Discovery beats forecasts despite higher gold costs

Discovery Mining (TSX: DSV; US-OTC: DSVSF) reported stronger-than-expected third-quarter earnings as lower depreciation helped offset rising gold costs at its Porcupine operations in Ontario.

Adjusted earnings rose to $83 million (C$117 million), or 10¢ a share, from $61.1 million, or 8¢, a year earlier, Discovery said Tuesday. That beat the 7¢ consensus forecast expected by analysts. Production met expectations, but operating cash costs eere higher than expected, National Bank Financial mining analyst Rabi Nizami said Tuesday.

“The beat on adjusted [earnings per share] and cash flow largely reflects lower depreciation and working capital movements,” Nizami said in a note. “Annual production and cost guidance was maintained, although cash costs are now expected at the top end of the range.”

The results put the focus on Discovery’s ability to turn steadier milling into stronger returns as it revamps the Porcupine complex acquired last year. Updated resources and a technical report expected in early 2027 will help investors assess the operation’s growth plans, Nizami said.

Higher costs

Discovery produced a record 70,564 oz. gold in the quarter, 12% more than a year earlier. Operating cash costs rose 6% from the second quarter to $1,470 per oz., while all-in sustaining costs increased by the same percentage to $2,293 per oz., the company said Tuesday.

Its full-year gold production target remains 260,000–300,000 oz., with operating cash costs expected at the top of the $1,250–$1,400 per oz. range. Output through September totalled 198,142 ounces.

Free cash flow reached $86.9 million, helped by a $56.5-million working capital inflow, largely from the timing of payments to suppliers, Nizami said. Cash increased 24% from June to $450.7 million, leaving Discovery with liquidity to continue rebuilding Porcupine, he said.

Discovery is aiming to more than double Porcupine’s annual gold output to over 500,000 oz. by expanding existing mines and restarting Dome as a large open-pit deposit. The company is also evaluating a central gold processing facility at the recently acquired Kidd metallurgical site to handle ore from across the complex and support larger operations at Dome and Pamour.

Mining at Dome is expected to restart by early 2028, with first ore production in mid-2028.

Mexico spending

Discovery also said Tuesday it reduced this year’s spending forecast for its Cordero silver project in Mexico by $70 million to $20–30 million. That cut was expected because permit fees were lower than assumed, Nizami said.

Mexico’s environmental department, SEMARNAT, approved the project through land-use and environmental impact permits announced last month. Discovery is updating construction and operating cost estimates from its 2024 feasibility study.

Cordero lies about 200 km south of Chihuahua city. The 2024 study outlined a 19-year operation with initial construction costs of $606 million and average annual payable silver output of about 14 million oz. in the first decade, according to Discovery.

Discovery shares dropped 4.4% to C$11.14 Tuesday morning in Toronto, valuing the company at about C$9.1 billion (C6.5 billion)$. They have traded between C$5.47 and C$13.43 over the past year.