Mr. Mark Utting reports
KIRKLAND LAKE GOLD REPORTS RECORD ANNUAL AND QUARTERLY PRODUCTION
Kirkland Lake Gold Ltd. has provided record annual and quarterly production for the full year and fourth quarter of 2017, respectively. Comparative information for the full year and fourth quarter of 2016 includes results for the Fosterville, Cosmo and Stawell mines prior to the merger between Kirkland Lake Gold and Newmarket Gold Inc. on Nov. 30, 2016, and results for the Holt and Taylor mines prior to the acquisition of St. Andrew Goldfields Ltd. on Jan. 26, 2016. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.
Highlights of 2017 and Q4 2017 operating results:
Consolidated full year 2017 production of 596,405 ounces, beating improved guidance of 580,000 to 595,000 ounces;Record full year production at all operating mines, including 263,845 ounces at Fosterville, 194,237 ounces at Macassa, 66,677 ounces at Holt and 50,764 ounces at Taylor;Consolidated quarterly production in Q4 2017 totalling 166,579 ounces, a 9-per-cent increase from Q4 2016 and 20 per cent higher than Q3 2017;Record quarterly production in Q4 2017 at Fosterville (79,157 ounces), Holt (19,263 ounces) and Taylor (16,538 ounces), second-best quarter ever at Macassa (51,608 ounces).
Other 2017 highlights:
Strong growth in mineral reserves
Fosterville mineral reserves more than doubled in 2017 to 1.03 million ounces at an average grade of 17.9 grams per tonne.Macassa mineral reserves increased 37 per cent to 2.01 million ounces at an average grade of 20.8 g/t.
Improved balance sheet strength
Cash and cash equivalents of approximately $230-million at Dec. 31, 2017;Debt eliminated: 6.0 per cent convertible debentures repaid June 30, 2017; 7.5 per cent convertible debentures matured Dec. 31, 2017 (converted into 4,505,393 commons shares).
Industry-leading shareholder returns
Kirkland Lake top-performing stock on S&P/TSX Composite Index in 2017 with share price increasing 174.5 per cent (for full year 2017);Quarterly dividend payment announced in March, doubled to two cents per share for Jan. 15, 2018, payment;5.4 million common shares repurchased for $76.5-million (Canadian) through normal course issuer bid.
Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: "We had a successful year in 2017, achieving record results at all of our operating mines, beating our improved consolidated production guidance, which had been increased three times during the year, and reporting solid growth in mineral reserves. Particularly encouraging was our strong finish to the year, with Q4 2017 being our best quarter ever for production. Leading the way was Fosterville, where full year production increased 74 per cent from the previous year, and record fourth quarter results reflected an average grade of 21.5 g/t, by far the highest quarterly average ever achieved by the mine. Over the last year, Fosterville has joined our Macassa mine as one of the world's highest-grade gold producers, with mineral reserve ounces and the average reserve grade more than doubling and annual production capacity increasing to over a quarter million ounces per year, with more growth to come.
"Looking ahead, we plan to keep building momentum through additional production growth, improved unit costs, as well as further increases to mineral reserves and resources based and continued exploration success. We will also remain focused on generating shareholder returns through continued operational effectiveness, strong financial performance and disciplined investment for future growth. In addition, we offer a competitive quarterly dividend, with growth potential, and will be opportunistic when it comes to future share repurchases. Supporting all of our activities is a strong balance sheet, with cash and cash equivalents of approximately $230-million at Dec. 31, 2017, and no debt."
Fourth quarter and full year 2017 operating results
Q4 2017 Q4 2016 Q3 2017 FY 2017 FY 2016FostervilleOre milled (tonnes) 118,877 176,242 143,326 547,476 693,066Grade (g/t Au) 21.5 8.514.115.8 7.6Recovery (%) 96.392.494.795.090.1Gold production (oz) 79,15744,40661,535 263,845 151,755MacassaOre milled (tonnes) 119,130 102,28893,391 409,065 396,633Run of Mine 119,13074,74592,377 387,054 331,353Low grade n/a27,543 1,01422,01165,280Grade (g/t Au) 13.916.316.515.214.1Run of mine13.921.616.616.016.5Low grade n/a 2.3 2.0 1.6 2.0Recovery (%) 96.897.697.497.197.1Gold production (oz) 51,60852,31848,206 194,237 175,167HoltOre milled (tonnes) 127,493 113,499 124,394 462,987 416,048Grade (g/t Au)5.0 4.6 4.5 4.7 4.5Recovery (%) 94.994.594.594.894.5Gold production (oz) 19,26315,76116,99566,67757,086TaylorOre milled (tonnes)89,29748,25471,897 292,003 199,231Grade (g/t Au)6.0 6.7 5.0 5.6 6.9Recovery (%) 96.296.195.596.296.5Gold production (oz) 16,53810,04811,06650,76442,639Operations on care and maintenance (2)Cosmo -- gold production (oz) n/a13,307 1,29020,59555,765Holloway -- gold production (oz) 13 9,825 n/a 28728,135Stawell -- gold production (ozs)n/a 6,971 n/a n/a32,204Gold production (excluding operations on care and maintenance or sold in 2017)166,566 122,533 137,801 575,523 426,647Total consolidated production (oz)166,579 152,636 139,091 596,405 542,751(1) The company's Cosmo mine in Australia was placed on care and maintenance effective June 30, 2017 (see news release dated May 4, 2017). The company's Holloway mine in Canada was transitioned to care and maintenance effective Dec. 31, 2016 (see news release dated Dec. 12, 2016). The company's Stawell mine in Australia was put on care and maintenance effective Dec. 13, 2016 (see news release dated Dec. 12, 2016), and was subsequently sold on Dec. 21, 2017 (see news release dated Dec. 11, 2017).(2) Production numbers may not add to total due to rounding.
PERFORMANCE AGAINST FULL YEAR 2017 PRODUCTION GUIDANCECanadian mines Australian minesMacassa Holt Taylor Fosterville Cosmo Consolidated2017 guidance (000s oz)190-19565-7050-55 250-26020580-595 2017 production (oz) 194,237 66,677 50,764 263,84520,595596,405
Full year 2017 production from currently operating mines totalled 575,523 ounces, an increase of 35 per cent from comparable full year 2016 levels. Including production from mines currently on care and maintenance, including the Stawell mine, which was sold on Dec. 21, 2017, total consolidated production for 2017 totalled 596,405 ounces, 10 per cent higher than the 542,751 ounces produced in 2016. Total production from mines on care and maintenance (including Stawell prior to its sale) totalled 20,882 ounces in 2017 compared with 116,104 ounces in 2016.
Production in Q4 2017 from operating mines totalled 166,566 ounces, an increase of 36 per cent from comparable production of 122,533 ounces in Q4 2016 and 21 per cent higher than the 137,801 ounces produced the previous quarter. Including production from Cosmo, Holloway and Stawell, total consolidated production in Q4 2017 totalled 166,579 ounces, a 9-per-cent increase from Q4 2016 and 20 per cent higher than Q3 2017.
Review of operating mines
Fosterville
The Fosterville mine achieved a record quarter in Q4 2017, producing 79,157 ounces of gold, an increase of 78 per cent from 44,406 ounces in Q4 2016 and 29 per cent from 61,535 ounces the previous quarter. The average grade for the quarter of 21.5 grams per tonne was the highest average quarterly grade ever reported by the mine, and compared with average grades of 8.5 g/t in Q4 2016 and 14.1 g/t in Q3 2017.A total of 118,877 tonnes were processed during Q4 2017 with average recoveries of 96.3 per cent, which compared with 176,242 tonnes and average recoveries of 92.4 per cent in Q4 2016 and 143,326 tonnes at average recoveries of 94.7 per cent the previous quarter. The lower total tonnes compared with both prior periods reflected a focus on maximizing the extraction of higher-grade stopes within the Lower Phoenix system during Q4 2017.
For full year 2017, Fosterville produced a record 263,845 ounces, a 74-per-cent increase from full year 2016 production of 151,755 ounces. A total of 547,476 tonnes were processed in 2017 at an average grade of 15.8 g/t and average recoveries of 95.0 per cent, which compared with 693,066 tonnes at an average grade of 7.6 g/t and average recoveries of 90.1 per cent the prior year. During 2017, underground mineral reserves more than doubled at Fosterville, to 1.03 million ounces, with the average underground mineral reserve grade increasing to 17.9 g/t, which compared with 490,000 ounces at an average grade of 9.8 g/t as at Dec. 31, 2016.
Macassa
The Macassa mine produced 51,608 ounces of gold in Q4 2017, the mine's second-best quarter of production ever. Production at Macassa in Q4 2017 compared with record quarter production of 52,318 ounces in Q4 2016 and 48,206 ounces in Q3 2017. A total of 119,130 tonnes were milled during Q4 2017 at an average grade of 13.9 g/t with average recoveries of 96.8 per cent, which compared with 102,288 tonnes at an average grade of 16.3 g/t and recoveries of 97.6 per cent in Q4 2016 and 93,391 tonnes at an average grade of 16.5 g/t and average recoveries of 97.4 per cent the previous quarter. The improvement in production from Q3 2017 reflected higher run-of-mine tonnes processed, which more than offset the impact of lower average grades as a small number of high-grade stopes did not perform as expected.
For full year 2017, production at Macassa was a record 194,237 ounces, an 11-per-cent increase from full year 2016 production of 175,167 ounces. A total of 409,065 tonnes were processed in 2017 at an average grade of 15.2 g/t and average recoveries of 97.1 per cent, which compared with 396,633 tonnes at an average grade of 14.1 g/t and average recoveries of 97.1 per cent the prior year. A 17-per-cent increase in run-of-mine tonnes processed more than offset a significant reduction in tonnes processed from low-grade stockpiles in accounting for the increase in total mill throughput. The higher volume of run-of-mine tonnes also accounted for the improvement in the average grade year over year.
Holt
During Q4 2017, the Holt mine achieved record quarterly production of 19,263 ounces, representing increases of 22 per cent from Q4 2016 and 13 per cent from the previous quarter, mainly reflecting a combination of higher throughput and an improved average grade compared with both prior periods. A total of 127,493 tonnes at an average grade of 5.0 g/t was processed from the Holt mine at the Holt mill during Q4 2017, compared with 113,499 tonnes at an average grade of 4.6 g/t for the same period a year earlier and 124,394 tonnes at an average grade of 4.5 g/t in Q3 2017. Recoveries averaged 94.9 per cent in Q4 2017, which compared with average recoveries of 94.5 per cent for both Q4 2016 and Q3 2017.
Production at Holt for full year 2017 was a record 66,677 ounces, based on processing a total of 462,987 tonnes at and average grade of 4.7 g/t and average recoveries of 94.8 per cent. Production in 2017 increased 17 per cent from 57,086 ounces in 2016, when 416,048 tonnes were processed at an average grade of 4.5 g/t and average recoveries of 94.5 g/t. Higher production reflected a significant increase in tonnes processed due primarily to improved stope productivity, a new mining horizon being accessed in Zone 6 and favourable sequencing.
Taylor
Gold production from the Taylor mine during Q4 2017 totalled 16,538 ounces, based on 89,297 tonnes processed at an average grade of 6.0 g/t and average recoveries of 96.2 per cent. Q4 2017 production compared favourably with production of 10,048 ounces in Q4 2016, based on processing 48,254 tonnes at an average grade of 6.7 g/t and average recoveries of 96.1 per cent, and production of 11,066 ounces in Q3 2017, based on 71,897 tonnes processed at an average grade of 5.0 g/t and average recoveries of 95.5 per cent. The increase in total tonnes processed from Q4 2016 largely reflected the addition of a number of stopes to the mine plan for the second half of 2017, while average grades reflected mine sequencing. The increase in production from the previous quarter was mainly due to higher tonnes, which more than offset a reduction in the average grade.
Production at Taylor for full year 2017 totalled 50,764 ounces, an increase of 19 per cent from the 42,639 ounces produced in 2016. A total of 292,003 tonnes were processed in 2017 at an average grade of 5.6 g/t and average recoveries of 96.2 per cent, which compared with total tonnes processed of 199,231 tonnes at an average grade of 6.9 g/t and average recoveries of 96.5 per cent in the prior year. The significant increase in tonnes processed reflected a higher number of stopes available for mining, while the reduction in the average grade was consistent with planned stope grades.
Cosmo
On June 30, 2017, Kirkland Lake Gold suspended operations at the Cosmo mine with the mine being placed on care and maintenance. No production was recorded from Cosmo in Q4 2017, which compared with production of 13,307 ounces in Q4 2016 (from processing 157,770 tonnes at an average grade of 2.8 g/t and average recoveries of 94.5 per cent) and 1,290 ounces in Q3 2017 (from processing 15,243 tonnes of stockpiled material at an average grade of 2.8 g/t and average recoveries of 94.9 per cent).
For full year 2017, a total of 20,595 ounces was produced at Cosmo from processing 259,729 tonnes at an average grade of 2.6 g/t and average recoveries of 95.0 per cent, which compared with production of 55,765 ounces in 2016 from processing 646,848 tonnes at an average grade of 2.9 g/t and average recoveries of 93.6 per cent.
Sale of Stawell Gold Mines Pty. Ltd.
On Dec. 21, 2017, the company completed a transaction to sell to an affiliate of Arete Capital Partners Ltd. all the issued and outstanding common shares of its indirectly held wholly owned subsidiary, Stawell Gold Mines Pty. Ltd., which holds the Stawell mine. Pursuant to the terms of the transaction, the company received $6.25-million in cash consideration upon closing and retains a 2.5-per-cent net smelter return royalty on the Stawell mine.
Normal course issuer bid (NCIB)
During Q4 2017, the company invested $26,263,786 (Canadian) related to the purchase 1,553,500 Kirkland Lake Gold common shares under the company's NCIB. Since the commencement of the NCIB program in May, 2017, the company has purchased a total of 5,443,400 common shares for cancellation at an average price of $14.05 (Canadian) for a total of $76,479,700 (Canadian). Under the NCIB, a maximum of 15,186,571 Kirkland Lake Gold shares can be purchased for cancellation. Accordingly, the company may purchase an additional 9,743,171 common shares for cancellation through the NCIB until the program's expiry in May, 2018.
7.5 per cent convertible debentures
The $61.0-million (Canadian) in 7.5 per cent unsecured convertible debentures of Old Kirkland Lake Gold matured on Dec. 31, 2017. In accordance with the terms of the trust indenture, during Q4 2017, debenture holders elected to convert approximately $61,724,000 (Canadian) at a conversion price of $13.70 per share, being a conversion rate of 72.9927 common shares for each $1,000 in principal held. As a result, the company issued an aggregate of 4,505,393 common shares with respect to the conversion of the debentures. In addition, the company paid an aggregate amount of $324,116 (Canadian) in cash with respect to the outstanding debentures not converted and interest totalling $2,139,968 (Canadian) with respect to all of the debentures.The debentures formerly traded on the Toronto Stock Exchange under the symbol KLG.DB.A.
Qualified persons
Pierre Rocque, PEng, vice-president, Canadian operations, and Ian Holland, FAusIMM, vice-president, Australian operations, are qualified persons as defined in National Instrument 43-101 and have reviewed and approved disclosure of the technical information and data in this news release.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold is a mid-tier gold producer with total production in 2017 of 596,405 ounces of gold from mines in Canada and Australia. The production profile of the company is anchored from two high-grade, low-cost operations, including the Macassa mine located in Northeastern 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 and operational expertise.
We seek Safe Harbor.
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