How smaller Canadian gold miners are thriving despite today’s gloomy price environment – by Peter Koven (National Post – September 19, 2015)

The National Post is Canada’s second largest national paper.

KIRKLAND LAKE, ONT. – Deep underground in Kirkland Lake, 300 kilometres north of Sudbury, it is hard to think about the rich veins of gold near at hand. The heat and humidity overpower everything else.

Crews are currently working 5,400 to 5,600 feet below surface, making it one of Canada’s deepest gold mines. And in this part of the world and at these depths, a first-time visitor would find the temperature suffocating.

Work crews start dripping with sweat almost as soon as they step out from the shaft underground to begin their shift. Mining this far down is technically challenging and not for the faint of heart. But more than 100 years after the first shaft was sunk in this sturdy Northern Ontario community, it looks as attractive as ever — even if it is surrounded by an environment of gloomy gold prices.

The Kirkland Lake operation, known as Macassa, is one of the world’s richest gold mines by any measure — the data service IntelligenceMine ranks it second overall. The mine’s owner, Kirkland Lake Gold Inc., likes to say that of the world’s 10 highest-grade operations, this is the only significant one that isn’t owned by a major company. Some mines are profitable with a reserve grade of one or two grams of gold per tonne of ore; at Macassa, it is over 19 grams.

This is the kind of high-quality operation that was built to withstand even the worst bear market in gold. Yet until recently, there were real fears that Kirkland Lake Gold was never going to make serious money. The company was bleeding cash from this operation in 2012 and 2013, and that was when gold was above US$1,500 an ounce. If investors knew at the time that the precious metal was going to plunge to US$1,100, they may have viewed this company as a lost cause.

But Kirkland Lake Gold righted itself and is now thriving amid a much weaker gold price. And it isn’t alone. Other small and medium-sized Canadian gold producers in the region, such as Detour Gold Corp., Lake Shore Gold Corp., Claude Resources Inc. and Richmont Mines Inc., have staged impressive turnarounds after being left for dead by many investors two years ago.

They have benefited from the weak Canadian dollar, of course, but have also made major operational improvements. They had to re-align their businesses to be successful in a low-price environment, and they have quieted a lot of doubters by doing just that.

These companies didn’t turn things around through ruthless cost cuts or by starving their operations of capital, as so many others in the industry have done. Instead, they raised money where necessary and invested it wisely. It shows there is a roadmap to success in the current gold market that involves more than hacking and slashing.

For the rest of this article, click here: http://business.financialpost.com/news/mining/how-smaller-canadian-gold-miners-are-thriving-despite-todays-gloomy-price-environment

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