Detour Gold Corporation

Detour Gold Corporation

September 09, 2009 08:00 ET

Detour Gold Receives Positive Pre-Feasibility Study for Its Detour Lake Gold Project in Ontario

TORONTO, ONTARIO--(Marketwire - Sept. 9, 2009) - Detour Gold Corporation (TSX:DGC) ("Detour Gold" or the "Company") is pleased to report positive results from the pre-feasibility study for a proposed open pit mine at its 100% owned Detour Lake gold project in northeastern Ontario. The pre-feasibility study was compiled by Met-Chem Canada ("Met-Chem") with the participation and contribution of prominent industry consultants. All figures are in US dollars except where noted.

Highlights of the Pre-feasibility Study (base case using US$775/oz gold)

- Proven and probable open pit reserves of 8.81 million ounces contained gold with a waste to ore ratio of 3.8 to 1

- 14.5 years life of mine (LOM) at mill throughput of 45,000 tonnes per day (tpd)

- Average annual gold production of approximately 560,000 ounces

- Average LOM cash operating costs of $404/oz

- At $775/oz, pre-tax Net Present Value (NPV) of $621 million at a 5% discount rate generating an Internal Rate of Return (IRR) of 13.5%

- At $900/oz, pre-tax NPV of $1.19 billion at a 5% discount rate generating an IRR of 20.1%

- Estimated start up capital costs of $844 million

- Opportunities to improve project economics for feasibility study

- Global measured and indicated mineral resources of 17.3 million ounces (inclusive of mineral reserves) and 5.2 million ounces in the inferred category

Gerald Panneton, President and CEO of Detour Gold stated: "The completion of the pre-feasibility study, less than three years since the acquisition of the project, is a major milestone for the Company. As a result of our efforts, the Detour Lake deposit is Canada's largest undeveloped gold reserve and ranks sixth among the top ten largest gold reserves in North America, with 8.8 million ounces. The positive results confirmed the Detour Lake deposit as a future significant gold producer with a long mine life located within a stable political environment. We are continuing with the feasibility study and believe that we can further enhance the project economics with improvements to the capital costs and by expanding the mineral reserves by continuing our drilling program throughout 2009. Other significant trade-off studies currently underway include increasing the mill throughput without significant capital costs and evaluating other tailing deposition scenarios to reduce costs for the tailings infrastructure. Detour Gold is also focusing on the other remaining key deliverables required to start a mine development, which include receipt of permits, negotiation of First Nations agreements and securing project financing. We expect to announce a debt advisor in the near future to evaluate project financing options and oversee the independent review of the project to assist the feasibility study completion."

Project Assumptions and Parameters

Gold price (US$/oz) (1) 775
Foreign exchange rate ($Cdn/$US) 1.18
Fuel price (US$/litre) 0.66
Income/mining tax rate (%) 27/10
Net Smelter Royalty (%) 2

Mine Parameters
Ore milled (Mt) 238.6
Waste mined (Mt) 907.9
Strip ratio (waste:ore) 3.8:1
Average gold grade (g/t) 1.15
Total contained gold (M oz) 8.81
Estimated gold recovery (%) 91.5
Total recovered gold (M oz) 8.06
Mine life (years) 14.5
Average annual gold production (oz) 560,000

Pre-production capital ($ M) 844
Sustaining capital and mine closure ($ M) 417
Average operating cash costs ($/oz) 404
Average total cash costs ($/oz) 420

Financial Analysis
Average annual (pre-tax) cash flow ($ M) 196
NPV 5% discount pre-tax ($ M) 621
IRR pre-tax (%) 13.5
IRR after-tax (%) 11.3
Payback period (years) 6.2

(1) approximates the 3-year trailing average

Detour Lake Mineral Reserves and Resources

The open pit mineral reserves were estimated within a detailed engineered pit design by using the measured and indicated resources only. The optimized pit shell was generated using the Lerchs-Grossmann (LG) pit optimizer algorithm using the cost and economic parameters shown above. In the pit design, inter-ramp pit slopes vary from 49 to 53 degrees depending on rock type and structure orientation. The block model was prepared using the Ordinary Kriging method and the kriged block grades include an average dilution rate of 13.5%. The estimated proven and probable reserves total 8.81 million ounces, using a 95% mining recovery rate.

Detour Lake Mineral Reserves at US$775/oz (cut-off grade of 0.6 g/t)

Reserve Tonnes Grade Gold Ounces
Category (millions) (g/t Au) (000's)
Proven 61.2 1.40 2,751
Probable 177.4 1.06 6,062
Total (P&P) 238.6 1.15 8,813
Effective date of September 9, 2009

The table below summarizes the global mineral resources estimated by Ordinary Kriging at different cut-off grades.

Detour Lake Global Mineral Resource Estimate(1)

Resource Cut-off Grade Tonnes Grade Capped(2) Gold Ounces
Category (g/t) (millions) (g/t Au) (000's)
Measured (M) 0.4 124.1 1.30 5,194
0.5 112.9 1.39 5,035
0.6 102.1 1.48 4,846
Indicated (I) 0.4 521.0 0.91 15,195
0.5 422.3 1.02 13,789
0.6 343.8 1.12 12,417
Total (M&I) 0.4 645.0 0.98 20,389
0.5 535.0 1.09 18,824
0.6 445.9 1.20 17,263
Inferred 0.4 242.1 0.85 6,609
0.5 190.8 0.96 5,877
0.6 151.4 1.07 5,189
(1) Mineral reserves are included within the mineral resources reported.
(2) Capping grade estimated by domains and varies from 20 g/t to 50 g/t.

The pre-feasibility study database included drilling data from the pre-Detour Gold programs, and Detour Gold's 2007, 2008, and 2009 drilling campaigns up to the cut-off date of June 1, 2009. It includes a total of 789,808 metres of drilling in 5,612 holes, including 247,998 metres from Detour Gold.

The mineral reserves could potentially increase for the feasibility study as the Company completes its infill drilling program on 40 metre drill spacing and expand the deposit to the west of the Calcite Zone. Thus far, after the cut-off date (June 1, 2009) for the assay results incorporated in this pre-feasibility study, the Company has completed 146 holes totaling approximately 56,000 metres. The Company is confident that a portion of the inferred resources (exceeding 5 million ounces; refer to above table) could be converted to the measured and indicated categories with more drilling and represents the potential to extend the mine life beyond 14.5 years.

Mining and Production

The pit design completed by BBA Inc. ("BBA") resulted in a mine plan containing 238.6 million tonnes grading 1.15 g/t gold. Total gold production over a 14.5 year mine life is estimated to be 8.06 million ounces, averaging 560,000 ounces per year. The life of mine waste to ore ratio is estimated at 3.8 to 1. Summary of the annual mine production plan is outlined below.

Years Ore Mined Ore Milled Head Grade Production Waste Strip
(kt) (kt) (g/t) (oz) (kt) ratio
0 1,895 1,062 1.42 45,000 23,625 -
1 22,906 15,398 1.30 590,000 62,394 2.72
2 22,704 16,425 1.41 680,000 70,426 3.10
3 16,425 16,425 1.10 529,000 63,948 3.89
4 16,425 16,425 1.09 527,000 63,681 3.88
5 16,425 16,425 1.07 518,000 76,153 4.64
6 16,425 16,425 1.00 483,000 88,166 5.37
7 16,425 16,425 1.17 567,000 87,763 5.34
8 16,425 16,425 1.09 529,000 83,297 5.07
9 16,425 16,425 1.00 484,000 64,728 3.94
10 16,425 16,425 1.05 509,000 61,182 3.72
11 16,425 16,425 1.11 536,000 58,270 3.55
12 16,425 16,425 1.23 593,000 50,941 3.10
13 16,425 16,425 1.42 687,000 34,892 2.12
14 10,392 16,425 1.26 609,000 18,397 1.77
15 0 8,587 0.69 173,000 0 -
Total 238,573 238,573 1.15 8,059,000 907,861 3.81

Conventional open pit mining methods will be used to mine the Detour Lake deposit utilizing a fleet size of up to 28 haul trucks (300 tonne), 3 electric cable shovels (24.5 m3 to 34.2 m3), 6 drills and various ancillary equipment to support the mining operation. Approximately 14 million tonnes of lower grade ore will be stockpiled during the first two years of operation, which is planned to be processed at the end of the mine life. The open pit design incorporates 10 metre high benches with a 34 metre wide main haul road at a maximium grade of 10%. The mine production daily rate, including waste, is estimated at an average of 220,000 tonnes per day.

Metallurgy, Processing, and Infrastructure

The pre-feasibility study contemplates using a conventional gravity, cyanidation and carbon-in-pulp processing facility operating at approximately 45,000 tpd, assuming 92% operating availability. The process plant design consists of two lines, each having one dual pinion SAG mill (36'X19') and one ball mill (26'X40'). Ore is crushed in a single-stage crushing circuit to K80 150 mm prior to being ground to an 80% passing size of 75 microns in a grinding circuit, with approximately 30% to 50% of the free gold recovered by gravity. The remaining gold in ore is sent to cyanidation with an estimated retention time of 28 hours followed by carbon in pulp (CIP) gold recovery. After carbon stripping, the final gold is recovered through an electrowinning process. Cyanide solution is recovered from the tailings stream for recycling. Final tailings are treated through a cyanide destruction process prior to placing the tailings in an impoundment area. Metallurgical test results and algorithms developed from the test data by Melis Engineering Ltd. were used by Met-Chem and BBA to arrive at a 91.5% average gold recovery for a 1.15 g/t head grade and a 28 hour leach retention time, including allowance for plant losses.

The plant design criteria are based on metallurgical tests conducted at various laboratories, including SGS Lakefield Research Ltd. in Lakefield, Ontario.

The pre-feasibility study proposes to construct a 230 (kV) transmission line for the power usage at the mine site using the existing 135 kilometer right of way connection to the power grid. The Company will initially use the same location for the tailings impoundment facility as the former mine. The current design is based on a two-cell downstream containment system with capacity for approximately 270 million tonnes. The surface facilities include a permanent camp and other supporting infrastructure.

Operating Costs

Operating cash costs over the life of the project are projected to average $404/oz. Total operating costs (including royalty) are anticipated to average $420/oz.

$/t milled $/t mined $/oz

Average mining costs 6.18 1.29 183
Processing cost 6.26 - 185
General and administration 1.22 - 36
Operating costs (LOM) 13.66 - 404

Royalty (2%) - - 16
Total operating costs (LOM) - - 420


Capital Costs Estimates

The pre-feasibility study is based on capital pricing as of the first quarter of 2009. The Company has not yet entered into commitments for long-lead items and as such the level of accuracy of the capital costs estimates is within +/-25%. The pre-production capital costs are estimated at $844 million. Sustaining capital expenditure over the operation's mine life is estimated to total $417 million, of which nearly 75% is in the first five years mainly for mining fleet and tailings expansion. Provisions for mine closure amount to $41 million.

The cost breakdown for pre-production capital expenditures, assuming an owner operator scenario, is shown below.

Description Estimate +/-25%
($ M)
Pre-production Capital
Mining 109
Process Plant 402
Tailings and Water Management 19
Infrastructure and Services 51
Powerline and Main Sub-station 76
Other Indirect 72
Contingency (10%) 75
Total Pre-production Capital 844
Sustaining Capital and Mine Closure 417

Financial Analysis

The financial analysis for the Base Case (at a gold price of $775/oz), which evaluates an owner's operation, indicates a pre-tax NPV at a 5% discount rate of $621 million with an IRR of 13.5% (unleveraged) and a payback period of 6.2 years. On an after-tax basis, the NPV at a 5% discount rate is $398 million with an IRR of 11.3%. The project is expected to generate $2.8 billion pre-tax operating cash flow.

The table below outlines key sensitivities for the pre-tax NPV and IRR of the Detour Lake project.

Discount rate Undiscounted 2.5% Base Case 7.5% 10.0%
NPV pre-tax ($ M) 1,596 1,014 621 353 169

Gold price (US$/oz) $650 $775/oz $900
NPV pre-tax @ 5% ($ M) 55 621 1,187
IRR (%) 5.8 13.5 20.1

Capex change +10% -10%
NPV pre-tax @ 5% ($ M) 519 621 723
IRR (%) 11.7 13.5 15.8

Operating cost change +10% -10%
NPV pre-tax @ 5% ($ M) 435 621 807
IRR (%) 11.2 13.5 15.8

Moving Forward - Opportunities in the Feasibility Study

The Company continues to advance the project towards completion of a feasibility study. The permitting process is currently underway to support a mid-2010 construction start, subject to securing funding to develop the project. The main construction period is estimated at 26 months followed by plant commissioning estimated to commence in the last quarter of 2012.

Detour is committed to working with the aboriginal communities that are potentially impacted by the project. The Company has an established consultation plan and is finalizing Memorandum of Understandings with the goal of outlining how the communities will be accommodated during the environmental assessment period and life of mine. The Company looks forward to the positive impact this development will have in partnership with the aboriginal communities.

The feasibility study will look to improve the economics of the project by:

- Converting inferred resources to reserves with additional drilling

- Stockpiling and processing of low-grade material (grading 0.4 g/t to 0.6 g/t gold), which equates to approximately 100 million tonnes

- Optimizing mill throughput i.e. coarser grinding process (from 75 to 100 microns)

- Optimizing tailings deposition plan for capital and operating savings

The Company is continuing to drill the Detour Lake deposit. An additional 50,000 metres of drilling is expected to be added to the feasibility study, which could positively impact the mineral reserves and thus provide additional flexibility to the mine plan and potential improvements in the project economics.

Qualified Persons for Pre-feasibility Study

The pre-feasibility study was prepared by leading independent industry consultants, all Qualified Persons (QP) under National Instrument 43-101, with the collaboration of the Detour Gold technical group. The QPs have reviewed and approved the content of this news release. The following consultants participated in the study:

- Met-Chem Canada, under the direction of Daniel Houde, Eng., Senior Project Manager (overall report preparation, mineral processing, capital and operating cost estimates and overall financial analysis)

- BBA Inc., Patrice Live, Eng., Mining Manager (mineral reserves, pit design, mine planning, and mining capital and operating cost estimates) and Andre Allaire, Eng., Director Mining and Metals (power line capital and operating cost estimates)

- Melis Engineering Ltd., under the direction of Lawrence Melis, P.Eng. (supervised metallurgical test work and associated reporting)

- SGS Geostat Ltd., under the direction of Michel Dagbert, Eng., Senior Geostatistician (mineral resources)

- AMEC Earth & Environmental, a Division of AMEC Americas Limited, under the direction of Sheila Daniel, P.Geo., Head Environmental Management, Associate Geoscientist (environment and permitting) and Xiaogang Hu, P.Eng., Principal Engineer and Head Mining Geo-Engineering (tailings and water and other mine wastes management, and associated capital and operating cost estimates)

- Ausenco Minerals Canada Inc., under the direction of David Brimage (AnsIMM), Manager Engineering and Process (infrastructure and services, and associated capital and operating cost estimates)

- Scott Wilson Roscoe Postle Associate Inc., Patti Nakai-Lajoie, P.Geo., Consulting Geologist (data verification)

- Robert Crepeau, P.Eng., Consultant (geology, quality assurance/quality control)

- Klohn Crippen Berger Ltd., Greg Noack, P.Eng., Associate (closure plan)

- Golder Associates Ltd., under the direction of Luiz Castro, P.Eng., Principal, Rock Mechanics (rock mechanics and mining pit slopes)

A NI 43-101 compliant Technical Report will be filed on the Company's website and on SEDAR within 45 days.

Conference Call

Detour Gold will hold a conference call today at 10:00 AM EST where senior management will discuss the pre-feasibility study and respond to questions from analysts and investors. To join the call:

- In Canada and the United States dial toll free 1-877-407-8035

- International 201-689-8035

- To listen to the audio webcast online, go to:

Note that the link provided on the September 8, 2009 press release was incorrect.

The conference call will be recorded and playback of the call will be available after the event by dialing toll free in Canada and the United States 1-877-660-6853, or internationally 201-612-7415, passcodes (both required for playback): Account # 286 and Conference ID # 332582.

Forward-Looking Information

This press release contains certain forward-looking information as defined in applicable securities laws (referred to herein as "forward-looking statements"). Specifically, this press release contains forward-looking statements regarding the results and projections contained in the pre-feasibility study of the Detour Lake gold project, including the expected mine life, recovery, capital costs, cash operating costs and other costs and anticipated production of the described open pit mine, the projected internal rate of return, the projected payback period, the availability of capital for development, sensitivity to metal prices, ore grade, the reserve and resource estimates on the project, the financial analysis, the timing for completion of a feasibility study on the Detour Lake gold project, and expected drilling activities. Forward-looking statements involve known and unknown risks, uncertainties and other factors which are beyond Detour Gold's ability to predict or control and may cause Detour Gold's actual results, performance or achievements to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking statements.
These risks, uncertainties and other factors include, but are not limited to, gold price volatility, changes in debt and equity markets, the uncertainties involved in interpreting geological data, increases in costs, environmental compliance and changes in environmental legislation and regulation, interest rate and exchange rate fluctuations, general economic conditions and other risks involved in the gold exploration and development industry, as well as those risk factors discussed in the section entitled "Description of Business - Risk Factors" in Detour Gold's 2008 annual information form. Such forward-looking statements are also based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about the following: the availability of financing for exploration and development activities; the estimated timeline for the development of the Detour Lake gold project; the supply and demand for, and the level and volatility of the price of, gold; the accuracy of reserve and resource estimates and the assumptions on which the reserve and resource estimates are based; market competition; ongoing relations with employees and local communities; and general business and economic conditions. In addition, the pre-feasibility study uses an estimate of gold price based on an approximate three-year average. The operating and capital costs in the pre-feasibility study were developed to be reasonable estimates within industry benchmarks. There is no certainty that the results of the pre-feasibility study will ever be realized. Should one or more of the risks or uncertainties involved in forward-looking statements relating to the pre-feasibility study materialize, or should the assumptions underlying the pre-feasibility study prove incorrect, actual results of the pre-feasibility study may vary materially from those anticipated, believed, estimated or expected. Accordingly, readers should not place undue reliance on forward-looking statements. Detour Gold undertakes no obligation to update publicly or otherwise revise any forward-looking statements contained herein whether as a result of new information or future events or otherwise, except as may be required by law.

Information Concerning Estimates of Mineral Reserves and Resources

The mineral reserve and resource estimates reported in this press release were prepared in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"), as required by Canadian securities regulatory authorities. For United States reporting purposes, the United States Securities and Exchange Commission ("SEC") applies different standards in order to classify mineralization as a reserve. In particular, while the terms "measured," "indicated" and "inferred" mineral resources are required pursuant to NI 43-101, the SEC does not recognize such terms. Canadian standards differ significantly from the requirements of the SEC. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories constitute or will ever be converted into reserves. In addition, "inferred" mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities laws, issuers must not make any disclosure of results of an economic analysis that includes inferred mineral resources, except in rare cases.

Contact Information

  • Detour Gold Corporation
    Gerald Panneton
    President and CEO
    (416) 304.0800
    Detour Gold Corporation
    Laurie Gaborit
    Director Investor Relations
    (416) 304.0581
    Detour Gold Corporation
    Royal Bank Plaza, North Tower,
    200 Bay Street, Suite 2040
    Toronto, Ontario M5J 2J1