TORONTO, May 07, 2019 (GLOBE NEWSWIRE) -- Kirkland Lake Gold Ltd. (“Kirkland Lake Gold” or the “Company”) (TSX:KL) (NYSE:KL) (ASX:KLA) today announced the Company’s financial and operating results for the first quarter (“Q1 2019”) of 2019, which included a significant increase in the Company’s cash position, driven by strong operating results and record quarterly net earnings and free cash flow. The Company’s full financial statements and management discussion & analysis are available on SEDAR at www.sedar.com and on the Company’s website at www.klgold.com. All dollar amounts are in U.S. dollars, unless otherwise noted.

Key highlights of Q1 2019 results include:
• Cash increases $83.9 million or 25%: Cash at March 31, 2019 totalled $416.1 million, increase of $83.9 million or 25% during Q1 2019


• Operating cash flow increases 95% from Q1 2018: Net cash provided by operating activities of$174.4 millioncompared to $89.6 million in Q1 2018 and $204.1 million the previous quarter


• Record free cash flow1: Free cash flow of $93.1 million, 85% increase from Q1 2018 and 8% higher than Q4 2018


• Revenue growth of 54%: Revenue of $304.9 million, 54% increase from Q1 2018 and 9% higher than Q4 2018; record gold sales of 232,929 ounces, 58% higher than Q1 2019 and 3% increase from previous quarter (average realized price of $1,307/oz versus $1,333/oz in Q1 2018 and $1,237/oz in Q4 2018)


• Record EBITDA1,2: EBITDA of $201.6 million, 101% increase from Q1 2018 and 7% higher than previous quarter


• Record net earnings: Net earnings of $110.1 million ($0.52/share) increased 120% from Q1 2018, with adjusted net earnings2 of $112.1 million ($0.53/share) increasing 114% from Q1 2018; Q1 2019 net earnings and adjusted net earnings compared to Q4 2018 net earnings and adjusted net earnings of $106.5 million ($0.51/share) and $109.6 million ($0.52/share)


• Record operating results

° Production of 231,879 ounces, 57% increase from 147,644 ounces in Q1 2018 and slightly higher previous quarterly record of 231,217 ounces in Q4 2018

° Production costs of $70.0 million versus $71.5 million in Q1 2018 and $64.6 million in Q4 2018

° Operating cash costs per ounce sold1 averaged $290, 35% improvement from Q1 2018 and largely unchanged from $286 in Q4 2018

° AISC per ounce sold1 averaged $560, 33% better than Q1 2018 and 1% improvement from Q4 2018


• Strong growth in Mineral Reserves: Consolidated Mineral Reserved increased 1.1 million ounces or 24% to 5,750,000 ounces @ 15.8 grams per tonne at December 31, 2018 versus 4,640,000 ounces @ 11.1 grams per tonne at December 31, 2017 (announced February 21, 2019)

° Fosterville Mineral Reserves increase 60% to 2,720,000 ounces @ 31.0 grams per tonne at December 31, 2018

° Macassa Mineral Reserves increase 11% to 2,250,000 ounces @ 21.9 g/t at December 31, 2018


• Quarterly dividend raised 34%: The Company announced on May 7, 2019 that the Q2 2019 dividend payment will total $0.04 in US funds (formerly $0.04 in Canadian funds) and will be paid on July 12, 2019 to shareholders of record on June 28, 2019. The change in the quarterly dividend to US funds represents an increase in value of approximately 34% based on current exchange rates.
1. See “Non-IFRS Measures” later in this press release and on pages 23 – 28 of the MD&A for the three months ended March 31, 2019.
2. Refers to Earnings before Interest, Taxes, Depreciation, and Amortization.

In addition to releasing Q1 2019 results, Kirkland Lake Gold today announced the appointment of Jeff Parr as the Chair of the Company’s board of directors effective immediately following the Company’s annual and special meeting on May 7, 2019. Mr. Parr has been a director of the Company since November 2016 and was previously a director of Kirkland Lake Gold Inc. from October 2014.

Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold, commented: “We are off to a strong start in 2019, with record gold production and sales and very low unit costs in Q1 2019. Macassa had an outstanding quarter, achieving record production, operating cash costs per ounce and AISC per ounce. The mine’s strong results were mainly related to continued grade outperformance from stopes around the 5700 Level of the South Mine Complex. Given that we will be mining in this general area for the balance of the year, we are optimistic that we will continue to see very strong results from Macassa. At Fosterville, we continued to develop on, and increase production from, the Swan Zone in Q1 2019, with stope production advancing on multiple levels. As we develop deeper into the zone, we are targeting higher levels of production from Swan, particularly in the second half of the year, which is expected to drive higher levels of consolidated production in the third and fourth quarters. Based on the strong results at Macassa and Fosterville in Q1 2019 and the outlook for the remainder of the year, we have raised the lower end of our consolidated production guidance for the year, and now expect to produce at least 950,000 ounces, and improved our operating cash cost per ounce sold guidance, which we are now targeting at $285 – $305.

“Turning to our financial results, we achieved record net earnings and free cash flow in Q1 2019. Our cash position grew 25% in one quarter, ending March 2019 at $416.1 million. Our operating earnings were very strong and our net earnings beat the previous record in Q4 2018 even though we had unfavourable foreign exchange movements this quarter as well as a higher effective tax rate. Looking ahead, with production and sales levels expected to increase in the second half of the year, we are well positioned for increased levels of profitability and cash flow going forward, assuming existing business plans and gold prices.”

Review of Financial and Operating Performance
Table 1. Financial Highlights

(in thousands of dollars, except per share amounts) Three Months Ended
March 31, 2019 Three Months Ended
March 31, 2018
Revenue $ 304,912 $198,237
Production costs 70,040 71,483
Earnings before income taxes 159,589 71,888
Net earnings $ 110,146 $50,037
Basic earnings per share $ 0.52 $0.24
Diluted earnings per share $ 0.52 $0.23
Cash flow from operating activities $ 174,364 $89,637
Cash investment on mine development and PE $ 81,314 $39,428


Table 2. Operating Highlights

Three Months Ended
March 31, 2019 Three Months Ended
March 31, 2018
Tonnes milled 418,960 417,356
Grade (g/t Au) 17.6 11.5
Recovery (%) 97.9% 96.3%
Gold produced (oz) 231,879 147,644
Gold Sold (oz) 232,929 147,763
Average realized price ($/oz sold)(1) $1,307 $1,333
Operating cash costs per ounce ($/oz sold)(1) $290 $447
AISC ($/oz sold)(1) $560 $833
Adjusted net earnings(1) $112,132 $52,337
Adjusted net earnings per share(1) $0.53 $0.25

1. Non-IFRS - the definition and reconciliation of these Non-IFRS measures are included on pages 23-28 of the MD&A for the three months ended March 31, 2019.




Revenue

Revenue in Q1 2019 totaled $304.9 million, an increase of $106.7 million or 54% from Q1 2018 revenue of $198.2 million. The increase in revenue from Q1 2018 reflected a 58% increase in gold sales, to a quarterly record of 232,929 ounces, which had a $113.5 million favourable impact on revenue compared to the same period in 2018. Partially offsetting the impact of higher volumes was a $6.1 million unfavourable variance related to a 2% reduction in the average realized gold price, to $1,307 per ounce from $1,333 per ounce in Q1 2018. The increase in gold sales was largely attributable to Fosterville, where ounces sold more than doubled, to 132,048 ounces from 61,500 ounces in Q1 2018. Also contributing to higher volumes was a 26% increase in sales at Macassa, to 67,305 ounces from 53,363 ounces a year earlier. Increased production levels, largely reflecting improved average grades, mainly accounted for the higher sales volumes at both Fosterville and Macassa.

Q1 2019 revenue increased $24.6 million or 9% from Q4 2018 revenue of $280.3 million. Of the increase, $16.3 million related to a 6% increase in the average realized price from $1,237 per ounce the previous quarter to $1,307 per ounce in Q1 2019. A 3% increase in gold sales from 225,692 ounces in Q4 2018 contributed $8.9 million to the growth in revenue quarter over quarter. The growth in gold sales reflected a 11% increase in sales at Fosterville from the 118,955 ounces sold the previous quarter, which more than offset reduced gold sales from Macassa and Taylor in Q1 2019.

Earnings from Mine Operations

Earnings from mine operations in Q1 2019 totaled $185.3 million, double the $92.8 million of earnings from mine operations in Q1 2018 and 8% higher than $170.8 million the previous quarter. The increase from both prior periods resulted from higher levels of revenue in Q1 2019. Production costs in Q1 2019 totaled $70.0 million, which compared to $71.5 million in Q1 2018 and $64.6 million in Q4 2018. The increase in production costs compared to the previous quarter is primarily due to higher sales volumes in Q1 2019. Depletion and depreciation costs in Q1 2019 totaled $41.3 million, which compared to $27.9 million in Q1 2018 and $37.3 million the previous quarter. The increase from the same period in 2018 reflected significant growth in production volumes, which was only partially offset by a small reduction in depletion and depreciation expense on a per ounce produced basis resulting from an increase in the level of Mineral Reserves at the Company’s operations following the release of the Company’s December 31, 2018 Mineral Reserve and Mineral Resource estimates on February 21, 2019. Royalty expense in Q1 2019 totaled $8.3 million compared to $6.0 million in Q1 2018 and $7.6 million the previous quarter. Higher sales volumes mainly accounted for the increase in royalty expense compared to both prior periods.

Unit Cost Performance (See Non-IFRS measures)

Operating cash costs per ounce sold averaged $290, a $157 per ounce or 35% improvement from Q1 2018 mainly resulting from a 53% improvement in the average consolidated grade to 17.6 g/t from 11.5 g/t for the same period a year ago. Operating cash costs at Fosterville averaged $144 per ounce sold, a 50% improvement from $287 per ounces sold in Q1 2018. Macassa’s operating cash costs per ounce sold averaged $332 in Q1 2019, 33% better than $499 during the prior year’s first quarter. Average grades at Fosterville and Macassa improved 73% and 49%, respectively, from Q1 2018, to 29.0 g/t and 29.6 g/t, respectively in Q1 2019. AISC per ounce sold averaged $560 in Q1 2019, $273 or 33% better than Q1 2018. The improvement mainly reflected lower operating cash costs per ounce sold, as well as a reduction in sustaining capital expenditures on a per ounce sold basis. Sustaining capital expenditures totaled $42.0 million, unchanged from Q1 2018. On a per ounce sold basis, sustaining capital expenditures averaged $180 in Q1 2019 versus $285 for the same period a year ago. Fosterville and Macassa were the key drivers of the improvement in AISC per ounce sold. AISC per ounce sold at Fosterville averaged $315, 45% better than $576 in Q1 2018, while Macassa’s AISC per ounce sold in Q1 2019 averaged $602, a 26% improvement from $818 in Q1 2018.

Compared to the previous quarter, operating cash costs per ounce sold were largely unchanged from $286 the previous quarter, while AISC per ounce sold improved 1% from $567. The improvement in AISC per ounce sold from Q4 2018 reflected lower sustaining capital expenditures compared to Q4 2018, both in total dollars and on an ounce sold basis. Sustaining capital expenditures in Q4 2018 totaled $46.4 million or $206 per ounce sold versus $42.0 million or $180 per ounce sold in Q1 2019.

Additional Expenses

Corporate G&A expense (excluding share-based payments expense and transaction costs) totaled $8.7 million compared to $6.9 million in Q1 2018 and $8.0 million the previous quarter. The increase from the previous year was mainly due to higher incentive compensation payments, as well as increased professional and consulting fees. Share based payment expense in Q1 2019 totaled $3.4 million versus $1.8 million for the same period in 2018 and $1.3 million in Q4 2018, with the increase from both prior periods largely related to share-price appreciation, resulting in greater mark-to-market values for the Company’s outstanding deferred-share units.

Exploration and evaluation expenditures (expensed) in Q1 2019 totaled $12.0 million compared to $16.7 million in Q1 2018 and $13.8 million the previous quarter. Exploration and evaluation expenditures in Q1 2019 included $9.5 million in Australia ($6.6 million at Fosterville and $2.8 million in the Northern Territory), and $2.5 million in Canada, approximately half of which related to exploration drilling and development at Macassa, with the other half at Taylor.

Other loss in Q1 2019 totaled $2.1 million, which compared to other income of $5.4 million in Q1 2018. Other loss in Q1 2019 resulted from an unrealized and realized foreign exchange loss of $2.1 million. The unrealized and realized foreign exchange loss in Q1 2019 resulted from the Australian and Canadian dollars strengthening against the US dollar during the quarter. Other income in Q1 2018 mainly related to unrealized and realized foreign exchange gains of $3.9 million, reflecting the weakening of the Australian and Canadian dollars against the US dollar, and a $2.3 million mark-to-market gain on fair valuing the Company's warrants. Other income in Q4 2018 totaled $1.2 million, which largely resulted from an unrealized and realized foreign exchange gain of $5.9 million, partially offset by a $3.5 million marked-to-market loss on fair valuing the Company’s warrants.

Finance costs in Q1 2019 totaled $0.7 million, mainly reflecting interest expense on financial leases and other loans. Finance costs totaled $0.7 million in Q1 2018 and $1.1 million the previous quarter.

Finance income, mainly related to interest income on bank deposits, totaled $1.4 million in Q1 2019 versus $0.7 million for the same period in 2018 and $3.1 million in Q4 2018.

Income tax expense in Q1 2019 included current income tax expense of $40.9 million and deferred income tax expense of $8.5 million. In Q1 2018, current income tax expense totaled $3.5 million, while deferred tax expense totaled $18.3 million. The deferred tax expense in Q1 2018 resulted from the utilization of $12.4 million of deferred tax assets in respect of loss carry forwards to reduce current income tax expense. Income tax expense in Q4 2018 included current income tax expense of $17.1 million and deferred income tax expense of $25.7 million. The Company’s effective tax rate in Q1 2019 was 31.0%, which compared to 30.4% in Q1 2018 and 28.7% the previous quarter. The Q4 2018 effective tax rate was lower than either Q1 2019 or Q1 2018 largely due to income tax benefits related to corporate reorganizations involving the Company’s Australian operations that were completed in the final quarter of 2018.

Net earnings in Q1 2019 total $110.1 million or $0.52 per basic share

Net earnings in Q1 2019 totaled $110.1 million ($0.52 per basic share), an increase of $60.1 million or 120% from $50.0 million ($0.24 per basic share) in Q1 2018. The $53.3 million increase in net earnings from Q1 2018 largely reflected a 54% increase in revenue and improved unit costs compared to the same period in 2018. Partially offsetting these factors were higher depletion and depreciation costs, increased corporate G&A and royalty expenses, as well as the impact of an other loss of $2.1 million versus other income of $5.4 million in Q1 2018, with the change mainly related to movements in foreign exchange rates. Q1 2019 net earnings compared to net earnings of $106.5 million ($0.51 per basic share) in Q4 2018 as an 8% increase in earnings from mine operations, reflecting higher revenue, more than offset the impact of higher corporate G&A costs, an increase in the effective tax rate, as well as the impact of the $2.1 million other loss in Q1 2019 versus other income of $1.2 million in Q4 2018.

Adjusted net earnings (Non-IFRS) in Q1 2019 total $112.1 million or $0.53 per basic share

The Company's adjusted net earnings in Q1 2019 totaled $112.1 million ($0.53 per basic share), compared to $52.3 million ($0.25 per basic share) in Q1 2018 and $109.6 million ($0.52 per basic share) in Q4 2018. The difference between adjusted net earnings and net earnings in Q1 2019 mainly related to the exclusion from adjusted net earnings of $2.3 million ($1.6 million after income tax) of certain purchase price allocation adjustments, as well as $0.4 million ($0.3 million after income tax) of severance costs. The difference between net earnings and adjusted net earnings in Q1 2018 related to the exclusion from adjusted net earnings of $5.4 million ($3.8 million after income tax) of certain purchase price allocation adjustments, as well as a $1.7 million ($1.5 million after income tax) of mark-to-market gains on the fair valuing of the Company’s warrants. The difference between adjusted net earnings and net earnings in Q4 2018 related to the fair valuing of the Company's warrants, with a $3.5 million ($3.1 million after income tax) mark-to-market loss being excluded from adjusted net earnings for the quarter.

Q1 2019 net cash provided by operating activities of $174.4 million, free cash flow (Non-IFRS) totals $93.1 million

Cash totaled $416.1 million at March 31, 2019, an increase of $83.9 million or 25% from $332.2 million at December 31, 2018. The increase in cash during Q1 2019 mainly reflected the $174.4 million of net cash from operating activities for the quarter less $86.0 million used for investing activities and $8.3 million used for financing activities. Net cash from operating activities in Q1 2019 compared to net cash from operating activities of $89.6 million and $204.1 million in Q1 2018 and Q4 2018, respectively. The change from the previous quarter mainly reflected the impact of changes in non-cash working capital, and a higher level of cash income taxes paid in Q1 2019. Among the main uses of cash during Q1 2019 was $86.0 million of net cash used for investing activities, mainly related to capital expenditures in support of both current operations and the continued advancement of the Company’s growth projects. The $86.0 million of net cash used for investing activities in Q1 2019 compared to net cash used for investing activities of $38.7 million for the same period in 2018 and $112.6 million the previous quarter. The change from Q4 2018 reflected reduced cash invested in additions to mineral properties and property, plant and equipment compared to the previous quarter largely reflecting the timing of payments related to the Company’s growth projects. Net cash used for financing activities in Q1 2019 totaled $8.3 million, including $6.3 million for dividend payments and $3.7 million for payment of finance lease obligations, partially offset by $1.0 million of interest received during the quarter. Net cash used in financing activities in Q1 2018 totaled $6.3 million, while net cash used in financing activities for the previous quarter totaled $5.0 million. The increase from both prior periods largely reflected increased dividend payments, with the Company increasing the quarterly dividend to C$0.04 per share effective the Q4 2018 dividend payment, which was paid early in Q1 2019. The increase in the quarterly dividend for the Q4 2018 payment was the third increase to the quarterly dividend since the Company’s dividend policy was introduced in March 2017.

Free cash flow in Q1 2019 totaled $93.1 million, an increase of $42.8 million or 85% from $50.2 million in Q1 2018. The change in free cash flow from the previous year’s first quarter mainly resulted from the 95% increase in net cash from operating activities in Q1 2019, to $174.4 million. Partially offsetting the impact of significant growth in net cash from operating activities were $40.5 million of cash used for mineral property additions, 34% higher than $30.2 million in Q1 2018, and $38.7 million of cash used for additions to property, plant and equipment, which compared to $9.2 million in Q1 2018. The Company also had additions to other long-term assets in Q1 2019 of $2.1 million versus nil for the same period a year earlier. Free cash flow in Q1 2019 compared to free cash flow of $86.4 million the previous quarter. Free cash flow in Q4 2018 resulted from net cash provided by operating activities of $204.1 million, less cash used for mineral property additions of $59.9 million, additions to property, plant and equipment of $52.6 million and additions to other long-term assets of $5.2 million.

Table 3. Review of Financial Performance
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