By Cameron French
TORONTO (Reuters) - Shares of Detour Gold Corp jumped 15 percent on Thursday to a record high as the market savored recent drill results and analysts speculated that the company could be a takeover target.
Shares of Detour, which is developing the Detour Lake project in northeastern Ontario, were up C$2.40 at C$18.35 on the Toronto Stock Exchange, outperforming shares of other TSX-listed gold miners.
The company was listed publicly early last year, and has nearly quintupled in value since then, with a market capitalization now in excess of C$600 million. The company is 47-percent owned by Pelangio Mines .
Detour in December announced a measured and indicated resource of 4.8 million ounces and an inferred resource of 3 million ounces, based on a gold price of $575 per ounce. Spot gold was at $907 on Thursday.
Initial results from phase 2 drilling released last week stoked further optimism, and prompted analysts to speculate the company will be able to continue expanding the resource.
Analyst Andre Kaip of Haywood Securities raised his one-year share price target to C$25 from C$17.60 on Thursday, and said he expects the company will be able to raise its resource estimate to 9.8 million ounces.
Canaccord Adams boosted its share price target to C$25.50 from C$22, citing higher gold prices, and said the company could become prey for a larger player hoping to expand its pipeline.
ABITIBI BELT
The property sits not far from the Ontario-Quebec border in the Abitibi region, near a previous mine owned by Placer Dome that produced nearly two million ounces between 1983 and 1999.
Gerald Panneton, the company's chief executive, was not available on Thursday. But in a recent interview on the Business News Network, he said the company may try to develop the property itself.
"I think we can build the team to develop the mine," he said.
He said the company will release an updated resource estimate in July and expects to have a feasibility study out by the end of the year.
He speculated a mine could be in production by 2011, with output of 400,000-600,000 ounces per year. Costs to develop the mine could be around C$400 million to C$500 million, he told
BNN.
While stock prices in generally have fallen hard this year, gold stocks have stayed near record highs as economic concerns have driven bullion prices to record levels.
And while rising costs have prompted some to take a more cautious approach to takeovers, demand for smallish one-mine development companies has been strong.
Barrick Gold , for instance, recently bought Arizona Star Resource for C$773 million for its stake in the Cerro Casale project in Chile, while Newmont Mining is buying Miramar Mining for C$1.5 billion for its Hope Bay project in Nunavut.
"When you take a look at an emerging developer, something like Detour Gold, it's a one-mine company. It's simple, clean, and really has no other assets. That is the sort of thing we're seeing for the emerging (takeover) stories," said Catherine Gignac, an analyst at Wellington West.
($1=$1.01 Canadian)
(Reporting by Cameron French; editing by Janet Guttsman)
