KIRKLAND LAKE, ONTARIO--(Marketwire - Dec. 13, 2012) - Kirkland Lake Gold Inc. (the "Company"), (KGI.TO)(KGI.L) an operating and exploration gold mining company, today announces financial and operational results for the second quarter of its fiscal year 2013 (August, September, and October 2012).
Mr. Harry Dobson, Chairman commented, "The focus of the Company remains the execution of the Mine Expansion Project to a production capacity of 2,200 tons of ore per day. Reaching this milestone will be a key step towards achieving the Company's goal of becoming a sustainable and consistently profitable intermediate gold mining company. The current critical path activity for this Expansion Project is the Service Cage Project. Regrettably, delays in completing this critical path activity have resulted in a delay in the overall Project, and are preventing the Company from meeting its production goals for the current fiscal year. Accordingly, the Company is reducing its guidance for the year ending April 30 to between 90,000 to 110,000 ounces of gold sold. This setback notwithstanding, the Company does remain committed to reaching the above referenced production capacity of 2,200 tons per day as close to the original plan target date of January 2014 as practicable."
Mr. Mark Tessier, Chief Operating Officer, added, "The current critical path item in this expansion project is the Service Cage Project, which will allow hoisting of ore and waste to begin to exceed the current 1,000 ton per day limit. Unfortunately, the completion of this Project continues to be delayed by technical issues with the hoist, primarily software and electronic issues; and also by additional shaft work that had to be moved up in the overall project schedule, and into the scope of the Service Cage Project. The delay in this Project has delayed the ramp up in ore tonnage produced that should have begun in Q2, has delayed the hiring and training of necessary underground workers, and has delayed development work required to access higher grade ore that was required to allow the Company to produce at the planned ore grades this year."
"The Service Cage Project is close to completion, but due to past delays in this Project, the Company is currently allowing in its projections that the Project will not be fully complete before the end of Q3, and that ore tonnage will not begin to ramp up until mid Q4, as a precaution. The Company is also slowing the expected rate of that ore tonnage ramp up to reflect the additional time that will be required to hire and train needed underground workers, and to reflect the time that will be required to complete the development work in the Mine that has been delayed."
KEY HIGHLIGHTS OF THE QUARTER
- Net loss before income taxes for the quarter ended October 31, 2012 of $0.8 million ($0.01 per share). This compares to net loss before taxes of $0.3 million ($0.00 per share) for the previous quarter and a net income before taxes of $11.8 million ($0.16 per share) for Q2 of fiscal 2012. Ore production for the quarter continued to be skewed towards lower grade areas, as access to higher grade ore was restricted due to delays in the Service Cage Project. Costs were also high as the Company had completed some hiring and training and committed to other work and activities in Q1 and Q2 in preparation for the planned production increases.
- Cash flows generated from operating activities were $10.5 million for the quarter compared to $2.4 million in the previous quarter and $13.4 million in Q2 of fiscal 2012. Year to date cash flows from operating activities were $12.9 million compared to $19.7 million in the previous fiscal year.
- Operating costs for the quarter were $360 per ton of ore ($1,253 per ounce of gold), compared with $316 per ton ($1,276 per ounce) in the prior quarter, and $277 per ton ($793 per ounce) in Q2 of fiscal 2012. The Company expects to lower operating costs to less than $250 per ton upon completion of the Mine Expansion Project.
- In the quarter, 70,800 tons of ore were produced at a head grade of 0.30 ounces of gold per ton (opt) and a gold recovery rate of 95.74% to produce 20,358 ounces of gold. Year to date, 141,001 tons of ore have been produced at a head grade of 0.28 opt and a gold recovery rate of 95.52% to produce 37,754 ounces. Ounces sold in the quarter were 22,345 ounces, bringing the year to date total to 42,309 ounces sold. The head grade of the ore coming from the South Mine Complex (SMC) in the quarter was 0.34 opt, which was above the 0.27 opt grade realized in the previous quarter, but well below the normal grade of ore coming from that area. The head grade of ore coming from the Main Break in the quarter was 0.25 opt.
- As at December 12, 2012, the Company's cash resources were $101.1 million. Net of the liability to Queenston and restricted cash, the Company's cash resources were $71.1 million.
- Work remaining on the Service Cage Project as of December 12 included some ongoing trials and upgrades planned for operation of the hoist in Cage mode, completion of shaft work between 53 Level and 54 Level, and completion of 50% to 60% of the required station work. Commissioning work on the hoist and cage took up most of the month of November due to some problems with software and electronics for the control systems and held back the work in other areas. The work platform remains in the shaft and is being used in combination with the cage as required for the shaft work. At present the hoist is operating in cage/work platform mode for shaft work with no issues, and is also being operated in cage only mode on a spare/trial basis with no issues.
- The Company is planning to replace the ten ton skips in the existing conveyance arrangement with newly designed 12.5 ton skips after completion of the Service Cage Project. Slight modifications to the shaft loading chairs will be required at the same time. This will increase the capacity of the mine hoisting plant to 2,275 tons per day of ore and waste. Completion of additional shaft work prior to January 2014 will bring the capacity of the mine hoisting plant to 3,200 tons per day. The shaft work brought ahead into the Service Cage Project was originally part of this later stage of the overall Project.
- The testing of the prototype battery scoop underground has been completed successfully. The scoop is currently commissioned and in production and performing very well, and this program is currently meeting all Project schedule requirements at this time.
- The new ball mill is currently on site; work is ongoing to expand the mill to 2,200 tons per day capacity.
- The Company workforce totalled 957 employees at quarter-end, up from 907 at the beginning of Q1. The Company is not experiencing difficulty meeting its workforce requirements in terms of numbers at this time. However, more hiring of inexperienced underground employees than expected has been required, with a resultant increase in training activities, and with lower than planned initial productivities. This has slightly impacted mining costs this fiscal year.
- The Expansion Project budget remains on track at $95.0 million, of which $72.7 million had been spent by the end of October, 2012. The Processing Plant Upgrade, the Hoisting Capacity Upgrade Project, and the remaining underground mobile equipment purchases represent the largest segments of unspent Project capital. Project spending in some non critical path Project areas has been delayed as necessary and where practicable to match progress on the critical path.
- Subsequent to quarter-end on November 7, the Company completed a $68.5 million (net of transaction costs) private placement of convertible debentures. The funds will be used in part to fund portions of the Expansion Project that had been expected to be funded from production.
The Company's ability to achieve production goals and targets is being impacted by the complex multi-year Exploration and Expansion Project that the Company is currently implementing. The Company's current and future production targets will therefore include additional contingencies to reflect the potential for greater variances arising from unanticipated or unknown problems, for unexpected challenges or delays that may arise, and for the higher priority status of project work over production. Work on next fiscal year's budget will begin shortly. At this time, the Company intends to budget based on gold sales of 150,000 to 180,000 ounces for fiscal year 2014, again using the methodology outlined above. The Company intends to increase gold sales further from these levels in future years. Please refer to the Company's Management Discussion and Analysis available on SEDAR and the Company's website for further information.
|SELECTED FINANCIAL INFORMATION & REVIEW OF OVERALL PERFORMANCE |
|Financial Highlights |
(All amounts in 000's of Canadian Dollars, except shares and per share figures)
|Three months ended,|
|Oct 31, 2012||Jul 31, 2012||Oct 31, 2011|
|Gold Sales (ounces)||22,345||19,964||24,762|
|Average Price (per ounce)||1,660||1,635||1,628|
|Net Income (Loss) before Income Taxes||(826||)||(295||)||11,785|
|Net and Comprehensive Income (Loss)||(783||)||413||9,264|
|Per share (basic and diluted)||(0.01||)||0.01||0.13|
|Cash Flow from operating activities||10,454||2,403||13,421|
|Cash Flow from financing activities||3,945||54,085||1,031|
|Cash Flow used in investing activities||(47,781||)||(38,319||)||(15,941||)|
|Net increase (decrease) in cash||(33,382||)||18,169||(1,449||)|
|Total cash resources||39,954||73,288||38,386|
|Other Current Assets||22,976||25,767||18,888|
|Weighted average number of shares outstanding||70,150,912||70,150,912||69,867,941|
|Dividends per share||NIL||NIL||NIL|
About the Company
Kirkland Lake Gold's corporate goal is to create a self sustaining and long lived intermediate Gold Mining Company based in the historic Kirkland Lake Gold Camp. The Company plans to do this by increasing production capacity to 2,200 tons of ore per day in several stages, and by decreasing production costs by realizing the economies of scale associated with that higher production capacity. At the same time, the company is committed to maintaining a significant exploration program aimed at developing and maintaining a property wide reserve and resource base sufficient to sustain a mine life of more than ten years for as long as practicable.
Cautionary Note Regarding Forward-Looking Statements
This Press Release contains statements which constitute "forward-looking statements", including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to the future business activities and operating performance of the Company. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to the Company, are intended to identify such forward-looking statements. Investors are cautioned that forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the Company's expectations in connection with the projects and exploration programs being met, the impact of general business and economic conditions, global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future conditions, fluctuating gold prices, currency exchange rates (such as the Canadian dollar versus the United States Dollar), possible variations in ore grade or recovery rates, changes in accounting policies, changes in the Company's corporate mineral resources, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, risks related to joint venture operations, the possibility of project cost overruns or unanticipated costs and expenses, higher prices for fuel, power, labour and other consumables contributing to higher costs and general risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, unexpected changes in mine life, seasonality and unanticipated weather changes, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims, and limitations on insurance, as well as those risk factors discussed or referred to in the Company's annual Management's Discussion and Analysis and Annual Information Form for the year ended April 30, 2012 filed with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements except as otherwise required by applicable law.