This company's record gold production in Q1/19 and
its impact on guidance along with expected catalysts were discussed in this
ROTH Capital Partners report.
In an April 9 research note, ROTH Capital Partners analyst Jake Sekelsky
reported that Kirkland
Lake Gold Inc. (KL:TSX; KL:NYSE) "continues to fire on all
cylinders," as it produced a record amount of gold in Q1/19.
The analyst noted the miner's Q4/19 production was strong and reviewed the
numbers. Total production was 231,879 ounces of gold (oz), which was in line
with ROTH's estimates. The Fosterville mine, which produced 128,445 oz and
the Macassa mine, which produced 72,776 oz, outperformed in Q1/19,
contributing to the record production overall.
In contrast, Fosterville, which produced 128,445 ounces of gold,
underperformed relative to ROTH's forecast, due to mine sequencing. However,
"we expect production at Fosterville to increase gradually throughout
the year as development work is completed at the high-grade Swan zone,"
Sekelsky commented.
Production at each of the rest of Kirkland Lake's mines was generally in
line—17,225 oz at Holt, 12,377 oz at Taylor and 1,056 oz at Holloway,
Sekelsky noted.
With a solid Q1/19 behind it, Sekelsky indicated, Kirkland Lake is
"well positioned" to meet full-year 2019 production guidance of
920,000 ounces to 1 million ounces of gold.
ROTH projects the company will reach 935,076 gold oz of production during
the year, but if more material from Fosterville's high-grade Swan zone is
"brought into the mine plan in H2/19," this estimate could prove
conservative, Sekelsky wrote. Management did say Fosterville production would
be weighted toward H2/19. "Given this, we expect grades to increase
above the 29 grams per ton gold processed during H1/19," the analyst
added.
During Q1/19, Kirkland Lake added $78 million to the balance sheet, which
took the cash total to $410 million.
Sekelsky highlighted that a 2019 catalyst for the company is exploration
news out of Fosterville as "we believe the potential to discover another
Fosterville at Fosterville remains. Further, we view the company's Northern
Territory assets as a potential dark horse."
The company's exploration budget for this year is $100–120 million with
$80–100 million allocated for work at its Australian operations, primarily
Fosterville. There, efforts will be concentrated on Lower Phoenix, Harrier
and Robbin's Hill along with other regional targets.
As for Union Reefs, the company is expected to conduct deeper exploration
to outline a mine plan. "The market ascribes little value to the
Northern Territory assets, creating a pocket of opportunity should the
company have exploration success," Sekelsky said.
ROTH has a Buy rating and a US$41 price target on Kirkland Lake. Its
shares are currently trading at US$31.56 apiece.
[NLINSERT]
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Disclosures from ROTH Capital Partners, Kirkland Lake, Company Note,
April 9, 2019
Regulation Analyst Certification ("Reg AC"): The research
analyst primarily responsible for the content of this report certifies the
following under Reg AC: I hereby certify that all views expressed in this
report accurately reflect my personal views about the subject company or
companies and its or their securities. I also certify that no part of my
compensation was, is or will be, directly or indirectly, related to the
specific recommendations or views expressed in this report.
ROTH makes a market in shares of Kirkland Lake and as such, buys and
sells from customers on a principal basis
ROTH Capital Partners, LLC expects to receive or intends to seek
compensation for investment banking or other business relationships with the
covered companies mentioned in this report in the next three months.
