Fosterville a standout performer for Kirkland Lake with record gold output

Canadian gold producer Kirkland Lake Gold (ASX: KLA) has posted record production at its Fosterville mine in Victoria for the first quarter of 2019 as a result of significantly higher average grades.

Releasing its production results for the three-month period to the end of March today, the Fosterville operation remained a key standout performer for the quarter with production totalling 128,445 ounces.

This result was significantly up from the 63,843oz produced in Q1 2018 and a 3% increase from the previous quarterly record of 124,307oz over the December 2018 period.

Kirkland attributed the increased levels of production from Fosterville to strong grade performance, as well as higher levels of mill throughput.

Average grade per tonne for the quarter tipped in at 29g/t gold, up from 16.8g/t a year prior, while average mill recoveries totalled 98.3%. The notable 73% increase in the average grade reflected the commencement of production from the high-grade Swan Zone during the second-half of 2018.

During the quarter, Fosterville’s reserves increased 60% to 2.72 million ounces at 31g/t, with the Swan Zone mineral reserve doubling to 2.34Moz at 49.6g/t.

Kirkland president and chief executive officer Tony Makuch flagged even higher levels of production from the Fosterville operation.

“At Fosterville, we continued to advance development and production from the Swan Zone, with stope production advancing on multiple levels,” he said.

“As we develop deeper into the zone, we are targeting higher levels of production from Swan, particularly in the second half of the year.”

On track to achieve production guidance

Overall, the company ended the first quarter well, with total production across its asset base for the period totalling 231,879oz, up 57% year-on-year. Total consolidated gold sales tipped in at 232,929oz, up from 225,692oz sold in the December 2018 quarter.

Across its portfolio, its Mascassa operation in Ontario, Canada also performed strongly with the company reporting record gold production of 72,776oz from the high-grade mine, up from 54,038oz in Q1 2018.

Kirkland said it was well positioned to achieve its improved full-year 2019 production guidance of 920,000-1,000,000oz.

At Fosterville, the company is targeting production of over 500,000oz per year by 2020 and could reach 600,000oz gold production annually by 2021.

Financial performance

On the financial front, the company was able to generate substantial amounts of cash flow during the quarter, helping lift its cash position by US$78 million to US$410 million at the end of March.

Meanwhile, net cash flow from operating activities increased 73% to US$543.1 million, while free cash flow jumped 40% to US$249.5 million.

“Our rapidly growing financial strength is a key differentiator for Kirkland Lake Gold and provides us with a great deal of flexibility in terms of financing our growth and examining additional opportunities for value creation, including returning capital to shareholders,” Mr Makuch said.

At the beginning of the quarter, Kirkland rewarded shareholders with a quarterly dividend payment of C$0.04 a share.

Kirkland’s shares added 1.3% in morning trade to $46.10.