Q3 2021 Iamgold Corp Earnings Call
Thank you for standing by the conference operator, welcome to the Iamgold third quarter 2021, operating and financial results Conference call.
As a reminder, all participants are and listen only mode and the conference is being recorded.
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I would now I'd like to turn the conference over two cream, Jenny Vice President Investor Relations and corporate Communications for unethical. Please go ahead Mr. Jenny.
Thank you operator, and welcome everyone to the I M Gold Thirdquarter, 20th 21, operating and financial results Conference call I'm pleased to join the Iamgold team. This weekend to host this call today.
Joining me on the call or Gordon <unk>, President and Chief Executive Officer Daniels.
Daniela Dimitrov Executive Vice President and Chief Financial Officer pregnant.
Greg Macdougall Executive Vice President growth and Tim Bradburn, Senior Vice President General Counsel in corporate Secretary.
My remarks on this call will include forward looking statements. Please refer to the cautionary statement included in the presentation under the heading cautionary statement regarding forward looking information and be advised that the same cautionary language applies to a remarks during the call.
No. One got measures will also be referenced on the call and we direct you to review the cautionary statement, including the presentation and the reconciliation, but these measures included in our most recent MD&A each under the heading non-GAAP performance measures with respect to the technical information to be discussed please refer to the information in the presentation under the heading qualified person and technical information Besides referenced.
On this call can be viewed on our website.
I will now turn the call over to our President and C E O Gordon Stockard.
Well. Thank you Graham Ah good morning, everyone and thank you for joining us and and for those of you that joined US on the Coke take two or thanks again for that that was great.
So in the third quarter of 2021, we saw an improvement in our operating performance. We produced 153000 ounces of gold on under attributable basis supported by the continuing strong results that African Rosebel performed in line with the revised plan and year to date attributable gold production of 448000 ounces and are updated.
Full year guidance remains at 565000, and 605000 ounces <unk>.
Cash cost and a I F. C are expected within guidance, although certain cost pressures continue including higher logistics and consumables cost including fuel.
We continue to monitor and opportunistically execute on various hedging transactions, including currency in line with our input costs risk management practices.
Year to date operating capital expenditures were $166 million and are expected to be below guidance of $260 million.
Primarily related to timing on spending on capital improvement projects at Kotte, while we expanded $72 million in the quarter, we actually incurred approximately $123 million with the delta sitting in working capital capital expenditures that kotte in 2021 are expected to be approximately three.
$350 million.
At the at a corporate and the strategic level, we have approximately $748 million in cash cash equivalents and short term investments and approximately 1.2 billion in total liquidity.
I am gold generated $31.9 million and Mindsight free cash flow during the quarter with an adjusted loss of $20.1 million or four cents per share.
We're very pleased to have announced our inaugural greenhouse gas initiative is part of our zero harm vision with a commitment to achieve net negative emissions by no later than 2050.
And in line with our board renewal strategy outlined earlier. This year, we have strengthened our board with two very experienced professionals with extensive technical operations and sustainability experience.
From a growth perspective as indicated in our October Q3 update and Cotype quarterly update news releases construction activities that kotte continue to progress per <unk> per schedule.
Reaching 36% project completion, and 85% detailed engineering complete at quarter and we.
We were pleased to host an investor analyst analysts site tour in mid October just as the first steel installation of the process building commenced and you can find the presentation from our site visit on our website at.
I'd got the lab, we achieved a significant milestone with the release of an initial mineral resource estimate totaling 3.4 million ounces of gold and the indicated category and another 1.7 million ounces of gold in the inferred resource category.
I am gold continues with its commitment to achieving high standards and environmental social and governance practices, which are reflected in our long held zero harm vision.
As noted earlier, we announced our inaugural greenhouse gas initiative with a commitment to achieve net negative emissions by no later than 2050, and we expect to provide a more detailed roadmap an interim targets as we go into 2022.
In partnership with Giants of Africa, a four year program aimed at youth development in West Africa. We were we were very pleased to jointly complete and unveil a new basketball court at the city you Center in Ouagadougou burnt Burkina-faso. This month this past month during the quarter, we also published or 2020th sustainability report.
<unk> <unk> in accordance with G. R E and SaaS be reporting standards we.
We are committed to also report in accordance with T. C. F D guidelines by the end of 2022.
And I have already mentioned the strengthening of our board with two new additions Doctor <unk> and Kevin O'kane.
For each of our sites, we have continued with our proactive management of COVID-19, and implementation of established protocols.
African Covid management remains stable with 60% of the workforce fully bacsik vaccinated the.
The COVID-19 situation in certain M and its site remains fragile mandatory.
Mandatory antigen testing continues to be in place among other mitigating controls and approximately 24% of the workforce is fully vaccinated.
At Westwood the COVID-19 situation remains stable and Kotte. Some cases were experienced by a small number of workers during the quarter, resulting in a heightened testing testing and implementation of additional constraints on site circulation, which limited the number of cases and had no material impact on project activities.
[noise] at Boto [laughter].
Testing and contract he contact tracing protocols remain in place with no material impact on project activities.
We continue to be proactively focused on safety implementing a number of initiatives to promote a safe working environment at Kotte gold. We had achieved another milestone with over 2.9 million hours and 1100 days without a lost time injuries since October of 2018.
Our year to date, dark, which stands for days away restricted and transfer duty frequency rate of 0.38, and the T. R. I are total recordable injuries frequency rate of 0.74, respectively for 200000 man hours worked.
Continue to outperform or consolidated annual targets.
0.51, and 0.85, respectively.
I will now a review our operating performance in more detail.
So as we can continue to perform strongly in the quarter with attributable gold production of 106000 ounces of cash cost of $878 Brown sold and all in sustaining costs of $1033 per ounce sold.
Production benefited from an increase in mill throughput and improved gold recoveries as positive impacts of the male Debottlenecking project are being realized.
As noted in prior quarters the improvement in capacity from the from the mill optimization project as important as Essakane most of greater volumes of transition and hard rock versus softer rock in the coming years.
As reported on Friday last week, a security incident involving shuttle buses carrying personnel took place on route to the <unk>. We're very pleased that all of the personnel involved in the incident are secure and safe.
We continue to assess the security situation.
And make appropriate precautionary adapt adaptations engagement with relevant authorities and partners continues with no material impact the date.
<unk> remains strongly committed to ensuring the health safety and security of our personnel and operations.
Looking forward to the balance of the year.
Year to date attributable production was 314000 ounces trending towards the upper range of a product production guidance of 390 to 400000 ounces for us again.
Certain cost pressures are expected to persist, including transportation security and consumables.
That rosebel following it very challenging second quarter attributable gold production improve by 60% to 40000 ounces as the operation achieved its highest mill troop with since the pandemic and was supported by higher grade as Pitt conditions and access after the rainy season improved.
The COVID-19 situation remains fragile and continues to impact workforce productivity, we continue to monitor and implement mitigating measures to reduce the impact on operations.
The date since the start of the pandemic close to a third of our workforce has tested positive for COVID-19 at one point or another although the majority large majority of those individuals have subsequently recovered.
This is required significant flexibility of our operating teams to manage productively with our COVID-19 protocols to ensure the safety of our workers and of our communities.
The mechanical condition of the gravity and Leach CIP circuits has been negatively impacting recoveries and as resulting in higher than normal levels of in circuit gold inventory in turn impacting gold sales the.
The ongoing project to improve the efficiency of our ADR circuit is expected to be completed by year end with improvements in both recovery and reduced in process inventories expected to be realised starting next year.
The maintenance backlog of mining a mill equipment continues to <unk> impact availability deliveries of new equipment aimed at improving availability have commenced.
[noise] recurrent pit intrusions by illegal miners continue to impact production at Royal Hill collaboration with a government task force in local communities is ongoing in an effort to reduce intrusions and they put on that long term and sustainable solutions.
Cash cost of $1796 per ounce sold in all in sustaining costs of $2156 per ounce sold were impacted by higher costs and a net realizable value of gold inventory stockpile, right down which accounted for approximately $300 per ounce increase to <unk>.
Cash cost and a I S C for the quarter and lower gold sales.
That's Sarah Macca construction of required infrastructure is continuing at the facility pad the sedimentation dams haul road and public road crossings and works on the west dump drain all to be completed in Q4.
We expect certain cost pressures, including higher logistics and energy costs to persist.
In addition, we have been working on a new geological model to form the basis of an updated mineral inventory estimate to be released in the first quarter of two I'm 2022.
Based on currently available information and given the negative impact of certain factors, including higher cost, we expect that mineral resources will likely decrease and mineral reserves may decreased by more than depletion.
Westwood produced 7000 ounces in the third quarter with the mail processing, mainly Grand Duke open pit or supplemented with underground to work from the East zone, where mining restarted in June.
Male throughput was impacted by lower availability due to an increase in the ratio of Grand Duke hard rock solutions to improve processing, a grand Duke hard rock are being investigated.
Although underground mining productivity is improving production continues to be impacted by labor shortages as well as the impact of implementing additional safety measures. The company is using additional training schedule changes and focused hiring activities to mitigate the challenging labor market conditions and productivity rates.
We do expect to provide a three you're operating plan update with the release of 20 twenty-two guidance and continue to evaluate the optimal path forward for the company and our site workforce.
I will now provide an update on the construction progress at our Kotte Gold project.
As of September 30th the project was 36% complete with detailed engineering, reaching 85%.
The project expanded $71.6 million in the quarter and $264.6 million since July 1st 2020, when the project was announced while incurred cost for the quarter were $122.7 million and $368 million since July 1st 20th.
20.
Remaining project costs from October 1st onwards are estimated at between $860 million and $910 million.
Progression of earthworks activities, including ongoing haul roads construction water realignment channels work in construction of dams.
Occurred during the quarter.
We completed the 2021 fish relocation program within the open pit footprint, which was really critical for mining sequencing.
The T M F water management infrastructure is currently being installed including coffer dams and pumping stations Prestripping work continued with open pit drilling blasting and crushing and mining reached the key elevation of 382 meters above sea level, which had originally been targeted for year and 2021.
[noise] plant Civil works progressed with a combined placement of pre cast and cast in place concrete.
Most of the process building structural steel is on site and pre assembly started in Q3.
First steel installation of the plant building shall commenced in mid October and it's progressing well.
The permanent camp has also progressed with commissioning now at 95% currently accommodating over 800 workers that site at the end of the quarter.
Operational readiness advanced focusing on a number of areas, including organizational design hiring strategy and technology as well as spare parts for critical equipment and training plans for autonomy haul trucks among other elements.
For the balance of the year. The work plan will continue to focus on Earth works, including the first or excavation and concrete works progressing with the installation of the process plant building initiation of mine facilities construction and completion of the remaining works for the camp Oh, while switching the camp to grid power.
Remaining capital costs in 2021 are expected to be approximately $150 million.
As previously disclosed on October 18th.
Operating metrics for the Coke Tangled project as outlined in a technical report that will be published by December 2nd <unk>.
Reconfirm kotte as robust tier one low cost and long life asset at a 1600 dollar gold price. The project has an M. P V a $1.6 billion with a 19% IRR on 100% basis.
Life of mine production is expected to remain at an average of 367000 ounces on 100 per cent basis and is expected average 489000 ounces per year over the first five years a.
S. C is expected average approximately $802 for gold ounce sold.
We remain on track for reaching commercial production on the second half of 2023 and.
And this slide shows a number of pictures illustrating the progress achieved its site.
You May also access a virtual 360 degree tour of the site by following the link at the top right corner of the slide and that is accessible on our website.
I will now turn the call over to Craig to discuss development and exploration.
Thank you and good morning, everyone will know provided an update on development and exploration project.
On October 18th we announced the result of a major objective in 2021, which was the completion of an initial mineral resource estimation of the guardsman deposit located immediately to the northeast of the cold table deposit.
Reported mineral resources are comprised of 335 million ounces indicated category.
A further 1.71 million ounces.
And for the category and overall rate similar to the code take hold deposits and reaching the upper end of our initial exploration target.
The addition of the guardsman deposit to the total mineral resources in the coat tea industry represents a 33% increase with respect to ounces and the measured and indicated category.
And a 45% increase with respect to ounces and the inferred category.
A couple of other highlights before I leave this flight.
Since the coup de project was acquired in 2012 or exploration efforts have now increased total resource sentences by nearly three times.
Certainly with potential to continue to increase this rate of resorts rope.
I also wanted to highlight.
The discovery delineation cost of the guardsman deposit.
He sits at $1.67 per hour, which I think you will agree is a remarkably low discovery cost investment.
Thank you also find this next slide very interesting showing the proximity of the Gosling resource could show and the Copay resource could show first you will note that the Dolphins one remains open along strikes from the northeast to the right of the slide.
And the deposit has only been drilled into the have the depth of the quote a deposit and remains open a desk, where a number of a girl who ended and mineralization.
Also note the overlap of the two independently derived resort could show, which provides opportunity for an optimization of a combined could show selection, which may unlock ounces and the overlap area.
The overall, we feel the potential to expand the resources remain quite positive as.
As we have previously demonstrated at 40 itself and this will be a focus for future drilling program.
Finally to wrap up on exploration, we have a number of ongoing programs that both operations and resource stage project focused on the delineation and expansion of resources.
Like most of the industry, we are seeing impacts whoever honor programs related to the availability of drilling contractors and lengthy assay turnaround.
And with that I will pass the call over to Daniel.
Thank you Craig and good morning, everyone.
The following are some key highlights have our third quarter financial results.
We reported adjusted EBITDA of $82.5 million from sales of 165000 gold ounces.
And 100% basis.
At an average realize gold price of 17 87 per ounce.
We reported address that net loss of $20.1 million or four cents per share for the corner.
And we also reported Mindsight free cash flow of almost $32 million.
An improvement over the prior quarter.
And totaling $121.6 million for the nine months and that's September 30th 2021.
In terms of our financial position, we ended the quarter with cash cash equivalent and short term investments $748 million.
We continue to maintain a largely undrawn credit facility, a $500 million maturing in January 2025.
Resulting in total available liquidity of approximately $1.2 billion at September 30th.
As Gordon mentioned, we continued to opportunistically enter into Canadian dollar currency hedging transactions in the third quarter to Derisk Cortes Canadian dollar project cost exposure during that construction faith.
Hey, Jess at a rate between 1.28 and 1.47 together what Canadian cash on hand.
<unk>, 100% off cocaine estimated Canadian dollar exposure in the fourth quarter.
Hey, Jess had rates ranging between 1.30 and 1.48 together, what Canadian cash now cover 75% and 48% of Cortez Canadian dollar exposure in 2022, and 2023 again as it pertains to project construction cost.
Additionally, we have hedged 100 per cent of the project total I expect that fuel costs for that construction period.
Please note that the updated hedging program slide at the end of our presentation presents that consolidated hedging program.
For that company. So for example, the percentage of Canadian Ust had she represents the percentage of our consolidated exposure versus just co tangled, which is that's hey, guys I just presented to you.
Looking for ward cash cost and all and sustaining costs are expected to be within that 2021 guidance range.
Cost pressures experienced year to date, including higher logistics and can see my walls include.
Including fuel are expected to persist.
Operating capital expenditures are expect that could be below that 260 million dollar guidance, primarily due to timing us depending on various capital improvement project.
Capital costs in the fourth quarter at <unk> I expect it to be approximately $150 million.
Taking a closer look at our cash flows in the third quarter, our cash balance decreased by almost $83 million, primarily resulting from the advancement of construction at <unk>.
Cash generated from operating activities of $88.6 million.
It was partially offset by income tax paid I've almost $10 million.
Amazement and non-cash working capital items, and Noncurrent or stockpile.
Resolve that in an outflow of $1.1 million.
Reflecting an increase in inventories and noncurrent or stockpiles at $13 million.
Primarily due to higher cost of production Rosebel and this was partially offset by an increase in accounts payable and accrued liabilities of $11.6 million.
Out with flows from investing activities reflect that capital expenditures.
Almost $139 million and capitalize borrowing costs and other investing activities of $3.7 million.
<unk> and financing activities reflect the payment of lease obligations dividends paid to minority interest.
Principal and interest payments on equipment loans, and the impact F F X fluctuations on cash in the period.
As noted earlier, our cash position at the end of the quarter was 748 million <unk>.
<unk> cash was 200.
And $13.6 million, what's total available liquidity of over $1.2 billion at September 30.
I will now passed the call back to gourd to conclude.
Well. Thank you daniella. So looking ahead at Q4 and into 2022.
I'd ask what can the mail optimization project continues to demonstrate improvement in hard rock or processing capacity, which is expected to continue over the balance of the year and stabilize to provide additional crushing capacity for hard rock throughput at.
At Rosebel, we continue to implement a number of initiatives to address the operational in COVID-19 headwinds encountered year to date in 2021, and we are progressing on the remaining saramaccan infrastructure.
At Westwood, we have restarted mining Nissan and continue to assess the optimal path forward.
At the Kotte construction project, we're at 36% overall project completion, and 85% detailed engineering and construction is progressing aggressively as we as we move forward. We continue to Derisk boto and an exploration we have completed our objective or of releasing an initial.
Mineral resources for <unk> in 2021.
Thank you to everyone for joining us today, and I will now pass the call back over to the operator for Q&A.
Thank you well.
I will now begin the question and answer session.
To join the question can you give me a <unk> sorry, then one on your telephone keypad, you'll hear a tone acknowledging your request if you're using a speaker phone. Please pick up your handset before pressing any key.
To withdraw your question. Please press Die then too.
Our first question comes from.
And yet and she got sick from Scotiabank. Please go ahead.
Hi, Good morning, everybody I think that's me Hey, we're calling for and I just thank you very much for taking my question.
Can I start with you just stop wanting to understand a little bit.
About that.
The cost inflation that you are seeing and I. Appreciate that you haven't given 2022 guidance that you keep coming back to high end of just six energy costs consumables, So I get that the energy cost consumables.
Just six is that around I'm, just what's happening the security at S. A can and some of them are just fix that rosebel and can you give us an idea of what that would be like.
Sounds sort of additional costs are incorrect.
Uhm.
I I I I don't have the exact dollar per ounce that we're incurring for logistics, Tanya, but but we will will dig that up and and and get back I can say you know you're you're effectively correct. We are seeing additional logistics charges for security.
And some of the other measures. We we've taken we did I think at at an earlier date released some numbers around the amount of impact we're seeing them in the neighbor Hood, it's below $20 an ounce at at at S account, I believe but like I say, well, we'll come up with the numbers, but the.
On that you know generally certainly consumables grinding steel, especially cyanide mm mm and and fuel, but a desk. Additionally, uhm shipping rates are up and that that does impact surcharges for for a lot of the bulk.
[noise] materials that we receive or or or and or parts. So there's just there's generally a lot of friction in in the in the supply chain system, which is which is generating some some some spiky results were were were looking at that really hard we're trying to understand you know <unk>.
Each of those cost increases is is systemic in which is a little more ephemeral as we look at at at 20 twenty-two and obviously as we come out with our our projections for I had our guidance for 2022 will be speaking a little more detail.
To what are are expected impacts are I mean, we do have some offsets. We do have we continue to have a pretty comprehensive fuel hedging program, which which does help us but that being said, there's there's a lot of areas where this cost inflation is is creeping in.
And and you know.
Number of calls inherit your parents talk about five 6%.
Inflation in costs in 2022 over 2021 would that be a fair assumption for you should I be looking for that or anything.
You know I I I think that's that's not an unfair assumption if you're looking on a on a dollar per unit rate uhm. So it's a dollar of per ton mind dollar per ton mailed, we're probably seeing those sorts of numbers, maybe slightly higher but not a lot higher obviously.
On a dollar per hour spaces given.
Given where we are this year and some of the challenges. We've had this year with production yeah. It's it's a little harder to to relate it directly in and are are.
You know as we're looking at 20 twenty-two we really need to aggressively pursue production as well to to help offset some of that that increase.
Okay. Thank you for that and maybe just <unk>.
Oh, Yes, I appreciate in your mind plan is coming out in 2022 guidance. He just the wording around your Westwood you know in terms of you know I never reviewing.
A mine plan what to do with the work for Us and.
I just kind of wonder.
The way you worded it I.
It is are you looking at possibility to Sally and the fact that it was just it was the wording that kind of thing you know confused me. So I'm just kind of trying to understand what are your options on behalf huh.
You know within our portfolio you know Westwood is is our smallest asset uhm.
As we've said I think a number of times over the past.
The past number of quarters, we really do have to understand how Westwood sits in the portfolio obviously.
Our first and foremost goal is to make it a safe profitable mind going forward.
That being said you know we need to we need to review how it sits in the portfolio.
[noise], Okay and.
And then maybe my last question for you just saw it on the ballot. Appreciate you know look at the updated reserves and resources that come here and.
Thank you mentioned that you know we may not on the reserve bases uhm.
Place depletion next year, so I E move one year of my life is that a reasonable fashion or could it be like a couple of years that we're looking to be impacted.
You know right now we're still looking at that really really hard I you know given the nature of of Rosebel. The cost pressures. We've seen you know <unk> rosebel very mature operation mature pet so uhm reserves automatically come with.
With Pushbacks, we need to understand within the.
Within the cost structure, we have and and what we project going forward what the reserves at Roosevelt look like we're working really hard to to make sure. We come up with the correct business case for ourselves going forward and will reflect that at that time, I really don't want to speculate as to the quantum.
Oh, Okay, well. Thank you so much I'll leave it to someone else to ask questions I appreciate your insights.
Thanks Tanya.
Once again, if anyone has a question. Please press star then one to join the question Q.
Our next question is from Anita Soni, let's see I B C World markets.
Go ahead.
Hi, <unk>. Good morning, everyone I just wanted to ask about about Westwood and the vaccination rate is that is that correct that it's only it's 19% for confirm cases and I think for for confirmed a double doxxed employees and you know could you just elaborate on that does that sound.
A fairly low number considering the availability of the vaccine to England, Canada.
I don't have a lot of details on that one I believe it is the.
That's people self reporting on on on vaccines. It doesn't necessarily mean that that's what the vaccine right is obviously.
Obviously the rate in Quebec overall is significantly higher than that I don't know what the regional rate is it's an area, where we continue to obviously work with our employees a very.
Relatively young demographic at at at at at Westwood, But we continue to work with him Uhm I mean importantly, I think for US is the protocols, we put in place for testing and and and managing the work underground and we really have not seen COVID-19 cases.
At this point in time of any significance, but you know it is an area that we're we're we're having a good hard look at Anita.
Yeah, I mean, I only ask that because you're having these labour challenges and you know obviously wondering if it's related to.
To the the vaccination rates that you have there and then no I I I don't think it's the vaccination rates. It's it's the labor market in the Abitibi right now.
Okay, and then just I'm moving on to the capital spend could you give us an idea I understand on and you've indicated that it'll be lower put the sustaining capital than the 260 guidance that you had that put out and you're all I think 165 or so year to date.
Uhm can you give us an idea of what the what the queue for Senator Clinton would be like how much under will you be for this here and then maybe some it's like sort of uhm idea where that understanding is is coming from my you know obviously you know costs are higher so the understanding is probably due to the lack of labor and what the.
Implications are I. This is a really long question what the implications are for your production outlook. You know if you haven't gotten to work what does that mean for next year's and which operation.
Okay, I'm gonna, let daniella speak to it. She she has she has those details.
Mhm.
[laughter].
Thank you Dan.
Daniela.
Sorry, I was on mute.
[laughter].
[laughter] operating many different devices.
Thank you. Thank you Gordon Hello, Anita in terms of the impact on on 22 production, we do not expect that impact too to be material and we will.
At least updated production Ah guidance in at the beginning of 2022 with respect that 20 twenty-two the obviously, particularly at at Rosebel, where.
You know some of the impact is resulting from from from Covid and and we had had you know if you look at the <unk> track the cases in our in our country. There was pull back towards the end of Q T U N N and better numbers in August however, the numbers.
Rose again through the third quarter and and Gore touched on.
On on the impact on our <unk> overall workforce over the course of 2021, so some of that pull back in the Capex spend it particularly there is is that a result of that.
In terms of where we're gonna end up as compared to that to 260 million dollar guidance.
Uhm, we we've not provided that that updated guidance in a sense. We we have indicated that that we are trending lower on on on that front.
And and we'll see you know what what further impact if any.
The circumstances that add rosebel and at <unk> would have an aunt that total spend number.
Okay. Thank you.
That's it for my questions.
Thanks for NATO.
This concludes the time allocated for on today's conference call for Q&A I'll now turn the call back over two cream Jennings for Clinton remarks.
Thank you again, operator, and thanks to everyone for joining us this morning and for your continued engagement with I am gold.
We look forward to have you join us again before fourth quarter and full year 2021 results conference call in February Goodbye.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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