Kirkland Lake Gold Ltd. (KL) is a gold mining company located in Canada and that operates three mines: one in Victoria, Australia, and two in Ontario, Canada, observes Doug Gerlach, editor of Small Cap Informer.
Kirkland has a strategic alliance agreement with Newmont Corporation (NEM) to assess regional exploration opportunities around properties in Ontario.
In early 2020, the company acquired Detour Lake in Ontario, Canada, one of world’s largest open-pit gold deposits with growth potential.
Investors were not keen on the purchase due to the higher costs of the Detour Lake operation compared to Kirkland Lake Gold's other operations, but management believes it has the skill and experience to reduce costs.
The mine does offer significant growth potential and results so far from Detour Lake have been favorable. Kirkland Lake Gold was known as Newmarket Gold before changing its name in December 2016.
In the last five quarters that the company has reported, revenues totaled $3.1 billion and EPS were $3.61, even after some softness in Q1 2021.
Revenues growth for the trailing twelve months as of Q2 2021 clocks in at 31.6%. For all of the company’s fundamental strength, investors have assigned the company a P/E ratio that is under 13.
For the full-year 2021, Kirkland Lake Gold expects AISC/ounce sold to be $790 - $810 and total production to be 1,350-1400 Kozs. We are maintaining our growth rate projection of 12.0% a year for both revenues and EPS over the next five years. This is in line with analysts’ expectations.
Kirkland Lake Gold’s stock currently trades at a P/E of 12.9, below its adjusted average P/E of 14.8. We expect the stock to reach a high P/E of 18 which equates to a high price of $98. On the downside, if the P/E falls to 9.5 and EPS stall at the TTM level of $3.08, a low price of $29 is indicated.
From the current price of $40 per share, this represents a 5.5-to-1 upside/downside ratio, and a potential 20.0% annual total return.
