***Updated with latest comments from broker Ocean Equities***
Gold miner Kirkland Lake Gold (TSE:KGI)(AIM:KGI) says its production results so far this year have come in slightly ahead of its planned forecast to sell between 90,000 to 110,000 ounces of gold in fiscal 2013.
For the three months to the end of January, the company said Monday 73,678 tons of ore were produced at its Macassa gold mine in Ontario, at a head grade of 0.32 ounces per ton and a gold recovery rate of 95.66% - to produce 22,261 ounces of gold.
It sold 17,389 ounces during the quarter, with the gap reflecting road closures due to an ice storm that delayed the last pour of the quarter from being delivered to the gold refinery, where it was to be sold. The company said the additional ounces will remain in inventory until they will be sold in the fourth quarter.
For its fiscal year thus far, 214,678 tons of ore have been produced at the mine, for 60,015 ounces of gold, and 59,648 ounces sold.
The overall production results, Kirkland said, have come in slightly ahead of its plan to meet its sale guidance for this year, with plans to increase output in the fourth quarter.
The expected boost comes on the heels of the company's announcement last week that it has completed its service cage project at the Macassa gold mine, which is going to give it the ability to take production from 1,000 tonnes per day to 3,000 tonnes per day over the next 12 months.
Broker Ocean Equities issued a positive note on the gold miner this morning, saying that bringing the service cage into operation will allow Kirkland to clear a backlog of development work and improve access to the higher grade ore areas of production levels at the mine.
In its statement Monday, Kirkland said head grade last month at the mine "improved considerably" to 0.39 ounces per ton, with the company working on the development of additional high grade ore mining areas in order to sustain these grades.
The new service cage is expected to help in these efforts, the company added.
"Rightly the company is focussing on development of more of the high grade ore areas of the South Mine Complex to bring production rates up, highlighting the importance of the recent commissioning of the service cage into operation," said Ocean Equities in its note.
"While the recent announcements regarding commissioning of the service cage and improved production rates are positive, it is critical that Kirkland meets its revised production guidance targets.
"Our model suggests that the lower end of the production guidance is within reach for Kirkland as long as the steady progress demonstrated in today's announcement can be maintained," the broker noted.
The gold mining company is indeed expanding fast. With a staff of nearly 1,000 already, the company says it is looking for another 250 people to hire this year as it builds up production at its Ontario properties.
In a radio interview last week with Kirkland Lake's local radio station, following a presentation to the community's town council, CEO Brian Hinchcliffe said the company is going to need an extra 250 people to round out its work force to approx 1,200 to 1,250 people directly, plus contractors.
With a highly skilled workforce, a newly completed service cage and cutting edge technology, Hinchcliffe said the company's focus is expansion, with the aim of bringing costs down to remain a competitive producer no matter what the gold price is.
"We are aiming to raise our mining rate, from 800 to 900 tpd to 2,200 tpd rate and the mill will be increased so that it has the same capacity as well," he said in the interview.
Kirkland Lake Gold owns the Macassa property and operating underground gold mine, as well as four contiguous gold properties known as the Lake Shore, Wright-Hargreaves, Teck-Hughes and Kirkland Minerals properties and their respective, formerly producing, underground gold mines - collectively called the South Mine Complex - as well as a mill and processing facility.
Last year, the company added to its portfolio when it completed an acquisition of Queenston Mining Inc.'s (TSE:QMI) 50-per-cent interest in seven joint venture properties in the Kirkland Lake camp for just $60 million.
"We feel that it is going to add another 2 million ounces to our 4 million ounces in reserves and resources," Hinchcliffe said last week.
"With some exploration success, we are targeting to have 6 million ounces in all categories a couple of years from now, and that would support some 200,000 ounce-plus production annually for 15 to 20 years."
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