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Detour Gold Reports First Quarter 2019 Results

TORONTO , May 2, 2019 /CNW/ - Detour Gold Corporation (DGC.TO) ("Detour Gold" or the "Company") reports its operational and financial results for the first quarter of 2019. All amounts are in U.S. dollars unless otherwise indicated.

Detour Gold (CNW Group/Detour Gold)

This release should be read in conjunction with the Company's first 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.

Q1 2019 Highlights

  • Gold production of 154,709 ounces
  • Total cash costso of $739 per ounce sold
  • All-in sustaining costso ("AISC") of $1,044 per ounce sold
  • Revenues of $206.1 million on gold sales of 157,723 ounces at an average realized priceo of $1,304 per ounce
  • Cash and cash equivalents of $201.1 million at March 31, 2019 , an increase of $69.2 million from December 31, 2018
  • Net earnings of $38.9 million ( $0.22 per basic share) and adjusted net earningso of $18.3 million ( $0.10 per basic share)


Subsequent Events

  • Appointment of Michael (Mick) McMullen as President and Chief Executive Officer and a Director of Detour Gold effective May 1, 2019
  • Bill Williams , who served as Interim Chief Executive Officer of Detour Gold since January 2019 , will continue to serve on the Board as a Director.


Mick Mullen , President and Chief Executive Officer, stated: "I am excited to start working with the team at Detour Gold as we continue to turn around the operations and deliver improvements in production and costs. There are still many opportunities to be realized and I look forward to engaging with our stakeholders to determine the optimal way to create shareholder value going forward."

Frazer Bourchier, Chief Operating Officer, commented on the first quarter operational results: "We are continuing to progress positively on stabilizing the operation as seen by another quarter of strong operational results. This has been by far the best performing 'first quarter' the Company has ever had since start of operations. I would expect that by year-end we start achieving predictable and consistent operational results and shift towards the optimization phase. We are tracking well to achieve our annual guidance and execute on our 2018 life of mine plan."

Q1 2019 Operational Results

  • Gold production totaled 154,709 ounces in the first quarter.
  • Mill throughput was on plan at 5.2 million tonnes (Mt) despite cold winter conditions.
  • Head grade averaged 1.00 grams per tonne (g/t) with recoveries improving to 92.2%.
  • Ongoing mill capital projects and modifications to maintenance and operating practices are resulting in improvements to plant reliability, operating time, and recovery.
  • Unit costs for milling in the first quarter included a portion of the costs associated with the second planned shutdown of the year that started on April 1 . The Company's planned mill shutdowns occur every 10 weeks.
  • A total of 26.6 Mt (ore and waste) was mined in the first quarter (equivalent to mining rates of 296,000 tpd), representing the Company's best ever first quarter on record.
  • Progress continues with improving maintenance and operating practices, including drill and blast and improving road conditions.
  • Unit costs for mining in the first quarter reflected slightly lower mine output than planned.
  • Run-of-mine stockpiles stood at 5.5 Mt grading 0.62 g/t (approximately 110,000 ounces) at end of first quarter, unchanged from year-end.
  • Unit costs for site G&A and other in the first quarter were in line with plan, reflecting higher budgeted First Nations' payments than the prior year.


Detour Lake Operation Statistics


Q1 2019

Q4 2018

Q3 2018

Q2 2018

Q1 2018

Ore mined (Mt)

5.3

5.3

4.3

4.9

5.8

Waste mined (Mt)

21.3

22.7

23.7

21.4

16.7

Total mined (Mt)

26.6

28.0

28.0

26.3

22.5

Strip ratio (waste:ore)

4.1

4.3

5.6

4.4

2.9

Mining rate (k tpd)

296

305

304

289

250







Ore milled (Mt)

5.2

5.6

5.4

5.1

4.6

Head grade (g/t Au)

1.00

0.98

0.97

1.06

1.17

Recovery (%)

92.2

90.9

89.3

88.9

91.1

Mill throughput (tpd)

57,880

60,300

59,219

55,825

50,860







Ounces produced (oz)

154,709

158,200

151,402

154,385

157,141

Ounces sold (oz)

157,723

172,935

139,821

146,856

151,060







Average realized priceo ($/oz)

$1,304

$1,228

$1,214

$1,305

$1,330

Total cash costso ($/oz sold)

$739

$712

$798

$723

$744

AISCo ($/oz sold)

$1,044

$1,102

$1,377

$1,104

$1,072







Miningo,1 (Cdn$/t mined)

$3.05

$2.92

$3.01

$3.25

$3.75

Millingo (Cdn$/t milled)

$10.60

$9.65

$9.74

$12.50

$11.60

G&A and othero,2 (Cdn$/t milled)

$4.11

$3.60

$3.48

$3.96

$4.61

1.

Includes capitalized stripping in excess of the average strip ratio of 3.4 in current LOM plan.

2.

Includes costs related to agreements with Indigenous communities.

Note: Totals may not add due to rounding.

 

Q1 2019 Update on Operational Focus Areas 

The Company continues to advance its key strategic operational objectives for 2019. Progress in the first quarter included:

  • Embed Condition-Based Maintenance (CBM) – reliability team staffed, CBM nearly fully integrated with proactive planned and scheduled maintenance approach to increase equipment reliability, completion expected in Q4 2019.
  • Establish Business Improvement Team (focus on efficiencies) – main focus on drill and blast, haul truck cycle efficiencies, loading practices, mobile fleet management, and mill throughput improvements.
  • Contractor management and Projects management – progressing on resourcing expertise and implementing better systems.
  • Automation and data analytics – tele-remote drills now operating and real-time remote operational data capture with effective reports and dashboards near completion for effective short interval operational control.
  • Processing plant capital projects – approximately 60% completed (started in Q1 2018).
  • TMA Cell 2 construction – new leadership, mostly on schedule with new earthworks operating practices and project management reporting.
  • HR recruitment and retention strategy – progressing on recruitment, performance management, pay for performance and talent review strategies, including succession planning.
  • Mine planning enhancements – added expertise to mine Technical Services department, advancing work on grade control model for better gold grade predictions by accounting for the positive block model reconciliation since start of production.


Q1 2019 Financial Review

  • Revenues for the first quarter were $206.1 million on the sale of 157,723 ounces of gold at an average realized priceo of $1,304 per ounce.
  • Cost of sales for the first quarter totaled $162.3 million , including $45.2 million of depreciation.
  • Total cash costso were $739 per ounce sold in the first quarter.
  • AISCo were $1,044 per ounce sold in the first quarter, mainly reflecting lower sustaining capital expenditures than projected for the quarter. Sustaining capital expenditures are expected to progressively increase over the remainder of the year with the construction of Cell 2 of the tailings facility.
  • Sustaining capital expenditures totaled $40.3 million for the first quarter, including $9.3 million of deferred stripping. The expenditures included $12.7 million for mining (mainly for major component replacements for the mobile fleet), $7.7 million for the ongoing construction of the tailings facility, $6.9 million for the processing plant, and $3.7 million for site infrastructure.
  • Earnings from mine operations for the first quarter totaled $43.8 million .
  • Net earnings for the first quarter were $38.9 million ( $0.22 per basic share). Adjusted net earningso in the first quarter amounted to $18.3 million ( $0.10 per basic share).


Liquidity and Capital Resources

  • As at March 31, 2019 , the Company had $201.1 million of cash and cash equivalents, approximately $220 million available from its bank credit facility, and net debto of approximately $49 million .


Financial Risk Management

The Company has established financial risk management programs for its 2019 gold sales, Canadian dollar expenditures, and diesel fuel requirements. These programs are in place to reduce a portion of the Company's exposure to volatile markets and to lock-in known rates for budgeting purposes. As at March 31, 2019 , the Company has the following positions:

  • 204,000 gold ounces of gold collars on 45% to 50% of the Company's remaining 2019 gold sales at an average floor price of $1,250 per ounce and participation up to an average ceiling price of $1,425 per ounce. These collars mature relatively evenly over 2019.
  • $325 million of zero-cost collars whereby it can sell U.S. dollars at an average rate of 1.28 and can participate up to an average rate of 1.35. These collars mature relatively evenly over 2019 and represent a hedge coverage ratio of approximately 70% of the Company's estimated 2019 Canadian dollar requirements for the remainder of the year. In April, the Company added $80 million of zero-cost collars protecting an average floor price of 1.30 and allowing participation up to an average ceiling price of 1.37 for the first half of 2020.
  • 25 million litres of diesel fuel contracts at an average rate of C$0.85 per litre, which settle on a net basis. These contracts represent approximately 40% of the Company's diesel fuel requirements for the remainder of 2019.


Selected Financial Information

(in $ millions unless specified)

Q1 2019

Q4 2018

Q3 2018

Q2 2018

Q1 2018

Metal sales 

206.1

212.8

170.0

191.8

201.4

Production costs

117.1

125.9

112.2

106.7

112.9

Depreciation

45.2

53.7

42.8

38.6

37.5

Cost of sales

162.3

179.6

155.0

145.3

150.4

Earnings from mine operations

43.8

33.2

15.0

46.5

51.0







Net earnings (loss)

38.9

(32.4)

12.7

8.8

9.9

Net earnings (loss) per share (basic)

0.22

(0.19)

0.07

0.05

0.06

Adjusted net earnings (loss)o

18.3

17.0

(1.5)

21.3

28.2

Adjusted net earnings (loss) per shareo

0.10

0.10

(0.01)

0.12

0.16

Note: Totals may not add up due to rounding.

 

Exploration Activities

  • In the first quarter of 2019, the Company completed its winter drilling program with 7,502 metres in 26 holes testing the western extension of Zone 58N and several exploration targets east and northeast of Zone 58N. The drilling program west of Zone 58N was successful in delineating gold mineralization 150 metres west of the current mineral resource. Further drilling east and up to 1 kilometres northeast of Zone 58N did not intersect significant gold mineralization.
  • The Company completed 50 line-kilometres of geophysical surveys in the Lower Detour area (Zone 58N area and Hopper Lake area, located 11 kilometres west of Zone 58N). This work will assist in identifying additional targets for a summer drilling program.


2019 Guidance
The guidance for 2019 remains unchanged.


2019 Guidance

Gold production (oz)

570,000-605,000

Total cash costs ($/oz sold)

$790-$840

AISC ($/oz sold)

$1,175-$1,250

Total capital expenditures (millions)

$190-210

 

Conference Call  
The Company will host a conference call and webcast at 10:00 AM E.T. on Friday , May 3, 2019. Access to the conference call is as follows:

  • Via webcast, go to www.detourgold.com and click on the "Q1 2019 Results Conference Call and Webcast" link on the home page
  • By phone toll free in North America 1-800-319-4610
  • By phone Toronto local and internationally 416-915-3239


A playback will be available until June 3, 2019 by dialing 604-674-8052 or 1-855-669-9658 within Canada and the United States , using pass code 3113. 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 , Operations Manager, a Qualified Person as defined by Canadian Securities Administrators National Instrument 43-101 "Standards of Disclosure for Mineral Projects."

Annual and Special Meeting of Shareholders
Detour Gold's Annual and Special Meeting of Shareholders will be held on June 5, 2019 at 2:00 PM E.T. in the St. Andrew's Lounge (27th Floor) of Vantage Venues at 150 King Street West in Toronto, Ontario .

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

Laurie Gaborit, VP Investor Relations

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 (o)
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, unit costs, average realized gold price, adjusted net earnings and adjusted net earnings per basic share. Refer to Non-IFRS Financial Performance Measures in the Company's 2018 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.

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, 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, but excluding proxy contest 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 ended



March 31

In millions of dollars, except where noted

2019

2018




Gold ounces sold

157,723

151,060




Total Cash Costs Reconciliation



Production costs

$

117.1

$

112.9

Less: Share-based compensation

-

-

Less: Silver sales

(0.5)

(0.5)

Total cash costs

$

116.6

$

112.4

Total cash costs per ounce sold 

$

739

$

744




All-in Sustaining Costs Reconciliation



Total cash costs

$

116.6

$

112.4

Sustaining capital expenditures1

40.3

45.0

Sustaining leases5

0.6

-

Accretion on decommissioning and restoration provision

0.1

-

Share-based compensation

-

-

Realized (gain) loss on operating hedges2

0.1

(0.1)

Corporate administration expense3

6.5

4.4

Sustaining exploration expenditures4

0.5

0.3

Total all-in sustaining costs

$

164.7

$

162.0

All-in sustaining costs per ounce sold 

$

1,044

$

1,072


1Based 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. Non-sustaining capital expenditures primarily relate to the West Detour project. 


2Includes 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, within caption "net finance cost".


3Includes the sum of corporate administration expense, which includes share-based compensation, per the statement of comprehensive earnings, excluding depreciation and selected non-sustaining activities within those figures.


4Includes the sum of sustaining exploration and evaluation expense, which includes share-based compensation, per the statement of comprehensive earnings, excluding depreciation within those figures. Non-sustaining exploration and evaluation expense primarily relates to costs associated with Zone 58N, regional exploration, and Burntbush property.


5Includes 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.

 

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 unit costs: calculated as site G&A costs, including costs related to agreements with Indigenous communities divided by total tonnes milled.

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


March 31

In millions of dollars, except where noted

2019

2018




Metal sales

$

206.1

$

201.4

Realized (gain) loss on gold contracts

-

-

Silver sales

(0.5)

(0.5)

Revenues from gold sales

$

205.6

$

200.9

Gold ounces sold

157,723

151,060

Average realized price per gold ounce sold

$

1,304

$

1,330

Less: Total cash costs per gold ounce sold

(739)

(744)

Average realized margin per gold ounce sold

$

565

$

586

 

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 (loss) is defined as net earnings (loss) 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, and other unusual or non-recurring items (such as proxy contest costs). The tax effect of adjustments, as well as the impact of foreign exchange translation on non-monetary assets related to deferred taxes, is 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 ended



March 31

In millions of dollars and shares, except where noted

2019

2018




Basic weighted average shares outstanding

175.6

174.9




Adjusted net earnings and Adjusted basic net earnings per share reconciliation






Earnings before taxes

$

40.4

$

38.6

Adjusted for:



Accretion on debt1

0.2

0.8

Non-cash unrealized (gain) loss on derivative instruments2

(7.3)

2.1

Foreign exchange (gain) loss1

(1.0)

1.2

Adjusted earnings before taxes

$

32.3

$

42.7




Income and mining taxes (expense) recovery

(1.5)

(28.7)

Income and mining tax adjustments

(12.5)

14.2

Adjusted income and mining tax expense

$

(14.0)

$

(14.5)




Adjusted net earnings 

$

18.3

$

28.2

Adjusted basic net earnings per share

$

0.10

$

0.16


1Balance included in the statement of comprehensive earnings caption "Net finance cost". The related financial statements include a detailed breakdown of "Net finance cost".


2Includes 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.


3Includes proxy contest costs and vesting of RSUs, PSUs and options as a result of the deemed Change of Control.

 

Net debt
Net 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, are used 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.

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 press release contains forward-looking statements regarding future opportunities to be realized and the creation of shareholder value; achieving predictable and consistent operational results and shift towards the optimization phase by year-end 2019; the Company's ability to achieve and progress towards its 2019 annual guidance and the 2018 LOM Plan (as defined below); fourth quarter 2019 expected completion to embed Condition-Based Maintenance; sustaining capital expenditures expected to progressively increase over the remainder of the year with the construction of Cell 2 of the tailings facility, 2019 gold production of between 570,000 and 605,000 ounces; 2019 total cash costs of between $790 and $840 per ounce sold; AISC of between $1,175 and $1,250 per ounce sold; and 2019 total capital expenditures of between $190 to $210 million .

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 2018 Annual Information Form ("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.

SOURCE Detour Gold


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