Kirkland Lake earnings boosted by Detour mine

Kirkland Lake Gold‘s (TSX: Kl; NYSE: KL; ASX: KLA) acquisition of Detour Gold and its Detour Lake mine in Ontario earlier this year now accounts for more than 40% of the company’s 2020 free cash flow.

“We are extremely pleased with the contribution already being made by Detour Lake mine, which generated US$231 million of free cash flow in the first eight months since the transaction,” chief executive Tony Makuch said in a statement.

The $4.4 billion (US$3.4 billion) acquisition of Detour, added 14.8 million oz. to Kirkland’s reserves, helping to help ease concerns about the short mine-life of the company’s flagship underground Fosterville operations in Australia.

Kirkland Lake saw production jump by 37% year-on-year to 339,584 oz. in the three months ended Sept. 30. All-in sustaining costs (AISCs) were US$886 per oz., (US$622 per oz. without Detour Lake).

The company’s Macassa in Ontario produced 38,028 oz. at US$1,081 per oz. in the quarter. Production was down from 62,945 oz. in the same quarter of 2019, and down from the 41,865 oz. produced in the second quarter. This was due to lower than expected average grades and tonnes processed, reduced workforce productivity and equipment availability related to excessive heat in the mine due to record temperatures in Kirkland Lake, as well as health protocols due to Covid-19.

Makuch said the number four shaft project at Macassa was advancing ahead of plan, and was on track for commissioning in late 2022. Once completed, it would improve operating efficiencies and help lift production towards the 400,000-oz.-gold-per-year target, he noted.

The high-grade Fosterville mine in Victoria, Australia, produced 161,489 oz. at an average head grade of 30.3 grams gold per tonne and mill recoveries averaged 99%. All-in sustaining costs (AISCs) rose 28% from last year’s third quarter to US$349 per oz. due to a 2.7% royalty introduced by the Victoria government in January.

Solid finances

The Toronto-based miner reported record free cash flow of US$275.1 million in the third quarter. That marked a 52% increase year-on-year, and a 22% surge from the previous quarter.

Year-to-date, free cash flow, the company said, is up 52% to $500.6 million.

Revenues jumped 66% to US$632.8 million from the same quarter in 2019, which helped drive headline earnings 49% higher to US$249.3 million, or US91¢ per share.

Kirkland Lake kept its already revised 2020 production guidance at 1.35-1.4 million oz., about 90% of the pre-Covid-19 outlook, at AISCs of US$790-$810 per ounce.

The company’s shares are trading at C$63.72, leaving the miner with a $17.6-billion market capitalization (US$13.5 billion).

— This article first appeared on MINING.com, part of Glacier Resource Innovation Group.