How High Will Kirkland Lake Gold’s Stock Surge?


Shares of Kirkland Lake Gold (TSX: [stock_market_widget type=”inline” template=”generic” color=”default” assets=”KL.TO” markup=”{symbol} {currency_symbol}{price} ({change_pct})” api=”yf”]) popped to 52-week highs after the company impressed Wall Street and investors alike with a solid set of results and outlook. The company delivered impressive growth, handsomely beat estimates, raised its production guidance, and lowered its cost outlook for the year. In all, Kirkland Lake’s latest performance ticked all the right boxes and that sent the stock soaring.

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Let’s take a closer look at the key points from Kirkland’s latest results and why it is on track to get even better this year.

Kirkland Reported Strong All-round Growth

Kirkland Lake produced a record 231,217 ounces of gold during the fourth quarter, up 39% from the prior-year period. Not surprisingly, the company’s top line shot up 32% year over year, though the growth was tempered to some extent by a 3% annual drop in the average realized price of gold.

More importantly, the massive increase in Kirkland Lake’s output was achieved at a lower production cost of $64.6 million as compared to the year-ago quarter’s costs of $68.3 million. In fact, the company’s all-in sustaining costs dropped close to 31% from the prior year period to just $567 per ounce during the fourth quarter.

See how Kirkland Lake’s gold production costs stack up against competitors in our mining guide.

The lower costs and higher revenue boosted Kirkland Lake’s net income to $109.6 million during the quarter as compared to $63.4 million in the prior-year period.

Kirkland Lake recorded such impressive production growth at lower costs last quarter on account of a superior grade profile. The company recorded an average grade of 17.8 grams per tonne of gold during the fourth quarter, which was an impressive improvement from the prior-year period’s grade of 11.8 g/t.

The superior gold grades last quarter meant that Kirkland Lake had to make less effort to extract gold this time. As it turns out, the company milled 412,260 tonnes of gold last quarter, a decrease of 9.3% from the year-ago period, while its gold recoveries increased by 1.5% to 97.8%.

In all, Kirkland Lake is coming off an operationally strong quarter that allowed it to offset a weak gold pricing environment. But more importantly, the company looks all set to carry forward its momentum as the guidance suggests.

Gold Production and Cost Gives Kirkland Stock Bright Outlook

Kirkland Lake has given its production outlook a massive boost. The company now expects to clock between 920,000 ounce and 1 million ounces in production this year as compared to its prior range of 740,000 ounces to 800,000 ounces. What’s more, it expects to hit the 1-million-ounce production mark in 2020 and 2021 as well.

But what’s really impressive is that this production boost will come at a lower cost base. Kirkland Lake anticipates operating cash costs per ounce between $300 and $320 per ounce for the year, while all-in sustaining costs are expected between $520 and $560 an ounce. The earlier guidance had called for operating cash costs of $360-$380 per ounce and all-in sustaining costs of $630 to $680 per ounce.

For comparison, Kirkland Lake’s 2018 all-in sustaining costs stood at $685 an ounce, so the company is setting itself up for a huge improvement on this front this year. As such, Kirkland Lake Gold investors should continue holding the stock even though it has gained nearly 150% over the past year because it has the potential to deliver more upside on account of substantial operational improvements.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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