🕐04.02.14 - 12:27 Uhr

INVESTEC: KIRKLAND LAKE GOLD : Q3 FY14 PRODUCTION UPDATE - BUY




Kirkland Lake Gold (Price: 178p | Target: 353p | Rec: Buy) Kirkland Lake Gold’s six month mine plan has resulted in the company reducing its FY14 production guidance to 120,000-125,000oz.

While this may unsettle the market, we can see the positives in that the company now has a viable production plan which is suitable for the prevailing gold price and which should be achievable.

Kirkland Lake has also been focussed on cost savings, with 144 employees having been released from employment recently, and a total of US$23m in annual savings having been identified. * Q3 production and FY14 outlook.

During Q3 FY14, Kirkland Lake produced 31,483oz of gold.

Importantly, the group produced 13,483oz of gold in January at a grade of 0.45oz/t, higher than the 0.26oz/t and 0.29oz/t achieved in November and December respectively.

The company has undertaken its mine optimisation plan and, given the prevailing gold price, is now focussed on increasing grade, over and above throughput.

Kirkland Lake has highlighted that it does not expect to meet its previous FY14 guidance of 150,000oz, and reduced its target to 120,000-125,000oz. * Longer term.

We have adjusted our long term assumptions for the company, reducing our steady-state production assumptions from FY16E onwards from 237,000oz/year to 182,000oz/year.

We assume that the company continues to deliver ore to the mill at an increased grade of 0.38oz/t.

For FY15E, we now assume the company produces 156,000oz. * Estimates.

Our FY14E EPS estimate reduces from 11c to -22c and our FY15E EPS forecast falls from 88c to 16c. * Recommendation and valuation.

Our valuation of Kirkland Lake is based on our estimate of the NPV of the company.

Given changes to our longer term gold production assumptions, we reduce our target price from 353p to 200p.
To access the full note please click here Analyst: Hunter Hillcoat +44 (0)20 7597 5182
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