Detour Lake: Canada’s Top Gold Reserve Set to Shine

With mineral reserves of 14.9 million ounces, the Detour Lake gold deposit in northeastern Ontario is Canada’s largest pure gold play and ranks fourth among the top ten largest gold reserves in North America. According to the positive feasibility study completed in May 2010, the Detour Lake mine is expected to produce nearly 650,000 ounces of gold annually over a 16-year mine life.

With the significant increase in reserves announced in January 2011 – from 11.4 to 14.9 million ounces using a conservative gold price of $850 per ounce – Detour Gold is proceeding with further economic studies to evaluate the potential of increasing the milling rate and proceed with an expansion of the processing plant once the mine is operational. Once operational, the mill is expected to recover 91 percent of the gold through a simple process of gravity followed by leaching, company founder, President and CEO Gerald Panneton says.

The feasibility study led to strong economics for the project generating an estimated $4 billion in pre-tax operating cash flow at $850 per ounce gold price.

Detour Gold Corp. plans to commence gold production at Detour Lake in the first quarter of 2013. “Once in operation, our goal is to become a leading mid-tier gold producer with the best net cash flow per share,” Panneton adds.

The feasibility study was delivered just after three years of exploration drilling and engineering studies. In those three years, Detour Gold has spent approximately $75 million in exploration and engineering studies (pre-feasibility and feasibility studies), and more than $500 million has been contracted to date for the development of this $1.2 billion project.

Under construction

Detour Gold now has initiated the infrastructure construction activities at the project site. In 2010, the company had bought and leased a portion of the Huntsville G-8 camp. The 1,000 construction camp is being installed by ATCO and is expected to be completed in April 2011.

“Crews are expected to begin pouring the concrete foundation for the processing plant in the spring of 2011,”

Panneton says. “These activities will be followed with steel erection in the second and third quarter of 2011 and with process plant building enclosure in the last quarter of 2011. An estimated 1,000 workers are expected to work on the site during the peak of construction over the next few years.”

Construction of the 180 kilometers power line started in January 2011 with the first segment of 135-kilometer section, connecting the site to the Island Falls power station. The contract for the project was awarded to Detour Lake Constructors, a partnership led by Peter Kiewit Infrastructure with participation of the First Nations. Kiewit is the construction manager and PowerTel Utilities Contractors of Whitefish, Ontario, is the transmission line subcontractor.

Once this segment is completed, the transmission line will provide 115 kilovolts of power to the site. The second

45-kilometer segment of the powerline, connecting to the Pinard transformer station, will be constructed in late 2011 and will provide up to 120 megawatts at 230 kilovolts of power during the operation of the Detour Lake project.

Detour Gold was proactive in communicating its exploration and development plans for the Detour Lake project to local First Nations communities, an approach that helped it secure signed impact benefit agreements in late 2010.

“In Canada, mining companies have a social responsibility with respect to the communities surrounding your project, including First Nations communities,” Panneton says. “Building positive relationships with the First Nations is our goal; the benefit agreements in place are confirmation of our success in this area.”

Detour Gold has signed agreements with the local First Nation communities including the Moose Cree, Taykwa Tagamou and Wahgoshig. The agreements provide the Aboriginal communities with economic development opportunities related to the project.

Standing Apart

Panneton says the Detour Lake asset distinguishes itself. “We’ve been able to excel at the work we’re doing because of the quality people we’ve hired and their commitment to the project,” he says. “Our team has extensive development and operational experience to successfully build, construct and operate the future Detour Lake mine.

“You can have the best gold asset in the world, but if you don’t have the best and most qualified people to build it, you will not succeed,” Panneton adds.

Detour Gold always has maintained a strong financial position by raising sufficient funds to cover its expenses. “We’ve always positioned ourselves strongly,” he stresses. As of year-end, the cash position of the company was approximately $970 million, which is sufficient to advance the development of the project through 2012.

Experienced Leadership

Panneton founded Detour Gold in 2006 as a private venture after a 12-year career at Barrick Gold Corp., last serving as director of advanced projects and evaluations. While at Barrick, he played a key role in advancing two gold projects towards development and production.

He has a bachelor of science degree in geology from the University of Montreal and a master’s degree from McGill University. “I consider my career at Barrick to truly be my schooling, and I attribute a large part of my success to working there,” he says.

Detour Gold became a publically traded company in January of 2007 with an initial stock price of $3.50 a share. The company traded around $28 a share in early 2011.

Panneton believes the company will continues to grow organically and offer more value to its investors. With the

Detour Lake deposit being open to the west and at depth, Detour Gold is planning to increase its mineral reserves even further.

For 2011, the company plans approximately 50,000 metres of drilling with the objective of further expanding the Detour Lake deposit to the west. The company also is conducting exploration on its 500-square-kilometer land package. There are two main east-west regional structures crossing the property, for a combined strike length of more than 80 kilometers. One of them hosts the world-class Detour Lake deposit and the other has several gold occurrences that will need to be tested in the near future. Drilling is currently underway on the Block A property (a 50 percent joint venture interest) and at the Sunday Lake property (earning a 50 percent interest).

“Our target is to eventually reach 20 million ounces in mineral reserves,” Panneton says. “Our plan is to stay focused and deliver gold production in early 2013 and be among the largest gold operations in North America.”