DGC: Optimism Regarding Upcoming Feasibility

MICHAEL CURRAN, RBC Capital Markets (03/29/2010)
"Detour Lake Update. 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 pre-feasibility study economics, including:
  • Reserve Increases—From in-fill drilling and increased long-term gold price assumption (US$775/oz used in pre-feasibility), we forecast open pittable reserves increasing from 8.8 million to over 10 million ounces.
  • Coarser Grind Size—Higher daily throughput (45 to 55Ktpd) leading to higher production rates if coarser grind size is used (assuming gold recovery rates are not significantly negatively impacted).
  • 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 further re-rating of DGC shares, for the successful delivery of a new Tier II gold producer, once permits are received and financing is secured to build the Detour Lake mine. In our view, the feasibility study also opens a 'window of opportunity' for takeover of DGC by other larger producers, which we believe could be interested in a large (+550Koz/yr) gold mine in a low political risk jurisdiction."

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