Coverage Initiated on 'Low-Cost, High-Grade, Growing Gold Producer'

Au Report

Source: Streetwise Reports 01/04/2019

A ROTH Capital Partners report outlined the bullish thesis for this Canada-based mining company.

In a Jan. 3 research note, analyst Jake Sekelsky reported that ROTH Capital Partners initiated coverage on Kirkland Lake Gold Inc. (KL:TSX; KL:NYSE) with a Buy rating and a US$31 per share target price. The stock is currently trading at around US$25.76 per share.

“We view Kirkland Lake as a low cost, high grade, growing gold producer with a strong organic growth profile,” Sekelsky commented. “The company is well positioned to deliver strong cash flow while executing on its stated objective to grow production to approximately 1 million ounces (1 Moz) by 2021.”

Sekelsky highlighted that “the surface has just been scratched at Fosterville” and high-grade production at that mine should drive growth in 2019 and beyond. Kirkland Lake has expanded the resource there to 1.7 million ounces 23.1 grams per ton (23.1 g/t) grade gold since December 2016. Due to the company’s continued successful exploration at Fosterville, ROTH expects the grade in Q4/18 will have averaged about 30 g/t gold.

The analyst also pointed out that Macassa, Kirkland Lake’s other cornerstone asset, could hugely benefit from the planned sinking of the #4 shaft, which can hoist about 4,000 tons per day (4 Ktpd), including waste. The shaft should significantly boost throughput at the mine to nearly 2 Ktpd by 2023 and, ultimately, allow for the nearly doubling of production from the current 220–225 Moz per year rate.

Further, Sekelsky indicated Kirkland Lake’s other assets should contribute to growth as well.

Also noteworthy, he wrote, is that the company is more concerned with quality than quantity. “Although we expect production to increase from our 2018 production estimate of 669,610 ounces to nearly 1.2 Moz in 2023, we do not expect the approximate 75% increase in production to come at the expense of high operating margins,” Sekelsky stated.

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Source:: The Gold Report