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With 'Attractive Valuation,' Gold Producer 'Upgraded to Outperformer'

Streetwise Reports, Streetwise Reports
0 Comments| March 27, 2020

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What makes Kirkland Lake Gold a compelling investment and its areas of focus in 2020 are presented in a CIBC report.

Click to enlarge

In a March 18 research note, analyst Cosmos Chiu reported that CIBC upgraded Kirkland Lake Gold Inc. (KL:TSX; KL:NYSE) to an Outperformer rating from Neutral because "the protracted weakness in Kirkland Lake Gold's share price has created an attractive entry point."

Chiu highlighted the company's "key attributes that will attract the interest of generalist investors."

One is Kirkland Lake Gold's significant production at a low all-in sustaining cost. Together, the company's assets, located in mining friendly jurisdictions in Canada and Australia, produce about 1.5 million ounces of gold at an AISC of $825 per ounce.

Another is meaningful expected cash flow. CIBC projects that the Toronto-based miner will generate more than $700 million in free cash flow this year, an 8% yield.

Also, Kirkland Lake Gold should benefit from a weakening Canadian dollar and lower fuel prices. CIBC calculated that a 5% move in the U.S. to Canadian exchange rate equals a roughly 10% move in net asset value. Similarly, a 25% decrease in fuel prices translates to about a $25 per ounce drop in AISC at Detour Lake.

Chiu noted that for the remainder of this year, Kirkland Lake will continue to focus on operational execution at Detour Lake in Ontario and exploration at Fosterville in Australia.

For the latter, the company has budgeted $70–$80 million. About $15–$20 million of those are allocated for development of a 4.8 kilometer underground exploration drive to connect Robbin's Hill to the Fosterville's existing mine infrastructure. Other areas of interest at the Australian deposit are the Lower Phoenix system, Cygnet and Harrier.

Exploration results to date "support our longer-term assumption of exploration success driving a life-of-mine, 20 grams per ton head grade that keeps Fosterville running as a highly profitable, high-grade producer for another 10-plus years," Chiu commented.

CIBC has a CA$62 per share target price on Kirkland Lake, the stock of which is trading now at around CA$45.21 per share.

1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures from CIBC, Kirkland Lake Gold Ltd., Rating Change-Upgrade, March 18, 2020

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Kirkland Lake Gold Ltd. (KL.TO)
• 2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from these companies in the next 3 months: Kirkland Lake Gold Ltd.
• 7 CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own 1% or more of a class of equity securities issued by these companies: Kirkland Lake Gold Ltd.

For important disclosure footnotes for companies mentioned in this report that are covered by CIBC World Markets Inc., click here: Disclaimers & Disclosures.

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