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TSX:KGI 1 klgold.com
TSX:KGI
TD Securities Mining Conference | January 27, 2016 Presenter: Perry Ing, Chief Financial Officer
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Cautionary Note Regarding Forward Looking Statements.
This presentation contains statements which constitute ”forward-looking statements”, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to the future business activities and operating performance of the Company. The words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the Company, are intended to identify such forward-looking statements. Forward-looking statements used in this Presentation include, but may not be limited to; statements regarding the Company’s combined production guidance for 2016, and guidance from the Macassa Mine Complex for the financial years ended 2017 and 2018; the ability to bring more higher grade stopes online from the 5400 level and access to the 5600 level and below, and the timing thereof; the exploration programs and the results and timing thereof, the integration of the East Timmins Operations resulting from the SAS acquisition, and the timing thereof. In respect of the forward-looking information concerning the anticipated completion of the proposed Transaction and the anticipated timing thereof, Kirkland Lake has provided them in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the time required to prepare and mail shareholder meeting materials, including the required information circular; the ability of the parties to receive, in a timely manner, the necessary regulatory, court, shareholder and other third party approvals; and the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Transaction. These dates may change for a number of reasons, including unforeseen delays in preparing meeting materials, inability to secure necessary shareholder, regulatory, court or other third party approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the Transaction. Accordingly, readers should not place undue reliance on the forward-looking information contained in this news release concerning these times. With respect to the forward looking information of Kirkland Lake and/or St Andrew, concerning the future gold production of Kirkland Lake and St Andrew, future cash costs of production, the gold resources and reserves of Kirkland Lake and St Andrew, and the development of the Kirkland Lake and St Andrew properties are subject to various key assumptions described in each party’s respective Annual Information Forms and Technical Reports referred to herein and as filed on the SEDAR profiles of both companies at www.sedar.com.
Investors are cautioned that forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made such as, without limitation, opinion, assumptions and estimates of management regarding the Company’s business, its ability to increase its production capacity and decrease its production cost. Such opinions, assumptions and estimates, are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors are discussed in length in the Company's annual Management's Discussion and Analysis and Annual Information Form for the year ended April 30, 2015. and the Company’s Management's Discussion and Analysis for the interim period ended October 31, 2015 filed with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements except as otherwise required by applicable law.
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Ontario Focused Intermediate Gold Producer
Ontario-focused intermediate producer expected to produce between 260 – 310 koz of gold in 2016 Improved diversification with production from four mines and two centrally located mills in Ontario’s southern Abitibi greenstone belt
Improved Financial Flexibility
Solid balance sheet with over C$100 million in cash Combination of strong future cash flows Ability to benefit from future operational and corporate synergies
Enhanced Market Profile
Two companies are covered by 15 research analysts collectively Enhanced trading liquidity and appeal to a larger shareholder base
Exploration Upside
Consolidation of large land holdings in the heart of two Ontario gold camps Proximity to existing mine infrastructure
Further Opportunities
Combined entity has a stronger market positioning and warrants a re-rating Leveraged to the Canadian dollar gold price
KGI and SAS Pro-Forma Highlights Include:
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Eric Sprott 2
Non-executive Chairman
Barry Cooper, B.Sc., MBA 1
Non-executive Director
Michael Churchill, MBA 4
Non-executive Director
Pamela Klessig, P.Geo
Non-executive Director
Barry Olson, M.Sc. 1
Non-executive Director
Jeffrey Parr, CPA-CA, BA, MBA 1
Non-executive Director
Dawn Whittaker, LLB
Non-executive Director
George Ogilvie, P.Eng George Ogilvie, P.Eng. President & Chief Executive Officer Perry Ing, CPA-CA, CPA (Ill), CFA 3 Chief Financial Officer Chris Stewart, P.Eng VP Operations Jennifer Wagner, LL.B. Corporate Legal Counsel Suzette N Ramcharan, CPIR Director, Investor Relations Kevin Fearn, BA, CHRP, CHRL Director, Human Resources
Board of Directors Senior Management
1 Appointed October 2014; 2 Appointed February 2015; 3 Appointed November 2015, 4 Appointed January 25, 2016
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East Timmins Properties
2015E Production 107 koz Au Q3 2015 AISC US$934/oz Au Holt Mill 3,000 tpd (75% utilized) Resources & Reserves* Holt Mine 591 kozs Holloway Mine 40 kozs Taylor Mine 156 kozs Total P&P (including Hislop Mine) 0.8 Mozs Measured & Indicated (Property Wide) 2.7 Mozs Inferred (Property Wide) 2.2 Mozs
Macassa Mine Complex
SY 2015E Production 103 koz Au Q2 SY2015 AISC US$989/oz Au Macassa Mill 2,000 tpd (50% utilized) Reserves & Resources* Total P&P Reserves (Macassa Mine Complex) 1.5 Mozs Measured & Indicated (Property Wide) 2.0 Mozs Inferred (Property Wide) 1.7 Mozs *Resources are exclusive of Reserves. See Company websites for NI 43-101 disclosure (www.kllgold.com; www.sasgoldmines.com)
Assets in close proximity within an 80km radius, accessed by provincial highways.
QUÉBEC
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CASH C$93.8 million 1 DEBT C$119 million 3
convertible debentures (principal amount owing)
KGI.DB: 6% coupon/ $15.00 strike C$56.9MM mature Jun/2017 KGI.DB.A: 7.5% coupon/ $13.70 strike C$62.1MM mature Dec/2017 NCIB allows KGI to purchase up to 10% of each issue within a 12 month period commencing April 3, 2015, and can be renewed annually 3
ROYALTY 2.5% NSR
Franco Nevada Corporation
Option to buyback 1% by October 31, 2016, at a cost of US$36MM less any money paid against the 1% 52 Week Performance 2 HIGH C$6.88 LOW C$2.79 Current Share Price C$4.66 (Jan 25) Major Shareholders (~50%) 2 Resolute Funds (~7%) Eric Sprott (~8%) Columbia Asset Management LLC (~5%) Equinox Partners (~4%) Van Eck Associates Corporation (~4%) Harry Dobson (~3%) Sprott Asset Management (~3%) Sentry Select (~3%)
CAPITAL STRUCTURE 2
ISSUED SHARES 114.3 million Stock Options ~5.5 million FULLY DILUTED ~119.8 million MARKET CAP ~533 million
1 As at December 31, 2015; 2 As at January 26, 2016
3 As of January 18, 2016, see press release dated April 1, 2015 for details on the NCIB
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SY15_Q2
(August – October)
Q3/2015
(July – September) Cash Cost Per Tonne
$345/tonne $122/tonne
Cash Operating Cost Per Ounce
US$635 US$687
All-In Sustaining Costs Per Ounce Sold (AISC)
US$989 US$901
Gold Sales (ounces)
34,606 23,621
Average Sales Price Per Ounce
US$1,110 US$1,122
Revenues
$61.7 MM $36.0 MM
Cash Flow from Operations
$14.9 MM $8.7 MM
Free Cash Flow
$4.1 MM
during the reporting period.
Measures such as cash cost per ton, AISC, and free cash flow.
KGI Standalone Financials SAS Standalone Financials CASH FLOW SALES COSTS
All Amounts in Canadian Dollars unless otherwise specified
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Select Group of Producing Assets with +1Moz’s in Reserves
Mine Operator Location Gold Grade Reserves Reserve Update g/t Au Date Macassa Mine Complex Kirkland Lake Gold Canada (Ontario) 19.2 1.5 Moz
Dec/2014
Turquoise Ridge Barrick USA (Nevada) 16.9 4.5 Moz
Dec/2014
Gosowong Newcrest Indonesia 12.0 1.2 Moz
Dec/2014
Moab Khotsong AngloGold Ashanti South Africa 10.0 6.1 Moz
Dec/2014
Mponeng AngloGold Ashanti South Africa 10.0 14.6 Moz
Dec/2014
Red Lake Goldcorp Canada 10.0 2.1 Moz
Dec/2014
Kupol/Dvoinoye Kinross Russia 8.5 2.1 Moz
Dec/2014
TauTona AngloGold Ashanti South Africa 8.0 1.4 Moz
Dec/2014
19.2 16.9 12.0 10.0 9.9 9.6 8.5 8.0 0.0 5.0 10.0 15.0 20.0 25.0
Macassa Mine Complex Turquoise Ridge Gosowong Red Lake Moab Khotsong Mponeng Kupol/Dvoinoye Tau Tona
Grade g/t Reserve Grades
Company Source – This is a select group of Companies that illustrate producing mines only with mineral reserves in excess of 1Moz’s (gold only, no equivalent Au ounces shown)
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Resources are Exclusive of Reserves
See Appendix for more disclosure on MRMR statement which is as of December 31, 2014.
Based on current level of reserves and a conservative 70% conversion of M&I resources (@ 200,000 oz p.a),
KGI has a 14 year mine life.
Property Wide SMC
Mineral Reserves (P&P) Includes the ’04/ Main Break and SMC
1.5 Moz’s 2.6M tons @ 0.56 opt (19.2 g/t ) 0.9 Moz’s 1.5M tons @ 0.65 opt (22.3 g/t)
Mineral Resources (M&I) Includes the ’04/ Main Break, SMC, Near Surface and other
2.0 Moz’s 4.2M tons @ 0.49 opt (16.8 g/t ) 0.9 Moz’s 1.4M tons @ 0.66 opt (22.6 g/t)
Mineral Resources (Inferred) Includes the ’04/ Main Break, SMC, Near Surface and other
1.7 Moz’s 2.1M tons @ 0.56 opt (19.2 g/t) 0.9 Moz’s 1.4M tons @ 0.65 opt (22.3 g/t)
Breakout of SMC only
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5025 Level P+P 28,000 Tons @ 0.48 oz/ton 14,000 Oz’s M+I 74,000 Tons @ 0.42 oz/ton 32,000 Oz’s 5300 Level P+P 561,000 Tons @ 0.47 oz/ton 261,000 Oz’s M+I 245,0000 Tons @ 0.43 oz/ton 107,000 Oz’s 5400 Level P+P 370,000 Tons @ 0.61 oz/ton 226,000 Oz’s M+I 174,000 Tons @ 0.42 oz/ton 72,000 Oz’s 5600 Level P+P 239,000 Tons @ 0.77 oz/ton 183,000 Oz’s M+I 186,000 Tons @ 0.63 oz/ton 117,000 Oz’s 5700 Level P+P 202,000 Tons @ 1.03 oz/ton 208,000 Oz’s M+I 164,000 Tons @ 0.91 oz/ton 96,000 Oz’s
Access from 5400L and 5600L allows delineation drilling of resources, especially below 5600L Remains Open at Depth and Across Strike OPEN
*Drawing not to scale
5800 to 6600 Level P+P 50,000 Tons @ 0.83 oz/ton 41,000 Oz’s M+I 551,000 Tons @ 0.91 oz/ton 499,000 Oz’s
OPEN OPEN
16.5 g/t 16.1 g/t 20.9 g/t 26.4 g/t 35.3 g/t 28.5 g/t
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100,000 150,000 200,000 250,000
14 15 SY15 16 17 18 Gold Ounces
Oz Recovered
Guidance
Linear (Oz Recovered)
April 30th Fiscal Year End Calendar Year End 8 Month Stub Year
The Stub Year (SY) 8 month period runs from May 1 – December 31, 2015. Recovered 102,597 ounces at a head grade of 0.42 opt (14.1 g/t), recoveries of 97.1% and achieved an average throughput of 1,016 tpd. 2016, 2017 and 2018 guidance based on stated head grade and average throughput of 1,130, 1,140 and 1,145 stpd respectively. 0.38/ 13.0 0.37/ 12.7 0.43/ 14.7 0.44/ 15.1 0.45/ 15.4 0.46/ 15.8
Guided Head Grades (OPT/ GPT)
0.33/ 11.3 0.43/ 14.7 0.42/ 14.4
Achieved (OPT/ GPT)
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Currently mining and exploring on one of the five mine targets. Current Underground and Surface Drilling Targets: Three main areas currently being explored from surface and underground. Regional Program: Regional exploration to test eastwards along strike.
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Holt Mine
Taylor Mine
Holloway Mine
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120 km strike length
Holt, Holloway, Taylor Producing Assets Hislop Care & Maintenance Ludgate, Aquarius Exploration Targets with existing resources Garrison Creek Exploration Target
Source: St Andrew website (www.sasgoldmines.com)
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Consolidated 2016 Production 260,000 – 310,000 ounces Cash Costs Per Ounce US$600-$690 All-In Sustaining Costs Per Ounce US$950
Stub Year 2015 YE Earnings March 10 Q1/2016 Consolidated Production April 11 Updated Guidance April (on or before April 15) Investor Day (Toronto) April (date to be confirmed) Q1/2016 Consolidated Earnings May 16
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Three new independent board members with diverse and credible experience Enhanced governance levels Operational improvements resulted in achieving production guidance Improved credibility and reputation New leadership to steer the Company in the right direction Eric Sprott appointed Chairman of the Board Rationalized business to return to profitability Positive earnings over past 6 quarters Generated free cash flow over the past 6 quarters Reduced costs resulted in increased cash position Successful bought deal financing to strengthen the balance sheet Raised $32.1 MM in February 2015 Delisted from the AIM market Additional cost and efficiency savings Change in financial reporting period and addition of AISC reporting metric Better visibility, inline with industry Relocated CFO position to Toronto head office Centralized management team Commenced regional exploration program to foster future organic growth Rebuilding a gold camp Assessing M&A to de-risk business and increase production in the near term Completed SAS acquisition and diversified operations
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Suzette N Ramcharan, CPIR Director of Investor Relations +1-647-361-0200 Mobile: +1-647-284-5315 sramcharan@klgold.com
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