TSX Commentary

Detour Gold Corp (DGC) – $15.72 – Detour Lake Project Update
Outperform, Speculative Risk, Price Target: $19.00
Detour Lake Update: The company is on track to deliver the full feasibility study for the 100%-owned Detour Lake gold deposit in northern Ontario during Q2/10. RBC CM believes there are several opportunities to improve the positive economics outlined in the 2009 pre-feasibility study, including: reserve Increases from in-fill drilling and increased long-term gold price assumption (US$775/oz used in pre-feasibility), higher daily throughput leading to higher production rates if coarser grind size is used (assuming gold recovery rates are not significantly negatively impacted). The company expects to announce testwork
results later this month. Stockpiling lower grade ore for processing later in the minelife could increase ore grades in early years, leading to higher gold output, lower costs, and improved economics. Financial position strong, but further funding likely needed. The pre-feasibility study gave an initial capital estimate of US$844 million to build the large, open pit, conventional milling operation. Detour currently has some $318 million in cash, and management believes it can secure further debt facilities and/or vendor financing for large equipment orders (mining fleet, SAG/Ball mills, etc.). RBC CM’s model assumes US$500MM in project debt financing, no vendor financing, and a further equity tranche of $200MM (13-14MM shares at $15/sh) later in 2010 to complete capital funding for the project. Investment thesis intact with a major milestone expected in Q2/10 – RBC CM believes a positive feasibility study could lead to a re-rating of DGC shares, for the successful delivery of a new Tier II gold producer, once permits are received and financing is secured to build the Detour Lake mine. In RBC CM’s view, one metric that clearly shows the re-rating opportunity is AMC/oz of mineable reserve. RBC CM also considers the tabling of the feasibility study as the opening of a “window of opportunity” for takeover of DGC by other larger producers, which RBC CM believes would be interested in a large (+550Koz/yr) gold mine in a low political risk jurisdiction.