Kirkland Lake Gold Inc.-Financial Results Q2 2011: Record Gold Production of 21,542 Ounces; Net Earnings of $8.6 Million
KIRKLAND LAKE, ONTARIO -- (Marketwire) -- 12/09/10 -- Kirkland Lake Gold Inc. (TSX: KGI)(AIM: KGI) ('Kirkland Lake Gold' or the 'Company'), an operating and exploration gold mining company located in Ontario, Canada, announces its second quarter fiscal 2011 results for the three months ended October 31, 2010. All amounts are in Canadian dollars, unless otherwise noted.
Mr. Harry Dobson, Chairman, commented:
'The second quarter demonstrated record gold production, earnings, and cash flow from operations as we increased the number of ore mining faces from the higher grade South Mine Complex. After meeting all operational costs, spending $15.5 million on capital costs and $1.8 million on exploration, total cash increased by $2.9 million in the quarter to $51.5 million.'
HIGHLIGHTS OF THE SECOND QUARTER
-- Cash flows generated from operating activities were $16.0 million.
-- Net income for fiscal Q2 2011 was $8.6 million, or $0.13 per share.
-- Cash resources (including short-term investments) as at October 31, 2010
were $51.5 million.
-- 117 additional people were hired, increasing the total workforce to 600
employees.
-- 21,542 ounces of gold were produced in Q2 2011, a record for the
Company.
-- 38,163 ounces of gold were produced year to date, which is within the
range required to maintain the yearly production target of 90,000 -
100,000 ounces.
-- The recovered ore grade for the quarter was higher than budgeted at
0.451 ounces of gold per ton driven by new South Mine Complex (SMC) work
places coming online below the 53 level earlier than budgeted, and all
ore in the quarter being produced by lower dilution cut and fill mining
methods.
-- The number of ore mining faces available for production was increased
from 25 to 28 during the quarter, with another 23 ore mining faces in
the development and planning stages.
-- Fiscal Q3 2011 gold production is forecast at 24,000 - 30,000 ounces.
DETAILS OF THE SECOND QUARTER
Mine Expansion and Production
-- A record total of 21,542 ounces of gold were produced in the quarter for
a total of 38,163 ounces produced year to date, which is within the
range required to maintain the yearly production target of 90,000 to
100,000 ounces. The completion of the first phase of the Company's
Expansion Project in the first quarter allowed the Company to begin to
deploy more resources in the second quarter and to begin to ramp up
production.
-- The underground haulage ramp between the No. 3 Shaft and the SMC mining
area reached the general area of the truck loading chutes and stations
below the 53 Level, and excavations for these facilities are underway.
The 53 Level track haulage-way was connected to the ramp and excavation
of the dumps and dump access drifts on the 53 Level are nearing
completion. Rockwork for a related ventilation upgrade was also
completed and construction work is now underway. The first dump at the
top of the haulage-way above the 51 Level Loading Pocket is also now
under construction. This key project is on track for completion by
November 2011.
-- Methane was encountered for the first time at the mine in an underground
diamond drill hole. While readings of gas in the immediate area of the
hole did not exceed twelve percent of the lower explosive limit,
regulations and best practices prescribe that certain policies and
procedures be put in place at a mine where explosive gases are
encountered before mining or exploration activities may continue. This
resulted in delays in operating the mine of one day, in production
activities on the 53 Level of the mine of one week, and in exploration
activities throughout the mine of three weeks. These delays reduced
production in the quarter by approximately 1,400 ounces. Methane is
regularly encountered in several other Ontario mines.
-- The Company's workforce grew by an additional 117 people to 600
employees in the quarter. The majority of the new employees hired were
underground workers in the areas of production, maintenance, and capital
projects. Most of these employees will require significant training and
the opportunity to gain experience in the mine before becoming fully
productive. A significant ongoing training effort is underway intended
to continue to bring the new employees up to speed safely and to
continue to upgrade the skills of all employees. The number of employees
in the Safety and Training Group over the course of the Expansion
Project has grown from three to eleven, with the activity level per
employee also increasing significantly.
-- Work to increase the hoisting capacity at the No. 3 Shaft by over 300
percent to an ultimate capacity of 3,600 tons per day continued in the
quarter. The planned start up of the new service hoist in the quarter
was delayed by electrical design problems. This hoist is required to
begin the upgrade of the third compartment of the No. 3 Shaft for
service conveyance operations, which has been pushed back by the delay.
As a result, the first step change in hoisting capacity targeted for the
end of January 2011 is now targeted for the end of the fourth quarter.
Shaft upgrade work continued in the quarter, and focused primarily on
the head-frame, the shaft services compartment and the underground shaft
stations and loading pockets. Crews were also utilized on maintenance
projects that were brought forward because of the delay.
-- The number of ore mining faces available for production was increased
from 25 to 28 during the quarter, with another 23 ore mining faces in
the development and planning stages. The maximum daily ore production
remains limited to no more than 700 tons per day until the initial
hoisting upgrade is completed due to hoisting capacity restrictions. In
practice, the actual average tonnage of ore to be hoisted per day is
being limited to that required to meet the yearly ounce production
target, as hoisting less ore allows more time for hoisting waste and
completing other expansion and exploration project related work. The ore
tonnage hoisted was planned to be lighter in the first two quarters of
the year and heavier in the last two quarters of the year, as more
resources are deployed and more ore headings are brought on line. A
lower tonnage and higher grade contingency mineplan has been implemented
due to the hoisting limitation being extended by three months.
-- Additions and improvements to the surface maintenance facilities,
headframe, surface muck handling facilities, warehouse, cold storage
facility, offices and parking lots, compressor plant, electrical plant,
and backfill plant are now being planned or are underway. This work is
planned to be completed as required during fiscal years 2011 and 2012.
Exploration
-- More diamond drills moved to a seven day per week operating schedule as
the contractor added drillers to the workforce as requested by the
Company.
-- An exploration drift was advanced to the edge of the Amalgamated
Kirkland - Queenston joint venture property of the Company and Queenston
Mining Inc. in preparation for driving a drift onto that property in
order to establish a central diamond drilling station by the second
quarter (Q2) of fiscal 2012.
Financial Results
-- Net income for Q2 of fiscal 2011 was $8.6 million or $0.13 per share,
which compares to a net income of $3.3 million for the first quarter
(Q1) of fiscal 2011, and a restated net loss of $7.3 million for Q2 of
fiscal 2010.
-- Operating costs were $365 per ton ($809 per ounce) in Q2 of fiscal 2011,
compared with $256 per ton ($709 per ounce) in the prior quarter, and
$569 per ton ($2,718 per ounce) in Q2 of fiscal 2010. Total cash costs
were $390 per ton ($866 per ounce) in Q2 of fiscal 2011, compared to
$273 per ton ($756 per ounce) in the prior quarter and $583 per ton
($2,788 per ounce) in Q2 of fiscal 2010. Unit costs benefited by a
positive inventory adjustment in the first quarter, and were affected by
a negative inventory adjustment in the second quarter. Over the longer
term, these inventory adjustments tend to net to approximately zero, and
longer term unit costs approach the average of the quarterly unit costs.
The Company is targeting a reduction in operating costs to less than
$250 per ton by continuing to expand and upgrade the operating
facilities and workforce and by increasing production.
-- Cash flows generated from operating activities were $16.0 million in Q2
of fiscal 2011 compared to $0.1 million in Q1 of fiscal 2011. Operating
cash flows before working capital changes were $9.7 million in Q2 of
fiscal 2011 compared to $5.0 million in Q1 of fiscal 2011. The major
components of the working capital changes are gold inventory and
accounts receivable changes.
-- Gold poured in the quarter was 23,419 ounces, which compares to 14,086
ounces for the previous quarter and 6,622 ounces for the same period in
the previous fiscal year.
-- After meeting all operating costs, spending $13.6 million on capital and
$1.8 million on exploration, total cash resources (including short-term
investments) increased $2.9 million during the second quarter to $51.5
million. As at December 7, 2010 this number had decreased to 43.3
million.
Health and Safety
-- The Company completed the quarter with the lowest accident frequency in
the Province of Ontario in the Large Mines category.
OUTLOOK
The production forecast for fiscal 2011 remains unchanged at between 90,000 and 100,000 ounces of gold. The operating strategy for the fiscal year included recovering 38,000 to 42,000 ounces of gold in the May through October 2010 period. These six months were expected to be low production labour months due to the allocation of workers to the completion of the first phase of the Expansion Project at the end of the first quarter, the retention of workers on higher priority Expansion Project activities throughout the summer, the reduction of labour available due to summer holidays and the lower initial productivity expected from the additional workers to be hired and trained starting in July. Actual production for this period was 38,163 ounces. A total of 21,542 ounces were produced in the second quarter, which was a quarterly record for the Company.
Production in the period between November 2010 and January 2011 (Q3 of fiscal 2011) is expected to be 24,000 to 30,000 ounces of gold assuming ongoing success in the critical recruiting and training activities and as more mining areas are brought on line. An increase in project and exploration activities will also take place during this period as more labour is employed in all areas.
In the period from February to April 2011 (Q4 of fiscal 2011) production is estimated to be in the range of 28,000 to 32,000 ounces of gold. Achieving this level of quarterly production is dependent on increasing recovered grades as production will be hindered by the expected late completion of the budgeted hoisting upgrade.
The Company's expansion activities will continue to take priority, and the available resources will be managed accordingly. The tonnage of ore to be hoisted and mined will be managed to meet these targets, provided higher priority activities are not hindered. The Company will continue to prioritize the work and investment required to meet our goals of attaining 5,000,000 ounces in total gold reserves and resources and of reaching a profitable production rate of 180,000 to 200,000 ounces of gold per year by November 2011.
'We expect to meet our yearly production targets due to a higher grade and lower tonnage contingency mine plan, despite the delay to the hoisting project. Our efforts in the second half of the year will also be focused on continuing to advance the Expansion Project in order to increase production rates to 180,000 to 200,000 ounces per year and decrease average yearly operating costs per ton to $250 by the end of the Project,' concluded Mr. Dobson.
---------------------------------------------------------------------------
Three months ended,
Financial Highlights --------------------------------
(All amounts in 000's of Canadian Dollars, Oct 31, July 31, Oct 31,
except shares and per share figures) 2010 2010 2009
---------------------------------------------------------------------------
Gold Sales (ounces) 23,392 15,727 6,612
Average Price (per ounce) 1,300 1,242 1,047
---------------------------------------------------------------------------
Revenue 30,418 19,538 6,925
Operating Expenses 20,536 14,069 15,514
Exploration Expenditure 1,792 1,502 1,062
Net Income (loss) 8,565 3,313 (7,273)
Per share (basic and diluted) 0.13 0.05 (0.12)
Cash Flow from (used in) operating
activities 16,046 112 (4,209)
Cash Flow from (used in) financing
activities 2,379 (4) 36,532
Cash Flow from (used in) investing
activities (5,635) (16,060) (41,054)
Net increase (decrease) in cash 12,790 (15,951) (8,731)
Cash at end of period 26,162 13,372 4,489
Short-term investments 25,347 35,236 45,206
Total cash resources 51,509 48,608 49,695
---------------------------------------------------------------------------
Total Assets 179,809 168,692 132,136
Total Liabilities 20,367 19,451 13,298
Working Capital 45,147 46,767 45,524
---------------------------------------------------------------------------
Weighted average number of shares
outstanding 67,763,116 67,728,645 61,168,393
Dividends per share NIL NIL NIL
---------------------------------------------------------------------------
About Kirkland Lake Gold Inc.
Kirkland Lake Gold Inc. is an operating and exploration gold mining company located in Ontario, Canada. It purchased the Macassa Mine and the 1,500 ton per day mill along with four former producing gold properties - Kirkland Lake, Teck-Hughes, Lake Shore and Wright Hargreaves - in December 2001. These properties, which have historically produced some 22 million ounces of gold, extend over seven kilometres between the Macassa Mine on the west and Wright Hargreaves on the east and, for the first time, are being developed and explored under one owner. This camp is located in the Southern Abitibi Greenstone Belt of Kirkland Lake, Ontario, Canada. The Company's corporate goal is to expand its gold reserves and reduce its operating costs to become a profitable gold producer.
The Company's common shares trade on the TSX (Toronto Stock Exchange) and on the AIM (Alternative Investment Market) of the London Stock Exchange.
The Company's senior management and Board of Directors have extensive experience in the natural resource and mining sectors that include exploration, mining and marketing, as well as experience in the legal and corporate finance areas.
Cautionary Note Regarding Forward Looking Statements
This Press Release may contain statements which constitute 'forward-looking statements' including statements regarding the plans, intentions, beliefs and current expectations of the Company, its directors, or its officers 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, or its management, are intended to identify such forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future business activities or performance and involve risks and uncertainties, and that the Company's future business activities may differ materially from those in the forward-looking statements as a result of various factors. Such risks, uncertainties and factors are described in the Company's periodic filings with the Canadian securities regulatory authorities, including the Company's Annual Information Form and quarterly and annual Management's Discussion & Analysis, which may be viewed on SEDAR 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.
Neither the Toronto Stock Exchange nor the AIM Market of the London Stock Exchange has reviewed and neither accepts responsibility for the adequacy or accuracy of this news release.
Contacts:
Kirkland Lake Gold Inc.
Brian Hinchcliffe
President
1 705 567 5208
1 705 568 6444 (FAX)
bhinchcliffe@klgold.com
Kirkland Lake Gold Inc.
Lindsay Carpenter
Director of Investor Relations
1 416 840 7884
1 705 568 6444 (FAX)
lcarpenter@klgold.com
www.klgold.com
Pelham Bell Pottinger
Klara Kaczmarek
44 (0) 20 7337 1524
kkaczmarek@pelhambellpottinger.co.uk
Ocean Equities Ltd.
Guy Wilkes
44 (0) 207 786 4370
guy.wilkes@oceanequities.co.uk
NOMAD: Panmure Gordon (UK) Ltd
Katherine Roe / Callum Stewart
44 (0) 20 7459 5744
katherine.roe@panmure.com