Record gold production shores up Kirkland Lake Gold’s best-ever cash flow

Kirkland Lake Gold ASX KLA record production Q1 2019 March quarter
Record production and cash flow boosted Kirkland Lake Gold’s net earning by 120% to $110.1 million.

Prevailing high gold prices and record operating results have proved a boon for Kirkland Lake Gold (ASX: KLA) which achieved its best-ever free cash flow for the March quarter of $93.1 million – up 85% on the previous corresponding period.

During the March quarter 2019, Kirkland produced 231,879 ounces of gold, which was a 57% increase on the same period in 2018 and marginally higher than the December quarter’s 231,217oz.

Meanwhile, all in sustaining costs averaged $560/oz sold – a 33% improvement on Q1 2018 and 1% better than Q4 2018.

Strong production and improved AISC underpinned Kirkland’s best-ever free cash flow of $93.1 million, which was also 8% higher than the previous December quarter.

As a result of the record cash flow, Kirkland’s net earnings rocketed 120% from Q1 2018 to $110.1 million.

“We are off to a strong start in 2019, with record gold production and sales and very low unit costs in Q1 2019,” Kirkland president and chief executive officer Tony Makuch said.

Mr Makuch said the company’s best-ever net earnings and free cash flow helped its cash position grow 25% to $416.1 million in just one quarter.

“Our operating earnings were very strong and our net earnings beat the previous record in Q4 2018 even though we had unfavourable foreign exchange movements this quarter as well as a higher effective tax rate.”

“Looking ahead, with production and sales levels expected to increase in the second half of the year, we are well-positioned for increased levels of profitability and cash flow going forward, assuming existing business plans and gold prices,” Mr Makuch added.

Production guidance lifted for 2019

Boosting production in Q1 2019 was a higher average grade of 17.6 grams per tonne compared to Q1 2018’s of 11.5g/t.

Additionally, recovery rates were higher at 97.9% – up from 96.3%.

According to Mr Makuch, Kirkland’s Ontario-based Macassa and Victoria-based Fosterville gold mines underpinned the March quarter’s results.

“Macassa had an outstanding quarter achieving record production, operating cash costs per ounce and AISC per ounce.”

Over at Fosterville, which is one of Victoria’s pre-eminent gold mines, record gold production was also achieved in Q1 2019.

The underground mine has mineral reserves of 2.7Moz with an average grade of 31g/t gold.

Due to Kirkland’s success at Fosterville, many new explorers have flocked to the state’s Stavely mineral province in recent years, which is where Fosterville is located.

Commenting on the company’s achievement at Fosterville in Q1 2019, Mr Makuch said the company was targeting higher production levels from the Swan zone, which is expected to boost total company gold output for the remainder of the year.

“Based on the strong results at Macassa and Fosterville in Q1 2019 and the outlook for the remainder of the year, we have raised the lower end of our consolidated production guidance for the year, and now expect to produce 950,000oz, and improved our operating cash cost per ounce sold guidance, which we are not targeting at $285-$305/oz,” Mr Makuch said.

Lorna has more than 10 years' experience as a finance journalist and editor. She has written for numerous industry publications reporting on various sectors, including: resources, energy, construction, biotech, pharma, science and technology, agriculture, and chemicals. Specialising in resources, Lorna has also covered a myriad of small and large cap ASX and dual-listed stocks.