Gold closed at $1,323.85 on the London Bullion Market on March 29. The precious metal is up $11.8 per troy ounce or plus 0.9% year-to-date. Compared to the first quarter of 2017, the bullion climbed nearly $110 an ounce or 9% on average.
Gold Futures are also trading higher than a year ago. The contracts are up $106.03 or 8.6% to an average of $1,337.32 per troy ounce in the first quarter of 2018 from an average of $1,231.29 per troy ounce in the comparable quarter of 2017.
Because of the existence of certain macroeconomic factors, which are positive to the commodity, and a low U.S. dollar, gold analysts are optimistic for the next three quarters of 2018, as well.
That is despite an increase of 1.50% to 1.75% in the Fed’s rates of March 21, which represents the first monetary squeeze of Jerome Powell’s tenure.
With such preconditions, investors may want to gain exposures to the metal through investments in those producers that are traded in the U.S. stock markets and that show the highest profitability at operations. One of these gold stocks, which is worth considering, is Kirkland Lake Gold (KL, Financial). The market has recognized that.
Look at the below graphic powered by GuruFocus: The North American gold producer and explorer with assets in Canada and in Australia has outperformed the Van Eck Vectors Gold Miners ETF (GDX) by an amazing 113% for the 52-weeks through April 2. Kirkland Lake Gold posted a 108% gain while the gold-backed exchange-traded fund lost 5%. The current share price of Kirkland Lake Gold is $15.61 on the New York Stock Exchange.
Kirkland Lake Gold has underground operations at Macassa Mine, Holt Mine, Taylor Mine in Ontario, as well as mining activities at the Fosterville Mine in Victoria and Cosmo Mine in the Northern Territory.
Kirkland Lake Gold beat the industry in terms of EBITDA margin at nearly 47%. According to GuruFocus, the industry median is 25% over the trailing 12 months.
The company is also engaged in the development of mineral properties that it acquires. As of Dec. 31, Kirkland Lake Gold has approximately 3.42 million ounces of gold in proven and probable reserves.
The company closed 2017 with a gold production of 596,405 ounces, a 90% increase from the prior fiscal, at an all-in sustain cost of $812 per ounce of metal sold. The AISC also improved from 2016 with a 13% rate and was better than expected.
Kirkland Lake Gold also posted growth in the cash flow generated from operations ($296.8 million; +64.4% year over year) and free cash flow ($164.98 million; +53.5% from full fiscal 2016).
KL data by GuruFocus.com
During 2017, the company invested $48.4 million in exploration activities, up $32.6 million from full fiscal 2016. Those were successful with the identification of high-grade extended zones at Macassa, Fosterville and Cosmo, and new mineralization at Taylor.
The financial position of the company is solid with $231.6 million in cash on hand and securities and with zero debt.
GuruFocus assigns Kirkland Lake Gold a financial strength rating of 8 out of a total of 10.
The stock is trading its book value at 2.84 times per common share towards an industry median of 2.06. Its EV-to-Ebitda ratio is at 8.83 times versus an industry median of 9.90.
The stock has a market capitalization of $3.26 billion and Kirkland Lake Gold is currently reporting a volume of 210.94 million shares outstanding. The portion of institutional ownership in the stock of the gold producer is 37.44% while insiders hold 0%.
The Van Eck Associates Corp. is the top institutional holder, says GuruFocus, with an 11.44% of total shares outstanding. That figure is as of Dec. 30, 2017.
(Disclosure: I have no positions in any security mentioned in this article.)
