Detour Gold stock outperforms peers on strong Q1 results

VANCOUVER (miningweekly.com) – The TSX-listed stock of Detour Gold outperformed its peers on Friday, rising 14% to c$17.33 a share early in the afternoon session.

For the first quarter ended March, Toronto-based Detour reported better-than-expected headline earnings of $10.5-million, or $0.06 a share, compared with adjusted net earnings of $11.3-million, or $0.07 a share in the comparable period a year earlier. This beat average analyst forecasts calling for $0.02 a share.

Net earnings fell to $6-million, or $0.03 a share, compared with net earnings of $27.6-million, or $0.16 per share, impacted by several special items in the quarter.

Revenues of $163.7-million was derived from the sale of 134 213 oz of gold, at a nearly 4% higher average realised price of $1 216/oz, and remained flat year-over year as the higher prices offset lower sales.

Gold output in the period rose 3% year-over-year to 131 418 oz, compared with 127 136 oz in the comparable period a year earlier.

Total cash costs rose 24% year-over-year to $788/oz, and all-in sustaining costs (AISC) were 36% higher at $1 118/oz sold in the first quarter, reflecting sustaining capital expenditures of $35.4-million and deferred stripping costs of $3.4-million.

Management advised that it is well-advanced in arranging $500-million in bank debt, which will be used to refinance the outstanding convertibles and fund further equipment purchases. This debt facility is expected to be finalised in the current quarter and would remove a financing overhang in the market since the new mine plan was provided.

REJIGGED MINE PLAN
Last month, Detour announced an updated life-of-mine (LOM) plan for its eponymous flagship asset, which calls for the development and mining of the West Detour pit and North pit in later years. Based on proven and probable openpit reserves of 16.5-million ounces contained gold, the yearly average gold output will rise to about 656 000 oz over LOM, lifting the mine life to about 23 years.

The LOM total site costs are expected to average $758/oz sold, contributing to an after-tax net present value, at a 5% discount, of C$3.7-billion, using a long-term gold price of $1 250/oz.

Detour modified its LOM plan for the Detour Lake operation because of permitting uncertainties associated with the West Detour project, located in north-eastern Ontario.

The updated LOM plan accommodates for the timing of a federal review process for permitting (if required); annual mining rate increase to 125-million tonnes with additional mine equipment; annual plant throughput maintained at 23-million tonnes starting in 2021; a near-term increase in strip ratio with 2019/20 average yearly gold output below 550 000 oz, then increasing significantly above 700 000 oz from 2021/22.

Total site costs increased to $758/oz sold, an 8% increase from the prior LOM plan.

Detour expects to produce between 550 000 oz and 600 000 oz of gold at total cash costs of $690/oz to $750/oz sold in 2017. AISC are expected to be between $1 025/oz and $1 125/oz.