Kirkland Lake Gold (NYSE: KL | TSX: KL.TO) out with Q2 production. After re-releasing guidance last week after suspending it due to Covid-19, the numbers came as no surprise. Production totaled 329,770. Fosterville had another reliable showing, with grades coming in at 40gpt. Detour grade was a tad lower because KL was running stockpile due to the pandemic. Macassa was the most impacted operation, but again this came as no surprise. Kirkland remains very much on track for meeting annual guidance. They need 357,183 ounces per quarter the remainder of the way to get to the mid-point. That’s just 8% more than Q2 with all operations back and fully functioning.
Kirkland’s Cash balance increased slightly QoQ. The company bought roughly 1.345m shares with buyback as tweeted here in this thread last week. https://twitter.com/economicalpha/status/1279106641888239622?s=21. KL also paid their last installment of 2019 tax in Australia in the amount of $133M.
The hedges on Detour that they paid roughly $30m to terminate was very well timed, as usual with this team. These hedges were in the $1300-$1490 range and the average realized price was $1714 in second quarter. A rough calculation on this maneuver when all is set and done will likely yield more than 2x their money.
As for financial metrics, Kirkland’s EBITDA margin in Q1 was roughly 70%. Realized Au price in Q1 was $1586. Using 70% EBITDA and a $1716 Au with 341,390 in Au sales during the quarter, I estimate $586M in sales and EBITDA of between $400M and $410M which translates into EPS of .74-.76 cents, using 277m SoS. KL used 258M SoS in Q1.
In summary, my suspicion is that the Detour deal perception has become so negative as well as Fosterville exploration potential, that now the stock is in a strong position to surprise many folks to the upside, especially in light of this gold environment. Baby steps. One step at a time. So far so good.
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