DGC: Detour Lake Project Update

MICHAEL CURRAN, RBC Capital Markets (02/02/2010)
"The company is on track to deliver the full feasibility study for the 100%-owned Detour Lake gold deposit in northern Ontario during Q2/10. We believe there are several opportunities to improve the positive economics outlined in the 2009 pre-feasibility study, including:
  • Reserve Increases—From in-fill drilling and increased long-term gold price assumption (US$775/oz used in pre-feasibility).
  • Coarser Grind Size—Higher daily throughput leading to higher production rates if coarser grind size is used (assuming gold recovery rates are not significantly negatively impacted). The company expects to announce testwork results later this month.
  • Stockpiling Lower Grade Ore—For processing later in the mine life; could increase ore grades in early years, leading to higher gold output, lower costs, and improved economics.

With a major milestone expected in Q2/10, we believe a positive feasibility study could lead to a re-rating of DGC shares, for the successful delivery of a new Tier II gold producer, once permits are received and financing secured to build the Detour Lake mine. In our view, one metric that clearly shows the re-rating opportunity is AMC/oz of mineable reserve.

We also consider the tabling of the feasibility study as the opening of a 'window of opportunity' for takeover of DGC by other larger producers, which we believe would be interested in a large (+550Koz/yr) gold mine in a low political risk jurisdiction."

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