CANADA S INTERMEDIATE GOLD PRODUCER. 21 st Annual Canada Mining Conference Bank of America Merrill Lynch Toronto September 10-11, 2015

Transcription

1 CANADA S INTERMEDIATE GOLD PRODUCER 1 21 st Annual Canada Mining Conference Bank of America Merrill Lynch Toronto September 10-11, 2015

2 Forward Looking Information This presentation contains certain forward-looking information and statements as defined in applicable securities law (referred to herein as forward-looking statements ). Forward-looking statements include, but are not limited to, statements with respect to 2015 guidance for production, total cash costs, all-in sustaining costs, capital costs, deferred stripping costs, and exploration costs; expected throughput, mining and recovery rates; expected future production and mining activities; opportunities to optimize the mine operation; timeline for the life of mine plan update, and exploration program; and opportunities to optimize the mine operation. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any of its future results, performance or achievements expressed or implied by forwardlooking statements. These risks, uncertainties and other factors include, but are not limited to, assumptions and parameters underlying the life of mine update not being realized, a decrease in the future gold price, discrepancies between actual and estimated production, changes in costs (including labour, supplies, fuel and equipment), changes to tax rates; environmental compliance and changes in environmental legislation and regulation, exchange rate fluctuations, general economic conditions and other risks involved in the gold exploration and development industry, as well as those risk factors discussed in the section entitled Description of Business - Risk Factors in Detour Gold s 2014 AIF and in the continuous disclosure documents filed by Detour Gold on and available on SEDAR at Such forward-looking statements are also 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 sustaining capital costs; the Company s ability to attract and retain skilled staff; sensitivity to metal prices and other sensitivities; the supply and demand for, and the level and volatility of the price of, gold; the supply and availability of consumables and services; the exchange rates of the Canadian dollar to the U.S. dollar; energy and fuel costs; the accuracy of reserve and resource estimates and the assumptions on which the reserve and resource estimates are based; market competition; ongoing relations with employees and impacted communities and general business and economic conditions. Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements contained herein are made as of the date hereof, or such other date or dates specified in such statements. All forward-looking statements in this presentation are necessarily based on opinions and estimates made as of the date such statements are made and are subject to important risk factors and uncertainties, many of which cannot be controlled or predicted. Detour Gold and the Qualified Persons who authored the associated Technical Report undertake no obligation to update publicly or otherwise revise any forward-looking statements contained herein whether as a result of new information or future events or otherwise, except as may be required by law. 2

3 Notes to Investors Non-IFRS Financial Performance Measures The Company has included non-ifrs measures in this presentation: total cash costs, all-in sustaining costs, adjusted net loss and adjusted net loss per share. 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. Other companies may calculate these measure differently. Detour Gold reports total cash costs on a sales basis. Total cash costs include production costs such as mining, processing, refining and site administration, less non-cash 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. Commencing in 2015, the Company adopted all-in sustaining costs on a prospective basis. 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 above), 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, and realized gains and losses on hedges due to operating and capital costs, all divided by the gold ounces sold to arrive at a per ounce figure. Costs excluded from all-in sustaining costs are non-sustaining capital expenditures and exploration costs that are expected to materially increase production, financing costs and tax expense. Consequently, this measure is not representative of all of the Company s cash expenditures. In addition, the calculation of all-in sustaining costs does not include depreciation and depletion expense as it does not reflect the impact of expenditures incurred in prior periods. Adjusted net earnings (loss) and adjusted basic 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: fair value change of the convertible notes, the impact of foreign exchange gains and losses, including the foreign exchange on deferred income and mining taxes, non-cash unrealized gains and losses on derivative instruments, accretion on convertible notes, unwinding of discount on decommissioning and restoration provisions, impairment provisions and reversals thereof, and other non-recurring items. Adjusted basic net earnings (loss) per share is calculated using the weighted average number of shares outstanding under the basic method of loss per share as determined under IFRS. Qualified Persons The scientific and technical content of this presentation was reviewed, verified and approved by Drew Anwyll, P.Eng., Senior Vice President Technical Services, and exploration results was reviewed, verified and approved by Guy MacGillivray, P.Geo., Exploration Manager, both Qualified Person as defined by Canadian Securities Administrators National Instrument Standards of Disclosure for Mineral Projects. 3

4 Unique Investment Opportunity DOMINANT GOLD PRODUCER IN CANADA Mining-friendly Jurisdiction Large-scale, long mine life Largest gold producing mine not controlled by a senior producer Growing cash flow profile Production growth opportunities Favourable exposure to Canadian Dollar 4

5 Canadian Intermediate Gold Producer #2 in Production and #1 in Reserves 2015 Production Guidance (Koz) Gold Reserves (Moz) AEM/YRI Canadian Malartic DGC Detour Lake G Red Lake AEM Meadowbank DGC Detour Lake AEM/YRI Canadian Malartic G Red Lake AEM Meadowbank 5

6 2015 Drivers to Success Execution of Plan Gold production increase with higher mining and milling rates Strengthen balance sheet Added Benefits Significant leverage to gold price and Canadian dollar Low power and favourable diesel costs Near to Long-Term Value Enhancements Plant optimization (with limited capital) Development of Block A Exploration potential 6

7 2015 Guidance third year of operation ESTIMATED PRODUCTION Gold ounces ESTIMATED COSTS AISC/oz sold 2 $1,050-$1, , ,000 TCC 2 $780- $850 Capital Expenditures Sustaining capital: US$ M Deferred stripping: US$20-25 M 1. Cost assumptions (US$): Gold price of $1,200/oz, diesel fuel price of $0.82 per litre; power cost of $0.04 per kilowatt hour; and exchange rate of $1.00US:$1.15Cdn. 2. Refer to the section on Non-IFRS Performance Measures on slide 3 of this presentation. 7

8 H Solid Progress H Highlights: Gold production of 230,920 oz at TCC of $828/oz sold and AISC of $1,163/oz sold Break-even cash flow position Positive amendments to credit facility of C$135 M Cash position of US$133 M at June 30 H Expectations: Stronger operational performance Encouraging results from Lower Detour 30,000 m drilling program H1 2015: Detour Lake Mine 0 $1,321 $1, Q1 Q2 Gold Production (k oz) AISC (US$/oz sold) 1 $1,350 $1,250 $1,150 $1,050 $950 $850 $ Refer to the section on Non-IFRS Performance Measures on slide 3 of this presentation. Reconciliation and adjustment of this measure is described in the MD&A for Q

9 Q Operating Results Mine Continued positive progress on drilling rates, blasted inventory, and shovel productivity Mining rates averaged 280,000 tpd, exceeding budget by 18% Mining Rates (k tpd) H1 Achieved Q1A Q2A H2E H2 Target: k tpd H L

10 H Mine Plan Focus Targeting 250,000 to 290,000 tpd for remainder of 2015 Successful re-build of ROM stockpiles at Q2 end ( g/t) provides operational flexibility for H2 2015: Focus on delivering higher grade to mill Accelerate Phase 2 pre-stripping On target for east end pit access to higher grade (former Campbell pit area) Maximize TMA placement efficiency (using CAT795 trucks) 10

11 Q Operating Results - Mill Throughput rate of 57,015 tpd At design capacity since March Milling rates at 2,712 tpoh with operating time improving to 88% Exceeding design of 2,500 tpoh Q2 15 Performance MT ore milled G/T AU head grade % gold recovery 2015 Mill Throughput (k tpd) 57 55* Q1'15 Q2'15 H2E 30 * Excluding the processing of fines 11

12 H Focus Mill 2015 Mine Plan Targets MT ore milled G/T AU head grade % gold recovery H2 Focus Continue plant optimization efforts Assess robustness of 410-conveyor Increase operating time to >90% Increase milling rate to 2,800 tpoh with fines Processing of fines in month of July; test to continue in Q4 Targeting average throughput rate of 55,000 tpd for H

13 Q Operating Costs Q1 15 Q E Mining (C$/t mined) $3.16 $2.42 $2.60 Processing 2 (C$/t milled) $11.78 $8.81 $9.87 G&A (C$/t milled) $3.89 $2.72 $3.05 Significant cost reduction per ounce & tonne due to economies of scale Continued reduction of plant consumables Trending down $954 $955 $886 $1,321 $939 $1,030 $734 TCC & AISC 1,2 ($/oz sold) Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q2 15 Total Cash Costs 1 Other (Sustaining capital, G&A and exploration) Refer to the section on Non-IFRS Performance Measures on slide 3. Reconciliation of these measures is described in the MD&A for the relevant periods. 2. The calculation for TCC and AISC (non-ifrs measures) and processing unit costs, including prior periods, were adjusted to allocate the electricity adjustment into the appropriate historical period to which the cost applied. Refer to slide 24 and MD&A for Q2 15.

14 Q Capital Expenditures Q1 15 Q E Sustaining Capital $19.8 M $25.8 M $ M Capitalized Stripping $10.0 M - $20-25 M Total (US$) $29.8 M $25.8 M $ M Q2 Sustaining Capital Mine Mill TMA $7.5 M $5.2 M $6.5 M Other $6.6 M 1 Breakdown of 2015 Sustaining Capital (US$) ~90% of costs in Cdn$ Mine $30 M TMA $34 M Other $13 M Water Management $10 M Mill $9 M 1. Includes US$2.0 M NAC settlement payment

15 Benefiting from a Weak Cdn $ YTD 2015 Gold Price in US Dollars vs Canadian Dollars $/oz $1,500 $1,400 $1,300 $1,380 $1,372 $1,479 Gold Performance YTD $Cdn: +8% $US: -5% $1,200 $1,100 $1,200 $1,182 $1,121 $1,000 Budget Jan-15 8-Sep-15 FX rate $Cdn $US 15

16 Prudent Financial Management No addition to hedging programs in Q2 15 Hedge up to 50% of 2015 Gold Production Forward sales on 35,000 US$1,276/oz Currency Exchange Contracts Zero-cost collars for US$40 M with a ceiling of 1.21; Forward contracts for US$40 M at average 1.26 Hedge ~50% of Next 3 Months Diesel Use Purchasing diesel product (~6 M litres) at effective hedge price of US$0.46/litre As at June 30, 2015: Mark-to-market value of US$3 M 16

17 LOM Plan Update EOY Target Goal: Maximize Returns for Next 5-10 yrs and Optimize NAV Optimize capital vs mine output (at gold price of US$1,200/oz long-term) Evaluate production ranging from 110 to 140 Mt annually (equivalent to mining rates of 300,000 to 385,000 tpd) Include Block A as a second feed source (at earliest 2018) Evaluate the use of Block A pit as waste rock dump and TMA cell Evaluate the inclusion of enriched low-grade stockpile (fines) in mineral reserves (2 nd test underway) 17

18 Processing of Fines Segregation of fines: Gold concentrates in the finer material Segregation of fines allows for: better grade faster processing rates First Test in Fall 2014: Positive results from first 200,000 tonnes test grade of 0.62 g/t = 41% higher than avg. grade of SP processed at 68,000 tpd Natural segregation of fines from unloading truck Low-grade stockpile (avg. grade 0.44 g/t) 18

19 Processing of Fines Second Test in Q3-Q4 2015: Fines processed in July and continuing in Q4 Tonnage up to 4,000 tpd Validate milling rate improvement If results are successful: Incorporate into LOM plan Plant throughput Added throughput X No fines Potential for +20,000 oz/yr at very low cost With fines 55,000 54,000 Projected model Loss of 1,000 tpd of capacity 0 4,000 Gain of 4,000 tpd Total 55,000 58,000 Net gain of 3,000 tpd 19

20 Exploration Lower Detour 30,000 m drilling program underway Drilling program started at end of June 17,900 metres in 45 holes completed as of September 6 All holes have intersected the targeted mineralized zones Majority of holes encountered visible gold Further targets identified from Magnetic & IP surveys east of Lower Detour trend Budget increased to approximately US$8 million 20

21 A GREAT TIME TO BE A GOLD PRODUCER! PRODUCTION GROWTH / DECLINING UNIT COSTS REALIZE VALUE-ENHANCING OPPORTUNITIES MATERIAL INPUTS TRENDING FAVOURABLY GROWING CASH FLOW 21

22 ADDITIONAL information 2015 Safety Performance Q Operational & Financial Summary Detour Gold Reserves & Resources Detour Lake & Block A Lower Detour Exploration Shareholder Information Analyst Coverage Cautionary Statement Management & Directors Contact Information 22

23 2015 Safety Performance Zero Harm is Our Goal H TRIFR at 2.8 with Q2 higher than Q Initiatives Safety Leadership for Safe Production Life Saving Rules Total Recordable Injury Frequency Rate ON Average H Total recordable injury frequency rates = number of recorded injuries per 200,000 hours worked Ontario Mining Industry average (source: Workplace Safety North, WSIB). 23

24 Q Operational Statistics Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Ore mined (Mt) Waste mined (Mt) Total mined (Mt) Strip ratio (waste:ore) Mining rate (tpd) 209, , , , ,000 Ore milled (Mt) Mill grade (g/t Au) Recovery (%) Mill throughput (tpd) 48,569 49,186 51,142 47,797 57,015 Mill operating time (%) Ounces produced (oz) 117, , , , ,348 Ounces sold (oz) 107, , , , ,296 24

25 Q Financial Summary Key Financial Statistics (US$ M, unless noted) Q2 15 Metal sales $147.5 Production costs ($100.2) Depreciation & depletion ($39.8) Earnings from mine operations $7.5 Net loss/adjusted net earnings 1 ($15.4) / 0.5 Net loss/adjusted basic earnings per share 1 ($0.09) / $0.00 Cash & short-term investments $ Refer to the section on Non-IFRS Financial Performance Measures on slide 3 of this presentation. Note: The Company has been notified by the Independent Electricity System Operator ( IESO ) of an adjustment to its electricity rebate for the period between January 2013 and April 2015, which has resulted in an additional electricity cost of US$12.5 million (refer to Note 6i in second quarter 2015 financial statements). The balance is payable in 20 equal monthly instalments starting in Q As per its contract with IESO, the Company pays a maximum of C$0.05/kWh until December The Company has filed for a three-year extension of the contact. Refer to the MD&A for Q

26 Detour Gold: Reserves & Resources Effective December 31, 2014 Tonnes (Mt) Grade (g/t Au) Contained Gold (koz) Reserves (1,2,3,4,5) Resources (1,3,4,5) Detour Lake Mine Proven ,795 Probable ,146 P&P ,941 Stockpiles Total P&P ,957 Detour Lake Mine Measured (M) Indicated (I) ,150 M+I ,874 Block A Measured (M) Indicated (I) ,934 M+I ,991 Total M+I ,866 Detour Lake Mine Inferred Block A Inferred Total Inferred Mineral reserves calculated using a gold price of US$1,000/oz; mineral resources calculated using US$1,200/oz. Foreign exchange rate of C$1.03 to US$1.00 (refer to the Detour Lake Mine NI Technical Report dated February 4, 2014). 2. Mineral reserves estimated using a 4% dilution at 0.20 g/t Au and 5% ore loss. 3. Based on an elevated cut-off grade of 0.5 g/t Au for Detour Lake and cut-off grade of 0.6 g/t Au for Block A. 4. Mineral resources are exclusive of mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral reserves and resources are compliant with CIM definitions. 5. Totals may not add due to rounding.

27 Detour Lake & Block A North Pit ~5.5 km P+P g/t Au M+I US$1,200/oz g/t Au Current US$1,000/oz Note: Mineral reserves and resources as of December 31, Refer to February 2014 Technical Report. 27

28 Exploration Focus: Lower Detour 630 km 2 Block A Resource Detour Lake OP Mine Lower Detour Area 28

29 Lower Detour Phase 1 Drilling Program* *Phase 1 drilling completed in Q

30 Lower Detour Phase 1 Drilling Program* *Phase 1 drilling completed in Q

31 Lower Detour Phase 1 Drilling Program* *Phase 1 drilling completed in Q

32 Shareholder Information Share Structure (August 31, 2015) Share Structure (03/31/2014) M Issued & outstanding 8.7 M Share options 13.0 M Convertible notes 1 Top Shareholders 13% Top Shareholders Paulson & Co. >80% INSTITUTIONS TOTAL M FULLY DILUTED US$133.2 MILLION cash position 2 C$2.3 BILLION market cap Conversion price for the Notes is US$ Cash and short-term investments at June 30,

33 Analyst Coverage (20) Initiating Firm Analyst Target Price at Research September 9, Haywood Kerry Smith $ Paradigm Don Blyth/Don MacLean $ Raymond James Phil Russo $ National Bank Steve Parsons $ Macquarie Mike Siperco $ Canaccord Rahul Paul $ TD Dan Earle $ RBC Dan Rollins $ BMO NB Brian Quast $ Laurentian Killian Charles $ CIBC World Markets Cosmos Chiu $ Credit Suisse Anita Soni $ Scotiabank Trevor Turnbull $ Desjardins Michael Parkin $ Beacon Securities Michael Curran $ GMP Securities Ian Parkinson $ Cormark Securities Richard Gray/Tyron Breytenbach $ Goldman Sachs Andrew Quail $ Dundee Capital Markets Josh Wolfson Under review Morgan Stanley Brad Humphrey $16.50 Average target C$

34 Cautionary Statement Information Containing Estimates of Mineral Reserves and Resources The mineral reserve and resource estimates reported in this presentation were prepared in accordance with Canadian National Instrument Standards of Disclosure for Mineral Projects ( NI ), as required by Canadian securities regulatory authorities. For United States reporting purposes, the United States Securities and Exchange Commission ( SEC ) applies different standards in order to classify mineralization as a reserve. In particular, while the terms measured, indicated and inferred mineral resources are required pursuant to NI , the SEC does not recognize such terms. Canadian standards differ significantly from the requirements of the SEC. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories constitute or will ever be converted into reserves. In addition, inferred mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities laws, issuers must not make any disclosure of results of an economic analysis that includes inferred mineral resources, except in rare cases. On February 4, 2014, Detour Gold announced an updated life of mine plan for the Detour Lake mine. The NI compliant Technical Report for this update was filed on SEDAR on February 4, The following QPs participated in this update: BBA Inc., under the direction of André Allaire, Eng., Acting President and CEO and Patrice Live, Eng., Director Mining; SGS Canada Inc., under the direction of Yann Camus, Eng., Project Engineer, and Maxime Dupéré, P.Geo., Senior Geologist; and AMEC Environment & Infrastructure, a Division of AMEC Americas Limited, David G. Ritchie M.Eng., P.Eng, Senior Associate Geotechnical Engineer and Geotechnical Engineering Group Manager. The scientific and technical content of this presentation has been reviewed, verified and approved by Drew Anwyll, P.Eng., Senior Vice President Technical Services, a Qualified Person as defined by Canadian Securities Administrators National Instrument Standards of Disclosure for Mineral Projects. 34

35 Management & Directors Management Paul Martin President and CEO Pierre Beaudoin COO James Mavor CFO Drew Anwyll Sr VP Technical Services Julie Galloway Sr VP General Counsel & Corporate Secretary Derek Teevan Sr VP Corporate & Aboriginal Affairs Jean-François Métail VP Mineral Resource Management Rachel Pineault VP HR & Aboriginal Affairs Jim Robertson VP Environment & Sustainability Charles Hennessey Mine General Manager Andrew Croal Director Technical Services Laurie Gaborit Director Investor Relations Alberto Heredia Controller Bill Snelling Director Corporate Systems & Controls Directors Lisa Colnett Robert E. Doyle André Falzon Ingrid Hibbard Michael Kenyon Paul Martin Alex G. Morrison Jonathan Rubenstein Graham Wozniak 35

36 Contact Information Paul Martin President and Chief Executive Officer Phone: James Mavor Chief Financial Officer Phone: