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Kirkland Lake Gold Surface Drilling Turns Up Encouraging Results

Kirkland Lake Gold (TSE:KGI)(AIM:KGI) announced Tuesday surface drilling results from its ongoing diamond drilling exploration program that it says further validate and expand two previously discovered mineralized zones, with reported results of up to 16.75 ounces per ton (opt) gold over 0.8 feet on the Ontario property.

The Ontario-based gold miner's most recent phase of the surface exploration program was designed to follow up on several high grade intercepts associated with the Amalgamated Break, the site of only limited historic exploration and little historic drilling.

One hole returned 16.75 opt uncut over 1.0 foot of core length, or 0.8 feet true width. This intersection was only 117 feet below surface and contained significant visible gold, the company said in its statement. Another hole intersected Zone 2 and returned 4.68 opt uncut over 1.0 foot of core length, or 0.6 feet true width.

This most recent drill program is part of a much larger long-term exploration initiative, which ties in with Kirkland Lake Gold's corporate goal of creating a self sustaining and long lived intermediate gold mining area based in the historic Kirkland Lake Gold Camp.

Long-term plans call for the company to achieve this goal via increasing production capacity to 2,200 tons of ore per day in several stages, and by decreasing production costs via the economies of scale associated with that higher production capacity. Kirkland Gold is committed to maintaining a concurrent exploration program of significant size, with the aim of developing and maintaining a property wide reserve and resource base sufficient for a mine life of more than ten years.

"We are very pleased with the results to date of this surface exploration program and are excited about the potential to add a reserve and resource calculation on ounces close to surface," said Kirkland chairman Harry Dobson.

"The surface program will continue throughout the year as exploration continues both east and west from this area. It should be noted that none of the surface drilling results to date were included in our latest reserve and resource update."

In a note from Ocean Equities addressing the drilling campaign, the analyst noted that while underground mining has every certainty of being mainstay of Kirkland going forward, "there is great potential for Kirkland to delineate an open pittable resource along the Amalgamated Break fault, which could be the source of some very cheap mill feed for Kirkland in the mid-term."

The note cited the recent results as evidence of "some very interesting zones of bonanza grade gold in the area". "Infill drilling in the area will be required to demonstrate that these zones can be incorporated into a mineable ore body but grades in excess of 500 g/t gold can bear a relatively high strip ratio and still be profitable to mine."

The Ocean Equities report further makes note of the fact that the company has consolidated its position via taking control of the various joint venture concessions it had in the area from Queenston Mining (TSE:QMI). The broker wrote that the C$60 million purchase price paid in August last year to Queenston had every appearance of being justified based on the resource increase the company has already been able to achieve as well as these latest exploration results that show there is "a large amount of bonanza grade gold mineralisation less than 150m from surface", adding that this is only the start of contemporary exploration along the Amalgamated Break fault.

Ocean wrote that while the company was using the expansion phase to increase production capacity at Macassa, doing so also displayed the geological prospectivity of Kirkland's land package, thus demonstrating the strength of the company's long term investment approach.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.