Detour Gold shares guidance for 2019

"The company will continue to execute on its operational strategy for 2019 with the goal of stabilising the operations by year-end," said Bill Williams, Interim CEO.

"The operational initiatives that Frazer Bourchier, COO, put in place during 2018 have produced positive results. We are building on this momentum to further improve efficiencies that will lead to steady-state operations and position the company towards a strong future."

2019 guidance review

• Full year projected gold production of between 570 000 - 605 000 oz.
• The mine plan calls for approximately 115 million t to be mined from the Detour Lake pit in 2019.
• Mill throughput is expected to range between 21.5 - 22.0 million t for 2019. Head grade is projected to range between 0.90 and 1.00 g/t, with the lowest grade projected during the second quarter. Mill recoveries are expected to range between 90.5% - 91.5%.
• 2019 AISC are expected to range from CAN$1175 - 1250/oz sold, with total cash costs of CAN$790 - 840/oz sold. The AISC are forecast to be above the yearly guidance in the second and third quarter of the year, mainly due to the timing of capital expenditures for the tailings facility construction.
• Capital expenditures are estimated to range between CAN$190 - 210 million. Higher sustaining capital is anticipated for accelerating the construction of Cell 2 of the tailings facility mainly due to slower progress than planned in 2018.
• Exploration budget of approximately CAN$5 million to focus mainly on drilling and geophysical surveys at a number of key targets on the Detour Lake property. The company plans to complete approximately 2500 m of drilling to better define the northeast and western extensions of Zone 58N. In addition, the company plans to complete an internal scoping study this year to assess the viability of pursuing an underground exploration and bulk sampling programme.
• Corporate general and administrative expense estimated at CAN$21 million and excludes share-based compensation.
• Interest expense estimated at approximately CAN$15 million.
• Depreciation expense expected to be approximately CAN$300/oz of gold sold, subject to the company completing its 2018 year-end reserve and resource estimate.

Principal assumptions used for the 2019 guidance include:

 

• Gold price: CAN$1250/oz.
• CAD vs US FX rate: 1.28.
• Diesel fuel price: CAN$0.95/l.
• Power cost: CAN$35/MWh.

   

Sensitivity analysis for changes affecting full year:

A CAN$50/oz change in the gold price impacts closing cash by approximately CAN$30 million.

A CAN$0.05 change in the CAN$ vs US$ exchange rate impacts closing cash by approximately CAN$20 million.

• 2019 Operational focus and initiatives

The company expect to further embed critical initiatives commenced in 2018 during the year to progress process plant capital projects and to introduce value-added business improvement plans. The focus remains on increasing production efficiencies while targeting the life of mine plan's benchmark production and cost metrics. Top focus areas for 2019 include:

• Employee retention and performance management.
• Tailings dam earthworks construction for Cell 2 including improved project management.
• Drill, blast and truck cycle efficiencies including fleet management.
• Condition-based maintenance processes for mine and plant.
• Business mine planning cycles together with data analytics and short interval controls.
• Cost controls including contractor management.
• Critical risk awareness and mitigation controls.

2019 Financial risk management

The company has established financial risk management programmes for its gold sales, Canadian dollar expenditures, and diesel fuel exposures. These programmes are to reduce a portion of the company's exposure to volatile markets and to lock-in known rates for budgeting purposes.

As of 22 January 2019, the company has the following positions:

1. 120 000 gold oz of collars have been added giving protection on gold sales at CAN$1250/oz and participation up to CAN$1400/oz. These collars mature evenly over 2019.
2. CAN$315 million of collars are in place that allow the company to sell US dollars at no worse than 1.27 and have upside to 1.35. These collars mature relatively evenly over 2019. These contracts along with other spot transactions completed to date in January have secured prices for approximately 60% of the company's estimated 2019 Canadian dollar requirements.
3. 35 million l of diesel fuel contracts at an average rate of CAN$0.85/l, which settle on a net basis. These contracts are predominantly weighted in the first nine months of 2019 and represent approximately 45% of the company's 2019 diesel fuel requirements.

Read the article online at: https://www.globalminingreview.com/finance-business/25012019/detour-gold-shares-guidance-for-2019/