CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 2021 and 2020
1
KIRKLAND LAKE GOLD LTD.
Condensed Consolidated Interim Statements of Financial Position
(unaudited - stated in thousands of United States Dollars)
| As at | Note | March 31, 2021 | December 31, 2020 | ||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash & cash equivalents | $792,239 | $847,638 | |||||||||
| Accounts receivable | 9 | 37,021 | 18,674 | ||||||||
| Inventories | 10 | 160,053 | 149,203 | ||||||||
| Prepaid expenses | 17,219 | 16,667 | |||||||||
| Income tax receivable | 9,555 | 4,488 | |||||||||
| 1,016,087 | 1,036,670 | ||||||||||
| Non-current assets | |||||||||||
| Other long-term assets | 11 | 103,116 | 115,887 | ||||||||
| Mining interests and plant and equipment | 12 | 5,840,568 | 5,804,199 | ||||||||
| Intangible asset | 84,768 | 89,697 | |||||||||
| Deferred tax assets | 34,341 | 34,083 | |||||||||
| $7,078,880 | $7,080,536 | ||||||||||
| Liabilities | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable and accrued liabilities | $202,950 | $235,950 | |||||||||
| Dividends payable | 50,073 | 50,268 | |||||||||
| Share based liabilities | 13 | 10,126 | 25,745 | ||||||||
| Lease obligations | 6,909 | 6,896 | |||||||||
| Income tax payable | 124,062 | 141,513 | |||||||||
| Provisions | 14 | 59,715 | 71,976 | ||||||||
| 453,835 | 532,348 | ||||||||||
| Non-current liabilities | |||||||||||
| Share based liabilities | 13 | 3,068 | 8,618 | ||||||||
| Lease obligations | 19,193 | 19,275 | |||||||||
| Provisions | 14 | 176,897 | 164,807 | ||||||||
| Deferred proceeds | 77,575 | 77,575 | |||||||||
| Deferred tax liabilities | 1,222,220 | 1,192,982 | |||||||||
| $1,952,788 | $1,995,605 | ||||||||||
| Shareholders' equity | |||||||||||
| Share capital | 3,332,981 | 3,289,497 | |||||||||
| Reserves | 21,303 | 31,244 | |||||||||
| Accumulated other comprehensive income | 45,611 | 235,709 | |||||||||
| Retained earnings | 1,726,197 | 1,528,481 | |||||||||
| 5,126,092 | 5,084,931 | ||||||||||
| $7,078,880 | $7,080,536 | ||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements
2
KIRKLAND LAKE GOLD LTD.
Condensed Consolidated Interim Statements of Operations and Comprehensive Income
For the three months ended March 31, 2021 and March 31, 2020
(unaudited - Stated in thousands of United States Dollars, except per share amounts)
| Three months ended | Three months ended | ||||||||||
| Note | March 31, 2021 | March 31, 2020 | |||||||||
| Revenue | $551,846 | $554,738 | |||||||||
| Production costs | (170,081) | (161,592) | |||||||||
| Royalty expense | (18,394) | (21,249) | |||||||||
| Depletion and depreciation | 12 | (104,100) | (92,839) | ||||||||
| Earnings from mine operations | 259,271 | 279,058 | |||||||||
| Expenses | |||||||||||
| General and administrative | (12,343) | (12,562) | |||||||||
| Transaction costs | 4 | — | (33,838) | ||||||||
| Exploration | (5,486) | (5,931) | |||||||||
| Care and maintenance | (4,196) | (2,890) | |||||||||
| Rehabilitation costs | 14 | 760 | — | ||||||||
| Earnings from operations | 238,006 | 223,837 | |||||||||
| Other income (loss), net | 7 | (1,424) | 72,205 | ||||||||
| Finance items | |||||||||||
| Finance income | 8 | 247 | 2,596 | ||||||||
| Finance costs | 8 | (846) | (4,113) | ||||||||
| Earnings before income taxes | 235,983 | 294,525 | |||||||||
| Current income tax expense | (42,971) | (70,130) | |||||||||
| Deferred income tax expense | (31,819) | (21,517) | |||||||||
| Net earnings | 161,193 | 202,878 | |||||||||
| Other comprehensive income (loss) | |||||||||||
| Items that have been or may be subsequently reclassified to net earnings: | |||||||||||
| Exchange differences on translation of foreign operations | (13,491) | (368,409) | |||||||||
| Items that will not be subsequently reclassified to net earnings: | |||||||||||
| Changes in fair value of investments in equity securities, net of $722 tax recovery | 11 | (10,948) | (105,368) | ||||||||
| Total other comprehensive income (loss) | (24,439) | (473,777) | |||||||||
| Comprehensive income | $136,754 | ($270,899) | |||||||||
| Basic earnings per share | 15(c) | $0.60 | $0.79 | ||||||||
| Diluted earnings per share | 15(c) | $0.59 | $0.77 | ||||||||
| Weighted average number of common shares outstanding (in 000's) | |||||||||||
| Basic | 15(c) | 267,111 | 257,418 | ||||||||
| Diluted | 15(c) | 267,907 | 258,360 | ||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements
3
KIRKLAND LAKE GOLD LTD.
Condensed Consolidated Interim Statements of Cash Flows
For the years ended March 31, 2021 and March 31, 2020
(unaudited - stated in thousands of United States Dollars)
| Three months ended | Three months ended | ||||||||||
| Note | March 31, 2021 | March 31, 2020 | |||||||||
| Operating activities | |||||||||||
| Net earnings | $161,193 | $202,878 | |||||||||
| Adjustments for the following items: | |||||||||||
| Depletion and depreciation | 104,100 | 92,839 | |||||||||
| Share based payment expense | 13 | (1,150) | (3,263) | ||||||||
| Redeemed share based units | 13 | (20,196) | (31,907) | ||||||||
| Other loss (income), net | 978 | (70,668) | |||||||||
| Finance items, net | 599 | (838) | |||||||||
| Loss on derivatives | — | 2,355 | |||||||||
| Income tax expense | 74,790 | 91,647 | |||||||||
| Accretion on long-term debt | — | 298 | |||||||||
| Rehabilitation costs | (760) | — | |||||||||
| Cash reclamation expenditures | (5,918) | (880) | |||||||||
| Change in non-cash operating working capital | 16 | (41,758) | (12,216) | ||||||||
| Operating cash flows before interest and income taxes | 271,878 | 270,245 | |||||||||
| Interest received | 247 | 2,596 | |||||||||
| Income tax paid | (63,951) | (31,335) | |||||||||
| Net cash provided by operating activities | 208,174 | 241,506 | |||||||||
| Investing activities | |||||||||||
| Additions to mining interests | 12 | (58,786) | (71,981) | ||||||||
| Additions to plant and equipment | 12 | (106,689) | (38,656) | ||||||||
| Investments in equity securities | 11 | (1,569) | (3,203) | ||||||||
| Sale of investments in equity securities | 11 | 2,800 | — | ||||||||
| Other | 60 | 581 | |||||||||
| Cash and cash equivalents acquired in Detour acquisition | — | 173,916 | |||||||||
| Net cash used in investing activities | (164,184) | 60,657 | |||||||||
| Financing activities | |||||||||||
| Net credit facility repayment | — | (98,643) | |||||||||
| Unwinding of derivative liabilities | — | (30,259) | |||||||||
| Proceeds from exercise of stock options | 15(a) | 798 | 1,170 | ||||||||
| Interest paid | (290) | (1,048) | |||||||||
| Payment of lease obligations | (2,165) | (3,415) | |||||||||
| Share repurchases | 15(a) | (46,318) | (329,849) | ||||||||
| Payment of dividends | 15(a) | (50,268) | (12,577) | ||||||||
| Net cash used in financing activities | (98,243) | (474,621) | |||||||||
| Impact of foreign exchange on cash balances | (1,146) | (3,851) | |||||||||
| Change in cash | (55,399) | (176,309) | |||||||||
| Cash, beginning of year | 847,638 | 707,206 | |||||||||
| Cash, end of year | $792,239 | $530,897 | |||||||||
Supplemental cash flow information – Note 16
The accompanying notes are an integral part of the condensed consolidated interim financial statements
4
KIRKLAND LAKE GOLD LTD.
Condensed Consolidated Interim Statements of Changes in Equity
For the three months ended March 31, 2021 and March 31, 2020
(unaudited - stated in thousands of United States Dollars, except share information)
| Share Capital | Reserves | Accumulated other comprehensive income (loss) | Retained earnings | Shareholders' equity | ||||||||||||||||||||||
| Note | Shares (000s) | Amount | Share based payments and other reserves | Foreign currency translation | Investment revaluation | |||||||||||||||||||||
| Balance at December 31, 2019 | 209,625 | $886,309 | $28,843 | ($60,234) | $74,805 | $887,031 | $1,816,754 | |||||||||||||||||||
| Exercise of share options, including transfer from reserves | 15(a) | 72 | 1,319 | (149) | — | — | — | 1,170 | ||||||||||||||||||
| Reclassification of foreign currency translation | — | — | — | (7,378) | — | 7,378 | — | |||||||||||||||||||
| Acquisition of Detour Gold Corporation | 4 | 77,217 | 3,131,451 | 2,993 | — | — | — | 3,134,444 | ||||||||||||||||||
| Foreign currency translation | — | — | — | (361,031) | — | — | (361,031) | |||||||||||||||||||
| Change in fair value of investments in equity securities, net of $11,204 tax recovery | — | — | — | — | (105,368) | — | (105,368) | |||||||||||||||||||
| Dividends declared | 15(a) | — | — | — | — | — | (34,650) | (34,650) | ||||||||||||||||||
| Share repurchases | 15(a) | (9,714) | (329,849) | — | — | — | — | (329,849) | ||||||||||||||||||
| Net earnings | — | — | — | — | — | 202,878 | 202,878 | |||||||||||||||||||
| Balance at March 31, 2020 | 277,200 | 3,689,230 | 31,687 | (428,643) | (30,563) | 1,062,637 | 4,324,348 | |||||||||||||||||||
| Balance at December 31, 2020 | 268,098 | $3,289,497 | $31,244 | $176,126 | $59,583 | $1,528,481 | $5,084,931 | |||||||||||||||||||
| Effect of change in functional currency | 5 | — | 88,868 | (9,805) | (165,659) | — | 86,596 | — | ||||||||||||||||||
| Exercise of share options, including transfer from reserves | 15(a) | 32 | 934 | (136) | — | — | — | 798 | ||||||||||||||||||
| Foreign currency translation | — | — | — | (13,491) | — | — | (13,491) | |||||||||||||||||||
Change in fair value of investments in equity securities, net of $722 tax recovery | — | — | — | — | (10,948) | — | (10,948) | |||||||||||||||||||
| Dividends declared | 15(a) | — | — | — | — | — | (50,073) | (50,073) | ||||||||||||||||||
| Share repurchases | 15(a) | (1,074) | (46,318) | — | — | — | — | (46,318) | ||||||||||||||||||
| Net earnings | — | — | — | — | — | 161,193 | 161,193 | |||||||||||||||||||
| Balance at March 31, 2021 | 267,056 | $3,332,981 | $21,303 | ($3,024) | $48,635 | $1,726,197 | $5,126,092 | |||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements
5
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Kirkland Lake Gold Ltd. (individually, or collectively with its subsidiaries, as applicable, the "Company"), is a publicly listed entity incorporated in the province of Ontario, Canada. The Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange ("NYSE") under the symbol "KL" and the Australian Securities Exchange ("ASX") under the symbol “KLA”. The Company’s head office, principal address and records office are located at 200 Bay Street, Suite 2800, Toronto, Ontario, Canada, M5J 2J1.
The Company is a growing gold producer with three wholly-owned operating mines, four wholly-owned mines currently on care and maintenance and exploration properties in Canada and Australia.
2. BASIS OF PREPARATION
(a)Statement of Compliance
These condensed consolidated interim financial statements (the "Interim Financial Statements") have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting ("IAS 34") and follow the same accounting policies and methods of application as the annual consolidated financial statements of the Company for the year ended December 31, 2020, except as noted below under adoption of new accounting standards and in note 5 in connection with the change in functional currency of the Company and its Canadian subsidiaries from the Canadian dollar to the United States dollar. The Interim Financial Statements do not contain all disclosures required by International Financial Reporting Standards ("IFRS") and accordingly should be read in conjunction with the 2020 annual consolidated financial statements and the notes thereto. The Interim Financial Statements were approved by the Company’s Board of Directors on May 5, 2021.
The Interim Financial Statements have been prepared on a historical cost basis except for financial instruments which are recorded at fair value, as set out in the accounting policies in note 3 of the 2020 annual consolidated financial statements.
(b)Use of estimates and judgments
The preparation of financial statements in compliance with IAS 34 requires management to make certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements as at and for the year ended December 31, 2020.
3. ADOPTION OF NEW ACCOUNTING STANDARDS
(a)New accounting standards and amendments effective in the period
IAS 16, Property, Plant and Equipment
The IASB issued an amendment to IAS 16, Property, Plant and Equipment to prohibit the deducting from property, plant and equipment amounts received from selling items produced while preparing an asset for its intended use. Instead, sales proceeds and its related costs must be recognized in profit or loss. The amendment will require companies to distinguish between costs associated with producing and selling items before the item of property, plant and equipment is available for use and costs associated with making the item of property, plant and
6
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
equipment available for its intended use. The amendment is effective for annual periods beginning on or after January 1, 2022, with earlier application permitted. The amendment is applicable to the accounting for the Company’s near surface project and as such, the Company has early adopted the amendment to IAS 16 and will recognize any sales proceeds and related costs of producing and selling the incidental ounces in profit or loss.
(b)Standards and amendments issued but not yet effective or adopted
IAS 1, Presentation of Financial Statements
The IASB issued an amendment to IAS 1, Presentation of Financial Statements to clarify one of the requirements under the standard for classifying a liability as non-current in nature, specifically the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendment includes: (i) specifying that an entity’s right to defer settlement must exist at the end of the reporting period; (ii) clarifying that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement; (iii) clarifying how lending conditions affect classification; and (iv) clarifying requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments. An assessment will be performed prior to the effective date of January 1, 2023 to determine the impact to the Company's financial statements.
4. ACQUISITION OF DETOUR
On November 25, 2019, the Company entered into an Arrangement Agreement to acquire all of the issued and outstanding common shares of Detour, with Detour shareholders receiving 0.4343 of a Kirkland Lake common share for every one Detour share ("Exchange Ratio"). Upon closing of the transaction on January 31, 2020, the Company issued 77,217,129 Kirkland Lake common shares to the former shareholders of Detour. Furthermore, all outstanding stock options of Detour that were not exercised prior to the acquisition date, have been exchanged under the agreement at the Exchange Ratio, resulting in the issuance of 190,069 replacement options.
The Company determined that the transaction represented a business combination under IFRS 3 Business Combinations ("IFRS 3"), with Kirkland Lake identified as the acquirer and as such, the transaction was accounted for using the acquisition method of accounting in accordance with IFRS 3. The total purchase price consideration of the acquisition was $3,134,444. The purchase price was allocated to the assets acquired and liabilities assumed as disclosed in note 6 of the Company’s 2020 annual consolidated financial statements. Acquisition related costs of $33,838 were recorded in the Company's condensed consolidated interim statements of operations and comprehensive income for the three months ended March 31, 2020. These interim financial statements include the results of Detour from January 31, 2020, which is the date of acquisition.
5. CHANGE IN FUNCTIONAL CURRENCY
The functional currency for each entity consolidated within the Company's financial statements is determined by the currency of the primary economic environment in which it operates (the “functional currency”). The functional currency for the Company and its Canadian subsidiaries up until December 31, 2020 was the Canadian dollar; the functional currency for all Australian subsidiaries is the Australian dollar. The consolidated financial statements are presented in United States dollars which is the presentation currency for the Company. The Company elected to change the tax reporting currency of its Canadian subsidiaries from the Canadian to the United States dollar effective January 1, 2021. This change in tax reporting currency resulted in a re-assessment of the primary and secondary factors under International Accounting Standards ("IAS") 21 and led to the conclusion that the
7
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
functional currency of the Canadian entities is the United States dollar. Effective December 31, 2020, the functional currency of the Company's Canadian entities changed from the Canadian dollar to the United States dollar, with the change applied on a prospective basis.
In making this change in functional currency to the United States dollar, the Company followed the guidance in IAS 21 The Effects of Changes in Foreign Exchange Rates with the December 31, 2020 statement of financial position translated at the December 31, 2020 exchange rate of 1 Canadian Dollar = $0.7855 US Dollar. The impact of this change on the closing balances of the Company’s equity accounts is reflected as an Effect of Change in Functional Currency within the interim statement of changes in equity for the period ending March 31, 2021.
6. EMPLOYEE BENEFITS EXPENSE
The following employee benefits expenses are included in production costs, general and administrative costs, and care and maintenance costs for the three months ended March 31, 2021 and 2020:
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| Salaries, short-term incentives and other benefits | $84,012 | $81,999 | ||||||
| Share based payment expense (note 13(iii)) | (1,150) | (3,263) | ||||||
| $82,862 | $78,736 | |||||||
7. OTHER INCOME (LOSS), NET
Other loss, net for the three months ended March 31, 2021 and 2020 includes the following:
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| Loss on disposal of plant and equipment and mining interest | ($7,720) | ($381) | ||||||
| Change in fair value of warrant investments | (228) | (1,493) | ||||||
| Foreign exchange gain, net | 5,653 | 72,944 | ||||||
| Other | 871 | 1,135 | ||||||
| Other income (loss), net | ($1,424) | $72,205 | ||||||
8. FINANCE ITEMS
Finance income and expense for the three months ended March 31, 2021 and 2020 includes the following:
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| Interest income on bank deposits | $247 | $2,596 | ||||||
| Finance income | $247 | $2,596 | ||||||
| Interest on finance leases and other loans | 290 | 1,048 | ||||||
| Finance fees and bank charges | 26 | 49 | ||||||
| Unwinding of discount on rehabilitation provision | 530 | 661 | ||||||
| Loss on derivative contracts | — | 2,355 | ||||||
| Finance costs | $846 | $4,113 | ||||||
8
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
9. ACCOUNTS RECEIVABLE
| As at | March 31, 2021 | December 31, 2020 | ||||||
| Trade receivables | $85 | $85 | ||||||
| Sales tax and other statutory receivables | 33,814 | 16,284 | ||||||
| Other receivables | 3,122 | 2,305 | ||||||
| $37,021 | $18,674 | |||||||
There are no expected credit losses and none of the amounts included in receivables at March 31, 2021 are past due.
Trade receivables represent the value of gold doré sold as at period end for which the funds are not yet received. There were no recorded allowances for credit losses during the three months ended March 31, 2021 and year ended December 31, 2020. In determining the recoverability of other receivables, the Company considers any change in the credit quality of the counterparty, with the concentration of the credit risk limited due to the nature of the counterparties involved.
10. INVENTORIES
| As at | March 31, 2021 | December 31, 2020 | ||||||
| Gold doré | $765 | $4,984 | ||||||
| Gold in circuit | 34,081 | 27,696 | ||||||
| Ore stockpiles | 42,329 | 34,955 | ||||||
| Supplies and consumables | 82,878 | 81,568 | ||||||
| $160,053 | $149,203 | |||||||
The cost of gold doré, gold in circuit, ore stockpiles (“metal inventory”), and supplies and consumables recognized as an expense and included in operating costs in the three months ended March 31, 2021 and 2020 are $169,864 and $162,398, respectively. During the three months ended March 31, 2021, there were write downs of metals inventory to net realizable value of $3,204 (three months ended March 31, 2020 - $1,990). There were no reversals of write downs of inventory to net realizable value during the three months ended March 31, 2021 and 2020.
11. OTHER LONG-TERM ASSETS
| As at | March 31, 2021 | December 31, 2020 | ||||||
| Investments in equity securities | $87,279 | $99,048 | ||||||
| Warrant investments | 141 | 367 | ||||||
| Deposits and other | 4,593 | 4,184 | ||||||
| Long-term stockpiles | 11,103 | 12,288 | ||||||
| $103,116 | $115,887 | |||||||
Long-term inventories include long-term stockpiles expected to be processed beyond the next 12 months and long-term supplies and consumables expected to be used beyond the next 12 months.
9
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
Investments in equity securities
Changes in the investments in equity securities for the three months ended March 31, 2021 and year ended December 31, 2020 are as follows:
| Three months ended March 31, 2021 | Year ended December 31, 2020 | |||||||
| Balance, beginning of year | $99,048 | $253,540 | ||||||
| Acquisition of investments | 1,569 | 26,803 | ||||||
| Disposition of investments | (2,800) | (174,334) | ||||||
| Gains (losses) recorded in OCI | (11,670) | (11,735) | ||||||
| Foreign currency translation recorded in OCI | 1,132 | 4,774 | ||||||
| Investments in equity securities, end of period | $87,279 | $99,048 | ||||||
The fair value of the investments in equity securities held as at March 31, 2021 and December 31, 2020 are as follows:
| Investments in equity securities | Shares held at March 31, 2021 | Fair value as at December 31, 2020 | Purchase/(sales) | Gains (losses) recorded in OCI | Foreign currency translation | Fair value as at March 31, 2021 | ||||||||||||||
| Novo Resources Corp. | 7,962,668 | 17,247 | (2,800) | 4,000 | 258 | 18,705 | ||||||||||||||
| Wallbridge Mining Company Ltd. | 78,109,200 | 47,860 | — | (10,491) | 572 | 37,941 | ||||||||||||||
| Other | 33,941 | 1,569 | (5,179) | 302 | 30,633 | |||||||||||||||
| Total | $99,048 | ($1,231) | ($11,670) | $1,132 | $87,279 | |||||||||||||||
| Investments in equity securities | Shares held at December 31, 2020 | Fair value as at December 31, 2019 | Purchase/(sales) | Gains (losses) recorded in OCI | Foreign currency translation | Fair value as at December 31, 2020 | ||||||||||||||
| Osisko Mining Inc. | — | $101,757 | ($107,664) | $7,199 | ($1,292) | $— | ||||||||||||||
| Novo Resources Corp. | 9,225,168 | 87,520 | (38,862) | (32,688) | 1,277 | 17,247 | ||||||||||||||
| Wallbridge Mining Company Ltd. | 78,109,200 | 39,943 | 17,643 | (12,064) | 2,338 | 47,860 | ||||||||||||||
| De Grey Mining Ltd. | — | 1,194 | (25,770) | 23,276 | 1,300 | — | ||||||||||||||
| Other | 23,126 | 7,122 | 2,542 | 1,151 | 33,941 | |||||||||||||||
| Total | $253,540 | ($147,531) | ($11,735) | $4,774 | $99,048 | |||||||||||||||
12. MINING INTERESTS AND PLANT AND EQUIPMENT
| Three months ended March 31, 2021 | Depletable | Non depletable | Total mining interest | Property, plant and equipment | Capital work-in-progress | Total | ||||||||||||||
| Cost | ||||||||||||||||||||
| At January 1, 2021 | $3,575,624 | $503,328 | $4,078,952 | $2,406,943 | $284,787 | $6,770,682 | ||||||||||||||
| Additions and transfers | 61,222 | — | 61,222 | 68,150 | 26,927 | 156,299 | ||||||||||||||
| Change in environmental closure assets (estimate and discount rate) | 6,900 | — | 6,900 | — | — | 6,900 | ||||||||||||||
| Disposals | (547) | — | (547) | (40,978) | — | (41,525) | ||||||||||||||
| Foreign currency translation recorded in OCI | (8,843) | (1,942) | (10,785) | (5,104) | 184 | (15,705) | ||||||||||||||
| Cost at March 31, 2021 | $3,634,356 | $501,386 | $4,135,742 | $2,429,011 | $311,898 | $6,876,651 | ||||||||||||||
| Accumulated depreciation and depletion | ||||||||||||||||||||
| At January 1, 2021 | $598,983 | $— | $598,983 | $367,500 | $— | $966,483 | ||||||||||||||
| Depreciation | 15,656 | — | 15,656 | 64,183 | — | 79,839 | ||||||||||||||
| Depletion | 28,657 | — | 28,657 | — | — | 28,657 | ||||||||||||||
| Disposals | (141) | — | (141) | (33,404) | — | (33,545) | ||||||||||||||
| Foreign currency translation recorded in OCI | (3,939) | — | (3,939) | (1,412) | — | (5,351) | ||||||||||||||
| Accumulated depreciation and depletion at March 31, 2021 | $639,216 | $— | $639,216 | $396,867 | $— | $1,036,083 | ||||||||||||||
| Carrying value at March 31, 2021 | $2,995,140 | $501,386 | $3,496,526 | $2,032,144 | $311,898 | $5,840,568 | ||||||||||||||
10
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
1Includes $173.8 million and $255.9 million in carrying amounts at March 31, 2021 related to Holt Complex and Northern Territory, respectively.
| Year ended December 31, 2020 | Depletable | Non depletable | Total mining interest | Property, plant and equipment | Capital work-in-progress | Total2 | ||||||||||||||
| Cost | ||||||||||||||||||||
| At January 1, 2020 | $1,105,283 | $161,073 | $1,266,356 | $576,635 | $191,521 | $2,034,512 | ||||||||||||||
Acquisition of Detour Gold Corporation1 | 2,026,183 | 336,756 | 2,362,939 | 1,342,054 | 120,371 | 3,825,364 | ||||||||||||||
| Additions and transfers | 285,555 | (19,571) | 265,984 | 436,469 | (41,510) | 660,943 | ||||||||||||||
| Change in environmental closure assets (estimate and discount rate) | 6,667 | — | 6,667 | — | — | 6,667 | ||||||||||||||
| Disposals | (437) | — | (437) | (61,047) | (683) | (62,167) | ||||||||||||||
| Foreign currency translation recorded in OCI | 152,373 | 25,070 | 177,443 | 112,832 | 15,088 | 305,363 | ||||||||||||||
| Cost at December 31, 2020 | $3,575,624 | $503,328 | $4,078,952 | $2,406,943 | $284,787 | $6,770,682 | ||||||||||||||
| Accumulated depreciation and depletion | ||||||||||||||||||||
| At January 1, 2020 | $376,197 | $— | $376,197 | $161,389 | $— | $537,586 | ||||||||||||||
| Depreciation | — | — | — | 238,415 | — | 238,415 | ||||||||||||||
| Depletion | 188,613 | — | 188,613 | — | — | 188,613 | ||||||||||||||
| Disposals | (303) | — | (303) | (51,441) | — | (51,744) | ||||||||||||||
| Foreign currency translation in OCI | 34,476 | — | 34,476 | 19,137 | — | 53,613 | ||||||||||||||
| Accumulated depreciation and depletion at December 31, 2020 | $598,983 | $— | $598,983 | $367,500 | $— | $966,483 | ||||||||||||||
| Carrying value at December 31, 2020 | $2,976,641 | $503,328 | $3,479,969 | $2,039,443 | $284,787 | $5,804,199 | ||||||||||||||
1Includes $16.2 million of ROU assets that were acquired with Detour Gold Corporation.
2Includes $180.8 and $261.2 million in carrying amounts at December 31, 2020 related to Holt Complex and Northern Territory, respectively.
Mining Interests
Non-depletable mining interests at March 31, 2021 of $501,386 (December 31, 2020 - $503,328) includes $349,639 of acquired mineral resources around the Detour Lake mine, and $64,863 (December 31, 2020 - $152,519) for the carrying amount of various acquired exploration properties in the Northern Territory.
13. SHARE BASED PAYMENT LIABILITIES
(i)Long-term incentive plan ("LTIP")
The Company has an LTIP that provides for restricted share units ("RSUs") and performance share units ("PSUs") (collectively, “Share Units”) that may be granted to employees, officers and eligible contractors of the Company and its affiliates. A director of the Company is not eligible to participate in the LTIP unless he or she is also an employee of the Company. At the discretion of the Company's Board of Directors, the Company can issue common shares or cash or any combination thereof in satisfaction of the Company’s obligations under Share Units held by participants.
The value of an RSU and PSU at the grant date is equal to the market price of a common share of the Company on that date. Unless otherwise determined by the Compensation Committee, no RSU or PSU shall vest later than three years after the date of grant.
11
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
Movements in the number of the PSUs and RSUs for the period ended March 31, 2021 and year ended December 31, 2020 are as follows:
| Three months ended March 31, 2021 | Year ended December 31, 2020 | |||||||||||||
| PSUs | RSUs | PSUs | RSUs | |||||||||||
| Balance, beginning of year | 372,640 | 386,767 | 511,768 | 540,828 | ||||||||||
| Granted | 117,333 | 117,706 | 104,861 | 106,985 | ||||||||||
| Cancelled | (9,303) | (9,304) | (18,578) | (18,578) | ||||||||||
| Redeemed | (168,612) | (168,612) | (225,411) | (242,468) | ||||||||||
| Balance, end of period | 312,058 | 326,557 | 372,640 | 386,767 | ||||||||||
(ii)Deferred share unit plan ("DSU Plan")
The Company has a DSU Plan for non-executive directors of the Company, which provides a cash payment, common shares, or a combination thereof on the date when a director ceases to be a director.
Changes in the number of DSUs outstanding during the three months ended March 31, 2021 and year ended December 31, 2020 are as follows:
| Three months ended March 31, 2021 | Year ended December 31, 2020 | |||||||
| DSUs | DSUs | |||||||
| Balance at beginning of year | 120,886 | 155,377 | ||||||
| Granted | 14,920 | 19,760 | ||||||
| Redeemed | — | (54,251) | ||||||
| Balance, at end of period | 135,806 | 120,886 | ||||||
Changes in the share based payment liabilities during the period ended March 31, 2021 and year ended December 31, 2020 are as follows:
| Three months ended March 31, 2021 | Year ended December 31, 2020 | |||||||
| Opening liability | $34,363 | $55,257 | ||||||
| Share based payment expense | (1,150) | 10,457 | ||||||
| Redeemed RSUs, PSUs, DSUs and phantom share units (cash payments) | (20,196) | (31,907) | ||||||
| Foreign currency translation recorded in OCI | 177 | 556 | ||||||
| Total share based payment liability | $13,194 | $34,363 | ||||||
| Current portion of share based payment liability | $10,126 | $25,745 | ||||||
| Long term share based payment liability | $3,068 | $8,618 | ||||||
12
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
(iii)Share based payment expense
The cost of share based payments is allocated to production costs (granted to employees involved in the commercial operations at the mines and mill), general and administrative costs (options granted to directors and corporate employees) and care and maintenance. The allocation of share based payment expense on the condensed consolidated interim statement of operations and comprehensive income for the three months ended March 31, 2021 and 2020 is as follows:
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| General and administrative | ($1,115) | ($2,457) | ||||||
| Production costs | 217 | (806) | ||||||
| Care and maintenance | (252) | — | ||||||
| Total share based payment expense | ($1,150) | ($3,263) | ||||||
14. PROVISIONS
| As at | March 31, 2021 | December 31, 2020 | ||||||
| Environmental rehabilitation provision | $228,947 | $229,125 | ||||||
| Long service leave | 7,665 | 7,658 | ||||||
| Total provisions | 236,612 | 236,783 | ||||||
| Current provisions | 59,715 | 71,976 | ||||||
| Long-term balance | $176,897 | $164,807 | ||||||
Environmental rehabilitation provision
The Company provides for the estimated future cost of rehabilitating mine sites and related production facilities on a discounted basis, if the impact of discounting is material, as such activity that creates the rehabilitation obligation occurs. The rehabilitation provision represents the present value of estimated future rehabilitation costs. These provisions are based on the Company’s estimates, with consideration of closure plans and rehabilitation requirements established by relevant regulatory bodies.
15. SHAREHOLDERS' EQUITY
The Company is authorized to issue an unlimited number of common shares without par value.
(a)SHARE CAPITAL
As at March 31, 2021, the Company had 267,055,602 common shares outstanding (December 31, 2020 - 268,097,877).
Share capital issuances
–During the three months ended March 31, 2021, the Company issued an aggregate of 31,825 common shares upon the exercise of 31,825 stock options for $934 (three months ended March 31, 2020 - the Company issued an aggregate of 72,149 common shares upon the exercise of 72,149 stock options for $1,319).
13
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
–Upon closing of the Detour acquisition on January 31, 2020, the Company issued 77,217,129 common shares to the former shareholders of Detour with a fair value of $3,131,451. Furthermore, all outstanding stock options of Detour that were not exercised prior to the acquisition date have been exchanged under the agreement at the Exchange Ratio.
Repurchases
2021
–For the three months ended March 31, 2021, the Company purchased 1,074,100 shares for $46,318 (C$58,790) pursuant to the Normal Course Issuer Bid. All of the shares acquired have been legally canceled as of March 31, 2021.
2020
–For the three months ended March 31, 2020, the Company purchased 9,713,500 shares for $329,849 (C$443,064) pursuant to the Normal Course Issuer Bid. All of the shares acquired have been legally canceled as of March 31, 2020.
Dividends
2021
| Dividend declaration date | Dividend paid date | Per share | Paid USD | Reduction in retained earnings | ||||||||||
| December 16, 2020 | January 14, 2021 | $0.1875 | $50,268 | $— | ||||||||||
| March 18, 2021 | April 14, 2021 | $0.1875 | $— | $50,073 | ||||||||||
| Total | $50,268 | $50,073 | ||||||||||||
2020
| Dividend declaration date | Dividend paid date | Per share | Paid USD | Reduction in retained earnings | ||||||||||
| December 16, 2019 | January 13, 2020 | $0.06 | $12,577 | $— | ||||||||||
| March 18, 2020 | April 13, 2020 | $0.125 | $— | $34,650 | ||||||||||
| Total | $12,577 | $34,650 | ||||||||||||
(b)RESERVES
(i)Share based payment compensation plans
In addition to the DSU and phantom share unit liabilities disclosed in note 13, the Company has the following outstanding equity based awards:
Stock options
During the three months ended March 31, 2021 and 2020, the Company did not grant any stock options other than replacement options issued relating to the Detour acquisition.
14
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
Changes in stock options during the three months ended March 31, 2021 and 2020 were as follows:
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||||||||
| Number of | Weighted average | Number of | Weighted average | |||||||||||
| options | exercise price (C$) | options | exercise price (C$) | |||||||||||
| Balance, beginning of year | 218,237 | $12.64 | 218,489 | $4.44 | ||||||||||
| Replacement options from Detour acquisition | — | — | 190,069 | 35.07 | ||||||||||
| Exercised | (31,825) | 29.27 | (72,149) | 21.78 | ||||||||||
| Expired | (24,146) | 47.80 | (8,153) | 5.61 | ||||||||||
| Stock options outstanding, end of period | 162,266 | $4.14 | 328,256 | $18.33 | ||||||||||
| Stock options exercisable, end of period | 162,266 | $4.14 | 328,256 | $18.33 | ||||||||||
Options are valued using the Black-Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate of the effects of non-transferability, exercise restrictions and behavioral considerations. Expected volatility is based on the historical share price volatility of the Company.
Replacement options from the Detour acquisition were valued at the date of acquisition using the Black-Scholes option pricing model with the following weighted average assumptions:
| Weighted average exercise price per share | C$35.07 | ||||
| Risk-free interest rate | 1.83 | % | |||
| Expected volatility | 36.64 | % | |||
| Expected life | 0.91 | ||||
| Weighted average per share grant date fair value | C$34.48 | ||||
Stock Options Exercised
The following table outlines share options granted under the former stock option plans of Kirkland Lake Gold Inc., St. Andrews Goldfields Ltd. and Detour Gold Corporation that were exercised during the three months ended March 31, 2021:
| Grant price (C$) | Number of options exercised | Exercise dates | Weighted average closing share price at exercise date (C$) | ||||||||
| $5.61 - $35.55 | 31,825 | January 1, 2021 - March 31, 2021 | $49.73 | ||||||||
The following table outlines share options granted under the former stock option plans of Kirkland Lake Gold Inc., St. Andrews Goldfields Ltd. and Detour Gold Corporation that were exercised during the three months ended March 31, 2020:
| Grant price (C$) | Number of options exercised | Exercise dates | Weighted average closing share price at exercise date (C$) | ||||||||
| $5.61 - $35.55 | 72,149 | January 1, 2020 - March 31, 2020 | $45.32 | ||||||||
15
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
(c)BASIC AND DILUTED INCOME PER SHARE
Basic and diluted income per share for the three months ended March 31, 2021 and 2020 is calculated as shown in the table below. The diluted income per share for the three months ended March 31, 2021 and 2020 includes the impact of certain outstanding options, PSUs and RSUs.
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| Net earnings | $161,193 | $202,878 | ||||||
| Weighted average basic number of common shares outstanding (in '000s) | 267,111 | 257,418 | ||||||
| Basic earnings per share | $0.60 | $0.79 | ||||||
| Net earnings | 161,193 | 202,878 | ||||||
| Cash settling LTIP adjustment | (1,939) | (4,489) | ||||||
| Net earnings for diluted earnings | 159,254 | 198,389 | ||||||
| Weighted average diluted number of common shares outstanding (in '000s) | 267,907 | 258,360 | ||||||
| Diluted earnings per share | $0.59 | $0.77 | ||||||
Weighted average diluted number of common shares for the three months ended March 31, 2021 and 2020 is calculated as follows:
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| Weighted average basic number of common shares outstanding (in '000s) | 267,111 | 257,418 | ||||||
| In the money shares - share options (in '000s) | 157 | 235 | ||||||
| Dilutive RSUs and PSUs (in '000s) | 639 | 707 | ||||||
| Weighted average diluted number of common shares outstanding | 267,907 | 258,360 | ||||||
16. SUPPLEMENTAL CASH FLOW INFORMATION
As at March 31, 2021, the Company’s cash balance of $792,239 (December 31, 2020 – $847,638) was held at major Canadian and Australian banks in deposit accounts, and was comprised of $222,323 (as at December 31, 2020 – $808,575) denominated in US dollars, which was exposed to movements in foreign exchange rates. As at March 31, 2021, the impact of a 10% strengthening or weakening in foreign exchange rates would have
resulted in a decrease or increase of $15,563 in net earnings, respectively.
Supplemental information to the statements of cash flows is as follows:
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| Change in non-cash working capital | ||||||||
| (Increase) decrease in accounts receivable | ($18,284) | $10,872 | ||||||
| (Increase) in inventories | (557) | 53,959 | ||||||
| (Increase) in prepaid expenses | (513) | 8,630 | ||||||
Increase (decrease) in accounts payable and accrued liabilities1 | (22,404) | (85,677) | ||||||
| ($41,758) | ($12,216) | |||||||
| Investing and financing non-cash transactions | ||||||||
| Property, plant and equipment acquired through lease | $2,229 | $— | ||||||
1Includes dividends payable.
16
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
17. OPERATING SEGMENTS
The reportable operating segments are those operations for which operating results are reviewed by the President and Chief Executive Officer who is the chief operating decision maker regarding decisions about resources to be allocated to the segment and to assess performance provided those operations pass certain quantitative thresholds. Operations with revenues, earnings or losses or assets that exceed 10% of the total consolidated revenue, earnings or losses or assets are reportable segments.
Each of the Company's reportable operating segments generally consists of an individual mining property managed by a single general manager and operations management team.
The Company’s operating segments reflect these multiple mining interests and are reported in a manner consistent with internal reporting used to assess the performance of each segment and make decisions about resources to be allocated to the segments.
The information reported below as at and for the three months ended March 31, 2021 and 2020 is based on the information provided to the President and Chief Executive Officer.
17
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
| As at and for the three months ended March 31, 2021 | ||||||||||||||||||||
| Macassa | Detour | Fosterville | Non-core3 | Corporate and other | Total | |||||||||||||||
| Revenue | $88,658 | $252,596 | $210,592 | $— | $— | $551,846 | ||||||||||||||
| Production costs | (34,989) | (108,307) | (26,785) | — | — | (170,081) | ||||||||||||||
| Royalty expense | (2,505) | (5,794) | (10,095) | — | — | (18,394) | ||||||||||||||
| Depletion and depreciation | (12,750) | (66,483) | (24,542) | — | (325) | (104,100) | ||||||||||||||
| Earnings from mine operations | 38,414 | 72,012 | 149,170 | — | (325) | 259,271 | ||||||||||||||
| Expenses | ||||||||||||||||||||
| General and administrative | — | — | — | — | (12,343) | (12,343) | ||||||||||||||
| Transaction costs | — | — | — | — | — | — | ||||||||||||||
| Exploration | (1,137) | (41) | (2,856) | (1,184) | (268) | (5,486) | ||||||||||||||
| Care and maintenance | — | — | — | (4,196) | — | (4,196) | ||||||||||||||
| Rehabilitation costs | — | — | — | 760 | — | 760 | ||||||||||||||
| Earnings (loss) from operations | 37,277 | 71,971 | 146,314 | (4,620) | (12,936) | 238,006 | ||||||||||||||
Other income (loss), net1 | (1,424) | |||||||||||||||||||
| Finance items | ||||||||||||||||||||
Finance income1 | 247 | |||||||||||||||||||
Finance costs1 | (846) | |||||||||||||||||||
| Earnings before income taxes | 235,983 | |||||||||||||||||||
| Expenditures on: | ||||||||||||||||||||
| Mining interest | $30,430 | $31,436 | $26,309 | $— | $— | $88,175 | ||||||||||||||
| Plant and equipment | 7,927 | 47,228 | 11,267 | 772 | 930 | 68,124 | ||||||||||||||
Total capital expenditures2 | $38,357 | $78,664 | $37,576 | $772 | $930 | $156,299 | ||||||||||||||
| Total assets | $804,403 | $4,426,086 | $584,837 | $464,700 | $798,854 | $7,078,880 | ||||||||||||||
| Total liabilities | $178,773 | $1,161,863 | $197,518 | $222,194 | $192,440 | $1,952,788 | ||||||||||||||
1 Certain costs are managed on a consolidated basis and are therefore not reflected in segment income.
2 Segment capital expenditures are presented on an accrual basis.
3Includes Holt Complex and Northern Territory.
18
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
| As at and for the three months ended March 31, 2020 | ||||||||||||||||||||
| Macassa | Detour | Fosterville | Non-core3 | Corporate and other | Total | |||||||||||||||
| Revenue | $80,594 | $179,383 | $247,343 | $47,418 | $— | $554,738 | ||||||||||||||
| Production costs | (26,408) | (87,817) | (18,942) | (28,425) | — | (161,592) | ||||||||||||||
| Royalty expense | (2,222) | (3,059) | (12,579) | (3,389) | — | (21,249) | ||||||||||||||
| Depletion and depreciation | (20,929) | (41,656) | (23,139) | (7,115) | — | (92,839) | ||||||||||||||
| Earnings from mine operations | 31,035 | 46,851 | 192,683 | 8,489 | — | 279,058 | ||||||||||||||
| Expenses | ||||||||||||||||||||
| General and administrative | — | — | — | — | (12,562) | (12,562) | ||||||||||||||
| Transaction costs | — | — | — | — | (33,838) | (33,838) | ||||||||||||||
| Exploration | (1,058) | (1,557) | (2,211) | (1,105) | — | (5,931) | ||||||||||||||
| Care and maintenance | — | — | — | (2,890) | — | (2,890) | ||||||||||||||
| Earnings (loss) from operations | 29,977 | 45,294 | 190,472 | 4,494 | (46,400) | 223,837 | ||||||||||||||
Other income (loss), net1 | 72,205 | |||||||||||||||||||
| Finance items | ||||||||||||||||||||
Finance income1 | 2,596 | |||||||||||||||||||
Finance costs1 | (4,113) | |||||||||||||||||||
| Earnings before income taxes | $294,525 | |||||||||||||||||||
| Expenditures on: | ||||||||||||||||||||
| Mining interest | $26,663 | $39,295 | $13,596 | $22,507 | $— | $102,061 | ||||||||||||||
| Plant and equipment | 8,744 | 8,517 | 19,734 | 3,048 | 363 | 40,406 | ||||||||||||||
Total capital expenditures2 | $35,407 | $47,812 | $33,330 | $25,555 | $363 | $142,467 | ||||||||||||||
| Total assets | $618,623 | $3,903,684 | $447,267 | $438,053 | $542,053 | $5,949,680 | ||||||||||||||
| Total liabilities | $175,132 | $929,040 | $144,856 | $104,106 | $272,198 | $1,625,332 | ||||||||||||||
1 Certain costs are managed on a consolidated basis and are therefore not reflected in segment income.
2 Segment capital expenditures are presented on an accrual basis.
3Includes Holt Complex and Northern Territory.
19
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
The following table shows non-current assets by geographic region:
| Non-current assets | ||||||||
| As at | ||||||||
| March 31, 2021 | December 31, 2020 | |||||||
| Geographic information | ||||||||
| Australia | $818,897 | $821,777 | ||||||
| Canada | 5,243,896 | 5,222,089 | ||||||
| Total | $6,062,793 | $6,043,866 | ||||||
The following table summarizes sales to individual customers exceeding 10% of annual metal sales for the following periods:
| Metal sales | ||||||||
| Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
| Customer | ||||||||
| 1 - Australia | $213,838 | $243,608 | ||||||
| 2 - Canada | 209,383 | 111,333 | ||||||
| 3 - Canada | 67,545 | 72,275 | ||||||
| 4 - Canada | 50,302 | — | ||||||
| Total | $541,068 | $427,216 | ||||||
| % of total sales | 98 | % | 77 | % | ||||
The Company is not economically dependent on a limited number of customers for the sale of its product because gold doré can be sold through numerous commodity market traders worldwide. The hierarchy of customers differ in the three months ended March 31, 2021 and 2020.
18. FINANCIAL INSTRUMENTS
Carrying values of financial instruments
The carrying values of the financial assets and liabilities at March 31, 2021 and December 31, 2020 are as follows:
20
KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
| As at | March 31, 2021 | December 31, 2020 | ||||||
| Financial Assets | ||||||||
| At fair value through profit or loss | ||||||||
| Warrant investments (note 11) | $141 | $367 | ||||||
| Note receivable | 3,982 | 3,928 | ||||||
| $4,123 | $4,295 | |||||||
| Loans and receivables, measured at amortized cost | ||||||||
| Cash | $792,239 | $847,638 | ||||||
| Accounts receivable (not including sales taxes) | 3,207 | 2,390 | ||||||
| $795,446 | $850,028 | |||||||
| Investments in equity securities, measured at fair value through Other Comprehensive Income | ||||||||
| Investments in equity securities (note 11) | $87,279 | $99,048 | ||||||
| Financial Liabilities | ||||||||
| At fair value through profit or loss | ||||||||
| Share based payment liabilities (note 13) | $13,194 | $34,363 | ||||||
| Warrant liability | 4,318 | 4,254 | ||||||
| Other financial liabilities, measured at amortized cost | ||||||||
| Accounts payable and accrued liabilities | $198,632 | $231,696 | ||||||
| Dividend payable | 50,073 | 50,268 | ||||||
| Leases | 26,102 | 26,171 | ||||||
| $292,319 | $346,752 | |||||||
Fair values of financial instruments
The fair values of cash, accounts receivable, note receivable, leases, restricted cash, accounts payable and accrued liabilities approximate their carrying values due to the short term to maturity of these financial instruments.
The fair value hierarchy of financial instruments measured at fair value on the consolidated statement of financial position is as follows:
| As at | March 31, 2021 | December 31, 2020 | ||||||
| Level 1 | ||||||||
| Investments in equity securities - publicly traded | $80,843 | $94,262 | ||||||
| Share based payment liabilities (note 13) | $13,194 | $34,363 | ||||||
| Level 2 | ||||||||
| Warrant investments (note 11) | $141 | $367 | ||||||
| Warrant liability | $4,318 | $4,254 | ||||||
| Level 3 | ||||||||
| Investments in equity securities - privately held | $6,436 | $4,786 | ||||||
19. RELATED PARTY TRANSACTIONS
Related party transactions are measured at the exchange amount which is the consideration agreed to between the parties.
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KIRKLAND LAKE GOLD LTD.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(unaudited - stated in thousands of United States Dollars, except per share amounts and number of shares, warrants, stock options, share based liability units and equity based instrument units)
The Company entered into contracts with wholly-owned subsidiaries of Gekko Systems, a global mineral processing and equipment company. The total expense was $5 during the three months ended March 31, 2021 (three months ended March 31, 2020 - $21). Ms. Elizabeth Lewis-Gray, a member of the Company’s Board of Directors, is the Co-founder, Chair and Managing Director of Gekko Systems.
20. CONTINGENCIES
Between June 29, 2020 and July 17, 2020, two putative class action complaints were filed by purported shareholders of the Company in the United States against the Company and Anthony Makuch, President and Chief Executive Officer. The complaints allege that during the period from January 8, 2018 and November 25, 2019, the defendants violated the United States securities laws by misrepresenting or failing to disclose material information regarding the acquisition of Detour Gold Corporation. Both actions were filed in the United States District Court for the Southern District of New York (the “Court”). Following motions filed by both individual complainants, the Court entered an order on September 24, 2020 appointing one lead plaintiff and one lead counsel. In November 2020, the lead plaintiff filed its amended complaint against the Company, Anthony Makuch and Eric Sprott. On January 22, 2021, the Company filed its motion to dismiss. The Company continues to believe that the claims are without merit and intends to defend the action vigorously. No amounts have been recorded for any potential liability arising from any of the proposed class actions. The Company believes that the likelihood of loss is undeterminable at this time.
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