Kirkland Lake Gold: A Hot Gold Stock You Shouldn’t Miss

Kirkland Lake Gold [stock_market_widget type="inline" template="generic" color="default" assets="KL.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is having a terrific year so far. Shares of the gold mining company have increased more than 21% as of this writing. It looks well-placed to take advantage of an increase in gold prices. Investors have been buoyed by the company’s strong production outlook, as well as its capability for strong execution.

Let’s take a closer look at the reasons why Kirkland Lake Gold is a stock that could keep rising.

Impressive Production Growth in the Cards

Kirkland Lake Gold is aiming to hit a million ounces of gold production this year at the high end of its guidance range. The good part is that its production range for the next couple of years indicates that the company could easily hit that mark. That’s because in 2021, Kirkland Lake Gold anticipates production between 995,000 ounces and 1,055,000 ounces of gold.

The mid-point of its 2021 guidance range is well ahead of 1 million ounces. This is great news for investors as Kirkland Lake Gold’s 2018 production came in at 723,701 ounces. So the company is on track to deliver strong growth in its output not only for 2019, but also in the coming years.

However, this isn’t the only reason why investors should be positive about this stock.

An Improving Cost Profile Will Be a Tailwind

Kirkland Gold’s operating cash cost per ounce of gold sold in 2018 stood at $362, which was a 25% improvement over the prior year. Also, its all-in sustaining cost per ounce of gold sold was $685, which was again an improvement of 16% over 2017 levels.

For 2019, Kirkland Lake Gold’s operating cash cost per ounce of gold sold is expected at $310 at the mid-point of its guidance. All-in sustaining costs, on the other hand, are expected at $540 an ounce as per the mid-point of its current guidance range.

Given the recent increase in gold prices and the company’s favourable cost profile, Kirkland Lake Gold is well on its way to improve its financial profile not only for 2019, but also in subsequent years. This is because the company seems to have found a way to increase production in the wake of the ongoing decline in discoveries in the gold industry.

Kirkland Lake Will Benefit From Constrained Gold Supply

Major gold miners are looking at consolidating their operations through mergers, acquisitions, or joint ventures. This is because the number of gold discoveries has been on the wane in recent years despite an increase in exploration spending.

Kirkland Lake Gold will be able to achieve stronger growth in the long run and also take advantage of improving gold prices.

The fact that Kirkland Lake Gold has managed to provide a positive production and cost outlook in such a scenario is a big positive for the company and its investors. That’s because Kirkland Lake’s average gold grades have increased impressively.

For instance, the company had reported a 60% increase in mineral reserves at the Fosterville mine to 2,720,000 ounces at a grade of 31.0 grams/tonne of gold as at Dec. 31, 2018. Prior to that, Fosterville’s mineral resources stood at 1,700,000 ounces at an average grade of 23.1 grams/tonne of gold.

The improved grade profile means that the company has to mine less waste tonnage, as a result of which it can achieve higher production at a lower cost. This is the reason why Kirkland Lake Gold will be able to achieve stronger growth in the long run and also take advantage of improving gold prices, paving the way for more upside.

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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