Detour Gold Corporation7 BUY · 2016-01-05 · December 9, 2013 3 RECOMMENDATION AND INVESTMENT SUMMARY We rate Detour Gold as a BUY with a price target of $8.00 Detour is on track

Mining

Prepared by GMP Securities L.P. Please see important disclosures on the last page of this report.

December 9, 2013

Ian Parkinson (416) 943-6639 [email protected] Associate: Magda Ogrodowska (416) 943-6631 [email protected]

Detour Gold Corporation7

On track to become the largest gold mine in Canada

Share Data BUY DGC-T C$3.73 Target C$8.00

Shares (mm, basic/f.d.) 164/167* 52-week high/low C$25.47/C$2.88 Market capitalization (mm) $514 Enterprise value (mm) $903 Projected Return 114% Net Debt (Cash) (mm) $389 Estimated Cash (mm) $137 Div idend Yield Nil • Ramping up the largest gold mine in Canada –The

company announced commercial production at Detour Lake in August 2013. Once at full capacity, the mine is expected to produce an average of 650,000 oz per year over a 21.5 year mine life (assuming DGC proceeds with a 10% throughput expansion).

• Cautious near-term outlook – Given the November 25th announcement of the company’s CEO resignation and Q3 disclosure suggesting the potential need for additional financing, we see an overhang for the stock in the near-term. Regardless, it appears that the Detour Lake Mine is fundamentally sound based on our positive medium to long-term outlook for gold.

• Leverage to the price of gold – A long mine life and relatively high all-in costs result in significant leverage to the price of gold and discount rates. Increasing gold price to $1,500/oz and decreasing the discount rate to 6% increases our NAV by almost 70%.

• Valuation – We are initiating coverage of Detour Gold with a BUY rating and a C$8.00 target based on a 0.8x multiple of our NAV8% calculation. We note that we have not included any value for Block A or exploration upside, but we have factored in a dilutive $96 million equity raise. We believe that there is potential for significant value creation as the company executes on its organic growth strategy.

NAV0%/share $27.23 NAV8%/share $10.58 P/NAV0% 0.1x P/NAV8% 0.4x *Pro-forma count assuming issue of 26.2mm shares at $3.65 for $96mm in proceeds

Financial Data (Dec YE) 2013E 2014E 2015E Au Production (oz) 247,000 450,000 521,000 Total Cash Costs ($/oz) $1,170 $1,064 $955 All-in-Costs ($/oz) $1,586 $1,253 $1,099 Capex (mm) $172 $85 $75 FCF (mm) ($106) ($42) $46 EPS (adj) ($0.49) ($0.47) ($0.12) P/E (adj) Nmf Nmf Nmf CFPS ($0.14) $0.37 $0.85 P/CFPS nm 10.0x 4.4x EV/EBITDA nm 12.1x 6.2x Mineral Inventory (mmoz) P&P M&I

Detour Lake 15.6 7.7

Long-Term Valuation Gold Price ($/oz) $1,350 Figures in CAD$, annual estimates in calendar years

TABLE OF CONTENTS

Recommendation and Investment Summary 3 Outlook and Valuation 4 Risks to Investment Thesis 6 Company Overview 7

Detour Lake Mine 7 Claims 7 History 8 Local Support 11 Geology 11 Resources 12 Mining & Processing 14 Ramp-Up 14 Debottlenecking & Expansion 16 Production Profile & Model Parameters 16

Exploration Upside 17 Block A 18

Key Management 19 Board of Directors 20

Capital Structure and Liquidity 21 Liquidity 21 Financing 22

Valuation 23 Comparable Projects 23 Peer Comparison 25 NAV and Price Target 26

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RECOMMENDATION AND INVESTMENT SUMMARY We rate Detour Gold as a BUY with a price target of $8.00 Detour is on track to become Canada’s largest single-mine gold producer with its $1.5bn, 55,000 tpd Detour Lake gold mine. The mine was completed in early 2013 and achieved commerciality on August 12th. Guidance for 2013 is 240,000-260,000 ounces and we expect production of approximately 450,000oz in 2014.

The company has experienced normal setbacks as it ramps up the mill, but achieved commercial production on schedule in Q3. Notwithstanding delays experienced in increasing throughput, we believe the project has been substantially de-risked (from a technical perspective) over the past few quarters.

As with all large capex projects, construction completion is an important risk reduction milestone; development capital spending was substantially completed at the end of Q2. The mill has shown the capability to produce at above nameplate capacity, achieving throughputs in excess of 50,000 tpd for 15 days in Q3. Grade reconciliation has thus far been positive. Mining dilution has been approximately 10% above plan, but management is addressing the issue and expects dilution to trend lower as the mine ramps up.

Detour’s balance sheet was strengthened by a C$176 mm bought deal in June. The combination of slower than expected mill ramp up and lower gold prices caused a liquidity crisis that culminated in an equity raise. The financing resulted in shareholder dilution of 14.5%. In addition, in its Q3 MD&A, DGC stated that it may not have sufficient internal financial resources to fund its ongoing operations, sustaining capital, corporate expenditures and debt repayments. In our model, we see DGC maintaining a positive cash balance in the next 12 months at gold prices above $1,300/oz.

Finally, we note the recent management changes at the company – on November 25th, the company announced that Gerald Panneton has resigned. Paul Martin, the CFO has been appointed as the interim Chief Executive Officer. James Mavor, the VP, Finance, has now been appointed the interim Chief Financial Officer.

In order to account for the financial risk facing the company from low gold prices, we have stress-tested our valuation at $1,200/oz gold in Q4 and 2014, reverting back to our $1,350/oz GMP price deck thereafter. Based on the company maintaining a $50mm buffer in its treasury, we see a potential ~$80mm shortfall by the end of 2014. In order to accommodate this funding gap, in our valuation, we have assumed the issue of 26.2mm shares (19% dilution) at $3.65/share (a 8.5% discount to the 10-day VWAP) for proceeds of $96mm. Based on recent underperformance, we believe that the stock today is pricing in an equity raise – based on our analysis, it appears that the downside potential is over exaggerated.

We have used a 0.8x P/NAV target setting multiple to account for the risks associated with recent management changes and downward production guidance revisions this year.

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All else being equal, we see room to revise this multiple upwards as the company delivers on its guidance.

Overall, we view the recent management changes and potential need for additional near-term financing as an overhang for the stock. While we remain cautious on the near-term outlook for DGC, we do not see any fundamental flaws with the operation and expect the mill to reach full capacity in the near-term which is expected to lead to stronger cash flow generation. We have modelled full production of 55,000 tpd beginning in Q4 of 2014, in line with company guidance for 55,000 tpd by the end of 2014. Based on our positive outlook for gold, we see potential for value creation at Detour Lake.

OUTLOOK AND VALUATION The focus over the next year will be on execution of the ramp up to full capacity at Detour Lake. While the company has achieved near name-plate capacity on several individual days and on one 4 day stretch, we will be looking for the ability to sustain high throughputs on a consistent basis. Commercial production was declared on August 12th, with financials reflecting revenues and operating costs as of September 1st.

While pre-feasibility work on Block A and a potential mill expansion was halted in H1 to conserve cash as a result of lower gold prices, we look forward to future updates on these projects – a Block A resource estimate is expected in 2014.

We expect Detour to release a 2014 capital plan in Q1 2014. The company has been working to minimize capital requirements, and as such, we do not believe they will include debottlenecking capital in 2014. We have assumed that an increase in throughput to 61,000tpd will be in place by 2016.

Exhibit 1 below shows modeled cash balances under various gold price scenarios. We highlight that based on our model, DGC should be able to maintain a positive cash balance for the next 12 months at gold prices above $1,300/oz. We currently view Q2/Q3 2014 as potentially at risk of a shortfall on the order of $50-$100mm.

In order to account for this downside scenario in our valuation, we have assumed the issue of 26.2mm shares at $3.65/share for proceeds of $96mm. Based on the sensitivity shown below (which excludes the impact of our assumed equity offering), we expect our assumed $96mm equity financing to meet the company’s needs at gold prices above $1,100/oz.

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Exhibit 1: Detour Cash Balance Sensitivity (pre-financing)

Source: GMP Securities

Detour has underperformed the market since the start of the year. In Exhibit 2, we show the adjusted enterprise value (implied mine value) since the beginning of the year (rebased to 100 as of January 2, 2013).

Exhibit 2: Market Adjusted Enterprise Value of Detour

Source: Company Reports, GMP Securities. Assumes current cash and debt balances, adjusted for financing prior to May 21, 2013.

We are initiating coverage of Detour Gold with a BUY rating and a $8.00 target based on a 0.8x P/NAV multiple of our NAV8% calculation. We believe that there is potential for value creation as the company de-risks the project. All else being equal, we anticipate opportunities to raise the P/NAV multiple as Detour delivers on its guidance.

We show the Detour’s NAV sensitivity to gold price and discount rate below. Given the long mine life and relatively high all-in costs (+$1,000/oz for 2014-2016 with $1,150-

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$1,250/oz expected in 2014) the valuation is very sensitive to both discount rate and gold price.

Exhibit 3: Detour Gold NAVPS Sensitivity (US$/sh) NAV Sensitivity Gold Price ($/oz)

Discount Rate (%) $1,100 $1,200 $1,350 $1,500 $1,6000% $13.93 $19.28 $27.23 $35.18 $40.476% $4.73 $8.21 $13.15 $17.85 $20.898% $3.16 $6.24 $10.58 $14.67 $17.29

10% $2.00 $4.74 $8.60 $12.20 $14.5012% $1.12 $3.58 $7.05 $10.27 $12.31

Source: GMP Securities

RISKS TO INVESTMENT THESIS • Continued volatility of gold price – despite spot gold prices around $1,220/oz, we

are positive on the outlook for gold. We highlight our Precious Metals price revision published December 2 – we see $1,350/oz as a reasonable medium-term assumption under which Detour stays profitable. We highlight that if gold prices drop below our price assumption, the company’s financial viability could be in jeopardy. We note that we have attempted to account for this risk in our valuation by including the issue of 26.2mm shares at $3.65/share for $96mm in proceeds.

• Potential liquidity shortfall – Detour management recently suggested that they plan to exit the year with $80-$90mm in the treasury. A decision on whether additional liquidity is necessary is expected to be made after Q4 performance is known. Management has brought up their CAT Financial lease as a potential source of funds. Detour entered into this facility in February 2012; it is for $150mm and $116.6mm of this facility is currently drawn down. DGC plans to work with Caterpillar to modify the terms of the facility to allow a re-drawdown of funds up to the $150mm limit. Our view is that gold prices remain the key determinant with respect to the need for additional financing – if additional liquidity is available from CAT, it should help buffer the impact of gold prices below $1,350/oz.

• Delays in ramp up to full production

• Operating costs not achieving modelled/feasibility levels

• Mining risks

o Execution of mining dilution reduction

o Grade control

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COMPANY OVERVIEW Detour Gold is a single-asset gold producer focused on ramping up its 100% owned Detour Lake gold mine to full production. The Detour Lake mine is large, low-grade, conventional open-pit bulk tonnage, truck and shovel operation. The 55,000 tpd cyanidation and carbon-in-pulp (“CIP) processing plant poured first gold in February and reached commerciality on August 14, 2013. The mine is expected to produce at near full capacity in 2014 with production of almost 450,000 oz at an estimated total cash cost of ~$1,000/oz (before sustaining capital).

Detour Lake Mine Detour Lake is located in Ontario, 300km north-east of T immins, 185km north-east of Cochrane and 12 km west of the Ontario-Quebec border. Below is a location map of the project.

Exhibit 4: Detour Lake Location

Source: Company Reports

Claims Detour has assembled a 630km2 land package, which includes the Detour Lake Mine (the “Mine Property”), through a series of transactions. The Mine Property and interests in number of exploration blocks (“Block’s A-E”) were acquired from Pelangio Exploration Inc. (“Pelangio”) in conjunction with Detour’s IPO in 2007. Consideration to Pelangio was 20 mm shares of Detour and $5mm in cash.

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In 2010, Detour purchased a 100% interest in the Aurora property and an option to acquire a 50% interest in the Sunday Lake Property from Conquest Resources Limited. (“Conquest”).

Block A was subject to a 50/50 joint venture with Trade Winds Ventures (“Trade Winds”). Detour acquired Trade Winds in December 2011 for total consideration of C$84 mm. The acquisition consolidated 100% interest Block A as well as ownership in the Gowest grounds.

As a result of these transactions, Detour holds a 100% interest in all claims (except for Sunday Lake). The claims map is shown in the Exhibit 5 below. The Mine Property is subject to a 2% NSR royalty payable to the Franco-Nevada Corporation (TSX:FNV). The exploration blocks are subject a 2% NSR royalty (1% for the Gowest block). Prism Resources Inc. holds a 7.5% net profit interest on the Aurora and Sunday Lake properties.

Exhibit 5: Claim Location Map


History Exploration on the property was first completed in 1974 by Amoco Canada Petroleum Company (“Amoco”). Geophysical surveys and subsequent drilling, including the construction of a decline to a depth of 120 m, confirmed a gold deposit of 9.5 mm tons at 6.4 g/t to a depth of 545 m.

As a result of a negative feasibility study completed between 1976 and 1978, the property was then ventured to Campbell Red Lake Mines (“Campbell”) and Dome Mines Ltd.

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(“Dome”) (each would gain a 25% interest). Additional work on the project was completed between 1979 and 1982, culminating in a resource estimate of 27.7 mm tonnes grading 3.88 g/t Au. Open pit mining was commenced in 1983, followed by underground mining in 1987. Cambell, Dome and Placer development merged in 1987 to become Placer Dome Inc. (“Placer”). The remaining 50% interest held by Amoco was consolidated less than a year later.

Between 1983 and 1987, the mine operated as an open pit with production of 313,070 ounces (3 mm tonnes grading 3.25 g/t). From 1987 to 1998, underground operations produced 1.5 mm ounces (9.1 mm tonnes grading 4.98 g/t). In the mid-1990s, the underground operation began experiencing production and grade problems. Open pit mining was briefly re-started in 1998. The mine was halted in 1999 as a result of low gold prices and deteriorating economics. Total production is estimated to have been 1.7 mm ounces from 14.3 mm tonnes at a grade of 3.82 g/t. Mill recovery is estimated to have averaged 93.1%.

In December 1998, Placer optioned the property to a 50/50 joint-venture between the Pelangio-Larder Mines (“Pelangio-Larder”) Franco-Nevada Mining Corporation. The predecessor to Pelangio acquired the assets of Pelangio-Larder in May 2000 and consolidated the property by acquiring Franco-Nevada’s stake in May 2002.

A mineral resource reported by Pelangio in late 2006, prior to Detour’s IPO, calculated a total resource of 3.4 mm ounces at a grade of 1.91 g/t. Since then, Detour has increased the size of the resource dramatically to 15.6 mm ounces of reserves and an additional 13.5 mm ounces of (out-of-pit) MI&I resources, as shown in Exhibit 6 on the following page.

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Exhibit 6: Detour Lake – Growth in Reserves & Resources


After acquiring the project, Detour moved the mine through to production very quickly given its scale. Just over 6 years elapsed from acquisition to first pour – we note that the brownfields nature of the project likely increased the development speed significantly.

A pre-feasibility study was completed in September 2009 which envisioned a 45,000 tpd mine based on reserves of 8.8mm ounces. The proposed mine was expanded in a feasibility study completed in June 2010 to the current 55,000 tpd operation, based on a reserve of 11.4 mm ounces. Construction of the mine was initiated in late 2010.

The reserves were updated at year end 2010 to 14.9 mm ounces and again at year end 2011 to 15.6 mm ounces. As the mine neared completion at the end of 2012, Detour released an updated mine plan, which included cost escalation of approximately 30-35% in both capital and operating costs. On the following page, we show the development of mine parameters and reserves from pre-feasibility to present.

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Exhibit 7: Mine Plan History

Pre- Reserve Mine feasibility Feasibility Update Plan Update

Date 9-Sep-09 25-May-10 31-Jan-11 4-Sep-12Mined Reserve (mt) 239 348 450 470Grade (g/t) 1.15 1.02 1.03 1.03Cut-off Grade (g/t) 0.60 0.50 0.50 0.50Contained Gold (mm oz) 8.8 11.4 14.9 15.6Recovery (%) 91.5% 91.2% 91.0% 91.0%Strip Ratio (Waste:Ore) 3.8 3.3 3.9 3.7Throughput (tpd) 45,000 55-61,000 55-61,000 55-61,000Mine Life (years) 14.5 16.0 21.0 21.5Avg. Annual Production (oz) 560,000 649,000 646,000 657,000LOM Total Cash Costs (US$/oz) $420 $454 $493 $749Development Capital (C$ mm) $844 $1,092 $1,092 $1,450

Pit Gold Price (US$/oz) $775 $850 $850 $850Gold Price (US$/oz) $775 $850 $850 $1,200C$ Exchange (C$/US$) 1.18 1.10 1.10 1.00IRR (pre-tax) (%) 13.5% 14.4% 15.2% 14.2%5% NPV (pre-tax) (C$ mm) $621 $1,026 $1,273 $1,660Payback (years) 6.2 5.9 5.5 6.7 Source: Company Reports

Local Support Northern Ontario is a very well established mining jurisdiction with a number of operating mines in the areas surrounding Detour Lake. The company’s workforce is 25% aboriginal. Detour has signed Impact and Benefit agreements with four aboriginal groups affected by the project; the Taykwa Tagamou Nation, Wahgoshig First Nation, the Moose Cree First Nation and the Metis Nation. Local communities are reported to have expressed strong support for the project, particularly in the Town of Cochrane.

Geology The Detour Lake property is within the northwest part of the Abitibi Greenstone Belt (“AGB”). Gold mineralization identified in the Detour Lake area occurs as Orogenic greenstone-hosted hydrothermal lode gold deposits. This is typical of the AGB and similar to the gold deposits found along the Destor-Porcupine Fault Zone from T immins, Ontario through to Destor, Québec.

The supracrustal rocks in the project area consist of mafic and ultamafic volcanic rocks of the Deloro Group in thrust contact to the south with the younger Porcupine sedimentary sequence. This regional east-west thrust zone is referred to as the Sunday Lake Deformation Zone ("SLDZ") and can be traced over a distance of more than 20 kilometres on the property.

At the Detour Lake mine, mineralization is principally found in a 200 m corridor (locally up to 350 m) north of the SLDZ and has been drilled along 3.5 km of strike. The bulk of the mineralization is found in the hanging wall of the SLDZ and is characterized by swarms of

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steeply dipping mineralized quartz veining. The foot wall (also known as the “Talc zone”) also contains mineralization, however it is less continuous and only 4 to 15 m wide.

Below is a geologic map of the property with the locations of the 2013 drill program (see the “Exploration Upside” section for details of the drill program).

Exhibit 8: Detour Lake and Area Geology


Resources The following Exhibit provides a summary of the current reserves, as well as in-pit and global resources at Detour Lake (calculated as of year-end 2011). Reserves and resources are all shown at a 0.5 g/t cut-off. Capping grades are estimated by domain and range from 15 g/t to 50 g/t. Resources assume internal dilution of 11.7% as a result of the grade interpolation methodology.

The database used to calculate resources contains over 1,100,000 m of drilling in 6,475 holes, including 524,465 m drilled by Detour between 2007 and November 2011. The most recent in-pit resources use the same optimized pit shell as in the 2010 year-end

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estimate, based on a gold price of US$850/oz and an exchange rate of C$1.10/US$1.00. The shell was generated using only the measured and indicated resources.

Reserves assume additional external dilution of 5.6% at 0.4 g/t for 2012-2014 and 3.8% at 0.4 g/t thereafter, resulting in global dilution of 15.5% (including the internal dilution of 11.7% noted above). Reserves also assume ore losses of 5%. The resultant pit contains 470 mm tonnes of ore grading 1.03 g/t and 1,734 mm tonnes of waste for a strip ratio of 3.7:1.

Exhibit 9: Detour Lake Resources and Reserves (2011 year-end)

Tonnes (mm) Grade (g/t) Ounces (mm)Proven 101.6 1.29 4.2Probable 368.4 0.96 11.4Total 470.0 1.03 15.6

Tonnes (mm) Grade (g/t) Ounces (mm)

M&I Resources (in-pit) 495.4 1.07 17.0Inferred Resources (in-pit) 6.0 0.70 0.1Total 501.4 1.06 17.2


M&I Resources 678.8 1.07 23.3Inferred Resources 208.5 0.86 5.8Total 887.3 1.02 29.0

In-Pit Resources (Inclusive of Resources)

Reserves

Global Resources and Reserves (Inclusive of Reserves)


Grade Control The company has completed grade control drilling tests using both diamond and RC drills. RC drills will be used for grade control during mining as the vertical nature of the Detour Lake mineralization makes blast hole grade control impractical. Both types of grade control tests confirmed the block model.

A diamond drill program of 133 holes on a 200x100m test section using 10x10m spacing was completed to confirm the reserve grade. The resource in that section was then calculated using 40x40m spacing, 20x20 m spacing and 10x10m spacing. Ounces contained within the different-sized blocks (40m/20m/10m) were similar (within 4%), as was the gold grade (within 7%) and the tonnage (within 11%).

Two RC grade control programs have been completed. In 2011, a 10,000 m inclined program comprised of 319 holes was completed on a 110x115m test section. Drilling was done on a 10m by 5m spacing. 2012 RC drilling was done in the Calcite Zone to support

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the 2012 mine plan. In general, the RC results appear to be in line with the diamond drilling results.

Resource Upside

The mine plan stockpiles ore under the 0.5 g/t cut-off, but above 0.3 g/t for potential future processing. This low-grade ore is included as waste and is expected to total 240 mm tonnes grading 0.39 g/t by the end of the current mine plan.

As noted above, the 0.5 g/t cut-off grade is based on a $850/oz gold price and is significantly higher than the 0.31-0.33 g/t cut-off in use at the similar Malartic mine. Should gold prices stabilize at higher levels and operating costs reach our estimates, re-calculation of the mine plan may significantly reduce the strip ratio (from 3.7 to 2.1) and could increase LOM production by nearly 20%. This material may also provide feed for an expanded processing plant.

Mining & Processing Mining is completed using a conventional open pit, truck and shovel operation. The company currently has a fleet of 26 haul trucks (20 CAT795F - 320 tonne and 6 100 tonne trucks with an additional three 320 tonne trucks expected by year-end) and 5 shovels (two hydraulic CAT6060 - 28/34 m3, two electric rope CAT495 - 48 m3 and a recently acquired small hydraulic shovel; a third CAT6060 is currently being assembled). A 250,000 tpd (ore and waste) mining rate is expected by the end of 2013.

The processing plant is a 55,000 tpd, conventional gravity, cyanidation and carbon-in-pulp (“CIP) facility. The crushing circuit consists of a large, first stage open circuit primary gyratory crusher (60”x113” HD equipped with 1,000 kW), followed by a second stage of 2 x 750 kW cone crushers. Additional crushing capacity is provided by 2 x 750kW pebble crushers in the grinding circuit. The grinding circuit consists of two parallel lines, each consisting of one twin pinion (36’x20’) SAG mills and one twin pinion ball mill (26’x40.5’). The four mills are all equipped with a pair of 7,500 kW variable speed drive motors. Gold recovery from the processing plant is expected to average 91%.

Ramp-Up While management has lowered production guidance for 2013 three times as a result of a slower than expected ramp up in throughput, the mine achieved commercial production on schedule in the third quarter. Management has indicated that the issues resulting in unplanned mill shutdowns in the second quarter have largely been fixed. These fixes include replacing SAG mill grates, malfunctioning valves in the SO2 cyanide detoxification system and two pebble by-pass chutes and shuttle conveyors in secondary crushers.

The first grinding line in the processing plant commenced in December 2012 with first gold poured in February. The second production line started early March and throughput in the second quarter averaged 31,452 tpd. Commercial production, defined as 60 days with an average throughput of 75% of capacity (41,250 tpd), was achieved on August 12th. During

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that period, the mill achieved 17 days above 50,000 tpd, including 4 continuous days averaging 52,900 tpd in mid-August.

Below, we show the actual and modelled ramp-up of the Detour Lake mill, compared to the ramp-up experienced by Osisko at Malartic. Malartic ramp-up was delayed significantly by lower SAG grindability than expected, resulting in the required addition of a pre-crush circuit (two cone crushers) and an additional pebble crusher. The pre-crush circuit was not fully installed until 1.5 years after commissioning (Q6 below), with the additional pebble crusher installed in Q7.

Exhibit 10: Comparison of Detour Lake mill ramp-up with Malartic


Mining rates in the 3rd quarter increased to 180,000 tpd of material moved (205,000 tpd in October) from 140,000 tpd in the second quarter. Q3 head grades were at 0.72g/t vs. 0.76g/t in Q2. November and December head grades are expected to increase as the Domain #2 higher grade zone starts making a contribution; we are currently modeling 0.78g/t in Q4.

Mine grades continue to reconcile well with RC drilling, however, dilution (external) has been coming in at above the planned levels of 5.6% - Q3 dilution was at 8%. A number of initiatives are planned to bring dilution down to plan, including improved training of shovel operators and the addition of an ore spotter at the mine level. In addition, as the pit expands, larger shovels will be shifted to waste mining and mining in narrower zones will be completed using smaller shovels.

Milled grades in the third quarter of 0.72g/t were slightly lower than the 0.76g/t seen in the second quarter. We expect to see higher grades (+0.8g/t) from 2014 onwards.

Recoveries have increased from 80% in Q1 to 83% in Q2 and to 85% in Q3. The plant was running without gravity circuits until June, when one line was commissioned. The second circuit was commissioned in the third quarter. The addition of gravity recovery is expected to increase overall recoveries on the order of 1-3%. We have modelled 88% recoveries starting in Q4.

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The capital spend is expected to decrease going forward. The 2014 sustaining capital spend will also be lower due to the tailings dam redesign. Based on the company’s November 7th press release, an estimated $56mm in sustaining capital is left out of a total of $192mm for the year.

Initial guidance for production in 2013 was initially between 350,000-400,000 ounces at cash costs of $800-$900/oz (after commerciality). The guidance was then lowered to 270,000 ounces at cash costs of $1,100/oz and then subsequently downgraded to 240,000-260,000oz at $1,100/oz on November 7th. Our model is slightly more conservative than the recent guidance.

Below is our assumed ramp-up profile for the company.

Exhibit 11: Detour Ramp-Up Schedule

Q1 A Q2 A Q3 A Q4 E H1 E H2 E 2013E 2014E 2015EThroughput (tpd) 11,178 31,452 42,488 48,000 50,000 53,647 33,279 51,824 54,795Grade (g/t) 0.64 0.76 0.72 0.78 0.82 0.85 0.74 0.84 0.92Recovery (%) 80% 83% 85% 88% 89% 88% 85% 88% 88%Production (oz) 16,841 57,897 75,672 96,673 214,136 235,486 247,083 449,623 520,660Operating Cost ($/t) n/a n/a $24.39 $25.56 $26.32 $24.33 $27.96 $25.28 $24.86Cash Cost ($/oz) n/a n/a $1,187 $1,131 $1,095 $985 $1,363* $1,037 $928All-in-costs ($/oz n/a n/a $1,981 $1,730 $1,508 $1,360 $1,781* $1,431 $1,250Capital+Sustaining ($mm) $139 $96 $34 $34 $43 $43 $302 $85 $75Free Cash Flow ($mm) -$169 -$110 -$71 -$33 -$27 $4 -$383 -$24 $65Cash & Invest. ($mm) $170 $197 $156 $111 $75 $69 $111 $69 $115Working Capital ($mm) $60 $115 $121 $91 $55 $49 $91 $49 $96Note: Excluded pre-commercial op costs as they w eren't disclosed & may not be meaningful.*Includes pre-commercial ounces

2013 2014

Source: GMP Securities, Company Reports

Debottlenecking & Expansion The mill was designed to produce 55,000 tpd as a base case, assuming a final P80 grind size of 95 μm. Simulations performed by BBA Inc. (“BBA”) showed that throughput can be increased to 61,000 tpd by allowing for a coarser final P80 grind of 105 μm. Metallurgical work indicates that recoveries would be expected to drop a minimal 0.5% as a result of the coarser grind. This would be counteracted by adding four leach tanks in order to slightly increase leaching time from 29 to 31 hours.

Expansion & debottlenecking to achieve the 61,000 tpd rate was included as sustaining capital in the feasibility study. The costs are primarily related to adding leach tanks, switching to oxygen instead of air in leaching and increasing the pumping capacity of the plant. Given the volatility in gold price and the fact that commercial production was just achieved, we do not believe that this expansion will be included in the 2014 capital budget (to be released in Q4). We have assumed that the processing plant will achieve a 61,000tpd throughput by 2016.

Production Profile & Model Parameters Exhibit 12 presents our modelled production profile for Detour.

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Exhibit 12: Detour Lake Production Profile


Exhibit 13 compares GMP’s life of mine operating assumptions with the October 2012 mine plan. Given the relatively short period of time since the mine plan was released, our model does not differ substantially from the reserve plan; it is, however, more conservative on a number of metrics.

Exhibit 13: GMP Assumptions vs. October 2012 Mine Plan

GMP Model October 2012 Mine PlanOunces Recovered (mmoz) 14.2 14.2Avg Grade Milled (g/t) 1.03 1.03Strip Ratio 3.7:1 3.7:1Recovery (% ) 91% 91%Avg Annual Production (oz) 664,800 674,900Peak Throughput (tpd) 61,000 61,000Expansion Year 2016 2015Sustaining Capex LOM ($mm) $1,585 $1,156Operating Cost ($/t) $23.67 $21.34Cash Cost ($/oz) $763 $710Total Cash Cost ($/oz) $789 $749


EXPLORATION UPSIDE As noted above, the company has 630km2 of contiguous land around the Detour Lake mine (the “Property”). The Property is within the northwestern portion of the Abitibi Greenstone Belt and has potential to add to the company’s resource base.

The most advanced exploration target is Block A, a near-surface gold deposit located 1 km west of the current pit that is being studied as potential mill feed for the Detour Lake plant.

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Unlike Osisko, which has made a number of project acquisitions, Detour has eschewed the acquisition of additional projects and focused on creating value through organic growth. The company estimates its discovery costs at Detour Lake to be less than < $10/oz of gold reserves. With a large land package, the company has the potential to grow significantly through the drill-bit.

Since 2011, the major exploration focus has been on the Lower Detour Deformation Zone (“LDDZ”), a major structural break that is parallel to and approximately 5 km from the SLDZ. This structure has been traced over an approximate strike length of 40 km and has similar characteristics to the SLDZ. Following results from the 2012 drill program and geophysical surveys, the company has focused its 2013 drilling program on this structure.

In the first half of the year, 74 holes totalling 25,066 m were drilled in the area. The best intercepts included 10.25 g/t over 4.5 m and 8.72 g/t over 9.2 m (including 17.33g/t over 4.4m). Follow-up drilling in this area is expected in the first quarter of 2014.

Block A From 2003-2011, Trade Winds, the previous operator of Block A, drilled 140,000 meters in 375 holes. This culminated in an in-pit resource estimate of 73.6 mm tonnes grading 0.99 g/t (2.3 mm oz) reported in February 2011. The pit design assumed a $1,000/oz gold price. The modelled pit crossed the boundary of Block A, into Detour’s mining lease; an additional 467,000 ounces of gold that was located across the boundary was not included in the resource estimate. The calculated strip ratio for the pit was 6.16 waste:ore at a cut-off grade of 0.5 g/t.

Exhibit 14: Block A Resources – February 2011


Indicated Resources (in-pit) 52.9 0.98 1.7Inferred Resources (in-pit) 20.7 1.00 0.7Total Resources (in-pit) 73.6 0.99 2.3 Source: Company Reports, GMP Securities. Assumes $1,000/oz gold and a cut-off of 0.5 g/t.

After acquiring Trade Winds at the end of 2011, Detour commenced a pre-feasibility study on this area in 2012, with the intent of processing ore from Block A at the Detour Lake plant. As part of the pre-feasibility work, the company completed a 49,171 meters, 155 hole drill program in 2012 on a 40 m by 40 m spacing. An updated resource estimate has not yet been released (scheduled for Q1 2014).

Overall, Block A geology appears to be similar to that at Detour Lake. Most of the mineralization is hosted in the East-West trending ‘M’ zone that has been traced for approximately 1.5km. Mineralization is found mainly in swarms of steeply dipping quartz veins.

Exhibit 15 shows the location of Block A relative to the Detour Lake pit.

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Exhibit 15: Location of Block A


As a result of lower gold prices and liquidity issues prior to the June equity financing, Detour deferred approximately $10 mm in exploration and Block A pre-feasibility expenditures beyond 2013. We currently do not model Block A as part of our valuation and will re-visit this assumption when a more definitive timeline is announced.

KEY MANAGEMENT Paul Martin — Interim Chief Executive Officer Mr. Martin has over 25 years of experience in the area of mining finance. His prior role was as CFO and VP Finance with New Gold. He has also held senior level positions with Gabriel Resources, European Goldfields, TVX Gold and Lac Minerals. He holds a CA designation.

James Mavor — Interim Chief Financial Officer Mr. Mavor has more than 18 years of experience in the mining industry. He was previously VP and Treasurer with Barrick Gold between 2007 and 2012. Prior to that, he held a number of roles with Barrick, including Operations Controller, Director of T reasury Operations and VP of Investor Relations. He has also served on the board of a mining company. Mr. Mavor holds a CA designation and a Bachelor’s degree in electrical engineering.

Pierre Beaudoin — Chief Operating Officer Mr. Beaudoin has a mineral processing background with experience in the areas of operations and project development. He was previously the Director of Projects in Barrick’s Capital Projects group, directing the studies for the Cerro Casale project. He has also held senior-level roles at processing plants in Quebec, Ontario and Australia.

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Board of Directors • Michael Kenyon, Director and Executive Chairman – Mr. Kenyon has more

than 35 years of international experience in the mining industry. He is a co-founder of Cumberland Resources where he served as Director until its 2007 acquisition by Agnico-Eagle. He is also the co-founder of Canico Resource Corp where he held the role of President and CEO until its 2005 acquisition by CVRD. He was also the founding director of Sutton Resources and served as its President and CEO.

• Peter Crossgrove, Director and Non-Executive Chairman – Mr. Crossgrove is a past Chairman and founder of Masonite International. He also previously held the role of Vice Chairman and CEO for Placer Dome. He is currently the Executive Chairman of Excellon Resources. His other board appointments include Dundee REIT, QLT Inc, Barrick Gold, Lake Shore Gold and Pelangio Exploration. Mr. Crossgrove is a member of the Order of Ontario as well as of the Order of Canada. He is also a recipient of the Queen’s Jubilee Medal.

• Louis Dionne – Mr. Dionne has spent over 30 years working as a mining engineer. He has been an independent consultant to the mining industry since 2005. He has served as the President and CEO of Richmond Mines and held the role of Senior VP, Underground Operations with Barrick. He has provided assistance as a technical expert in several evaluations, acquisitions and J/Vs. His other Board appointments include Aurizon Mines and RX Gold&Silver.

• Robert Doyle – Mr. Doyle has extensive international experience with resource exploration, development and production. He is the co-founder of Medoro Resources, where he served as CEO between 2008 and 2009. His prior roles include Executive VP of Pacific Stratus Energy, CFO of Coalcorp Mining and CFO of Boliviar Gold. He is currently a Director of Golden Star Resources, Mandalay Resources and NXA Inc. Mr. Doyle is a Chartered Accountant.

• André Falzon – Mr. Falzon is a Chartered Accountant and senior financial executive with over 25 years of financial and management experience within the mining industry. Between 1984 and 2006, Mr. Falzon held increasingly senior positions at Barrick Gold Corporation, serving as Vice President and Controller from 1994 and finishing his last year at Barrick as Vice President, Planning and Compliance. Currently, he is a director and Audit Committee Chair for both African Barrick Gold Plc and Aurizon Mines Ltd.

• Ingrid Hibbard – Ms. Hibbard is a mining and securities lawyer with more than 25 years of experience. She has held the role of President and CEO with Pelangio Exploration since 1996. She also has experience in private practice working with a wide range of mining and exploration companies. She was also the Corporate Secretary for Hemlo Gold between 1993 and 1999.

• Alex G. Morrison – Mr. Morrison has spent more than 25 years working in the mining industry. His most recent appointment was as VP and CFO of Franco-Nevada Corporation. He has also spent time with Newmont, serving as VP, Operations Services and VP, Information Technology, with Novagold where he

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held the role of VP and CFO, with Homestake Mining as VP and Controller. He is currently a Director of Taseko Mines and is a Chartered Accountant.

• Jonathan Rubenstein – Mr. Rubenstein is one of the founders of Canico Resources Corp, serving as Director and VP and Corporate Secretary. He is a past Director of Cumberland Resources and Aurelian Resources. He was also the VP, Corporate Affairs for Sutton Resources. His current appointments include Chairman and Director of MAG Silver and Director of Eldorado Gold, Rio Novo Gold and Troon Ventures. Mr. Rubenstein is a lawyer.

• Graham Wozniak – Mr. Wozniak has more than 37 years of experience in the heavy industrial sector. He has acted in a management capacity for a number of large projects in various sectors. He has been involved with advisory and directorship roles for mining feasibility studies and construction since 2004. Notable projects include Pueblo Viejo, the Stafford Leach copper project, the Cerro Verde copper mine expansion, the Tenke copper mine expansion and the Galore Creek project. Mr. Wozniak has served as the President of Monad Contractors between 1988 and 2004, overseeing a number of mining projects during that time. He is a civil engineer.

CAPITAL STRUCTURE AND LIQUIDITY As of September 30, 2013, Detour had cash and equivalents of $137 mm and total long-term debt of $554mm (at face value). The company also had $20 mm available under its $90 mm revolving credit facility.

Basic shares outstanding totalled 138.2 mm. There are 9.9 mm options and DSU’s outstanding and 355,000 shares to be issued to aboriginal groups. An additional 13.0 mm shares may be issued upon conversion of convertible debt (at US$38.50/sh) with a fully diluted share count of 161mm shares.

Paulson & Co currently hold 15% of the outstanding shares. Management holds approximately 2% of the company on a basic basis and approximately 9% on a partially diluted basis.

Liquidity As of the first quarter of 2013, management estimated they would have sufficient liquidity to achieve commercial production without additional funding, assuming production of 60,000 ounces in Q2 and a gold price of $1,465/oz. Actual production was 57,897 ounces, with a gold price of $1,420/oz. As a result, Detour raised C$176 mm (20.125 mm shares at C$8.75) in a June equity financing. The financing resulted in dilution of 14.5%. Based on our current model for the company, it appears that DGC should have sufficient cash resources for the next 12 months at gold prices above $1,300/oz. Looking at recent commodity price volatility, we view a shortfall as possible – if this were to happen, we expect that it would be less than $50mm based on spot gold prices. We have assumed a $96mm equity issue in our valuation to account for this possibility.

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Below, we show modeled cash balances under various gold price scenarios – this excludes the impact of our assumed $96mm equity issue at $3.65/share.

Exhibit 16: Detour Cash Balance Sensitivity (pre-financing)

Source: Company Reports, GMP Securities.

Financing Detour funded the construction of the mine with approximately C$1,700 million in equity financings and $712 mm in debt. The post-IPO equity financings were completed between 2007 and 2013, at prices ranging from C$8.75 (most recently) to C$29.75/sh. The average price was C$19.13/sh. The primary source of debt was in the form of a $500 mm convertible offering backstopped by Paulson & Co in December 2010. Below, we present the breakdown of Detour’s debt.

Exhibit 17: Debt Structure

Interest Maximum Drawn Book ConversionFacility Rate Amount Amount Value Price Shares Maturity

(%) ($ mm) ($ mm) ($ mm) ($/sh) (mm) (date)Senior Unsecured Notes 5.50% $425.0 $425.0 $296.7 $38.50 11.0 Nov-17Class A Notes 5.50% $75.0 $75.0 $66.8 $38.50 1.9 Nov-17Equipment Lease Facility 4.30% $150.0 $123.6 $116.6 - 0.0 Mar-16Revolving Credit Facility 3.20% C$90.0 $70.0 $70.0 - 0.0 Aug-18Total Debt 5.1% $737.3 $693.6 $550.1 - 13.0

Letter of Credit Facility 2.1% C$45.0 $39.5 - - Mar-16


The Class A notes are the same in all respects to the Senior Unsecured Notes, except that Detour has the option to settle the conversion in cash. The notes were structured in this fashion to maintain Paulson & Co. below the 20% threshold on a partially diluted basis.

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The terms of the Senior Unsecured Notes and Class A notes initially restricted the company to maximum additional indebtedness of $150 mm in equipment leases and a $10 mm revolving credit facility. In 2012, Detour paid a 50 basis point fee to noteholders in order to increase the maximum permitted size of its revolving credit facility to $100 mm with an additional $50mm letter of credit. We note that should Detour require financing for an expansion, it would not be able to use secured debt financing except with consent of the noteholders.

The accounting of the Senior Unsecured Notes can cause significant quarterly volatility in earnings. Every quarter, the option value of the notes is marked to market, with a decline in the price of Detour resulting in a gain on the income statement and vice versa. The average non-cash income effect over the past 4 quarters has been ~$36 mm. The notes are also accreted from their book value towards the principal amount for an additional non-cash interest expense of ~$6 mm per quarter (increasing over time). We have excluded these amounts from our calculation of adjusted earnings per share.

VALUATION In arriving at our valuation for Detour, we analyze the project and company from 3 perspectives; 1) comparable projects, 2) cash flow multiples of producing companies and 3) a discounted cash flow valuation.

Comparable Projects As we have noted, the most direct comparable for Detour Lake is Osisko’s Malartic mine. Exhibit 18 shows the relevant features of both projects. The modelled total market value per ounce (defined as enterprise value per ounce + sustaining capital per ounce + total cash costs per ounce) are remarkably similar at around $1,000/oz. Detour does trade at a significant discount on an enterprise value per annual ounce of production basis. Note that in this analysis, we do not include any value for Osisko’s other projects (Hammond Reef, Upper Beaver), nor do we include value for Detour’s exploration targets (Block A).

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Exhibit 18: Comparison between Detour Lake and Malartic

CompanyProject

Feasibility GMP Model Reserve(1) GMP ModelOunces mined (mmoz) 15.6 15.6 10.1 9.5 Grade mined (g/t) 1.03 1.03 1.01 1.00 Average Production (oz/yr) 657,000 646,100 574,000 530,000

Strip Ratio 3.70 3.72 2.27 2.30 Mill Capacity (tpd) 55,000/61,000 55,000/61,000 60,000 55,000 Development Capital ($mm) $1,450 $1,450 $789 $1,200Sustaining Capital ($mm) $1,160 $1,757 n/a $586Recovery 91% 91% 86% 86% Total Cash Costs $/oz $749 $779 $707 $647

$/t $22.52 $23.41 $19.25 $18.00

Enterprise Value / oz $/oz $65 $65 $231 $244Sustaining Capital / oz $/oz $82 $124 $68 $72Total Market Cost / oz $/oz $896 $969 $1,006 $962Enterprise Value / Annual oz $/oz $1,403 $1,427 $3,487 $3,777(1) Average production based on 2011 mine plan update. Sustaining capital per ounce assumes GMP capital estimate.

Production

Detour LakeDetour Gold Osisko

Malartic


Exhibit 19 on the following page presents the relevant features of comparable development projects in Northern Ontario. We have calculated a similar metrics to the total market cost / oz and enterprise value / annual oz for these projects; however, we have substituted development capital for enterprise value and excluded any market value for the asset.

We note that relative to the pre-production projects, Detour stands out in terms of resource size, lower operating risk (as a number of the pre-producers are facing challenges from nearby lakes or more complex development scenarios) and the availability of infrastructure.

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Exhibit 19: Estimated Parameters of Development Projects in Northern Ontario

Company New GoldProject Rainy River

GMP Model GMP Model PEA (2013) GMP Model PEA (2012)Ounces mined (mmoz) 5.0 3.0 2.9 8.2 7.9 Grade mined (g/t) 0.68 1.72 1.25 0.86 1.03 Average Production (oz/yr) 392,500 187,000 217,000 470,000 235,500

Strip Ratio 1.01 4.00 1.70 2.50 2.50 Mill Capacity (tpd) 60,000 10,000 20,000 50,000 20,000 Development Capital ($mm) $1,500 $425 $438 $1,400 $694Sustaining Capital ($mm) $225 $136 $107 $370 $555Recovery 88% 94% 80% 94% 91% Total Cash Costs ($/oz) $881 $602 $636 $787 $560

($/t) $18.8 $31.3 $20.1 $17.7 $20.6

Development Capital / oz ($/oz) $343 $151 $188 $181 $97Sustaining Capital / oz ($/oz) $51 $48 $46 $48 $78Capital + Cash Cost / oz ($/oz) $1,275 $802 $870 $1,016 $735Development Capital / Annual oz ($/oz) $3,822 $2,273 $2,018 $2,979 $2,948

Pre-Production

MaginoIAMGOLDCote Lake

OsiskoHammond Reef

Argonaut Gold CanyonSpringpole


Peer Comparison In exhibit 20, we show the valuation of producing companies that we believe Detour will be compared to as the Detour Lake mine begins generating cash flow. We expect that investors will begin to value Detour on a cash flow per share basis as the mine approaches full production. We note that Detour’s 2014 production and costs do have some execution risk as the company ramps up to nameplate capacity.

Once again, we highlight Osisko as the closest comparable to Detour. Compared to Osisko, Detour trades at a discount on a P/NAV basis and on a forward P/CFPS basis.

Exhibit 20: Valuation of Producing Comparables P/CF 2014 2015

Company Ticker Close basic sh Mkt cap EV Production Cash Cost Production Cash Cost(TSX) (C$/sh) (MM) (US$ MM) (US$ MM) /sh P/NAV 2014 2015 2016 (koz) ($/oz) (koz) ($/oz)

Yamana Gold Inc7 YRI C$9.15 752.9 $7,345 $8,198 $6.56 0.61x 6.85 x 6.95 x 6.62 x 1,661 $382 1,562 $424Agnico-Eagle Mines Ltd7 AEM C$27.16 173.4 $5,022 $4,841 $22.16 1.15x 7.39 x 7.30 x 7.76 x 1,260 $695 1,286 $684New Gold Inc7 NGD C$5.05 504.0 $2,714 $3,144 $6.73 0.50x 5.14 x 5.15 x 4.98 x 474 $192 471 $202Osisko7 OSK C$4.07 437.8 $1,782 $2,002 $5.44 0.75x 5.34 x 5.22 x 5.71 x 583 $647 583 $647AuRico Gold7 AUQ C$3.85 247.6 $1,016 $1,042 $5.35 0.67x 6.23 x 5.12 x 6.04 x 214 $642 255 $644Arithmetic average 0.74x 6.19x 5.95x 6.22x 838 $511 831 $520

Detour Gold7 DGC C$3.73 164.4 $613 $1,002 $10.58 0.35x 9.97 x 4.38 x 2.97 x 450 $1,064 521 $955

8% NAV ($1,350/oz)


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NAV and Price Target Exhibit 21: Detour Gold NAV summary

ValueOwnership Discount (US$ mm) Per Share

AssetsWorking Capital $120.5 $0.72Value of ITM Instruments $26.7 $0.16Detour Lake 100% 8% $2,148.3 $12.84Total Assets $2,295.5 $13.72

LiabilitiesLong-term Debt $525.6 $3.14Total Liabilities $525.6 $3.14

Net Asset Value $1,769.9 $10.58P/NAV Multiple 0.80xTarget Price C$8.00

Commodity Prices 2013E 2014E 2015ELong TermGold Price ($/oz) $1,432 $1,350 $1,350 $1,350* Per share valuations assume 167.3mm shares outstanding which includes 23.4mm shares from in-the-money dilution. Source: GMP Securities, Company Reports

Exhibit 22: Detour Gold NAVPS Sensitivity (US$/sh) NAV Sensitivity Gold Price ($/oz)

Discount Rate (%) $1,100 $1,200 $1,350 $1,500 $1,6000% $13.93 $19.28 $27.23 $35.18 $40.476% $4.73 $8.21 $13.15 $17.85 $20.898% $3.16 $6.24 $10.58 $14.67 $17.29

10% $2.00 $4.74 $8.60 $12.20 $14.5012% $1.12 $3.58 $7.05 $10.27 $12.31


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Detour Gold (DGC CN) Ian ParkinsonStock Rating: BUY [email protected] Price: $8.00 +1 (416) 943-6639Share Price: $3.72 Magda OgrodowskaImplied Return: 115.3% [email protected] Cap: 515 +1 (416) 943-6631

Company Summary Reserves / ResourcesTonnes

(mm) Gold g/t Gold mmozDetour Lake Mineral ReservesProven 101.6 1.29 4.2Probable 368.4 0.96 11.4Proven + Probable 470.0 1.03 15.6Detour Lake In-Pit Mineral Resources (inc. Reserves)Measure & Indicated 495.4 1.07 17.0

Investment Thesis & Catalysts Inferred 6.0 0.70 0.1Total In-Pit Resources 501.4 1.06 17.2Detour Lake Global Mineral Resources (inc. Reserves)Measure & Indicated 678.8 1.07 23.3Inferred 208.5 0.86 5.8Total Global Resources 887.3 1.02 29.0

GMP Commodity Forecast 2012A 2013E 2014E 2015E 2016EGold Price (US$/oz) 1,668.23 1,431.87 1,350.00 1,350.00 1,350.00 Silver Price (US$/oz) 31.24 24.17 22.00 22.00 22.00

Production (Attributable) 2012A 2013E 2014E 2015E 2016EFinancial Data 2012A 2013E 2014E 2015E 2016E Detour LakeCash 197.8 92.2 50.1 96.4 209.6 Gold Production (000 oz) - 122 450 521 605 Debt 533.5 548.5 555.8 567.5 584.1 Total Gold Production (000 oz) - 122 450 521 605 Total Debt / Total Asset 23% 22% 23% 24% 24% Total Cash Costs (US$/oz Au) $0 $1,170 $1,064 $955 $902EPS (adj) (0.43) (0.49) (0.47) (0.12) 0.13 All-in Costs (US$/oz Au) $0 $1,781 $1,431 $1,250 $1,154CFPS (0.33) (0.14) 0.37 0.85 1.25 P/E (adj) n/m n/m n/m 28.5xP/CF n/m 10.0x 4.4x 3.0xEV/EBITDA n/m 11.9x 6.1x 4.4xComparables (2014E GMP) P/CF P/E EV/EBITDAAurico Gold 6.7x 13.1x 8.3xDetour Gold 10.0x n/m 11.9xIAMGold 4.5x 12.7x 4.4xNew Gold 5.5x 17.7x 6.6xOsisko 5.3x 14.2x 5.5xYamana Gold 7.3x 21.0x 5.8xComparables P/CF (GMP) 2013 2014 2015 2016Aurico Gold 10.1x 6.7x 5.5x 6.5xDetour Gold n/m 10.0x 4.4x 3.0x NAV Valuation Ownership Discount Rte $MM $/ShIAMGold 4.9x 4.5x 3.5x 3.7x Current AssetsNew Gold 9.0x 5.5x 5.5x 5.4x Working Capital $120.5 $0.72Osisko 6.5x 5.3x 5.2x 5.7x Value of ITM Instruments $26.7 $0.16Yamana Gold 9.0x 7.3x 7.4x 7.1x Total Current Assets $147.2 $0.88Income Statement (U 2012A 2013E 2014E 2015E 2016ERevenue - 163.6 607.0 702.9 816.5 Mining AssetsEBITDA (58.2) (23.3) 82.9 160.5 226.0 Detour Lake 100% 8% $2,148.3 $12.84EBIT (58.2) (53.1) (43.1) 12.7 52.9 Net Income (38.5) (0.6) (103.1) (50.8) (14.3) Total Mining Assets $2,148.3 $12.84EPS (0.43) (0.49) (0.47) (0.12) 0.13 LiabilitiesEBITDA/Share (0.52) (0.18) 0.50 0.98 1.37Basic Shares Outstandi 112.69 132.37 164.35 164.35 164.35 Long-term Debt $525.6 $3.14Options & Warrants 0.40 3.38 2.97 2.97 2.97 Total Liabilities $525.6 $3.14Fully Diluted Shares Ou 113.09 135.76 167.32 167.32 167.32Cash Flow (US$) 2012A 2013E 2014E 2015E 2016E NAV Multiple 0.80Net Income (38.5) (0.6) (103.1) (50.8) (14.3) Operating NAV $2,148.3 $12.84

Depreciation - 29.7 126.0 147.7 173.1 Non-Operating NAV -$378.4 -$2.26Other (6.7) (31.2) 38.6 42.9 47.3 Total NAV $1,769.9 $10.58

Operating Cash Flow (45.2) (2.1) 61.5 139.9 206.2 Exchange Rate (USD:CAD) 1.00Investing Cash Flow (855.5) (334.3) (84.4) (74.4) (73.9) CAD Valuation $1,340.2 $8.01Financing Cash Flow 472.4 237.5 (19.2) (19.2) (19.2) DGC Target Price $8.00Cash Increase/Decreas (490.1) (105.6) (42.1) 46.3 113.1 Ending Cash 197.8 92.2 50.1 96.4 209.6 NAV Sensitivity Gold Price ($/oz)Free Cash Flow (428.3) (98.8) (42.1) 46.3 113.1 Discount Rate (%) $1,100 $1,200 $1,350 $1,500 $1,600Company Management 0% $13.93 $19.28 $27.23 $35.18 $40.47Paul Martin Interim CEO 6% $4.73 $8.21 $13.15 $17.85 $20.89James Mavor Interim CFO 8% $3.16 $6.24 $10.58 $14.67 $17.29Pierre Beaudoin COO 10% $2.00 $4.74 $8.60 $12.20 $14.50

Source: Company Reports. GMP Securities, Bloomberg, FactSet 12% $1.12 $3.58 $7.05 $10.27 $12.31

Detour's flagship asset is the Detour Lake Mine in Northern Ontario which declared commercial production in August 2013. 2013 production guidance for the operation stands at 240,000oz-260,000oz at $1,100/oz (after commercial production). We expect Detour Lake to ramp up to full capacity in 2014 and to be a substantial source of free cash flow for the company. 2014 guidance is for 440,000-500,000oz at all-in costs of $1,150-1,250/oz.

Detour's Detour Lake mine is a relatively rare large, pure gold asset with production averaging 650,000 oz per year over a long 21.5 year mine life. The company has experienced a number of normal teething issues comissioning the mine. Combined with lower gold prices, this resulted in a cash crunch and subsquent financing in June 2013. We see potential as Detour executes on its organic growth strategy. With a 21.5 year mine life, an additional 3 mm ounces of low grade stockpiles in the mine plan and another near-surface deposit 1km away from the current pit (Block A), the mine is ripe for an expansion.

- 100 200 300 400 500 600 700

2012A 2013E 2014E 2015E 2016EGold Production (000oz)

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Detour Gold Corporation7 BUY · 2016-01-05 · December 9, 2013 3 RECOMMENDATION AND INVESTMENT SUMMARY We rate Detour Gold as a BUY with a price target of $8.00 Detour is on track