The repair crew for Detour Gold (TSX: DGC; US-OTC: DRGDF) didn’t let the holidays get in the way of getting the job done.
While others were tucking into Christmas turkey, Detour’s team was hard a work repairing the thickener system at the company’s flagship Detour Lake gold mine.
After all the hard work, the company welcomed the new year with news that operations at Detour Lake are back in full swing.
Investors were notified that things were getting interesting at the mine just two days before Christmas, when Detour announced that it had shut down its mill on Dec. 17 due to structural damage to the torque cage.
The repair crew got to work on the pre-leach thickener system and replaced the bottom section of the torque cage over the holidays. The mill was running again on Jan. 2, and Detour says it should be back to operating at 50,000 tonnes per day.
Detour made the most of the downtime, using it as an opportunity to wrap up mill-related repairs and improvements, including installing a second shuttle chute to the secondary crushers.
After announcing the shut-down, Detour updated the market on the mine’s progress, saying that mining rates improved in December and averaged 238,000 tonnes per day up, and that it expected gold production to be 81,000 oz. for the fourth quarter and 231,000 oz. for the year.
The company also said it had higher-grade inventory of 847,000 tonnes with an average grade 1.07 grams per tonne, compared to the proven and probable reserves’ average grade of 1.03 grams per tonne.
Scotiabank analyst Leily Omoumi believes the shutdown was an isolated incident, and that the severe cold was a contributing factor.
“The mechanical issue with the thickener should be viewed as short term and likely not a fatal flaw. We doubt there is anything unique about Detour’s slurry that would lead to anything out of the ordinary,” she wrote in a research note.
Omoumi expects that fourth-quarter production at the mine will come in at 80,000 oz. gold, and expects $73 million in cash for 2013, against the company’s $80-million guidance.
BMO Capital Markets analyst John Hayes agreed that the failure of the thickener system would only be a fourth-quarter issue, but added that the improvements made during the shutdown would bode well for the future.
“The installation of the shuttle conveyors should help increase mill throughput to design levels,” he wrote.
Hayes rates Detour as “outperform,” with a $9.50 target price.
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