Kirkland Lake Gold Ltd. (TSX:KL) (NYSE:KL) (ASX:KLA) announced production results for the fourth quarter and full-year of 2020. Q4 2020 production totaled 369,434 ounces, a 32% increase from the fourth quarter of 2019 and 9% higher than the previous quarter. All three of the Company’s cornerstone assets achieved their highest quarterly production levels of the year in Q4 2020. For FY 2020, the Company produced 1,369,652 ounces, a 41% increase from 2019 and in line with full-year 2020 guidance of 1,350,000 – 1,400,000 ounces. All dollar amounts are expressed in U.S. dollars, unless otherwise noted. Per share amounts are based on a total of 268,097,877 shares outstanding at December 31, 2020.
$847.6 million returned to shareholders in 2020
A total of $847.6 million of cash was returned to shareholders through share repurchases and dividend payments in FY 2020 ($280.1 million in Q4 2020), representing $3.16 per share outstanding and $619 per ounce of FY 2020 production. A total of $731.6 million (C$974.6 million) of cash was used to repurchase 18,925,900 shares during the year through the Company’s normal course issuer bid of which 5,727,500 shares were repurchased during Q4 2020 for $245.9 million (C$319.4 million). With additional repurchases of 1,074,100 shares during the first week of January 2021, for $46.3 million (C$58.8 million), the Company has now achieved its goal of repurchasing 20.0 million shares over a 12 to 24-month period, which was announced in February 2020 following the completion of the Detour Gold Corporation (“Detour Gold”) acquisition. Dividend payments in 2020 totaled $116.0 million, including $34.2 million being used in Q4 2020 for a dividend payment of US$0.125 per share on October 14, 2020 to shareholders of record on September 30, 2020. The Company increased the quarterly dividend twice in 2020, doubling it to US$0.125 per share effective the Q1 2020 payment, with an additional 50% increase, to US$0.1875 per share, introduced effective the Q4 2020 payment, to be paid on January 14, 2021 to shareholders of record on December 31, 2020.
Significant financial strength maintained
At December 31, 2020, the Company had cash of $848 million (with no debt), an increase of $141 million or 20% from $707 million at December 31, 2019. Cash at December 31 ,2020 was unchanged from the previous quarter end, mainly reflecting the significant capital returned to shareholders during Q4 2020.
Highlights of Q4 2020 and FY 2020 Production Results
Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold, commented: “Our most significant achievement in 2020 was our extensive response to the COVID-19 pandemic, which clearly demonstrated that, at Kirkland Lake Gold, nothing is more important than the health and safety of our people and the responsible operation of our business. Looking at our operating performance, in many respects our team had its best year ever in 2020. Faced with unprecedented challenges, we generated solid results, with production of 1,369,652 ounces achieving our full-year 2020 guidance. Our strong performance was driven by Fosterville, which generated record production of 640,467 ounces, including better than expected results during Q4 2020. Detour Lake and Macassa were significantly impacted by COVID-19, including being placed on reduced operations at the end of the first quarter. Both operations bounced back later in the year, achieving their best quarter of production in Q4 2020. Looking at Detour Lake, we are extremely pleased with our acquisition of the mine on January 31, 2020, which was clearly a case of the right deal at the right time. Detour Lake is a tremendous asset with substantial upside that is already making a significant contribution to our operating and financial results. In 2021, the mine is poised for strong production growth and improved unit costs, with there being considerable potential for additional growth as we continue to have success with our extensive exploration program.
“Turning to exploration, we achieved very encouraging drill results at all three of our cornerstone assets, which support our view that Detour Lake, Macassa and Fosterville are not just three very profitable operations, they are also three of the most exciting exploration stories in the industry. We also made excellent progress with our key growth projects, including our #4 Shaft project at Macassa which was advancing ahead of schedule at year end, with target completion in late 2022. At Fosterville, a twin exploration drive being developed to Robbin’s Hill advanced over 3,200 metres, with underground drilling from the drive to commence late this year. We also commenced several key projects at Detour Lake during 2020 in support of the significant production growth we are targeting in the years ahead, with these projects focused on mill enhancements, tailing capacity expansion, and construction of new site infrastructure.
“Finally, one of our key strategic priorities is returning capital to shareholders and, in this critical area of value creation, 2020 was an extremely successful year. In total, we returned $847.6 million to shareholders during the year, including $731.6 million through share repurchases and $116.0 million in dividend payments. In February of 2020, we announced a target to repurchase 20.0 million shares through our NCIB within a 12 to 24-month period as part of completing the Detour Gold acquisition and, as of January 8, 2021, we have achieved that goal. We also increased our dividend twice in 2020, growing the quarterly dividend from $0.06 per share when 2020 began to $0.1875 per share effective the Q4 2020 dividend ($0.75 per share annualized). With three cornerstone assets like Detour Lake, Macassa and Fosterville, we expect to continue to generate strong earnings and cash flows, which will support our ongoing efforts to return substantial amounts of capital to shareholders going forward.”
Key Developments in FY 2020
Proactive and effective response to COVID-19 pandemic
Significant achievements in Environment, Social and Governance performance
Acquisition of Detour Gold Corporation
Drilling results demonstrate substantial exploration upside at all three cornerstone assets
Significant progress with key growth capital projects
Operations suspended at non-core assets
Significant proceeds from sale of strategic investments
Q4 and FY 2020 Production
|Production Results||Q4 2020||Q4 2019||Q3 2020||FY 2020||FY 2019|
|Ore Milled (tonnes)||183,635||121,998||167,533||593,343||492,874|
|Grade (g/t Au)||28.1||49.3||30.3||33.9||39.6|
|Gold Production (ozs)||164,008||191,893||161,489||640,467||619,366|
|Ore Milled (tonnes)||74,353||87,573||78,526||312,758||324,077|
|Grade (g/t Au)||22.4||20.5||15.4||18.6||23.6|
|Gold Production (ozs)||52,283||56,379||38,028||183,038||241,297|
|Ore Milled (tonnes)||5,829,230||–||5,898,694||21,091,938||–|
|Grade (g/t Au)||0.89||–||0.81||0.83||–|
|Gold Production (ozs)||153,143||–||140,067||516,757||–|
|Ore Milled (tonnes)||–||252,801||–||215,318||853,528|
|Grade (g/t Au)||–||4.1||–||4.5||4.4|
|Gold Production (ozs)||–||31,469||–||29,391||113,952|
|Total Consolidated Production (ozs)3||369,434||279,742||339,584||1,369,652||974,615|
|Total Consolidated Gold Sales (ozs)||371,009||278,438||331,959||1,388,944||979,733|
|1)||The Detour Lake Mine was acquired on January 31, 2020. FY 2020 production represents output from that date to December 31, 2020.|
|2)||The Holloway Mine, a component of Holt Complex, was placed on care and maintenance in March 2020 with no plans for a resumption of operations. The remainder of the Holt Complex was placed on temporary suspension effective April 2, 2020 as part of the Company’s COVID-19 response. In July 2020, the Company announced that operations at the Holt Complex would remain suspended until further notice|
|3)||Production numbers may not add to totals due to rounding.|
Performance Against Full-Year 2020 Production Guidance (as at November 5,
|2020 Guidance (,000 ozs)||210 – 220||29||520 – 540||590 – 610||1,350 – 1,400|
|FY 2020 Production (ozs)||183,038||29,391||516,757||640,467||1,369,652|
After withdrawing guidance for 2020 on April 2, 2020 due to uncertainties related to the COVID-19 pandemic, the Company issued new guidance on June 30, 2020 (see table above), which remained unchanged throughout the balance of the year. FY 2020 consolidated production totalled 1,369,652 ounces, in line with re-issued guidance and a 41% increase from FY 2019. The increase from the previous year mainly reflected the addition of Detour Lake Mine, which was acquired on January 31, 2020, as well as the impact of record production at Fosterville. These factors more than offset a significant reduction in production at Holt Complex, where operations were suspended effective April 2, 2020, as well as lower production at Macassa largely reflecting the impact of reduced operations and protocols related to COVID-19 and reduced workforce productivity and equipment availability resulting from excessive heat in the mine during Q3 2020.
Review of Operations
The Fosterville Mine produced 164,008 ounces in Q4 2020 based on processing 183,635 tonnes at an average grade of 28.1 g/t and average mill recoveries of 98.9%. Q4 2020 production compared to record production of 191,893 ounces in Q4 2019, when the mine processed 121,998 tonnes at an average grade of 49.3 g/t and average recoveries of 99.2%. Q4 2020 production compared to production of 161,489 ounces the previous quarter when the mine processed 167,533 tonnes at an average grade of 30.3 g/t and at average recoveries of 99.0%. The change from Q4 2019 reflected a lower average grade, which more than offset the impact of increased tonnes processed, resulting from higher mining rates in both Lower Phoenix and Harrier as the mine benefited from recent investments in improved ventilation and paste fill. The reduction in the average grade reflected mine sequencing in the Swan Zone as well as a lower proportion of total mined tonnes coming from the Swan Zone versus other, lower-grade, areas. The increase in production from the previous quarter resulted from increased tonnes processed in Q4 2020.
Production at Fosterville for FY 2020 was a record 640,467 ounces, 21,101 ounces or 3% higher than the 619,366 ounces produced in FY 2019. FY 2020 production resulted from processing 593,343 tonnes at an average grade of 33.9 g/t and average recoveries of 98.9%. The increase from FY 2019 was mainly due to a 20% increase in tonnes processed, which more than offset a 14% reduction in the average grade. The 640,467 ounces of production for FY 2020 exceeded full-year 2020 production guidance of 590,000 – 610,000 ounces mainly due to higher than planned tonnes processed and average grades during the second half of 2020.
Production at Macassa in Q4 2020 totaled 52,283 ounces compared to production of 56,379 ounces in Q4 2019 and 38,028 ounces the previous quarter. Production in Q4 2020 resulted from processing 74,353 tonnes at an average grade of 22.4 g/t and average recoveries of 97.7%, which compared to 87,573 tonnes processed in Q4 2019 at an average grade of 20.5 g/t and average recoveries of 97.8% and 78,526 tonnes at an average grade of 15.4 g/t and average recoveries of 97.8% in Q3 2020. The change in production from Q4 2019 largely reflected lower tonnes processed which was only partially offset by an improvement in the average grade, mainly due to mine sequencing in the SMC. The 37% increase in production compared to the previous quarter was due to a 45% improvement in the average grade reflecting a greater proportion of higher-grade stopes in the SMC being mined during the final quarter of the year. During Q3 2020, mine production was affected by limited operating development being completed during reduced operations, the impact of ongoing health and safety protocols, including those related to COVID-19, and reduced equipment availability, mainly due to extremely high temperatures in the mine. These factors resulted in reduced mining rates and a focus on the most accessible areas, which were largely the lower-grade stopes planned for the quarter.
Production at Macassa in FY 2020 totaled 183,038 ounces, which resulted from processing 312,758 tonnes at an average grade of 18.6 g/t and at average recoveries of 97.7%. FY 2020 production compared to production of 241,297 ounces for FY 2019, which resulted from processing 324,077 tonnes at an average grade of 23.6 g/t and at average recoveries of 97.9%. FY 2020 production did not achieve the re-issued full-year 2020 guidance of 210,000 – 220,000 ounces reflecting both lower than expected processing rates and average grades largely due to the impact of ongoing health and safety protocols related to COVID-19 and reduced workforce productivity and equipment availability resulting from excessive heat in the mine in Q3 2020.
Production at Detour Lake in Q4 2020 totaled 153,143 ounces, which involved processing 5,829,230 tonnes at an average grade of 0.89 g/t and average recoveries of 91.8%. Production in Q4 2020 compared to production in Q3 2020 of 140,067 ounces, which resulted from processing 5,898,694 tonnes at an average grade of 0.81 g/t and average recoveries of 90.7%. The increase in production quarter over quarter resulted from a higher average grade due to mine sequencing with production concentrated in higher-grade areas than during the previous quarter.
Production at Detour Lake for the 11 months ended December 31, 2020 totalled 516,757 ounces, which resulted from processing 21,091,938 tonnes at an average grade of 0.83 g/t with average recoveries of 91.3%. The 516,757 ounces of production in FY 2020 was below the re-issued full-year 2020 guidance range of 520,000 – 540,000 ounces, reflecting slightly lower than planned average grades during the second half of 2020.
The assets included in the Holt Complex (Holt, Holloway and Taylor mines and Holt Mill) were designated as non-core on February 19, 2020 with the Company planning to assess options for maximizing the value of these assets. In March 2020, the Holloway Mine was transitioned to care and maintenance. Effective April 2, 2020, operations were suspended at the remainder of the Holt Complex as part of the Company’s COVID-19 response and while the Company conducted a strategic review of these assets. In July 2020, the Company announced that the suspension of operations at Holt Complex would be extended until further notice. As a result, there was no production from Holt Complex in Q4 2020.
For FY 2020, production from Holt Complex totaled 29,391 ounces, almost all of which was produced during the first quarter of the year. The Company has no plans for a future resumption of operations at Holt Complex at the present time.
Natasha Vaz, P.Eng., Senior Vice President, Technical Services and Innovation is a “qualified person” as defined in National Instrument 43-101 and has reviewed and approved disclosure of the technical information and data in this News Release.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a senior gold producer operating in Canada and Australia that is targeting 1,300,000 – 1,400,000 ounces of production in 2021. The production profile of the Company is anchored by three high-quality operations, including the Macassa Mine and Detour Lake Mine, both located in Northern Ontario, and the Fosterville Mine located in the state of Victoria, Australia. Kirkland Lake Gold’s solid base of quality assets is complemented by district scale exploration potential, supported by a strong financial position with extensive management expertise.
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