Analyst Jake Sekelsky reported in a Jan. 17 research note the takeaways from Kirkland Lake Gold Inc.'s (KL:TSX; KL:NYSE) Investor Day, held the same day.
First, Sekelsky relayed, the company has a potential stock catalyst coming in the announcement of its updated reserves and resources toward the end of February. The new numbers should reflect "a significant increase in ounces and grade," he wrote.
Second, Kirkland Lake intends to continue focusing on exploration in Australia in 2019, spending $85–100 million to expand on its 2018 program. There is a possibility, Sekelsky noted, the company could discover "another Fosterville at Fosterville."
Third, Kirkland Lake's "Northern Territory assets could be a dark horse," Sekelsky commented. They include the Union Reefs mill, the Cosmo mine and the Maud Creek project. "We believe investors ascribe little value to the Northern Territory assets and believe these assets are generally underappreciated by the market." However, additional exploration efforts in the area are expected this year.
Finally, Sekelsky indicated, the #4 shaft currently being constructed at Macassa could "increase production to approximately 400,000 ounces per year while significantly lowering costs by 30–40%." It should also derisk the project, at which there currently is only one shaft. Completion of the second phase of the #4 shaft project is expected in 2023.
Sekelsky concluded that "the company is on track to deliver on its organic production growth objectives while establishing an increased reserve base in support of extended mine lives, particularly at Fosterville."
ROTH has a Buy recommendation and a US$31 per share target price on Kirkland Lake, whose share price now is about US$28.20.
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Disclosures from ROTH Capital Partners, Kirkland Lake, Company Note, January 17, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Kirkland Lake and as such, buys and sells from customers on a principal basis.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.
