UPDATE 1-Kirkland Lake Gold eyes sale of assets, shares

Mon Jan 6, 2014 11:20am EST
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(Adds investor comment, context on company's performance and Kirkland Lake, Ontario)

Jan 6 (Reuters) - Canadian gold producer and explorer Kirkland Lake Gold Inc said on Monday it has started a strategic review and is considering selling assets or shares, sending its stock down more than 8 percent in early trading.

Gold miners are under pressure after the gold price posted its biggest annual decline in 32 years in 2013, falling 28 percent.

The dive in the gold price came as Kirkland was boosting production and hiring and training workers at its operation in Kirkland Lake in northern Ontario. That effort could eventually cut costs per ounce, but in recent quarters expenses have been above long-term targets.

The company said in December that it would focus on preserving cash and reducing costs, in part by mining higher-quality ore and boosting productivity. It froze hiring, but as of Oct. 31 about 100 of the company's 1,215 workers were still in training.

"I think that they have, potentially, a really good asset," said Chris Mancini, analyst at the Gabelli Gold Fund. "The issue for Kirkland Lake is getting from here to there, especially considering that the gold price works against them."

Gabelli holds a small stake in the company.

Once training and related expenses drop, costs per ounce could improve significantly, Mancini said. He praised the high grades at the company's Kirkland Lake mine, and its good access to infrastructure and the company's exploration potential. He added that acquiring Kirkland Lake Gold could make sense for mid-tier miner.