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TICKERS: KL

Target Raised on Gold Miner 'On Track to Meet Overall Guidance'
Research Report

Source:

Q3/19 production totals from the company's various assets are discussed in a CIBC report.

In an Oct. 10 research note, analyst Cosmos Chiu reported that CIBC raised its price target on Kirkland Lake Gold Inc. (KL:TSX; KL:NYSE) to CA$67 per share from CA$64 to reflect the company's "outlook for near-term cash flow generation." In comparison, the gold explorer's stock is currently trading at around CA$59.14 per share.

Chiu reviewed Kirkland Lake's reported production in Q3/19. Total production of 248,000 ounces (248 Koz) during the quarter was a miss, as CIBC expected 255 Koz. The 240 Koz, however, took total H1/19 production to 695 Koz, which is "on track to meet overall guidance of 950 Koz to 1 million ounces."

The two strong project performers during Q3/19 were Fosterville and Macassa, Chiu noted, "demonstrating the quality of both assets that generate about 90% of the company's overall production." In Q4/19, production from those assets should more than offset any production shortfall from the Holt complex.

Fosterville's Q3/19 production was 158 Koz, a 13% quarter-over-quarter (QOQ) increase, driven by head grades of 42 grams per ton (42 g/t), which exceeded CIBC's 41 g/t projection. Year-to-date production at Fosterville was 427 Koz; annual guidance is 570610 Koz. "We expect Q4/10 production of 171 Koz."

Q3/19 production at Macassa, where grades and throughput exceeded those in Q2/19, was 63 Koz, reflecting a 30% QOQ increase. "The strong throughputs demonstrate to us the water ingress challenges from Q2/19 were indeed temporary," Chiu indicated. Having produced 185 Koz so far in 2019, Macassa, too, is well on its way to meeting the year's guidance of 240250 Koz.

Chiu commented that "the strong performance at Fosterville and Macassa should carry Kirkland Lake comfortably into its overall guidance range." Thus, CIBC raised increased its full-year production estimate on the miner to about 960 Koz.

Production at the Holt complex came in at 27 Koz, below CIBC's forecasted 39 Koz. This resulted from a slower ramp-up at Holloway than anticipated. The complex's H1/19 production was 82 Koz versus 2019 guidance of 140150 Koz. CIBC expects Q4/19 production there to be about 30 Koz.

As for the balance sheet, Chiu reported that Kirkland Lake ended Q3/19 with $615 million in cash, a $146 million QOQ increase. CIBC expects the company to finish 2019 with more than $750 million in cash.

CIBC has an Outperformer rating on this Canadian gold producer.

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Disclosures from CIBC, Kirkland Lake Gold Ltd., Earnings Update, October 9, 2019

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Kirkland Lake Gold Ltd. (KL) CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Kirkland Lake Gold Ltd. in the next 3 months.




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