Markets

Analyst Actions: Credit Suisse Maintains "Outperform" Rating on Detour Gold

Event: Detour Gold recently released its Q3 financial results on November 9th. These results were released a day after a construction update on November 8th. The update reiterates that Detour Lake project construction is on track, with gold production expected to start in January 2013.

2013 production guidance unchanged at 350-400kozs at $800-900/oz cash costs on commercial production. First gold production is expected by January 2013, with commercial production expected to be declared by early Q3/13. Credit Suisse FY13 estimate is 404kozs (247kozs commercial) at $881/oz.

Capex expected to be within 3% of the $1.45B project cost estimate, sufficient cash on hand to bring project to production: The increase is mainly associated with the acceleration of the schedule to process ore by 2012 year end. As of September 30th, DGC had spent $1.19B and expects an additional $0.27-$0.31B in project expenditures. DGC's cash balance was ~$348M in cash and equivalents at September 30th. DGC is expected to secure a $100M line of credit by the end of November to provide additional working capital during the ramp-up period.

Stockpile expected to be 2.3Mt at 0.81g/t by 2012 year end: In line with our estimate of 0.84g/t mill feed for 2013. We expect the lower grade stockpiled ore to be put through the mill during the ramp up period in H1/13, transitioning to higher grades in H2/13.

Investment thesis: We believe that DGC has done a lot of leg work to mitigate some ramp up risk in advance. Looking beyond 2013 towards a 21+ year mine life, we expect that longer term DGC will be better able than its peers to control costs and manage production in a low grade environment. We expect an upward re-rating as DGC graduates to the established producer category and generates FCF.

No change to Credit Suisse forecasts, except 2012 EPS updated to reflect Q3 results.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Commodities

Latest Markets Videos