Go For Gold With Kirkland Lake Gold

Oct. 28, 2020 12:33 PM ETAgnico Eagle Mines Limited (AEM), AEM:CA31 Comments
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StockBros Research


  • Kirkland Lake Gold is the most well-run mining company on the market.
  • Conditions are favorable for gold which translates into growth for this miner.
  • We estimate that the company is trading below intrinsic value based on current market conditions.

Investment Thesis

When investing in gold miners, it's more likely that they will burn a hole in your account than be the next big thing. Generally, we are not too fond of companies that are correlated to the price of commodities. However, Kirkland Lake Gold Ltd. (KL) is one of the few exceptions in the industry. We believe that its proven track record of operating efficiently combined with a favorable environment for gold will act as tailwinds for the stock price.

KL gold

What We Like About Kirkland

Kirkland is the most well-run mining company on the market. This has been reflected in the company's stock price in the last 5 years. The issue some investors might have with mining companies is that their value is dependent on the price of the commodity they're digging for. Therefore, when gold prices hit a slump, the miners follow. However, Kirkland seems to be an exception. Despite a stagnant gold market between 2016 and the end of 2018, Kirkland's stock price saw an increase of over 1000%.

This growth has been driven by the company's improving fundamentals. Over the years, Kirkland has reduced its all-in sustaining costs per ounce of gold while simultaneously increasing its production, therefore, minimizing the impact of the commodity price. Unsurprisingly, revenue and earnings grew consistently at an explosive pace year-over-year.

The company achieved this while maintaining a clean balance sheet. In a recent announcement, Kirkland mentioned that it had increased its cash position to over $848 million with no debt which gives it plenty of ammunition to explore new potential mines and expand its operations. In addition, the company continues to buy back shares and increase dividends thanks to its strong free cash flow.

Dividend Growth: KL started paying dividends in 2017 at $0.008/share quarterly, according to dividendchannel.com. The company has consistently been increasing

ChartData by YCharts

This article was written by

StockBros Research profile picture
Two bros that talk about stocks, mainly GARP (growth at a reasonable price) stocks, but we look for opportunities everywhere. We don't have a specified time horizon. We invest in a stock for as long as our thesis holds true, and get out when the facts change. In addition, we've developed market-beating algorithms with python that help us find attractive investment opportunities within our own portfolios.Website: www.stockbrosresearch.comTwitter: @StockBrosTrades

Disclosure: I am/we are long KL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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