Tuesday, 21 May 2013

Kirkland Lake Gold replaces reserves, increases resource

Kirkland Lake Gold Inc. (TSX:KGI) (AIM:KGI) has achieved success in both replacing proven and probable ounces, and in growing the resource base at its operations in Kirkland Lake, Ontario according to the company’s  annual gold reserve and resource estimates (as at December 31, 2012) released Tuesday.

Explorations for the past calendar year have concentrated on the expansion of the high grade South Mine Complex (SMC) discovered in 2005 on the properties previously held under a joint venture with Queenston Mining Inc., with the additional goal of replacing the ounces already mined in both the SMC and the historic Main Break. To this end the company completed 200,000 feet of underground exploration drilling and 183,000 feet of surface exploration drilling during calendar 2012, with an additional 124,000 feet of underground production drilling completed during this period as well.

For the SMC, the figures for the reserve category were recorded as 139, 000 ounces proven and 669, 000 probable as at December 31 2012, down slightly from the 119, 000 ounces and 697, 000 ounces recorded in the same categories on the same date a year before, a drop of only a single per cent year on year after the recovery of 50,848 ounces from the SMC.

Mine wide reserves showed a similarly minor decrease, of 1.3 per cent, after the recovery of a total of 86,250 ounces (35,402 ounces from Main Break) in the period from January to December 2012. The proven reserves of 530, 000 ounces recorded as at December 31, 2012 and the probable reserves of 924, 000 ounces reported for the same period for a total of 1. 454 million ounces (Moz) are slightly down on the 539, 000 proven ounces and 934, 000 probable ounces – a total of 1.473 Moz recorded a year earlier.

The figures posted for resources in the measured, indicated and inferred categories for the South Mine Complex were well up, coming in at more than 24 per cent higher than the corresponding figures reported as at December 31, 2011, due in part to inclusion of the Queenston portion of the resource base, but also attributable to considerable exploration success which added an additional 33.8 per cent to the indicated resource total and an additional 45.4 per cent to the inferred resource total on top of the ounces gained by the purchase of the joint venture property alone.

While the lion’s share of resource increases were derived from the SMC, the historical Main Break also contributed to the increased numbers with mine wide measured and indicated resources now standing at 1.871 Moz, an increase of 15 .3 per cent on the figure of 1.623 Moz posted for the year before, with the figure for inferred resources reported as 1.157Moz an increase of 15.2 per cent on the figure of 1.004 Moz recorded for the year before.

"The intention of this past year's exploration program was to replace the proven and probable reserves mined by the company and grow the measured and indicated resource categories, both of which were successful," said Kirkland Lake Gold president Brian Hinchcliffe.

"Our total reserve and resource base is close to our target; therefore, going forward we will focus on replacing ounces mined at elevated production levels and maintaining current mineral inventory. We have therefore reduced next year's exploration underground footage to 94,000 feet and surface exploration footage to 145,000 feet from 200,000 feet and 183,000 feet, respectively."

Certainly Ocean Equities Ltd. was upbeat about the results, with the specialist natural resources brokerage saying in an analyst note issued Tuesday that the results augured well for Kirkland Lake’s potential  as both a short and long term investment.

“The reserve and resource update shows that Kirkland did well last year to maintain its reserve inventory as well as bolt on additional ounces to its resource base through both acquisitions and exploration success. While the acquired ounces are a good immediate plus it is clear that the South Claims concessions have much more to offer the Company and this ties into the long term investment thesis for Kirkland.”

Shares in the company were trading up today on the TSX, gaining from an open of $3.53 to hit as high as $3.83 in intraday trading.

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