This stock operates one open-pit gold mine at full capacity, with an expected mine life of 22 years.
It has plans to expand mining across the site and nearby region over the next decade. Output, revenue and earnings were all up in the most recent quarter. The shares trade at a low 6.4 times projected cash flow, but further progress will depend on the direction of gold prices.
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DETOUR GOLD CORP. (symbol DGC on Toronto; www.detourgold.com) finished building its Detour Lake mine in the Abitibi Greenstone belt in northeastern Ontario in February 2013. In the closing decades of the last century, the area yielded almost 2 million ounces of gold for a previous mining firm, Placer Dome.
Detour Gold now operates the open-pit mine at full capacity. The company expects the site’s production to average 656,000 ounces of gold annually over the course of the mine’s remaining 22 years.
Detour continues to make efficiency improvements in order to boost output. It intends to increase the mining fleet in the next few years in order to meet an upgraded mine production schedule. In the three months ended March 31, 2018, gold production rose 4.7%, to 157,141 ounces from 150,046 a year earlier.
Revenue in the quarter rose 23.0%, to $201.4 million from $163.7 million. (All figures in U.S. dollars.) Excluding one-time items, earnings rose 5.2%, to $28.2 million, or $0.16 a share, from $26.8 million, or $0.15.
The company now expects to report total production of between 595,000 and 635,000 ounces this year. It will likely generate cash flow of $1.64 U.S. per share in 2018. The stock trades at just 6.4 times that estimate.
Mining Stocks: Company has over $150 million in cash and manageable debt
The company also has plans to extend mining on the Detour Lake property. It expects to begin developing the West Detour pit, containing reserves of 1.6 million ounces of gold, in 2025. Development of the North Pit, containing 187,000 ounces of gold, is scheduled to start in 2026.
In addition, the company is carrying out extensive exploration in the region. In the second quarter of 2018, it will release an initial mineral resource estimate obtained from 135,000 metres of drilling south of the Detour Lake mine.
Detour holds cash of $152.5 million, or $0.87 a share. Its total debt of $258.5 million U.S. is a low 17% of its market cap.
Meeting its production and cash flow targets is key for Detour. Still, as it is for most gold firms, the company’s shares will be heavily influenced by the direction of gold prices.
TSI Network recommendation: Detour Gold is okay for aggressive investors to hold.
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