Excerpted from Jay Tayor’s MiningStocks.com
Kirkland Lake Gold is by far the best up-and coming gold miner I am aware of. And Novo Resources CEO Dr. Quinton Hennigh, who knows Kirkland’s Chairman Eric Sprott as well as anyone in the mining industry, told me Eric won’t be satisfied until he makes Kirkland the preeminent gold mining company in the world. I think Sprott can actually achieve that goal, in part because like another successful executive named Rob McEwen who launched Goldcorp into its status as one of the largest gold mining companies in the world, Eric understands the product he produces and sells. Like McEwen, Eric understands that gold is money, which was a refrain Rob was constantly reminding his shareholders of when he was at the Goldcorp helm. If anything, as a strong supporter of the Gold Anti Trust Action Committee, Sprott understands gold even better than McEwen does. Whether or not that is true, Sprott is thinking very big and he is entering into various strategic investments that have the potential to launch Kirkland into the gold mining company big leagues in fairly short order from its current very profitable earnings base.
In 2017 Kirkland earned $132.4 million, or $0.64 per share, and its operating cash flow totaled $309.8 million on production of 596,405 ounces of gold. At the end of Q1 2018 the company earned another $53.8 million and increased its cash on its balance sheet to $275.3 million. Production is currently coming from three mines in Ontario and one in Australia. But the aggressive big picture acquisition and strategic investment strategy of Eric Sprott since he took the helm at Kirkland combined with strong operating performance of Kirkland is really the story.
The first bold move was to acquire Newmarket Gold in 2016 that brought the phenomenal Foster Mine in Australia. But under the radar are a couple of other moves Eric has made that I think can catapult this company to another level. Of course, subscribers to this letter are well aware that both Eric Sprott and Kirkland have invested a lot of money into Novo Resources. This past week, Novo’s shares rallied on the news that Kirkland acquired another 4 million shares of Novo. Previously it purchased 14 million shares for $56 million. Upon closing of its recent purchase, it will reportedly own 29,830,268 or roughly 18.86% of Novo.
Clearly, Eric Sprott, who has used Quinton Hennigh as a geological consultant, has considerable confidence and belief that Dr. Hennigh may well be into a Witwatersrand-like discovery. Bulk sample assays from Comet Well are expected to be reported by the end of this month. Stay tuned!
But Novo isn’t the only strategic project Sprott and Kirkland have in their sights. Both Sprott and Kirkland have made very sizeable investments in Bonterra, which is developing the Gladiator Gold Project in Quebec’s Urban-Barry Camp and they will soon be coming out with a high-grade underground gold resource that will be massively larger than the initial gold resource. Thinking strategically, Sprott and Kirkland also have made a sizeable investment in Metanor Resources, which is a very strategic decision for two reasons. First and most significant, Metanor’s operating mill is the only operating mill in the Urban-Barry Camp, which gives it a huge competitive advantage. In addition, Metanor is enjoying some very significant exploration success, as explained in my recommendation of Metanor in this issue.
See how these pieces might come together? In his quest to put together the premier gold mining company in the world, Sprott is thinking big and he is thinking strategically and he is shaping share structures in a way to merge some elephant-sized companies into something even more interesting.