Kirkland Lake Gold $KL Q3 Preview

Kirkland Lake Gold reports Q3 2019 financial results on the morning of Wednesday November 6. The conference call will be held later that day at 4pm EST and will be hosted from the Company’s office in Melbourne, Australia.

We know that Q3 production came in at a record 248,400 ounces, driven by record production output at Fosterville, which accounted for 158,327 ounces, or nearly 64% of the total production. Gold sales came in at 256,726. For my model, I used a $1,455 gold price, which was the 89 day exponential moving average at the end of September. Thus, my estimate for revenue is $374 million rounded up.

I then modeled an increase in production expenses to $68.5 million, followed by royalty expenses of $7 million and depletion and depreciation of $40 million, to arrive at earnings from mine operations of $258.5 million. I modeled a slight uptick in G&A to $12.5 million and an uptick in exploration and evaluation expenses to $12 million to get to earnings from operations of $234 million. After netting out other items of -$2.5 million, EBIT comes in at $231.5 million. Finally, using a tax rate of 31%, I modeled net income of .76 cents or $160 million. The biggest wild card this quarter is how much exploration was capitalized and what the D&D contribution was.

The key takeaways for the call are as follows: (1) Fosterville exploration update or progress. This is obviously very important as the market is clearly waiting for an update here. It is also interesting that they are hosting the earnings call in Australia while having site visits the week after. Could just be entirely coincidental as well as scheduling convenience due to site visit the week after, we shall see; (2) Update on Northern Territory. Test processing of mineralization from the Lantern Deposit at the Cosmo Mine commenced in early October. To what extent do we get more clarity on potential resumption of operations there? (3) What are the future plans with the Holt Complex, which was discussed when they provided Q3 production numbers? And finally (4) Any additional guidance for Q4 would be nice to see. We know that guidance at Fosterville for Q4 will be better than Q3. Any commentary there would be helpful.

That’s all for now. See you on Wednesday.

* Money figures are expressed in USD unless otherwise stated.

4 thoughts on “Kirkland Lake Gold $KL Q3 Preview

  1. Can you do a write up or analysis of PVG. Do you think the resource is not as good as the resource model? Seems like that might be the case with missing grades for 2 years?

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    1. There’s is definitely too much variability, and while the mine may still prove out over the long term, it’s hard to get excited given the QoQ gyrations and management credibility issues.

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