Why Kirkland Lake Gold (TSX:KL) Stock Whipsawed This Week

Here’s why Canadian gold miner Kirkland Lake Gold (TSX:KL)(NYSE:KL) stock whipsawed this week amid high volatility.

| More on:
Gold bullion on a chart

Image source: Getty Images.

What happened?

Kirkland Lake Gold (TSX:KL)(NYSE:KL) stock is trading with extreme volatility this week. After posting solid gains on Monday, the stock whipsawed Tuesday. As a result, KL stock is now trading at $51.38 per share with 2.3% year-to-date losses against nearly 16% gains in the TSX Composite Index.

Here’s what could be the primary reason for Kirkland Lake stock’s roller-coaster ride this week.

So what?

Kirkland Lake Gold stock surged more than 8% in intraday trading on Monday, September 27. The stock erased some of these gains later during the session and closed $55.70 per share — up 3.4% for the day. Notably, it was its highest closing level in over eight months. Rumours about its merger and acquisition talks with several companies were the main driving force behind this sharp rally.

The next day, these rumours turned out to be true when Kirkland Lake announced that its Canadian rival Agnico Eagle Mines (TSX:AEM)(NYSE:AEM) has agreed to acquire the company in a deal roughly worth $13.5 billion. But this news surprisingly upset Kirkland investors, as KL stock tanked by more than 10% Tuesday before settling with 7.8% losses for the session. Agnico shares also slid by 1.2% Tuesday.

The Canadian gold miner Kirkland Lake’s two major operating mines, Macassa Mine and Detour Lake Mine, are located in northern Ontario, while its Fosterville Mine is located in Australia. Agnico Eagle owns gold mines in Canada, Finland, and Mexico and is also engaged in exploration and development activities in other countries, including the United States and Colombia.

According to the agreed merger deal, Kirkland Lake Gold’s each common share will be converted into Agnico Eagle’s 0.7935 shares. In the last few years, Kirkland Lake has emerged as one of the most profitable Canadian gold mining companies with an outstanding financial position. By comparison, Agnico Eagle’s profit margins are much lower, and the debt level is much higher than Kirkland Lake. That’s why Kirkland Lake Gold investors were seemingly unhappy with the current deal and likely anticipated a better deal.

Now what?

Now, with the merger deal already on the table, investors should look at its positive aspects, in my opinion. After the Kirkland-Agnico merger, the combined company will become the world’s one of the top senior gold producers with solid profitability, strong liquidity, and a low-risk profile. It would create a great investment opportunity for long-term investors — especially those who want exposure to gold.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Metals and Mining Stocks

Better Metals Buy: Gold Stocks vs. Lithium Stocks

Gold is the evergreen choice as a hedge against inflation and weak markets. In contrast, battery metals may offer unique…

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Wednesday, March 22

The Federal Reserve’s interest rate decision and economic projections are likely to keep the TSX highly volatile today.

Read more »

gold stocks gold mining
Metals and Mining Stocks

Gold Stocks Are Gaining Steam: Are They a Buy at Current Prices?

Gold stocks will likely steal the limelight this year, making up for their last year's underperformance.

Read more »

edit Sale sign, value, discount
Energy Stocks

2 Cheap Canadian Stocks You Can Buy for Less Than $50

You can buy Suncor Energy stock, and this gold stock at cheap valuations today

Read more »

A golden egg in a nest
Bank Stocks

How to Protect Your Retirement Portfolio From a Banking Crisis

The US banking crisis has created a market sell-off. Know how safe your money is and protect your retirement portfolio…

Read more »

Initial Public Offering (IPO) concept image, businessman selecting stock trading interface
Metals and Mining Stocks

Lithium Royalty IPO: Is it the Best Way to Invest in Lithium?

Lithium Royal stock went public on the TSX after it raised $150 million via an IPO. Is LIRC stock a…

Read more »

gold stocks gold mining
Tech Stocks

These Stocks Are Half-Priced, But Are They Actually Worth Buying?

Two top growth stocks have fallen by 50% in the last 12 months, and only one of them is worth…

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Thursday, March 2

Macroeconomic concerns and more corporate earnings could continue to keep TSX stocks volatile today.

Read more »