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 $844 million
- Opportunities to improve project economics for feasibility
study
- Global measured and indicated mineral resources of 17.3 million
ounces (inclusive of mineral reserves) and 5.2 million ounces in the
inferred category
Gerald Panneton, President and CEO of Detour Gold stated: "The
completion of the pre-feasibility study, less than three years since the
acquisition of the project, is a major milestone for the Company. As a
result of our efforts, the Detour Lake deposit is Canada's largest
undeveloped gold reserve and ranks sixth among the top ten largest gold
reserves in North America, with 8.8 million ounces. The positive results
confirmed the Detour Lake deposit as a future significant gold producer
with a long mine life located within a stable political environment. We
are continuing with the feasibility study and believe that we can
further enhance the project economics with improvements to the capital
costs and by expanding the mineral reserves by continuing our drilling
program throughout 2009. Other significant trade-off studies currently
underway include increasing the mill throughput without significant
capital costs and evaluating other tailing deposition scenarios to
reduce costs for the tailings infrastructure. Detour Gold is also
focusing on the other remaining key deliverables required to start a
mine development, which include receipt of permits, negotiation of First
Nations agreements and securing project financing. We expect to
announce a debt advisor in the near future to evaluate project financing
options and oversee the independent review of the project to assist the
feasibility study completion."
Project Assumptions and Parameters
| Assumptions |
|
| Gold price (US$/oz) (1) |
775 |
| Foreign exchange rate ($Cdn/$US) |
1.18 |
| Fuel price (US$/litre) |
0.66 |
| Income/mining tax rate (%) |
27/10 |
| Net Smelter Royalty (%) |
2 |
| Mine Parameters |
|
| Ore milled (Mt) |
238.6 |
| Waste mined (Mt) |
907.9 |
| Strip ratio (waste:ore) |
3.8:1 |
| Average gold grade (g/t) |
1.15 |
| Total contained gold (M oz) |
8.81 |
| Estimated gold recovery (%) |
91.5 |
| Total recovered gold (M oz) |
8.06 |
| Mine life (years) |
14.5 |
| Average annual gold production (oz) |
560,000 |
| Costs |
|
| Pre-production capital ($ 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
Category |
Tonnes
(millions) |
Grade
(g/t Au) |
Gold Ounces
(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
Category |
Cut-off Grade
(g/t) |
Tonnes
(millions) |
Grade Capped (2)
(g/t Au) |
Gold Ounces
(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
(kt) |
Ore Milled
(kt) |
Head Grade
(g/t) |
Production
(oz) |
Waste
(kt) |
Strip 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 |
| EPCM |
42 |
| 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 $2.8 billion pre-tax operating cash flow.
The table below outlines key sensitivities for the pre-tax NPV and IRR
of the Detour Lake project.
| Discount rate |
Undiscounted |
2.5% |
Base Case
(5.0%) |
7.5% |
10.0% |
| NPV pre-tax ($ 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 André 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:
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.
For further information, please contact:
Gerald Panneton, President and CEO
Tel: (416) 304.0800
Laurie Gaborit, Director Investor Relations
Tel: (416) 304.0581
Detour Gold Corporation, Royal Bank Plaza, North Tower, 200 Bay Street,
Suite 2040, Toronto, Ontario M5J 2J1
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
43-101Standards 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.
|