Press release from Marketwire
Kirkland Lake Gold Inc.: Operations Update & Financial Results Q1 Fiscal 2011; Record Gold Production in August 2010
Tuesday, September 14, 2010
Kirkland Lake Gold Inc.: Operations Update & Financial Results Q1 Fiscal 2011; Record Gold Production in August 201002:00 EDT Tuesday, September 14, 2010KIRKLAND LAKE, ONTARIO--(Marketwire - Sept. 14, 2010) - Kirkland Lake Gold Inc. (TSX:KGI)(AIM:KGI) ('Kirkland Lake Gold' or the 'Company'), an operating and exploration gold mining company located in Ontario, Canada, announces an operations update and its first quarter fiscal 2011 results for the three months ended July 31, 2010.Mr. Harry Dobson, Chairman, commented, "Progress in the first quarter to achieve the production ramp-up for this fiscal year is progressing on track, and Kirkland Lake Gold is on target to deliver our forecast of 90,000 to 100,000 ounces of gold this fiscal year with the Company generating a $3.3 million net income for the first quarter. This August was a record production month for the Company, with 9,390 ounces produced taking total production for the fiscal year thus far to 26,011 ounces."KEY HIGHLIGHTS -- 16,621 ounces of gold were produced in Q1 2011, on target for yearly production of 90,000 to 100,000 ounces. -- 9,390 ounces of gold were produced in August, which is a monthly record; 26,011 ounces of gold were produced from ore grading 0.42 ounces per ton from May 1 to the end of August. -- Net income for fiscal Q1 2011 was $3.3 million or $0.05 per share. -- Operating costs were $256 per ton ($709 per ounce), on target to reduce operating costs to less than $250 per ton in fiscal year 2011. -- Cash resources (including short-term investments) as at July 31, 2010 were $48.6 million. -- Increased exploration continued as key drills moved to a seven day per week schedule after completion of the new worker changing facility. HIGHLIGHTS OF THE FIRST QUARTERMine Expansion and Production -- A total of 16,621 ounces of gold were produced in the quarter, which is within the range required to maintain the yearly production target of 90,000 to 100,000 ounces. Until the end of June, the number of underground production workers was limited by the capacity of the existing worker changing area, and by the need to continue to staff critical underground expansion and exploration projects. An expansion of the changing area for workers capable of accommodating an additional 300 people (for a total capacity of 650 underground workers) was completed on schedule by the end of June. A further expansion to accommodate an additional 300 persons will begin in the second quarter of this year. -- The supply of skilled and experienced top level miners and underground mechanics and electricians in the labour market tightened in April resulting in a requirement to strengthen and expand the Company's training and development program. Workers with less experience requiring more training are still readily available. This had been anticipated and the necessary trainers and training programs were in place by the end of June. -- Additional underground workers have been hired steadily since the beginning of July, following the completion of the additional changing facilities. Due to training and experience requirements, new employees are not immediately productive. The impact of this step change in the number of underground workers should be felt in future quarters. Production will step up at a number of points throughout the year as components of the expansion project are completed. Again, this had been anticipated by the Company. -- A design problem was discovered in the setup of the main production hoist resulting in an unbudgeted production interruption of seven days in the quarter. This problem resulted in a production shortfall of roughly 1,500 ounces of gold, which should be made up in subsequent quarters. The Company's budget had allowed for up to two weeks of maintenance and project related hoist downtime in the year. Ongoing planning efforts have reduced this to seven days or less. Some other surface maintenance and hoisting project construction work was advanced during the hoisting interruption. This also reduced the number of hoist downtime days required. -- Work to increase the ultimate hoisting capacity at the #3 Shaft by over 300% to 3,600 tons per day continued in the quarter. Installation of the new service hoist and building should be complete by November 2010, and these facilities will be used to start the work required to upgrade the third compartment of the #3 Shaft as required for service conveyance operation. Shaft upgrade work continued in Q1 of fiscal 2011, focused primarily on the shaft services compartment and the underground shaft stations and loading pockets. The first step change in hoisting capacity is still targeted for the end of January. -- The underground haulage ramp between the #3 Shaft and the South Mine Complex (SMC) mining area reached the edge of the 53 Level SMC mining area. Work to connect the 53 Level track haulage-way to the ramp has begun. Rockwork for a related ventilation upgrade is also nearing completion and construction work is underway. -- The number of ore mining faces available for production was maintained at twenty-five throughout the quarter, with another twenty-five ore mining faces remaining in the development and planning stages. Two high grade mechanized cut and fill ore mining faces below the 53 Level in the SMC replaced two lower grade mined out main break longhole stopes by quarter end. Daily ore production remains limited to no more than 700 tons per day until the initial hoisting upgrade is completed due to hoisting capacity restrictions. The actual average tonnage of ore to be hoisted per day is being limited to that required to meet the yearly ounce production target, as hoisting less ore allows more time for hoisting waste and completing other expansion and exploration project related work. -- Additions and improvements to the surface maintenance facilities, headframe, surface muck handling facilities, warehouse, cold storage facility, offices and parking lots, compressor plant, electrical plant, and backfill plant are now being planned or are underway. This work is planned to be completed as required in fiscal 2011 and 2012. Work on the core handling facility was completed in the quarter. -- The mill and crushing plants were shut down for nineteen days during the quarter for repairs and upgrades. This was scheduled work and did not impact quarterly production. Exploration Increased -- Several of the large electric diamond drills moved to a seven day per week operating schedule after completion of the new worker changing facility. -- The yearly program of exploration on the Queenston Joint Venture property was completed in the quarter with results announced in July. Planning for this year's program is now underway. Financial Results -- Net income for the quarter ended July 31, 2010 was $3.3 million or $0.05 per share, which compares to a net loss of $1.7 million for Q4 of fiscal 2010 and a net income of $1.6 million for Q1 of fiscal 2010. -- Operating costs were $256 per ton ($709 per ounce), compared with $257 per ton ($803 per ounce) in Q4 of fiscal 2010, and $302 per ton ($958 per ounce) in Q1 of fiscal 2010. Total cash costs were $273 per ton ($756 per ounce), compared to $270 per ton ($843 per ounce) in Q4 of fiscal 2010 and $319 per ton ($1,010 per ounce) in Q1 of fiscal 2010. The Company target is to reduce the operating costs to less than $250 per ton this year by continuing to expand and upgrade the operating facilities.(1) (1) The Company has included non-GAAP performance measures, operating cost and total cash cost per ton ore mined and per gold ounce produced. Refer to Appendix 2 of the Company's MD&A for Q1 of fiscal 2011 for a reconciliation of operating costs and total cash costs to reported operating expenses. -- Cash flows generated from operating activities were $0.1 million in Q1 of fiscal 2011 compared to $2.5 million in Q4 of fiscal 2010 and $7.0 million in Q1 of fiscal 2010. Operating cash flows before working capital changes(2) were $5.0 million in Q1 of fiscal 2011 compared to $0.1 million in Q4 of fiscal 2010 and $3.7 million in Q1 of fiscal 2010. The major components of the working capital changes are gold inventory and accounts receivable changes. (2) Operating cash flows before working capital changes is a non-GAAP measure which the Company believes provides a better indicator of the Company's ability to generate cash flows from its mining operations. -- Gold poured in the quarter was 14,086 ounces, which compares to 14,995 for the previous quarter and 21,014 for the same period in the previous fiscal year. Mill inventory was building in the quarter and in the previous quarter and tends to build when ore grade is in an uptrend. Ore grade rises and falls, as a result of the different mining areas, that are in the current mining cycle. -- Cash resources (including short-term investments) as at July 31, 2010 were $48.6 million and as at September 13, 2010 this number had decreased to $46.0 million. OUTLOOK -- Production for fiscal 2011 is forecasted to be between 90,000 and 100,000 ounces of gold. The operating strategy for the year included recovering 24,000 to 28,000 ounces of gold in the May through August period. These four months were expected to be low production labour months due to the expansion of the worker changing facility being scheduled for completion only at the end of June, the need to keep workers on the higher priority expansion project activities throughout the summer, the normal summer holiday period, and the lower initial productivity to be expected from the additional workers to be hired and trained starting in July. Actual production for this period was 26,011 ounces. 9,390 ounces were produced in August, which was a monthly record for the Company. -- Production in the five month period from September through to January is expected to be 36,000 to 40,000 ounces of gold assuming success in the critical recruiting and training activities. An increase in project and exploration activities will also take place during this period as more labour is employed in all areas. -- February to April (Q4 of fiscal 2011) production is estimated to be in the range of 30,000 to 36,000 ounces of gold. Achieving this level of quarterly production is dependent on completing the initial hoisting upgrade on schedule by the end of January 2011. -- The Company's expansion activities will continue to take priority, and the available resources will be managed accordingly. The tonnage of ore to be hoisted and mined will also be managed to meet this target and is dependent on ore grade. Ore grade to the end of August at 0.42 ounces of gold per ton has been slightly higher than the 0.38 ounces per ton targeted. The ore grade month to month varies significantly depending on the areas being mined. -- The Company will continue to prioritize the work and investment required to meet our goals of attaining five million ounces in total gold reserves and resources and of reaching a profitable production rate of 180,000 to 200,000 ounces of gold per year by November, 2011. "Fiscal 2011 will be a pivotal year for Kirkland Lake Gold. Work over the next couple of quarters includes completing the first steps of the hoisting upgrade, connecting the 53 Level track haulage-way to the new production ramp, a construction of an additional dry facility for workers, all to support doubling production this fiscal year, and doubling again by mid-fiscal 2012. Production is planned to continue to increase each month, concurrent with the Company advancing the development work needed to increase production to 180,000 to 200,000 ounces by November 2011. As the monthly production numbers increase, management believes the Company will deliver average cash costs of $250 per ton for fiscal 2011. Lastly, we now have several exploration diamond drills on a 7-day week schedule, increased from a 4-day week schedule in fiscal 2010, so exploration will also be a big ramp up for us this year," concluded Mr. Dobson. --------------------------------------------------------------------------- Financial Highlights (All amounts in 000's of Canadian Dollars, except shares and per share figures) Three months ended, ----------------------------------- July 31, April 30, July 31, 2010 2010 2009 --------------------------------------------------------------------------- Gold Sales (ounces) 15,727 13,522 20,994 Average Price (per ounce) 1,242 1,153 1,072 --------------------------------------------------------------------------- Revenue 19,538 15,630 22,499 Operating Expenses 14,069 13,566 19,216 Exploration Expenditure 1,502 1,615 1,092 Net Income (loss) 3,313 (1,710) 1,617 Per share (basic and diluted) 0.05 (0.03) 0.03 Cash Flow from operating activities 112 2,533 7,001 Cash Flow from (used in) financing activities (4) 31,850 210 Cash Flow from (used in) investing activities (16,060) (15,259) 4,203 Net increase (decrease) in cash (15,951) 19,125 11,413 Cash at end of period 13,372 29,323 13,220 Short-term investments 35,236 30,233 15,143 Total cash resources 48,608 59,556 28,363 --------------------------------------------------------------------------- Total Assets 168,692 162,207 103,233 Total Liabilities 19,451 16,530 14,122 Working Capital 46,767 55,699 25,856 --------------------------------------------------------------------------- Weighted average number of shares outstanding 67,728,645 62,628,013 58,557,132 Dividends per share NIL NIL NIL --------------------------------------------------------------------------- About Kirkland Lake Gold Inc.Kirkland Lake Gold Inc. is an operating and exploration gold mining company located in Ontario, Canada. It purchased the Macassa Mine and the 1,500 ton per day mill along with four former producing gold properties - Kirkland Lake, Teck-Hughes, Lake Shore and Wright Hargreaves - in December 2001. These properties, which have historically produced some 22 million ounces of gold, extend over seven kilometres between the Macassa Mine on the west and Wright Hargreaves on the east and, for the first time, are being developed and explored under one owner. This camp is located in the Southern Abitibi Greenstone Belt of Kirkland Lake, Ontario, Canada. The Company's corporate goal is to expand its gold reserves and reduce its operating costs to become a profitable gold producer.The Company's common shares trade on the TSX (Toronto Stock Exchange) and on the AIM (Alternative Investment Market) of the London Stock Exchange.The Company's senior management and Board of Directors have extensive experience in the natural resource and mining sectors that include exploration, mining and marketing, as well as experience in the legal and corporate finance areas.Cautionary Note Regarding Forward Looking StatementsThis Press Release may contain statements which constitute 'forward-looking statements' including statements regarding the plans, intentions, beliefs and current expectations of the Company, its directors, or its officers with respect to the future business activities and operating performance of the Company. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to the Company, or its management, are intended to identify such forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future business activities or performance and involve risks and uncertainties, and that the Company's future business activities may differ materially from those in the forward-looking statements as a result of various factors. Such risks, uncertainties and factors are described in the Company's periodic filings with he Canadian securities regulatory authorities, including the Company's Annual Information Form and quarterly and annual Management's Discussion & Analysis, which may be viewed on SEDAR at www.sedar.com. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements.FOR FURTHER INFORMATION PLEASE CONTACT: Kirkland Lake Gold Inc. Brian Hinchcliffe President +1 705 567 5208 +1 705 568 6444(FAX) email@example.com or Kirkland Lake Gold Inc. Lindsay Carpenter Director of Investor Relations +1 416 840 7884 +1 705 568 6444(FAX) firstname.lastname@example.org www.klgold.com or Pelham Bell Pottinger Klara Kaczmarek +44 (0) 20 7337 1524 email@example.com or Ocean Equities Ltd. Guy Wilkes +44 (0) 207 786 4370 firstname.lastname@example.org or NOMAD: Panmure Gordon (UK) Ltd Katherine Roe / Callum Stewart +44 (0) 20 7459 5744 email@example.com Neither the Toronto Stock Exchange nor the AIM Market of the London Stock Exchange has reviewed and neither accepts responsibility for the adequacy or accuracy of this news release.