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VANCOUVER — The past two years have been a story of redemption for producer Kirkland Lake Gold (TSX: KGI; US-OTC: KGILF) at its Macassa and South Mine complex in the prolific the Southern Abitibi gold belt 46 km due southeast of Timmins, Ont. The company just wrapped up its third consecutive quarter of positive earnings and free cash flow, and looks poised to hit the upper end of its annual production guidance.
On March 11 Kirkland reported that it sold 39,700 oz. of gold last quarter at an average realized price of US$1,371 per oz., which resulted in cash flow from operations of $23.7 million. Over the past nine months the company has cranked out around 162,000 oz. of gold at all-in sustaining cash costs of US$1,289 per oz., which marks a material improvement over the 131,000 oz. it produced in 2014 at all-in costs of US$2,054 per oz.
The main driver for Kirkland has been higher grades encountered at the South Mine Complex (SMC), which has also resulted in improved throughput rates at the Macassa mill.
Average production rates last quarter were around 934 tonnes per day, which marks a 3% quarter-on-quarter increase. The good news for Kirkland is that it managed a further improvement in January, when throughput averaged 1,107 tonnes per day resulting in the delivery of around 34,500 tonnes of ore to the mill.
The increase was attributed to better-than-anticipated worker productivity and higher stope availability throughout the mine due to improved transitioning in the mining cycle from ore production to paste filling back to ore production cycles. Head grades averaged 15.1 grams gold per tonne, which represents a 9% increase over the previous quarter. Roughly 60% of quarterly tonnes and 67% of the ounces were generated from the SMC.
The SMC has been labeled an entirely new mineralized system in the Kirkland Lake mining camp that is characterized by generally shallow-dipping, structurally-controlled zones of finely disseminated pyrite, visible gold and tellurides. The SMC stands in sharp contrast to the steeply-dipping quartz vein hosted gold of the Main and ’04 Break zones that put Kirkland Lake on the map.
“The positive change in our operating cost is driven by improving head grades and cost reduction strategies that we continue to implement and reinforce within our operation,” noted vice-president operations Chris Stewart during a conference call. “We expect the head grade will continue to increase [this year]. We currently have three stopes in production at the [SMC], and expect a fourth stop to come online by the end of April.”
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