Kirkland Lake Gold completes hoisting increase; ore production to increase quarterly
Kirkland Lake Gold Inc. is an operating and exploration gold company located in Kirkland Lake, Ontario, in the Southern Abitibi gold belt. In 2001, Kirkland Lake Gold acquired 13,000 acres of five contiguous formerly producing gold mines, which had historically produced 21 million ounces of gold grading 15.1 grams per ton (0.44 ounces per ton) primarily from the Main/’04 Break system. The current focus is on expanding gold production from the Main/’04 Break and a new discovery area, the South Mine Complex (SMC).
When the camp was bought in 2002 by founders Harry Dobson and Brian Hinchcliffe, the $5-million purchase price included a significant amount of infrastructure, including a deep four-compartment shaft. Taking advantage of an empty compartment in this shaft, Kirkland Lake Gold achieved a significant milestone in 2013 by more than doubling its hoisting capacity with the installation of personnel cages, and replacing the 10-ton skips with larger 12.5-ton skips. Prior to the completion of this project, just three compartments were in operation and had to move people, materials, equipment, and rock. As a result, hoisting rock was limited to just eight hours per day, 13 skips per hour, which translated to 1,000 tons per day hoisting capacity. The dedicated personnel cage enabled rock hoisting to move to 14 hours per day, which increased hoisting capacity to 1,800 tons per day in the interim. The installation of the larger skips further increased total capacity to 2,300 tons per day. A record hoisting day of 2,800 tons per day was achieved in the summer of 2013. Kirkland Lake Gold is also working to improve the speeds within the two production hoists for a total hoisting capacity of 3,200 tons per day, expected next year.
Kirkland Lake’s production profile is already benefiting from the hoisting capacity increase. Daily ore tonnages for the six months since the personnel cage installation have ranged from 1,000 to 1,063 tons per day, up from the 400 to 900 tons per day realized in past years.
In addition to the ore production increase, the upgraded hoist reaps benefits across the board in terms of mine efficiency and productivity. Kirkland Lake Gold can now accelerate development of stopes in the higher-grade SMC, move equipment without interruption to production activities, and move shift crews into the mine in one hour, versus two.
The hoisting project was part of a three-phase, five-year expansion project the company commenced in January 2009, with the ultimate goal being to increase annual production rates to over 200,000 ounces and lower its operating costs. The first phase completed successfully, on time and budget in summer 2010 and increased ore production to 700 to 900 tons per day. As a result, gold production during the Kirkland Lake Gold’s fiscal years 2011 and 2012 were 81,860 ounces and 100,275 ounces, respectively. Kirkland Lake Gold turned a net profit those years of $20.1 million in 2011 and $42.3 million 2012, and reinvested it toward the expansion capital program. Kirkland Lake Gold’s last fiscal year (2013) was concurrent with the hoisting project, which resulted in 91,518 ounces produced. Production was impacted by shutdowns necessary to complete the hoisting project, which led to fewer ounces for that fiscal year. Kirkland Lake Gold’s last planned shutdown of the hoist for expansion work was completed earlier this year.
The major project of the second phase of expansion was the hoisting project; now that it is completed, Kirkland Lake Gold expects to reach its Phase 2 production rates of 1,400 to 1,600 tons per day by the third quarter of its current fiscal year 2014 (December 2013, January 2014). With most of the expansion programs completed, 2014 is poised to be a pivotal year for Kirkland Lake Gold. Ore production will ratchet up each quarter over the next 10 to 12 months to reach the ultimate Phase 3 production capacity of 2,200 tons per day. Once economies-of-scale are realized, combined with labour-productivity improvements and increased mine efficiencies, operating costs are expected to fall to less than $250 per ton. Additional capital savings to Kirkland Lake Gold come in the form of completing the expansion capital spend. Of the $95 million required to reach the 2,200 tons per day rate, $89 million has been spent. Going forward, capital spending will decrease substantially. At current gold prices, Kirkland Lake Gold expects to be free cash-flow positive within the first six months of 2014.
As of December 31st, 2012, the reserves and resources on the South Mine Complex include 1,541,000 tons at a grade of 0.52 ounces of gold per ton (opt) for 808,000 ounces in the proven and probable reserve category; 1,458,000 tons at a grade of 0.66 opt for 967,000 ounces in the measured and indicated resource category, with an additional 1,223,000 tons at a grade of 0.67 opt for 824,000 ounces.
Mine-wide, including the South Mine Complex, the proven and probable reserves increase to 3,230,000 tons at a grade of 0.45 opt for 1,454,000 ounces; measured and indicated resources increase to 3,813,000 tons at 0.49 opt for 1,871,000 ounces, with an inferred resource of 2,238,000 tons at a grade of 0.52 opt for 1,157,000 ounces.
Current exploration plans include extending the South Mine Complex to depth and to the east utilizing electric drills on the Macassa 5,300-foot level. An aggressive surface exploration program was initiated one year ago, aimed at defining near-surface mineralization in areas which had seen little exploration in the past.