Kirkland Lake Gold (TSE:KGI) (LON:KGI) said Monday that poor weather, which led to road closures, affected both revenue and inventory accounts and increased net loss in its third quarter, but daily hoisting rates in excess of 1,800 tons per day were achieved since the company's new service cage went into operation at the end of the latest period.
The company said that the increased capacity will support the planned development of new stopes in the higher-grade areas of its Macassa gold mine in Ontario.
For the quarter that ended January 31, cash flows generated from operating activities were $1.98 million, compared to $10.4 million in the previous quarter and $20.07 million a year earlier.
Revenues stood at $29.5 million, down from $37.1 million on a sequential basis and $43.8 million a year earlier.
The company produced 73,678 tons of ore at a head grade of 0.32 ounces of gold per ton (opt) and a gold recovery rate of 95.66 per cent in the third quarter, to produce 22,261 ounces of gold.
It sold 17,340 ounces of gold as a result of a delay in shipment of the final gold bars poured, totaling some 4,271 ounces.
At the quarter's end, the service cage went into operation, which Kirkland said will free the main production hoist to increase the hoisting of both ore and waste, and to bolster the slinging activities required to bring heavy equipment into the mine.
This will work to reduce the development shortfall in the higher-grade South Mine Complex, and to bring more ore mining workplaces on line, the company added.
"With this in operation, hoisting capacity was expected to increase from 1,000 tons per day to 1,800 tons per day. Based on February trials this capacity has been achieved," said chairman Harry Dobson.
Indeed, Dobson noted that daily hoisting rates in excess of 1,800 tons per day - up to 2,160 tons per day in one day - were achieved on several days during the month. The average hoisting rate during February was 1,300 tons per day of ore and waste, which is expected to increase steadily going forward.
"Significant progress has also been made towards reducing the backlog of ore and waste waiting to be hoisted, towards reducing the backlog in material waiting to go underground and in slinging heavy equipment into the mine," he continued.
Looking ahead, Kirkland said it expects to sell slightly more than 90,000 ounces this fiscal year, which is toward the lower end of its revised guidance range. This projection assumes an increase in ore grade and ore tonnages over the remainder of this fiscal year, as expected higher grade ore comes on line.
As of the end of February, production was tracking plan very closely, the company said, adding that work on its 2014 budget for the fiscal year beginning May 1, 2013 is well underway, and is based on selling between 150,000 to 180,000 ounces.
The target of its expansion project remains, to realize an average production rate of 2,200 tons per day, it said.
Kirkland noted that it will delay the replacement of the 10-ton skips in the existing shaft conveyance arrangement until its fiscal first quarter of 2014. The new drive for the production hoist will also be activated in the same quarter.
This will allow for more focus on underground work required to bring higher grade workplaces on line in its fourth quarter, Kirkland said, adding that hoisting capacity beyond 1,800 tons per day is not required until the second quarter of fiscal 2014.
In the meantime, as part of its expansion project, the company said that the new ball mill is currently being assembled in the new mill building, in an effort to increase milling capacity from 1,450 tons per day to 2,200 tons per day. The project is on track to be completed in the summer, with the excess capacity not required until its third quarter of 2014.
Kirkland said that its overall project budget to complete the infrastructure upgrades is $95.0 million, of which $79.5 million had been spent by the end of January.
In its fiscal third quarter, Kirkland posted a net loss of $5.7 million or eight cents per share, compared to net loss of $0.8 million or one cent per share in the second quarter and net income of $13.6 million or 20 cents per share a year earlier.
Net loss and comprehensive loss for the quarter was $9.7 million or 14 cents per share, compared to net income and comprehensive income of $9.5 million or 14 cents per share in the year-ago quarter.
Kirkland noted that it recorded a $4.0 million tax provision during the latest quarter, which contributed to the material difference between the reported net loss and comprehensive loss.
Operating costs were $288 per ton of ore and $954 per ounce of gold, compared with $360 per ton and $1,253 per ounce in the second quarter, and $291 per ton and $908 per ounce a year earlier.
After meeting all operating costs, spending $22.8 million on infrastructure and $4.1 million on exploration, total cash resources as at January 31 were $87.9 million.
Kirkland said that as at March 8, this figure had increased to $90.5 million.
Kirkland Lake is located in Ontario's Southern Abitibi gold belt and the gold mining company is based in the historic Kirkland Lake Gold camp, which has produced 22 million ounces of gold in its 100-year history.
Its project consists of the Macassa property and operating underground gold mine, 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.