Q1 2015 Highlights

  • Gold production of 105,572 ounces
  • Mill throughput rates averaged 47,797 tpd, including record month in March at 58,661 tpd
  • Phase 1 mining rates averaged 215,000 tpd, with March attaining budget rate of 223,000 tpd
  • Total cash costs of $925 per ounce sold and all-in sustaining costs of $1,307 per ounce sold
  • Revenues of $127.4 million on gold sales of 104,497 ounces at an average realized price of $1,232 per ounce
  • Net loss of $63.1 million ($0.38 per share) and adjusted net loss of $23.5 million ($0.14 per share)
  • Balance sheet deleveraged with debt repayments of $124.2 million (refer to March 6, 2015 news release)
  • Drilling results confirm continuity of high-grade gold mineralization at Lower Detour

Detour Gold president and CEO Paul Martin said: "While first quarter gold production was shy of the lower end of our first quarter forecast, we remain on track to meet our production and cost guidance for 2015.

"Following the challenges faced in the first half of the quarter, the operation has since stabilized and has gained significant momentum with the mill operating at design capacity for the last 82 days and mining rates exceeding budget at 250,000 tpd for the last 69 days.

Our objective is to maintain and build upon this progress for the remainder of the year. On the exploration front, we have confirmed a high-grade gold mineralized system at Lower Detour and plan to spend an additional $5 million to continue the drilling program this summer."

Q1 2015 Summary Operational Results

  • Gold production totaled 105,572 ounces, approximately 4% below the lower end of the guidance range for the first quarter of 2015.
  • For the period, the mill facility processed 4.3 million tonnes (Mt) of ore or an average of 47,797 tonnes per day (tpd) at recoveries of 91%. Processed grade was 0.84 grams per tonne (g/t), in line with projections for the quarter.
  • Mill operating time at 78% was below expectations for the quarter as a result of operational challenges in the first half of the quarter with conveyors and ore movement in the stockpile dome, which were intensified by the extreme cold weather. The 410 conveyor belt was replaced in early January and wet ore mined from the bottom of the pit caused freezing in the stockpile dome. With these issues largely resolved by mid-February, the processing plant has operated at design capacity of 55,000 tpd for the last 82 days.
  • Blast hole drilling rates increased significantly in the first quarter resulting in a 88% increase in blasted inventory (up to 3.1 Mt by the end of March), which has resulted in higher shovel productivity, especially on the CAT7495 shovels by providing the opportunity for double-side loading.
  • A total of 19.4 Mt was mined in Phase 1 (equivalent to mining rates of 215,000 tpd), approximately 3% lower than the annual budgeted rate of 222,000 tpd. The Detour Lake mine operated with a reduced shovel fleet during the quarter as a result of a series of mechanical failures, including the loss of a CAT7495 shovel in March for approximately two weeks to replace the boom and dipper arms. Phase 1 tonnage shortage from the first quarter has been recovered in April.

Detour Lake Mine Operation Statistics

  • Phase 2 pre-stripping, which does not impact production before 2017, started in February with smaller equipment than plan due to poor ground conditions. A total of 420,000 tonnes was mined in Phase 2 during the quarter. Since early April, Phase 2 mining rates have improved to budgeted rates with the introduction of a CAT6030 excavator, as originally planned. The Company is expecting to recover the first quarter shortfall before the end of the year.
  • Mining rates (Phase 1 and 2) have been at budgeted levels of 238,000 tpd for the last 97 days, with the last 69 days averaging 250,000 tpd.
  • At the end of the quarter, run-of-mine stockpiles were at 0.5 Mt grading 0.70 g/t and are scheduled to be further re-built during the year.
  • Total cash costs for the first quarter of 2015 were $925 per ounce sold and all-in sustaining costs were $1,307 per ounce sold, higher than plan due to lower production and costs of $5 million incurred to repair the 410 conveyor belt and for unscheduled maintenance on the shovel fleet.

Q1 2015 Financial Performance

  • Metal sales for the first quarter were $127.4 million. The Company sold 104,497 ounces of gold at an average realized price of $1,232 per ounce, higher than the average London PM fix gold price of $1,219 per ounce due to the Company’s gold hedging program.
  • Cost of sales for the first quarter was $134.6 million, including $36.9 million of depreciation and depletion expense, or $353 per ounce sold.
  • The Company recorded a net loss of $63.1 million ($0.38 per share) in the first quarter which included $77.2 million of non-cash items. Adjusted net loss in the first quarter amounted to $23.5 million ($0.14 per share) and excludes non-cash items such as the impact of deferred tax expense and changes in the Company’s convertible notes.

Q1 2015 Liquidity and Capital Resources

  • Operating cash flow for the quarter was $16.5 million and was reduced by a $12.3 million payment of Harmonized Sales Tax (HST) on the buyout of the equipment finance leases that occurred later in the first quarter of 2015. The Company expects to receive this HST refund during the second quarter of 2015.
  • During the quarter, sustaining capital expenditures were $19.8 million and cash deferred stripping costs totaled $10.0 million, both of which were on plan.
  • On February 10, 2015, the Company closed a bought deal financing for net proceeds of $123.1 million and used the proceeds to repay the equipment finance lease obligations and revolving credit facility thereby reducing long-term debt by $124.2 million.
  • Cash and short term investments were $118.1 million at March 31, 2015. The Company’s cash balances are expected to benefit in the second quarter from the receipt of the HST refund.

Financial Risk Management

  • In accordance with the Company’s gold sales risk management policy, management is permitted to enter into transactions to hedge up to 50% of the Company’s 2015 forecasted gold sales. As at March 31, 2015, the Company had a total of 85,000 ounces of outstanding gold hedges at an average price of $1,255 per ounce to be settled before the end of the third quarter.
  • The Company has entered into a six-month commodity swap to economically hedge approximately 50% of its diesel consumption for that period, representing approximately 12 million litres of diesel. Between April and September of 2015, the Company will purchase a diesel product at a fixed price of $0.46 per litre.
  • The Company has entered into "zero-cost" collars to hedge a portion of its Canadian dollar expenditures in the first nine months of 2015. As at March 31, 2015, the Company had used zero-cost collars to hedge a total of $90 million, guaranteeing it will purchase Canadian dollars at a rate of no worse than 1.11 and can participate at a rate of up to 1.20. In addition, the Company has $50 million of forward contracts at an average exchange rate of 1.26.