Kirkland Lake Gold

Growing through acquisitions & exploration

By Gregory Reynolds

A two-pronged strategy to achieve growth is paying off these days for Kirkland Lake Gold Inc. The strategy is based on acquisitions and a heavy investment in exploration. Through the acquisition of St Andrew Goldfields Ltd. on Jan. 26 the company acquired both established producers and Ontario’s latest gold mine, the Taylor, in the Golden Triangle. The Triangle comprises the historic Timmins, Matheson and Kirkland Lake Mining Camps. KL Gold raised $15 million in July through a non-brokered private placement financing. One of the purposes of the financing is to support an $18 million exploration budget for 2016. KL Gold now has four producing mines, the Macassa in Kirkland Lake and the Holt, Holloway and Taylor in the Timmins-Matheson area. As well, it now has a significant land package in what it calls its East Timmins Holding.

Eric Sprott, KL Gold board chairman, commented “we remain committed to increasing the company’s growth potential through exploration of our extensive mineral claim holdings in both the prolific East Timmins and Kirkland Lake gold districts. Second quarter results released Aug. 4 highlights were: Pre-released gold production of 130,613 ounces (68,338 in Q2/16); Sold 141,453 ounces of gold (72,144 ounces in Q2/16); Realized an average price per ounce of gold sold of US$1,211 (US$1,271 in Q2/16); Operating costs per ounce of gold sold of US$641 (based on total production expenses of C$159,482) (US$667 based on total production expenses of C$81,740 during Q2/16); All-in sustaining costs per ounce of gold sold (AISC) of US$925 (US$990 in Q2/16); Generated free cash flow of $57.3 million ($31.9 million in Q2/16); Ended the quarter with a cash balance of $157.5 million; The company remains on track to meet its production guidance of between 270,000 to 290,000 ounces for 2016.

Anthony Makuch, president and CEO, said “Kirkland Lake delivered another quarter with positive earnings, free cash flow and a strengthened balance sheet”.

“With the recently closed flow-through financing of $15 million, we will become more aggressive in exploring our highly prospective land position in both the Kirkland Lake Camp and along the Porcupine-Destor Fault Zone. We look forward to providing an update on our exploration programs as they become available.”

Doug Cater, vice president, explorations, said “I am very excited and encouraged at the opportunity to expand our exploration programs with the announcement of this flow-through financing, especially considering the company’s recently approved 2016 exploration budget which proposed $18 million in surface and underground exploration drilling at both our Kirkland Lake and East Timmins operations. This financing will enable our exploration personnel to actively explore for mineralized zones adjacent to our operations, as well as allowing us to take a discovery focus to the company’s regional targets.”

Exploration programs will be conducted throughout the East Timmins/Matheson district, which consists of more than 1,700 mineral claims, many of which straddle the Porcupine-Destor Fault Zone, host to numerous gold mines and deposits including the company’s Holt and Holloway operations and the company’s consolidated claim package over the highly prospective section of the Main and Amalgamated Breaks in the Kirkland Lake District.

“This financing is a substantial exploration commitment for the company and it speaks to the high quality mineral potential and overall prospectivity of the districts in which the company operates,” said Carter. All proceeds from the sale of the Flow-Through Shares will be used to incur eligible Canadian Exploration Expenses at the company’s Macassa Mine Complex and its East Timmins Operations, all located in Ontario. The company will renounce qualifying expenses as at Dec. 31, 2016.

The company owns five former high grade gold mines within the Kirkland Lake Camp that produced in excess of 22 million ounces at an average grade of 15.1 grams per tonne and controls a strike length of 120 kilometres along the Porcupine-Destor Fault Zone, which has produced in excess of 100 million ounces of gold from Timmins eastwards towards Val d’Or in Quebec. The company currently operates the Macassa Mine Complex, and the Holt, Holloway and Taylor mines and is targeting production of between 270,000 – 290,000 ounces of gold in 2016.

On Nov. 5, 2015, Duncan Middle­miss, president and CEO of St Andrew, said “we are pleased to declare Taylor the newest mine in Ontario, one which we anticipate will bolster the company’s gold production profile for 2016 by 40,000-50,000 ounces and provide much needed jobs and economic benefits to the communities of the region. I would personally like to thank the SAS team, the provincial government officials, the First Nations and our communities for their hard work and support in helping us bring Taylor into reality. The mine is expected to be a significant contributor in the future as we are ramping up to full production by the end of this year.”

St Andrew is now a wholly-owned subsidiary of Kirkland Lake Gold and all of the issued and outstanding common shares of St Andrew were acquired by Kirkland Lake Gold in consideration for 0.0906 of one common share of KL Gold.

In connection with the closing of the Arrangement, KL Gold issued an aggregate of 33,367,488 common shares to the former shareholders of St Andrew. As a result, Kirkland Lake Gold has 114,321,605 common shares issued and outstanding, with former St Andrew shareholders holding approximately 29% on an undiluted basis.