Monday, 24 September 2012

Dundee, National Bank keep ratings unchanged on Kirkland Lake Gold

Two major capital markets firms have kept their ratings unchanged on Kirkland Lake Gold (TSE:KGI)(AIM:KGI) after the company recently posted first-quarter earnings.

Last week, the company said first-quarter revenues declined as it was impacted by production challenges, but the Ontario-focused gold producer maintained its output guidance for the year. 

For the three months that ended in July, Kirkland's Macassa mine in Ontario produced 70,201 tons of ore at a head grade of 0.26 ounces of gold per ton. 

A gold recovery rate of 95.2 per cent gave the company 17,396 ounces of gold in the latest quarter, with Kirkland selling a total of 19,964 ounces in the period, versus 24,178 ounces a year earlier. 

In a note, Dundee Securities' head of research Ron Stewart said: "The results were mixed given the combination of weaker than expected production and the announcement that the company's hoist expansion had been delayed yet again."

Dundee has a "Buy" rating and $16 price target on Kirkland Lake.

In a separate note, National Bank Financial kept its "Outperform" rating and $23 price target unchanged, as analyst Paolo Lostritto noted: "Grades were 22 per cent below our expectations as the company added more low-grade stopes to the mine sequence, which could be backfilled with waste rock, bypassing some higher grade stopes in the South Mine Complex. 

"This allowed additional development work to be completed, avoiding material handling bottleneck of the current shaft configuration. We note that this is not an issue with the reserve grade and that the higher grade stopes bypassed this quarter are expected to be mined at a later date."

Kirlkand Lake Gold is currently amongst National Bank's top picks in the junior mining space.

"We believe that KGI’s management and prospective land package should allow it to achieve its projected run-rate likely causing KGI’s shares to re-rate towards the intermediate producer level as it demonstrates its growth potential...We believe a dividend is possible over the next 18 months," National Bank's Lostritto said.

The bullish tone was also present in the Dundee Securities note: "With production expected to begin rising next quarter, we believe patient investors are likely to be rewarded with time," adding that 
the second quarter "should demonstrate a significant improvement over the first with production estimated at around 24,000 ounces".

National Bank analysts are planning a site visit later this quarter to refine estimates and confirm its increasingly bullish stance onKirkland Lake Gold.

Kirkland Lake Gold is an operating and exploration gold mining company focused exclusively on advancing and optimizing the Macassa Mine, in the Southern Abitibi gold province at Kirkland Lake, Ontario. 

The company's goal is to expand the Macassa mine's production to 250,000-300,000 ounces per year of profitable gold production by the end of fiscal 2013.

No comments:

Post a Comment