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Kirkland Lake Gold Limited: Sparkling Q3 Performance (NYSE:KL)

Introduction

It is earnings season and we have just received the 3rd quarter financial results for Kirkland Lake Gold Limited (KL).

As you may already know, we became shareholders in KL due to the takeover of Detour Gold Corp. (OTCPK:DRGDF) on February 12, 2020. Soon after acquiring this stock the coronavirus problems hit the market and KL’s stock price fell accordingly. We took the view that the acquisition of Detour Gold Corp. was a good one and so decided to hang on and monitor the company’s performance rather than cut and run. And we are glad we did as the recovery is a pleasure to watch.

Today, we will take a quick look at how the company is performing.

Kirkland Lake Gold Limited Q3 Financial Results

The Q3 results as published on October 12, 2020, are excellent with the standouts being as follows:

Q3 2020 production totaled 339,584 ounces, an increase of 91,184 ounces or 37% from 248,400 ounces for the third quarter of 2019.

A 50% increase in the quarterly dividend, to US$0.1875 per share, effective the fourth quarter of 2020 dividend payment.

Also worthy of note is that a total of $141.9 million of cash was returned to shareholders during Q3. It is good to see a gold miner paying a dividend as dividends tend to be scarce or miserly at best in this sector of the market.

The company’s cash position increased 58% during Q3 2020 to $848 million as of September 30, 2020, with no debt.

The buildup of cash places the company in a strong position for expansion, either organically or via further acquisitions. If you believe as I do that we are in a bull market for gold with prices increasing considerably in the next few years, then it would make sense for KL to hit the acquisition trail aggressively and secure a quality pipeline of projects before other predators get the same idea and beat it to it.

The average price realized for gold was $1,907/Oz which is about $200/Oz more than the previous quarter. Given that it has already produced 1,000,218/Oz YTD and that guidance for the year targets between 1,350,000/Oz and 1,400,000/Oz, Q4 could deliver around 400,000/Oz. If the average price holds at say $1900/Oz, the company will generate a turnover of $760 million for the quarter which is an exciting prospect, assuming all goes well. If I allow my imagination to run and bear in mind that some analysts have gold trading close to $2500/Oz by the year-end, KL could generate a billion dollars (400,000/Oz at $2500/Oz) in Q4, a tantalizing thought.

Source Kirkland Lake Gold Limited

Financials

Kirkland Lake Gold trades on the NYSE under the ticker symbol of KL, and on the Toronto Stock Exchange under the symbol of KL and in Australia the symbol is KLA. Kirkland Lake Gold has a market capitalization of $14.10 billion, a 52-week trading range high of $57.69 and a low of $18.02. A P/E ratio of 17.56, an EPS of $2.93 with good liquidity of 1.8 million shares traded per day for those traders who wish to trade in and out of a stock frequently.

The Chart Of Kirkland Lake Gold Limited

As the chart below clearly shows, the last 12 months have been a white-knuckle ride for stockholders and KL was no exception. Also note the MACD has just formed a crossover at a low level which is a positive sign.

Conclusion

Forward guidance production target of 1,350,000/Oz–1,400,000/Oz is now expected to be achieved.

No debt and a strong cash balance in readiness to take advantage of new opportunities as and when they present themselves.

A well-managed company going from strength to strength.

My subscribers and I are long Kirkland Lake Gold Limited, and I still rate this stock as a good acquisition at today’s price.

Take good care.

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Disclosure: I am/we are long KL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: gold-prices.biz makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents our views and replicates trades that we are making but nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this letter. Options contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. Past performance is neither a guide nor guarantee of future success.

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