Q MANAGEMENT S DISCUSSION AND ANALYSIS

Transcription

1 Q MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE QUARTER ENDED MARCH 31, 2018

2 MANAGEMENT S DISCUSSION AND ANALYSIS This ( MD&A ) of Detour Gold Corporation ( Detour Gold, we, our or the Company ) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of the Company. This MD&A should be read in conjunction with Detour Gold s unaudited condensed consolidated interim financial statements and related notes for the three months ended March 31, 2018 and 2017 which are prepared in accordance with International Accounting Standard Interim Financial Reporting ( IAS 34 ) as issued by the International Accounting Standards Board ( IASB ). This MD&A contains certain forward-looking statements. Refer to the cautionary language at the end of this MD&A. All dollar figures stated herein are expressed in United States dollars, except for: (i) tabular amounts which are in millions of United States dollars; (ii) per share or per ounce amounts; or (iii) unless otherwise specified. This MD&A is dated April 26, The Company s public filings, can be viewed on the SEDAR website ( and on the Company s website ( Certain non-ifrs financial performance measures are included in this MD&A. Detour Gold 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. 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. These measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to other issuers. The non-ifrs financial performance measures included in this document are: total cash costs, all-in sustaining costs ( AISC ), average realized price, average realized margin, adjusted net earnings, adjusted basic net earnings per share, and free cash flow before financing activities. Refer to the Non-IFRS Financial Performance Measures section for a reconciliation of non-ifrs measures. In addition, included in this MD&A is the measure Earnings from mine operations. Refer to section Additional IFRS Financial Performance Measures for additional information on this measure. The following abbreviations are used throughout this document: USD or U.S. dollar (United States dollar), Cdn (Canadian dollar), AISC (All-in sustaining costs), Au (gold), oz (ounces), g/t (grams per tonne), Mt (million tonnes), km (kilometres), m (metres), TMA (tailings management area), tpd (tonnes per day), ROM (run-of-mine), and LOM (life of mine). 1

3 TABLE OF CONTENTS BUSINESS OVERVIEW... 3 FIRST QUARTER 2018 HIGHLIGHTS... 3 OUTLOOK... 4 CORPORATE DEVELOPMENTS... 4 EXPLORATION ACTIVITIES... 6 KEY PERFORMANCE DRIVERS... 7 OPERATING RESULTS FIRST QUARTER 2018 FINANCIAL RESULTS FINANCIAL CONDITION REVIEW LIQUIDITY AND CAPITAL RESOURCES COMMITMENTS OFF-BALANCE SHEET ARRANGEMENTS SUMMARY OF QUARTERLY FINANCIAL RESULTS NON-IFRS FINANCIAL PERFORMANCE MEASURES ADDITIONAL IFRS FINANCIAL PERFORMANCE MEASURES CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES SIGNIFICANT ACCOUNTING POLICIES INTERNAL CONTROLS OVER FINANCIAL REPORTING OUTSTANDING SHARES RISKS AND UNCERTAINTIES FORWARD LOOKING STATEMENTS TECHNICAL INFORMATION CORPORATE INFORMATION

4 BUSINESS OVERVIEW Detour Gold was incorporated under the laws of Ontario in 2006 and was listed on the Toronto Stock Exchange (TSX:DGC) in January Detour Gold is a Canadian-based intermediate gold mining company with a 100% interest in the Detour Lake mine, a long-life, large-scale open pit operation located in northeastern Ontario, approximately 300 km northeast of Timmins and 185 km by road northeast of Cochrane. The Company continues to focus on improving the Detour Lake mine and on organic growth by exploring and developing its large Detour Lake property, which consists of a contiguous block of mining claims and leases totaling approximately 625 km 2 in the District of Cochrane. Our business plan is to be a leading intermediate gold producer. The Company s near-term strategy is to continue with operational improvements at the Detour Lake mining operation while applying cost and capital discipline. With the mine now generating positive cash flow from operations, the Company is in a position to focus on strengthening its balance sheet by way of debt reduction and pursuing organic growth opportunities. FIRST QUARTER 2018 HIGHLIGHTS Gold production of 157,141 ounces compared to 131,418 ounces in Q AISC (1) of $1,072 per ounce sold and total cash costs (1) of $744 per ounce sold compared to $1,118 and $788 per ounce sold, respectively, in Q Revenues of $201.4 million on gold sales of 151,060 ounces at an average realized price (1) of $1,330 per ounce compared to $163.7 million on gold sales of 134,213 ounces at an average realized price of $1,216 per ounce in Q Earnings from mine operations of $51.0 million compared to $22.2 million in Q Net earnings of $9.9 million ($0.06 per basic share) compared to net earnings of $6.0 million ($0.03 per basic share) in Q Adjusted net earnings (1) of $28.2 million ($0.16 per basic share) compared to adjusted net earnings of $5.0 million ($0.03 per basic share) in Q Cash and cash equivalents of $152.5 million at March 31, 2018 (December 31, $134.1 million) Repaid $10 million on the revolving credit facility Signed amended Impact Benefit Agreement with the Wahgoshig First Nation to include West Detour project 1 Refer to the non-ifrs Financial Performance Measures section for a reconciliation of this metric. 3

5 OUTLOOK 2018 Outlook and Guidance Revisions The Company is revising its annual gold production guidance to between 595,000 and 635,000 ounces to reflect the anticipated change in mine sequencing planned in the 2018 LOM plan and to account for lower annual mill throughput tonnage (mainly resulting from the first quarter). AISC for 2018 are estimated to be between $1,200 and $1,280 per ounce sold with the increase being approximately equally attributable to: lower gold production; lower ore tonnes mined resulting in the use of ROM stockpiles; increased operating costs related to higher consumption of mill consumables, higher price assumptions for diesel (C$0.75/L to C$0.80/L) and electricity (C$0.025/kWh to C$0.030/kWh), increased contractor crushing (until the new primary crusher mantle is installed in June), and mobile fleet and fixed plant asset repairs; and a $16 million increase in essential capital expenditures ($6 million for processing plant equipment, $5 million for the mobile fleet, $3 million for the tailings facility and $2 million for other) Guidance Revised Previous Gold production (oz) 595, , , ,000 Total cash costs ($/oz sold) $700-$750 $670-$730 AISC ($/oz sold) $1,200-$1,280 $1,050-$1,150 With these planned adjustments, the Company is expected to generate approximately $55 million of free cash flow before financing activities in 2018 compared to the prior estimate of $115 million (using a gold price of $1,300/oz and U.S. to CAD exchange rate of 1.25). The mine plan for 2018 now calls for approximately 107 Mt versus 112 Mt to be mined from the Detour Lake pit as a result of the first quarter performance and the anticipated mine sequencing changes driven by the 2018 LOM plan. The average waste to ore strip ratio for the year is revised to 4.7:1 from 3.7:1, thereby increasing deferred stripping costs to approximately $60 million from $21 million. Based on the performance of the plant in the first quarter and a longer delay than anticipated in substituting the new mantle in the primary crusher, the plant is now forecast to process 21.0 Mt versus 22.0 Mt of ore. Forecast head grade and recoveries remain relatively unchanged for the full year. CORPORATE DEVELOPMENTS Update on Mine Plan Assessment As previously disclosed, the Company has been evaluating the opportunity to improve the near-term gold production and cash flow profile of the Detour Lake operation by accelerating access to the higher grades scheduled to be processed in 2021 and 2022 under the life of mine plan issued in March 2017 ( 2017 LOM plan ). Based on the Company s assessment, the revised mine plan increases gold production in 2019 and 2020 by approximately 50,000 ounces each year, thereby smoothing the projected gold production over the period to an average of approximately 600,000 ounces per year and substantially reducing the large variation in production under the 2017 LOM plan. 4

6 Despite achieving the primary objective of this assessment, the benefits are diminished as a result of two factors. During the review of the cost model from the 2017 LOM plan, management determined that some of the operating cost and capital expenditure assumptions needed to be increased and the quantum of anticipated operating and maintenance improvements needed to be slightly reduced. These changes reflect new insights derived from recent operational experience, some ongoing relevant benchmark comparisons and the Company not achieving its unit cost objectives for 2017; and As one of the Company s Aboriginal communities has not yet expressed its support of the Environmental Study Report filed in January 2017 for the West Detour project, management has now determined that greater permitting flexibility is appropriate and has therefore rescheduled the North pit development and any impact on Walter Lake to This delay is resulting in the deferral of approximately 150,000 ounces to beyond the period. The development of the West Detour pit remains in The Company is in the process of completing its assessment and expects to release a revised life of mine plan in June 2018 ( 2018 LOM plan ) to reflect the foregoing factors. The areas which remain to be concluded are some of the future life of mine capital assumptions and the rate at which certain operating cost reductions can be realized although management does not anticipate these to have a significant impact on its overall conclusions to date. The planned mill throughput, life of mine strip ratio and assumed mobile equipment and fixed plant productivities are largely unchanged from the assumptions in the 2017 LOM plan. Although work is continuing and more detailed reviews are still required, given the expected changes on the period and on the life of mine, the Company is providing the following preliminary information: Mine Parameters Period LOM Plan (preliminary) Period LOM Plan Total mined (Mt) Ore mined (Mt) Strip ratio (waste:ore) Ore milled (Mt) Average gold grade (g/t) Recovery (%) Total recovered gold (M oz) Average annual gold production (oz) 606, ,000 (1) Includes 5.3 Mt of LG Fines and 1.8 Mt of low grade material ( g/t) processed during that period. Additional preliminary operational information for the period : Annual mining rate to ramp up to 126 Mt in 2023 Annual plant throughput to increase to 22.5 Mt in 2019 and be maintained at 23.0 Mt starting in 2021 Strip ratio to vary annually from 3.5:1 to 6.6:1 ROM stockpiles are depleted and rebuilt at various times through this period 5

7 Preliminary financial analysis for the period and life of mine: Parameters 2018 LOM Plan 2 (preliminary) 2017 LOM Plan 1,2 Period Gold Production (M oz) ~ Total Site Costs 4 (US$/oz sold) $950-$1,000 3 $888 Total Site Cash Flows (pre-tax) (C$ Billions) At $1,250/oz & FX rate 1.25 ~ At $1,300/oz & FX rate 1.25 ~ Life of Mine ( ) Gold Production (M oz) ~ Total Site Costs 4 (US$/oz sold) $810-$850 $747 Total Site Cash Flows (pre-tax) (C$ Billions) At $1,250/oz & FX rate 1.25 $7.4-$8.1 $8.9 At $1,300/oz & FX rate 1.25 $8.3-$9.0 $9.8 5 NPV 5% (after-tax) (C$ Billions) At $1,250/oz & FX rate 1.25 $3.0-$3.2 $3.7 At $1,300/oz & FX rate 1.25 $3.4-$3.6 $4.1 (1) 2017 LOM Plan assumed a gold price of $1,250/oz for all years and FX rate of 1.27 for 2018 and 1.25 for all other years. Year 2017 has been removed from mine plan. (2) The following assumptions from the 2017 LOM plan are unchanged in the 2018 LOM plan: electricity costs at $0.035/kWh to end of 2024 (except $0.03/kWh for 2018) and $0.08/kWh for 2025+; diesel costs at $0.80/L for (3) For , preliminary total site costs average $1,050-$1,125/oz sold and are expected to gradually decline to below $900/oz sold in (4) Total site costs are presented on an average annual basis. This non-ifrs measure is discussed at the end of the news release. (5) Number not provided in March 2017 Technical Report. EXPLORATION ACTIVITIES Detour Gold has a 100% interest in the 625 km 2 Detour Lake property located on the northernmost Abitibi greenstone belt in northern Ontario. With the Detour Lake mine in operation since early 2013, the Company s exploration activities have focused on evaluating the exploration potential of its large Detour Lake property and developing a multi-year exploration plan with the main objective of finding high-grade satellite gold deposits within trucking distance of its large processing plant. The Company has also looked at grassroot opportunities in proximity to its main asset for future organic growth, which resulted in the staking in 2016 of the 494 km 2 Burntbush property located 70 km south of the Detour Lake mine Exploration Program A 7,000 m drilling program commenced in February 2018 to test several targets to the northeast and west of Zone 58N. The Company completed 5,621 m in 18 holes during the winter program. Alteration and mineralization similar to Zone 58N, including visible gold, was intersected in a number of holes. The Company expects to have all the assay results by the end of the second quarter and based on this additional understanding of the area will continue to identify additional drilling targets. 6

8 The Company has completed the block model for Zone 58N and plans to release an initial mineral resource estimate in the second quarter of 2018 and will then evaluate options for an appropriate advanced underground exploration program to further test the underground mining potential of Zone 58N. KEY PERFORMANCE DRIVERS The Company s key internal performance drivers are production volumes and costs which are disclosed in the sections Operating Results and First Quarter 2018 Financial Results. The key external performance drivers are the price of gold and foreign exchange rates. Gold price The price of gold is the most significant external financial factor affecting the Company s profitability and cash flow from operations. Therefore, the financial performance of the Company is expected to be closely linked to the price of gold. The price of gold is subject to volatile fluctuations over short periods of time and is affected by numerous industry and macroeconomic factors. During the first quarter of 2018, the gold price traded in a range of $1,308 to $1,355 per ounce (based on the London Bullion Market Association PM Auction). The average market price for the quarter was $1,329 per ounce, a 9% increase compared to the average market price of $1,219 per ounce for the first quarter of The gold price improved in the first quarter of 2018 in response to the broad-based weakening of the U.S. dollar across numerous currencies, uncertainty associated with the U.S. political climate and geopolitical risk, and as a safe haven alternative to volatile equity markets. The Company periodically uses forward and option contracts as part of its gold sales risk management program. During the first quarter of 2018 and as at March 31, 2018, the Company had no contracts in place and therefore had full exposure to the gold price. 7

9 Foreign exchange rates The Company s functional and reporting currency is the U.S. dollar. A significant portion of the operating and capital costs at the Detour Lake mine, as well as the corporate administration and exploration and evaluation costs, are denominated in Canadian dollars. Consequently, the Company s operating results and cash flows are influenced by changes in the Canadian dollar against the U.S. dollar exchange rate. The average Canadian dollar exchange rate strengthened by 5% during the first quarter of 2018 compared to the first quarter of The Canadian dollar strengthened in response to uncertainty regarding the U.S. political climate and U.S. economy, optimism regarding favorable outcome to NAFTA negotiations, narrowing of interest rate differentials, and strengthening of oil prices. A stronger Canadian dollar increases costs in U.S. dollar terms as the Company estimates that approximately 75% of its operating and capital expenditures in 2018 are denominated in Canadian dollars. The Company has a foreign exchange risk management program whereby it can use derivative instruments to hedge a portion of its Canadian dollar expenditures to reduce exchange rate risk. As at March 31, 2018, the Company had $144.0 million of zero-cost collars to hedge its 2018 Canadian denominated costs whereby it can sell U.S. dollars at an average rate of 1.25 and can participate up to an average rate of During the first quarter of 2018, the Company realized a gain of $0.1 million on its foreign exchange risk management program. Refer to section Liquidity and Capital Resources Derivative Instruments for details on the foreign exchange derivatives settled during the first quarter of 2018 and outstanding at March 31,

10 KEY OPERATING AND FINANCIAL STATISTICS The key operating and financial data for the periods are as follows: In millions of U.S. dollars, except where noted Three months ended March Operating data Ore mined Mt Waste mined Mt Total mined Mt Strip ratio waste:ore Mining rate 000s tpd Ore milled Mt Head grade g/t Au Recovery % Mill throughput tpd 50,860 58,114 Gold ounces produced oz 157, ,418 Gold ounces sold 1 oz 151, ,213 Financial data Metal sales $ Earnings from mine operations $ Net earnings $ Per share - basic $/share diluted $/share Adjusted net earnings 2 $ Per share basic 2 $/share Total assets $ 2, ,376.5 Debt 3 $ Average realized price 2 $/oz 1,330 1,216 Total cash costs 2 $/oz Average realized margin 2 $/oz AISC 2 $/oz 1,072 1,118 1 Gold ounces sold are net of 2% royalty ounces payable in-kind. 2 Refer to the non-ifrs Financial Performance Measures section for a reconciliation of these amounts. 3 Debt at March 31, 2018 represents the Credit Facility face value of $260.0 million. 9

11 OPERATING RESULTS Gold production The Detour Lake mine produced 157,141 ounces of gold in the first quarter of 2018, an increase of 20% compared to 131,418 ounces of gold in the prior year period. Gold production for the first quarter of 2018 reflected record head grades, partially offset by lower mill throughput. Mining The Company mined a total of 22.5 Mt of ore and waste (equivalent to approximately 250,000 tpd) in the first quarter of 2018, an increase of 3% from the prior year period. Mining rates for the first quarter were below plan due predominantly to low shovel availability caused primarily by the premature failure of the frame of a rope shovel and, to a lesser extent, other shovel component failures, combined with the delay in commissioning the Company s seventh shovel (operational since mid-april). At the end of the first quarter, ROM stockpiles increased to 7.1 Mt grading 0.69 g/t (approximately 158,000 ounces). Milling During the first quarter of 2018, the mill processed 4.6 Mt of ore (equivalent to 50,860 tpd), a decrease of 12% compared to the first quarter of 2017 (5.2 Mt of ore processed or 58,114 tpd). Mill throughput was impacted by additional repairs to the primary crusher which had begun in the fourth quarter of 2017 and related conveyor belt damage. A new redesigned mantle for the primary crusher is scheduled for June Head grade averaged a record 1.17 g/t for the quarter compared to 0.88 g/t in the first quarter of 2017 due to higher grades returned from mining the Campbell pit crown pillar. Mill recoveries averaged 91.1% for the first quarter of 2018 compared to 88.6% for the first quarter of The commissioning and ongoing ramp-up of the lead nitrate and oxygen control system in late 2017 has partially contributed to improvements in recovery in the first quarter of Q Q Q Q Q Ore mined Mt Waste mined Mt Total mined Mt Strip ratio waste:ore Mining rate 000s tpd Ore milled Mt Head grade g/t Au Recovery % Mill throughput tpd 50,860 54,144 61,548 60,259 58,114 Ounces produced oz 157, , , , ,418 Ounces sold oz 151, , , , ,213 10

12 FIRST QUARTER 2018 FINANCIAL RESULTS Factors Affecting First Quarter Net Earnings Millions of U.S. dollars Metal sales Metal sales for the first quarter of 2018 were $201.4 million compared to $163.7 million in the prior year period, reflecting higher gold sales and a higher average realized gold price. Gold sales during the first quarter of 2018 amounted to 151,060 ounces, an increase of 13% compared to 134,213 ounces in the prior year period and is attributable to higher gold production as described in the previous section. The average realized price for the first quarter of 2018 was $1,330 per ounce, an increase of $114 per ounce relative to the prior year period, reflecting a higher average market price for gold. Cost of sales Cost of sales for the first quarter of 2018 was $150.4 million compared to $141.5 million in the first quarter of This balance is comprised of production costs and depreciation. Production costs include costs associated with mining, processing, refining, site administration, and agreements with Aboriginal communities. Production costs during the first quarter of 2018 were $112.9 million compared to $106.4 million in the first quarter of The increase is primarily driven by a higher volume of gold ounces sold. Costs in the first quarter of 2018 were negatively impacted by reduced mobile fleet and fixed process plant availabilities resulting in additional contractor and component replacement costs associated with repairing the unplanned and premature failures as noted in Operating Results section. Specifically, we incurred shovel repairs of approximately $2.6 million, and mill repairs, as well as contractor ore crushing, of approximately $2.0 million. Depreciation during the first quarter of 2018 was $37.5 million, or $248 per ounce sold, compared to $35.1 million, or $262 per ounce sold in the first quarter of The depreciation per ounce decreased in the first quarter of 2018 due to higher gold production. 11

13 Total cash costs for the first quarter of 2018 were $744 per ounce sold, a decrease of 6% or $44 per ounce sold from the first quarter of 2017 of $788 per ounce sold. The benefit realized from the higher gold production was partially offset by the additional costs incurred in the quarter as described above. AISC for the first quarter of 2018 totaled $1,072 per ounce sold, compared to $1,118 per ounce sold in the first quarter of The decrease of $46 per ounce sold is primarily attributable to lower total cash costs per ounce sold as described above. Sustaining capital expenditures in the first quarter of 2018 amounted to $45.0 million or $298 per ounce sold (including $1.3 million of deferred stripping) compared to $38.8 million or $289 per ounce sold (including $3.4 million of deferred stripping) in the prior year period. Sustaining capital expenditures in the first quarter of 2018 included $29.3 million for mining (mainly relating to haul trucks and shovel and significant components to the mobile fleet), $8.0 million for the ongoing construction of the tailings facility, $1.3 million for processing plant, and $5.1 million for site infrastructure mainly for the new camp. Corporate administration expense Corporate administration expense was $4.4 million in the first quarter of 2018 compared to $4.0 million in the prior year period. Included in this amount is $0.3 million of share-based compensation expense, consistent with the first quarter of Corporate administration expense for the first quarter of 2018 is in-line with plan. Exploration and evaluation expense Exploration and evaluation expense was $1.3 million in the first quarter of 2018 compared to $2.2 million for the prior year period, reflecting drilling programs at Zone 58N. Refer to section Exploration Program for additional details. Net finance cost Interest expense and bank charges During the first quarter of 2018, the Company recorded interest expense and bank charges of $2.9 million compared to $5.1 million in the prior year period. The decrease is due to lower levels of debt outstanding at a lower interest rate. During the first quarter of 2018, the Company had drawn an average of $268.6 million on its credit facility compared to $357.8 million on its Convertible Notes in the prior year period. Unrealized and realized gain/loss on derivative instruments During the first quarter of 2018, the Company recorded a realized gain of $0.1 million on its financial risk management program (first quarter $0.5 million net loss) and recorded an unrealized net loss of $2.1 million on its derivative positions at March 31, 2018 (first quarter $0.3 million net loss). Details on the Company s derivative positions at March 31, 2018 are included in the Liquidity and Capital Resources Derivative Instruments section. Income and mining tax During the first quarter of 2018, an income and mining tax expense of $28.7 million was recognized (first quarter of $2.2 million recovery). The deferred tax expense recognized is primarily due to utilization of accelerated discretionary tax deductions and foreign exchange translation of non-monetary assets resulting from a weakened Canadian dollar since year-end. The Company s functional currency for financial reporting purposes differs from its tax filing currency. As a result, the tax basis of non-monetary assets and liabilities that are denominated in a currency other than the U.S. dollar are subject to re-measurement for changes in currency exchange rates at each reporting period. 12

14 Net earnings Net earnings for the first quarter of 2018 were $9.9 million, or $0.06 per basic share, compared to net earnings of $6.0 million, or $0.03 per basic share in the first quarter of The increase primarily reflects $28.8 million higher earnings from mine operations and lower net finance costs of $5.6 million, offset by a $30.9 million increase in deferred taxes. Adjusted net earnings Adjusted net earnings for the first quarter of 2018 amounted to $28.2 million, or $0.16 per basic share, an increase from adjusted net earnings of $5.0 million or $0.03 per basic share from the prior year period, primarily due to the increase in earnings from mine operations. Reconciliation of First Quarter 2018 Adjusted Net Earnings Millions of U.S. dollars Net earnings were adjusted to exclude specific items that are significant, and 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 non-recurring items. 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. Adjusting for these items provides an additional measure to evaluate the underlying operating performance of the Company as a whole for the reporting periods presented. The Company revised this measure and included a reconciliation of the current and comparative periods in the section Non-IFRS Financial Performance Measures. 13

15 FINANCIAL CONDITION REVIEW In millions of dollars March December Cash and cash equivalents $ $ Other receivables Other assets Current and long-term inventories Property, plant and equipment 2, ,122.6 Total assets $ 2,450.8 $ 2,417.5 Trade and other payables $ 74.0 $ 70.6 Long-term debt Other liabilities Deferred tax liability Total liabilities $ $ Total equity $ 1,968.1 $ 1,957.1 Total assets were $2.5 billion at March 31, 2018, an increase of $33.3 million compared to December 31, The Company s asset base is primarily comprised of non-current assets, property, plant and equipment, reflecting the capital intensive nature of mining. The net increase in total assets primarily reflects an increase in cash and cash equivalents and increase in current and long-term inventories. At March 31, 2018, inventories included $49.8 million of stockpiled ore (December 31, $36.7 million), $27.5 million of gold in-circuit (December 31, $27.2 million), $12.4 million of finished metal inventory (December 31, $12.9 million), and $40.9 million of materials and supplies (December 31, $37.5 million). Other receivables were primarily related to Harmonized Sales Tax (HST) refunds. At any period end, the Company expects to have one or two months of HST refunds outstanding. The Company does not carry any trade receivables. Property, plant and equipment increased by net $3.6 million during the first quarter of Net additions to property, plant and equipment, including deferred stripping, amounted to $43.1 million, mainly attributable to the expansion of the mobile fleet and construction costs associated with the TMA. This balance was partially offset by $39.5 million of depreciation expense. The Company s primary contractual obligations consist of debt and trade and other payables. The Company s debt at March 31, 2018 consists of its Credit Facility, of which $260 million was drawn at March 31, Refer to section Liquidity and capital resources for additional details. Trade and other payables increased to $74.0 million from $70.6 million, primarily due to the timing of payments. The Company s decommissioning and restoration provisions are included within Other liabilities in the table above. Significant restoration and rehabilitation activities include land rehabilitation, demolition of buildings and mine facilities, ongoing care and maintenance and other costs. At March 31, 2018, the provision was $34.0 million compared to $35.0 million at December 31, The decrease was primarily related to the impact of foreign exchange fluctuations in the valuation of the liability. There have been no changes to the underlying mine site closure activities or future cash flows. The Company s derivatives are included in Other assets and Other liabilities in the table above. The movement in these balances is due to the change in value in open contracts and market rates at period end. A summary of the 14

16 derivative positions and settlements during the quarter are included in section Liquidity and Capital Resources Derivative Instruments for details on the Company s derivative activities. The Company recognized deferred tax liabilities of $115.0 million in respect of income and mining taxes, an increase of $28.7 million from December 31, The deferred tax expense recognized is primarily due to utilization of discretionary tax deductions and foreign exchange translation of non-monetary assets. Total shareholders equity was $2.0 billion at March 31, 2018, an increase of $11.0 million compared to December 31, 2017, primarily due to net earnings of $9.9 million for the first quarter of

17 LIQUIDITY AND CAPITAL RESOURCES The Company manages liquidity risk by monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities. Cash flow forecasting is performed regularly. The Company monitors forecasts of the Company s liquidity in the form of cash and cash equivalents and requirements to ensure it has sufficient cash to meet operational needs while maintaining additional liquidity on its Credit Facility. Forecasting takes into consideration the Company s debt servicing requirements, covenant compliance and internal liquidity targets. In addition, factors that can impact the Company s liquidity are monitored regularly and include assumptions of gold market prices, foreign exchange rates, production levels, operating costs and capital costs. Contractual obligations and other commitments that could impact the Company s liquidity are detailed in the Commitments section of this document. Liquidity and capital resources The Company uses a mix of cash, debt and shareholders equity to maintain an efficient capital structure and ensure adequate liquidity exists to meet the needs of the operations and the Company. As at March 31, 2018, the Company had cash and cash equivalents of $152.5 million compared to $134.1 million at December 31, The funds are maintained in interest bearing accounts at select Canadian chartered banks. During the first quarter of 2018, the Company made a discretionary repayment of $10.0 million on its revolving credit facility. As at March 31, 2018, the Company had drawn $200.0 million of the term loan and $60 million of the revolving credit facility. In addition, the Company has used the Credit Facility to issue $29.6 million of letters of credit. At March 31, 2018 the Company had undrawn capacity of approximately $210.0 million. The Credit Facility bears an interest rate of Libor plus 2.125% to 3.125% on drawn amounts and 0.48% to 0.70% on undrawn amounts, based on the Company s leverage ratio, as defined in the agreement. The Credit Facility is secured against all assets of the Company and contains covenants customary for a loan facility of this nature, including limits on indebtedness, asset sales and liens. It contains financial covenant tests that include (a) a minimum interest coverage ratio of 3.5:1:0, and (b) a maximum leverage ratio of 3.5:1.0. The Company is in compliance with all Credit Facility covenants as at March 31, The long-term debt repayment profile at March 31, 2018 is as follows: in millions of dollars Thereafter Repayment of term loan $ - $ - $ $ - $ - Repayment of revolving credit facility Interest on the credit facility Total $ 9.1 $ 12.2 $ $ 62.5 $ - In the current gold price environment, the Company considers its liquidity and capital resources together with the expected cash flows from operations to be sufficient to support the Company s normal operating requirements for the foreseeable future. 16

18 Cash flows Three months ended March 31 In millions of dollars Cash flow from operating activities $ 68.3 $ 48.4 Cash flow used in investing activities (36.7) (24.5) Cash flow used in financing activities (12.1) (20.8) Effect of foreign exchange rates on cash (1.1) 0.5 Net increase in cash Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period $ $ Cash flow from operating activities The Company generated $68.3 million of operating cash flow during the first quarter of 2018 compared to $48.4 million in the prior year period. The Company benefitted from a higher average realized gold price, higher volume of gold sales and lower total cash costs. This benefit was partially offset by favourable working capital movements relative to the prior year period. Cash flow used in investing activities Cash outflows from investing activities amounted to $36.7 million for 2018 compared to $24.5 million in Cash used in investing activities is primarily for sustaining capital expenditures at the Detour Lake mine. The $12.2 million increase in spend in 2018 was primarily due to the planned expansion of the mobile fleet including the acquisition of two haul trucks and auxiliary equipment and construction activities related to the TMA and camp. Included in sustaining capital is $1.3 million of deferred stripping compared to $3.4 million in the prior year period. Cash flow used in financing activities Net financing cash outflows during the first quarter of 2018 amounted to $12.1 million compared to $20.8 million in the prior year period. The decrease in financing activities primarily relate to a lower level of debt repayments in the first quarter of 2018 compared to the prior year period. The Company repaid $10.0 million on its revolving credit facility compared to a $20.3 million convertible note repurchase in the prior year period. 17

19 Derivative instruments Fair values of derivative instruments Balance sheet March 31 December 31 In millions of dollars classification Currency contracts Derivative assets $ 0.8 $ 2.5 Currency contracts Derivative liabilities $ (1.2) $ (0.8) Total derivative assets $ 0.8 $ 2.5 Total derivative liabilities $ (1.2) $ (0.8) All derivatives outstanding as at March 31, 2018 and December 31, 2017 mature or expire within one year from the period end date. As at March 31, 2018, the Company had $144.0 million of zero-cost collars to hedge its Canadian dollar denominated costs whereby it can sell U.S. dollars at an average rate of 1.25 and can participate up to an average rate of As at March 31, 2018, the Company had no outstanding gold or diesel derivative contracts. (Gains) losses on derivative instruments Three months ended March 31 In millions of dollars Unrealized (gain) loss Gold contracts $ - $ (0.4) Currency contracts Diesel contracts Total $ 2.1 $ 0.3 Realized (gain) loss Gold contracts $ - $ - Currency contracts (0.1) 0.7 Diesel contracts - (0.2) Total $ (0.1) $ 0.5 Total unrealized and realized (gain) loss on derivative instruments $ 2.0 $ 0.8 Sensitivities The Company enters into foreign exchange collars relating to the portion of the future operating expenses incurred in Canadian dollars. With all other variables held constant, a 10% increase or decrease of the U.S. dollar against the Canadian dollar would have affected the Company s net earnings and comprehensive earnings by negative $10.0 million and positive $12.0 million, respectively. COMMITMENTS Purchase commitments As at March 31, 2018, total purchase commitments for capital expenditures for the Detour Lake mine amounted to $24.4 million (December 31, $30.2 million). 18

20 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 $0.5 million in 2018, $0.7 million each year from 2019 to 2020, and $0.1 million thereafter. 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. For the three months ended March 31, 2018, the Company accrued or paid in-kind 3,019 ounces of gold (three months ended March 31, ,583 ounces of gold). Mine site closure obligations The Company has issued $15.6 million (Cdn$20.1 million) of surety bonds, and a letter of credit for $22.0 million (Cdn$28.3 million) under the Credit Facility in favour of the Ministry of Northern Development and Mines in support of the closure plan of the Detour Lake mine as at March 31, OFF-BALANCE SHEET ARRANGEMENTS The Company does not have any off-balance sheet arrangements. 19

21 SUMMARY OF QUARTERLY FINANCIAL RESULTS In millions of dollars, except per share and ounce amounts Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Gold ounces produced 157, , , , , , , ,359 Gold ounces sold 1 151, , , , , , , ,606 Metal sales 1 $ $ $ $ $ $ $ $ Cost of sales Production costs Depreciation and depletion Total cost of sales Earnings from mine operations Expenses 2 (5.7) (6.5) (7.7) (10.2) (6.1) (4.5) (8.2) (16.2) Net finance income (cost) (6.7) (11.0) (6.5) (9.4) (12.3) 2.9 (0.8) (51.3) Income tax recovery (expense) (28.7) (15.8) (16.8) (6.5) 2.8 Net earnings (loss) $ 9.9 $ 16.7 $ 41.1 $ 24.4 $ 6.0 $ (13.5) $ 9.7 $ (30.7) Earnings (loss) per share Basic $ 0.06 $ 0.10 $ 0.24 $ 0.14 $ 0.03 $ (0.08) $ 0.06 $ (0.18) Diluted ( $ 0.06 $ 0.10 $ 0.23 $ 0.14 $ 0.03 $ (0.08) $ 0.06 $ (0.18) ( 1 Gold ounces sold are net of 2% royalty in-kind ounces. Refer to section Commitments Detour Lake mine royalty. 2 Includes corporate administration, exploration and evaluation expenses and other operating income (expenses). 20

22 NON-IFRS FINANCIAL PERFORMANCE MEASURES The Company has included certain non-ifrs measures in this document. 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. Total cash costs Total cash costs is a common financial performance measure in the gold mining industry but with no standard meaning under IFRS. Detour Gold reports total cash costs on a sales basis. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, such as sales, certain investors use this information to evaluate the Company s performance and ability to generate operating earnings and cash flow from its mining operations. Management uses this metric as an important tool to monitor operating cost performance. Total cash costs include production costs such as mining, processing, refining and site administration, agreements with Aboriginal communities, 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. Production costs include the costs associated with providing the royalty in-kind ounces. Other companies may calculate this measure differently. All-in sustaining costs The Company believes that AISC more fully defines the total costs associated with producing gold. The Company calculates AISC as the sum of total cash costs (as described above), share-based compensation, corporate general and administrative expense, exploration and evaluation expenditures 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. Other companies may calculate this measure differently as a result of differences in underlying principles and policies applied. Differences may also arise due to a different definition of sustaining versus non-sustaining capital. 21

23 Total cash costs and AISC reconciliation The following table reconciles these non-ifrs measures to the most directly comparable IFRS measures. Three months ended March 31 In millions of dollars, except per ounce Gold ounces sold 151, ,213 Total Cash Costs Reconciliation Production costs $ $ Less: Share-based compensation - (0.2) Less: Silver sales (0.5) (0.4) Total cash costs $ $ Total cash costs per ounce sold $ 744 $ 788 All-in Sustaining Costs Reconciliation Total cash costs $ $ Sustaining capital expenditures Accretion on decommissioning and restoration provision - - Share-based compensation Realized (gain) loss on operating hedges 2 (0.1) 0.5 Corporate administration expense Sustaining exploration expenditures Total all-in sustaining costs $ $ All-in sustaining costs per ounce sold $ 1,072 $ 1,118 1 Based 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. 2 Includes 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. 3 Includes the sum of corporate administration expense, which includes share-based compensation, per the statement of comprehensive earnings, excluding depreciation within those figures. 4 Includes 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. 22

24 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 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 per ounce Metal sales $ $ Realized (gain) loss on gold contracts - - Silver sales (0.5) (0.4) Revenues from gold sales $ $ Gold ounces sold 151, ,213 Average realized price per gold ounce sold $ 1,330 $ 1,216 Less: Total cash costs per gold ounce sold (744) (788) Average realized margin per gold ounce sold $ 586 $

25 Adjusted net earnings and Adjusted basic net earnings per share Adjusted net earnings and adjusted basic net earnings 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. Starting in 2018, the Company revised the reconciliation of these measures. The previous method adjusted for the impact of deferred taxes, while the current method adjusts for the impact of foreign exchange translation on nonmonetary assets. The Company believes this adjustment will result in a more meaningful trend analysis for investors and analysts to evaluate the Company s performance. As a result, the Company is presenting the revised measure for comparative periods noted below. Adjusted net earnings is defined as net earnings 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. 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 per share is calculated using the weighted average number of shares outstanding under the basic method of earnings per share as determined under IFRS. In millions of dollars and shares, except w here noted Q Full Year 2017 Q Q Q Q Full Year 2016 Basic w eighted average shares outstanding Adjusted net earnings and Adjusted basic net earnings per share reconciliation Earnings (loss) before taxes $ 38.6 $ 91.8 $ 32.4 $ 32.5 $ 23.1 $ 3.8 $ (24.4) Adjusted for: Fair value (gain) loss of the convertible notes 1 - (0.9) - - (0.1) (0.8) 4.6 Accretion on debt Non-cash unrealized (gain) loss on derivative instruments (0.5) (2.1) 0.3 (1.7) Foreign exchange (gain) loss (4.6) 1.3 (3.2) (2.1) (0.6) - Adjusted earnings before taxes $ 42.7 $ $ 40.1 $ 37.4 $ 26.3 $ 10.5 $ 10.3 Income and mining taxes (expense) recovery (28.7) (3.6) (15.8) Income and mining tax adjustments 14.2 (35.6) 2.5 (19.0) (11.4) (7.7) (18.1) Adjusted income and mining tax expense $ (14.5) $ (39.2) $ (13.3) $ (10.4) $ (10.0) $ (5.5) $ (0.6) Adjusted net earnings $ 28.2 $ 75.1 $ 26.8 $ 27.0 $ 16.3 $ 5.0 $ 9.7 Adjusted basic net earnings per share $ 0.16 $ 0.43 $ 0.15 $ 0.15 $ 0.09 $ 0.03 $ Balance included in the statement of comprehensive earnings caption Net finance cost. The related financial statements include a detailed breakdown of Net finance cost. 2 Includes 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. 24

26 Free cash flow before financing activities Free cash flow before financing activities is calculated as cash flow from operations less cash flow from investing activities. It provides useful information to management and investors as an indicator of the cash generated from the Company s operations before consideration of how those activities are financed. Three months ended March 31 In millions of dollars Net cash generated by operating activities $ 68.3 $ 48.4 Net cash used in investing activities (36.7) (24.5) Free cash flow before financing activities $ 31.6 $ 23.9 ADDITIONAL IFRS FINANCIAL PERFORMANCE MEASURES The Company has included the additional IFRS measure Earnings from mine operations in this document. 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, other operating (income) expenses, finance cost, and taxation. CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES 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 critical accounting estimates and judgments applied in preparation of the Company s condensed consolidated interim financial statement for the three months ended March 31, 2018 are consistent with those applied and disclosed in the Company s audited annual consolidated financial statements 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 consolidated financial statements as at and for the year ended December 31, New standards adopted by the Company and changes in accounting policies IFRS 9 - Financial Instruments The Company has adopted IFRS 9 retrospectively, with an initial application date of January 1, The Company did not restate comparative information for prior periods; accordingly the information presented for 2017 reflects the requirements of IAS 39. IFRS 9 Financial instruments replaces IAS 39 Financial instruments recognition and measurement. IFRS 9 includes revised requirements for the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and new general hedge 25

27 accounting requirements. It also carries forward the requirements on recognition and derecognition of financial instruments from IAS 39. The Company concluded that no adjustments were required to its opening accumulated deficit and there were no significant changes to its measurement of financial instruments for the comparative period as a result of the adoption of IFRS 9. The Company s financial instruments are classified as follows under IFRS 9, as compared to the Company s previous policy in accordance with IAS 39: Classification IAS 39 IFRS 9 Cash and cash equivalents Amortized cost Amortized cost Other receivables Loans and receivables Amortized cost Trade payables Amortized cost Amortized cost Interest payable Amortized cost Amortized cost Derivatives FVTPL FVTPL Credit facility Amortized cost Amortized cost As a result of the adoption of IFRS 9, the accounting policy for financial instruments as disclosed in the Company s December 31, 2017 consolidated financial statements has been updated as follows: Financial assets Financial assets are classified as either financial assets at fair value through profit or loss, amortized cost, or fair value through other comprehensive income. The Company determines the classification of its financial assets at initial recognition. i. Financial assets recorded at fair value through profit or loss ( FVTPL ) Financial assets are classified as fair value through profit or loss if they do not meet the criteria of amortized cost or fair value through other comprehensive income. Gains or losses on these items are recognized in net finance income (cost). ii. Amortized cost Financial assets are classified as measured at amortized cost if both of the following criteria are met and the financial assets are not designated as at fair value through profit and loss: 1) the object of the Company s business model for these financial assets is to collect their contractual cash flows; and 2) the asset s contractual cash flows represent solely payments of principal and interest. The Company s other receivables are recorded at amortized cost. A provision is recorded when the estimated recoverable amount of the financial asset is lower than the carrying amount. The Company s cash and cash equivalents are classified as financial assets measured at amortized cost. Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss or at amortized cost. The Company determines the classification of its financial liabilities at initial recognition. i. Amortized cost Financial liabilities are classified as measured at amortized cost unless they fall into one of the following categories: financial liabilities at fair value through profit or loss, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition, financial guarantee contracts, commitments to provide a loan at a below-market interest rate, or contingent consideration recognized by an acquirer in a business combination. 26

28 The Company s trade payables, interest payable, and credit facility do not fall into any of the exemptions and are therefore classified as measured at amortized cost. ii. Financial liabilities recorded fair value through profit or loss ( FVTPL ) Financial liabilities are classified as fair value through profit or loss if they fall into one of the five exemptions detailed above. The Company s derivatives are classified as fair value through profit or loss. Derivative instruments, including embedded derivatives, are recorded at their fair value on the date the derivative contract is entered into and transaction costs are expensed as incurred. The Company has not offset derivative assets and derivative liabilities. Transaction costs Transaction costs associated with financial instruments, carried at fair value through profit or loss, are expensed as incurred, while transaction costs associated with all other financial instruments are included in the initial carrying amount of the asset or the liability. Subsequent measurement Instruments classified as FVTPL are measured at fair value with unrealized gains and losses recognized in net finance income (cost). Instruments classified as amortized cost are measured at amortized cost using the effective interest rate method. Instruments classified as FVOCI are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Derecognition The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in net finance income (cost). Expected Credit Loss Impairment Model IFRS 9 introduced a single expected credit loss impairment model, which is based on changes in credit quality since initial application. The adoption of the expected credit loss impairment model had no impact on the Company s financial statements. The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full or when the financial asset is more than 90 days past due. The carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. IFRS 15 - Revenue from contracts with customers The Company adopted IFRS 15, with an initial application date of January 1, The Company adopted the standard prospectively and elected not to restate disclosures in comparative periods. IFRS 15 Revenue from contracts with customers replaces IAS 18 Revenue, IAS 11 Construction contracts, and some revenue-related interpretations. Under IFRS 15, revenue is recognized when a customer obtains control of the goods or services provided. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. The Company concluded that no adjustments were required to its opening accumulated deficit and no changes were required in the amounts of revenue recognized or in the timing of revenue recognition as a result of the adoption of IFRS 15. Due to the nature of the Company s sales, the timing of revenue recognition did not change as a result of adopting IFRS

29 As a result of IFRS 15 adoption, the accounting policy for metal sales has been updated as follows: Metal Sales Metal sales include sales of refined gold and silver. Revenue is recognized at a point of time when the performance obligation is satisfied as follows: the Company has a present right to payment for the metal, the customer has legal title to the metal, the Company has transferred physical possession of the metal, the customer has the significant risks and rewards of ownership of the metal, and the customer has accepted the metal. These conditions are generally met when the customer has received the goods physically, typically on settlement date. Payment is due and generally received on settlement date. IFRIC 22 - Foreign currency transactions and advance consideration The Company adopted IFRIC 22 Foreign Currency Transactions and Advance Consideration with an initial application date of January 1, The Interpretation clarifies which date should be used for translation when a foreign currency transaction involves an advance payment or receipt. The interpretation is applicable for annual periods beginning on or after January 1, The interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. The implementation of this interpretation did not have an impact on the Company s financial statements. New accounting pronouncements not yet adopted On June 7, 2017, the IASB issued IFRIC Interpretation 23 Uncertainty over Income Tax Treatments. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The Interpretation is applicable for annual periods beginning on or after January 1, Earlier application is permitted. The Company intends to adopt the Interpretation in its financial statements for the annual period beginning on January 1, The Company does not expect the Interpretation to have a material impact on the financial statements. On January 13, 2016, the IASB issued IFRS 16 Leases. The new standard is effective for annual periods beginning on or after January 1, IFRS 16 will replace IAS 17 Leases. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosures to be provided by lessors. Other areas of the lease accounting model have been impacted, including the definition of a lease. Transitional provisions have been provided. The Company intends to adopt IFRS 16 in its financial statements for the period beginning on January 1, The Company is evaluating the impact of adoption and expects to report more detailed information in its consolidated financial statements as the effective date approaches. 28

30 INTERNAL CONTROLS OVER FINANCIAL REPORTING The Chief Executive Officer and Chief Financial Officer of the Company are responsible for designing internal controls over financial reporting or causing them to be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The control framework that has been used is the COSO (2013) framework. There was no material change in the Company s internal controls over financial reporting that occurred during the first quarter of 2018 that has materially affected, or is reasonably likely to materially affect, the Company s internal controls over financial reporting. Disclosure controls and procedures Disclosure controls and procedures have been designed to provide reasonable assurance that all relevant information required to be disclosed by the Company is accumulated and communicated to senior management as appropriate to allow timely decisions regarding required disclosure. The Company s Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation of the design of the disclosure controls and procedures as of March 31, 2018, that the Company s disclosure controls and procedures provide reasonable assurance that material information is made known to them by others within the Company are appropriately designed. Since the December 31, 2017 evaluation, there have been no material changes to the Company s disclosure controls and procedures. Limitations of controls and procedures The Company s management, including the Chief Executive Officer and Chief Financial Officer, believe that any internal controls over financial reporting and disclosure controls and procedures, no matter how well designed, can have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance that the objectives of the control system are met. OUTSTANDING SHARES Outstanding Share Data at April 26, 2018 Number in millions Common shares Share purchase options 4.3 Restricted share units

31 RISKS AND UNCERTAINTIES The Company s major risk factors are disclosed in the Annual Information Form (AIF) for the year ended December 31, 2017 filed with the Canadian provincial securities regulatory authorities. The risk factors disclosed should be given special consideration when evaluating trends, risks and uncertainties relating to the Company s business. Any of the following risk factors could cause circumstances to differ materially from those described in forward-looking statements relating to the Company, and could have a material adverse effect upon the Company, its business, operations, results of operations, financial condition and future prospects. Although the risk factors disclosed in the AIF are the major risk factors identified by management, they do not comprise a definitive list of all risk factors related to the Company. In addition, other risks and uncertainties not presently known by management could impair the Company and its business, operations, results of operations, financial condition and future prospects in the future. FORWARD LOOKING STATEMENTS This MD&A 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. The forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date or dates specified in such statements. Specifically, this MD&A contains forward-looking statements regarding revised gold production in 2018 of between 595,000 and 635,000 ounces; revised AISC in 2018 of between $1,200 and $1,280 per ounce sold with estimated total cash costs in 2018 of between $700 to $750 per ounce sold; 2018 free cash flow before financing activities of $55 million (using a gold price of $1,300/oz and U.S. to CAD exchange rate of 1.25); increasing gold production in 2019 and 2020 by approximately 50,000 ounces each year; smoothing the projected gold production over the period to an average of approximately 600,000 ounces per year and substantially reducing the large production variation in the 2017 LOM plan; the rescheduling of the North pit development and any impact on Walter Lake to 2026; the deferral of approximately 150,000 ounces to beyond the period; the development of the West Detour pit in 2025; the 2018 LOM plan being released in June 2018 and the content and results of such revised life of mine plan; management not anticipating the additional work to be completed having a significant impact on its overall conclusions to date as set out in this news release; preliminary information on mine parameters for the period in the 2018 LOM plan as set out in this news release; the annual mining rate ramping up to 126 Mt in 2023; annual plant throughput increasing to 22.5 Mt in 2019 and being maintained at 23.0 Mt starting in 2021; the strip ratio varying annually from 3.5:1 to 6.6:1; the ROM stockpiles being depleted and rebuilt at various times through the period; a preliminary financial analysis for the period and life of mine as set out in this news release; the installation of a new redesigned mantle for the primary crusher for June 2018; the receipt of the assay results of its exploration program in the second quarter of 2018; plans to release an initial mineral resource statement for the Detour Lake Property with the addition of Zone 58N in the second quarter of 2018 and then evaluating development options for an advanced exploration program to test the underground mining potential of Zone 58N; approximately 107 Mt to be mined from the Detour Lake pit in 2018; an average waste to ore strip ratio for 2018 of 4.7:1; deferred stripping costs of approximately $60 million for 2018; the plant processing 21.0 Mt of ore in 2018; and forecasted head gold grade and recoveries to remain relatively unchanged for

32 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 final revised life of mine 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 Aboriginal 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 2017 Annual Information Form ( AIF ) and in the continuous disclosure documents filed by Detour Gold on and available on SEDAR at 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 final revised life of mine 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 Aboriginal 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. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Detour Gold'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 contained herein are made as of the date hereof, or such other date or dates specified in such statements. Detour Gold undertakes 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. 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. TECHNICAL INFORMATION The scientific and technical content included in this MD&A was 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. 31

33 CORPORATE INFORMATION Directors Company Information Michael Kenyon Chairman Corporate Office Paul Martin President and Chief Executive Officer Commerce Court West Lisa Colnett (4), (5) Corporate Director 199 Bay Street, Suite 4100 Edward Dowling (3), (5) Corporate Director Toronto, ON M5L 1E2 Robert Doyle (2), (3) Corporate Director t: Andre Falzon (1), (2) Corporate Director f: (1), (5) Ingrid Hibbard Corporate Director Alex Morrison (2), (3), (4) Corporate Director Investor Relations Jonathan Rubenstein (1), (4) Corporate Director Laurie Gaborit, Vice President Investor Relations t: Board Committees e: (1) Corporate Governance and Nominating Committee (2) Audit Committee Media Inquiries (3) Technical Committee t: (4) Human Resources and Compensation Committee e: (5) Corporate Social Responsibility Committee Management Transfer Agent Paul Martin President and Chief Executive Officer Computershare Investor Services Frazer Bourchier Chief Operating Officer tf: James Mavor Chief Financial Officer t: Julie Galloway General Counsel and Corporate Secretary Drew Anwyll Senior Vice President, Technical Services Auditors Derek Teevan Senior Vice President, Corporate and Aboriginal Affairs KPMG LLP Laurie Gaborit Vice President, Investor Relations Ruben Wallin Vice President, Environment and Sustainability Charles Hennessey Mine General Manager Alberto Heredia Controller 32