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Kirkland Lake Gold's Fosterville Attains Record Q4 Production

Zacks Equity Research

Kirkland Lake Gold Ltd. KL recently released production figures for the fourth quarter and 2019.

The company’s gold production for the fourth quarter rose 21% year over year to 279,742 ounces. The upside was driven by record quarterly production at the Fosterville Mine.

Consolidated gold production for 2019 surged 35% year over year to 974,615 ounces.

Fosterville Leads Quarterly and Yearly Production  

Fosterville: Fourth-quarter gold production at the mine surged 54% year over year and 21% sequentially to 191,893 ounces. For 2019, gold production surged 74% year over year to 619,366 ounces.

The surge in production reflects increased tons processed, higher average grades as well as improved recoveries. Notably, higher levels of production from the Swan Zone contributed to growth in average grade in the fourth quarter on a year-over-year basis.

Macassa: The mine’s gold production fell 19.4% year over year and 10.4% sequentially to 56,379 ounces in the fourth quarter. For 2019, gold production inched up 0.5% year over year to 241,297 ounces.

The company witnessed lower average grades in the fourth quarter, which affected the mine’s performance. Grade underperformance in certain stopes more than offset the benefits of higher tons processed at the mine.

Holt Complex: Gold production declined 14.9% year over year to 31,469 ounces in fourth-quarter 2019. In 2019, gold production fell 10.5% year over year to 113,952 ounces.

The downside was caused by lower average grade at both Taylor Mine and Holt Mine, which more than offset the impact of production at the Holloway Mine in the fourth quarter.  

Update on Detour Gold Buyout

The company’s recently announced agreement to acquire Detour Gold provides additional upside. The company foresees opportunities for substantial value creation through investment in the Ontario, Canada-based Detour Lake Mine’s growth and exploration potential.

The buyout offers opportunities for synergies and other value creation worth $75-$100 million per year along with an increase in free cash flow generation, mineral reserves and production.

Financials

Also, the company’s cash position improved 15% during the fourth quarter. As of Dec 31, 2019, total cash and equivalents amounted to $705 million. The company used $30 million to repurchase 727,200 common shares through its normal course issuer bid (“NCIB”). The company utilized an additional $25 million for a strategic investment.

Price Performance

Kirkland Lake Gold’s shares have surged 66.2% in the past year compared with the industry’s 30.2% growth.



Zacks Rank & Key Picks

Kirkland Lake Gold currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp DQ, Pan American Silver Corp PAAS and Commercial Metals Company CMC, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has projected earnings growth rate of 315.4% for 2020. The company’s shares have surged 96.4% in the past year.

Pan American Silver has an estimated earnings growth rate of 46.7% for 2020. Its shares have returned 56.9% in the past year.    

Commercial Metals has an expected earnings growth rate of 17.3% for fiscal 2020. The company’s shares have rallied 35.9% in the past year.

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