KIRKLAND LAKE GOLD COM NPV (OTCMKTS:KLGDF) is junior gold player that has been performing extremely well in an environment that has not been at all kind to the gold space. Anytime we see this type of a sector divergence to the positive, we want to check in and take a close look. In this case, Kirkland has been on a real roll in terms of production. The principal recent catalyst was the company’s announcement that the company achieved record overall production in Q2.
In its operating results report for both Q2 and the 1h for 2017, the company reported that it hit record quarterly gold production of 160,156 ounces, which it noted reflects significant increase in mill grade at Fosterville. In addition, according to the release, the company specifically hit record production at Fosterville of 77,069 ounces in Q2 2017 based on mill grade of 17.2 g/t Au and record recoveries of 94.7% (67% increase from previous record of 46,083 ounces in Q1 2017).
KIRKLAND LAKE GOLD COM NPV (OTCMKTS:KLGDF) bills itself as a Canadian-listed gold mining company with three 100% owned operating mines across Australia.
The Company is focused on creating substantial shareholder value by maintaining strong foundation of quality gold production, over 200,000 ounces annually, generating free cash flow and maintaining a large resource base as it executes a clearly defined gold asset consolidation strategy.
KLGDF is focused on sustainable operating performance, a disciplined approach to growth, and building gold reserves and resources while maintaining the high standards that its core values represent.
According to company materials, “Kirkland Lake Gold Ltd (KL Gold) is a mid-tier gold producer targeting +500,000 ounces in tier 1 mining jurisdictions of Canada and Australia. The production profile of the Company is anchored from two high-grade, low-cost operations including the Macassa Mine Complex located in northeastern Ontario and the Fosterville Gold Mine located in the state of Victoria, Australia. KL Gold’s solid base of quality assets is complemented by development and district scale exploration projects, supported by a strong financial position with extensive management and operational expertise.”
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As noted above, the main point to make here is the rampant outperformance of KLGDF over the broad junior mining space. The best gauge is the ETF GDXJ, which is the junior miners ETF. It has performed dreadfully over the past 6 months. And the outlook isn’t great.
One of the stalwart driving ideas for the gold mining space is that the major central banks of the world would be stuck on pouring out huge piles of cash via QE programs until the day came when everyone was freaking out about runaway inflation.
However, here we are with very subdued inflation, and already the Fed is tightening with rates and starting a process of melting away at the balance sheet that is expected to begin in coming months. The ECB and the BoE have both started to signal that they aren’t running far behind the same path.
All this should be terrible news for gold miners. And yet, here is KLGDF blasting higher, up nearly 50% from just May of this year. It’s extremely impressive.
Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold, commented: “With solid results at our key operations in H1 2017, we increased production 13% from the first half of 2016, even with two mines on care and maintenance. We entered the second half of the year well positioned to achieve our revised full-year 2017 production guidance, which we increased to 530,000 – 570,000 ounces in May 2017 following our strong first quarter. Based on our performance to date, we have continued to build our cash position in 2017, with cash and bullion increasing 14% during the first six months of the year, and that is after we repaid our 6% convertible debenture on June 30th. Our strong balance sheet has enabled us to repay debt with cash, while also introducing a quarterly dividend and repurchasing shares under our normal course issuer bid (“NCIB”). A total of 2.0 million shares have been repurchased to date through the NCIB program.”
In all, the chart shows 16% added to share values of the stock over the past month of action. Market participants may want to pay attention to this stock. KLGDF has evidenced sudden upward volatility on many prior occasions. Furthermore, the company has benefitted from a jump in recent trading volume to the tune of 24% over the long run average.
Now commanding a market cap of $1.9B, KLGDF has a gargantuan pile of cash on the books ($279M), which compares with just over $200M in total current liabilities. The company has booked about $168M in ttm revs. This is an exciting story, and we look forward to a follow-up chapter as events transpire. For continuing coverage on shares of $KLGDF stock, as well as our other breakout stock picks, sign up for our free newsletter today and get our next hot stock pick!
Disclosure: we hold no position in $KLGDF, either long or short, and we have not been compensated for this article.