"We reiterated our SPECULATIVE BUY rating and C$22.50 target price on Detour Gold ahead of the final feasibility study on the Detour Lake project (expected in April). Recent discussions with management have highlighted the potential for improvement over the pre-feasibility project economics, including the potential for 10%–20% reserve additions and a 10%–15% throughput increase, advancing the construction timeline, and potential capital cost savings.
While we do model the potential upside for a 20% expected reserve addition and a 12.5% throughput increase, the potential for advancing the construction timeline and capital cost savings could improve project economics. More importantly, the delivery of the feasibility study by as early as April may provide the opportunity to derisk our valuation (i.e., lower discount rate) and raise our target multiple. All else being equal, the potential lift to our target price could be from C$22.50 to C$32.25."
- Precious Metals Weekly (02/16/10)
