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Click to edit Master title style Click to edit Master Click to edit Master text styles text styles Second level Second level ACQUISITION OF Third level Third level ST ANDREW GOLDFIELDS Fourth level Fourth level
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November 17, 2015
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Today’s announcement is available from each respective Company’s website Kirkland Lake Gold – www.klgold.com St Andrew Goldfields – www.sasgoldmines.com
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This presentation contains forward-looking statements and forward-looking information (collectively, “forward-looking information”) within the meaning of United States and Canadian securities laws, respectively. The use of any of the words "expect", "potential", "target", "anticipate", "continue", "estimate", "objective", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information. More particularly and without limitation, this presentation contains forward-looking information concerning: the anticipated benefits of the Transaction to Kirkland Lake, St Andrew and their respective shareholders, the timing and anticipated receipt of required regulatory, court, and shareholder approvals for the Transaction; the ability of Kirkland Lake and St Andrew to satisfy the other conditions to, and to complete, the Transaction as proposed; the anticipated timing of the mailing of the information circular regarding the Transaction, the closing of the Transaction, 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 and exploration of 120 kilometres of strike length situated along the St Andrew Porcupine-Destor Fault Zone. In respect of the forward-looking information concerning the anticipated completion of the proposed Transaction and the anticipated timing thereof, Kirkland Lake and St Andrew have provided them in reliance on certain assumptions that they believe 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 their respective Annual Information Forms and Technical Reports referred to herein and therein. Since forward-looking information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risk that the Transaction may not close when planned or at all or on the terms and conditions set forth in the arrangement agreement; the failure to obtain the necessary shareholder, Court, regulatory and other third party approvals required in order to proceed with the transaction; the synergies expected from the Transaction not being realized; business integration risks; operational risks in development, exploration and production for precious metals; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; uncertainties inherent to feasibility and other economic studies; health, safety and environmental risks; gold price and other commodity price and exchange rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; ability to access sufficient capital from internal and external sources; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other risks and factors that could affect the operations or financial results of Kirkland Lake and St Andrew are included in reports on file with applicable securities regulatory authorities, including but not limited to, Kirkland Lake’s Annual Information Form for the fiscal year ended April 30, 2015 which may be accessed on Kirkland Lake’s SEDAR profile and St Andrew’s Annual Information Form for the fiscal year ended December 31, 2014 which may be accessed on St Andrew’s SEDAR profile at www.sedar.com. Management has included the above summary of assumptions and risks related to forward looking information provided in this presentation in order to provide shareholders with a more complete perspective on the proposed transaction and such information may not be appropriate for other purposes. Actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward looking information will transpire or occur, or if any of them do so, what benefits may be derived therefrom and accordingly, readers are cautioned not to place undue reliance on the forward looking information. The forward-looking information contained in this presentation are made as of the date hereof and neither Kirkland Lake nor St Andrew undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events, or results or otherwise, other than as required by applicable securities laws.
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Kirkland Lake Gold Inc. St Andrew Goldfields Ltd. George Ogilvie, P.Eng President & CEO Duncan Middlemiss, P.Eng President & CEO Perry Ing, CPA-CA, CPA (Ill), CFA Chief Financial Officer Keyvan Salehi, P.Eng, MBA Vice President, Corporate Development & Technical Services Jennifer Wagner, LL.B. Corporate Legal Counsel Ben Au, CA Chief Financial Officer, Vice President, Finance & Administration
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Ontario Focused Intermediate Gold Producer
The combined entity will be an 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 from both companies 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 Consolidation Opportunities
Combined entity will have stronger market positioning and increased access to capital Well positioned to execute on future consolidation opportunities
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Proposed Transaction
Business combination of Kirkland Lake Gold Inc. and St Andrew Goldfields Ltd. Total equity value of approximately C$178mm1 Pro forma ownership: 71% Kirkland Lake Gold / 29% St Andrew Goldfields1
Consideration
0.0906 of a Kirkland Lake common share, representing consideration of C$0.47 per St Andrew common share1 46% premium based on 20-day volume weighted average prices for both companies and a 25% premium to the St Andrew closing price on November 16, 2015
Conditions
66 2/3% St Andrew shareholder vote 50.1% Kirkland Lake shareholder vote Customary regulatory and court approvals
Other Terms
35% of St Andrew shares outstanding have entered into support agreements to vote in favour of the transaction One St Andrew Director to join Kirkland Lake’s Board of Directors Standard reciprocal non-solicitation clauses with a fiduciary out in respect of a Superior Proposal Five full business day right to match provision for Kirkland Lake Reciprocal break fee of C$7.1mm
Proposed Timing
Mailing of meeting materials as soon as practical Shareholder meetings in January 2016 Expected closing by late January 2016
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Accretive Transaction
Immediately accretive to Kirkland Lake shareholders on net asset value, production and operating cash flow, on a per share basis
Asset Diversification
Adds three producing gold mines in a proven and mining friendly jurisdiction
Exploration Potential
Combined land positions in Timmins and Kirkland Lake gold camps, two historically prolific and underexplored camps, close to existing mine infrastructure
Total Resources
Over 50% increase in proven & probable gold reserves to 2.3Moz Au and over 100% increase in measured & indicated gold reserves
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Significant Premium
Offer represents a 46% premium based on the 20-day VWAP for each company and a 25% premium to the November 16, 2015 closing price
Significant Pro Forma Ownership
St Andrew shareholders will represent 29% ownership in a Canadian intermediate gold producer
Enhanced Market Presence
Exposure to attractive pool of investors, greater trading liquidity and significantly increased analyst coverage
Access to Enhanced Cash Flows and Financial Liquidity
Combined company will boast a strong balance sheet with aggregate cash and cash equivalents of over C$100mm and robust future cash flows
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Pro Forma TSX Share Price1 C$/share $5.23 $0.38 Basic Shares Outstanding1 mm 80.7 368.3 114.7 FDITM Shares Outstanding2 mm 83.5 375.4 117.6 FDITM Market Capitalization2 C$mm $436.9 $178.0 $615.0 Cash and Cash Equivalents2 C$mm $88.5 $24.8 $113.3 Debt3 C$mm $124.3 $6.5 $130.9 Enterprise Value C$mm $472.8 $159.8 $632.6
based on transaction offer price.
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Pro Forma LTM Avg. Daily Trading Value C$mm $3.0 $0.1 $3.1 Analyst Coverage # 14 1 15 2P Reserves
1,463,000 833,331 2,296,331 Measured & Indicated Resources
2,047,000 2,668,000 4,715,000 2015 Production
152,629 105,000 257,629 AISC US$/oz $956 $934 $947
based on mid-range of 2015 guidance.
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St Andrew Goldfields is a junior gold producer with a portfolio of operating assets in the Timmins Mining District SAS controls a 120km stretch of exploration ground along the Porcupine-Destor Fault Zone Current operations include the Holt, Holloway, and Taylor Mines Largest Shareholders: the Abramson Family, Trapeze Asset Management
Corporate Overview YTD 2015 Highlights
Taylor advanced to commercial production in Q4 2015, according to schedule FY2015 production guidance raised to 100-110koz Au Continued exploration programs ‒ Holt Deep Exploration (Holt): South Western Extension of Zone 4 at depth of 1,000-1,200m ‒ Smoke Deep Zone (Holloway): Open at depth plunging to the east, looking to add resources to extend LOM
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Macassa Taylor Holt Holloway
Kirkland Lake Gold
SY 2015E Production 90 – 110 koz Au Q1 SY 2015 AISC US$956/oz Au Property Wide (includes Macassa Mine Complex) Measured and Indicated 3,510koz Au Inferred 1,777koz Au
Together, Kirkland Lake and St Andrew have a large asset base in Ontario with four producing mines and two centrally located mills
St Andrew Goldfields
2015E Production 100-110koz Au YTD Q3 2015 AISC US$934/oz Au Holt (Producing) Measured and Indicated 1,548koz Au Inferred 1,181oz Au Holloway (Producing) Measured and Indicated 157koz Au Inferred 389koz Au Taylor (Producing) Measured and Indicated 512koz Au Inferred 257koz Au Hislop (Care and Maintenance) Measured and Indicated 173koz Au Inferred 92koz Au Aquarius (Exploration) Measured and Indicated 926koz Au Other – Clavos, Ludgate, Canamax (Exploration) Measured and Indicated 185koz Au Inferred 233koz Au
Measured and Indicated Resources inclusive of Reserves.
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$1,507 $1,037 $615 $488 $471 $423 $406 $233 $140 New Gold Alamos Pro Forma Lake Shore Primero Kirkland Lake Klondex Richmont St Andrew 25,740 17,376 7,011 3,510 3,501 3,174 2,987 2,114 863 #N/A Alamos Pro Forma Kirkland Lake St Andrew Primero Lake Shore Richmont Klondex
Market Capitalization (C$mm) Combined entity will be positioned as a new intermediate gold producer with a significant resource base in two world class gold camps in Ontario Measured and Indicated Resources (koz Au)2
(1)
New Gold
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451 361 291 274 175 160 157 131 89 Alamos New Gold Pro Forma Primero Lake Shore Kirkland Lake Klondex St Andrew Richmont $722 $703 $669 $661 $611 $591 $590 $562 $276 St Andrew Alamos Richmont Pro Forma Kirkland Lake Lake Shore Primero Klondex New Gold
Significant Production at Attractive Cash Costs
2016E Production (koz)1 2016E Cash Cost per oz (US$)1 St Andrew will add significant annual gold production
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New Ontario-focused intermediate gold producer Profitable with strong cash flow generation from four mines and two mills Strong AISC profile and long-term, sustainable production platform Robust balance sheet with over C$100mm in cash Leverage to Canadian dollar gold price Significant exploration upside in prolific Abitibi greenstone belt gold camps Proven management team and board of directors
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Resources are inclusive of Reserves
MINERAL RESERVES - As at December 31, 2014 MINERAL RESOURCES - As at December 31, 2014
Project Proven Probable Proven + Probable Tonnes Grade Ounces Au Tonnes Grade Ounces Au Tonnes Grade Ounces Au ('000) (g/t Au) ('000 oz) ('000) (g/t Au) ('000 oz) ('000) (g/t Au) ('000 oz) Holt 1,452 4.26 199 2,414 5.05 392 3,866 4.75 591 Holloway 233 5.35 40 233 5.35 40 Hislop 280 5.16 46 280 5.16 46 Taylor 774 6.27 156 774 6.27 156 Total 1,452 4.26 199 3,701 5.33 634 5,153 5.03 833 Project Measured Indicated Measured + Indicated Inferred Tonnes Grade Ounces Au Tonnes Grade Ounces Au Tonnes Grade Ounces Au Tonnes Grade Ounces Au ('000) (g/t Au) ('000 oz) ('000) (g/t Au) ('000 oz) ('000) (g/t Au) ('000 oz) ('000) (g/t Au) ('000 oz) Holt 3,702 3.97 473 3,861 3.90 485 7,563 3.94 957 7,866 4.67 1,181 Holloway 310 4.71 47 482 4.54 70 792 4.61 117 2,479 4.88 389 Hislop 983 4.01 127 983 4.01 127 690 4.16 92 Taylor 2,323 4.76 356 2,323 4.76 356 1,951 4.10 257 Aquarius 22,300 1.29 926 22,300 1.29 926 9 0.79 Clavos 503 4.81 78 503 4.81 78 318 4.73 48 Ludgate 522 4.06 68 522 4.06 68 1,396 3.60 162 Canamax 240 5.09 39 240 5.09 39 170 4.26 23 Total 4,012 4.03 520 31,214 2.14 2,149 35,227 2.36 2,668 14,879 4.5 2,154
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approximately 45km northeast of Kirkland Lake
fault known as the Destor-Porcupine Deformation Zone, 1km apart from each other
Reserves
2017
3,000 tpd capacity
Holloway-Holt (100%) Taylor (100%)
7 14 21 28 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Production (Koz Au)
Quarterly Gold Production Breakdown
Holt Holloway Hislop Taylor
53km east of Timmins
2015
Hislop (100%)
Mill
2010
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Resources are exclusive of Reserves
Grade Grade
Au
Grade Grade
Au
Grade Grade
Au
g/t
(000's)
g/t
(000's)
g/t
(000's) '04 & Main Break
545 0.43 494 14.7 236 583 0.48 529 16.5 278 1,128 0.46 1023 15.8 514
South Mine Complex
346 0.51 314 17.5 177 1,120 0.69 1016 23.7 773 1,467 0.65 1,331 22.3 949 Macassa Mine Complex 891 0.46 808 15.8 412 1,703 0.62 1,545 21.3 1,051 2,595 0.56 2,354 19.2 1,463 Proven
Tonnes (000's) Tons (000's) Tonnes (000's)
Zone Probable Proven & Probable
Tons (000's) Tonnes (000's)
Tons (000's)
MINERAL RESERVES - As at December 31, 2014
Note: Columns may not add due to rounding. Macassa Mine Complex reserves the ’04 & Main Break and the SMC.
MINERAL RESOURCES - As at December 31, 2014
Grade Grade
Au
g/t
(000's) 04 & Main Break
485 0.41 440 14.1 201
SMC
1,358 0.65 1,232 22.3 876
Near Surface Target
100 0.42 91 14.4 42 Property Wide 2,114 0.56 1,918 19.2 1,777 Zone
Tons (000's) Tonnes (000's)
Inferred Note: Columns may not add due to rounding. Property Wide resources include the ’04 & Main Break, SMC, Near Surface Target, as well as peripheral resources blocks (such as the Lakeshore Ramp).
Grade Grade
Au
Grade Grade
Au
Grade Grade
Au
g/t
(000's)
g/t
(000's)
g/t
(000's) 04 & Main Break
1063 0.4 964 13.7 430 1148 0.42 1041 14.4 483 2,211 0.41 2006 14.1 913
SMC
33 0.37 30 12.7 12 1377 0.67 1249 23.0 917 1,410 0.66 1279 22.6 929
Near Surface Target
0.34 299 11.7 112 330 0.34 299 11.7 112 Property Wide 1106 0.4 1003 13.7 447 3,096 0.52 2,809 17.8 1,599 4,202 0.49 3,812 16.8 2,047 Measured
Tons (000's) Tonnes (000's)
Zone Indicated Measured & Indicated
Tons (000's) Tonnes (000's)
Tons (000's) Tonnes (000's)
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Eric Sprott 2 Non-executive Chairman Barry Cooper, B.Sc., MBA 1 Non-executive Director Pamela Klessig, P.Geo Non-executive Director Barry Olson, M.Sc. 1 Non-executive Director Jeffrey Parr, CA, BA, MBA 1 Non-executive Director Dawn Whittaker, LLB Non-executive Director George Ogilvie, P.Eng. Director, President & Chief Executive Officer Perry Ing, CPA-CA, CPA (Ill),CFA 3 Chief Financial Officer Chris Stewart, P.Eng. Vice President, 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
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CASH C$88.5 million 3 DEBT C$119.5 million
convertible debentures (principal amount owing)
KGI.DB: 6% coupon/ $15.00 strike C$57.4MM 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 4
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$5.23 (Nov 16) Major Shareholders (~50%) 1 Resolute Funds (~10%) Eric Sprott (~9%) Columbia Wanger Asset Management LLC (~8%) Equinox Partners (~7%) Van Eck Associates Corporation (~5%) Harry Dobson (~4%) Sprott Asset Management (~4%) ABC Funds (~2%)
CAPITAL STRUCTURE 1
ISSUED SHARES 80,704,130 Stock Options 3,984,800 FULLY DILUTED 84,688,930 MARKET CAP ~450 Million 2
1 As at October 1, 2015; 2 As at October 31, 2015
3 As of October 31, 2015; 4 See press release dated April 1, 2015 for details on the NCIB
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5% 56% (7)% (20%) 0% 20% 40% 60% 80% 100% 1-Jan-15 1-Feb-15 1-Mar-15 1-Apr-15 1-May-15 1-Jun-15 1-Jul-15 1-Aug-15 1-Sep-15 1-Oct-15 1-Nov-15 Kirkland Lake Spot Gold GDXJ
Rebased to CAD
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The Kirkland Lake gold camp has been in production for over 100 years One of the highest grade gold camps in the world Almost 25 Moz’s has been produced to date, from seven mines KGI owns five former producing high grade mines with historical production of ~22 Moz’s of gold Average head grade of 0.44
Currently only mining and exploration on one of these past producers
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Firm Analyst
GMP Oliver Turner Dundee Securities Mathew O’Keefe CIBC World Markets Cosmos Chiu Macquarie Capital Markets Michael Siperco BMO Capital Markets Brian Quast M Partners Derek Macpherson Mirabaud Securities Richard Morgan
Firm Analyst
Scotiabank Craig Johnston PI Financial Philip Ker Pareto Securities John McClintock National Bank Financial Raj Ray Clarus Securities Jamie Spratt Investec Bank Hunter Hillcoat Very Independent Research John Tumazos
KIRKLAND LAKE GOLD IS FOLLOWED BY THE ANALYSTS LISTED ABOVE. THIS LIST IS PROVIDED FOR INFORMATION PURPOSES ONLY AND IS SUBJECT TO CHANGE AS COVERAGE IS ADDED OR DROPPED BY A FIRM. OPINIONS, ESTIMATES OR FORECASTS REGARDING KIRKLAND LAKE GOLD'S PERFORMANCE THAT ARE MADE BY THESE ANALYSTS ARE THEIRS ALONE AND DO NOT REPRESENT THE OPINIONS, ESTIMATES OR FORECASTS OF KIRKLAND LAKE GOLD OR ITS MANAGEMENT. KIRKLAND LAKE GOLD DOES NOT IMPLY ITS ENDORSEMENT OF, OR CONCURRENCE WITH, SUCH INFORMATION, CONCLUSIONS OR RECOMMENDATIONS AND TAKES NO RESPONSIBILITY FOR MONITORING, SUPPLEMENTING OR CORRECTING ANY INFORMATION OR FORECASTS PROVIDED BY THE ANALYSTS.
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("NI 43-101"). All of the scientific and technical disclosure contained in this presentation regarding the Kirkland Lake project was reviewed and approved by Mr. Ogilvie, Mr. Stewart and
considered independent.
the scientific and technical disclosure contained in this presentation regarding the St Andrew properties was reviewed and approved by Mr. Middlemiss, Mr. Pelletier and Mr. Cater. As the Chief Executive Officer, VP and General Manager of Operations and VP Exploration of St Andrew, respectively, neither Mr. Middlemiss, Mr. Pelletier or Mr. Cater are considered independent. Notes for Kirkland Lake Reserves and Resources as at December 31, 2014: The reserves and resources have been classified according to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Reserves: Definition and Guidelines (December 2005). 1. The reserves and resources are estimated using the polygonal method. 2. Resources do not include reserves. 3. All intersections are calculated to a 6.0 foot minimum horizontal mining width for structures dipping at greater than 45 degrees. The minimum mining height for structures dipping less than 45 degrees is 9.0 feet. 4. Dilution is added to reserves at varying rates depending on the mining method, and the width of the ore. The average dilution of the reserves at December 31, 2014, is 27% at 0.02
anywhere between 10-50%. 5. All higher grades are cut to 3.50 opt. Based on a statistical analysis completed by Scott Wilson Roscoe Postle Associates Inc. in 2007, the Company has implemented various higher grade cutting factors for four zones in the South Mine Complex. These four zones are the New South Zone (7.20 opt), Lower D North (9.30 opt), Lower D North Footwall (4.80 opt), and the #7 and #7 HW Zones (6.40 opt). Cut-off grades of 0.22 opt and 0.18 opt are used for reserve and resource calculations respectively, depending on the location, and economics of the block. Generally, a cut-off of 0.22 opt is required on a whole-block basis to achieve profitability and reserve classification. It is possible to have sub-blocks within an ore reserve block that assay less than any cut-off which have been incorporated for mining or geotechnical reasons. Ore blocks that grade between 0.18 opt and the cut-
Postle and Associates in October 2014, suggest that the cutting factor for mineralization on the Amalgamated Trend be set at 2.50 opt. This grade capping was implemented by the Company and incorporated in the estimates for 2014. 6. The area of influence of the proven and measured categories are 30 feet from development chip samples, probable and indicated categories are 50 feet of radius from a known sample point (drill holes) and inferred is another 50 feet of influence (between 50 – 100 feet). 7. A 94.2% tonnage recovery is used. Continuity of the veins appears very good. 8. The assumptions used include CAD$1,350.00 (US$1,200) per ounce of gold. 9. The Company is not aware of any environmental, permitting, legal, title, taxation, socio-political, marketing or other issue that may materially affect its estimate of mineral resources. 10. Mineral resources which are not mineral reserves do not have demonstrated economic viability.
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Suzette N Ramcharan, CPIR Director of Investor Relations +1-647-361-0200 Mobile: +1-647-284-5315 sramcharan@klgold.com
TSX:KGI