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Detour Gold Reports Third Quarter 2019 Results

November 14, 2019

TORONTO--(BUSINESS WIRE)--Nov 14, 2019--

Detour Gold Corporation (TSX: DGC) (“Detour Gold” or the “Company”) reports its operational and financial results for the third quarter of 2019 . All amounts are in U.S. dollars unless otherwise indicated.

This release should be read in conjunction with the Company’s third quarter 2019 Financial Statements and MD&A on the Company’s website or on SEDAR. All references to non-IFRS measures are denoted with the superscript “0” and are discussed at the end of this news release.

Q3 2019 Highlights

Mick McMullen, President and Chief Executive Officer, stated: “Q3 was a good operational quarter for the Company where we continued to deliver on guidance and look for improvements within the business. As we noted on our Q2 conference call, we expected the grade to be lower in Q3 and much stronger in Q4 and this is what we have seen.

Given the strength of the operating performance and improvements realized in the business year-to-date, we are lowering our cash cost and all-in sustaining cost guidance for the year and increasing the lower end of our production guidance.

During Q3, we continued to work on optimizing the mine plan, with the result that we have been able to reduce planned total expit tonnes relative to the 2018 LOM by 18 Mt in 2020 and 31 Mt in each of 2021 and 2022 while still filling the mill. This is a result of the continued strongly positive reserve reconciliation (21.6% more ounces year to date) and using discounted cash flows to plan the pit staging.

Despite the lower ounces produced quarter over quarter, we have made very good progress on reducing absolute costs and this quarter represents our highest ever cash cost margin per ounce.

Contractor management has improved significantly and based on the work to date we expect to save approximately C$15-$20 million per annum from 2020 onwards on contractor spend. This represents over C$300 million in value life-of-mine.

The work to reduce the maintenance back log in the plant along with the fragmentation project is paying dividends with the mill now regularly reaching its 75 ktpd permit limit and we will soon be applying to increase the mill permit to 90 ktpd. Amendments to the mobile equipment maintenance and repair contract are underway and a definitive agreement is expected in Q4, as a result of this amendment the Company expects to realize cumulative cash savings of over $25 million through 2022.

Subsequent to the end of Q3, we received approval for our updated Closure Plan from the Ontario government and have put in place surety bonds for this, rather than letters of credit, freeing up head room under our Revolving Credit Facility. The Closure Plan approval is a reflection of the hard work of our team who worked closely with the relevant government agencies and all of our Indigenous stakeholders.”

Q3 2019 Operational Results

Detour Lake Operation Statistics

 

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q3 2018

Ore mined (Mt)

5.2

5.1

5.3

5.3

4.3

Waste mined (Mt)

21.1

21.8

21.3

22.7

23.7

Total mined (Mt)

26.3

26.9

26.6

28.0

28.0

Strip ratio (waste:ore)

4.1

4.3

4.1

4.3

5.6

Mining rate (ktpd)

286

296

296

305

304

 

 

 

 

 

 

Ore milled (Mt)

5.6

5.4

5.2

5.6

5.4

Head grade (g/t Au)

0.83

0.93

1.00

0.98

0.97

Recovery (%)

91.2

92.8

92.2

90.9

89.3

Mill throughput (tpd)

61,348

59,376

57,880

60,300

59,219

 

 

 

 

 

 

Ounces produced (oz)

137,670

150,079

154,709

158,200

151,402

Ounces sold (oz)

137,872

153,748

157,723

172,935

139,821

 

 

 

 

 

 

Average realized price 0 ($/oz)

$1,436

$1,309

$1,304

$1,228

$1,214

Total cash costs 0 ($/oz sold)

$730

$793

$739

$712

$798

AISC 0,2 ($/oz sold)

$1,198

$1,143

$1,044

$1,098

$1,377

 

 

 

 

 

 

Mining 0,1 (C$/t mined)

$3.32

$3.38

$3.05

$2.92

$3.01

Milling 0 (C$/t milled)

$8.23

$9.75

$10.60

$9.65

$9.74

G&A and other 0,2 (C$/t milled)

- G&A

- Indigenous communities

$4.41

$3.49

$0.93

$4.58

$3.75

$0.83

$4.11

$3.73

$0.38

$3.60

$3.60

$0.00

$3.48

$3.23

$0.24

 

Total Cost/Ore Tonne (C$/t)

$29.58

$32.24

$30.27

$28.73

$33.08

1 Includes capitalized stripping in excess of the average strip ratio of 3.4 in current Life of Mine (“LOM”) plan.
2 Includes costs related to agreements with Indigenous communities.
Note: Totals may not add due to rounding.

Unit Costs Q3 2019 vs Q3 2018

2019 Outlook

Based on the results from the first nine months of the year and the strong outlook for Q4 2019, we are expected to meet the higher end of guidance for gold production and are raising the lower end of the range from 570,000 ounces to 590,000 ounces.

As previously indicated, we expected to see lower production in Q3 as a result of lower mined grades and mine sequencing that led to a 5,000 ounce gold-in-circuit inventory build towards the end of September which was unwound in early October. As per the mine plan, we are realizing strong mined grades in Q4 resulting in very strong October production of 60,000 ounces poured, including the largest weekly gold pour in the history of the Company at 17,500 ounces at month end.

Our strong Q4 forecast production and cost performance are giving us the confidence to lower the AISC guidance range by $75 per ounce to $1,100-$1,175 and we expect to have costs towards the lower end of the new guidance range for AISC.

Our cash cost guidance range is also being reduced to $750-$790/oz, a $40 per ounce reduction.

The Company continues to focus on cost control, mining practices, contractor management and optimizing the short-term mine plan in light of the ongoing strong positive reserve reconciliation.

 

 

Previous Guidance

Revised Guidance

Gold production (oz)

 

575,000 - 605,000

590,000 - 605,000

Total cash costs ($/oz sold)

 

$790 - $840

$750 - $790

AISC ($/oz sold)

 

$1,175 - $1,250

$1,100 - $1,175

Total capital expenditures (millions)

 

$190 - $210

$185 - $195

Q3 2019 Financial Review

Liquidity and Capital Resources

Financial Risk Management

The Company has established financial risk management programs for its gold sales, Canadian dollar expenditures, and diesel fuel requirements for 2019 and 2020. These programs are in place to help protect the margin on a portion of the Company’s gold production and sales. As at September 30, 2019, the Company has the following outstanding positions:

Selected Financial Information

(in $ millions unless specified)

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q3 2018

Metal sales

202.6

202.0

206.1

212.8

170.0

Production costs

100.1

121.4

117.1

125.9

112.2

Price-linked Indigenous expense

2.3

2.0

-

-

-

Depreciation

40.4

45.0

45.2

53.7

42.8

Cost of sales

142.8

168.4

162.3

179.6

155.0

Earnings from mine operations

59.8

33.6

43.8

33.2

15.0

 

 

 

 

 

 

Net earnings (loss)

(12.6)

16.0

38.9

(32.4)

12.7

Net earnings (loss) per share (basic)

(0.07)

0.09

0.22

(0.19)

0.07

Adjusted net earnings (loss) 0,1

35.3

11.3

18.3

17.6

(1.5)

Adjusted net earnings (loss) per share 0

0.20

0.06

0.10

0.10

(0.01)

1 In the second quarter of 2019, the Company incurred costs associated with payments to senior management upon resignation of $3.5 million (C$4.5 million). These costs were deemed to be non-sustaining and removed from adjusted net earnings. The Company has revised adjusted net earnings for the fourth quarter and second quarter of 2018 to reflect similar payments to senior management.
Note: Totals may not add up due to rounding.

Exploration Activities

Conference Call

The Company will host a conference call and webcast at 10:00 AM ET on Friday, November 15, 2019. Access to the conference call is as follows:

A playback will be available until December 15, 2019 by dialing 604-674-8052 or 1-855-669-9658 within Canada and the United States, using pass code 3671. The webcast and presentation slides will be archived on the Company’s website.

Technical Information

The scientific and technical content of this news release was reviewed, verified and approved by David Londono, Mine General Manager, a Qualified Person as defined by Canadian Securities Administrators National Instrument 43-101 “Standards of Disclosure for Mineral Projects.”

About Detour Gold

Detour Gold is a mid-tier gold producer in Canada that holds a 100% interest in the Detour Lake mine, a long life large-scale open pit operation. Detour Gold’s shares trade on the Toronto Stock Exchange under the trading symbol DGC.

For further information, please contact:

Mick McMullen, President & CEO

Jaco Crouse, CFO

Tel: 416-304-0800

Tel: 416-304-0581

Detour Gold Corporation, Commerce Court West, 199 Bay Street, Suite 4100, P.O. Box 121, Toronto, Ontario M5L 1E

Non-IFRS Financial Performance Measures (0)
The Company has included certain Non-IFRS measures in this document with no standard meaning under International Financial Reporting Standards (“IFRS”): total cash costs, all-in sustaining costs (AISC), unit costs, average realized gold price and average realized margin, adjusted net earnings, adjusted net earnings per basic share, free cash flow, net cash (debt) and operating cash flow per share. Refer to Non-IFRS Financial Performance Measures in the Company’s Q3 2019 MD&A for further information.

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.

Unit costs

Detour Gold reports the following unit costs:

Mining unit costs: calculated as mining costs divided by total tonnes mined (ore+waste).
Processing unit costs: calculated as processing costs (including bullion delivery and refining) divided by total tonnes milled.
G&A and other unit costs: calculated as site G&A and other costs, which includes costs related to agreements with Indigenous communities divided by total tonnes milled.

All-in sustaining costs

The Company believes this measure more fully defines the total costs associated with producing gold. The Company calculates all-in sustaining costs as the sum of total cash costs (as described below), share-based compensation, corporate general and administrative expense net of corporate depreciation and other non-sustaining costs, exploration and evaluation expenses that are sustaining in nature, reclamation cost accretion, sustaining capital including deferred stripping, realized gains and losses on hedges due to operating and capital costs, all divided by the total gold ounces sold to arrive at a per ounce figure.

Total cash costs

Detour Gold reports total cash costs on a sales basis. Total cash costs include production costs such as mining, processing, refining and site administration, agreements with Indigenous communities, less share-based compensation and net of silver sales divided by gold ounces sold to arrive at total cash costs per gold ounce sold. The measure also includes other mine related costs incurred such as mine standby costs and current inventory write downs. Production costs are exclusive of depreciation and depletion. Production costs include the costs associated with providing the royalty in-kind ounces.

All-in sustaining costs and total cash costs do not have any standardized meaning whether under IFRS or otherwise and therefore may not be comparable to other issuers. Accordingly, other companies may calculate these measures differently as a result of differences in underlying principles and policies applied. Differences may also arise to a different definition of sustaining versus non-sustaining capital. These 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.

Three months endedNine months ended
September 30September 30
In millions of dollars, except where noted

2019

2018

2019

2018

 
Gold ounces sold

137,872

139,821

449,343

437,737

 
Total Cash Costs Reconciliation
Production costs

$ 100.1

$ 112.2

$ 338.6

$ 331.8

Price-linked Indigenous expense

2.3

-

4.3

-

Less: Share-based compensation

(1.1)

(0.4)

(1.8)

(0.7)

Less: Silver sales

(0.6)

(0.2)

(1.9)

(0.9)

Total cash costs

$ 100.7

$ 111.6

$ 339.2

$ 330.2

Total cash costs per ounce sold

$ 730

$ 798

$ 755

$ 754

 
All-in Sustaining Costs Reconciliation
Total cash costs

$ 100.7

$ 111.6

$ 339.2

$ 330.2

Sustaining capital expenditures 1

52.7

74.8

137.8

166.3

Sustaining leases 5

0.6

-

1.8

-

Accretion on decommissioning and restoration provision

-

-

0.1

0.1

Share-based compensation

1.1

0.4

1.8

0.7

Realized loss on operating hedges 2

4.2

-

4.4

0.1

Net corporate administration expense 3

5.6

5.5

19.5

18.4

Sustaining exploration expenditures 4

0.3

0.3

1.1

1.0

Total all-in sustaining costs

$ 165.2

$ 192.6

$ 505.7

$ 516.8

All-in sustaining costs per ounce sold

$ 1,198

$ 1,377

$ 1,125

$ 1,181

1 Based on property, plant and equipment additions per the cash flow statement, which includes deferred stripping. Non-sustaining capital expenditures included in the cash flow statement have been excluded. Sustaining capital expenditures include the value of commissioned assets with deferred payments – major components are included when the replacement of a component occurs. Non-sustaining capital expenditures primarily relate to the West Detour project.
2 Includes realized gains and losses on derivative instruments related to operating hedges (foreign exchange and diesel hedges only) as disclosed in the “Derivative instruments” section of this document. These balances are included in the statement of comprehensive earnings (loss), within caption “net finance cost”.
3 Includes the sum of corporate administration expense, which includes share-based compensation, per the statement of comprehensive earnings (loss), excluding depreciation contractual severance/retirement payments for changes in senior management and proxy contest costs.
4 Includes the sum of sustaining exploration and evaluation expense, which includes share-based compensation, per the statement of comprehensive earnings (loss), excluding depreciation within those figures. Non-sustaining exploration and evaluation expense primarily relates to costs associated with Zone 58N, regional exploration, and Burntbush property.
5 Includes the sum of principal and interest charges on Right-of-Use Assets identified during IFRS 16 adoption. These principal charges were previously treated as production costs and corporate administration expenses before the adoption of IFRS 16 on January 1, 2019.

Average realized price and Average realized margin

Average realized price and average realized margin per ounce sold are used by management and investors use these measures to better understand the gold price and margin realized throughout a period.

Average realized price is calculated as metal sales per the statement of comprehensive earnings (loss) and includes realized gains and losses on gold derivatives, less silver sales. Average realized margin represents average realized price per gold ounce sold less total cash costs per ounce sold.

Three months ended Nine months ended
September 30 September 30
In millions of dollars, except where noted

2019

2018

 

2019

2018

  
Metal sales

$ 202.6

$ 170.0

 

$ 610.7

$ 563.2

Realized gain (loss) on gold contracts

(4.0)

-

 

(4.0)

-

Silver sales

(0.6)

(0.2)

 

(1.9)

(0.9)

Revenues from gold sales

$ 198.0

$ 169.8

 

$ 604.8

$ 562.3

Gold ounces sold

137,872

139,821

 

449,343

437,737

Average realized price per gold ounce sold

$ 1,436

$ 1,214

 

$ 1,346

$ 1,285

Less: Total cash costs per gold ounce sold

(730)

(798)

 

(755)

(754)

Average realized margin per gold ounce sold

$ 706

$ 416

 

$ 591

$ 531

Adjusted net earnings (loss) and Adjusted basic net earnings (loss) per share

Adjusted net earnings (loss) and adjusted basic net earnings (loss) per share are used by management and investors to measure the underlying operating performance of the Company. Presenting these measures from period to period helps management and investors evaluate earnings trends more readily in comparison with results from prior periods.

Adjusted net earnings is defined as net earnings adjusted to exclude specific items that are significant, but not reflective of the underlying operations of the Company, including: the impact of foreign exchange gains and losses, unrealized and non-cash fair value gains and losses of financial instruments, accretion on long-term debt, impairment provisions and reversals thereof, the impact of foreign exchange translation on non-monetary assets, non-sustaining corporate administration expense such as contractual severance/retirement payments for changes in senior management and proxy contest costs, and other unusual or non-recurring items. The tax effect of adjustments, as well as the deferred tax impact of foreign exchange translation on non-monetary assets and de-recognition of the deferred tax asset in respect of the decommissioning and restoration liabilities for the Detour Lake mine closure plan, are presented in the income and mining tax adjustments line.

Adjusted basic net earnings (loss) per share is calculated using the weighted average number of shares outstanding under the basic method of earnings per share as determined under IFRS.

Three months endedNine months ended
September 30September 30
In millions of dollars and shares, except where noted

2019

2018

2019

2018

 
Basic weighted average shares outstanding

177.0

175.2

176.2

175.1

 
Adjusted net earnings and Adjusted basic net earnings per share reconciliation
 
Earnings before taxes

$ 14.5

$ 6.0

$ 65.5

$ 75.0

Adjusted for:
Non-sustaining corporate administrative expense 3

-

-

3.5

3.8

Impairment of Long-Term Deposits 4

20.3

-

20.3

-

Accretion on debt 1

0.4

0.2

1.3

1.2

Non-cash unrealized loss on derivative instruments 2

15.1

(1.1)

17.6

1.8

Foreign exchange (gain) loss 1

0.4

(1.3)

(1.7)

2.1

Adjusted earnings before taxes

$ 50.7

$ 3.8

$ 106.5

$ 83.9

 
Income and mining taxes (expense) recovery

(27.1)

6.7

(23.2)

(43.6)

Income and mining tax adjustments

11.7

(12.0)

(18.2)

11.6

Adjusted income and mining tax expense

$ (15.4)

$ (5.3)

$ (41.4)

$ (32.0)

 
Adjusted net earnings (loss)

$ 35.3

$ (1.5)

$ 65.1

$ 51.9

Adjusted basic net earnings (loss) per share

$ 0.20

$ (0.01)

$ 0.37

$ 0.30

1 Balance included in the statement of comprehensive earnings (loss) caption “Net finance cost”. The related financial statements include a detailed breakdown of “Net finance cost”.
2 Includes unrealized gains and losses on derivative instruments as disclosed in the “Derivative Instruments” note in the related financial statements. The balance is grouped with “Net finance cost” on the statement of comprehensive earnings (loss).
3 In the second quarter of 2019, the Company also incurred costs associated with contractual payments to senior management upon resignation of $3.5 million (Cdn $4.5 million). During the second quarter of 2018, the Company incurred in a similar amount related to changes in senior management, including the retirement of the President and CEO.
4 During September 2019, the Company completed a review of the recoverable value of long-term deposits and recorded an impairment expense of $20.3 million to reduce its carrying value to its recoverable value.

Free Cash Flow

Free cash flow is calculated as cash flow from operations less cash flow from investing activities. It provides useful information to management as an indicator of the cash generated from the Company’s operations before consideration of how those activities are financed.

Three months endedNine months ended
September 30September 30
In millions of dollars

2019

2018

2019

2018

 
Net cash generated by operating activities

$ 88.4

$ 81.8

$ 292.4

$ 215.5

Net cash used in investing activities

(50.9)

(74.5)

(134.4)

(164.9)

Free cash flow

$ 37.5

$ 7.3

$ 158.0

$ 50.6

Net Cash (Debt)

Net cash (debt) is comprised of the face value of the Company’s long-term debt less cash and cash equivalents. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s financial position and its ability to take on new debt in the future, purchase new assets or withstand adverse economic conditions.

In millions of dollars

September 30
2019

December 31
2018

 
Cash and cash equivalents

$ 144.2

$ 131.9

Less: Long-term debt face value

(100.0)

(250.0)

Net Cash (Debt)

$ 44.2

$ (118.1)

Operating cash flow per share

Operating cash flows generated from operations is intended to provide additional information only and does not have any standardized meaning under IFRS.

Three months ended Nine months ended
September 30 September 30
In millions of dollars

2019

2018

 

2019

2018

  
Net cash generated by operating activities

$ 88.4

$ 81.8

 

$ 292.4

$ 215.5

Weighted average basic number of shares outstanding

177.0

175.2

 

176.2

175.1

  
Operating cash flow per basic share

$ 0.50

$ 0.47

 

$ 1.66

$ 1.23

Additional IFRS Financial Performance Measures
The Company has included the additional IFRS measure “Earnings from mine operations” in the news release. The Company believes that this measure provides useful information to investors as an indication of the Company’s principal business activities before consideration of how those activities are financed, sustaining capital expenditures, corporate administration expense, exploration and evaluation expenses, loss on disposal of assets, finance income and costs, and taxation.

Cautionary Note regarding Forward-Looking Information
This news release contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking statements”). Forward-looking statements reflect current expectations or beliefs regarding future events or the Company’s future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates”, “targets” or “believes”, or variations of, or the negatives of, such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements, including those herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this news release speak only as of the date of this news release or as of the date or dates specified in such statements.

Specifically, this news release contains forward-looking statements regarding items including, but not limited to: 2019 gold production; 2019 total cash costs; 2019 AISC; 2019 total capital expenditures; unit costs compared to the 2018 LOM projections; benefits from the finer feed product on processing costs; costs associated with planned shutdowns to decrease; mill recovery, TMA capital expenditure and sustaining capex compared to the guided 2019 range; and savings from contractor management.

Inherent in forward-looking statements are risks, uncertainties and other factors beyond the Company’s ability to predict or control. These risks, uncertainties and other factors include, but are not limited to, the results of the life of mine plan (“2018 LOM Plan”), 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, support of the Company’s Indigenous communities, interest rate and exchange rate fluctuations, general economic conditions and other risks involved in the gold exploration, development and production industry, as well as those risk factors listed in the section entitled “Description of Business - Risk Factors” in Detour Gold’s Annual Information Form for the year ended December 31, 2018 (“AIF”) and in the continuous disclosure documents filed by Detour Gold on and available on SEDAR at www.sedar.com. Readers are cautioned that the foregoing list of factors is not exhaustive of the factors that may affect forward-looking statements. Actual results and developments and the results of the 2018 LOM Plan are likely to differ, and may differ materially or materially and adversely, from those expressed or implied by forward-looking statements, including those contained in this news release. Such statements are 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; operating and capital costs; results of operations; the Company’s available cash resources; the Company’s ability to attract and retain skilled staff; the mine development and production schedule and related costs; dilution control; sensitivity to metal prices and other sensitivities; the supply and demand for, and the level and volatility of the price of, gold; timing of the receipt of regulatory and governmental approvals for development projects and other operations; the timing and results of consultations with the Company’s Indigenous partners; the supply and availability of consumables and services; the exchange rates of the Canadian dollar to the U.S. dollar; energy and fuel costs; required capital investments; estimates of net present value and internal rate of returns; the accuracy of mineral reserve and mineral resource estimates, production estimates and capital and operating cost estimates and the assumptions on which such estimates are based; market competition; ongoing relations with employees and impacted communities and general business and economic conditions; and general business and economic conditions.

The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements.

View source version on businesswire.com:https://www.businesswire.com/news/home/20191114005899/en/

CONTACT: Mick McMullen, President & CEO

Tel: 416-304-0800Jaco Crouse, CFO

Tel: 416-304-0581

KEYWORD: NORTH AMERICA CANADA

INDUSTRY KEYWORD: MINING/MINERALS NATURAL RESOURCES

SOURCE: Detour Gold Corporation

Copyright Business Wire 2019.

PUB: 11/14/2019 05:30 PM/DISC: 11/14/2019 05:30 PM

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