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Kirkland Lake Gold – Undervalued Gold Producer

Kirkland Lake Gold Ltd is a Canada-based gold mining, development, and exploration company with a diversified portfolio of exploration projects. The company's production profile includes the Macassa mine complex located in northeastern Ontario and the Fosterville gold mine located in the State of Victoria, Australia. Also, the company owns the Holt mine and the Detour mine. The company's mines and material mineral projects are located in Canada and Australia.

Kirkland Lake Gold Ltd is a Canada-based gold mining, development, and exploration company with a diversified portfolio of exploration projects. The company's production profile includes the Macassa mine complex located in northeastern Ontario and the Fosterville gold mine located in the State of Victoria, Australia. Also, the company owns the Holt mine and the Detour mine. The company's mines and material mineral projects are located in Canada and Australia.

KL and gold comparison Source: Patrik Mackovych. Tradingview.

According to the price of the primary metal that the company targets - gold, the stock should be traded a few percent higher. In the previous swing cycle, at a similar gold price, KL has recently traded 10-15% higher. This producer has a strong financial position, as it has only a minimum of liabilities vs. assets. We can say with a clear conscience that the situation is so intense that even if the price of gold fell below USD 1000 for a few months, we could say that it would not go bankrupt.

On the other hand, the company has AISC (all-in sustaining costs) at a low $ 790 / 1oz. Compared to the competition, this is a deficient number; many others and large producers have an AISC of 800-1000 $ / 1oz. Therefore, it can be said that it has a competitive advantage and a higher margin compared to other companies in the industry. The company has no debt, only a small portion of liabilities. It has a sufficiently high amount of cash, and the company invests in research and development. Compared to last year, the company increased production and, thanks to the price of gold, reported an increase in sales of 78%.

KL's earnings report in 2020 Source: KL's earnings report.

The balance sheet also looks very healthy. Current assets are almost double those of short-term liabilities, and total assets are more than three times the total liabilities.

Guidance

The 3-year outlook looks optimistic, although it provides less room for revenue growth. In any case, it should be recalled that the company is without significant short-term and long-term debt. This production amount represents a solid future free cash flow, which should be significantly reflected in the share price, but mainly depend on gold's price.

KL three year production plan Source: KL's presentation for investors.

Valuations

The company is constantly growing, although the outlook for the coming years shows much lower revenue growth than we saw in 2020. We expect that the company's asset component and its book value will continue to grow significantly, which should again be reflected in its shares. KL should also have enough cash for additional buybacks and dividend increases in the future. In 4Q / 2020, the dividend increased by $ 0.18, growing steadily every year. Kirkland Lake Gold repurchased 18,925,900 of its shares in 2020.

P/E: 11.10 P/B: 1.76 P/FCF: 12.02

KL fundamentals from gurufocus Source: Patrik Mackovych via gurufocus.

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...

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