What happened
Extending their 70% climb in 2018, shares of Kirkland Lake Gold (KL) have soared 65% through the first six months of 2019, according to data from S&P Global Market Intelligence.
In addition to posting a glittering earnings report for 2018, Kirkland Lake excited investors' hopes by forecasting a strong performance in 2019. But those weren't the only catalysts for the stock's rise for the first half of the year. A bullish outlook from Wall Street and the upward movement in the price of gold also spurred investors to act.
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So what
Thanks in part to record gold production in the fourth quarter, Kirkland Gold crushed expectations and reported 2018 gold production of 723,700 ounces -- 8% higher than the guidance of 670,000 and 21% higher than what it reported in 2017. But that wasn't the only way in which the company glittered last year; Kirkland Lake also exceeded expectations regarding its cost profile, reporting 2018 all-in sustaining costs (AISC) of $685 per gold ounce, a 16% reduction compared to the previous year. The cash flow statement also provided investors with cause for celebration: Kirkland Lake reported free cash flow of $249.5 million -- a 40% increase over the $178 million it generated in 2017.
While Kirkland Lake shone brightly in 2018, the company anticipates an even more lustrous 2019 than it had originally expected. In mid-February, management provided upwardly revised 2019 guidance, which included annual gold production of 920,000 ounces to one million ounces, a notable increase over the original estimate of 740,000 ounces to 800,000 ounces. Management, moreover, anticipates AISC to be lower than the original forecast. Whereas 2019 AISC per gold ounce was forecast to be $630 to $680, Kirkland Lake now expects AISC per gold ounce to fall between $520 and $560.
Wall Street's approval provided investors with additional reasons to pick up shares. In January, Roth Capital initiated coverage on Kirkland Lake with a buy rating and a $31 price target -- at that time shares were trading around $26 -- according to TheFly.com. About three months later, investors found additional support for the stock in the form of an upgrade to outperform from sector perform thanks to Scotiabank.
Lastly, no discussion of the rise in Kirkland Lake's stock would be complete without also acknowledging the 10.2% rise in the market price of the yellow stuff, since there is a high correlation between the prices of mining stocks and the commodities in which they deal.
Now what
The strong performance of Kirkland Lake's stock is unsurprising considering the company's glittering performance in 2018 and management's belief that the road through 2019 is also paved in yellow bricks. While shares have soared over the past year and a half, the company's anticipated growth and debt-free balance sheet suggest that this is one of the more intriguing options for gold-minded investors.
