Detour Gold Corp. (DGC:TSX)

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1 (DGC:TSX) Updated Mineplan Largely As Expected February 6, 2014 Michael Curran, CFA (416) Detour Gold s current focus is the ramp up of its 100%- owned Detour Lake mine in northern Ontario to become a +600Koz/yr gold producer. The company recently provided an updated life-of-mine (LOM) plan (see fig.1 on page 2) and a detailed briefing to analysts. In our view, the main takeaways included: Reserves/Resources: mineable reserves were unchanged from December 2011, at 15.5MMoz (grading 1.02g/t gold). In-pit total resources increased almost 4MMoz, from 17.1MMoz in 2011 to 20.9MMoz, with additions roughly evenly split between the Main and Block A pits. Sustaining Capital: LOM forecast of $1.14 billion was in line with our modeled estimate. Deferred Stripping: the LOM forecast of $614 million was a figure we had not specifically broken out in our model (we had included somewhat within our sustaining capital estimate and/or within cash cost forecasts). We expect this will be the main adjustment to analysts valuation models. For us, model revisions lead to lower cash cost forecasts and higher depreciation expenses. However, the net impact to our cashflow forecast is negative, resulting in a lower NAV for DGC shares. Delayed Ramp Up: the new mineplan calls for a more gradual ramp up to 61Ktpd by 2017, which is likely months later than most analysts were modelling. The company s 2014 forecast is 52Ktpd. Next Catalysts: Q4/13 and full year 2013 operating and financial results are expected in early March. Update BUY (unch) $8.75 (from $9.00) Previous Close $ month Target Price $8.75 Potential Return 29.1% Dividend Yield 0.0% 52 Week Price Range $2.88-$22.54 Estimates (US$MM, except per unit) FY12 FY13e FY14e FY15e Revenue $0.0 $153.6 $623.0 $737.3 Net income -$38.5 $15.7 $19.8 $62.7 Cashflow -$21.4 -$29.3 $167.6 $245.7 Shares O/S, wgt. avg EPS (operating) -$0.20 -$0.40 $0.18 $0.41 CFPS -$0.19 -$0.23 $1.11 $1.50 Valuation P/E n/a n/a 37.6x 16.4x P/CF n/a n/a 6.1x 4.5x NAV $13.81 $18.05 P/NAV 0.5x 0.4x Financials MM Shares Outstanding Mgt/Insiders 1% (C$MM) Market Capitalization $937 LT Debt (corporate) $525 Working Capital $120 Enterprise Value $1,342 Fiscal Year End December 31 Reserves / Resources 2P Reserves 15.5 MMoz M+I Resources 4.9 MMoz Total Resources (M+I+I) 20.9 MMoz Quarterly Estimates Q1/12 Q2/12 Q3/12 Q4/12 EPS (operating) -$0.05 $0.15 -$0.46 $0.17 CFPS -$0.05 $0.15 -$0.46 $0.18 Q1/13 Q2/13 Q3/13 Q4/13e EPS (operating) -$0.10 -$0.07 -$0.07 -$0.12 CFPS -$0.10 -$0.07 -$0.05 -$0.02 Company at a Glance Detour Gold is a Canadian gold mining company focused on the successful ramp up of the 100%-owned Detour Lake gold project in northern Ontario, which is poised to become the largest operating gold mine in Canada. All prices in US$ unless otherwise indicated Stock Performance Detour Gold Corporation (DGC-CA) Volume (Millions) Price (CAD) Target Tweaked: as a result of changes to our DCF model for the Detour Lake mine, we are lowering our 12-month target price slightly from C$9.00 to C$8.75, and maintain our BUY rating on DGC shares. 0 0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Volume Detour Gold Corporation Average Volume - DGC-CA Source: FactSet Prices Beacon Securities Ltd. 66 Wellington Street West Suite 4050, Toronto, Ontario, M5K 1H

2 Investment Thesis Our Favourite Gold Producer We view Detour Gold Corp. as an attractive investment for the potential re-rating of an emerging mid-tier gold producer, assuming the successful ramp-up of the 100%-owned Detour Lake gold mine in northern Ontario later this year to become +600Koz/yr gold producer. After the close on Tuesday, the company published an updated mineplan for the Detour Lake gold mine. Fig 1 Life-of-Mine (LOM) Mineplan: Detour Lake Gold Mine Source: Company press release February 6, 2014 Page 2 Michael Curran mcurran@beaconsecurities.ca

3 Further Optimization Potential Detour Gold management considers the LOM mineplan to have included several conservative assumptions, and has outlined a number of potential opportunities to deliver better than forecast operating results: Geologic Model operating results to date have suggested that the open pit deposit contains higher tonnage and gold ounces than originally modelled. Should this effect continue, there may be an opportunity to increase the cut-off grade, which could lead to a higher processed grade, lowering cash costs and increasing profitability. Productivity Improvements the LOM mineplan has conservative assumptions regarding the availability of the larger mining equipment used in the open pit. Achieving consultant s estimates and/or best practice levels of operation (tonnes moved per operating hour), could also lower operating costs and improve profitability. Mineralized Waste the LOM mineplan includes the stockpiling (material is mined but not processed) of lower grade mineralized material grading g/t gold. This stockpile would contain some 1.5MMoz of gold resources that could be available for processing at the end of the minelife. There may be a further 1MMoz grading g/t gold. Plant Recovery the new LOM assumes average gold recoveries of 92% can be achieved, +1% higher than the feasibility study estimate. Management believes there is some potential to increase recoveries 1-2% (to 93-94%) with further optimization. These levels have been achieved in the mill for short periods of time (typically days) in the past few months. Satellite Deposit(s) Detour plans to continue exploring and developing additional gold resources which could be economically mined and trucked to the Detour Lake mill. Block A the LOM mineplan does not include any mining of the Block A open pit resource, which occurs only a few hundred metres to the west of the Main pit, and is host to +2MMoz (54MMt grading 1.15g/t gold). A $2MM budget is forecast to take the project from resource to reserve. Lower Detour Area a 6,000-8,000m drill programme is planned during Q1/14 to follow up significant drill results from 2013 (such as 17.3g/t over 4.4m). The target here is high-grade, narrow vein gold mineralization, located 5-10km from the Main pit. February 6, 2014 Page 3 Michael Curran mcurran@beaconsecurities.ca

4 Valuation Methodology Our favored valuation method for precious metals producers is a price-tonet-asset-value (P/NAV) multiple based on a discounted cash flow (DCF) model constructed using our estimates of the parameters of existing or potential mining operations. We employ a US$1,500/oz long-term gold price assumption, but have recently lowered our short-term gold price forecasts to US$1,350/oz for 2014, US$1,400/oz for 2015, and US$1,450/oz for Future year cash flows are then discounted using a base rate of 5%, to which a risk premium is added, depending on the overall political risk the company s assets are exposed to. Detour s Ontario assets are considered to be firmly among the lower risk group (5% base + 2% premium). Fig 2 Net Asset Value Breakdown: Detour Gold Corp. Discount Rate Ownership Value Per Share (C$/sh) C$MM FY14e FY15e FY16e Detour Lake (Ontario) 7.0% 100% $2,691 $13.50 $17.04 $17.00 Exploration potential $25 $0.17 $0.17 $0.17 OPERATING ASSETS $2,716 $13.66 $17.20 $17.16 Working Capital $171 $0.86 $1.50 $1.71 LT Debt (non-debenture) ($141) ($0.71) ($0.66) ($0.05) CORPORATE ASSETS $30 $0.15 $0.84 $1.66 NET ASSET VALUE $2,746 $13.81 $18.05 $18.82 Source: Beacon Securities estimates In Fig. 2 we provide forward-looking NAV/sh estimates to show how the company s NAV is forecast to change over the next few years. For midsized gold producers (annual gold output between 250Koz and 1.5Moz), we employ a target range of x P/NAV. For Detour, we employ a target P/NAV multiple of 0.65x while we await a successful ramp up to 55Ktpd forecast for late this year. Applying the target multiple on our 2014 NAV estimate suggests a fair value of $9/sh for Detour Gold. On a forward-looking P/CF multiple basis, we forecast Detour Gold could achieve CFPS of $1.50/sh in 2015 (expected first full year of operation). Discounting this estimate back to 2014 and applying our target multiple of 6.5x P/CF to this estimate, which is within our 5.0x-12.5x target range for mid-sized gold producers, suggests a fair value of $8.50/sh. Using the valuation methods described above, and a 50/50 blend of fair values, generates our 12-month target price of $8.75 per DGC share. February 6, 2014 Page 4 Michael Curran mcurran@beaconsecurities.ca

5 Appendix : Summary Financials Detour Gold Corporation Symbol DGC-TSX Last Share Price C$ 6.78 Stock Rating BUY Shares Outstanding Price Target C$ 8.75 Market Capz'n (C$MM) 937 All US$ unless noted For Fiscal Year Ended Dec 31 Beacon Securities Limited Michael Curran, CFA (416) INCOME STATEMENT FY12 FY13e FY14e FY15e RATIO ANALYSIS FY12 FY13e FY14e FY15e Revenues $MM Dividend Paid $/sh $0.00 $0.00 $0.00 $0.00 Operating Costs $MM Dividend Yield % 0.0% 0.0% 0.0% 0.0% EBITDA $MM (47.6) LTD/(Total Cap) % 24.0% 22.7% 20.5% 18.9% DD&A $MM EV / EBITDA neg 28.1x 7.0x 4.9x EBIT $MM (48.3) PRICES/EXCHANGE RATES FY12 FY13e FY14e FY15e Interest Expense $MM (9.8) Spot Gold Price $/oz 1,572 1,404 1,350 1,400 EBT $MM (31.9) (44.2) Realized Gold Price $/oz - 1,284 1,350 1,400 Non-Recurring Items/Other $MM 6.6 (59.9) US$:C$ exchange Taxes/Recovery $MM Net Income (operating) $MM (38.5) MINE/EQUITY PRODUCTION FY12 FY13e FY14e FY15e Shares o/s $MM Gold Production 000 oz EPS (adjusted) $/sh ($0.20) ($0.40) $0.18 $0.41 Total Cash Costs $/oz - 1, P/E Multiple x n.m. n.m. 37.6x 16.4x Cash Flow (adjusted) $MM (21.4) (29.3) CFPS $/sh ($0.19) ($0.23) $1.11 $ ,000 $1,200 P/CF Multiple x n.m. n.m. 6.1x 4.5x Gold Production (oz) Total Cash Costs (US$/oz) SCFP FY12 FY13e FY14e FY15e 700,000 $1,100 Cash Flows from Operations Net Income $MM (38.5) ,000 $1,000 DD&A $MM Deferred Taxes $MM ,000 $900 Non Recurring/Other $MM 0.4 (49.0) Working Cap. Changes $MM (7.7) ,000 $800 Net Operating Cash Flow (45.2) (15.3) Cash Flows From Investing Capital Expenditure (net) $MM (982.2) (350.0) (131.0) (137.5) 300,000 $700 Acquis./Investments $MM ,000 $600 Other $MM Net Investing Cash Flow (909.5) (320.0) (131.0) (137.5) 100,000 $500 Cash Flows From Financing Equity Issues (net of costs) $MM $ E 2014E 2015E 2016E 2017E Net Borrowings $MM (32.5) (32.5) Dividends Paid & Other $MM (29.6) RESERVES / RESOURCES Net Financing Cash Flow $MM (32.5) Gold Reserves MMoz 15.5 Net Inc/Dec (incl FX) $MM (490.1) (114.3) AMC/oz $/oz 57 Cash at End of Year $MM Total Gold Resources MMoz 20.9 BALANCE SHEET FY12 FY13e FY14e FY15e AMC/oz $/oz 43 Cash & Equivalents $MM AMC = Market Cap + LTD - Working Capital Total Current Assets $MM Total Resources = measured, indicated, and inferred PP&E & Mining Interests $MM 2, , , ,341.0 NET ASSET VALUE (NAV) E Other $MM Discount Status Own'ship C$MM C$/Sh %NAV Total Assets $MM 2, , , ,732.6 Detour Lake 7.0% mine 100% $2, % Current Liabilities $MM Exploration $ % Long Term Debt $MM Operating NAV $2,716 $ % Other Long Term Liabilities $MM Working Capital $171 $0.86 6% Total Liabilities $MM LT Debt ($141) ($0.71) -5% S/Holder Equity $MM 1, , , ,035.9 NAV $2,746 $13.81 Total Liab. & S/Holder Equity $MM 2, , , ,732.6 Current P/NAV 0.5x Working Capital $MM Source: Company reports, Beacon Securities estimates February 6, 2014 Page 5 Michael Curran mcurran@beaconsecurities.ca

6 Disclosure Requirements Does Beacon, or its affiliates or analysts collectively, beneficially own 1% or more of any class of the issuer's equity securities? Yes No Does the analyst who prepared this research report have a position, either long or short, in any of the issuer s securities? Yes No Does Beacon Securities beneficially own more than 1% of equity securities of the issuer? Yes No Has any director, partner, or officer of Beacon Securities, or the analyst involved in the preparation of the research report, received remuneration for any services provided to the securities issuer during the preceding 12 months? Yes No Has Beacon Securities performed investment banking services in the past 12 months and received compensation for investment banking services for this issuer in the past 12 months? Yes No Was the analyst who prepared this research report compensated from revenues generated solely by the Beacon Securities Investment Banking Department? Yes No Does any director, officer, or employee of Beacon Securities serve as a director, officer, or in any advisory capacity to the issuer? Yes No Are there any material conflicts of interest with Beacon Securities or the analyst who prepared the report and the issuer? Yes No Is Beacon Securities a market maker in the equity of the issuer? Yes No Has the analyst visited the head office of the issuer and viewed its operations in a limited context? Yes No Did the issuer pay for or reimburse the analyst for the travel expenses? Yes No Beacon analysts are not permitted to own the securities they cover, but are permitted to have a position, either long or short, in securities covered by other members of the research team, subject to blackout conditions. All information contained herein has been collected and compiled by Beacon Securities Limited, an independently owned and operated member of the IIROC. All facts and statistical data have been obtained or ascertained from sources, which we believe to be reliable, but are not warranted as accurate or complete. All projections and estimates are the expressed opinion of Beacon Securities Limited, and are subject to change without notice. Beacon Securities Limited takes no responsibility for any errors or omissions contained herein, and accepts no legal responsibility from any losses resulting from investment decisions based on the content of this report. This report is provided for informational purposes only and does not constitute an offer or solicitation to buy or sell securities discussed herein. Based on their volatility, income structure, or eligibility for sale, the securities mentioned herein may not be suitable or available for all investors in all countries. As at January 31, 2014 # Stocks Distribution BUY 18 55% BUY Total 12-month return expected to be >15% Speculative BUY 5 15% Speculative BUY Potential total 12-month return is high (>15%) but given elevated risk, investment could HOLD 3 9% HOLD Total 12-month return expected to be between 0% and 15% SELL 1 3% SELL Total 12-month return expected to be negative Restricted 3 9% Under Review 3 9% Total % Dissemination Beacon Securities distributes its research products simultaneously, via , to its authorized client base. All research is then available on via login and password. Analyst Certification The Beacon Securities Analyst named on the report hereby certifies that the recommendations and/or opinions expressed herein accurately reflect such research analyst s personal views about the company and securities that are the subject of the report; or any other companies mentioned in the report that are also covered by the named analyst. In addition, no part of the research analyst s compensation is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report. Beacon Securities Ltd. 66 Wellington Street West Suite 4050, Toronto, Ontario, M5K 1H