Detour Gold
Detour Gold Corporation is a gold exploration and development company with a primary focus to advance their Detour Lake project. Located on the northernmost part of the Abitibi Greenstone Belt in north-eastern Ontario, their region is relatively under-explored.
With a lot of work ahead of them, Gerald Panneton, President and CEO of Detour Gold, and his team of about 30 have all hands on deck, whether it’s onsite at Detour Lake, in the technical office or at head office in downtown Toronto.
Meet the President
Before he began his 25-year career in mineral exploration and development, Panneton started in university studying physical geography. After a few courses, he realised that his passion was really geology.
“I had the dream of understanding where we live on earth and the formations of rocks. So I took many courses in different fields of geology, a discipline which is as diverse as medicine. I was intrigued and really interested in gold mineralization and followed that path into my career as a geologist.”
Since becoming a professional geologist, Panneton has travelled to all corners of the world, evaluating gold deposits and increasing his knowledge of and fascination with the field. When it came time to move forward with the Detour Lake project, he knew what he was looking for and was confident it was the right decision. Panneton was involved from the very first day of negotiations.
Detour Lake Project
You can’t tell the story of how the company started without talking about Detour Lake at the same time. Both are symbiotic.
In 2006, Panneton and his team evaluated the project, which belonged to Pelangio Mines at the time. Once they realized the potential in the property, they initiated negotiations that summer. Panneton believed the best thing would be to start a new company with the Detour Lake asset; thus, Detour Gold Corporation was born in January 2007.
To give a better idea of the project, the Detour Lake property encompasses roughly 265 square kilometres of prospective ground and hosts one of the largest undeveloped gold resources in the country. From 1983 to 1999, the former Detour Lake mine produced 1.8 million ounces of gold, of which approximately 400,000 ounces was from the open pit. At the time of Detour Gold’s acquisition of the property, the deposit contained a near-surface resource of 3.4 million ounces (including 1.4 million ounces in the indicated category). On July 2, 2008, Detour Gold reported an updated resource of 13.2 million ounces, of which 10.8 million ounces are in the measured and indicated categories—a sizeable increase. Since the acquisition and up to the end of 2008, the company has completed 231,104 metres of drilling in 621 holes on the deposit.
If you’re wondering what made Detour Lake so appealing, Panneton sums it up: location, location, location.
“There is infrastructure nearby, which is great. Other than the deposit itself, the attraction to the project is that we can drive to the site on paved roads and have access to the Ontario power grid. We also have a local and readily available labour force about two hours from the project.”
If that wasn’t enough, Detour Gold is building strong and positive working relationship with the local First Nations communities. The project has what it needs to be successful, says Panneton.
There is a lot of work yet to be completed, but if you ask Detour Gold, they’ll say that things are in good shape. The company already has the feasibility study underway, along with infrastructure studies and is re-permitting for the construction of the power line and connection to the existing power grid.
“We go by milestones,” explains Panneton. “In 2009, we anticipate concluding a pre-feasibility study for the Detour Lake gold project in the second quarter. Following that, we’ll have a feasibility study later this year. Detour Gold has already spent $50 million in the last two years and we’re prepared to spend another $10 to $15 million this year to complete the study.”
“Once it’s done,” Panneton continues, “the Board of Directors and Technical Committee will review the results to determine our next step, whether or not we go forward into production. They will have to look at the market conditions. We are bounded by the markets.”
Market Talk
Speaking of the economy, Detour Gold has been one of the fortunate companies that hasn’t suffered from the downturn. The company raised money in February 2008—$65 million to be exact. With just under $40 million still in the bank and a flexible budget for this year with no major financial commitments as of yet, Detour Gold is in a good position. On top of that, the gold price environment is excellent and the company suspects it will likely last beyond 2009.
“We’re positive about 2009,” says Panneton. “If you look at all the financing done in the last few months, fundraising for gold companies has been successful. We foresee the current strong gold environment lasting until at least the end of 2009. By then, we will have completed our feasibility study and will hopefully have the funds in place to move the project towards construction.”
It’s not just the gold price that has kept the company well ahead of the game. The economic downturn has played a big part in substantial reductions for input costs for both capital and operating parameters, from which the Detour Lake project is expected to benefit.
“The biggest thing that helps us in this economic downturn is capital expenditures. Both equipment and labour cost less now than they were a year ago. People don’t always realize that. There was a shortage of workers in 2008, which had an associated escalating pricing on salary. Now it’s different.. We’re fortunate that our market is still thriving, because it puts our company in the position to develop our project at a lower cost.”
Even if the gold price fluctuates, Detour Gold will continue its business as usual. When you have been in the industry for a few decades, you come to realize that the markets, like life, have their ups and downs.
“I’ve seen the price of gold rise to $800 an ounce in 1981 and then drop down to $256 in 1998,” Panneton reminisces. “I’ve seen mine closures and I’ve seen big projects get completed. The one thing I’ve learned is that even when you are subject to price fluctuations, it always comes back. That’s because gold is one of the safest investments out there.”
He’s right. Gold has a lot of uses in technology, medical tools, jewellery and for protection against currency depreciation.
“The one thing you’ll find is that the supply is not increasing and hasn’t increased in 10 years,” Panneton says. “Gold deposits are harder to find, more remote and more expensive, which makes the Detour Lake project very attractive to investors. It is one of the largest undeveloped gold resources in the world.”
A Simple Horizon
Detour Gold sees a bright future. Right now, they are completing a merger with one of their major shareholders, PDX Resources, which should be completed by the end of March. This move should simplify the share structure without increasing the number of shares outstanding, which is lean. Moving forward, Detour Gold expects to be in an excellent position to approach the financing market when their feasibility study is complete.
“Our horizon is very simple,” says Panneton. “Our focus is on achieving the next milestone, which is obviously the feasibility study this year. We’ve done over 230,000 metres of drilling and now we’re compiling those results. Aside from that, permitting and environmental studies are underway and expected to be completed in 2010. We still have a bit of work left and a few loose ends to tie up, but it’s coming along well. Once we achieve these milestones, we look forward to moving on to the next step. We could be in production in 2012, if everything goes according to plan.”
“I think what we have an excellent project going forward.”
