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Building Canada’s next mid-tier gold
KIRKLAN LAKE GOLD Meet the best performing mining stock on the TSX in 2020
MINING | KIRKLAND LAKE GOLD
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On September 15, 2020, Kirkland Lake Gold was deemed the best performing mining stock on the Toronto Stock Exchange (TSX) with incredible share price growth of 363% over the last three years. Kirkland Lake Gold’s President and CEO Tony Makuch tells RGN that the company’s inclusion on the TMX Group’s annual TSX30 ranking of the best performing stocks across all sectors on Canada’s main market primarily comes down to rapid growth in profitable, cash-flow generating production over the three-year timeframe. In 2017, the company produced 0.5 million ounces (Moz) of gold. This year, it is targeting over 1.35 Moz, thanks to a sustained period of growth via timely acquisitions and investments in exploration at its three gold mines; in Ontario, Canada (Macassa, Detour Lake) and in Victoria, Australia (Fosterville).
Kirkland Lake Gold entered
unwelcome emergence of the
2020 by completing the
COVID-19 pandemic this year.
transformational acquisition
The company acted quickly
of Detour Gold for $3.7 billion
to protect is people and
in January. The all-stock deal,
communities at all sites during
which was first announced
the height of the first wave in
in November 2019, gave the
March.
“At the same time, we’ve been very competitive with our unit cost performance, generated industry leading financial performance and increased our balance sheet strength,” says Makuch. “Really that’s the true measure of production growth that creates value.” The sustained free cash flow generated by Kirkland Lake Gold has allowed it to return significant capital to shareholders from share buybacks and dividends. “We introduced both in 2017 and have increased the dividend over seven times since then. So far in 2020, we’ve returned over US$640 million to shareholders. There aren’t many companies that can say they return that much value.”
“Detour Lake has generated
Many new on-site protocols
over 40% of our free cash flow
revolve around a tight
in the first nine months of the
adherence to social distancing
year and we see great potential
guidelines, changing how
here to grow production, lower
employees are transported to
unit costs and unlock increased
and from the workplace and
value.”
the proximity in which they
company ownership of Detour Lake, located within the
“In Canada, a lot of our
Northernmost section of the
employees live in remote
renowned Abitibi Greenstone
regions in James Bay. We sent
Belt.
people home, we gave people 14 days salary continuation
The open pit gold mine has
and reduced operations at
already made significant
Macassa and Detour. Since
contributions towards the
then, strict protocols have
operational and financial
become the new norm across
success of Kirkland Lake Gold
our sites.”
this year, according to Makuch.
COVID-19 response Kirkland Lake has also had to
can work in certain spaces, such as the cages that take workers to the underground Macassa mine.
demonstrate an unparalleled level of flexibility and
“It’s taken a bit of time to get
responsiveness following the
used to the changes, but our
MINING | KIRKLAND LAKE GOLD
people have really taken on the challenge and worked things through. Everyone has adhered to the standards put in place and come up with new ideas which we have subsequently adopted.” One by-product of the COVID-19 pandemic has been a flurry of ‘safe haven’ investment in gold throughout the year, which has boosted the price to record highs and brightened the horizons of gold mining companies around the world. Lo and behold, Kirkland Lake Gold’s net earnings were up around 41% in the first nine months of the year on an adjusted basis, and it generated close to $700 million of free cash flow, excluding non-recurring items. While Makuch acknowledges that the high gold price has certainly benefited the industry this year, he is quick to highlight the strong performance of the company’s people in extraordinarily trying circumstances.
MINING | KIRKLAND LAKE GOLD
MINING | KIRKLAND LAKE GOLD
“We have tried to focus on
three of the flagship assets,
Likewise, at the Macassa mine
keeping our costs down, which
each of which hold significant
in Kirkland Lake, Ontario, the
is a key success driver for our
upside potential in their own
company has grown reserves
business. Our operating cash
right.
from just under 1 Moz at 20
costs so far this year are just
g/t in 2016 to 2 Moz at over 22
over $400 per ounce, with AISC
At Fosterville, in the Australian
g/t, with plenty of additional
of around $800 per ounce.
state of Victoria, Kirkland Lake
exploration opportunities
Those are very strong numbers
Gold has achieved year-on-
available, including continuing
in our industry and support
year exploration success since
to grow the high-grade South
significant earnings and cash
acquiring the underground
Mine Complex (SMC) and
flow generation at much lower
mine in 2016. In particular, the
identifying new areas of high-
gold prices than we have today.
discovery of the Swan Zone has grade mineralisation along the been a key value driver and
Amalgamated Break and the
“The price of gold has gone up
has helped boost production to
historic Main/’04 Break.
and that has been beneficial
over 600,000 ounces this year.
for the company, and we feel
Recent drilling has intersected
very confident that the gold
In addition, the company has
price is going to continue to
grown the Fosterville reserve
be strong, but we build our
from around 240,000 ounces
business around keeping
at just under 7 g/t in 2016 to
ourselves profitable and
2 Moz at over 22 g/t this year.
sustainable in a low gold price
“Ounces have gone up, grades
environment.”
have gone up and the costs
Growing from the drill bit
exceptionally high grades
KIRKL AND L AKE GOL D AT A G L A N C E
have gone down, which has created significant value,” Makuch explains.
The crux of Kirkland Lake
STOCK TICKER
Gold’s strategy is to secure
“We think that there are
TSX:KL, NYSE:KL, ASX:KLA
long-term growth and value
more high-grade zones at
creation through success
Fosterville and we continue to
MARKET CAPITALISATION
with the drill bit, and the
drill there. We could be one
company has been doing just
drill intersection away from
that this year with exploration
a whole new level of success
campaigns taking place at all
there.”
US$12.79 billion (as of October 26, 2020)
aj
“We incre we’ve m
MINING | KIRKLAND LAKE GOLD
introduced share buybacks and dividends in 2017 and have eased the dividend over nine times since then. So far in 2020, e returned over US$640 million to shareholders. There aren’t many companies that can say they return that much value.” – Tony Makuch, Kirkland Lake Gold president and CEO
TONY MAKUCH, KIRKLAND LAKE GOLD PRESIDENT AND CEO
in an area where the SMC
Break. In addition, a new
term exploration across the
approaches the Amalgamated
high-grade corridor of
vast Kirkland Lake gold camp,
“The price of gold has gone up and that has been beneficial for the company, and we feel very confident that the gold price is going to continue to be strong, but we build our business around keeping ourselves profitable and sustainable in a low gold price environment”
mineralisation has been
most of which the company
identified along the Main
now owns.
Break, near the location of a new shaft that Kirkland Lake
“It is a century-old camp, but
Gold is sinking.
there is a lot of gold left to be found and we are sinking a
The #4 Shaft, which is slated
new shaft at Macassa because
for completion in late 2022,
of the size of our current
will result in significantly
reserves and the tremendous
higher production at better
potential to add more through
unit costs, and will also
continued exploration
improve working conditions
success.”
in the mine and support long-
MINING | KIRKLAND LAKE GOLD
But Makuch is perhaps most excited by the growth potential at Detour Lake, which is already one of largest openpit gold deposits in the world with mineral reserves of 14.8 Moz at 0.97 g/t. Kirkland Lake Gold is drilling a number of inmine exploration targets after recent drilling revealed that mineralisation is open down dip of the Main Pit and in areas between the Main and West pits. “We’ve had significant exploration success in the Saddle Zone between the West Pit and the Main Pit. With that success, and the mineral inventory we have right now, we believe it is possible to double the reserves at Detour Lake. That’s a forward-looking statement, but we feel pretty confident that the opportunity is there.” And to give an idea of the broader exploration potential in the region, Kirkland Lake Gold’s land position at Detour Lake covers over 1,000 km2
MINING | KIRKLAND LAKE GOLD
along the Abitibi Greenstone
in the communities where our
Makuch points out that, at the
Belt, which is the largest
people live.
end of the day, success comes
mineral-rich belt of its kind in the world.
down to people, and Kirkland “We are focused on working
Lake Gold is blessed to have a
with the traditional
team possessing unsurpassed
landowners in our area and
knowledge of how to build and
don’t look at it from a business
grow profitable, value-creating
While the company’s
perspective, but a relationship
gold mines.
exploration prospects have
perspective. We are one big
Responsible and sustainable
certainly appealed to investors, family and we treat everyone
“We have a strong track record
Makuch also credits Kirkland
in terms of operational and
with respect.
Lake Gold’s focus on ESG in
financial performance and
the last few years for its high-
“We also treat the land with
that, more than anything else,
ranking position on the TSX30
respect and understand
speaks to the quality of our
this year.
the importance of natural
assets and the quality of our
resources like water in the
people. With the progress
However, he makes it very
regions where we operate.
we, as a team, have achieved,
clear that the company’s
If we can focus on these
we have generated industry-
emphasis on sustainable
[aforementioned] areas, then
leading earnings, cash flow
and responsible mining is
the results will speak for
and balance sheet strength
not simply to accommodate
themselves.”
and delivered superior returns
modern investor demands, but
for our shareholders, without
because caring for its people,
Clearly, Kirkland Lake Gold
whom we would not be in
its communities and the
views ESG, like exploration,
business.”
environment is inherently the
as a core component of its
right way to run a business.
business, and one that is critical for success. “As a gold
“The health, safety and
miner producing in two of
wellness of our people is
the world’s greatest mining
paramount. After this, we
jurisdictions, ESG is central to
try to build our supply chain
everything we do; it impacts
in the region and give back
every aspect of our business
through investments in social
and it is the key to maintaining
and recreational programmes
social licence.”
Published by Anderson Murray Media Ltd
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