TORONTO Oct 29, 2015 (Thomson StreetEvents) -- Edited Transcript of Detour Gold Corp earnings conference call or presentation Thursday, October 29, 2015 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Laurie Gaborit Detour Gold Corporation - Director of IR * Paul Martin Detour Gold Corporation - President, CEO & Director * Drew Anwyll Detour Gold Corporation - Senior VP, Technical Services * James Mavor Detour Gold Corporation - CFO ================================================================================ Conference Call Participants ================================================================================ * Rahul Paul Canaccord Genuity - Analyst * Cosmos Chiu CIBC World Markets, Inc. - Analyst * Steve Parsons National Bank Financial - Analyst * Dan Rollins RBC Capital Markets - Analyst * Anita Soni Credit Suisse - Analyst * Don Blyth Paradigm Capital - Analyst * Mike Parkin Desjardins Securities - Analyst * Ardem Keshishian Haywood Securities - Analyst * Andrew Quail Goldman Sachs - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by. Welcome to the Detour Gold Third Quarter 2015 Results Conference Call and Webcast. (Operator instructions.) At this time, I'd like to turn the conference over to Laurie Gaborit, Director of Investor Relations of Detour Gold. Please go ahead. -------------------------------------------------------------------------------- Laurie Gaborit, Detour Gold Corporation - Director of IR [2] -------------------------------------------------------------------------------- Thank you, Operator, and good morning, everyone. I'm Laurie Gaborit, and I'm pleased to welcome you today to Detour Gold's 2015 third quarter results conference call and webcast. Paul Martin, President and CEO, will review our Q3 results, and following this, Drew Anwyll, our Senior VP, Technical Services, and James Mavor, our Chief Financial Officer, will also be available to answer questions at the end of the call. Today's presentation is available for download both on this webcast and on the Company's website on our home page. Yesterday's related press release is also posted on the Company's website. Please note that certain statements to be made today by the management team may contain forward-looking information. Forward-looking statements are subject to known and unknown risk, uncertainties, and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking statements. For more information, we refer you to our detailed cautionary note in yesterday's press release. Please note that all dollar amounts mentioned in this call are in US dollars unless otherwise noted. I will now turn the call over to Paul for the third quarter results. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [3] -------------------------------------------------------------------------------- Thanks, Laurie, and good morning, everyone. I'd like to start the call first by letting you know that I visited Pierre, our COO, last Sunday, who's off on temporary medical leave of absence, and I can confirm that -- advise that his recovery is going well, although he's not quite ready to resume his favorite pastime, golf. In his absence, Drew Anwyll, former mine general manager, is assuming Pierre's duties and responsibilities. Chuck Hennessey, our third mine general manager, and his team continue their commitment to the success of the Detour Lake mine. Following a record quarter of production, I would categorize this quarter as solid, with perhaps a missed opportunity for even higher gold production as a result of lower plant availability. Before I review the key highlights of the quarter, I would like to first provide an update on safety. Our safety performance, measured on total [recordable] injury frequency, improved during the quarter and averaged 2.4 for the first nine months of the year, including 1.7 for Q3, our best result to date. We have planned an external safety audit in Q4, leading to our commitment to being a safer operation. And as announced on September 2, we continue to cooperate fully with the authorities on their investigation with respect to the passing of an employee at site in the second quarter. Let's move to the third quarter highlights now. Gold production exceeded budget and totaled 128,000 ounces for the quarter, nearly 3,000 ounces more than the second quarter. Total cash costs and all-in sustaining costs totaled $766 and $1,071 per ounce sold, respectively, and above expectation despite a favorable exchange rate during the quarter. Year-to-date, we've had 359,000 ounces of gold produced at total cash cost of $806 and all-in sustaining cost of $1,130 per ounce sold, respectively. We did generate $2 million of free cash flow for the quarter, although the late sales tax refunds conspired to reduce this increase by $9 million. We certainly expect higher production and lower costs in the fourth quarter, resulting in free cash flow, and which puts us on track to meet our guidance for the year. This is our second quarter in a row that we have processed over five million tons of ore. For Q3, we processed 5.2 million, equivalent to a throughput rate of 56,015 tons per day, or just over 1,000 tons above design. I mentioned the missed opportunity earlier, as we had two unplanned shutdowns in the quarter that were originally scheduled for the fourth quarter planned shutdown, and which reduced plant availability to 85%. First, their 410 conveyor belt, despite vigilant monitoring, which led to its longest use to date before replacement, had to be changed out prematurely. And secondly, we replaced the pulp lifters in the SAG mills due to premature wear. We have now changed the design of the pulp lifters to enable the better flow of the slurry out of the SAG mills, and now expect longer life from these liners. To compensate, we had record milling rates of 2,750 tons per operating hour, slightly higher than Q2 and 10% higher than design. We are now seeing high 60,000 tons per day on a regular basis, and we're excited to find out what this plant can ultimately achieve. Our head grade averaged .86 grams per ton for the quarter, or 5% better than Q2, with September averaging .92 grams as we accessed higher grade ore near the Campbell pit. In July and August, we triple-fed 92,000 tons of fines, and as you recall, this is the enriched top portion of the mineralized waste stockpile. We believe we have sufficiently tested this now, and we expect this process will be phased into the new life-of-mine update. At the mine, we were on plan, with mining rates at 255,000 tons per day per quarter. The mine continued to increase its minable and drilled inventory, which stood at 8.5 million tons at quarter-end. We have now essentially completed all of the pre-stripping for phase one, which will be the primary source of ore for the next three years. And as shown on the photo, we can clearly see that the perimeter of the phase one pit and the destacking of it that has resulted in fewer and larger mining benches, which allows for better productivity from our shovels. The western portion of the pit, which is the bottom area on the photo, is where we'll mine and process the more continuous calcite zone, adding confidence to our ability to deliver higher grades in Q4. In addition, we successfully met our objectives for the quarter, accelerating access to the east end of the pit to expose higher grade ore sooner than originally planned, nearly doubling the run-of-mine stockpiles now standing at 3.3 million tons, making gains on phase two pre-stripping, and our tailings management area activities, we're on schedule and budget, and with the contractors now have been completed their work and left site. For Q4, we have a scheduled shutdown in November to replace the SAG ball mill liners, and also an unplanned replacement of a damaged trunnion on ball mill one. This trunnion issue was caused as a result of a [latent fault] that was present from construction, and which resulted in material getting inside the trunnion shell and racing, or circulating internally, causing internal wear on this trunnion. This issue was isolated to ball mill one and not applicable to ball mill two, and will not be recurring. A replacement trunnion has been sourced, and it is now in Ontario being ready for machining to enable it to be installed in the November shutdown. Despite having to extend the shutdown, we still expect to process five million tons of ore at grades above .9 grams per ton. One significant change we want to make in the first half of 2016, and one that we have not been shy about, is making the 410 conveyor more robust. This is expected to cost less than $10 million and increase the availability of feeding material to the stockpile dome. And keeping this dome near capacity is key to consistent high throughput levels being realized in this plant, and with a goal of increasing the plant operating time over the 88% realized in Q2 in 2015. For the fourth quarter, we plan to operate primarily with three shovels in phase one and two shovels in phase two, equal to mining rates of 250,000 to 260,000 tons per day while prioritizing the delivery of higher grade to the mill and usage of our 795 haulage fleet for the direct delivery of material to the tailings area for the winter work program. On operating costs, total cash costs were higher than planned as a result of the impact of mining more tons, combined with increasing our drilled and blasted inventory in the pit, and the repairs required to the 410 conveyor and pulp lifters. At the processing plant, the unplanned shutdown costs were largely offset by lower power costs, which averaged $0.033 per kilowatt hour. The further weakening of the Canadian dollar benefited costs despite the adverse impact of our currency hedges, which added $4.6 million, or $34 per ounce sold, to our all-in sustaining costs. These costs, however, do not reflect the positive impact of our gold hedge program, which improved our sales by $5.1 million, or $40 per ounce sold. Going into the fourth quarter, as I said, we do expect higher production mainly as a result [of the process] in higher grade ore, which will lead to lower costs. For 2015, we are targeting the midpoint of our production guidance of 475,000 to 525,000 ounces, and all-in sustaining cost guidance of $1,050 to $1,150 per ounce sold. Capital expenditures remain on target, between $90 million and $100 million, and no additional deferred stripping is expected beyond the $10 million incurred to date. And as you know, the team is cautiously optimistic, but we do feel we are at an inflection point, which means the start of significant free cash flow is now right in front of us at today's gold and FX rates. On the life-of-mine, we have made significant progress during the quarter, and we remain on schedule for a January delivery, along with the 2016 guidance. At this time, we cannot disclose the key decision points, but I am prepared to say this - we are focusing on a lower risk operational profile than the current life of mine. And in the current gold price environment, high tonnage production plans with significant capital injection is not in the best interest of our shareholders. This philosophy logically leads us to reducing the maximum mining rate, which is 140 million tons annually, or said another way, "mine the pit slower," allowing us to lower the near-term stripping ratio and delayed adding to the mining fleet. We also will be making a call on the projected maximum annual throughput that our plant can sustain. We have now demonstrated consistently higher-than-designed tons per operating hour, and now we need to make a call [on] when we can realize on higher operating times. We also plan on adding block A as a second feed source, with pre-stripping to commence no sooner than 2018, which will provide flexibility to the operation. And lastly, we now expect that the processing of fines will be incorporated in the life-of-mine plan. We are confident that we will deliver a life-of-mine plan that will not disappoint, have a lower risk profile, and will provide solid economics at current gold prices. On the exploration front, as you saw, we released positive drill results last week on the first half of the Lower Detour program, and which demonstrated the continuity of the gold mineralization at four grams per ton and above in zone 58 north. We are now awaiting the key results from the deeper holes and deeper eastern holes to see if we can expand the size of the mineralized zone. And a further update will be forthcoming in December, where we can talk more definitively on the options in front of us based on the remaining results of the program. Let's move to the key financial highlights of the quarter. The Company generated earnings from operations of $3.4 million in Q3, and had adjusted net loss of $13.3 million. The net loss increased quarter-over-quarter was as a result of a lower realized gold price, approximately $50 per ounce, and higher operating costs of approximately $30 per ounce, although the quarter benefited from higher gold sales and a favorable exchange rate average of 1.31 in Q3. The Company's gold, foreign exchange, and diesel hedging programs continue to be effective. As noted earlier, the net position of the gold and FX programs were positive $1 million in Q3, while the diesel program was negligible. During Q3, we added $50 million in currency hedging related to Q4 2015 and Q1 2016, $30 million in callers with strike prices between 1.26 and 1.36, and $20 million in forward contracts at 1.25, which were placed early in Q3. Our current gold hedge program was depleted in Q3, and no new positions have been added at this time. Capital expenditures for the quarter totaled $27.4 million, with major components being related to the seasonal tailings work, approximately $16.8 million, and at the mine $8.1 million. And as noted, there was no deferred stripping incurred in the quarter. We closed the quarter with a strong cash balance of $133 million and a fully undrawn CAD85 million credit facility. I'd like to spend the last few minutes on a question we're getting more frequently these days, what's next for Detour. The Company is approaching a turning point. The operation is set to deliver higher gold production and generate free cash flow for the Corporation. As we well know, we are a single asset company and unique among our peer group, as we have a long mine life and a significant gold production profile located in a safe jurisdiction. Our first priority is to maintain the strong balance sheet to withstand any bumps along the way. And you all know the age-old expression, been there, done that before, and having had a relatively weak balance sheet, we can assure you we're not going back there. We accomplish this by executing at Detour Lake, where we've made great strides, but have yet to fully realize on the economies of scale and cost reductions needed. Next on the list is to focus on organic internal growth. Our promising 630 square kilometer land package potentially offers the lowest cost and highest value of return for our shareholders. The first part to this organic growth strategy is to expand our Detour Lake operation with the development of block A, and hardly anyone is giving up any value for this two million ounce resource, and which we see as much more than merely extending the mine life. Having two pits will de-risk the entire operation when considering the need to feed a plus-22 million ton per annum processing plant. We will also look at using the depleted pit as a waste dump and potentially a good tailings (inaudible) area to reduce the overall footprint of the operation. The second part of the organic growth strategy is to continue exploring on our large prospective claim block. We now have our third exploration success with Lower Detour, and we'll soon be evaluating the economic potential of this higher grade underground target. Next will be to evaluate a drilling program on our claim block to test a number of interesting geophysical targets. And we also need to stockpile cash to manage the maturity of our notes, which are due in November 2017, or consider repurchasing some of these notes in advance of their maturity. And with the free cash flow projected to be generated from 2016 and 2017, plus our opening cash balance in 2016, we are targeting to reduce the refinancing of the notes to $300 million or less, depending on the performance of the gold price. And once we have the certainty of our ability to reduce our debt level, we can look at upside opportunities. In this regard, we're preparing ourselves, looking and monitoring the landscape, [from doing our] exploration to development-stage projects in locations we prefer. We wouldn't be doing our jobs if we didn't. And we're certainly seeing that the most attractive valuations are currently in the exploration and development stage projects rather than companies with producing assets. So, for the moment, it makes more sense to develop block A, where we have no acquisition costs nor the need to build a plant facility. So, to summarize, our corporate strategy is simple and straightforward - execute at Detour Lake, accelerate our priority organic growth targets while maintaining a strong balance sheet. And by doing this, we'll trade at a premium and put ourselves in the driver's seat in regards to the optionality for future external growth. And with that, Operator, I'll turn the call over to you to open up the line for questions for Drew, Jim, or myself. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator instructions.) Rahul Paul, Canaccord Genuity. -------------------------------------------------------------------------------- Rahul Paul, Canaccord Genuity - Analyst [2] -------------------------------------------------------------------------------- Hi, everyone. On the planned shutdown for Q4, how long is the planned shutdown, and when exactly do you plan to shut it down? Also, I'm just wondering if you anticipate having everything back up and running before the extreme cold kicks in. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [3] -------------------------------------------------------------------------------- Sorry, what was the last part, Rahul? -------------------------------------------------------------------------------- Rahul Paul, Canaccord Genuity - Analyst [4] -------------------------------------------------------------------------------- I'm just wondering if you're expecting to have everything back up and running after the shutdown before the extreme weather kicks in. -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [5] -------------------------------------------------------------------------------- Yes. So, we have a shutdown that'll start in November, and that'll be to [realign] line two. And then, when the trunnions get machined, we'll do that later on in November. So, all up, we're looking at about a five-day shutdown. We don't anticipate that the cold will hit, and we've already seen snow up there. But, we don't anticipate that it's going to be an issue for us at all, Rahul. -------------------------------------------------------------------------------- Rahul Paul, Canaccord Genuity - Analyst [6] -------------------------------------------------------------------------------- Thanks, Drew. And then, on the mill (inaudible), the mill has been doing quite well on throughput, but the recoveries dipped slightly in Q3. How long do you expect it will take to get to your target recovery rates of 92%, 92.2%, I think? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [7] -------------------------------------------------------------------------------- That's a great question. The biggest lever that we see in the plan, the two biggest levers we see onsite is mill throughput and grade, and the third one being recovery. The reality is we have started to see an increase in the gravity recovery. That's from putting a focus on that. And overall, from the leads recovery, we've done some trials on lead nitrate. We still need to do some more trials, but that's an area where we believe, now that the plant is a whole lot more stable, we can start attacking that with focus. -------------------------------------------------------------------------------- Rahul Paul, Canaccord Genuity - Analyst [8] -------------------------------------------------------------------------------- Okay. Thanks, Drew. And then, the last question from me, it looks like you've indicated you're open to continuity of currency hedging program, but I'm just wondering, going forward, how much unhedged currency exposure on the cost side would you like to maintain, or do you plan to just hedge it all? -------------------------------------------------------------------------------- James Mavor, Detour Gold Corporation - CFO [9] -------------------------------------------------------------------------------- Hi, Rahul, it's Jim. I don't think there'd be any intention to hedge at all, but given how much the Canadian dollar's depreciated in 2015, and our view that there's potentially more to go, we'd be inclined to do callers, so that's what we've sort of dipped a toe in in early [2016]. And we just wanted to -- [this is a risk] management program, and we'd be more inclined to add positions that allow us to participate in case the Canadian dollar does depreciate in the future. -------------------------------------------------------------------------------- Rahul Paul, Canaccord Genuity - Analyst [10] -------------------------------------------------------------------------------- So, no forwards, basically, just callers is what you're looking at? -------------------------------------------------------------------------------- James Mavor, Detour Gold Corporation - CFO [11] -------------------------------------------------------------------------------- Yes, unless there's a real aberration in the market, we'd be more inclined just to use the callers that give us a wider range. -------------------------------------------------------------------------------- Rahul Paul, Canaccord Genuity - Analyst [12] -------------------------------------------------------------------------------- Okay, thanks, Jim. And that's it for me. My best wishes to Pierre for a speedy recovery. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [13] -------------------------------------------------------------------------------- All right. Thank you, Rahul. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs. -------------------------------------------------------------------------------- Unidentified Participant [15] -------------------------------------------------------------------------------- Hi, this is [J.P.] here. I'm filling in for Andrew. Hi, can you hear me? Yes, congratulations on a strong quarter. Actually, we just had a couple of questions. First, like, looking at the recovery rate, we could see that it was down in this quarter. Do we expect an increase, going forward in 2016, or to 4Q? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [16] -------------------------------------------------------------------------------- Yes. Going ahead, we -- again, it goes up and down by decimal point. Like I said previously, we anticipate that, with more focus and more steady production, that's where the issue of recovery becomes more stable, I guess you'd say. We can address that one more directly. So, yes, at the plant, we expect (inaudible), [we'll be rated] on what we've seen to date. -------------------------------------------------------------------------------- Unidentified Participant [17] -------------------------------------------------------------------------------- Thank you. And the next question would be around the gold hedges. As we can see, as of now, you guys don't have any gold hedges in place. So, are there any future plans for going into any such hedge? -------------------------------------------------------------------------------- James Mavor, Detour Gold Corporation - CFO [18] -------------------------------------------------------------------------------- Yes. So, our Board-approved policy is we're a short-term hedger, so we do have approval to hedge up to 50% of our production in 2016. And we're in a position within the Company where we can take a more opportunistic view on the hedging. As our gold production goes up, the requirement to hedge reduces, however, knowing that we still have a debt repayment that is due in 2017. So, describe it as being opportunistic, and you kind of watch and see. -------------------------------------------------------------------------------- Rahul Paul, Canaccord Genuity - Analyst [19] -------------------------------------------------------------------------------- Okay, perfect. That will be all from us. Thank you, thanks a lot. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Cosmos Chiu, CIBC. -------------------------------------------------------------------------------- Cosmos Chiu, CIBC World Markets, Inc. - Analyst [21] -------------------------------------------------------------------------------- Thank you. Thanks, Paul, Jim, Drew, and Laurie for hosting the call. A few questions from me here. Maybe first off on talking about the grade in Q3, it came it at grade .86. How did that compare to your internal estimates or targets? Knowing that previously you had talked about some of the higher grades that were expected for Q4, maybe push forward into Q3, did you see some of that impact for Q3? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [22] -------------------------------------------------------------------------------- Yes, Drew here. We did manage to bring ounces forward. But, in terms of the grade, it was pretty much spot-on with our mine planning. The key thing is we had the ability -- and if you look on the slide that's up right now, slide 19, that really shows what the pit looks like right now. So, the key important thing we'd need, going ahead, is making sure that grade is available to us in Q4. So, we've got the calcite zone, which historically has performed extremely well for us. We've got that set up well, and towards the top side of that picture that we have on the screen, the east end of the pit, that's where some high-grade comes in, as well. So, all [things told], Q3 was really to allow us to get set up for Q4. -------------------------------------------------------------------------------- James Mavor, Detour Gold Corporation - CFO [23] -------------------------------------------------------------------------------- And I was going to say, I'd just remind people, our original guidance for Q3 was 110,000 to 120,000 ounces, so indicating -- and we didn't have great mill availability. So, definitely the grade was better than we originally budgeted for. -------------------------------------------------------------------------------- Cosmos Chiu, CIBC World Markets, Inc. - Analyst [24] -------------------------------------------------------------------------------- Yes, of course. And then, Drew, you had mentioned about setting up for Q4. Is that in part to make sure that, with the extreme cold, you can deal with it? In the past there had -- there weren't a lot of issues, but certainly extreme cold's something that you have to deal with at Detour Lake. Given that Q4 you're expecting even higher production, it's going to be a large part of full-year guidance here, do you expect any issues in terms of dealing with the extreme cold? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [25] -------------------------------------------------------------------------------- We're not expecting -- again, Q4 is typically cold. We'll see the bone-chilling cold in the end of December and January. The advantage we have this year from the mining side is we have learned from last year, which was not a pleasant year, but also we don't have a large volume [till] coming out. Typically, that's what has bitten us in the past, and we have some till mining on stage two, but it's not critical path to delivering the ounces. And on the plant side, if the plant -- when the plant stays running, it typically doesn't cause us any grief. -------------------------------------------------------------------------------- Cosmos Chiu, CIBC World Markets, Inc. - Analyst [26] -------------------------------------------------------------------------------- And then, maybe switching gears a little bit here, looking at deferred stripping, it looks like you're going to end the year at $10 million, which is less than what you had expected when the year first started. Is that just an accounting classification matter, or is it actual money that wasn't spent? And if it's the latter, does that impact the mine plan in any way? Does it impact getting access to certain areas of the pit in any way? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [27] -------------------------------------------------------------------------------- Yes. In terms of the stripping ratio, up to where we are at the end of Q3, we have been behind on stage two, not a significant amount, but we've also been ahead on stage one. So, we've gotten more ore, and we've also got a positive reconciliation in terms of tons we've seen from the block model. So, it's really those three things. So, stage two is weight, so we're slightly behind on that. Stage one, that's where our ore is coming from, so we're ahead on that. And we've got a positive reconciliation on the block model in terms of tons. So, that has allowed us to build up our stockpile. So, while the deferred stripping didn't [add the rate] on the stripping ratio, didn't [add] the rate we budgeted, we can understand why it is as such. -------------------------------------------------------------------------------- Cosmos Chiu, CIBC World Markets, Inc. - Analyst [28] -------------------------------------------------------------------------------- Okay, great. That's all I have. Thank you. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- (Operator instructions.) Steve Parsons, National Bank Financial. -------------------------------------------------------------------------------- Steve Parsons, National Bank Financial - Analyst [30] -------------------------------------------------------------------------------- Yes, good morning. Wouldn't mind digging in on the grade profile a little bit more, specifically I was interested in looking into 2016 and the relationship of 2016 with the new mine plan. So, Paul had mentioned that phase one pre-stripping is complete, and that would provide and be the principal source of ore for the next several years. So, if we were to assume that the new mine plan would probably have no impact on 2016 ore grades if the pre-stripping for phase one is already complete? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [31] -------------------------------------------------------------------------------- Sorry, yes, you lost me a bit on that one, Steve? Can you ask that again? -------------------------------------------------------------------------------- Steve Parsons, National Bank Financial - Analyst [32] -------------------------------------------------------------------------------- With phase one pre-stripping done, and it being the principal source of ore for the next several years, is it fair to assume that 2016 grades at minimum would not be impacted by the new mine plan? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [33] -------------------------------------------------------------------------------- Yes. So, again, not to speak too far ahead [of school], the stage one pit is well developed. When we go back, say a year and a half, where we had the south wall that wasn't developed, we had to spend a lot of energy to bring that south wall down to open up that pit to allow us to mine it. So, that's where our main source of ore comes from in the foreseeable future, from that stage one pit. That doesn't preclude the need to take down stage two, stage two all around the pit, and that really allows us for the future gold beyond that. So, in terms of grade, what we've seen in stage one, that is where we're getting our value from in the short term, short-term being the next two to three years. Does that answer your question? -------------------------------------------------------------------------------- Steve Parsons, National Bank Financial - Analyst [34] -------------------------------------------------------------------------------- Maybe not specific enough, but that's all right. So, I mean--. -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [35] -------------------------------------------------------------------------------- --[What is your question, what's the grade] for next year? -------------------------------------------------------------------------------- Steve Parsons, National Bank Financial - Analyst [36] -------------------------------------------------------------------------------- When would the new mine plan kick in? In what year would the new mine plan kick in and start affecting grades? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [37] -------------------------------------------------------------------------------- Yes. So, what we're doing right now is we've done the life -- we've progressed on the life of mine. Now, the mine plant is doing the budget, so that's really 2016, 2017. So, we take their drivers and really put them in. So, again, those are the guys that have the pointy end of the stick in terms of what's progressing. So, we take the 2016 (inaudible) positions and really repopulate those into the life-of-mine. -------------------------------------------------------------------------------- Steve Parsons, National Bank Financial - Analyst [38] -------------------------------------------------------------------------------- Okay, thanks a lot. -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [39] -------------------------------------------------------------------------------- So, I don't think I specifically answered your question, but maybe we can clarify after if I answered the wrong one. -------------------------------------------------------------------------------- Steve Parsons, National Bank Financial - Analyst [40] -------------------------------------------------------------------------------- That sounds good. Thanks, Drew. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Dan Rollins, RBC. -------------------------------------------------------------------------------- Dan Rollins, RBC Capital Markets - Analyst [42] -------------------------------------------------------------------------------- Yes, thanks very much, and congrats on a solid quarter, guys. Just a couple of questions. One, with respect to the milling rate on a tons per hour, in the Q2 presentation, you noted that you were targeting to get at 2,800 ton per hour or above with the fines. Given the success you've seen in the mill through Q3, is it safe to say that you're going to be able to push that further with the fines? Can you actually -- [would other fines] get the same (inaudible) above 2,800 ton, and if you [get] a couple more quarters, where do you think you could get? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [43] -------------------------------------------------------------------------------- So, we did a fairly small test on the fines, again, it was less than 100,000 tons. So, the results for the quarter, the milling rate, we're down. We're about where the nameplate is, but slightly down from our expectations. All things said, going ahead in the fines, on the trial we did, it confirmed that we're going to get the throughput with those things. So, in terms of what are we going to see the lever on, going ahead, we believe the milling rate is very strong, and what we need to focus on is the operating time for the plant. -------------------------------------------------------------------------------- Dan Rollins, RBC Capital Markets - Analyst [44] -------------------------------------------------------------------------------- Okay, perfect. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [45] -------------------------------------------------------------------------------- That is the 410. -------------------------------------------------------------------------------- Dan Rollins, RBC Capital Markets - Analyst [46] -------------------------------------------------------------------------------- Okay, perfect. And then, on the mining rate, again, it'll ebb and flow. You did 280 last quarter, 255 this quarter. Is there anything that's limiting the mining rate, or is it literally a fact that you just don't need to push the mine right now within the current phases? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [47] -------------------------------------------------------------------------------- It exactly right, to the latter point. We've seen that we can do the 300,000 tons ex-pit. Now, where we are right now is, if we did that with the current pit configuration, we would just spend additional cost (inaudible) some ounces or some grade ore, but those would just go in the stockpile. So, the reality is it's finding the sweet spot of the operation. With the bigger stage two coming in, then we can bring that stripping down faster. But really, you're just advancing cost. So, it's really understanding what the long-term plan is, and operating for those conditions. -------------------------------------------------------------------------------- Dan Rollins, RBC Capital Markets - Analyst [48] -------------------------------------------------------------------------------- Okay. So, you really have no issues with the capacity? It's just you don't have a need or a desire to put money out of there that you're not going to see any value for for a couple years? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [49] -------------------------------------------------------------------------------- Previously it was a huge advantage to us to get that mining rate up as high as it can be. At this point in time, where the pit's developed well enough that, so long as we get the grade to feed the plant, that's what will drive the value. -------------------------------------------------------------------------------- Dan Rollins, RBC Capital Markets - Analyst [50] -------------------------------------------------------------------------------- Perfect. And then, just one last one for me, just on the G&A. I know it'll go up and down quarter-over-quarter. You did have slightly lower mill throughput, but I would say maybe representative that the G&A was up quarter-over-quarter. Anything specifically driving that, or is it more just a one-off item? -------------------------------------------------------------------------------- James Mavor, Detour Gold Corporation - CFO [51] -------------------------------------------------------------------------------- Dan, so the G&A is pretty fixed, but we do have a couple things that went in in the first and the third quarter. We had some one-off payments that go out, and that would have impacted Q3. And I think, obviously at [$3 a ton], it's consistent with where we were in the first quarter and late last year. But, I think we're trending below the $3 mark, and Q2 was an exceptionally good performance. -------------------------------------------------------------------------------- Dan Rollins, RBC Capital Markets - Analyst [52] -------------------------------------------------------------------------------- Okay, that's perfect. And congrats on the quarter. I'm looking forward to see some more free cash flow come into the beast. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [53] -------------------------------------------------------------------------------- So are we. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- Anita Soni, Credit Suisse. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [55] -------------------------------------------------------------------------------- Good morning, guys. So, my question -- most of them have been asked and answered. It's a follow-on, though, from Dan Rollins' question, and that is if your fleet is not confined, and you're basically keeping -- I understand that you're basically keeping the mining fleet on pace at the mill at this point, considering the down time that you guys are going to have in the fourth quarter. Why would you not work on phase two stripping at this point? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [56] -------------------------------------------------------------------------------- We certainly can. We certainly can, and we will. At this point in time, the productivity of the stage two is a challenge. We're dealing with pioneering. We're dealing with some till. We only have one shovel up there at this point in time, so it's not a priority for us. Later on in the quarter, we do get the second one up there. But, at this point in time, if we did smash through those tons, we would be able to advance some more weight. But, with the mine plan, we don't bring any ore [forward] with additional tons specifically. Again, being an open-pit mine, everybody likes to get large -- big numbers in (inaudible) tonnage, but it's really prudent to manage and operate to your plan. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [57] -------------------------------------------------------------------------------- And then, if you could just give me an idea, I guess as I'm thinking about stage two and when that comes on, what's the average strip ratio now that remains in the stage one, and what's the strip ratio in stage two? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [58] -------------------------------------------------------------------------------- Sorry, I don't have that off the top of my head. Again, because we worked on the life of mine, I know where the trends are. And we did quite a bit of effort to reduce the stripping ratio from the current [second level report] to where we're working on the new life-of-mine. So, that was something we did look directly on. So, I can't tell you off the top of my head, Anita, I'm sorry, for what the strip ratio is in stage one. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [59] -------------------------------------------------------------------------------- Okay. So, are you saying that you guys worked at reducing the strip ratio within stage one and within stage two, or just worked on it from sort of (inaudible) perspective in minimizing the strip ratio between the two? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [60] -------------------------------------------------------------------------------- Yes. It was really optimizing the strip ratio. Again, like Paul suggested in the presentation, we looked at the previous technical report, had 140 million tons. When you look at the average life-of-mine strip ratio, what we need to mind ex-pit, it's a whole lot less than that. So, that's really part of the exercise that we did, balance the ex-pit tonnage, and the capital required to meet that. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [61] -------------------------------------------------------------------------------- Okay. Sorry, I'll go back and look at the presentation. I was on the [Bear] call for the first portion of your call. Thank you for answering my questions. -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- (Operator instructions.) Don Blyth, Paradigm Capital. -------------------------------------------------------------------------------- Don Blyth, Paradigm Capital - Analyst [63] -------------------------------------------------------------------------------- Morning, guys. That 410 conveyor's certainly been a source of headaches for you. Could you go into a little more detail, or what the plans are to fix this in the New Year, and how long you might think it's going to take to evict the last of the gremlins out of there? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [64] -------------------------------------------------------------------------------- Yes. So, we've got a bunch of engineering. And again, what we've done in the 410 is really done it in stages. Pierre has spoken about it in the past, and with the original phases was to get it lined up, to get a true change (inaudible), et cetera, et cetera, get the system to change the belt. So, we've progressed through a lot of those things on a systematic manner, and the same thing will apply for 2016. So, the guys at site are still working on the engineering and the budget timeframe, but what we're targeting is getting the 410 behind us in the first half of the year. If the plants wanted to run at 55,000 tons a day, the nameplate, then we wouldn't be doing anything else, but we do see the potential to get additional capacity in the plant and improve that mine-mill interface. So, that's why the 410 is such a key element of that. -------------------------------------------------------------------------------- Don Blyth, Paradigm Capital - Analyst [65] -------------------------------------------------------------------------------- Okay. And while the global (inaudible) does bob up and down a bit, the recovery of 90% was versus about 91.5% in Q2, and that despite the head grade being higher. One would have expected the recovery be higher, not lower. Is there any substantial risk on this as obviously we're moving into higher grades, moving forward? Any potential risk to the sort of long-term life-of-mine recovery rate? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [66] -------------------------------------------------------------------------------- Yes, it's a good question, Don. Going through the process, going through the mine, we do see different areas of different performance on recovery. And that's really what we're going through the learning curve. The pit's getting bigger. We're seeing some material, and we're understanding that. Was that the source of the ups and downs? There's going to be some of that, but really it's almost evidence of we're now getting to the stage where we can manage the efficiency of the operation, and that's what becomes important. -------------------------------------------------------------------------------- Don Blyth, Paradigm Capital - Analyst [67] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [68] -------------------------------------------------------------------------------- So, no specific concern of recovery, but it is one of those areas we need to tackle, going ahead. -------------------------------------------------------------------------------- Don Blyth, Paradigm Capital - Analyst [69] -------------------------------------------------------------------------------- Certainly. Again, so fourth quarter you're going to be hopefully pushing up towards around one gram material, so hopefully we will see a reversal of the trend. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [70] -------------------------------------------------------------------------------- Well, we certainly expect to reverse the trend, and we are expecting higher grades. -------------------------------------------------------------------------------- Don Blyth, Paradigm Capital - Analyst [71] -------------------------------------------------------------------------------- Great. Thanks. -------------------------------------------------------------------------------- Operator [72] -------------------------------------------------------------------------------- Mike Parkin, Desjardins. -------------------------------------------------------------------------------- Mike Parkin, Desjardins Securities - Analyst [73] -------------------------------------------------------------------------------- Hi, guys, just had one question regarding the broken inventory in the pit. Are you thinking of using that for the first quarter during the cold climate to keep the equipment from -- basically it would be easier to (inaudible) have better throughput than we did last year where we saw kind of a weak February? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [74] -------------------------------------------------------------------------------- Yes, you're spot-on. Again, we won't stand down drills, but it also gives us the flexibility to do that if we have to. It's really a buffer. It costs us a good amount of money to get that safety net in front of us, but from the operating experience we've learned over the last couple years, drill performance has been hugely important, and that's one area that the guys on site have been hugely successful at, as well. So, yes, it gives us that buffer. It gives us that flexibility. -------------------------------------------------------------------------------- Mike Parkin, Desjardins Securities - Analyst [75] -------------------------------------------------------------------------------- And it kind of indicated in the press release that cost for that was already expensed. Is there any on the books that would flow through, or would we actually expect a fairly significant drop in cost just from an accounting perspective in the first quarter? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [76] -------------------------------------------------------------------------------- Again, I wouldn?t suggest we'd see a drop in cost. We'd want to maintain a current volume broken in front of you. And it's really -- we've got that bird in the hand now, so we're not ready to give that up. So, we would continue to want to keep a high broken inventory in front of us. -------------------------------------------------------------------------------- Mike Parkin, Desjardins Securities - Analyst [77] -------------------------------------------------------------------------------- All right, thanks. That's it for me. -------------------------------------------------------------------------------- Operator [78] -------------------------------------------------------------------------------- Ardem Keshishian, [Hayward] Securities. -------------------------------------------------------------------------------- Ardem Keshishian, Haywood Securities - Analyst [79] -------------------------------------------------------------------------------- Thanks, Operator. I just have one question. The shutdown that you guys had in the quarter, how long was it, if you could just elaborate on that a bit? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [80] -------------------------------------------------------------------------------- In terms of the Q3 shutdown? -------------------------------------------------------------------------------- Ardem Keshishian, Haywood Securities - Analyst [81] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [82] -------------------------------------------------------------------------------- So, it was -- between the two lines, again, we had about -- I guess total plant downtime was a little over three days. Again, the operating time you could see was 85% for the quarter, so that means that includes some of the unplanned downtime in addition to the normal planned downtime that we have every three to four weeks. -------------------------------------------------------------------------------- Ardem Keshishian, Haywood Securities - Analyst [83] -------------------------------------------------------------------------------- Right. Okay. Okay, that's it. Thank you very much. -------------------------------------------------------------------------------- Operator [84] -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [85] -------------------------------------------------------------------------------- Yes, morning, Paul and team. This is the real Andrew Quail. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [86] -------------------------------------------------------------------------------- You sound like him. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [87] -------------------------------------------------------------------------------- Look, [all] these questions have been answered. I just have one. I mean, obviously, the availability, right, is obviously increasing, as you expect, and probably tracking about 85% this year. I mean, Q2 was absolutely standout, (inaudible) for the year's about over. Going into 2016, do you sort of -- what's the sort of ultimate goal to get to once you guys are steady-state for sort of availability? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [88] -------------------------------------------------------------------------------- In terms of the long-term, this plan we believe can get to 92%. In terms of the next year, we do have some big downtime relating to the 410, and then the normal scheduled downtime. So, it's really an incremental process to get to that 92%. To get us where we are right now, again, Q2 was a good quarter. We've seen that we can do it. Q3 we had some unplanned downtime that's really not routine downtime. So, by eliminating those issues, we expect we're going to get towards that 92%. Now, so that being said, I'd be a bit optimistic to suggest that 92% would be what we would see in 2016. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [89] -------------------------------------------------------------------------------- Got it. Okay, thanks very much, guys. Is it more like maybe 90%-ish? -------------------------------------------------------------------------------- Drew Anwyll, Detour Gold Corporation - Senior VP, Technical Services [90] -------------------------------------------------------------------------------- Ish. -------------------------------------------------------------------------------- Andrew Quail, Goldman Sachs - Analyst [91] -------------------------------------------------------------------------------- Ish, yes. Okay, cool. Thanks, guys, appreciate it. -------------------------------------------------------------------------------- Operator [92] -------------------------------------------------------------------------------- There are no more questions at this time. I will now hand the call back over to Paul Martin for closing remarks. -------------------------------------------------------------------------------- Paul Martin, Detour Gold Corporation - President, CEO & Director [93] -------------------------------------------------------------------------------- Okay. I want to just thank everyone for your attendance today. I know it's a busy release period, so we appreciate your patronage. And have a safe Halloween on Saturday, whether you're taking out your kids or driving while the trick-or-treaters are out there. So, everyone just be careful. Thanks very much. -------------------------------------------------------------------------------- Operator [94] -------------------------------------------------------------------------------- This concludes today's conference call. You may now disconnect your lines. Thank you for participating. Have a pleasant day.
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