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Detour Gold is closing in on the opening of Canada’s largest gold mine in January, just as rallying gold prices set the stage for fat profits. “We’re in the last stretch,” said founder Gerald Panneton, a geologist and industry veteran who worked at global gold mining giants such as Barrick Gold Corp. before starting his own company in 2006 and taking it public in January, 2007. “We foresee that we will be completely finished building by the end of the year.”
The Detour Lake mine in the Cochrane, Ont., area marks the strongest sign yet of a trend toward massive, open-pit gold mining in Canada on a scale more commonly seen in desert geographies in Nevada or Chile or on the African continent. Other examples include Osisko Mining Corp. and its Malartic project in Quebec and San Gold Corp.’s Rice Lake mine in Manitoba.
“They really spearheaded this movement of going into old camps where you had traditionally high-grade narrow-vein type mines, and looking at the bigger picture and seeing whether or not that can be developed into a very large, open-pit style low-grade deposit,” said Mike White, chief executive officer of IBK Capital, the boutique investment bank that helped broker the consolidation of Detour Gold’s exploration properties for their former owner, Pelangio Mines Inc.
Pelangio bought the lands of Detour Lake from Placer Dome in 1998, paying just $2.3-million at a time when gold prices were plummeting. Detour Gold paid 32 times that, or $75-million, eight years later, when gold prices started rebounding but were still only a fraction of today’s price above $1,700 (U.S.) an ounce.
At those prices, and cash costs of as little as $710 per ounce, Detour will clear about $2-billion before taxes in its first five years in operation. Six years after it acquired the property, it has a market capitalization of $3-billion.
“We are making money at $1,200 gold,” Mr. Panneton said in an interview, predicting gold prices will continue to rise. “We’ll make a lot more if the gold price goes up.”
Detour Lake will produce about 150,000 ounces of gold in the first half of the year as it ramps up to commercial production around June. On average it will produce about 657,000 ounces of gold per year for more than 20 years.
It will also be among the lowest-grade gold mines to come on-stream in recent years, mining just one gram per tonne of ore milled. That compares to about 2.72 grams per tonne in the open pit mine at Goldstrike, Barrick’s flagship mining complex in Nevada, and to some mines with grades below one gram per tonne in Mexico.
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