Detour Gold has a big Impact on Kirkland Lake Gold's First Quarter

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.             

                                                   https://www.vaneck.com/row/

Oceanagold Prepares for Phillipines decision on new Start Up Date

On May 6 Oceanagold released it's first quarter operational report.It contained some information that Oceanagold shareholders have been waiting for but the final report will be out on May14.The Phillipine government has not  yet allowed production to continue  on the Didipio mine but negotiations seem slightly more friendly than in 2019. There has been a hiatus of about 7 months now.And OGC is still waiting to see if any  conditions will be required in order to begin production at their Didipio mine.In the meantime the Phillipine government has granted some minor concessions while the President of the Phillipines studies the timing for the new startup of the Didipio mine.

This website predicted in my blog dated Workathon 01/08/2020 that the Didipio mine would likely be operating by the start of Q2.But that will be in 3 weeks and that would make the shutdown almost 8 months.This blog would like to see the Didipio mine in operation sometime during Q2. 

Q1 Highlights

Consolidated gold production was 80,707 ounces plus 54,134 ounces of silver.Both were well above production in Q1 2019.In addition,there were increases in unproven reserves of 1.5 million ounces of which 800,000 was measured and indicated (M&I).The high production was chiefly because of the resumed operations at the Macraes mine.Furthermore they have enhanced development of the Martha Underground project at their Waihi mine.These developments have caused OGC to maintain their annual guidance and expect stronger second half performance.

Actual gold sold was up in Q1- to 91,400 ounces from 37,800 ounces in 2019.This includes the sale of 6,450 ounces from the Didipio mine that had been put in storage in gold bars form for several months.The Phillipine government allowed them to be exported and sold.

           

Summary

This is a preliminary report; the final Q1 treport will be out on May14.This report tells us that 54,134 ounces of silver were produced but it does not tell if this was an increase over Q1 2019.Doubtless the revenues were higher in this quarter because of the increase in the price of silver.It is important to notice that even with a 5 week lockdown (for health reasons) Oceanagold will maintain it's original guidance.And this is partly because the average price of gold  has increased by 25% in Q1 2020. Perhaps it will now invest more into it's partly owned subsidiary called New Pacific Minerals.All of that aside, soon investors will be demanding more concrete action towards the startup of the Didipio mine.

Tucows has another quarter but Same Old,Same Old

 Tucows had another average quarter so that annual revenue came in at $337 million or down 3% from 2018.While annual net income showed as $15.4 million which was down 10% from 2018.There were no major changes of any kind.So  annual revenues and earnings were down from 2018.More importantly e.p.s. was down 10% to $1.45 per share.While the CEO was proud to announce that operating cash flow was $40 million.But managing Tucows (TC) is about as complex as having the guy in the caption above in charge.And that is why this blog recommended in my blog on my website called Blogdaleup dated December 4,2019 that their CEO be replaced.
        A true Software Company
This blog is disappointed in the reduction of annual revenues as well as annual e.p.s.This is what determines the price of Tucows' shares.In 2019 Tucows reached a high of $120 per share.But investors realized that Tucows is not a real software company.It is only a domaine registry.It only takes a few guys like the one above to collate and manage the domaine names.Elliot Noss,the CEO, tells investors that TC earned $40 million in operating cash flow but then he says that he wants to put much of it into a mobile telephone company called Ting in southern USA.And he has already put $32 million into Ting.There is little mention of the earnings from Ting because earnings are minimal.This blog has called in the past and again for Tucows to look at acquiring a small internet software company to build for the future.Earnings may stand still at first but will gradually climb with an accretive acquisition.In short, the domaine registry will finance the acquisition to help build Tucows into a true software company.
                             

      Who will lead Tucows into the Future ?
  It is clear to this blog that Tucows needs a new direction and new directors.First there is negative growth in revenues,earnings and e.p.s. While adjusted EBITDA grew only by 4% in 2019.Domaine names is a mature market;TC needs a new,growing market.But in order to do that there needs to be a new CEO and 3 or 4 new board members.In summary,Tucows needs "new blood ".Especially when the "old blood" is getting paid $500,000-$600,000 each.
                   

Kirkland Lake takes Detour then a detour itself

Kirkland Lake Gold (KL) released it's fourth quarter and annual results on February 25.Results were good so KL told it's shareholders that it has doubled their annual dividend.KL  also told it's shareholders that it has completed the acquisition of Detour Gold for $4.9 billion.Detour Gold has a large ore body with a low to medium grade of ore.In contrast,Kirkland Lake with it's Macassa mine and especially it's Fosterville mine in Australia has a high grade of ore.So the highly profitable Kirkland Lake operation will be used to develop the Detour Gold operations.Strangely though investors have taken Kirkland Lake Gold share prices down -not up.
    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.     

Oceanagold meets Guidance,gold price rises, but Share Price Falters

    The gold price has risen for the last six months and now trades at almost $1575 an ounce -a 25% rise since June 2018.As the currencies,including the American dollar, start to be less stable investors move into gold.And this has been the case again in 2019-2020.But not all gold stocks have reacted  in parallel to this rise. Oceanagold which is listed on the Australian index(ASX) and the TSX took a tumble in the fall and has not yet bounced back.In fact, in June 2018 OGC traded at $3.60.The  main cause  of the drop was the closing of their mine in the Phillipines called Didipio.Still Didipio produced 83,000 ounces of gold and 10,000 tonnes of copper.The mine closing was started by a local court but  Oceanagold appealed and won in a federal court.Now the matter is being reviewed by the President of the Phillipines and a victorious decision is expected by the end of Q1.However this blog expects some conditions to be attached to the upcoming victory.
          New Production
   Oceanagold (OGC) has not been dormant while waiting for the Didipio decision.In the back half of 2019 Oceanagold has completely replaced the earnings and the lost production in the Phillipines. This was forecasted in my blog on Workathon of 23/10/2019.Their mines in America and New Zealand have increased production by 20-26%.In addition, they have discovered new gold ore at their Waihi mine and especially in their Martha Underground project.Production at their Waihi mine will likely increase in 2020 and the Martha Underground in Q2 2021.Production guidance will rise in 2020 with or without their Didipio mine.And some experts ( such as Jaimie Carasco) are predicting a $1600 price of gold in 2020.
      New Gold Reserves at old Mines          

  The main reason for increased guidance will be the new reserves they have located.And these new reserves are mostly extensions of existing mines.So they are analyzing their properties more thoroughly than in the past with quite effective results.Often the best place to look is just beside your old mine.They also bought a considerable amount of land around their Macraes discovery and expect a substantial ore body.Lastly they found a new gold discovery in New Zealand not too far from their other New Zealand mine.This reduces the Didipio mine to being a wild card although a nice wild card to have.                  

Intrinsync Technology " sells the farm "

     This blog has been saying for several years now that Intrinsync Technology needs new products and new revenue streams.Their last quarterly report (Q3) shows a continuation of the same trend  seen over the last 2 years.Consequently they have decided to use their open-Q module technology and it's revenue stream to get themselves a better deal.It is not that they weren't getting orders and even some very big ones.But their revenues were showing little or no year over year increase.Consequently this blog tried to arrange a merger with Sangoma Technology which is in their market space but showing more growth.After several attempts at a Canadian merger Intrinsyc decided on an American partner.They chose to dance with Lantronix which is listed on the Nasdaq exchange and has a market cap of about $92 million.
      The Future for Open-Q Modules 
  Intrinsyc Technology was originally doing much more software technology but they gradually switched to doing more hardware and then adapted this hardware technology.I believe they got a hardware contract from Quallcom to buy and build computer modules they referred to as Open-Q modules.And gradually they only sold these modules.This blog criticized them for being too dependent on a single product line.So they started to modify these modules to be used for various applications.Still the market was too limited and revenues stalled.However they were getting some bigger orders and this blog became somewhat hopeful of their future.Even at that, this blog recommended an alliance with Sangoma Technology which had a more rapidly growing product line and market.Sangoma is located in Markham, Ontario and the distance between them may have hindered a merger.      

         A Healthy Merger
   This blog would have preferred to see a Canadian merger, especially with Sangoma Technology.However it will probably do well with Lantronix(listed on the Nasdaq) which actually has a smaller market capitalization. Sangoma produces communication infrastructure and Intrinsyc Technology designs,produces and modifies telecommunications and internet  computer modules.ITC has increased the number of applications recently partly because it  modified the internal software of it's Open-Q modules. It still has it's some of it's software capability remaining.In addition, ITC now gets some quite large orders to manufacture and modify communications   equipment.Ideally this could have been a very successful Canadian combination.If the merger with Lantronix is as suitable, look for ITC to drift slowly towards $2.00 a share by early summer.If not then Sangoma will likely be watching closely.     

Capital Power shows increased Adj. EBITDA and AFFO but high Price/Earnings ratio

 This blog and the author (above) often sees companies differently than other financial websites.One such company is Capital Power (CPX).A number of websites including several banks show the CPX price/earnings ratio as about 75.This is a misleading statistic.A better measure of the performance of Canadian utilities is price/adjusted EBITDA or price/adjusted funds from operations (AFFO).This would produce a present P/E ratio of about 13.
         Non-recurring Items
   Capital Power is in the unusual situation where it's generating capacity  and revenues show good increases while it's adjusted net earnings show losses in Q3.It has made a number of large acquisitions. And at the same time spent a lot of money converting it's coal-fired operations to dual-fuel operations.This has lead to large expenses and created net losses.On the other hand adjusted EBITDA has been revised upwards.One factor here is the increase in the Alberta power price from $47 per MWh to $59 per MWh.Another is the new revenues from their recent acquisitions including Arlington Valley,Goreway (in Brampton) and New Frontier Wind.As a result 2019 annual guidance for adjusted funds from operations (AFFO) has been raised upwards by 12% or from $485 to$535 million up to $535-$560 million.
                     

    Better Performance Data
 Both Scotiabank and TD bank show negative e.p.s. and a price/earnings ratio of about 75 times.This implies that Capital Power is an expensive stock.But using adjusted EBITDA per share the P/E ratio is about 15 times 2020levels..Technically the banks are correct but this an accounting anomaly and gives a very misleading picture of an aggressive,well-managed Canadian utility.This healthy increase in AFFO will allow CPX to make further accretive acquisitions and raise it's dividend by7% in 2020and 2021.Consequently look for CPX to inch upwards towards $38 before the next dividend increase in Q2.    https://www.capitalpower.com/