PRECIOUS METALS

Kirkland Lake faces Detour Gold class action suit

Kirkland Lake Gold and its president and CEO Anthony Makuch face the prospect of a jury trial after a class action lawsuit was filed in the US District Court, Southern District of New York, by investor Stephen Brahms et al for violation of federal securities law.

Kirkland CEO Tony Makuch

Kirkland CEO Tony Makuch

In a case called Brahms vs Kirkland Lake Gold, the plaintiffs argue investment decisions were made on the grounds that the company had all-in sustaining costs, which averaged about US$564 per ounce, about half the global average for other gold miners, and due to the high quality of its underground mines, with a reported average reserve grade of 18.5 grams per tonne, compared with other gold mines with an average grade of about 1g/t.

In this context the plantiffs argue Detour Gold, which Kirkland announced it would acquire in November 2019, "was an underperforming gold miner, one-third of the size of Kirkland who consistently recorded significantly worse performance metrics, including high all-in sustaining costs and a low average reserve grade. Detour's costs were more than double of Kirkland's, and well above the average for other gold miners," said the complaint, pointing out that Detour's reserve grade was nearly twenty-fold below Kirkland's.

The plantiffs claim that over the course of several months prior to the acquisition announcement, Kirkland was trading at artificially inflated levels and that, "investors have realized that the real value of Kirkland is one which reflected Kirkland's transformation from an ultra low-cost, high-grade producer to a larger producer with higher costs and lower grades. Investors thus learned that Kirkland's rosy projections, guidance, and plans, promising to deliver low-cost, high-grade mining were false and unsustainable in the light of the impending acquisition of Detour which only the Company executives knew of".

The price of Kirkland's shares fell 17% upon announcement of the Detour transaction and several securities analysts downgraded its rating and their price target on the company. The plantiffs argue Kirkland's wrongful acts and omissions, and the precipitous decline in the market value of Kirkland's common shares, meant that suffered significant losses and damages.

Shares in Kirkland Lake Gold are trading at C$53.02, valuing the company at $14.9 billion.

 

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Project Pipeline Handbook 2024

View our 50 top mining projects, handpicked using a unique, objective selection process from a database of 450+ global assets.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.