Kirkland Lake Gold Limited: Sell 
Wednesday, September 6, 2017 at 07:48PM
Silver Prices

Background

The recent breakout in the precious metals sector with gold leading the way has to some extent re-focused the attention of the investors onto the producers. Kirkland Lake Gold Limited (KL) is one such company which has been under the spot light lately and for good reason as it is a good quality stock.

Any acquisition such as this should remain under constant surveillance as a company’s circumstances can change in a blink of an eye. This is not so much the case with Kirkland Lake Gold but its recent rise is close to meteoric and deserves our attention, so we will take a quick look.

The Company

Kirkland Lake Gold is a mid-tier gold producer targeting 570,000 – 590,000 ounces of gold production in 2017 from mines in Canada and Australia.

The news flow from this company is good and includes the following:

They have entered into a term sheet agreement with Novo Resources Corp to acquire 14,000,000 units at a price of CAD$4.00 per Unit for a total cost of CAD$56,000,000, which shows their thirst for expansion

It has recently been listed on the NYSE under the symbol of KL which saw its volume of shares traded more than double, such was the interest.

The second quarter results demonstrated a robust balance sheet with an increase in free cash flow, revenue more than doubles from Q2 2016 and an impressive AISC of $729 per ounce.

Financials

Kirkland Lake Gold Limited trades on the New York Stock Exchange and the under the symbol (KL) and the Toronto Stock Exchange under the symbol (KL) and has a market capitalization of US$2.761B. The shares have a 52 week trading range of $6.33 to $13.71 with an average volume approaching one million shares traded. The company has an EPS of $0.39 and a PE ratio of 34.85 which is respectable when compared with others in this sector.

The Chart of Kirkland’s progress


A quick look at the chart shows us that this stock has almost tripled in price this year.

Good results, an NYSE listing and the underlying strength in gold and silver have helped make this stock flavour of the month.

The RSI now stands at 87.54 which is well above the ‘70’ level suggesting that it is extremely overbought, the MACD and the STO are also bumping up against the ceiling suggesting a breather is now due in the near term.

Conclusion

It’s a battle between the fundamentals which are positive and the technicals which tell us that this stock has ran too far too fast.

Everything of course depends on the progress of the underlying commodities of gold and silver, if this current rally continues then just about all of the PM stocks will follow suit. However, there is a certain amount of rotation that takes place in all sectors of the market and the profits on offer with KL might prove too good to be missed, so some profit taking could ensue.

On this occasion we decided to take the profits and sell our stake in Kirkland Lake Gold Limited. We believe it to be a good quality company but just a tad too frothy for us right now. It will go back onto our Watch List with the view to acquiring it at a cheaper entry level in the future.

We sold this stock recently but would ask that you do your own research and your own due diligence as it is your hard earned cash that is being put at risk.

Got a comment, then please fire it in whether you agree with us or not, as the more diverse comments we get the more balance we will have in this debate and hopefully our trading decisions will be better informed and more profitable.

Take good care.

 

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