Kirkland Lake Q2 earnings beat estimates

Kirkland Lake Gold (TSX, NYSE: KL) (ASX: KLA) on Thursday reported strong financial and operating results for the second quarter of 2020 despite disruptions caused by covid-19.

Adjusted net earnings came to $219.3 million ($0.79 per share), double the Q2 2019 level of $109.8 million ($0.52 per share) and 22% higher than the $179.2 million ($0.70 per share) recorded for the previous quarter.

Earnings of $0.79 per share surpassed Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was $0.74 per share.

Revenue for the three-month period also doubled to $581.0 million from $281.3 million in Q2 2019 and was 5% higher than the previous quarter.

Gold production across Kirkland Lake’s operations reached 329,770 ounces, a 54% improvement from Q2 2019

During the quarter, the company generated net cash of $222.2 million and free cash flow of $94.1 million from operations, resulting in total cash balance of $537.4 million with no debt at quarter-end.

Gold production across Kirkland Lake’s operations reached 329,770 ounces, a 54% improvement from 214,593 ounces in Q2 2019 and comparable to 330,864 ounces for the previous quarter.

Cash cost and all-in sustaining cost (AISC) averaged $374 and $751 per ounce, respectively. Operating cash cost was $312 in Q2 2019 and $440 in Q1 2020, while AISC was $638 in Q2 2019 and $776 in Q1 2020.

At quarter-end, the company re-issued guidance for 2020 recognizing the progress achieved in ramping up business activities that had been impacted by covid-19. Included among the re-issued guidance was production of 1.35 to 1.4 million ounces, approximately 90% of the withdrawn 2020 production guidance.

Meanwhile, Kirkland Lake has also released new drilling results from the Fosterville mine in Australia, with higher than anticipated grades and visible-gold encountered near the intersection of the Swan Fault and the Swan Splay structure.

“The infill results confirm that the area where the Swan Fault and Swan Footwall Splay intersect contains more gold than currently modelled,” president and CEO Tony Makuch stated.

Shares Kirkland Lake Gold climbed more than 2% to a new 52-week high on Thursday. The stock has jumped 13% since the beginning of the year.

The Toronto-based gold major has a market capitalization of nearly C$18.9 billion.

Denison Mines wins arbitration ruling over Mongolian asset sale

The London Court of International Arbitration (LCIA) has recently rendered a final award in favour of Canadian uranium miner Denison Mines (TSX: DML) for the previously disclosed arbitration proceedings between the company and Uranium Industry (UI).

In November 2015, Denison completed the sale of its mining assets and operations located in Mongolia to UI pursuant to an amended and restated share purchase. The primary assets at that time were the exploration licences for the Hairhan, Haraat, Gurvan Saihan and Ulzit projects.

In September 2016, the Mineral Resources Authority of Mongolia formally issued mining licence certificates for all four projects, triggering Denison’s right to receive additional post-closing contingent consideration of $10 million, with an original due date of November 16, 2016.

The payment due date was later extended to July 16, 2017, under an extension agreement between the two parties. As consideration for the extension, UI agreed to pay interest at a rate of 5% per year, payable monthly up to the due date, and also agreed to pay a $100,000 instalment towards the balance of the receivable amount. However, the required payments were not made, Denison says.

Subsequently, the company served notice to UI in February 2017 and later that year filed a request for arbitration with the LCIA in conjunction with the default of UI’s obligations.

In its final ruling, the arbitration panel declared that UI had violated its obligations to Denison under the related agreements and ordered UI to pay Denison $$10 million plus interest at a rate of 5% per annum from November 16, 2016, plus certain legal and arbitration costs. The arbitration panel further dismissed all other claims and counterclaims.

Denison is currently focused on uranium mining in the Athabasca Basin region of northern Saskatchewan.

Newmont tops profit estimates on gold surge

Newmont (NYSE: NEM, TSX: NGT) said on Wednesday that higher gold prices helped generate significant free cash flow in the second quarter.

The world’s biggest gold miner’s adjusted net income for the June quarter was $261-million, or $0.32 a diluted share, compared with $92-million, or $0.12 a diluted share, in the prior-year quarter. The result topped analysts’ estimates of $0.31 per share.

Newmont reported $984 million in adjusted EBITDA and $388 million in free cash flow.

Newmont’s 2020 attributable gold production remains at about six-million ounces

Revenue rose 5% from the prior-year quarter to $2.37-billion, helped by record-high gold prices.

Newmont’s averaged realized gold price jumped about 31% to $1,724 per ounce in the second quarter ended June 30.

Its attributable gold production, however, fell 21% to 1.26 million ounces as coronavirus lockdowns led to the temporary closure of some of its mine sites.

“We safely and efficiently executed restart plans at our mines previously in care and maintenance and Newmont’s world-class portfolio is well positioned to deliver an even stronger second half of 2020.” said Tom Palmer, President and CEO.

“The ongoing favorable gold price environment amplifies our free cash flow generation yet our discipline around capital allocation will not change as we continue to invest in profitable projects”.

On Wednesday, Agnico Eagle, also reported a near four-fold increase in quarterly profit, owing to the surge in gold prices.

Pandemic

Newmont will spend $45 million per month to maintain safety protocols at its mines and is particularly worried about community spread of the virus in Mexico, Peru and Argentina, CEO Tom Palmer said on a call.

The company reaffirmed its revised guidance issued on May 19. The miner’s 2020 attributable gold production remains at about six-million ounces.

Midday Thursday, Newmont’s stock was down nearly 3% on the NYSE. The company has a $52 billion market capitalization.

Kenorland cuts 29 metres of 8.47 g/t gold in Quebec; plans listing

Private prospect generator Kenorland Minerals has announced a major discovery next to the past-producing Troilus mine in Quebec and plans to go public via a complete a reverse takeover transaction with Northway Resources.

The grassroots discovery at the Frotet project in the Frotet-Evans greenstone belt, 100 km north of Chibougamau, returned highlights of:

  • 29.1 metres of 8.47 g/t gold and 12.23 g/t silver starting at 72 metres depth, including 11.1 metres of 18.43 g/t gold and 25.93 g/t silver in hole 007;
  • 2.6 metres of 9.89 g/t gold and 10.2 g/t silver starting from 256.3 metres depth in hole 004;
  • 10.4 metres of 0.83 g/t gold and 0.63 g/t silver starting from 106 metres in hole 009; and
  • 4.9 metres of 9.59 g/t gold and 18.36 g/t silver starting from 47.6 metres in hole 015.

All holes were drilled at the Regnault target at Frotet, which is located just south of the Troilus gold-copper project being advanced by Troilus Gold.

The project is under option to Sumitomo Metal Mining, which funded the initial 15-hole exploration program and can earn an interest of up to 80% by funding C$8.3 million in exploration over four years.

Kenorland initially staked the project in 2017 and optioned it to Sumitomo in April 2018

“The results from the maiden drill program at Regnault are nothing short of amazing. We have found a new significant gold system just a few kilometres off the Route du Nord in Quebec, completely concealed undercover, through systematic grassroots exploration,” said Zach Flood, president and CEO of Kenorland, in a release.

“The results announced are the outcome of a sustained effort over multiple seasons, in collaboration with, and support from, our partners at Sumitomo Metal Mining. The discovery here highlights the potential to make further incredible grassroots discoveries in Quebec and elsewhere, even in areas that have been considered heavily prospected in the past.”

Flood says the drill program intersected multiple gold-bearing structures at various orientations over an area of 1.5 km by 500 metres. The company plans to follow up to on this discovery with additional exploration on strike, with favourable boulders and soil geochemistry, in the months ahead.

Kenorland initially staked the project in 2017 and optioned it to Sumitomo in April 2018. Two seasons of grassroots exploration were conducted before this year’s maiden drill program.

The Regnault discovery is hosted in a multi-phase intrusive complex located along an east-west trending deformation zone. Visible gold can be be seen in quartz veins hosted within altered intrusive rocks, with gold mineralization also associated with broadly disseminated pyrite hosted in in zones of intense alteration along the contacts of the intrusive phases.

RTO

Kenorland has also signed a letter of intent with Northway Resources that will see the TSX Venture Exchange-listed junior acquire it.

Kenorland owns 14.5% of Northway which has two exploration projects in Alaska and is also led by Flood as president and CEO. The related-party transaction is contingent on both parties entering a definitive agreement before the end of August. Its terms include Northway raising C$10-million in a private placement, and the approval by a majority of Northway’s shareholders outside of Kenorland.

Also in Quebec, Kenorland holds the Chicobi project, which is under option to Sumitomo, and the Chebistuan project, which is under option to Newmont. The company also holds the Tanacross porphyry copper-gold-molybdenum project in Alaska.

(This article first appeared in the Canadian Mining Journal)

Copper Mountain shares up on strong Q2 results

Copper Mountain Mining (TSX: CMMC) exceeded its revised operating plan for the second quarter of 2020, the Vancouver-based miner announced on Wednesday.

Production for the three-month period reached 23.9 million pounds of copper equivalent, comprising of 18.1 million pounds of copper, 7,499 ounces of gold and 86,126 ounces of silver.

Revenues rose to C$91 million from C$65 million in the same period last year, while gross profit saw a significant jump to C$30.3 million compared to C$1.6 million in Q2 2019 as a result of reduced cash costs.

Cash flow from operations before working capital changes came to C$41.5 million, up from C$4.7 million in Q2 2019.

Copper Mountain has reaffirmed its 2020 production and AIC guidance of 70-75 mlb copper and $2.20-$2.35/lb copper produced

“We are pleased to have achieved such a strong quarter despite the global impact of the covid-19 virus and the associated lower copper price environment,” commented Gil Clausen, Copper Mountain’s president and CEO.

“With higher metal prices and lower costs, our objective is to build our cash position to allow for a rapid restart of the second stage of the mill expansion project, the installation of the third ball mill,” Clausen said.

The company completed the first stage of its 45,000 tpd mill expansion and installation of the direct flotation reactors in early July. The miner has also maintained spending on long lead time items associated with installation of the third ball mill and anticipates resuming construction in late 2020 or early 2021.

Meanwhile, Copper Mountain has reaffirmed its 2020 production and all-in cost (AIC) guidance of 70-75 million pounds of copper and $2.20-$2.35 per pound of copper produced, respectively.

Production is expected to be more heavily weighted to the second half of the year as a result of higher grades and as the company begins to mine coarser grained ore areas that have higher recovery associated with them.

AIC for the first half of 2020 was below guidance, and although the company expects to continue to operate at lower costs in the second half, it is not adjusting guidance at this time given any uncertainty surrounding the pandemic.

Shares of Copper Mountain Mining jumped 4.2% on the TSX by 2:30 p.m. EDT. The company has a market capitalization of C$143.5 million.

Cameco to restart Cigar Lake in September

Cameco (TSX: CCO; NYSE: CCJ) is planning to restart its Cigar Lake mine in northern Saskatchewan in early September, the Canadian uranium major announced on Wednesday.

Restart of the mine, which has been placed on care and maintenance since March 23, will be dependent on several factors, the company said, including its ability to establish safe and stable operating protocols, availability of the necessary workforce, and how the covid-19 pandemic

CEO Tim Gitzel said that the decision to resume Cigar Lake was “prudent”, noting that the covid-19 pandemic posed a greater risk to supply than to demand, as the industry had become highly concentrated geographically and geologically.

Cameco expects to recover $303 million in cash paid and $482 million in letters of credit secured with the CRA

The world’s largest uranium producer, Kazatomprom of Kazakhstan, also suspended operations on April 7, tightening global supply.

Cameco said it would not be able to make up the lost production, and therefore has set a target 2020 production of up to 5.3 million pounds.

“With the uncertainty remaining about our ability to restart and continue operating the Cigar Lake mine, the delays and deferrals of project work and therefore the resulting production rate in 2020 and 2021, we believe the current plan represents an appropriate balance of the commercial considerations affecting our decision,” said Gitzel.

Meanwhile, Cameco reported a net loss of $53 million and an adjusted net loss of $65 million for the second quarter of 2020, impacted by additional care and maintenance costs of $37 million resulting from the suspension of production at the Cigar Lake mine, Blind River refinery and Port Hope UF6 conversion plant.

Given the production interruptions at the Cigar Lake mine and at the Inkai operations, Cameco said it would increase its required spot market purchasing in 2020 to meet its delivery commitments and to maintain desired inventory levels. Combined with the additional care and maintenance costs, the average unit cost of sales in the uranium segment would be higher than the company’s previous estimate.

“We have the tools we need to deal with the current uncertain environment. We are well positioned to self-manage risk. We have $878 million in cash and short-term investments on our balance sheet and a $1 billion undrawn credit facility, which we do not anticipate we will need to draw on this year.”

Cameco also believes its risks have been “significantly reduced” with the Federal Court of Appeal’s decision last month to rule in favour of the company in its tax dispute with the Canada Revenue Agency (CRA) for the 2003, 2005 and 2006 tax years.

Based on its calculations, the company expects to recover $303 million in cash paid and $482 million in letters of credit secured with the CRA in relation to this dispute.