Kirkland Lake to become 1.5Moz producer with Detour buy

Kirkland Lake Gold is set to acquire Canada’s Detour Gold in a deal worth around $C4.9 billion ($5.4 billion).

The acquisition will bolster Kirkland Lake into a producer of 1.5 million ounces of gold a year, an increase on its ambitions to deliver one million ounces by the end of 2019.

Kirkland Lake also expects to deliver free cash flow of nearly $US700 million ($1.03 billion) from its Australian and Canadian assets this year.

Its Fosterville mine in Australia and Macassa mine in Canada have already achieved record production, driving the company’s output 41 per cent higher to 694,873 ounces as of this month compared with the same period last year.

Fosterville and Macassa are expected to easily achieve their 2019 full-year guidance of 240,000–250,000 ounces and 570,000–610,000 ounces respectively.

The proposed acquisition of Detour will add 15.4 million ounces to Kirkland Lake’s mineral reserve base and extends its reserve by eight years.

Detour’s land position covers 1040 square kilometres along the northern-most sections of the Abitibi Greenstone Belt, spanning from Ontario to Quebec.

Kirkland Lake chief executive Tony Makuch said the acquisition was an excellent fit for the company as it had already transformed the Macassa and Fosterville mines into high-quality assets that generated industry-leading earnings and free cash flow.

“The addition of the Detour Lake mine provides an opportunity to add a third cornerstone asset that is located in our back yard in northern Ontario,” Makuch said.

“Detour Lake will provide the pro forma company with a 20-plus year mine life which provides unparalleled optionality and excellent growth potential for the benefit of all shareholders.

“The management team at Detour Gold has done an exceptional job in making improvements and building momentum at the mine.”

Kirkland Lake offered a ratio of 0.4343 of its shares for each of Detour’s. Existing Kirkland Lake shareholders will own around 73 per cent of Detour, with the latter’s shareholders holding the remaining 27 per cent.

Once the transaction is completed, Kirkland Lake will continue to optimise its current operations and evaluate expansion opportunities at Detour Lake.

Kirkland Lake plans to conduct extensive drilling within the Detour land position. This will be a key component of Kirkland Lake’s exploration program going forward.

Detour chief executive Mick McMullen said the transaction recognised the improvements the company had made to re-engineer its operations and business practices.

“Our significant mineral resource base, exploration potential, and long-life production profile are a great addition to the Kirkland Lake Gold portfolio, and we are excited that we can share in the growth opportunities that exist going forward,” McMullen said.

The transaction is expected to close in January 2020.

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