Detour Gold Corp DRGDF

From TD today

[Weeble]

Across the board beat brings relief.  Daniel Earle July 27,2017

Target $22.00

Event
Last night, Detour reported its Q2/17 financial results. Adjusted EPS of $0.15 was
well above consensus of $0.07 and our estimate of $0.05, as a result of lower
costs and higher production. CFPS of $0.39 was above our estimate of $0.29 and
consensus of $0.32. A conference call will be held at 10:00 a.m. TODAY. Dial-in:
800-319-4610 or 416-915-3239.
Impact: POSITIVE
Gold production of 150 koz was above our estimate of 138 koz due to higher
grades (0.95 g/t vs. TD 0.89 g/t) and throughput (60.3 ktpd vs. TD 58.5 ktpd).
Total cash costs of $706/oz (AISC: $1,123/oz) were also better than our forecast
of $780/oz (AISC: $1,144/oz).
Mining rates of 277 ktpd (242 ktpd in Q1/17) were above our estimate of 271 ktpd.
The increase in mining rate was due to additions to the mining fleet (CAT6060
shovel commissioned in late-March and two haul trucks were commissioned in
February and April) and the benefit of productivity gains from the opening up of
mining areas in the pit.
The mine plan is on target for approximately 100 Mt (in line with guidance) to be
mined in 2017, with the current available fleet of six shovels and 32 haul trucks
supported by the addition of an ROM fleet.
The company has committed to the purchase of its seventh shovel and two
additional haul trucks, which are scheduled to arrive at site at year-end, to position
itself for higher tonnages in 2018 and beyond.
2017 guidance is unchanged: 550–600 koz (282 koz in H1/17) at AISC of $1,025–
$1,125/oz. AISC are expected to be towards the upper-end of the guidance range
due to additional payments for mine equipment and the strengthening of the
Canadian dollar.
In Q2/17, Detour was largely FCF-neutral. Based on our price deck, we would
expect the company to generate positive FCF of $43mm in H2/17 and $113mm
in 2018.
TD Investment Conclusion
We expect Detour to trend toward a premium multiple, consistent with eventual upper
mid-tier levels of gold production in Canada, as the company incrementally improves
its operating results and continues to generate FCF while demonstrating upside
potential.