be some non-core divestitures or a new Australian subsidiary formed.And Kirkland Lake still has not told shareholders how much of the Detour acquisition has been paid for and how soon the rest will be financed.That aside Kirkland Lake Gold has a very strong operation now and a proven large gold reserve.
