Detour Gold Mine expects 2013 Production to hit 350,000 ounces

By Gregory Reynolds

Although it has poured four gold bars and expects to produce 350,000 ounces of gold in 2013, Detour Gold Corporation only expects to declare commercial production at its Detour Lake Gold Mine in the third quarter of this year.

Detour Gold is a Canadian gold mining company with a highly experienced management and technical team. The company’s primary focus is the successful ramp up of its flagship asset - the Detour Lake Mine, located in the mining friendly territory of Northeastern Ontario. Cost of the mine was $1.5 billion.

The company says that with more than 15.6 million ounces in reserves and excellent growth potential, Detour Lake is on track to become Canada’s largest operating gold mine. In turn, this remarkable asset will make Detour Gold a leading intermediate producer and a premier investment opportunity.

The Detour Lake open pit mine is expected to produce an average of 657,000 ounces of gold annually over a period of 21.5 years. The mine is 185 km northeast of the Town of Cochrane.

“As per our guidance, we started gold production in the first quarter of 2013 after 27 months of construction. Our commissioning and operational teams have worked hand in hand and deserve our recognition for their continuous efforts.

The ramp-up is progressing and we had already achieved more than 36,000 tonnes per operating day in the latter part of March, including one 12 hour shift at 22,000 tonnes. We are confident that the plant will be able to deliver its nameplate of 55,000 tonnes per day (tpd) at 92% availability,” said Gerald Panneton , president and CEO, in announcing first quarter results April 9.

Highlights of the first quarter included:

• First production line started on Jan. 12

• First gold pour on Feb. 18

• Second production line started on March 9

• Gold production (poured and plant inventory) for the quarter totaled 16,841 ounces

• Processing rates averaging 36,000 tonnes per operating day at end of March

During the quarter, the mill processed a total of 1.02 million tonnes of ore from a combination of stockpiles and run-of-mine. In the last week of March, with both grinding lines in operation, the mill averaged more than 36,000 tonnes per operating day, largely without the use of the secondary crushers. As previously reported, all of the main operating units are fundamentally performing as expected.

The valuable start-up experience of the first production line was effectively applied to the second production line and results are steadily improving despite lower than expected overall plant availability.

The focus will now shift to adjusting and optimizing both secondary crushers’ by-pass chutes and shuttle conveyors, which is necessary to increase availability and daily throughput levels to plant design. This work is expected to be completed in May 2013.

The mill facility produced 16,841 ounces of gold in its start-up quarter. As per the mine plan, the average head grade was 0.64 g/t and mill recoveries averaged 80%. Mill recoveries reached 86% in March, which is in line with the model recovery. The gravity circuit is expected to be commissioned in the third quarter coinciding with daily throughput closer to design capacity.

In the first quarter, 10.43 million tonnes were mined, of which 8.51 million tonnes were waste (including 4.4 million tonnes of overburden). The run of mine (ROM) ore stockpiles contain over 2.3 million tonnes grading 0.70 g/t. The low-grade stockpile was also increased by 0.62 million tonnes to 1.58 million tonnes grading 0.40 g/t.

The first quarter mining rates in the open pit averaged approximately 123,000 tpd (149,000 tpd in March) of total material moved (overburden, ore, waste and re-handling). Ore mining occurred in narrow, lower grade zones just north of the main Calcite zone where higher localized dilution reduced the average plant feed grade (i.e. mining widths of minimum 15 metres).

In April, the ore mining has transitioned into the wider Calcite zone (+80 metres) where higher grade ore is to be mined during the second quarter and where dilution is expected to be reduced.

The reconciliation work indicates that the mining grades correspond well with the reserve block model, validating the value of the grade control methodology (RC drilling) and applicable mining dilution.

The company has a mining fleet of 20 haul trucks and four shovels available for use, which more than meets the requirements of the 2013 mining operation.

The company had given a production guidance of between 350,000 to 400,000 ounces of gold for 2013 and total cash costs of between $800/oz and $900/oz to be reported after commercial production is declared. The company now believes that producing 350,000 ounces of gold will be at the higher end for 2013 production and will update its guidance in the second quarter.

As of March 31, 2013, the company had approximately $170 million in cash and short-term investments, which includes a $70 million drawdown from its $90 million revolving credit facility.