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Kirkland Lake 1Q results boosted by Detour acquisition, higher gold prices

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(Kitco News) - Kirkland Lake Gold Ltd. (TSX: KL; NYSE: KL; ASX: KLA) posted a sharp jump in earnings during the first quarter, with revenue boosted by the acquisition of Detour Gold Corp. and higher gold prices, the company announced Wednesday.

The quarter was one in which a number of key developments occurred, including challenges and temporary mine suspensions due to the COVID-19 pandemic, as well as the acquisition of Detour Gold on Jan. 31, with the Detour Lake Mine contributing to Kirkland Lake’s results during the final two months of the quarter.

Adjusted net earnings totaled $179.2 million, or 70 cents per share, up 57% from $113.8 million, or 54 cents, in the first quarter of 2019. Credit Suisse reported that the consensus estimate was 76 cents. Net earnings were $202.9 million, or 79 cents, 84% higher than $110.1 million, or 52 cents, in the year-ago period.

First-quarter revenue of $554.7 million jumped 82% from $304.9 million in the year-ago period. Detour Lake contributed revenue of $179.4 million in the first quarter. Gold sales jumped 48% year-on-year to 344,586 ounces, compared to 232,929 a year ago. The average gold price rose to $1,586 per ounce from $1,307.

The company said cash as of quarter-end was $530.9 million, with no debt.

“Our production increased from Q1 2019, even excluding Detour Lake, with Fosterville continuing to be a key driver of our performance,” said Tony Makuch, president and chief executive officer. “Looking at Detour Lake, the mine contributed $78 million of free cash flow in its first two months since the acquisition, and that included a period of running at reduced operations.”

Consolidated production was 330,864 ounces, a 43% increase from 231,879 ounces in the first quarter of 2019. Excluding Detour Lake, production totaled 239,309 ounces.

Kirkland Lake reported all-in sustaining costs per ounce of gold sold was $776, compared to $560 a year ago. Excluding Detour Lake, AISC per ounce averaged $619.

As a result of uncertainty created by the pandemic, the company withdrew its 2020 production guidance early last month. The company said revised guidance will be issued whenever Detour Lake and Macassa make progress towards returning to more predictable levels of production. Kirkland Lake also withdrew its three-year guidance while it assesses long-term effects from COVID-19 and incorporates Detour Lake into the company’s long-term business plan.

During the quarter, the Detour Lake and Macassa mines were transitioned to reduced operations, while work was temporarily suspended at the Holt Complex. Kirkland Lake also put in place a number of health and safety protocols. Operations continued at Fosterville.

Kirkland Lake said it is now beginning to recall employees who were off work due to the steps taken to combat COVID-19. The ramp-up will be gradual, and Kirkland Lake said it does not anticipate achieving full production during the second quarter and anticipates output and costs will be impacted for most of the year.

Kirkland Lake said it plans to donate $20 million over the next year to medical, social and community organizations in the areas of Canada and Australia where the company operates.

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