NEWS RELEASE
DETOUR GOLD
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TORONTO - Detour Gold Corporation (TSX:DGC) ("Detour Gold" or the "Company") reports its operational and financial results for the first quarter of 2016.
This release should be read in conjunction with the Company's first quarter 2016 Financial Statements and MD&A on the Company's website or on SEDAR. All amounts are in U.S. dollars unless otherwise indicated.
In this news release, the Company uses the following non-IFRS measures: total cash costs, all-in sustaining costs ("AISC"), realized gold price, average realized margin, adjusted net earnings (loss), and adjusted basic net earnings (loss) per share.
Q1 2016 Highlights
- Gold production of 127,136 ounces
- Total cash costs of $637 per ounce sold and AISC of $824 per ounce sold
- Revenues of $163 million on gold sales of 137,608 ounces at an average realized price of $1,172 per ounce
- Earnings from mine operations of $30.8 million
- Net income of $27.6 million ($0.16 per share) and adjusted net earnings of $11.3 million ($0.07 per share)
- Cash and short-term investments balance of $214 million at March 31, 2016
- New life of mine plan for the Detour Lake operation released on January 25
"Despite achieving the lower end of our gold production guidance range for the first quarter, the Company delivered a solid quarter with its lowest total cash costs and all-in sustaining costs since the start of operations. With the successful modifications of the 410-conveyor completed earlier this month, we now expect improved plant performance supporting our operational targets for the rest of the year," stated Paul Martin, President and CEO of Detour Gold.
"With the first results from our delineation drilling at Lower Detour's Zone 58N continuing to be positive, we are proceeding with a preliminary cost estimate and infrastructure design to support an underground exploration program."
Q1 2016 Summary Operational Results
- Gold production totaled 127,136 ounces, at the low end of the Company's quarterly guidance range, based on mill throughput of 4.7 million tonnes (Mt) at an average grade of 0.91 grams per tonne (g/t) and average recoveries of 91.4%.
- The mill throughput rate was approximately 5% below the design rate during the quarter mainly due to limited power draw on one of the SAG mills and coarser material being processed which impacted milling rates. The SAG mill is back to full power following the April planned shutdown.
- A total of 21.0 Mt (ore and waste) was mined in the first quarter (equivalent to mining rates of 231,000 tpd), lower than plan primarily as a result of lower availability of the rope shovels and slower progress in Phase 2 to remove the old mining infrastructure and to mine around the former Campbell pit.
- At the end of the first quarter, run-of-mine stockpiles increased to 6.1 Mt grading 0.64 g/t (approximately 125,000 ounces).
- Total cash costs of $637 per ounce sold for the first quarter benefitted from a favourable foreign exchange rate and lower than budget prices for electricity and diesel fuel. All-in sustaining costs of $824 per ounce sold also benefitted from a slower capital expenditure profile during the quarter.
- Unit costs (expressed in Canadian dollars) were in line with budget for the first quarter except for mining costs as a result of less tonnes mined.
Q1 2016 Financial Performance
- Metal sales for the first quarter were $163 million. The Company sold 137,608 ounces of gold at an average realized price of $1,172 per ounce, lower than the average price of the LBMA Gold Price Auction of $1,183 per ounce due to the Company's gold hedging program.
- Cost of sales for the first quarter totaled $132.2 million, including $42.8 million of depreciation or $311 per ounce sold.
- Earnings from mine operations for the first quarter totaled $30.8 million.
- The Company recorded net income of $27.6 million ($0.16 per share) in the first quarter. Adjusted net earnings in the first quarter amounted to $11.3 million ($0.07 per share) and excludes non-cash items such as the impact of foreign exchange resulting in a deferred tax recovery and change in the fair value of the Company's convertible notes.
Q1 2016 Liquidity and Capital Resources
- Operating cash flow improved to $51.0 million for the first quarter as a result of higher gold sales and a lower cost structure.
- During the first quarter, sustaining capital expenditures were $14.8 million, including $7.1 million for the mine, $6.1 million for the tailings facility, $1.1 million for the plant and $0.5 million for others. There were no deferred stripping costs for the period. Non-sustaining capital expenditures totaled $0.3 million for the first quarter.
- Cash and short term investments totaled $214 million at March 31, 2016. The Company's Cdn$85 million revolving credit facility remains fully undrawn.
Financial Risk Management
- As at March 31, 2016, the Company had a total of 90,000 ounces of outstanding gold forward hedge contracts at an average price of $1,173 per ounce to be settled during 2016. In addition, the Company has entered into "zero-cost" collars to hedge a further 37,000 ounces of gold, providing an average floor price of $1,195 per ounce and participation up to an average rate of $1,278 per ounce.
- As at March 31, 2016, the Company had no outstanding foreign exchange hedges.
Outlook
- Detour Gold reaffirms its 2016 guidance of between 540,000 and 590,000 ounces of gold at total cash costs of $675 to $750 per ounce sold and all-in sustaining costs of $840 to $940 per ounce sold (budgeted US dollar to Canadian dollar exchange rate of $1.33).
- Projected sustaining capital expenditures for 2016 remain as previously stated at approximately $60 to $70 million. In addition, capitalized stripping is estimated to be between $5 and $10 million for 2016.
Lower Detour Drilling Program
- At Zone 58N, the Company has completed 36,830 metres of infill drilling in 119 holes, approximately 61% of its planned 60,000 metres program. This program is testing the continuity and size of Zone 58N at a 25 metre drill spacing above 250 metres and at a 50 metre spacing below 250 metres. The Company has now completed its winter drilling program in the Lower Detour area and will resume its drilling program this summer.
- Results received to date, mainly from the centre of the mineralized zone, are in line with prior assay results. The Company expects to have all the results by the end of the second quarter.
- Metallurgical testing is progressing in parallel to confirm the amenability of the mineralized material from Zone 58N to be processed at the existing Detour Lake plant.
- The Company has contracted an independent firm to commence an assessment of the potential economic value of Zone 58N gold mineralization and a cost estimate of the required infrastructure to undertake an underground exploration program.
- In addition, the Company has completed 36 holes totaling 9,977 metres along the 25 kilometre Lower Detour trend. An additional 5,000 to 7,000 metres of drilling is planned this summer to test additional targets on the Lower Detour trend and in the area of the tailings facility.
- An Induced Polarisation (IP) survey comprised of approximately 147 line kilometres was completed on the eastern end of the Lower Detour trend and in the area of the tailings facility.
West Detour Project
- The Company is expecting to file an environmental assessment for West Detour with the Ontario Ministry of Natural Resources in the third quarter of 2016. Operational permits will largely comprise amendments to Detour Gold's existing approvals.
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