Update: Kirkland Lake Gold Soars On Q1 2015 Production Data

Aug.13.14 | About: Kirkland Lake (KGILF)

Summary

Kirkland Lake Gold reported strong Q1 2015 production on increased ore grades and increasing mill capacity.

This expansion is inline with the thesis I put forth last July.

The stock has under-performed since then while management is achieving its goals.

The stock isn't cheap but it has a lot of potential to grow production, find new gold, and lower costs making it an interesting stock to consider.

Kirkland Lake Gold (OTCPK:KGILF) just reported its first quarter operating results for its fiscal 2015. The company reported strong production of 39,000 ounces as it has increased its mill throughput putting it well on its way to achieving its goal of 250,000 ounces of annual production. This year production is supposed to reach 140,000 to 155,000 ounces versus 100,000 ounces when I wrote about the company last July. The company has also been mining higher grade ore - quarter over quarter average ore grade is up from 10.6 gpt of gold to 15.4 gpt of gold.

These figures show clearly that the company has set realistic goals - as ambitious as they may be - and it is achieving them and even exceeding them (if we annualize Q1 production we get a production figure at the top of the company's production range. It is for this reason that the company trades with a (relatively) NEV of $440 million while it is set to produce 150,000 ounces for the fiscal year.

Recently the company hasn't been making money because expansion costs have been high, but at this point higher grades and production should outpace the costs of expansion, and I suspect that the company will be able to turn a profit going forward. The company has been able to achieve this production growth while keeping the share count down, which means that the company will be able to meet its long-term goal of 250,000 ounces and about $50 million in annual cash flow by 2016 (the company's fiscal 2016-7). With this in mind the company isn't cheap, but it is bringing costs down and achieving its goals, making it an interesting stock to consider on weakness. But keep in mind that this weakness is gone with the stock up 20% in the past month and 85% year to date.

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