Spotlight: Kirkland Lake Gold
Kirkland Lake Gold operates in Northern Ontario, Canada, one of the safest mining jurisdictions in the world. The Company mines one of the highest-grade ore bodies in the world at 0.44 opt (14 g/t) with massive exploration and growth potential in the immediate area.
Kirkland Lake’s mission statement is to produce gold in a safe, sustainable and profitable manner such that the Company generates a return on investment for its shareholders while providing benefits to all stakeholders with the goal of improving the lives of their employees and the residents within the communities that they operate. The Company remains true to this mission statement by considering safety, sustainability and profitability in every decision they make within the business each and every day.
Kirkland Lake operates with the core values of safety, trust, respect, equity, environmental, teamwork and social responsibility. “We want our employees to go home in the same condition as they came to work. Subsequently, safety is at the forefront of every decision we make while all meetings start with a safety talk. In the workplace we believe in trust through honesty, commitment and open dialogue and communication,” says Kirkland Lake’s CEO George Ogilvie.
“We respect everyone’s contribution no matter how small and regularly reward and acknowledge our employees when we see good results and the right behavior. More often than not it requires a team effort to get the best results. We also treat our people with dignity. All of these values are part of how I conduct myself as the CEO so that they can cascade down into the business. Environmental stewardship and sustainability is also a very important core value for us; which is highlighted in our main energy conservation program. We take our social responsibility very seriously and subsequently invest in the community and groups when the right opportunities present themselves.”
A concrete example of how these values are applied to their employees includes the Company’s improved management: “I think the management here is enjoying the new management style. I encourage collaboration amongst managers and staff, support and consider new ideas or suggestions on how we can improve. Now it's much more of a partnership and collaborative process where we determine the targets and hold ourselves accountable and responsible for our results towards our targets. And we're constantly monitoring, giving positive recognition and feedback when we're doing well, as well as addressing weaknesses through discussion and action planning.”
Among the many factors that help keep Kirkland Lake among the leaders in the mining industry is their dedication to continuous improvement. This includes raising cut-off grades and stopping the practice of mining incremental tonnage, which is mineralization not in any reserve and resource category, but previously was mined when encountered.
Something that is unique to the Kirkland Lake Gold Camp is their high reserve grade of 0.44 ounces per ton. “Prior to my appointment, mined grades were significantly below reserve grades. This was creating an adverse effect on costs and margin. Stopping this practice has increased our calendar year grade to 0.39 ounces per ton, a significant improvement over the 0.30 ounces per ton the Company was averaging prior to January 2014,” says Ogilvie.
The primary methods of achieving these particular results through continuous improvement include tighter dilution control, tighter scrutiny with onsite requests for capital (managers required to show IRR, payback and NPV’s and other justifications on capital requests), and aggressively looking at new ore sources on our existing land package to feed the mill and lower costs.
In addition, Ogilvie shared a particularly promising element regarding improved productivity through new equipment: "We're looking at productivity gains in the mine department. In some areas where we should be more productive, we ordered new electricity powered equipment from Atlas Copco. Typically, all the drilling is done with handheld drills, which operate through compressed air, which is very inefficient and not particularly effective...so once our new electric drills arrive we think in the second half of the calendar year we should see better productivity."
Kirkland Lake Gold Camp has been producing for a very impressive 100 years. One of the most recent releases from the company provided details regarding why we might be able to expect 100 more. According to the report, it included near-surface mineralization within 1,000 feet of surface of 152,000 oz. gold (104,000 oz. indicated and 48,000 oz. inferred category) at 0.35 opt grade.
“We believe this represents an expansion opportunity in the future; which could be mined cost effectively while the mill has excess capacity. Subsequently, one exploration drill is currently expanding the resource with a second doing in-fill drilling with the hope of having a mineable reserve in 12 months with plans to mine the orebody at that time. All of this could be completed with minimal capex and could be undertaken quickly once given the green light due to the near surface proximity.”
Next Phase of Development
The strategy for Kirkland is to return the mine to producing at its historical grade averages of 0.4 – 0.44 ounces per ton. The Company also plans to lower unit costs through scale and efficiencies and return to generating free cash flow. Once this is achieved the company will look to further increases output through self-funded exploration and development of other sources of ore from their current property position. “The Company’s share count of 70 million shares in issue, 83 million fully diluted permits that once the company’s production is steady state and generating significant free cash flow significant return on investment would be seen by shareholders,” says Ogilvie.
With its new business plan in place, the Company has a strong focus on higher grade. The Company expects to return to breakeven and profitability in the next several quarters. Once profitability has been returned any future uplift in the gold price will result in a corresponding uplift in free cash flow, meaning greater return on investment for shareholders. All signs point to Kirkland Lake being a solid investment.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”