Mr. Paul Martin reports
DETOUR GOLD ANNOUNCES 2016 OPERATING RESULTS AND 2017 GUIDANCE
Detour Gold Corp. has released its fourth-quarter and full-year 2016 operating results, and 2017 guidance for its Detour Lake mine located in northeastern Ontario.
All 2016 numbers are preliminary figures, unaudited and subject to final adjustment. All amounts are in U.S. dollars unless otherwise indicated. The Company's fourth quarter and full year 2016 financial results will be released on March 9, 2017.
Annual gold production of 537,765 ounces; fourth quarter gold production of 143,512 ounces
Annual average mill throughput of 56,792 tpd and mining rate of 239,000 tpd; fourth quarter average mill throughput of 60,052 tpd and mining rate of 227,000 tpd
All-in sustaining costs(1) ("AISC") estimated at $1,005 per ounce sold; fourth quarter estimated AISC(1) of $1,124 per ounce sold
Debt reduction of $142 million
Year-end cash and short-term investments balance of approximately $129 million
Positive drilling results from Zone 58N
Paul Martin, President and CEO, commented: "2016 finished on a positive note with our best gold production quarter of the year. The mill performed at the highest level to date following the successful modification of the 410-conveyor. The mining rate did not achieve our target in 2016, leading to our decision of accelerating capital and adding to our mining fleet commencing in 2017 to meet our operational targets."
Gold production (oz) 550,000-600,000
Total cash costs(1) ($/oz sold) $690-$750
All-in sustaining costs(1) ($/oz sold) $1,025-$1,125
(1)Refer to the section on Non-IFRS Performance Measures at end of the news release.
2016 Fourth Quarter and Full Year Operational Results
Gold production of 143,512 ounces in the fourth quarter bringing total gold production to 537,765 ounces for the year, in line with revised guidance of 525,000 to 545,000 ounces.
In the fourth quarter, the mill facility processed a record 5.5 million tonnes (Mt) of ore at an average grade of 0.90 g/t with average recoveries of 90%. For the year, the mill processed 20.8 Mt of ore as planned, an increase of 1 Mt over the prior year. Head grade of 0.90 g/t and recoveries of 89% were below plan for the year by 6% and 2%, respectively.
A total of 20.9 Mt (ore and waste) was mined in the fourth quarter (equivalent to mining rates of 227,000 tpd), below plan mainly as a result of lower shovel availability. The Campbell pit recovery plan which started in September remained on target at year-end. For the year, a total of 87.4 Mt was mined, approximately 9.3 Mt below plan.
At the end of December, run-of-mine stockpiles stood at 7.0 Mt grading 0.65 g/t (approximately 145,000 contained gold ounces).
From September to year-end, the Company conducted a large-scale test where it crushed and screened approximately 1.9 Mt of low and medium grade stockpiles (average grade of approximately 0.48 g/t) to <2 inches. The screened portion (<2 inches), equivalent to 665,000 tonnes, was processed through the mill at an estimated grade of 0.79 g/t (or 65% grade improvement). The other crushed material generated during this process can be used for the tailings and road construction. The Company will evaluate these results along with the prior testwork to assess the best approach of integrating the fines in the operations.
2016 Detour Lake Mine Operation Statistics
Q1 2016Q2 2016Q3 2016Q4 2016 2016 2015
Ore mined (Mt) 5.8 5.5 5.0 5.8 22.3 23.0
Waste mined (Mt) 15.2 16.4 18.5 15.0 65.1 67.7
Total mined (Mt) 21.0 21.9 23.5 20.9 87.4 90.7
Strip ratio (waste:ore) 2.6 3.0 3.7 2.6 2.9 2.9
Mining rate (tpd) 231,000241,000256,000227,000239,000249,000
Ore milled (Mt) 4.7 5.3 5.2 5.5 20.8 19.8
Head grade (g/t Au) 0.91 0.92 0.88 0.90 0.90 0.88
Recovery (%) 91 89 87 90 89 91
Mill throughput (tpd) 52,165 58,466 56,453 60,052 56,792 54,114
Mill operating time (%) 88 87 84 86 86 84
Ounces produced (oz) 127,136139,359127,758143,512537,765505,558
Ounces sold (oz) 137,608131,606113,845144,668527,727486,243
Note: Totals may not add due to rounding.
Sustaining capital expenditures for 2016 are estimated at approximately $100 million, at the low end of the revised guidance of $100 and $110 million, and include approximately $16 million for capital purchases originally planned in 2017-18 (including three CAT795 trucks, bringing the hauling fleet to 28 trucks at year-end). Capitalized stripping costs totaled approximately $3 million. The Company incurred approximately $2 million of non-sustaining expenditures for the development of West Detour.
AISC(1) for 2016 are estimated at $1,005 per ounce sold, within the revised guidance of $970 to $1,020 per ounce sold. For the fourth quarter, AISC are estimated at $1,124 per ounce sold and were impacted by accelerated capital expenditures in the quarter.
Gold production is expected to be between 550,000 and 600,000 ounces for 2017 with production being the lowest in the first quarter.
The mine plan calls for approximately 100 million tonnes (Mt) to be mined from the Detour Lake pit in 2017. Mining rates are expected to trend higher starting in the second quarter with the addition of a CAT6060 shovel and four CAT795 trucks, bringing the available fleet to six shovels and 32 trucks, supported by the addition of a new ROM fleet. The average waste to ore ratio for the year is estimated at 3.6:1. There are specific months during the year where this strip ratio will be above the life of mine pit average and stripping costs will be capitalized.
The Detour Lake operation is forecast to process 21 to 22 Mt of ore in 2017. Head grades are expected improve after the first quarter. The Company does not anticipate processing fines during the year and will continue to engineer its low-grade stockpiles (0.4-0.5 g/t) for future use.
2017 AISC(1) are expected to range from $1,025 to $1,125 per ounce sold, with total cash costs from $690 to $750 per ounce sold. Due to the variability of gold production and the timing of capital expenditures, the Company expects that the first quarter actual all-in sustaining costs will be significantly above the yearly guidance.
2017 Capital expenditures
Capital Expenditures ($ millions)
Site infrastructure, G&A & other 31
Total sustaining 155
Capitalized stripping 14
Total capital expenditures $160-$180
Sustaining expenditures include an investment of approximately $40 million for mining equipment to advance the Phase 2 mining and increase mining rates (one CAT6060 shovel, four CAT795 trucks and ROM fleet) and $30 million of accelerated capital for the construction of Cell 2 of the tailings facility ($9 million), the replacement of the contractor camp ($17 million) and the lead nitrate project ($4 million). Approximately $23 million of these sustaining expenditures will be paid in 2018.
The Company is expected to incur non-sustaining expenditures of $5 million for the development of West Detour.
Key assumptions used for the 2017 guidance include:
Gold price of $1,200/oz CAD/US FX rate of 1.30
Diesel fuel price of C$0.70 per litrePower cost of C$0.03 per kilowatt hour
The total exploration budget for the Detour Lake property is approximately $6 million, of which $4 million is non-sustaining expenditures for definition drilling of Zone 58N (Lower Detour), an underground high grade gold target located 6 kilometers south of the Detour Lake processing plant. The balance is considered sustaining and will be used to explore other targets on the property.
Drilling activity has commenced on Zone 58N to continue the infill drilling program between 250 and 450 metres.
2017 Financial Outlook
The 2017 corporate general and administrative expense is estimated at $21 million and excludes share-based compensation. Share-based compensation for the Company is estimated at $11 million, assuming no change in the share price year-over-year. The Company expects to record interest expense and pay interest costs of approximately $20 million on the convertible notes in 2017.
The Company re-purchased $142 million of convertible notes in 2016, reducing the amount due at maturity on November 30, 2017 to $358 million. The Company is evaluating refinancing opportunities for the convertible notes and its bank credit facility which expires on August 31, 2017.
As at December 31, 2016, the Company had $161 million of zero-cost collars to hedge its Canadian dollar costs whereby it can sell US dollars at a rate no lower than 1.30 and can participate up to a rate of 1.40. For 2017, approximately 75% of operating costs and 65% of capital costs are expected to be denominated in Canadian dollars; however, the majority of planned capital expenditures for 2017 are based on exchange rates that were fixed at the time of entering into the contract.
The scientific and technical content of this news release was reviewed, verified and approved by Drew Anwyll, P.Eng., Senior Vice President, Technical Services, a Qualified Person as defined by Canadian Securities Administrators National Instrument 43-101 "Standards of Disclosure for Mineral Projects."
The Company will host a conference call on Tuesday, January 31, 2017 at 10:00 AM E.T.
Access the conference call as follows:
Via webcast, go to www.detourgold.com and click on the "2017 Guidance Conference Call and Webcast" link on home page
By phone toll free in Canada and the United States 1-800-319-4610
By phone internationally 416-915-3239
A playback will be available until February 28, 2017 by dialing 604-674-8052 or 1-855-669-9658 within Canada and the United States, using pass code 1141. The webcast and presentation slides will be archived on the Company's website.
About Detour Gold
Detour Gold is an intermediate gold producer in Canada that holds a 100% interest in the Detour Lake mine, a long life large-scale open pit operation.
(1) Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this news release. The Company believes that these measures, in addition to conventional measures prepared in accordance with IFRS, provide investors an improved ability to evaluate the underlying performance of the Company. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to other issuers.
The 2016 Financial Statements and MD&A are expected to be issued on March 9, 2017. Reconciliation of these figures will be included.
We seek Safe Harbor.
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