Review of operating costs showed the 2017 plan to be too optimistic, and the company has guided that overall LoM total site costs are likely to increase 8–14%, to $810–$850/oz. …the mining cost has hovered around C$3.00/tonne, even as the mining rate increased from 210Ktpd to 300Ktpd over the last few years. The economies of scale have not materialized, and despite spreading the fixed costs over more tones, the variable cost increases negated that decrease.
This is paradigm capital's note:
Cost Pressures Overshadow Near-Term Production Increases in LoM Plan Review
Investment Thesis. Detour Gold is an Intermediate gold producer with the flagship Detour Lake mine in northern Ontario. We view the mine as a world-class asset with annual gold production expected to be in the 550–700Koz range for 20+ years. Due to the nature of the orebody there are some years of lower profitability in the near-term, and we believe the long-term value of the world-class asset and years of stronger profitability longer-term is not fully recognized.
Event
Detour released its Q1/18 financials and the preliminary results of a review of an updated life-of-mine (LoM) plan for the Detour Lake operations on Thursday and held an Analyst Workshop on Friday. While Detour was successful in identifying opportunities to increase production in 2019–2020, this was overshadowed by a review of operating costs suggesting permanent increases to the estimates provided in last year's LoM plan.
Highlights
Q1 Results Buoyed by Grade, but 2018 Guidance Downgraded
