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Recent Developments

Recent Developments (Updated November 3, 2014)

Q3 2014 Summary

Detour Gold reported its third quarter operational and financial results on the Detour Lake mine on November 3, 2014.

View the related press release:
14 11 03 - Detour Gold Reports Third Quarter 2014 Results

 


Detour Lake Mine – Q3 2014 Operational Summary

Gold production for the third quarter of 2014 was in line with plan totaling 115,344 ounces.

For the period, the mill facility processed 4.5 million tonnes (Mt) of ore or an average of 49,186 tonnes per day (tpd) at recoveries of 90%. Processed grade was 0.88 grams per tonne (g/t), consistent with projections for the quarter. Mill availability at 81% was at the low end of expectations for the quarter, mainly impacted by five days of unplanned downtime in early July to replace the pulp lifters in both SAG mills due to premature wear. Following further scheduled improvements made to the 410 conveyor (primary crusher feeding the stockpile dome) in August, both operational downtime and milling rates have shown significant progress. From August 18 to September 30, throughput rates averaged 55,443 tpd with 90% availability.

The final major planned plant shutdown for the year took place in October during which further adjustments were completed to the primary crusher unit, along with the liner changes for the SAG and ball mills. The Company conducted a full inspection of the pre-leach thickener and also commissioned and tested a new pre-leach thickener by-pass system which would allow the plant to operate at 90% capacity in the event of maintenance on the pre-leach thickener.

During the third quarter, a total of 18.9 Mt was mined (equivalent to mining rates of 206,000 tpd), approximately 14% lower than targeted levels. At quarter-end, the total ore stockpiles stood at 0.9 Mt grading 0.73 g/t.

Following the significant overburden and till removal program that ended in July, mining rates did not improve as expected, primarily due to low drilling productivity and delays in explosive loading, which impacted shovel productivity and utilization. To a lesser extent, shovel availability also contributed to lower mining rates (availability of 81% versus 85% target). The Company is working towards a step-up phase to gradually improve mining rates, which includes improving quality assurance and controls for drilling and blasting procedures.

Mining activities are now focusing on further opening up the pit by de-stacking the benches to the south and east following the completion of the southwall pushback and the Campbell breakthrough. This will progressively result in larger mine faces and thereby improve shovel allocation and productivity to achieve economies of scale.

The majority of the tailings construction activities planned for 2014 were completed in the third quarter.

Total cash costs for the third quarter of 2014 were US$941 per ounce sold, same as the second quarter but above plan, mainly due to lower mining rates which resulted in lower credits for deferred stripping and fixed costs spread over lower unit bases.

For the quarter, unit mining costs were higher than plan due to the shortfall in tonnes mined. Unit milling costs trended lower mainly due to lower electricity charges.

Detour Lake Mine Operation Statistics:

Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Ore mined (Mt) 4.16 4.09 4.88 2.89 4.20
Waste mined (Mt) 12.42 16.80 14.29 16.11 14.71
Total mined (Mt) 16.58 20.89 19.17 19.00 18.91
Strip ratio (waste:ore) 3.0 4.1 2.9 5.6 3.5
Mining rate (tpd) 180,000 203,000 213,000 209,000 206,000
 
Ore milled (Mt) 3.88 3.41 4.08 4.42 4.53
Head grade (g/t Au) 0.72 0.81 0.90 0.91 0.88
Recovery (%) 85 92 91 91 90
Mill throughput (tpd) 42,141 37,090 45,282 48,569 49,186
Mill availability (%) 78 66 80 83 81
Ounces produced1 (oz) 75,672 81,877 107,154 117,366 115,344
Ounces sold (oz) 75,600 95,000 84,560 107,206 106,334
           
Average realized price2 (US$/oz)             $1,340 $1,269 $1,301 $1,293 $1,278
Total cash cost per oz sold2 (US$/oz)             $1,214 $1,174 $976 $941 $941
 
Mining (Cdn$/t mined) - $2.60 $2.87 $2.87 $2.98
Milling (Cdn$/t milled) - $11.75 $11.13 $11.25 $9.70
G&A (Cdn$/t milled)3 $4.13 $3.68 $3.46 $3.25

Notes:
1 For Q3 2013 includes pre-production ounces prior to the declaration of commercial production on September 1, 2013.
2 Refer to the section on Non-IFRS Financial Performance Measures section at end of this page. Reconciliation of these measures is described in the MD&A for the relevant periods.
3 G&A costs include site G&A, infrastructure, environmental and Aboriginal costs.

Update on Near-term Opportunities

Pebble Circuit Removal:
The sampling completed to date on the potential to remove the pebble circuit indicates high variability in the gold content of the pebbles. Test work will continue this quarter to better understand this variability and the milling conditions (mainly SAG screen opening) to better define the percentage of pebbles that could potentially be removed from the circuit. The Company is considering the design of a prototype pebble extractor, which could be commissioned by mid-2015. Barren pebbles could be used for road and tailings construction.

Segregation of Fines in the Low-grade Stockpile:
The Company has confirmed that a significant portion of the gold in the Detour Lake deposit is naturally concentrating in the fines following drilling and blasting. The Company proceeded to test the gold enrichment potential of its 15 metre high low-grade stockpile, which exhibits a natural segregation pattern. To date, the Detour Lake mine operation has stockpiled, at a book value of ‘zero’ cost, over 12 Mt of ‘mineralized waste’ grading 0.44 g/t gold (material not included in mineral reserves as below the elevated cut-off grade of 0.50 g/t; see February 2014 Technical Report).

In mid-October, the Company processed a first sample of approximately 200,000 tonnes in one batch, excavated from the top two metres of the stockpile, at throughput rates of approximately 68,000 tpd. Results were positive and indicated a mill sampling grade of between 0.60 g/t to 0.65 g/t gold (unreconciled), approximately 35% to 45% higher than the average grade of the low-grade stockpile. The Company is planning additional testing and if conclusive will incorporate, as needed, into its future processing plan. As the mining costs have already been expensed, the only costs associated with this material is the re-handling and processing costs.

Heap Leach of the Low-grade Stockpile:
Results from conventional bottle roll test work conducted on three samples from a low-grade stockpile yielded recoveries of between 55% and 70% on material screened or crushed to minus ½ inch, providing preliminary indications that the gold mineralization is amenable to heap leaching. More test work is being planned to assess the variability throughout the deposit and if additional leach time would improve recovery (all tests were still leaching when stopped).

Outlook

The Company reconfirms guidance for 2014 of between 450,000 and 480,000 ounces at total cash costs of between US$900 and US$975 per ounce sold.

Based largely on the mining rates being below target levels at the end of the third quarter, the annual mine output is expected to range between 75 Mt and 77 Mt versus target of 82 Mt with the annual mill output remaining at 17.7 Mt. As a result, the stockpiles are not expected to increase from current levels. The Company expects to further improve mill availability for the remainder of 2014 with the objective of exiting 2014 at design capacity of 55,000 tpd.

In order to maximize its cash balance, the Company is not intending to make any discretionary debt repayments near-term and therefore total debt repayments for 2014 will be approximately US$60 million.

The Company intends to release its 2015 guidance in January 2015 after evaluating the progress it makes in improving mining rates in the fourth quarter of 2014. With the block model reconciling well and the mill operating at design capacity, increasing mining rates is now the primary driver to attaining higher gold production levels.

The 2015 mine plan from the February 2014 life of mine plan indicated a total of 101 Mt (equivalent to 270,000 tpd) to be mined. The significant overburden and till removal program completed in 2014 to open up the pit to the south and east has reduced the total tonnes required to be mined to approximately 89 Mt (i.e. equivalent to 245,000 tpd) to attain a gold production target of approximately 540,000 ounces. While it is anticipated that mining rates will improve over the coming months, only after the Company has had the benefit of seeing improvement during the fourth quarter will it be in a position to estimate an average mining rate for 2015 and whether an average of 245,000 tpd is achievable.

Potential upside opportunities not reflected in the life of mine plan that could benefit 2015 include processing of the ‘fines’ from the low-grade stockpile and the removal of the barren pebbles, which are both subject to further evaluation in 2015.

Additional Technical Documents View PDF

Technical Information
The scientific and technical content of this news release has been reviewed, verified and approved by Drew Anwyll, P.Eng., Vice President of Operations, a Qualified Person as defined by Canadian Securities Administrators National Instrument 43-101 “Standards of Disclosure for Mineral Projects”.

Non-IFRS Financial Performance Measures
The Company has included non-IFRS measures in this website page. The Company believes that this measure, 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. Refer to the Company's MD&A for the relevant periods for further details.

NI 43-101 Disclosure:
On February 4, 2014, Detour Gold announced an updated mine production plan for the Detour Lake project. The NI 43-101 compliant Technical Report for this update was filed on SEDAR on February 4, 2014. The following QPs participated in this update:  BBA Inc., under the direction of André Allaire, Eng., Acting President and CEO and Patrice Live, Eng., Director Mining; SGS Canada Inc., under the direction of Yann Camus, Eng., Project Engineer and Maxime Dupéré, P.Geo., Senior Geologist; and AMEC Environment & Infrastructure, a Division of AMEC Americas Limited, David G. Ritchie M.Eng., P.Eng, Senior Associate Geotechnical Engineer and Geotechnical Engineering Group Manager.