Detour getting Detour Lake into game shape

Detour Gold (TSX: DGC) continues to whip its recently commissioned Detour Lake gold mine into shape.

The emerging world-class mine situated 185 km northeast of Cochrane, Ont., managed to turn out 57,897 oz. gold of production for the second quarter. Not a bad number considering the mine only went into its initial stages of production in February of this year. 

Those total ounces were achieved on the back of a mill that processed 2.87 million tonnes of ore, which while an impressive of total was still shy of Detour’s internally goal of 3.58 million tonnes milled.

The average grade processed was 0.76 gram gold per tonne and recoveries averaged 83%.

As with the ramp-up of any large scale mine, Detour Lake has had its challenges. Chief among them has been mill availability issues caused by unplanned shutdowns.

The good news for investors is that the company had worked through most of those issues by the end of the quarter. To do so it had to change out SAG mill grates, modify the transfer chute design and replace valves in the cyanide detoxification system.

Haywood Securities analyst Kerry Smith is bullish on the progress being made, writing in a research note that he expects the company to reach its availability target of 90-92% by year-end.

Outside of the availability issues, Smith said the company’s ramp-up in mill throughput went “nicely”. He points to Detour reaching 15 days with throughput over 40,000 tonnes per day, including five days at over 50,000 tonnes per day, with one day reaching 56,000 tonnes, as evidence of its progress .

“Detour Lake remains one of the best new gold mines – it is large (over 20-year reserve life) and once fully commissioned will generate significant cash flow with production over 660,000 ounces on average over the life-of-mine,” Smith wrote.

Detour Lake currently has proven and probable reserves of 470 million tonnes grading 1.03 grams gold for 15.57 million oz. gold.

The company expects to produce between 260,000 and 320,000 oz. gold in 2013 and plans to be in commercial production in this quarter. Commercial production is defined as achieving 60 consecutive days of operation at throughput over 75% of the plants designed capacity, which is 55,000 tonnes per day.

The company is well financed with $207 million in the treasury, largely thanks to a $176-million financing completed in May.

In Toronto on July 10, the company’s shares were off 2¢ to $8.68 on 1.03 million shares traded.