Kirkland Lake raises dividend on strong earnings

The Detour Lake gold mine in northeastern Ontario. Credit: Kirkland Lake Gold.

Kirkland Lake Gold (TSX:KL; NYSE: KL) reported third-quarter gold production of 339,584 oz., a 3% increase over the 329,770 oz. generated in the prior quarter. The Detour Lake and Fosterville mines led this output, producing 140,067 oz. gold and 161,489 oz. gold in the period, respectively.

With 331,811 oz. of gold sales, at an average realized price of US$1,907 per oz., the producer closed out the quarter with US$848 million in cash, a 58% increase during the reporting period.

In addition to the gold sales, Kirkland Lake’s financial position was positively impacted by a US$109.1-million sale of 32.6 million shares in Osisko Mining (TSX: OSK) and a US$75-million payment from Newmont (TSX: NGT; NYSE: NEM), received as part of a strategic alliance agreement on properties around Timmins, Ontario.

With this strong bottom-line performance, Kirkland Lake is also growing its quarterly dividend by 50%, to US18.75¢ per share, which will come into effect with the fourth quarter payout. The miner returned US$141.9 million in cash to shareholders over the course of the third quarter, with US$107.4 million used to repurchase 2.2 million shares, and US$34.5 million used for a July dividend.

With 1 million oz. gold churned out in the first three quarters of the year, Kirkland Lake expects to meet its updated (revised in June, following Covid-19 impacts) production guidance of 1.35-1.4 million ounces.

The Holt complex in Ontario, part of the strategic alliance agreement signed with Newmont in August, was designated as a non-core asset in February and operations were suspended in April.

“We continued to generate solid results in Q3 2020 and have entered the final quarter of [the] year well-positioned to achieve our full-year 2020 production guidance,” Tony Makuch, the company’s president and CEO, said in a statement.

Makuch added that the Detour Lake project, located in Ontario, led the company’s year-on-year production growth. Fosterville, in Australia’s Victoria state, also posted a strong performance, as recent investments into ventilation and paste fill allowed the company to increase mining rates and utilize spare capacity within the Fosterville mill.

Output from Macassa, also in Ontario, which produced 38,028 oz., was affected by factors related both to Covid-19 related protocols and reduced equipment availability from high temperatures in the mine, as well as by unplanned mill downtime.

According to Makuch, Macassa is already producing higher-grade ore, with expected improved results going forward. However, Kirkland Lake expects the asset to miss its 2020 production guidance of 210,000-220,000 ounces.

The company plans to provide updated guidance for each operation with its full third-quarter financial and operating results, which will be issued on Nov. 5.

— This article first appeared in the Canadian Mining Journal, part of Glacier Resource Innovation Group.


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