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Why Kirkland Lake Gold Shares Plunged

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of gold miner Kirkland Lake Gold (TSX: KGI) sank 10% today after initiating a strategic review process to explore shareholder-boosting options that may include the sale of assets.

So what: The stock has plunged over the past year on slumping gold prices, and today’s announcement only reinforces concerns over Kirkland’s current financial position. Bay Street is particularly skeptical that the company will be able to shed assets at a decent price, if at all, given its lackluster track record, prompting investors to sell on the risk of even more disappointing news ahead.

Now what: Kirkland’s Board of Directors has appointed a Special Committee of independent directors to conduct the review. “The strategic review will encompass a careful evaluation of the Company’s business plan, development strategy, market valuation and capital structure and will consider various alternatives for the Company,” said Kirkland CEO George Ogilvie, “including the potential sale of the Company’s shares or assets, and any other options identified by executive management with the fundamental objective of achieving the best value for the Company’s shareholders.” Given Kirkland’s still-very speculative nature, however, conservative Fools would be better off watching things unfold from the sidelines.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Pacampara does not own shares in any of the companies mentioned in this post.  The Motley Fool does not own shares in any of the companies mentioned in this post.

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