There was a decided lack of excitement about the Detour Lake property in 2006. The former Placer Dome property, 250 kilometres northeast of Timmins, had produced 1.8 million ounces of gold between 1983 and 1999 and was owned by Pelangio Mines. The property had a firm believer in company president Ingrid Hibbard and the price of gold was on the upswing, but nothing much was happening.
Today, of course, it’s a different story. Detour Lake is a beehive of activity. Current owner Detour Gold has a reserve of 15 million ounces and is spending $1.2 billion to develop a mine which will produce 650,000 ounces of gold per year over a 21-year mine life.What happened in 2006 to alter the trajectory of this Ontario gold property makes for a fascinating case study on the magic that happens when experience, entrepreneurship and the economic environment are in alignment.Geologist Gerald Panneton had just ended a 12-year career with Barrick Gold and had been hired as president and CEO of Continental Minerals, a Hunter Dickenson company with a porphyry copper project in Tibet.“A former director of Pelangio saw me at a presentation of Continental Minerals,” recalled Panneton. “After the presentation, he came up to me and asked me ‘Where are you from? I never saw you before.’ I was with Barrick for 12 years. I wasn’t a front man. I was a geologist. I went out to the field and I came back to the office, so nobody knew me. No bankers, no analysts. He said, ‘I think I have a project for you.’”
A dog
Panneton had worked for Placer Dome out of Val d’Or from 1989 to 1993, but had never visited Detour Lake. From what he knew, it had a reputation as a dog.
“He said ‘just look at it,’ so I gave him a day, sat down, looked at the sections and my eyes went like this. Immediately. It was so obvious.
“They had gold mineralization everywhere on the project. They had a corridor 300 metres wide by three kilometres long. They had drilled 20,000 metres, say 100 holes here, here, here, and here, but never put everything together. When I looked at the sections with the Placer Dome work from before, I said there’s gold here, gold there, gold there, but not enough drilling to demonstrate the continuity of the deposit. After I looked at that, I said wait a minute. That’s spectacular. If I connect all the gold together, it could be very big. I saw that in one day.”
Panneton decided there and then that he had to have the property. It was “skinny,” as he puts it, at the 2006 gold price of $450 an ounce, but he figured there was a 50:50 chance that it could work. “It wasn’t a grassroots project in the middle of nowhere, where the chances are one in a million. My chance was down to one out of two.”
Experience in the field over a 25-year career in gold exploration played a critical role in arming Panneton with the knowledge to distinguish between a tired old dog that nobody wanted and a potential gold mine.Born in Trois Rivieres, Quebec, Panneton earned an undergraduate degree in geology at the Université de Montreal and a Masters in geology at McGill University. He began his career as project geologist for Sulpetro andthe Vior-Mazarin Group in the Abitibi Greenstone Belt from 1985 to 1989 and worked for Placer Dome from 1989 to 1993. He then joined Barrick to head up its Canadian exploration team, eventually serving as director of advanced projects and evaluation for the company’s exploration and corporate development group.
Panneton figures he has visited more than 300 mines over the course of his career, including 50 open pits and 250 underground mines on just about every continent.
“When I joined Barrick in 1993, I had an exploration team of about 12 geologists and our goal was to visit a mine every month - any mine, sometimes just as a learning experience. Visiting a mine is an education because no deposit is the same. What you learn helps you do a better job. When we come out of school, we know very little. We know our books. We know a few things, but we don’t know much.”
Panneton’s horizons widened when Barrick shu tdown its Canadian exploration office in 1998 and began focusing on global exploration opportunities.
“I was the architect behind Barrick’s acquisition of Pangea Goldfields in 2000,” he said. “We put two mines into production: Tulawaka and Buzwagi. Tulawaka was my little baby because I took it from discovery all the way through to drilling, feasibility, environmental impact assessment and permitting. It was the turning point of my career because for the first time, I was taking a deposit from A to Z.”
A desire for new and even bigger challenges convinced him to move on.
“I was very, very happy at Barrick,” he said. “I am the person I am today technically and personally because of my 12 years with Barrick. I was working in an environment driven by excellence with people like Bob Smith, Louis Dionne and Alex Davidson, but after Tulawaka, there was no more challenge. The next step was replacing my boss, but he had a great job and there was no need for me.”
Panneton’s experience at Barrick taught him several important lessons. The first was that “if you want to be successful in the exploration business, it’s easier to buy something that is pregnant than something that is not, meaning there’s already a deposit, but it’s undervalued and not really appreciated by people.”
Detour Lake fit the mold perfectly.
Fresh blood
“When we purchased the property, Pelangio had $1 million left in the bank and had no intention of working on the project anymore,” said Panneton. “It needed fresh blood.”
Another important lesson he learned was to never skip steps. “When you fast track a project without jumping steps and do all your homework,” he said, “you can be very successful. We did it at Tulawaki and we’re doing it at Detour Lake.”
Panneton didn’t waste any time. He rolled the property into a new company to give it the fresh start it needed, raised $10 million at the Denver Gold Show in September 2006 and did an IPO at $3.50. An aggressive drilling program confirmed the continuity of the deposit, the price of gold cooperated and a feasibility study in May 2010 gave credence to Panneton’s assessment of the property four years earlier.
“It’s an amazing story because we’re going to create 500 jobs,” he said. “We’ve made a lot of happy millionaires with our story because we went from a market cap of $100 million to a market cap of $3 billion in four years, and it’s not finished. Once we go into production and get re-rated, it could be $5 or $6 billion at the current gold price.”
Break-even for Detour Lake is $600 an ounce and “everything so far has been calculated at $850,” said Panneton.
Work is well underway at the mine site. A 1,000-person construction camp has been set up, a 135-kilometre powerline is being built and a fleet of CAT 795 haulage trucks has been ordered. Pre-stripping for the 320 metre wide, three kilometer long pit begins in the fourth quarter, mining is scheduled to start in the summer of 2012 and a 55,000 to 61,000 tonne per day processing facility will be up and running in the first quarter of 2013.
