Kirkland Lake Gold Ltd. [KL-TSX, NYSE; KLA-ASX] said December 11 that it has reached a share sale agreement with an affiliate of Arete Capital Partners Ltd. pursuant to which Arete will acquire all of the issued and outstanding shares of Stawell Gold Mines Ltd.
Stawell’s key asset is the Stawell Gold Mine in Victoria, Australia. The site is estimated to host about 132,000 ounces of proven and probable reserves, grading 1.5 g/t gold. The mine is not currently in production. Under the terms of the agreement, Kirkland Lake will receive US $6.25 million in cash and will retain a 2.5% net smelter royalty (NSR) on the Stawell mine.
“This transaction is consistent with our long term strategy to focus on our low-cost, high-grade core assets while simultaneously providing Kirkland Lake Gold with continued exposure through the NSR,’’ said Kirkland Lake President and CEO Tony Makuch.
“We believe the management team at Arete is well positioned to optimize the operational potential of Stawell in a sustainable manner to create value,’’ he said.
Closing of the transaction is expected to occur on or before December 22, 2017, and is subject to certain customary closing conditions. Kirkland Lake shares eased 5.6% or $0.005 to $16.915 in morning trading on Monday December 11.
Kirkland Lake is a mid-tier gold producer with 2017 target production of 580,000 to 595,000 ounces from four mines in Canada and Australia. The company’s key operations are the Macassa Mine in northeastern Ontario and the Fosterville Mine in the state of Victoria, Australia.
In its most recent financial results, Kirkland Lake said year to date production in the first nine months of 2017 was 429,822 ounces, more than double the 207,887 ounces produced in the same period in 2016.
The company’s Australian operations, mainly Fosterville, contributed 205,283 ounces in 2017.
Production from the Canadian operations totalled 224,539 ounces in 2017, an increase of 8% compared to the previous year. Kirkland Lakes all in sustaining costs averaged US $811 an ounce in the first nine months of 2017, a 14% improvement from the same period in 2016. That compares to the December 11 spot gold price of US $1,245.27 an ounce.