#Mining: #Digital solutions are being adopted, but usually as point solutions in the value chain rather than as a holistic approach

@media print { body { margin: 2mm 9mm; } .original-url { display: none; } #article .float.left { float: left !important; } #article .float.right { float: right !important; } #article .float { margin-top: 0 !important; margin-bottom: 0 !important; } } EY – Digital mining: the next wave of transformation – EY – Global

EY’s latest report: Given that digital has become a key enabler of margin improvement and enhancer of competitiveness in the sector, it is critical that [Mining] organizations develop a clear approach to bridging the disconnect between the potential of and the successful delivery from digital transformation.

https://www.ey.com/gl/en/industries/mining—metals/ey-digital-in-mining-and-metals

Improving digital effectiveness

Digital effectivenessDigital wave approachDigital NavigatorFAQsRelated insightsContacts

Digital effectiveness is the top risk facing the mining and metals sector, with the growing disconnect between the potential of and the successful delivery from digital transformation. Given that digital has become a key enabler of margin improvement and enhancer of competitiveness in the sector, it is critical that organizations develop a clear approach to bridging the disconnect.

Digital solutions are being adopted, but usually as point solutions in the value chain rather than as a holistic approach as discussed in our paper, “How do you prepare for tomorrow’s mine today?” Point solutions will not get us to the next level of productivity improvement or enhance end-to-end decision-making.

The collective impact of these challenges can result in a tentative approach to strategy — reflected by small, disconnected initiatives — rather than a strong commitment to a multi-year transformation approach.

EY’s digital wave approach to transformation

We have identified a pragmatic and effective approach to transitioning your business from its current state towards an improved future state. This is to create a clear pathway for transformation, specifically described as “The digital wave transformation approach.” It meets the need of having an active, progressive and compelling digital strategy, while also recognizing the issues associated with business risk and maintaining a coherent program of work.

Our approach is like a series of waves moving through the organization, steadily introducing more digital hotspots and interconnections, all within a coherent overarching strategy.

This wave approach to digital transformation contains four main components – Pre-start, Wave 1, Wave 2 and Wave 3.

Click on each component to know more:

EY's digital wave approach to transformation

The process of launching waves is not necessarily sequential. For example, high-value areas with a close link to productivity may move from Wave 1 to Wave 2 before initial work has commenced in areas with less-compelling business cases.

Market leadership can quickly be lost if dominant players respond slowly or ineffectively to industry disruption and external changes. The pathway through the waves cannot be viewed as static, sequential or “set and forget.” We see the end-state vision as constantly changing and businesses will need to be ready to adapt and change course as required.”

Paul Mitchell, Global Mining & Metals Advisory Leader

EY’s Digital Navigator

Leaders in the sector understand the compelling case for change, but are looking for the right way to go about the transformation without falling into various pitfalls that cause many change initiatives to fail. It is not a question of when to go digital; it is about how to start thinking of a fully integrated business culture shift, and that really needs leadership focus.

We can support your business through the use of the Digital Navigator — an approach and toolkit that supports EY to assess a company’s digital maturity and help create an actionable digital road map for our clients based on linking current capability and existing investments with business ambition and strategy.

Our approach and toolkit has three phases:

Using the Digital Navigator together with the Process in Mining Enterprises (PRIME) model — to assess and map digital solutions against the most critical areas of the mining value chain — aids effective prioritization of solutions and alignment for maximum release of value over time. 

See the whole report here: https://www.ey.com/gl/en/industries/mining—metals/ey-digital-in-mining-and-metals


from MasterMetals http://bit.ly/2xccbDD on May 25, 2018 at 02:51PM

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#Mining: #Digital solutions are being adopted, but usually as point solutions in the value chain rather than as a holistic approach

@media print { body { margin: 2mm 9mm; } .original-url { display: none; } #article .float.left { float: left !important; } #article .float.right { float: right !important; } #article .float { margin-top: 0 !important; margin-bottom: 0 !important; } } EY – Digital mining: the next wave of transformation – EY – Global

EY’s latest report: Given that digital has become a key enabler of margin improvement and enhancer of competitiveness in the sector, it is critical that [Mining] organizations develop a clear approach to bridging the disconnect between the potential of and the successful delivery from digital transformation.

https://www.ey.com/gl/en/industries/mining—metals/ey-digital-in-mining-and-metals

Improving digital effectiveness

Digital effectivenessDigital wave approachDigital NavigatorFAQsRelated insightsContacts

Digital effectiveness is the top risk facing the mining and metals sector, with the growing disconnect between the potential of and the successful delivery from digital transformation. Given that digital has become a key enabler of margin improvement and enhancer of competitiveness in the sector, it is critical that organizations develop a clear approach to bridging the disconnect.

Digital solutions are being adopted, but usually as point solutions in the value chain rather than as a holistic approach as discussed in our paper, “How do you prepare for tomorrow’s mine today?” Point solutions will not get us to the next level of productivity improvement or enhance end-to-end decision-making.

The collective impact of these challenges can result in a tentative approach to strategy — reflected by small, disconnected initiatives — rather than a strong commitment to a multi-year transformation approach.

EY’s digital wave approach to transformation

We have identified a pragmatic and effective approach to transitioning your business from its current state towards an improved future state. This is to create a clear pathway for transformation, specifically described as “The digital wave transformation approach.” It meets the need of having an active, progressive and compelling digital strategy, while also recognizing the issues associated with business risk and maintaining a coherent program of work.

Our approach is like a series of waves moving through the organization, steadily introducing more digital hotspots and interconnections, all within a coherent overarching strategy.

This wave approach to digital transformation contains four main components – Pre-start, Wave 1, Wave 2 and Wave 3.

Click on each component to know more:

EY's digital wave approach to transformation

The process of launching waves is not necessarily sequential. For example, high-value areas with a close link to productivity may move from Wave 1 to Wave 2 before initial work has commenced in areas with less-compelling business cases.

Market leadership can quickly be lost if dominant players respond slowly or ineffectively to industry disruption and external changes. The pathway through the waves cannot be viewed as static, sequential or “set and forget.” We see the end-state vision as constantly changing and businesses will need to be ready to adapt and change course as required.”

Paul Mitchell, Global Mining & Metals Advisory Leader

EY’s Digital Navigator

Leaders in the sector understand the compelling case for change, but are looking for the right way to go about the transformation without falling into various pitfalls that cause many change initiatives to fail. It is not a question of when to go digital; it is about how to start thinking of a fully integrated business culture shift, and that really needs leadership focus.

We can support your business through the use of the Digital Navigator — an approach and toolkit that supports EY to assess a company’s digital maturity and help create an actionable digital road map for our clients based on linking current capability and existing investments with business ambition and strategy.

Our approach and toolkit has three phases:

Using the Digital Navigator together with the Process in Mining Enterprises (PRIME) model — to assess and map digital solutions against the most critical areas of the mining value chain — aids effective prioritization of solutions and alignment for maximum release of value over time. 

See the whole report here: https://www.ey.com/gl/en/industries/mining—metals/ey-digital-in-mining-and-metals


from MasterMetals http://bit.ly/2xccbDD on May 25, 2018 at 02:51PM

#Lithium Cartel: The emerging oligopoly in key #battery element #EV $ALB $SQM

@media print { body { margin: 2mm 9mm; } .original-url { display: none; } #article .float.left { float: left !important; } #article .float.right { float: right !important; } #article .float { margin-top: 0 !important; margin-bottom: 0 !important; } } The Lithium Cartel Should Be Stopped

#Tianqi Lithium Corp. will pay $4.1 billion to buy Nutrien Ltd.’s 24 percent stake in Soc. Quimica & Minera de Chile SA, or SQM, in a deal that will entangle the biggest and fourth-biggest producers of the battery metal. The transaction could theoretically give Tianqi half of the board seats

https://www.bloomberg.com/amp/view/articles/2018-05-18/time-to-block-the-lithium-cartel?__twitter_impression=true

The Lithium Cartel Should Be Stopped

Why are we so relaxed about an emerging oligopoly in the key battery element?

The stuff of lithium dreams in Chile.

Photographer: Michael Smith/Bloomberg

The world doesn’t like its essential commodities being controlled by a small group of producers.

So why is there so little noise about the emerging oligopoly in one of the hottest elements on the periodic table, lithium?

Tianqi Lithium Corp. will pay $4.1 billion to buy Nutrien Ltd.’s 24 percent stake in Soc. Quimica & Minera de Chile SA, or SQM, in a deal that will entangle the biggest and fourth-biggest producers of the battery metal. The transaction could theoretically give Tianqi half of the board seatsThe transaction could theoretically give Tianqi half of the board seats, though other major shareholders who’ve historically guarded their interests have opposed such a path.

Here’s how the lithium carbonate market is structured at present: North Carolina-based Albemarle Corp. is the market leader, with an 18 percent share, followed by Jiangxi Ganfeng Lithium Co. on 17 percent; SQM on 14 percent; and Tianqi on 12 percent. Other players have the 39 percent or so that remains — the largest among them being FMC Corp., which is soon to offer its shares to whoever wants them in a planned initial public offering.

On top of that, Ganfeng and Tianqi, while both technically independent private companies, are strategically important businesses operating in the China of 2018. Tianqi Chairman Jiang Weiping is a delegate to China’s National People’s Congress, according to the company’s latest annual report. Ganfeng Chairman Li Liangbin has been a member of the standing committee to the People’s Congress in Xinyu city, where the company is based, according to its IPO prospectus.

The outlines of the oligopoly are also indistinct. Tianqi is only a minority shareholder in SQM; it’s only connected to Albemarle through a joint venture that accounts for a bit less than half of Albemarle’s output; and Beijing has no formal control over private Chinese companies, whether they’re Tianqi or Ganfeng.

Still, the world’s regulators should sit up and take notice of what’s happening. Those who’ve fretted in recent years over Beijing’s dominance of rare earths and tungsten — not to mention the current tariffs on steel and aluminum justified on national defense grounds — seem to be asleep at the wheel.

Read the whole article online 

from MasterMetals http://bit.ly/2IRUjT9 on May 19, 2018 at 01:14AM

#Lithium Cartel: The emerging oligopoly in key #battery element #EV $ALB $SQM

@media print { body { margin: 2mm 9mm; } .original-url { display: none; } #article .float.left { float: left !important; } #article .float.right { float: right !important; } #article .float { margin-top: 0 !important; margin-bottom: 0 !important; } } The Lithium Cartel Should Be Stopped

#Tianqi Lithium Corp. will pay $4.1 billion to buy Nutrien Ltd.’s 24 percent stake in Soc. Quimica & Minera de Chile SA, or SQM, in a deal that will entangle the biggest and fourth-biggest producers of the battery metal. The transaction could theoretically give Tianqi half of the board seats

https://www.bloomberg.com/amp/view/articles/2018-05-18/time-to-block-the-lithium-cartel?__twitter_impression=true

The Lithium Cartel Should Be Stopped

Why are we so relaxed about an emerging oligopoly in the key battery element?

The stuff of lithium dreams in Chile.

Photographer: Michael Smith/Bloomberg

The world doesn’t like its essential commodities being controlled by a small group of producers.

So why is there so little noise about the emerging oligopoly in one of the hottest elements on the periodic table, lithium?

Tianqi Lithium Corp. will pay $4.1 billion to buy Nutrien Ltd.’s 24 percent stake in Soc. Quimica & Minera de Chile SA, or SQM, in a deal that will entangle the biggest and fourth-biggest producers of the battery metal. The transaction could theoretically give Tianqi half of the board seatsThe transaction could theoretically give Tianqi half of the board seats, though other major shareholders who’ve historically guarded their interests have opposed such a path.

Here’s how the lithium carbonate market is structured at present: North Carolina-based Albemarle Corp. is the market leader, with an 18 percent share, followed by Jiangxi Ganfeng Lithium Co. on 17 percent; SQM on 14 percent; and Tianqi on 12 percent. Other players have the 39 percent or so that remains — the largest among them being FMC Corp., which is soon to offer its shares to whoever wants them in a planned initial public offering.

On top of that, Ganfeng and Tianqi, while both technically independent private companies, are strategically important businesses operating in the China of 2018. Tianqi Chairman Jiang Weiping is a delegate to China’s National People’s Congress, according to the company’s latest annual report. Ganfeng Chairman Li Liangbin has been a member of the standing committee to the People’s Congress in Xinyu city, where the company is based, according to its IPO prospectus.

The outlines of the oligopoly are also indistinct. Tianqi is only a minority shareholder in SQM; it’s only connected to Albemarle through a joint venture that accounts for a bit less than half of Albemarle’s output; and Beijing has no formal control over private Chinese companies, whether they’re Tianqi or Ganfeng.

Still, the world’s regulators should sit up and take notice of what’s happening. Those who’ve fretted in recent years over Beijing’s dominance of rare earths and tungsten — not to mention the current tariffs on steel and aluminum justified on national defense grounds — seem to be asleep at the wheel.

Read the whole article online 

from MasterMetals http://bit.ly/2IRUjT9 on May 19, 2018 at 01:14AM

#BatteryMetals: #EV Electric Vehicle Forecast Through 2050 & Primer @RBC

By 2025, we see ~7.5% BEV global penetration of new demand representing a ~34% CAGR from 2017’s levels and ~12% HEV/PHEV penetration representing a ~21% CAGR. 

By 2025, we see BEV penetration in China at ~15%, Western Europe at ~8% and the US at 5%. Our ~7.5% global BEV penetration rate compares to IHS at ~5%.

Battery EVs will represent ~35% of global VIO by 2050



RBC Electric Vehicle Forecast Through 2050 & Primer

We’ve picked up a noticeable increase in the amount of electrification conversations among industry participants and an acceleration in investor expectations for the pace of electric vehicle penetration. With that in mind, we took a fresh look at our electric vehicle forecast, out through 2050, and present a primer on electric vehicles and how different industry participants are preparing for the future.
Forecast global BEV sales penetration of ~7.5% by 2025
We estimate that globally, battery electric vehicles (BEVs) represented ~0.8% of 2017 global demand, while hybrid-electric vehicles (HEVs) and plug-in hybrid-electric vehicles (PHEVs) represented ~2.9%. But we see robust growth off these low figures. The growth will be driven in two phases. The first phase, through 2025, is primarily regulatory driven. By then, we see ~7.5% BEV global penetration of new demand representing a ~34% CAGR from 2017’s levels and ~12% HEV/PHEV penetration representing a ~21% CAGR. By 2025, we see BEV penetration in China at ~15%, Western Europe at ~8% and the US at 5%. Our ~7.5% global BEV penetration rate compares to IHS at ~5%.
Forecast global BEV sales penetration of ~66% by 2050
In the second phase, we see change factors aligning to impart more significant revolution. Battery costs decline, infrastructure is built out, and the regulatory-driven push gives way to a consumer-led one. BEVs become more cost efficient than ICE vehicles and take share from HEV/PHEV. By 2050, we see ~66% BEV global new vehicle penetration, representing a ~9% CAGR over a 25-year period from 2025. We see regions like China and Western Europe reaching 85% penetration. We forecast the US at 60% penetration.
BEVs will represent ~35% of global VIO by 2050
Our modeling shows that for global vehicles in operation (VIO) by 2025, ~91% will be ICE, ~3% 48V, ~4% HEV/PHEV (so ~98% still have some sort of ICE), and ~2% BEV. By 2050, we model the global VIO to be ~49% ICE, ~8% 48V, ~8% HEV/PHEV (so vehicles having some sort of ICE down to ~65%), and ~35% BEV. Please see regional analyses inside and ask your RBC salesperson for our EV model.
What it means for automakers?
Automakers are accelerating electrification efforts. R&D increases, limiting profits today. But electrification is also an opportunity to rethink production/supply chains/capability, which may represent an opportunity for OEMs to re-capture value. German OEMs doing the most. GM ahead of Ford to-date but Ford spending to catch up. Tesla increasingly competes on attributes besides electrification.
What it means for suppliers?
For ICE/exhaust products, expect margin pressure driven by lower volumes. Ultimately, we see the need for powertrain consolidation. There are opportunities for evolution and new parts such as batteries, electric motors, and power electronics come into vehicles. But evolution means investment now. Suppliers may look to JVs to fill competency gaps. Interim solutions such as 48-volt technology can be a strong growth opportunity (41% CAGR through 2025) for companies like BWA, DLPH and LEA. However, the majority of future electrified platforms likely PHEV/BEVs creating opportunities to add value from motors (BWA) and power electronics (DLPH, BWA). Meanwhile, axle makers (AXL, DAN, MTOR) may have an underappreciated opportunity to grab more value.
Will EVs make China an automotive powerhouse?
EVs present a significant opportunity for China to assert itself within the automotive industry. Our view is informed by: 1) a government that is very supportive of EVs; 2) Chinese companies pushing EV product; 3) China appears to control a large portion of battery supply…; 4) …and the battery supply chain.

 

from MasterMetals http://bit.ly/2rZaBiX on May 18, 2018 at 03:04PM

#BatteryMetals: #EV Electric Vehicle Forecast Through 2050 & Primer @RBC

By 2025, we see ~7.5% BEV global penetration of new demand representing a ~34% CAGR from 2017’s levels and ~12% HEV/PHEV penetration representing a ~21% CAGR. 

By 2025, we see BEV penetration in China at ~15%, Western Europe at ~8% and the US at 5%. Our ~7.5% global BEV penetration rate compares to IHS at ~5%.

Battery EVs will represent ~35% of global VIO by 2050



RBC Electric Vehicle Forecast Through 2050 & Primer

We’ve picked up a noticeable increase in the amount of electrification conversations among industry participants and an acceleration in investor expectations for the pace of electric vehicle penetration. With that in mind, we took a fresh look at our electric vehicle forecast, out through 2050, and present a primer on electric vehicles and how different industry participants are preparing for the future.
Forecast global BEV sales penetration of ~7.5% by 2025
We estimate that globally, battery electric vehicles (BEVs) represented ~0.8% of 2017 global demand, while hybrid-electric vehicles (HEVs) and plug-in hybrid-electric vehicles (PHEVs) represented ~2.9%. But we see robust growth off these low figures. The growth will be driven in two phases. The first phase, through 2025, is primarily regulatory driven. By then, we see ~7.5% BEV global penetration of new demand representing a ~34% CAGR from 2017’s levels and ~12% HEV/PHEV penetration representing a ~21% CAGR. By 2025, we see BEV penetration in China at ~15%, Western Europe at ~8% and the US at 5%. Our ~7.5% global BEV penetration rate compares to IHS at ~5%.
Forecast global BEV sales penetration of ~66% by 2050
In the second phase, we see change factors aligning to impart more significant revolution. Battery costs decline, infrastructure is built out, and the regulatory-driven push gives way to a consumer-led one. BEVs become more cost efficient than ICE vehicles and take share from HEV/PHEV. By 2050, we see ~66% BEV global new vehicle penetration, representing a ~9% CAGR over a 25-year period from 2025. We see regions like China and Western Europe reaching 85% penetration. We forecast the US at 60% penetration.
BEVs will represent ~35% of global VIO by 2050
Our modeling shows that for global vehicles in operation (VIO) by 2025, ~91% will be ICE, ~3% 48V, ~4% HEV/PHEV (so ~98% still have some sort of ICE), and ~2% BEV. By 2050, we model the global VIO to be ~49% ICE, ~8% 48V, ~8% HEV/PHEV (so vehicles having some sort of ICE down to ~65%), and ~35% BEV. Please see regional analyses inside and ask your RBC salesperson for our EV model.
What it means for automakers?
Automakers are accelerating electrification efforts. R&D increases, limiting profits today. But electrification is also an opportunity to rethink production/supply chains/capability, which may represent an opportunity for OEMs to re-capture value. German OEMs doing the most. GM ahead of Ford to-date but Ford spending to catch up. Tesla increasingly competes on attributes besides electrification.
What it means for suppliers?
For ICE/exhaust products, expect margin pressure driven by lower volumes. Ultimately, we see the need for powertrain consolidation. There are opportunities for evolution and new parts such as batteries, electric motors, and power electronics come into vehicles. But evolution means investment now. Suppliers may look to JVs to fill competency gaps. Interim solutions such as 48-volt technology can be a strong growth opportunity (41% CAGR through 2025) for companies like BWA, DLPH and LEA. However, the majority of future electrified platforms likely PHEV/BEVs creating opportunities to add value from motors (BWA) and power electronics (DLPH, BWA). Meanwhile, axle makers (AXL, DAN, MTOR) may have an underappreciated opportunity to grab more value.
Will EVs make China an automotive powerhouse?
EVs present a significant opportunity for China to assert itself within the automotive industry. Our view is informed by: 1) a government that is very supportive of EVs; 2) Chinese companies pushing EV product; 3) China appears to control a large portion of battery supply…; 4) …and the battery supply chain.

 

from MasterMetals http://bit.ly/2rZaBiX on May 18, 2018 at 03:04PM

$DGC #DetourGold crashes as costs increase #Gold

Review of operating costs showed the 2017 plan to be too optimistic, and the company has guided that overall LoM total site costs are likely to increase 8–14%, to $810–$850/oz. …the mining cost has hovered around C$3.00/tonne, even as the mining rate increased from 210Ktpd to 300Ktpd over the last few years. The economies of scale have not materialized, and despite spreading the fixed costs over more tones, the variable cost increases negated that decrease. 

This is paradigm capital’s note:
Cost Pressures Overshadow Near-Term Production Increases in LoM Plan Review
Investment Thesis. Detour Gold is an Intermediate gold producer with the flagship Detour Lake mine in northern Ontario. We view the mine as a world-class asset with annual gold production expected to be in the 550–700Koz range for 20+ years. Due to the nature of the orebody there are some years of lower profitability in the near-term, and we believe the long-term value of the world-class asset and years of stronger profitability longer-term is not fully recognized.
Event
Detour released its Q1/18 financials and the preliminary results of a review of an updated life-of-mine (LoM) plan for the Detour Lake operations on Thursday and held an Analyst Workshop on Friday. While Detour was successful in identifying opportunities to increase production in 2019–2020, this was overshadowed by a review of operating costs suggesting permanent increases to the estimates provided in last year’s LoM plan.
Highlights
 Q1 Results Buoyed by Grade, but 2018 Guidance Downgraded
 Detour’s Q1 financial results were good, with 157.1Koz of gold produced at an AISC of $1,072/oz. However, operationally, the quarter was weak with the average total mining rate (ore & waste) running at ~250Ktpd versus the expected ~300Ktpd rate due to equipment issues (major shovel failure). The better-than-expected grade (1.17 g/t) from mining the area of the Campbell pit crown pillar helped offset the operational difficulties to deliver the good financial results for Q1. Detour has downgraded its 2018 guidance to 595–635Koz and an AISC of $1,200–$1,280/oz (previously 600–650Koz @ $1,050–$1,150/oz).
 Updated LoM Plan Improves 2019–2020 Production, But Costs Are Higher 
Detour had been reviewing its 2017 LoM plan to assess if it was possible to increase production in 2019 and 2020, as the production had been forecast to dip to ~550Koz and the lower grades and higher strip ratio in those years, significantly reduced cash flow. While the review did demonstrate that it will be possible to increase the production to ~600Koz in those years, the review of operating costs showed the 2017 plan to be too optimistic, and the company has guided that overall LoM total site costs are likely to increase 8–14%, to $810–$850/oz. This cost review was based on the experiences to date, which have been “lack of cost reductions” rather than increases; for example, the mining cost has hovered around C$3.00/tonne, even as the mining rate increased from 210Ktpd to 300Ktpd over the last few years. The economies of scale have not materialized, and despite spreading the fixed costs over more tones, the variable cost increases negated that decrease. Detour did provide the “big-picture” guidance of the new LoM plan, although the review is not yet finalized, and the official new plan is expected to be released in June.
 No Near-term Strain on the Balance Sheet Envisioned
As at the end of Q1/18, Detour has $152.5M in cash and long-term debt of $258.5M, maturing in 2020–2021. The concern of the 2017 LoM plan was the low cash flow in 2019–2020; this has partially been addressed by the increase in anticipated gold production in those years. We do not yet know how much of the improved cash flow from increased production will be offset by higher operating costs, but we anticipate it should be a net improvement in cash flow for 2019–2020 — to be confirmed when the LoM plan is released in June. With net debt of only ~$108M and a cash-flowing asset producing over 500Koz of gold annually (with a ~20-year mine life), we see no immediate financial stress, and do not foresee the necessity to raise money through an equity issue, particularly after the 32% decline in the share price following the release of this news.
Valuation & Conclusion
We have made preliminary adjustments to our forecasts for Detour. Based on the broad guidance, we have increased our gold production by ~50Koz for both 2019 and 2020. As a first pass, we have simplistically applied an 11% increase to our prior operating cost assumptions (the mid-point of the LoM increase suggested in the guidance). Based on this, our NAV (5% DCF, priced at spot gold $1,323/oz) declines from C$20.30 to C$17.34/sh, or about 16%. We apply a 0.9x P/NAV multiple to the NAV calculated at our target $1,450/oz gold price to arrive at a new target price of C$19.85 (was C$25.50). While there are some challenging years ahead, there are also some of the mine’s best years still ahead. We believe the 32% share price decline on Friday was an overreaction to a market loathe for negative surprises from gold producers. The share price decline was double that of our preliminary estimate of the decline in NAV, and we expect some of this to be recovered in the next few trading days, but not all, as some uncertainty remains until the full new LoM plan details are released in June, and the company will be in the investor penalty box for such a significant change in LoM guidance over the plan released just one year ago. Nevertheless, in our opinion, if the share price remains at these depressed levels, it is possible that Detour could become a takeover candidate for a senior gold producer looking to add a world-class asset to its portfolio. We maintain our Buy rating.

Gold & Precious Metals
  • Detour Gold Corp: Cost Pressures Overshadow Near-Term Production Increases in LoM Plan Review
    [NAV: $17.34<img src="https://www.paradigmcap.com/images/default-source/default-album/down_arrow.png?Status=Temp&sfvrsn=da0d0b0f_2&quot; alt="Down" width="9" height="9" hsp,="" $19.85="" tp<img="" buy]
    Event: Detour released its Q1/18 financials and the preliminary results of a review of an updated life-of-mine
    (LoM) plan for the Detour Lake operations on Thursday and held an Analyst Workshop on Friday. While
    Detour was successful in identifying opportunities to increase production in 2019-2020, this was
    overshadowed by a review of operating costs suggesting permanent increases to the estimates provided in
    last year ‘s LoM plan.
    Analyst: Don Blyth

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from MasterMetals http://bit.ly/2vX879Z on April 30, 2018 at 04:32PM