Ann: Diucon depth width and strike extensions, page-79

Actually the comparison was even more off than I first thought, this out today in fact ;

Kirkland Lake Gold Ltd (TSX:KL) has released significant new Mineral Resource estimates for the Detour Lake Mine in Ontario as at June 30, 2021.Included in the Mid-Year 2021 Mineral Resource estimates are total Measured and Indicated (M&I”) Mineral Resources, exclusive of Mineral Reserves, of 14,718,000 ounces (572.0 million tonnes (MT) at an average grade of 0.80 grams per tonne g/t)), an increase of 10,061,000 ounces or 216% from the previous estimate of 4,657,000 ounces (131.2MT at an average grade of 1.10 g/t) as at December 31, 2020.

https://www.theassay.com/news/kirkland-lake-gold-unveils-216-jump-in-mi-mineral-resources-at-detour-lake/

When they purchased the asset they had circa 5.0 M in Measured and Indicated and about 15.70 M if you count in all the inferred resources. Admittedly there was a lot of exploration upside with the asset as today's announcement shows, but you can make a strong argument that too exists with Deg.


So doing a bit of simple maths, on an total all-in resource basis they paid about $400 AUD per Oz. If you calculate it on just the much higher confidence level M&I resources (akin to reserves) which were about 5.0 Million at acquisition, they paid about $1,240 AUD per M&I Oz. DEG has as of the last quarterly with Hemi now added got about about 3.80 M of M&I and 9.0 M if you count Inferred also. Actually with latest announcements it probably is well over 10.0 M now, but lets not count them for the sake of conservatism.

Now Detour is a working mine but comes with substantial sustaining capex given the low grade nature of the resource ( sub 1 gram) but yes for sure purchasing it requires no mill etc and other basic mine infrastructure to set up, so I will take a $ 1.0 Bn deduction off for this to try and make it comparable using the Detour numbers. $ 1.0 Bn capex should get us into production even if a higher POX spending is required , so I think its a reasonable deduction .

Comparison to Detour ;
On Total all-in resources including inferred = Deg would be 9.0 M x $ 400 per Oz - $ 1.0 Bn to establish mine and infrastructure = $ 2.60 Bn. Deg today $ 1.50 Bn, looks cheap on this metric.
On M&I Deg would be = 3.80 M x $ 1240 per oz - $1.0 BN = $ 3.70 Bn. Again looks cheap on this Metric.

Conclusions

If this feasibility study can start putting some flesh on the bones around mining costs (both Opex and Capex ) that look reasonable , whatever way you cut it, DEG possibly looks cheap, not dear , when you use the detour purchase as a comparator. Yer for sure Detour is actually pumping out cash now which makes it very valuable and its a de-risked project, which DEG admittedly is not there yet, so sure it deserves a much higher valuation for these aspects but Deg is trading at a significant discount to this comparison (40-60% in fact whether you take the M&I or the All-in comparison), so I think its reasonably valued for where we are in the development cycle, given the large upside here that could flow in the coming years. Agreed much work to be done, but I don't think you can call it over valued certainly if your using Detour as your justification.