DETOUR GOLD CORPORATION

Transcription

1 DETOUR GOLD CORPORATION SECOND QUARTER 2015 Condensed Consolidated Interim Financial Statements

2 Condensed Consolidated Interim Statements of Financial Position (Expressed in thousands of U.S. dollars) ASSETS December 31 Note Current assets Cash and cash equivalents $ 131,537 $ 133,465 Short-term investments 1,702 1,808 Other receivables 4 13,627 12,241 Prepaid expenses and deposits 4,137 5,040 Inventories 5 102,434 92,089 Derivative assets 14 4,236 1,193 Total current assets 257, ,836 Non-current assets Restricted investments 1,945 2,087 Long-term deposits 6 7,801 14,057 Property, plant and equipment 6 2,221,306 2,254,577 Total non-current assets 2,231,052 2,270,721 Total assets $ 2,488,725 $ 2,516,557 LIABILITIES Current liabilities Trade and other payables $ 69,308 $ 77,028 Current portion of long-term debt 7-22,914 Current portion of provisions 3,513 3,702 Derivative liabilities 14 1,310 1,190 Total current liabilitites 74, ,834 Non-current liabilities Long-term payables 6(i) 4,987 - Long-term debt 7 426, ,381 Provisions 41,699 41,580 Deferred tax liability 15 43,517 19,119 Total non-current liabilities 517, ,080 Total liabilities 591, ,914 EQUITY Shareholders' equity Issued capital 8 2,233,417 2,108,334 Accumulated deficit (438,037) (359,575) Share-based payment reserve 102,192 98,884 Total shareholders' equity 1,897,572 1,847,643 Total liabilities and equity $ 2,488,725 $ 2,516,557 Commitments and contingencies (note 12) The accompanying notes are an integral part of these condensed consolidated interim financial statements. 1

3 Condensed Consolidated Interim Statements of Comprehensive Loss (Expressed in thousands of U.S. dollars, except per share amounts) Three months ended Six months ended Note Revenues Metal sales $ 147,526 $ 139,009 $ 274,901 $ 249,024 Cost of sales Production costs 6 (i) 100,162 98, , ,273 Depreciation and depletion 39,837 38,273 76,732 68,876 Earnings (loss) from mine operations 7,527 2, (1,125) Corporate administration expense 8,849 7,946 16,234 15,362 Exploration and evaluation expense 920 1,446 1,656 2,789 Other operating expenses 956-1,079 - Loss before finance items and taxes (3,198) (6,797) (18,683) (19,276) Net finance income (cost) 11 (14,739) (28,240) (35,015) (70,704) Loss before taxes (17,937) (35,037) (53,698) (89,980) Income and mining tax recovery (expense) 15 2,536 - (24,764) - Net loss and comprehensive loss $ (15,401) $ (35,037) $ (78,462) $ (89,980) Loss per share Basic and diluted 9 $ (0.09) $ (0.22) $ (0.47) $ (0.60) The accompanying notes are an integral part of these condensed consolidated interim financial statements. 2

4 Condensed Consolidated Interim Statements of Cash Flows (Expressed in thousands of U.S. dollars) Three months ended Six months ended Note Operating activities Net loss $ (15,401) $ (35,037) $ (78,462) $ (89,980) Adjustments for: Depreciation and depletion 40,011 38,763 77,134 69,703 Loss on disposal of assets 956-1, Net change in employee benefit provision 2,014 1,270 3,528 3,641 Share-based payments 2,892 3,801 5,956 7,008 Net finance (income) cost 16,452 29,995 37,047 65,843 Income and mining tax (recovery) expense 15 (2,536) - 24,764-44,388 38,792 71,046 56,647 Changes in non-cash w orking capital items: Accounts receivable and other assets 10,035 5,088 (931) (11,450) Accounts payable and accrued liabilities 6,239 (5,303) 7,513 (12,329) Inventories (8,687) 7,693 (9,150) (18,688) Net cash generated by operating activities 51,975 46,270 68,478 14,180 Investing activities Purchase of property, plant and equipment (25,825) (42,234) (55,586) (59,633) Electricity rebate received - - 1,404 - Purchase of short-term investments - - (1,670) (1,767) Redemption of short-term investments - - 1,649 1,744 Interest received Proceeds from insurance settlement 1,563-1,563 - Cash deposits held as security (4,645) Net cash used in investing activities (24,176) (42,052) (52,483) (64,054) Financing activities Issuance of common shares: on exercise of options ,570 1,288 5,743 on public offerings, net of transaction costs 8 - (96) 123, ,042 Repayment of finance lease obligation (94,223) - Revolving credit facility repayments (30,000) (40,000) Financing fees (164) - (164) (100) Interest paid (14,048) (14,901) (15,578) (15,760) Net cash generated by (used in) financing activities (13,234) (11,427) (15,557) 98,925 Effect of exchange rate changes on cash and cash equivalents (2,366) (892) Increase (decrease) in cash and cash equivalents 15,151 (7,117) (1,928) 48,159 Cash and cash equivalents, beginning of period 116, , ,465 88,130 Cash and cash equivalents, end of period $ 131,537 $ 136,289 $ 131,537 $ 136,289 Non-cash consideration for an interest in a mining property 10 $ - $ - $ - $ 3,774 The accompanying notes are an integral part of these condensed consolidated interim financial statements. 3

5 Condensed Consolidated Interim Statements of Changes in Equity (Expressed in thousands of U.S. dollars) Six months ended Issued capital Balance, beginning of period $ 2,108,334 $ 1,929,972 Issued on exercise of options 8 1,597 9,186 Issued on public offerings, net of transaction costs 8 123, ,042 Issued as consideration for an interest in a mining property 8-3,774 Deferred tax recovery on share issuance costs Balance, end of period 2,233,417 2,091,974 Accumulated deficit Balance, beginning of period (359,575) (210,080) Net loss for the period (78,462) (89,980) Balance, end of period (438,037) (300,060) Share-based payment reserve Balance, beginning of period 98,884 95,847 Share-based payments 10 3,617 6,770 Exercise of options (309) (3,443) Issued as consideration for an interest in a mining property - (3,774) Balance, end of period 102,192 95,400 Total equity $ 1,897,572 $ 1,887,314 The accompanying notes are an integral part of these condensed consolidated interim financial statements. 4

6 1. CORPORATE INFORMATION Detour Gold Corporation ( Detour Gold or the Company ) is a company domiciled in Canada and was incorporated on July 19, 2006 under the Canada Business Corporations Act. The Company is publicly traded with its shares listed on the Toronto Stock Exchange (TSX: DGC). The Company s registered and head office is located at Commerce Court West, 199 Bay Street, Suite 4100, Toronto, Ontario, M5L 1E2. The Company is a Canadian gold producer engaged in the acquisition, exploration, development and operation of mineral property interests. The Company s primary asset is its wholly-owned Detour Lake mine located in northeastern Ontario. 2. BASIS OF PREPARATION (a) Statement of compliance These condensed consolidated interim financial statements (the financial statements ) have been prepared in accordance with IAS 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board and IFRS Interpretations Committee. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes to the Company s financial position and performance since the last annual consolidated financial statements. These financial statements were authorized for issuance by the Company s Board of Directors on July 29, (b) Use of estimates and judgments The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ materially from these estimates. The significant judgments made by management in applying the Company s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, SIGNIFICANT ACCOUNTING POLICIES Except as described below, the accounting policies applied by the Company in these financial statements are the same as those applied by the Company in its financial statements as at and for the year ended December 31, (a) New accounting policy Performance-based restricted share units ( PSUs ) PSUs are granted under the Company s Restricted Share Unit Plan and are cash-settled. The amount of units to be issued (or the amount of cash to be paid) on the vesting date will vary from 0% to 200% of the number of PSUs granted, depending on the Company s total shareholder return compared to the return of its peer group. Vesting, and therefore the liability, is based on the achievement of performance goals and the target settlement ranges from 0% to 200% of the original grant of units. The fair value of a PSU reflects the value of a Detour Gold common share (based on the five day volume weighted average trading price) and the number of units issued is dependent upon the Company s relative performance against a group of peer companies. 5

7 The initial fair value of the liability is calculated as of the grant date and is recognized within salaries and benefits expense over the vesting period in accordance with the vesting terms and conditions. Subsequently, at each reporting date and on settlement, the liability is remeasured with any changes in fair value recorded in corporate administrative expense in the statement of comprehensive loss. 4. OTHER RECEIVABLES December Sales tax receivable $ 11,766 $ 7,240 Electricity rebate receivable 1,394 4,900 Interest receivable Other Other receivables $ 13,627 $ 12, INVENTORIES December Ore stockpile $ 17,250 $ 6,938 In-circuit 27,246 22,809 Finished metal 9,844 19,118 Materials and supplies 48,094 43,224 Inventories $ 102,434 $ 92,089 The amount of depreciation included in inventories at, 2015 is $14,878 (December 31, $13,684). 6

8 6. PROPERTY, PLANT AND EQUIPMENT Land Mining properties Plant & equipment Capital w orksin-progress Total Cost As at January 1, 2014 $ 1,483 $ 182,197 $ 2,153,252 $ 14,927 $ 2,351,859 Additions - 35,231 12,345 82, ,865 Disposals - - (10,045) - (10,045) Transfers in (out) ,722 (92,722) - Electricity rebate - (16,142) - - (16,142) Decommissioning and restoration - provision adjustments ,694-10,694 As at December 31, , ,286 2,258,968 4,494 2,466,231 Additions - 12,821 3,274 31,672 47,767 Disposals - - (9,988) - (9,988) Transfers in (out) ,508 (21,508) - Electricity rebate (i) - 2, ,752 Decommissioning and restoration - provision adjustments As at, 2015 $ 1,483 $ 216,859 $ 2,273,801 $ 14,658 $ 2,506,801 Accumulated depreciation As at January 1, 2014 $ - $ 835 $ 51,733 $ - $ 52,568 Depreciation - 4, , ,614 Disposals - - (3,528) - (3,528) As at December 31, , , ,654 Depreciation - 2,213 78,972-81,185 Disposals - - (7,344) - (7,344) As at, 2015 $ - $ 7,271 $ 278,224 $ - $ 285,495 Net book value As at December 31, 2014 $ 1,483 $ 196,228 $ 2,052,372 $ 4,494 $ 2,254,577 As at, 2015 $ 1,483 $ 209,588 $ 1,995,577 $ 14,658 $ 2,221,306 i. The Company signed a long-term electricity contract in 2014 with the Independent Electricity System Operator ( IESO ), which is applicable until December The contract enables the Detour Lake mine to receive a reduction in electricity costs in the form of a rebate. During 2015, the IESO adjusted the calculation of the electricity rebate related to the period from January 2013 to April 2015, resulting in an additional cost of $12,473. The portion of the rebate adjustment related to the pre-commercial production period, $2,752, resulted in an increase to property, plant and equipment. The remaining portion of the rebate adjustment related to the post-commercial production period, $7,732 (in 2013 and 2014) and $1,989 (in 2015) and is recorded in current period production costs. The balance is payable in 20 equal monthly instalments beginning in the third quarter of 2015 and is classified as a current and long-term payable accordingly. ii. The Company s long-term deposits on the statement of financial position of $7,801 (December 31, $14,057) represents down payments on equipment including significant components of mobile equipment which are transferred to property, plant and equipment when available for use. 7

9 7. LONG-TERM DEBT AND CREDIT FACILITIES December Convertible notes (a) $ 426,819 $ 402,040 Finance lease obligations (b) - 94,255 Credit facility (c) - 30, , ,295 Less: current portion - (22,914) Long-term debt $ 426,819 $ 503,381 Scheduled debt repayments Thereafter Repayment of convertible notes $ - $ - $ 500,000 $ - $ - $ - Interest on convertible notes 13,750 27,500 27, Debt repayments $ 13,750 $ 27,500 $ 527,500 $ - $ - $ - 1 The table illustrates the contractual undiscounted cash flows. (a) Convertible Notes December Fair value of Class A Notes $ 74,156 $ 67,407 Debt component of Senior Unsecured Notes 339, ,763 Fair value of embedded derivatives of Senior Unsecured Notes 12,805 8,870 Interest payable 2,292 2,292 Convertible notes 429, ,332 Less: interest payable included in Trade and other payables (2,292) (2,292) Convertible Notes $ 426,819 $ 402,040 On December 3, 2010, the Company completed an offering of Senior Unsecured Convertible notes ( Notes ) for total gross proceeds of $500,000, net proceeds of $490,808. The Notes bear interest at 5.5% per annum, payable in arrears in equal semi-annual installments on May 31 and November 30 in each year. The Notes mature on November 30, The Notes are convertible into common shares of the Company at the option of the holder at any time prior to maturity at a Conversion Price of $38.50 per share ( Conversion Price ). With respect to the Class A Notes, the Company has the right, in certain circumstances, upon receiving a conversion notice, to elect to satisfy its obligations by delivering either common shares of the Company at the Conversion Price or the cash equivalent thereof to the holder. Additionally, in certain circumstance, if the current market price of the Company s common shares is at least 130% of the Conversion Price, the Company has the right to redeem the Notes. The fair value of the Class A Notes increased from $67,407 at December 31, 2014 to $74,156 at, 2015, resulting in a loss of $6,749. The fair value of the equity conversion option in the Notes increased from $8,870 at December 31, 2014 to $12,805 at, 2015, resulting in a loss of $3,935. The losses are recorded in net finance income and costs. 8

10 The embedded derivative was valued upon the initial measurement date and at each subsequent financial position reporting date using a convertible note valuation model. The inputs used in the convertible note valuation as at June 30, 2015 and December 31, 2014 are as follows: December Expected life in years Expected volatility 1 60% 60% Risk free rate 1.07% 1.25% Credit spread 6.22% 8.93% Foreign exchange spot rate (Cdn$:U.S.$) Underlying share price of the Company $ $ 8.18 Conversion option exercise price $ $ Expected volatility is an implied volatility of the Company s common shares based upon the rate a buyer would use to value the Senior Unsecured Notes for purchase. The changes to the obligations related to the Notes are summarized below: Class A Senior Unsecured Notes Notes Total Balance, January 1, 2014 $ 60,373 $ 303,875 $ 364,248 Accrued interest payable 4,126 23,374 27,500 Interest paid (4,126) (23,374) (27,500) Accretion - 25,213 25,213 Fair value change 7,378 7,493 14,871 Balance, December 31, , , ,332 Accrued interest payable 2,063 11,687 13,750 Interest paid (2,063) (11,687) (13,750) Accretion - 14,095 14,095 Fair value change 6,749 3,935 10,684 Balance,, 2015 $ 74,500 $ 354,611 $ 429,111 The Company recorded interest charges of $6,874 (three months ended, $6,874) and $13,750 (six months ended, $13,750). Accretion costs of $7,181 (three months ended, $6,181) and $14,095 (six months ended, $12,134) related to the debt component of the Senior Unsecured Notes were recognized in the three and six months ended, 2015, respectively. 9

11 (b) Finance Lease On February 6, 2012, the Company entered into a mobile fleet equipment finance lease with Caterpillar Financial Services Limited ( CAT Financial ). CAT Financial agreed to underwrite up to $150 million in mobile fleet equipment financing to fund the acquisition of CAT mining equipment for the Detour Lake mine. Leases bear interest at the three month LIBOR plus 4.0%. The term of the lease is five years from the date of each drawdown and secured by the mobile fleet. During the first quarter of 2015, the Company repaid, without penalty, all outstanding obligations to CAT Financial, using a portion of the proceeds from a public offering (note 8(iii)). (c) Credit Facility In March 2013, the Company entered into a Cdn$135,000 senior secured credit facility (the Facility ) with a syndicate of chartered Canadian and Australian banks. In June 2015, the Company amended the terms of the Facility and it is now comprised of a Cdn$85,000 (previously Cdn$90,000) (or the equivalent amount in U.S. dollars) revolving credit facility (the Revolving Credit Facility ) and a Cdn$50,000 (previously Cdn$45,000) letter of credit facility (the LC Facility ). The maturity date of the Facility has been extended from March 2016 to August As part of the amendment the Completion test covenant was removed. The interest margin on drawings under the amended Facility denoted below are over LIBOR, the Prime Rate or the Base Rate. Interest Rate Standby Fee Revolving Credit Facility % 0.825% LC Facility 1.65% 0.495% The Facility contains a financial covenant requiring the Company to maintain at all times a minimum tangible net worth of $1,081,000, increasing by 50% of positive net income for each fiscal quarter subsequent to September 30, 2012 thereafter. Positive net income excludes the impact of unrealized gains and losses from mark to market adjustments on the convertible notes. In addition, the Company is subject to two financial covenants on a quarterly basis according the ratios in the table below: a leverage ratio test measuring net debt to earnings before interest, taxes, depreciation and amortization ( EBITDA ), and an interest coverage ratio test measuring EBITDA to interest expense. Maximum Leverage Ratio Minimum Interest coverage ratio Quarters ending June March March-September Thereafter The Company is in compliance with all covenants for the period ending, As at, 2015, the Company has not drawn any funds under the Revolving Credit Facility (December 31, $30,000 drawn); however the LC Facility has been used to issue letters of credit of $34,155 (Cdn$42,605). 10

12 8. ISSUED CAPITAL Authorized share capital of the Company is comprised of an unlimited number of voting and participating common shares, without par value. All issued shares are fully paid. Number of shares Amount Balance, January 1, ,153,791 $ 1,929,972 Shares issued under: Share purchase option plan i 679,480 10,014 Consideration for an interest in a mining property ii 383,000 4,046 Public offering iii 18,653, ,579 Less: Transaction costs - (6,537) Deferred tax asset on share issuance costs iv - 15,260 Balance, December 31, ,869,271 2,108,334 Shares issued under: Share purchase option plan i 165,920 1,597 Public offering iii 12,650, ,774 Less: Transaction costs - (5,654) Deferred tax asset on share issuance costs iv Balance,, ,685,191 $ 2,233,417 i. Shares issued under the Company s share option plan (note 10 (a)). ii. Shares issued to Aboriginal groups in connection with the Detour Lake mine (note 10 (b)). In 2014, the Company purchased the remaining 50% interest in the Sunday Lake claim block ( Sunday Lake claims ) from Conquest Resources Limited ( Conquest ). The Company issued 33,000 common shares to Conquest and holds a 100% interest in the Sunday Lake claims. The fair value of the claims was measured by reference to the fair value of the Company s shares on issuance. iii. On February 10, 2015, the Company closed a public offering on a bought deal basis of 11,000,000 common shares with an over-allotment option of 1,650,000 common shares at a price of $10.18 (Cdn$12.80) per common share. The gross proceeds to the Company were $128,774 (Cdn$161,920). In connection with the offering the underwriters were paid a 4% commission totaling approximately $5,151 (Cdn$6,477). Share issuance costs of $503 (Cdn$631) were incurred in relation to the offering. On March 7, 2014, the Company closed a public offering and over-allotment option of 16,220,000 and 2,433,000 common shares, respectively, at a price of $8.34 (Cdn$9.25) per common share for cash consideration of $155,579 (Cdn$172,540). In connection with the offering, the underwriters were paid a 4% commission totaling approximately $6,223 (Cdn$6,902). Share issuance costs of $314 (Cdn$346) were incurred in relation to the offering. iv. Relates to deferred tax asset recognized on share issuance costs incurred by the Company in current year and prior years. 11

13 9. BASIC AND DILUTED LOSS PER SHARE Three months ended Six months ended Net loss for the period $ (15,401) $ (35,037) $ (78,462) $ (89,980) Basic and diluted w eighted average shares outstanding 170,585, ,517, ,772, ,490,783 Loss per share Basic $ (0.09) $ (0.22) $ (0.47) $ (0.60) Diluted $ (0.09) $ (0.22) $ (0.47) $ (0.60) The following table lists the equity securities excluded from the computation of diluted loss per share. The securities were excluded as the inclusion of the equity securities had an anti-dilutive effect on net loss. Three months ended Six months ended Share options 9,175,352 10,975,361 9,175,352 10,975,361 Convertible notes 12,987,013 12,987,013 12,987,013 12,987,013 22,162,365 23,962,374 22,162,365 23,962,374 12

14 10. SHARE-BASED PAYMENTS The share-based payments that have been recognized in these financial statements were as follows: Performance Other Addition to Deferred Restricted restricted Total Share option share based share-based share unit share unit share unit share-based plan (a) payments (b) payment reserve plan (c) plan (d) plan (e) payments Production costs i $ 998 $ - $ 998 $ - $ 364 $ - $ 1,362 Exploration and evaluation ii Corporate administration iii 2,586-2,586 1,356 1, ,068 Property, plant and equipment Period ended, 2015 $ 3,617 $ - $ 3,617 $ 1,356 $ 2,168 $ 322 $ 7,463 Production costs i $ 1,346 $ - $ 1,346 $ - $ 99 $ - $ 1,445 Exploration and evaluation ii Corporate administration iii 3,450-3,450 1, ,379 Property, plant and equipment (752) 2,542 1, ,790 Period ended, 2014 $ 4,228 $ 2,542 $ 6,770 $ 1,657 $ 371 $ - $ 8,798 i. Total share-based payments for the three months ended, 2015 was $604 ( $861). ii. Total share-based payments for the three months ended, 2015 was $16 ( $93). iii. Total share-based payments for the three months ended, 2015 was $3,779 ( $2,847). (a) Share Option Plan The Company s share option plan, as amended and restated effective April 20, 2010, was approved by the Company s shareholders on May 26, 2010 and renewed on May 9, These share options may be settled in the Company s shares only. The changes to the share options are summarized below: Number of Weighted average Weighted average options exercise price (i) exercise price (Cdn) Balance, January 1, ,158,450 $ $ Granted 2,105, Forfeited (597,031) Expired (898,825) Exercised (679,480) Balance, December 31, ,089, Granted 682, Forfeited (349,855) Expired (1,080,450) Exercised (165,920) Balance,, ,175,352 $ $ i. At, 2015, the U.S. dollar weighted average exercise price was calculated using the period end Canadian to U.S. dollar exchange rate of (December 31, ). The weighted average share price on the date of exercise of stock options for the six months ended, 2015 was Cdn$14.86 (six months ended, Cdn$13.07). The fair value of the options granted to employees, officers and directors under the share option plan was measured using the Black-Scholes option pricing model. The grant date fair value is amortized over the vesting period as part of compensation expense. 13

15 The weighted average inputs used in the measurement of fair value at grant date during the six months ended June 30 were: Number of stock options granted 682,507 1,891,651 Expected volatility i 69% 63% Risk free rate 0.54% 1.27% Estimated forfeiture rate 3.60% 3.60% Expected dividend yield $nil $nil Expected life in years Fair value (w eighted average) Cdn $ 6.23 $ 4.81 U.S. ii $ 5.00 $ 4.34 i. Expected volatility is measured based on the Company s historical share price volatility over the expected life of the options. ii. The U.S. dollar weighted average Black-Scholes value was calculated using the spot Canadian to U.S. dollar exchange rate applicable on the date of grant. Share options outstanding and exercisable at, 2015 are: Exercise price (Cdn) Options Outstanding Number of options Weighted average exercise price (i) Weighted average exercise price (Cdn) Weighted average remaining contractual life (years) Number of options Options Exercisable Weighted average exercise price (i) Weighted average exercise price (Cdn) Weighted average remaining contractual life (years) $ $ ,000 $ 5.91 $ ,000 $ 4.36 $ $ $ ,889, ,750, $ $ $ $ ,787, ,552, ,175,352 $ $ ,381,210 $ $ i. At, 2015 the U.S. dollar weighted average exercise price was calculated using the period end Canadian to U.S. dollar exchange rate of (December 31, ). (b) Other share based payments: Shares issued to Aboriginal groups In December 2010 and January 2011, the Company made financial and other commitments in consideration of the Company s interest in a mining property (the Rights ) to various Aboriginal groups who asserted Aboriginal rights and interests in the area of the Detour Lake mine. The financial compensation provided for in these agreements payable during the construction of the Detour Lake mine in conjunction with certain project milestones and with a final issuance scheduled six months after the achievement of commercial production at the Detour Lake mine. The Company could not reliably measure the fair value of the Rights received from these Aboriginal groups as a market price for such Rights does not exist. Instead, these are measured by reference to the fair value of the Company s shares granted, initially estimated on the agreement signing dates and subsequently on the financial position reporting dates and on issuance. During the year ended December 31, 2014, the Company issued the remaining 350,000 shares as required under the agreements. Since inception, a total of 1,150,000 shares were issued with a fair value of $24,732. The Company has no further share-based payment commitments to Aboriginal groups. 14

16 (c) Deferred share units In May 2013, the Company established a deferred share unit ( DSU ) plan for non-executive directors. Each DSU has the same value as one Detour Gold common share (based on the five day volume weighted average trading price). DSUs must be retained until the director leaves the Board of Directors, at which time the cash value of the DSUs are paid out. The fair value of the DSUs at, 2015 was $2,223 (December 31, $1,253). During the three and six months ended, 2015, compensation expense recognized was $1,147 and $1,356 (three and six months ended, $697 and $1,657). (d) Restricted share units In May 2014, the Company established a RSU plan for certain employees of the Company. Each RSU has the same value as one Detour Gold common share (based on the five day volume weighted average trading price). The RSUs vest one-third on the first, second and third anniversary of the grant date and are settled only in cash. The fair value of the RSUs at, 2015 was $2,008 (December 31, $961). During the three and six months ended, 2015, compensation expense recognized was $1,416 and $2,168 (three and six months ended, $371). (e) Performance restricted share units In February 2015, the Company granted PSUs to certain employees of the Company. Each PSU has the same value as one Detour Gold common share (based on the five day volume weighted average trading price). The amount of units to be issued (or the amount of cash to be paid) on the vesting date will vary from 0% to 200% of the number of PSUs granted, depending on the Company s total shareholder return compared to the return of its peer group. The PSU liability at, 2015 was $322 (December 31, $nil). During the three and six months ended, 2015, compensation expense recognized was $257 and $322 (three and six months ended, $nil). DSU RSU PSU number of units number of units number of units Balance, January 1, , Granted 96, ,676 - Forfeited - (17,249) - Settled for cash - (6,899) - Balance, December 31, , ,528 - Granted 64, ,822 94,733 Forfeited - (18,328) - Settled for cash (38,714) (105,546) - Balance, , ,476 94,733 15

17 11. FINANCE INCOME AND COSTS Three months ended Six months ended Note Finance income Interest income $ 179 $ 248 $ 290 $ 313 Finance costs Fair value gain (loss) of the convertible notes through profit or loss financial instruments 7 (6,581) (15,103) (10,684) (31,582) Accretion on convertible notes 7 (7,181) (6,181) (14,095) (12,134) Unw inding of discount on decommissioning and restoration provisions (16) (74) (80) (168) Interest expenses and bank charges (7,184) (8,646) (15,580) (17,608) Financing expenses (164) - (164) (100) Foreign exchange gain (loss) 1, Unrealized/realized gain (loss) on derivative instruments 14 4, ,955 (10,341) (14,918) (28,488) (35,305) (71,017) Net finance income (cost) $ (14,739) $ (28,240) $ (35,015) $ (70,704) 12. COMMITMENTS AND CONTINGENCIES (a) Purchase commitments As at, 2015, the total purchase commitments for capital expenditures for the Detour Lake mine amounted to approximately $1,836, which are expected to settle over the next 12 months. (b) Operating leases The Company has operating lease agreements involving office space and equipment. Future minimum lease payments required to meet obligations that have initial or remaining non-cancelable lease terms are $269 for 2015, $647 each year from 2016 to 2020, and $108 thereafter. (c) Detour Lake mine royalty Production from the Detour Lake mine is subject to a 2% net smelter royalty payable to Franco-Nevada Canada Holdings Corp. ( FN ). FN has the right to elect, on a yearly basis, to have the royalty paid in cash or in kind. FN has elected to receive the royalty paid in kind. During the three and six months ended, 2015, the Company accrued or paid in kind 2,478 and 4,491 ounces of gold (three and six months ended, ,111 and 4,057 ounces of gold). (d) Mine site closure obligations The Company issued $16,144 (Cdn$20,138) surety bonds and a letter of credit for $22,657 (Cdn$28,262) under the Facility (note 7) in favour of the Ministry of Northern Development and Mines in support of the closure plan of the Detour Lake mine as at,

18 (e) Contingencies On May 13, 2014, a proposed securities class action claiming, among other things, special and general damages in the amount of $64,133 (Cdn$80,000), was commenced against the Company and its former President and Chief Executive Officer, Gerald Panneton, in relation to the Company's secondary market public disclosure concerning its Detour Lake Mine operations between April 9, 2013 and November 7, 2013 (the Class Action Claim ). On July 10, 2014, the Plaintiff issued a Fresh As Amended Statement of Claim incorporating allegations respecting the Company s primary market disclosure, specifically in respect of the Company s final short form prospectus dated June 3, On May 25, 2015, the Plaintiff served a Motion to Amend the Fresh As Amended Statement of Claim. The proposed Second Fresh As Amended Statement of Claim names additional defendants and incorporates new allegations respecting the Company s alleged failure to disclose certain debt covenants. No date has been set for the Plaintiff s Motion to Amend. The Plaintiff has delivered amended materials in support of an Application for Leave to proceed with the Class Action Claim and in support of an Application for Certification. No date has been set for the Applications for Leave and Certification. The Company is investigating the allegations, and intends to vigorously defend the claims. No provision has been recorded in these financial statements. 13. FAIR VALUE MEASUREMENTS The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an arm s length transaction between market participants at the measurement date. When appropriate, the Company adjusts the valuation models to incorporate a measure of credit risk., 2015 Carrying value Fair value Designated at fair value through profit or loss Loans and receivables Other financial liabilites Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Financial assets Significant unobservable inputs (Level 3) Cash and cash equivalents $ - $ 131,537 $ - $ - $ - $ - Short-term investments - 1, Other receivables - 1, Restricted investments - 1, Derivative assets 4, ,236 Total financial assets $ 4,236 $ 137,045 $ - $ - $ 4,236 $ - Financial liabilities Trade and other payables $ - $ - $ 64,755 $ - $ - $ - Deferred share units 2, ,223 - Resricted share units 2, ,008 - Performance share units Long-term payables - - 4, Class A notes 74, ,156 - Senior unsecured notes - embedded derivative 12, ,805 - Senior unsecured notes , , Derivative liabilities 1, ,310 - Total financial liabilities $ 92,824 $ - $ 410,651 $ 407,414 $ 92,824 $ - 17

19 December 31, 2014 Carrying value Fair value Designated at fair value through profit or loss Loans and receivables Other financial liabilites Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Financial assets DSUs, RSUs and PSUs are included in trade and other payables on the consolidated statements of financial position but have been separately disclosed in the table. The carrying values of cash and cash equivalents, short-term and restricted investments, other receivables, trade and other payables approximate their fair values due to the immediate or short-term maturity of these financial instruments. The fair value of derivative assets and liabilities, are based on independently provided inputs and determined using standard valuation techniques. Derivative assets are not offset against derivative liabilities. Valuation methodology for Level 2 financial liabilities Significant unobservable inputs (Level 3) Cash and cash equivalents $ - $ 133,465 $ - $ - $ - $ - Short-term investments - 1, Other receivables Restricted investments - 2, Derivative assets 1, ,193 Total financial assets $ 1,193 $ 137,461 $ - $ - $ 1,193 $ - Financial liabilities Trade and other payables $ - $ - $ 74,814 $ - $ - $ - Deferred share units 1, ,253 - Resricted share units Class A notes 67, ,407 - Senior unsecured notes - embedded derivative 8, ,870 - Senior unsecured notes , , Finance lease obligations - 94, Revolving credit facility - 30, Derivative liabilities 1, ,190 - Total financial liabilities $ 79,681 $ 124,255 $ 401,870 $ 373,099 $ 79,681 $ - The Senior Unsecured Notes trade Over The Counter. The fair value for these notes are estimated using the periodend closing prices. The fair value of the Class A Notes (note 7) is estimated based on the trading level of the Senior Unsecured Notes and the Company s share price on the measurement date, adjusted to reflect the fact that the Class A Notes are callable at any time when the stock price is at least 130% of the Conversion Price. The fair value of the embedded derivative in the Senior Unsecured Notes was estimated based on the assumptions disclosed in note 7. 18

20 14. DERIVATIVE INSTRUMENTS The Company uses derivatives as part of its risk management program to mitigate the variability associated with changing market values related to the hedged item. The Company has not applied hedge accounting to derivative contracts. Changes in the fair value of derivative instruments are recognized through unrealized and realized derivative instruments gain (loss) included in net finance income and costs. The mark-to-market fair value of all contracts is based on independently provided inputs and determined using standard valuation techniques. Summary of derivatives at, 2015 Notional Amount Note Dollars Ounces Litres Average rate Financial Position Currency Collars (U.S.$/Cdn$) U.S. Put - Purchased i $ 40, Derivative assets U.S. Call - Sold i $ 40, Derivative liabilities Currency Forw ards (U.S.$/Cdn$) Buy Cdn$ i $ 40, Derivative assets Commodity Contracts Gold forw ards ii - 35,000 - $ 1,276 Derivative assets Energy Contracts Diesel forw ards iii - - 6,000,000 $ 0.46 Derivative assets All derivatives mature or expire within one year from the period end date. i. The Company has entered into zero-cost collars to hedge a portion of its Canadian dollar expenditures in the first nine months of As at, 2015, the Company had used zero-cost collars to hedge a total of $40,000, guaranteeing it will purchase Canadian dollars at a rate of no worse than 1.11 and can participate at a rate of up to In addition, the Company has $40,000 of forward contracts at an average exchange rate of ii. iii. As at, 2015, the Company had a total of 35,000 ounces of outstanding gold hedges at an average price of $1,276 per ounce to be settled before the end of the third quarter of As at, 2015, the Company had a total of 6 million litres of outstanding diesel at an average rate of $0.46/litre, which will settle on a net basis. Fair values of derivative instruments Balance sheet classification December Currency contracts Derivative assets $ 346 $ 303 Currency contracts Derivative liabilities $ (1,310) $ (1,190) Gold forw ards Derivative assets $ 3,668 $ 890 Diesel forw ards Derivative assets $ 222 $ - Total derivative assets $ 4,236 $ 1,193 Total derivative liabilities $ (1,310) $ (1,190) 19

21 Gains (losses) on derivative instruments Three months ended Six months ended Unrealized gain (loss) on derivative insturments Gold forw ards $ (2,079) $ (1,372) $ 2,778 $ (5,588) Currency contracts 4, (77) 108 Diesel forw ards Total $ 2,951 $ (1,228) $ 2,923 $ (5,480) Realized gain (loss) on derivative instruments Gold forw ards $ 2,508 $ 72 $ 4,183 $ (5,491) Currency contracts (1,005) 1,683 (2,361) 630 Diesel forw ards Total $ 1,713 $ 1,755 $ 2,032 $ (4,861) Total unrealized and realized gain (loss) on derivative instruments $ 4,664 $ 527 $ 4,955 $ (10,341) Sensitivities The following table sets for the impact on the Company s net income for the first quarter of 2015 for a 10% increase or decrease in rates/prices used in the fair value calculation of the derivative instruments with all other variables remaining constant. At, 2015 Change in Fair Value +/-10% Gold forwards + /- 4,098 Currency contracts + /- (7,164) / 5,921 Energy contracts + / CURRENT AND DEFERRED TAXES Current and deferred tax (recovery) expense for the three and six-months ended is as follows: Three months ended Six months ended Current tax expense $ - $ - $ - $ - Deferred tax (recovery) expense Ontario mining tax 1,939-14,409 - Income tax (4,475) - 10,355 - Total current and deferred tax (recovery) expense $ (2,536) $ - $ 24,764 $ - 20