Mr. Anthony Makuch reports
KIRKLAND LAKE GOLD TARGETS HIGHER PRODUCTION, IMPROVED UNIT COSTS IN 2018 GUIDANCE, ANNOUNCES NEW SHAFT PROJECT FOR MACASSA
Kirkland Lake Gold Ltd. has provided the company's full-year guidance for 2018, which includes increased production, improved unit costs, andhigher levels of capital and exploration expenditures in support of the company's objective of growing annual gold production over the next five to seven years to approximately a million ounces. Included among planned investments in 2018, are initial capital expenditures for a new shaft at the Macassa mine (see section, Macassa shaft project). All dollar amounts are expressed in U.S. dollars unless otherwise noted.
Highlights of 2018 guidance include:
Production growth to over 620,000 ounces;Improved unit costs, with operating cash costs and all-in sustaining costs (AISC) per ounce sold expected to average $425 to $450 and $750 to $800, respectively (1);Exploration expenditures estimated at $75-million to $90-million in 2018, with $60-million to $75-million targeted for Australia aimed at achieving continued growth of the Swan zone and other high-potential areas at Fosterville, and in support of resuming operations at the Cosmo mine in the Northern Territory;Sustaining capital expenditures of $150-million to $170-million, with higher sustaining capital expected at Fosterville related to elevated levels of development in support of mining to lower depths, establishing additional mining fronts and sustaining operations over multiple years;Growth capital expenditures of $85-million to $95-million, with key capital requirements including expenditures for a new shaft (see section, Macassa shaft project) and tailings impoundment area at Macassa, as well as the bulk of growth capital required at Fosterville to achieve the mine's target of over 400,000 ounces of annual production by 2020.
Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: "Our 2018 business plan includes strong performances at each of our operating mines, leading to higher consolidated production and improved unit costs compared to 2017. It also outlines an important year of investment, both to ensure the long-term sustainability of current operations and for investing to achieve our longer-term objective of reaching a million ounces of annual gold production. Towards that objective, we see a clear path to reaching over 400,000 ounces per year from both Fosterville and Macassa. Fosterville is targeted to reach this level within three years as we achieve full production at the Swan zone and commence production from additional mining fronts. Macassa's path to over 400,000 ounces will take longer and will involve sinking a new shaft. The new shaft will benefit Macassa in many ways, including derisking the operation, supporting more effective underground exploration, improving working conditions, in addition to increasing production and lowering unit costs.We also plan to increase production at our Taylor mine and, with continued exploration success, are working toward resuming operations in the Northern Territory (2) of Australia. With production from all sources, we are working to make Kirkland Lake Gold a million-ounce-per-year gold producer within five to seven years.
"In support of our growth plans, we are increasing our commitment to exploration in 2018, with a focus on Australia. At Fosterville, we are planning extensive exploration programs aimed at continuing to grow the Swan zone, expanding Harrier South, extending the Lower Phoenix and Robbin's Hill mineralization, and investigating a number of other regional targets.We will also be completing significant exploration work in the Northern Territory of Australia, where we will be developing into, and drilling, the Lantern deposit at the Cosmo mine, and drilling several additional high-potential targets in the region. In Canada, exploration drilling will be mainly focused on continuing to extend the South mine complex at Macassa and expanding gold mineralization at Taylor."
2018 GUIDANCE MacassaTaylorHolt Fosterville ConsolidatedGold production (000s oz) 215-225 60-70 65-75 260-300 +620Op. cash costs ($/oz) (1) 475-500 625-650 625-650 270-290$425-$450 AISC/ounce sold ($/oz) (1) $750-$800 Operating cash costs ($M) (1)$260-$270 Royalty costs ($M) $22-$27 Sustaining capital ($M)$150-$170 Growth capital ($M)$85-$95 Exploration ($M) $75-$90 Corporate G&A ($M) (3) $20-$22
Review of 2018 guidance
Consolidated gold production in 2018 is targeted at over 620,000 ounces, an increase from the 596,405 ounces produced in 2017. Production is expected to increase at both Macassa (2017 production of 194,237 ounces) and Taylor (2017 production totalled 50,764). Production at Holt is expected to be similar to the 2017 production level of 66,677 ounces.Fosterville is also targeting to have similar production to 2017, when the mine produced 263,845 ounces, as the impact of mining lower-grade stopes, due to mine sequencing, is offset by the benefit of initial stope production from the Swan zone in the second half of 2018. The wide target range for production at Fosterville reflects the potential for production growth to be achieved in the event that the mine continues to benefit from positive grade reconciliations, as was the case throughout much of 2017.
Operating cash costs per ounce sold are expected to average $425 to $450, which compares with current full-year 2017 guidance of $475 to $500 and the average for the first nine months of 2017 of $508 (4). The improvement is largely expected to result from higher grades at the Macassa mine in 2018.
All-in sustaining costs (AISC) per ounce sold are targeted at $750 to $800 in 2018, compared with the current full-year 2017 guidance of $800 to $825 and the nine-month 2017 average of $811 (4). The anticipated improvement in AISC per ounce sold in 2018 mainly reflects the expected improvement in operating cash costs per ounce sold.
Operating cash costs for 2018 are estimated at $260-million to $270-million, which compares with the current guidance for year-end 2017 of $270-million to $280-million and total operating cash costs in the first nine months of the year of $217-million (4).
Royalty costs in 2018 are estimated at $22-million to $27-million compared with current guidance for 2017 of $20-million to $25-million (4) and total royalty costs of $15.2-million in the first nine months of the year.
Sustaining capital expenditures in 2018 are targeted at $150-million to $170-million. The 2018 guidance compares with the company's guidance for total capital expenditures in 2017 of $160-million to $180-million, with all but approximately $15-million related to sustaining capital (4). Higher sustaining capital expenditures are expected at Fosterville in 2018 reflecting planned investments that will support multiple years of production. Included in the investments is extensive underground development to access and commence production from the Swan zone in the Lower Phoenix gold system and from the Harrier South zone in the Harrier gold system. Also included in sustaining capital expenditures at Fosterville will be upgrades to the mine's mobile equipment fleet and investments in the grinding, gravity and BIOX circuits in the Fosterville mill.
Growth capital expenditures are estimated at $85-million to $95-million in 2018. Of planned growth capital expenditures, approximately $45-million is at Macassa, and relates to the commencement of two key multiyear projects, the sinking of a new shaft (see section entitled, Macassa shaft project, which follows) and construction of a new tailings impoundment area, with the latter targeted for completion in 2019.Work on the shaft project during 2018 is expected to focus primarily on completing permitting, engineering, procurement, ramp excavation and surface construction. Growth capital at Fosterville in 2018 is estimated at approximately $35-million with major projects planned for the year including a new ventilation system, involving driving two vent raises, construction of a paste fill plant and establishment of a new water treatment plant in support of future production growth and effective environmental management.
Exploration expenditures in 2018 are expected to increase (4), to $75-million to $90-million, with approximately $60-million to $75-million to be targeted for the company's Australian operations. Expenditures in Australia will focus on drilling and underground exploration development activities at Fosterville as well as at the Cosmo mine in the Northern Territory, where the company is working toward resuming mining operations after placing the mine on care and maintenance in June, 2017.At Fosterville, drilling during the year will focus on extending known mineralized zones at Swan, Lower Phoenix, Harrier and Robbin's Hill, and also test for new mineralized structures. In addition, approximately $10-million is being directed to the LODE (large ore deposit exploration) program at Fosterville, which includes greenfield drilling, surface soil sampling, gravity and 3-D seismic geophysical surveys, and reconnaissance exploration on newly granted exploration licences.
In the Northern Territory of Australia, planned exploration programs at the Cosmo mine involve underground development and drilling to improve the understanding of the Lantern deposit and support resource definition and expansion. In addition, drill programs are also planned at the formerly producing Prospect open pit at Union Reefs, Maud Creek and other targets on the Northern Territory land position. Exploration expenditures in 2018 for the Northern Territory are largely focused on supporting the establishment of a five-year production plan for the Cosmo mine and Union Reefs mill that is sufficiently attractive to support a resumption of operations. Approximately $15-million of the planned exploration expenditures at Cosmo relates to care and maintenance expenses while operations remain suspended.
Lower levels of exploration expenditures are planned for the company's Canadian operations in 2018. At Macassa, underground drilling will continue to focus on resource replacement and expansion. Deep surface drilling at Macassa is being discontinued while the company sinks the new shaft, which will support more effective and efficient underground exploration programs going forward. Drilling at Taylor in 2018 will continue to target additional expansion of mineralization around the Shaft and West porphyry deposits. There is no exploration drilling planned for the Holt and Holloway mines in 2018.
Corporate general and administrative (G&A) (3) expense in 2018 is targeted at $20-million to $22-million, similar to the current target for full year 2017 of $20-million.
Macassa shaft project
Among planned investments in 2018 are initial capital expenditures related to a new shaft at the Macassa mine.The new, 21.5-foot-diameter, concrete-lined shaft will offer a number of important benefits to the Macassa mine, including: derisking the operation; enabling more effective underground exploration to the east of the South mine complex; improving ventilation and general working conditions in the mine; and supporting higher levels of production and lower unit costs. The new four-compartment shaft will have a total hoisting capacity of 4,000 tonnes per day (ore and waste) and is an important component of the company's plan to increase production at Macassa with a goal of reaching over 400,000 ounces per year over the next five to seven years.
Construction of the shaft will be completed in two phases. The first phase will be to a depth of 5,450 feet and include a mid-shaft loading pocket. Completion of phase one is targeted for the second quarter of 2022 at a capital cost estimated at $240-million (approximately $40-million of expenditures planned in 2018). Phase two of the project will be undertaken following the commencement of production from phase one, and will involve extending the shaft to an ultimate depth of approximately 7,000 feet. Completion of phase two is targeted for the end of 2023 at an estimated capital cost of approximately $80-million. The company has not completed a National Instrument 43-101 level feasibility study on the shaft project.
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 2018 production targeted at over 620,000 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.
Footnotes
(1) Operating cash costs, operating cash cost/ounce sold and AISC/ounce sold are non-IFRS (international financial reporting standards) measures and reflect an average U.S.-to-Canadian-dollar exchange rate of 1.250 and a U.S.-to-Australian-dollar exchange rate of 1.250. See non-IFRS measures set out starting on page 27 of the company's MD&A (management's discussion and analysis) for the three and nine months ended Sept. 30, 2017, and 2016 for further details about these non-IFRS measures. The most comparable IFRS measure for operating cash costs, operating cash costs per ounce sold and AISC per ounce sold is production costs as presented in the condensed consolidated interim statements of operations and comprehensive income.
(2) The company's Cosmo mine and Union Reefs mill in the Northern Territory of Australia was placed on care and maintenance effective June 30, 2017 (see news release dated May 4, 2017). A portion of the company's 2018 capital and exploration expenditures will be incurred in the Northern Territory as the company works to resume operations at higher levels of production, higher grades and lower costs.
(3) Corporate G&A expense includes general and administrative costs and severance payments.
(4) The company's full financial results for full year 2017 will be released in late February, 2018. As such, comparisons in this press release involving financial measures included in the company's 2018 guidance are made to existing 2017 guidance, as well as the company's nine-month 2017 results.
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