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Kirkland Lake Gold Ltd: Maintaining
Growth Rate Projection – SmallCap Informer

Doug Gerlach, editor, SmallCap Informer newsletter began covering Kirkland Lake Gold (NYSE/TSX: KL) in his October 2020 issue when the stock was trading around $48 with a P/E of 16 and gold was selling around $1,888/oz.

Since then, gold has fallen to around $1,813/oz. at the end of July 2021, and KL shares closed July at $42.74. “But in the last five quarters that the company has reported, revenues totaled $3.1 billion and EPS were $3.61, even after some softness in Q1 2021. Revenues growth for the trailing twelve months as of Q2 2021 clocks in at 31.6%. For all of the company’s fundamental strength, investors have assigned the company a P/E ratio that is under 13.

There are certainly other factors to consider when analyzing gold mining stocks, but the mismatch between Kirkland Lake Gold’s current valuation and long-term prospects is not something we can ignore and are presenting the company once again. KL is among the highest total return prospects in SmallCap Informer’s coverage list. KL offers the opportunity to add to holdings or establish a new position.

About the Company

Kirkland Lake Gold Ltd. is a gold mining company located in Canada and that operates three mines: one in Victoria, Australia, and two in Ontario, Canada.

Kirkland Lake Gold has a strategic alliance agreement with Newmont Corporation to assess regional exploration opportunities around properties in Ontario.

In early 2020, the company acquired Detour Lake in Ontario, Canada, one of world’s largest open-pit gold deposits with growth potential. Investors were not keen on the purchase due to the higher costs of the Detour Lake operation compared to Kirkland Lake Gold's other operations, but management believes it has the skill and experience to reduce costs. The mine does offer significant growth potential and results so far from Detour Lake have been favorable. Kirkland Lake Gold was known as Newmarket Gold before changing its name in December 2016.

Growth Analysis

Since 2014, revenues at Kirkland Lake Gold have risen an average of 52.4% a year, while EPS growth has averaged 61.3% annually. (Note that the company reported a so-called stub year in 2015 as it changed its fiscal year reporting period, resulting in figures for an eight-month annual period.

In the second quarter ended June 30, 2021, Kirkland Lake Gold’s production of 379,195 oz. was better than guidance. All in sustaining costs (AISC) were $780/oz., below fiscal year guidance of $790-$810. The miner produced 379,195 oz. of gold in the quarter, up 15% from Q2 2020 and 25% from Q1 2021.

Total revenues in the quarter grew 14.1% to $662.7 million, while EPS increased 68.5% to $0.91. Though Q2 2020 offered a soft comparison due to the pandemic-induced slowdown in the quarter, this was still the single best quarterly EPS result in the company’s history.

For the full-year 2021, Kirkland Lake Gold expects AISC/ounce sold to be $790 - $810 and total production to be 1,350-1400 Kozs.

We are maintaining our growth rate projection of 12.0% a year for both revenues and EPS over the next five years. This is in line with analysts’ expectations.

Quality Analysis

Kirkland Lake Gold closed the second quarter with cash of $858.4 million and no debt. Many gold miners are capitalized with lots of debt, so this is a big advantage.

In fiscal 2020, Kirkland Lake Gold saw its pre-tax profit margin drop from 2019 as the company integrated the higher-cost operations at its recently acquired Detour Lake operation. This is still considerably better than most of its peers.

ROE is superior to its peer group though it also retreated a bit since 2019. The company’s dividend has been regularly increased since it was initiated in 2017.

Valuation Analysis

Kirkland Lake Gold’s stock currently trades at a P/E of 12.9, below its adjusted average P/E of 14.8. We expect the stock to reach a high P/E of 18 which equates to a high price of $98.

On the downside, if the P/E falls to 9.5 and EPS stall at the TTM level of $3.08, a low price of $29 is indicated.

From the current price of $40, this represents a 5.5-to-1 upside/downside ratio, and a potential 20.0% annual total return. The current indicated annual dividend is $0.75, representing a current yield of 1.9%.”

Kirkland Lake Gold Reports
Record Net Earnings in Q2 2021

[Ed. Note] Commenting on record net earnings in Q2 2021, Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold said: “We had an excellent quarter in Q2 2021 highlighted by record earnings, record quarterly production, strong revenue growth and significant increases in both operating and free cash flow. All three of our cornerstone assets increased production during Q2 2021, with Fosterville having a particularly successful quarter based largely on continued grade outperformance. Read Q2 Report. Click Here.

Editor’s Note: Small-Cap Informer presents profiles of high-quality small-cap stocks with superior track records – the kinds of companies that provide the best opportunities for investors to meet (or even beat) the overall market over the long term. To take advantage of the 50% off the regular online subscription price – a limited time offer, call 1-877-334-2582 or visit

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