On April 8 Kirkland Lake Gold released it's first quarter results and it's production was very impressive.These results included production from recently acquired Detour Gold.In fact, without the Detour Gold production there would have only been a 3% increase in total production.And the increase in total production was due to the 25% increase in production from the rich Fosterville mine in Australia.However this was offset by lower production at the Holt and Macassa mines.This website has had several blogs on the size of the Fosterville ore body but little on the richness of the grade.For example, in this quarter there was an almost 50% improvement in the average grade of ore to 43 grams per tonne.The Fosterville mine now accounts for 40% of Kirkland Lake Gold's total production.
Detour Gold is Wrapped up now
This blog Workathon in 16/09/2019 predicted that Kirkland Lake would need to issue 90 million shares to acquire Detour Gold.The calculation was that the cost of the acquisition was $4.9 billion and the reserve size was 14.5 million ounces.In their latest press release Kirkland Lake states that it only issued 77 million new shares.However it also paid in cash $100 million to repay Detour debt and $30 million to close out Detour's gold hedge positions.In addition, KL doubled it's dividend in 2019.
The Fosterville mine Revisited
In several earlier blogs on Workathon it was calculated that the size of the Fosterville mine in Australia had been underestimated.Now in this quarter, KL management tells shareholders that Fosterville production is up 25% from Q1 2019.Although no new estimate is given on the size of the ore body.They do say that they are looking at a new mine entrance in the north in the Robin's Hill sector.Presumably the new entrance is to increase production in 2020 or 2021.My blog on Workathon dated 16/09/2019 estimated that the size of the gold deposit here was possibly greater than 8 million ounces.KL later made the statement that the Fosterville ore body was at least 6.5 million ounces.And now KL says that there was a 24% increase in Fosterville production in Q1. Furthermore,only now does Kirkland Lake Gold tell shareholders that they are experiencing dramatic improvement in the average grade of ore (up to 49 grams per tonne).Most of this gold is in the Phoenix fault.But Newmarket Gold,the previous owner, found grades of 80 to 100 grams per tonne in the last two faults,that is, the Lower Phoenix and Eagle faults.If this is consistent throughout the fault the size of the Fosterville deposit may be quite a bit bigger than 8 million ounces.
Summary for 2020
There is no doubt that the acquisition of Detour Gold has had a big impact on Kirkland Lake production for Q1 and will have for the rest of 2020.This blog in the Workathon blog dated 16/09/2019 predicted that KL would have to pay 90 million shares to pay for Detour Gold which had a valuation of $4.9 billion.in this report they tell shareholders that they issued 77 million shares and paid out $130 million in debt.That was largely because at the time of that blog gold was trading at $1460-$1500 per ounce and now it trades at $1700.Kirkland Lake told shareholders in their last report they might sell off some non-core assets including the Maud Creek and Cosmo mines.This will enrichen their on hand cash balance.Also production from Detour might increase in Q3 or Q4 as KLmanagement intends to invest another $25-$30 million into upgrading the Detour Gold mine.
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