Target raised from $42 to $50.

Detour Gold Corp.
(DGC-T) C$27.92

Resuming Coverage with Detour Lake Fully Funded

We are resuming coverage of Detour Gold following the close of a bought
deal financing. After the full exercise of the over-allotment option by the
underwriters, the company sold a total of 14.38mm common shares at a price
of $29.75/share to raise gross proceeds of $428mm.
We estimate that this financing raises the company’s cash balance to $1.2bln,
and that this is sufficient to fund the remaining $1bln of capital expenditures
required to bring the Detour Lake gold project to production and provide
surplus funds for working capital, exploration, and corporate expenditures.

Impact – POSITIVE

We believe the completion of project funding may remove a financing
overhang that could have put pressure on the stock over the last few months
after the company disclosed that capital costs for the project were expected to
be realized at the higher-end of the feasibility study allowance.
Moreover, with project financing behind it and the completion of project
permitting expected by us before the end of Q2/12, we believe the company
may begin to be revalued from a development stage multiple to a premium
multiple consistent with eventual mid-tier levels of gold production in what
we consider to be an attractive mining jurisdiction.
Adjusting our valuation for the terms of the equity financing and our higher
modeled long-term gold price of US$1,500/oz (US$1,000/oz previously), our
corporate NAV5% increases to $42.55/share ($27.88 previously). We use a
1.2x target multiple (1.5x previously) to generate a revised 12-month target
price of $50.00/share ($42.00 previously) and resume coverage with a
SPECULATIVE BUY recommendation.


Fully Funded to Production in 2013
Detour announced the close of a bought deal offering that saw the company issue 14.38mm common shares at
$29.75/share for gross proceeds of $428mm. We estimate that the company’s cash balance now stands at
approximately $1.2bln, and that this is sufficient to fund the remaining $1bln of capital expenditures required
to bring the Detour Lake gold project to production and provide surplus funds for working capital, exploration,
and corporate expenditures. With approximately 70% of development expenditures capital protected
(excluding $100mm in contingencies), we believe there is limited scope for budget overruns at this stage.
Updated Reserve at US$850/oz Au in Q1/12 – Major Growth at US$1000/oz Au
Detour is scheduled to release an updated reserve estimate for the Detour Lake deposit in Q1/12 (the existing
reserve of 14.9mm oz was reported at an assumed gold price of US$850/oz in January 2011). We understand
that this estimate would incorporate drilling designed to infill the western portion of the pit to a 40x40m
spacing, sufficient for the classification of reserves and to extend drill coverage further west to section 17,220E.

Infill drilling within the existing US$850/oz pit could deliver an incremental 0.4mm oz through the conversion
of approximately 90% of the inferred blocks in the model, with the added benefit that converting these blocks
to ore from waste may reduce the overall strip ratio to 3.3 to 1 (from 3.9 to 1 presently). Extending the pit to
the west could add an additional 0.9mm oz in our estimation.
A far greater benefit would come, in our view, with the adoption of a US$1000/oz gold price assumption,
which we believe would be in line with industry practice. Analysis of the company’s block model suggests to
us that this would contribute a further 3mm oz to the reserve classification, and dramatically improve
continuity and reduce the strip ratio to nearly 2 to 1.
Moreover, with a +20mm oz reserve (calculated at a US$1000/oz gold price), the company could justify a
throughput expansion of the Detour Lake project to 90,000 tpd (from 60,000 tpd as presently contemplated).

An expansion study is currently in progress and is expected to be completed in Q1/12; however, the expansion would not come online until at least the third year of production.
Please note that we do not incorporate any potential growth in reserves or throughput expansion in our
valuation at this time.
Federal Permitting Expected by Q2/12
The company is currently in the process of preparing a revised Comprehensive Study Report for submission to
the Ministry of Environment. Following the approval of this document, we believe it would take another six to
nine months to complete the remaining steps in permitting the Detour Lake gold project


Gold & Precious Minerals
Recommendation: SPEC. BUY
Unchanged
Risk: SPECULATIVE
12-Month Target Price: C$50.00?
Prior: C$42.00
12-Month Total Return: 79.1%
Market Data (C$)
Current Price $27.92
52-Wk Range $23.12-$34.00
Mkt Cap (f.d.)($mm) $2,945.6
Dividend per Share
.00
Dividend Yield 0.0%
Avg. Daily Trading Vol. (3mths) 594495
Financial Data (C$)
Fiscal Y-E December
Shares O/S (f.d.)(mm) 105.5
Float Shares (mm) 97.8
Net Debt/Tot Cap --
Cash ($mm) $1,160.0
NAVPS (current)(f.d.) $42.55
All figures in C$, unless otherwise specified