In a Nov. 6 research note, ROTH Capital Partners analyst Jake Sekelsky reported that Kirkland Lake Gold Inc. (KL:TSX; KL:NYSE) in Q3/19 "beat our estimates on both the top and bottom line, and Macassa and Fosterville continue to drive strong cash flow generation."
Sekelsky relayed that Kirkland Lake, reported in Q3/19, a "strong quarter," an adjusted net earnings of $0.84 per share on revenue of $381.4 million, which exceeded ROTH's projection of $0.74 earnings on revenue of $371.2 million. He added that "while the company beat our earnings estimate, we attribute the majority of this to increased capitalization of exploration expenditures."
Costs were roughly consistent with estimates at the Fosterville and Macassa mines, Sekelsky pointed out, but higher than expected at the Holt complex. As such, Kirkland Lake is considering longer term options there.
The gold company ended Q3/19 with $615.7 million in cash and no debt. "[We] believe the company's strong cash balance and currency places Kirkland Lake in a strong position to pursue both organic and inorganic growth opportunities heading into 2020," commented Sekelsky.
The company increased its quarterly dividend by 50% to $0.06 per share. Test processing in progress at the Union Reefs mill indicates Kirkland Lake is advancing its Northern Territory assets. Further, ROTH expects a positive production decision in 2020.
Kirkland Lake is expected to release exploration results from Fosterville by year-end 2019, Sekelsky noted. ROTH believes the market has already considered they will be favorable and has factored that into the stock price. Therefore, the investment banking firm maintained its Neutral rating and US$50 per share 12-month price target on the gold producer, whose current share price is around $47.62.[NLINSERT]
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Disclosures from ROTH Capital Partners, Kirkland Lake Gold, Company Note, November 6, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Kirkland Lake and as such, buys and sells from customers on a principal basis.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.