Q2 2025 IAMGOLD Corp Earnings Call
Speaker #4: Thank you for standing by. This is a conference operator. Welcome to the IAMGOLD second quarter 2025 operating and financial results conference call and webcast.
Speaker #4: As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.
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Speaker #4: At this time, I would like to turn the conference over to Graeme Jennings, VP of Investor Relations for IAMGOLD. Please go ahead, Mr. Jennings.
Speaker #5: Thank you, operator, and welcome everyone to our conference call today. Joining us on the call are Renaud Adams, President. Officer, Marthinus Theunissen, Chief Financial Officer, Bruno Lemelin, Chief Operating Officer, any Tokyo Legacy, Chief Legal and Strategy Officer, and Doreena Quinn, Chief People Officer.
Speaker #5: We're calling today from IAMGOLD's Toronto office, which is located on Treaty 13 territory on the traditional lands of many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, Haudenosaunee, and the Wendat peoples.
Speaker #5: At IAMGOLD, we believe respecting and upholding Indigenous rights is founded upon relationships that foster trust, transparency, and mutual respect. Please note that our remarks on this call will include forward-looking statements and refer to non-IFRS measures.
Speaker #5: We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures included in the presentation and the citations of these measures in our most recent NBNA, each under the heading "Non-GAAP Financial Measures."
Speaker #5: 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.
Speaker #5: The slides referenced on this call can be viewed on our website. I will now turn the call over to our President and CEO, Renaud Adams.
Speaker #6: Thank you, Graeme, and good morning, everyone, and thank you for joining us. To walk you through our quarterly results, highlighting our operations, financial performance, and strategic priorities.
Speaker #6: Overall, at the halfway point of 2025, IAMGOLD has made major advancements as a leading mid-term Canadian gold producer. This starts with a highlight of the quarter.
Speaker #6: Which was the successful ramp-up of Cody Gold to nameplate capacity, ahead of plan. The second quarter also significant as it was a full quarter where the mine achieved overall operating milestones.
Speaker #6: Including throughput in gray, in-line consensus estimate, and with gold recovery and reconciliation, military reserve in line with plans as well. As we continue to stabilize quotas, we are confident that the ability to operate the mine with consistency and predictability and stability quarter over quarter will be rewarded by the market.
Speaker #6: Further, with another quarter behind us, we get closer to unlocking the expansion potential of quota. We outlined to the market a larger quota in scale and scope, targeting ounces from both the quota and Gosling zone at the conclusion of our 2025 drilling program, of 20 million ounces plus of measured and indicated resources.
Speaker #6: As we will discuss today, work on this plan is in motion and we will be announcing an updated quota life of mine in the second half next year.
Speaker #6: Operationally, IAMGOLD is on track to achieve its production guidance target of 735 to 820,000 ounces of gold this year. Though, at a revised consolidated all in sustaining cost range of between 1,830 and 1,930 dollars per ounce.
Speaker #6: As we will discuss more on the revision moment, financially, we have now concluded our gold prepayment arrangement with 75,000 ounces delivered this year.
Speaker #6: In an environment where the gold price averaged 3,100 dollars an ounce. These deliveries translate to approximately 200 million dollars of value that went towards what can be considered a form of debt servicing this year.
Speaker #6: With this behind us, IAMGOLD is now an 810,000-ounce-plus gold producer with full exposure to gold prices and significant cash flow generation. Beyond quotas, IAMGOLD offers a robust organic growth portfolio with our own backyard in Canada.
Speaker #6: With the rapid growth of the Nelligan and Monster Lake assets in Quebec, which combined have nearly 9 million ounces of gold resources. Turning to the quarter, and we are now on slide five.
Speaker #6: Above all, the safety of our people remains our top priority. And I'm ud to report that our total recordable injury frequency rate continues to trend below prior year level.
Speaker #6: Reflecting our commitment to a culture of safety and continuous improvement. In addition, in May, we released our 2024 sustainability report, which marked eighth year in a row.
Speaker #6: We have documented and disclosed our achievement and dedication to responsible mining practices. Looking at operation, on an attributable basis, IAMGOLD produced 173,000 ounces of gold in the second quarter.
Speaker #6: Bringing the year-to-date production to 354,000 ounces of gold. The quarterly performance was led by strong results at Quota, which produced 96,000 ounces on a 100% basis, followed by improved quarter-over-quarter production at Westwood with 29,000 ounces, and the Sakane at 77,000 ounces of attributable production as the mine continues to work through the lower grades early in Phase Seven.
Speaker #6: On a cost basis, IAMGOLD reported the Q2 cash cost of 1,556 dollars per ounce and an all in sustaining cost of 2,041 dollars an ounce.
Speaker #6: Because we're higher in the first half of the year, due to a combination of higher royalties, foreign currency movement, and a higher unit cost as we continue to work on stabilizing quota at maximum throughput and grade mill as we will discuss next.
Speaker #6: Looking at our guidance, total attributable production in first half of the year was 334,000 ounces. The company expects attributable production in the second half of the year to be much stronger ensuring that we are on track to achieve the full year production guidance of 735 to 820,000 ounces of gold.
Speaker #6: The stronger second half is due to continued improvement at the quota mine during its full first year of operation. Copper coupled with an increase in expected grades at both the Sakane and Westwood based on respective mining sequences.
Speaker #6: Our Q3 performance to date at our asset reinforced our confidence in our production guidance for the year. On a Sakane, the attributable guidance was estimated at beginning of the year assuming IAMGOLD 90% ownership interest in the project.
Speaker #6: With the change in ownership to now 85% at the end of the second quarter, the company expects the Sakanes attributable production to fall towards the lower end of the original guidance range.
Speaker #6: Looking at cost, we have revised our cost guidance upwards, with cash costs now expected to be in the range of $1,375 to $1,475 per ounce sold.
Speaker #6: Or approximately 150 dollars per ounce higher and an all in sustaining cost of 1830 to 1,930 per ounce. The increase in cash costs is a combination of external and operational factors, including higher royalty being paid as gold prices rise at quota in the Sakane.
Speaker #6: At the Sakane, the government increased the royalty structure when gold prices are above 3,000 dollars an ounce. Further, the recent strain in the strength in the euro has necessitated a revision of its impact to our costs in the country.
Speaker #6: At quota, we are seeing temporary higher costs at the mine and mill associated with the ramp-up and stabilization activities. Processing costs at the mine are expected to fall following the installation of the additional secondary crusher in the fourth quarter and the mining costs expected to improve as the team continues to transition to bulk mining and that mine to mill with less rehandling.
Speaker #6: At quota, we are seeing temporary higher costs at the mine and mill associated with the ramp-up and stabilization activities. Processing costs at the mine are expected to fall following the installation of the additional secondary crusher in the fourth quarter and the mining costs expected to improve as the team continues to transition to bulk mining and that offer more direct feed cents per ton mine or roughly $1 per ton mill but also unlocking additional value of nearly $15 per ton mill.
Speaker #6: In the short term, while rehandling is adding costs, it also allows until the mine is set for it to boost the mine grade of 0.995 grams per ton in Q2 to a 1.1 grams a ton mill.
Speaker #6: By uplifting the grade mill. Same idea with the extra milling costs. We have accelerated nameplate in part because we found a way to temporarily maximize throughput by incorporating additional refeed system using contractor for aggregate plant.
Speaker #6: Moving ahead, nameplates by five to six months allow for maximizing tons milled over just waiting for the second crusher to support. This idea of following for extra milling costs also brings the opportunity to monetize additional tons already in mind until the end of the year by building a finance core stockpile that could be used during planned longer shutdowns, particularly around the installation of the second gold crusher.
Speaker #6: As we move forward, we will eliminate that practice and replace by in-house crushing and repeat system once the second crusher is commissioned allowing for extra capacity.
Speaker #6: On the capital side, at quota, we have increased our sustaining capital estimate by $20 million this year for projects that will further improve the availability of the plant and working conditions.
Speaker #6: This includes a more robust dust management system as well as a final repeat system to support the mill during scheduled downtime of the crushing plant.
Speaker #6: These adjustments at quota are a byproduct of where we are in the life cycle of the project. This is the first full year of operation and in Q2 we achieved the first full months of nameplate production.
Speaker #6: Standing back, the ramp-up of quota has gone extremely well and the project is delivering and displaying its potential. With that, I will pass the call over to our CFO to walk us through our financial results and position.
Speaker #6: Martin.
Speaker #7: Thank you, Renaud, and good morning, everyone. In terms of our financial position, at the end the second quarter, IAMGOLD at 223.8 million in cash and cash equivalents, and net debt of 1 billion.
Speaker #7: The company has $250 million drawn on the credit facility, and approximately $391.7 million remains available, resulting in liquidity at the end of June of approximately $616.5 million.
Speaker #7: We note that within our ash and cash equivalents, 91.4 million was held in the corporate treasury, 56.4 million representing IAMGOLD's 70% share was held by the Cota Gold UJB, and 85.1 million was held by Sakan and Burkina Faso.
Speaker #7: IAMGOLD's interest in Sakan was adjusted from 90% to 85% effective June 20, 2025, as per the updated Burkina Faso mining code adopted in August 2024.
Speaker #7: Following the change in ownership, Sakan declared a significant dividend of approximately 855 million, representing all of the undistributed profits of Sakan's up to and including the 2024 profits.
Speaker #7: The company's 85% portion of the dividend, net of withholding taxes, is approximately 680 million. Sakan will make dividend payments during the third quarter based on the cash flows generated during the period and the remaining balance of the dividend will be converted into a shareholder account between Sakan and IAMGOLD.
Speaker #7: The shareholder account structure looks like an intercompany loan and allows for the company's portion of the dividend to be repaid at any time of the year using excess cash generated by Sakan.
Speaker #7: Therefore, improving the efficiency of cash repatriation and aligning the interest of both IAMGOLD and the government of Burkina Faso being more regular cash flow movements from Sakan.
Speaker #7: The government of Burkina Faso received its portion of the dividend totaling $128.3 million in June of 2025. Looking at our debt obligations, IAMGOLD is in a good position to execute on our strategy to responsibly deliver the balance sheet.
Speaker #7: Over the last 45 years, in order to fund the construction and completion of quota, IAMGOLD put in place numerous financial vehicles with the goal to avoid permanent incumbences or transactions that would permanently decrease IAMGOLD's ownership interest in quota.
Speaker #7: These included the gold prepaid arrangements and the second term loan. In the second quarter, we concluded delivering into the gold prepaid angements. Year to date, the company delivered 75,000 ounces into the arrangements resulting in the third revenue of 154 million being recognized.
Speaker #7: The third revenue represents the cash IAMGOLD received when entering into these arrangements, adjusted for the impact of any gold aging structures included in the arrangements.
Speaker #7: If those ounces were delivered at today's gold prices, cash would have been higher by approximately 200 to 225 million. Illustrating the potential increase in our future cash flows, as we will now sell all production at market prices.
Speaker #7: We are now prioritizing repaying the highest cost debt, which is our second in term loan. And it has a floating rate of more than 12%.
Speaker #7: Repaying the term loan will also reduce our average debt carrying cost. We're proud to announce that subsequent quarter end, the company made the first step on its delivering strategy and repaid 10% or 40 million of the term loan, reducing the principal balance to 360 million.
Speaker #7: Looking further ahead for IAMGOLD, we are continuously analyzing what the proper capital structure is for an organization of this size with our expected cash flow generation.
Speaker #7: Ultimately, we look forward to discussing the potential of returning value to our shareholders, whether through share buybacks or dividends, once we have addressed our capital structure.
Speaker #7: Looking at our Q2 financial results, revenues from continuing operations total 580.9 million from sales of 182,000 ounces on a 100% basis. And a record average realized price of 3,182 dollars per ounce.
Speaker #7: Which includes the impact of the gold prepaid arrangement in comparison to the spot price of 3,320 dollars per ounce. Cost of sales excluding depreciation was 287.1 million.
Speaker #7: And adjusted EBITDA was a record 276.4 million. Compared to 191 million in the second quarter 2024. At the bottom line, adjusted earnings per share in the second quarter was 13 cents.
Speaker #7: Looking at the cash flow waterfall at the bottom of slide eight, which is displaying the cash flow movements for the first half of the year, we can see the year-to-date combined impact of the gold prepaid deliveries.
Speaker #7: And the dividend payment to the government of Burkina Faso following Sakan's large dividend declaration. On a mine site pre-cash flow basis, IAMGOLD generated 140.5 million in the second quarter.
Speaker #7: Including 93.9 million from quota and 36.6 million at Westwood. Sakan reported 10 million in mine site pre-cash flow in the second quarter. Which is important to highlight as an impacted by approximately 47.5 million for the timing cash tax payments related to the final assessment on 2024 earnings as well as an rease in working capital and the VAT receivable.
Speaker #7: I would also like to note that subsequent to quarter end, Sakan received a 27 million VAT refund, reducing the receivable. And with that, I will pass the call to Bruno, our Chief Operating Officer.
Speaker #7: Bruno.
Speaker #8: Thank you, Martin. Starting with quota gold, as Renaud noted in the opening remarks, this was an important quarter for quota. As the mine transitions from ramp-up to optimization and stability, we are very proud of our progress at the mine.
Speaker #8: Sixteen months ago, on March 31st, Quota poured its first gold bar, followed by commercial production four months later. Ultimately, we achieved nameplate throughput of 36,000 tons per day on June 23rd.
Speaker #8: Well before the 20-month estimate at project initiation. Looking at the quarter, quota produced 96,000 ounces on a 100% basis. Mining activity total 11.8 million tons in quarter, with 3.2 million ore tons mined equating to a strip ratio of 2.7.
Speaker #8: The average grade mine increased from the prior quarter to 0.95 grams per ton in line with the updated mining plan as in debt activities continue to broaden the mining area within the pit to support the transition to bulk mining.
Speaker #8: On a cost basis, we saw unit mining costs of $3.88 a ton due to the higher-than-expected diesel consumption associated with additional rehandling, as well as contractor costs and consumable parts related to an increase in gridding, loading, and blasting activities.
Speaker #8: Mining costs are expected to reduce in the second half of the year closer to the $3.50 a ton level. This will be achieved by targeting an objective of 1 million tons a week and the reduction of rehandling through an increased proportion of direct feed material coupled with improved blasting and pit management.
Speaker #8: Turning to processing mill throughput total 2.9 million tons with successive increases in throughputs each month during the quarter. Head grades of 1.1 per ton were in line with plan, with feed material comprised of a combination of direct feed ore and stockpiles.
Speaker #8: Mill recoveries averaged 93% in the quarter. Beyond plan, as well as we believe we are seeing the benefit of the microfracturing created by the HPGR.
Speaker #8: Reconciliation between the reserve models grade control models mill feed and production continues to be in line with expected tolerances with Q2 ex-pit production seeing 7% positive reconciliation to both reserve tons and grade.
Speaker #8: Bedding unit costs saw quarter over quarter improvement to $6.94 per ton milled though they remain elevated from our target of about $12 per ton.
Speaker #8: Unit costs are impacted by the supplementary crushing and coarse ore refeed activities which have performed well to provide the additional capacity during maintenance windows but come at an increased cost.
Speaker #8: The supplementary crushing is temporary and we expect unit costs to decline following the installation of the additional cone crusher in the fourth quarter. Looking ahead, we remain confident in our quota gold production guidance of 360 to 400,000 gold ounces on a 100% basis.
Speaker #8: Which is essentially a doubling of production from last year. The primary focus continues to be the stabilization of the processing plan to operate at or above the design capacity of 36,000 tons per day.
Speaker #8: On cost, as Renaud highlighted, cost guidance has been revised cash costs are now expected to be in the range of 1100 to 1200 dollars per ounce sold and all in sustained cost is now expected to be 1600 to 1700 dollars per ounce sold.
Speaker #8: The cash cost increase is primarily associated by with higher royalties due to the higher gold price equating to an increase of about 50 to 60 dollars per ounce.
Speaker #8: Coupled with the higher than planned cost to operate the temporary coarse ore refeed crushing circuit and higher maintenance cost that contributed close to 150 dollars per ounce over the course of the year.
Speaker #8: The all-in sustained cost revision includes the additional $20 million, or $40 per ounce, for the additional non-recurring capital to improve overall plant capability and operating conditions, including mitigation systems inside the facilities.
Speaker #8: We are looking forward to seeing the impact of the installation of the second cone crusher in Q4 which will provide further capacity and flexibility in the dry side of the plant in support of the operation and potential future expansions.
Speaker #8: Which leads us to what is the most exciting slide, the advancement of the quota gas line super pit scenario. Our drills are busy at work with over 32 thousand meter completed on the 45,000 meter program.
Speaker #8: This program is prioritizing the resource conversion that gas line to provide the foundation for an updated technical report that is expected to outline a significantly upsized reserve base combining quota and gas line into a super pit.
Speaker #8: This report is expected to be released in the second half of next year. As currently designed, quota as the mining capacity to average an annual ore mining rate of 50,000 tons per day versus our current nameplate processing rate of 36,000 tons per day.
Speaker #8: As part of the 2026 technical report, we will look to find the right balance between an increased processing rate with mining rates targeting the combined quota gas line super pit.
Speaker #8: It is interesting to note that the quota deposit itself has over 400 million tons of measured and indicated material. If mined at a rate of 20 million tons of ore per year, or 50,000 tons per day, the quota deposit itself would have a mine life of potentially 20 years prior to bringing gas line into plan.
Speaker #8: This would allow for considerable flexibility for pay permitting and capital outlays. Altogether, there is a significant amount of value to continue to uncover at quota.
Speaker #8: Turning to Quebec, the second quarter at Westwood saw improvement from the prior quarter with production of 29,000 ounces as the mine operates through some lower grade stokes and cone ducts additionally underground activity to set up the mine for a stronger second half.
Speaker #8: Underground mining total 98,000 tons averaging nearly 1100 tons per day. As volumes from the underground continue to increase compared to the prior year and previous quarters, production drilling has continued to improve quarter over quarter achieving 193 meters per day a record since the mine restarted in 2021.
Speaker #8: Building confidence that our underground mining methodologies and systems are proving be effective. The project satellite open pit reported 315,000 tons mined higher than the previous quarters in line with the mining schedule.
Speaker #8: Mill throughput in the second quarter totaled 323 thousand tons at an average head grade of 3.07 grams per ton. The strong throughput was due to plant availability in the quarter of 96%, which was higher than the same prior year period of 89%.
Speaker #8: The mill achieved recoveries of 92% in the second quarter 2025 in line with the same prior year period. Cash costs and all in sustained costs came in above our updated guidance ranges for the year as production is expected to be second half weighted with cash costs averaging 1,562 dollars an ounce and all in sustaining averaging 2,140 dollars an ounce.
Speaker #8: In the quarter, looking ahead, we remain confident in Westwood's ability to meet our production guidance of 125,000 to 140,000 gold ounces.
Speaker #8: Underground mining rates are expected to be maintained at around 1,000 tons per day from multiple active mining zones while grade is expected to increase in second half of 2025 as the mining sequence transitions to higher grade zones during the period.
Speaker #8: As previously discussed, cost guidance has been revised and cash costs are now expected to be in the range of $1,275 to $1,375 per ounce sold.
Speaker #8: And all in sustained costs to be between 18 to 19 hundred dollars per ounce sold. Unit costs were higher in the first half of the year due to higher mining and maintenance costs combined with lower production from lower average grade relative to plan in the first half of the year.
Speaker #8: Unit costs are expected to decline in the second half of the year due to higher production expectations. Turning to Sakane, it was a challenging quarter as we worked through the lower grade of the upper benches of phase seven while being impacted by higher costs.
Speaker #8: On increased royalties, a stronger euro, increased maintenance and consumables costs, and a higher proportion of sweeping activities being expensed. Production of a 90% basis on a 90% basis Q2 total 77,000 ounces.
Speaker #8: Mining activity total 10.7 million tons with ore tons mined of 2.2 million tons equating to a strip ratio of four to one. Mill throughput was 3.1 million tons at an average head rate of 0.93 grams per ton.
Speaker #8: The grade decreased as the mining activities progressed through the upper benches of Phase 7. Grades tend to reconcile slightly below the reserve model during the earlier stages of mining a new phase and conversely to the positive as mining moves deeper into the phase.
Speaker #8: As we saw in the first half of 2024, when we were mining the later stages of phase five. The transition to the higher grade benches in phase seven occurred later than forecast with increases in grade materializing subsequent quarter end.
Speaker #8: On a cost basis, Sakan reported cash costs of 1,855 dollars per ounce and all in sustained costs of 2,224 dollars per ounce in the quarter.
Speaker #8: Costs were higher in the quarter due to a lower proportion of capitalized waste in the period. Higher maintenance activities and an increase in consumable costs including diesel and grinding media.
Speaker #8: Labor contractor and facility costs also increased due to the appreciation of the local currency which is pegged to the euro. Royalties accounted for 257 dollars per ounce in the quarter representing an increase of nearly 100 dollars per ounce from the prior year period primarily due to higher realized prices and a revision in royalty rates.
Speaker #8: Looking ahead, we estimate that Sakan will be on the lower end of the attributable production guidance target ranging from 360 to 400,000 gold ounce.
Speaker #8: The guidance, this guidance accounts for the revision of the company's interest in projects to 85% from 95 to 99% previously. Our second cost guidance has been revised and cash costs are now expected to be in the range of 1,600 to 1,700 per ounce sold and all in sustained costs is now expected to be between 1,850 dollars to 1,900 50 dollars per ounce sold.
Speaker #8: Costs as Sakan are higher than planned primarily due to the increased royalty rate previously mentioned and the impact higher gold prices have on royalties resulting in an increase of approximately 7 dollars per ounce and the continued impact of a stronger euro on operating costs.
Speaker #8: While the cost of operation and country have risen over the recent years, Sakan continues to be a world-class mine and is positioned to generate significant free cash flows moving forward.
Speaker #8: Finally, it is worth highlighting that work is ongoing at the second largest gold mining camp, the Nettingen and Monster Lake project in Shibugama, Quebec.
Speaker #8: Year to date, we have completed over 12,000 meters of drilling at Nettingen with an upsized drill program of 15,000 meters, and 11,000 meters of drilling at Monster Lake.
Speaker #8: The Nettingen program prioritized the extension of the deposit at depth. Nettingen's mineral resources estimate was updated earlier this year which saw unscathed ounces increase to 3.1 million ounces with an average grade of 0.95 grams per ton.
Speaker #8: And an additional 5.2 million ounces in inferred at similar grades. We plan to have assay results from this program later in the year as we work to grow Nettingen targeting over 10 million ounces making it among the largest on the level gold project in Canada.
Speaker #8: With that, I will pass it back to Renaud. Renaud.
Speaker #9: Thank you, Bruno. So thank you all. There is no questions we have to be exceptionally diligent. At our operations to ensure cost management containment management.
Speaker #9: Particularly during the rising gold price environment to ensure the margin expansion is protected. Looking beyond this, it is a very exciting time for IAMGOLD.
Speaker #9: We are now completely exposed to the gold price with the conclusion of our prepaids. We are expecting a strong second half of the year, and our quota gold project is performing very well with significant value growth opportunity ahead.
Speaker #9: So thank you for your support. With that, I would like to pass the call back to the operators for the Q&A. Operator.
Speaker #4: Thank ou. We will now begin the question and answer session. To join the question queue, ou may press star then one on your telephone keypad.
Speaker #4: You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two.
Speaker #4: Our first question comes from Anita Sony with CIBC World Markets. Please go head.
Speaker #10: Hi, good morning, Renaud and team. A couple of questions. Just firstly on the cost increase at quota. Could you just give us an idea of what the, I think you ioned that the stripping, the the amount of material moved, would be around 11 to 12 million tons.
Speaker #10: Per quarter for the back half of this year. Could ou just give a breakdown of what the strip ratio would be for those two quarters?
Speaker #10: I'm sorry if you've already id it. I've just gone to competing calls right now, so.
Speaker #11: On the strip ratio, we should be slightly below, I ess, the H1. But the most important thing is when you look at the rehandling, so it's not just rehandling that has to do with moving the grade mine to the mill.
Speaker #11: So we talk a lot about the aggregate plan and the the support from contractors. So that's also encouraged some rehandling around this. But all in all, yes, we had about over 2 million tons of total move above the total mine.
Speaker #11: So this is all those movements. So what I like about this, at least in the short term, is it does, as I said, it does bring some.
Speaker #11: Some uplifting grade at the mill and so forth. So, obviously the benefit of set largely. Why not in the long run? We talked largely about it.
Speaker #11: In the long run, we see more direct feed. We see bulk mining. We see the ability to reduce on rehandling while continuing to separate at the source and the pit, the lower grade from there.
Speaker #11: So Renaud, you have maybe more detail on the strip ratio. Good morning, Anita. So we're going to have a stripping ratio closer to 2.5 in the second half.
Speaker #11: Which is quite like a similar to what we had in H1 and as Renaud mentioned, like the rehandling is due to be reduced as we transition to toward the direct ore feed strategy.
Speaker #11: That will be held coupled with the installation of the secondary cone crusher for the second cone crusher. So we expect a sharp decline in rehandling for that activity.
Speaker #11: And after the installation of the cone crusher. What I can add maybe to this is we have a roughly 2 million tons of ore stockpile what we call the NGO.
Speaker #11: Which, as Renaud mentioned, by processing it, we had the positive reconciliation on it. So that's bringing what I would call the project today pretty bang on.
Speaker #11: So we're very, very pleased with that. But eventually, the strategy to continue to deplete. So you'll ach the point where you wouldn't have all those stockpiles to play with.
Speaker #11: So the mine will continue to ramp up, reach a point where the excess ore tons lower grade will be stockpiled for the long run and the direct feed.
Speaker #11: So this is really the strategy. So we're not there yet, but we're advancing well and we're facing the pit and so forth. So it's a matter of time, but for the time being, the rehandling while adding costs actually adds quite a bit of revenue as well.
Speaker #10: Okay. And then second question on the processing. So I noticed you had a pretty good drop in the processing unit costs. How does that evolve with the two shutdowns?
Speaker #10: You've got a maintenance shutdown in Q3 and then also the tie-in that we knew in Q4. So do you expect the processing costs to go up temporarily and then in 2026 could be at the cost that you delivered in Q2 or lower?
Speaker #11: With not necessarily for the exact same reason you just mentioned. You know, so that's the reason why we decided to maintain external support. We got some tie-in to do.
Speaker #11: We're not going to speak about that. They'll quite a bit of work around the crushers as well and safety first and all that. So we decided to maintain.
Speaker #11: So now we, that's the reason why we adjusted the 150, because you could argue that the rehandling, extra rehandling in the short term, all those extra milling costs—yes, some also rent and maintenance power as well.
Speaker #11: You know, to help. So all that in the short term. Which kind a four or five dollars on a combined basis. So basically explain the 150.
Speaker #11: So we got to maintain this in place, making sure we maximize the throughput. Once the second cone is installed and that's held dynamic with change as we move forward, Renaud.
Speaker #11: Any additional comments? So we have our annual shutdown in August the 5B shutdown. So we're going to be again, we just want to remain prudent.
Speaker #11: It's the first year of operation. They will be training and we're going be doing it the safe way. And after that, in Q4, with the installation of the cone crusher, we're trying strategize as to not to interrupt the mill too ch.
Speaker #11: So but it will be some interruption to make all the tie-ins and everything. All in all, we're very confident that we're going to be producing as expected within the production guidance.
Speaker #11: What we need some support to complete those two activities. The activity of installing the second cone crusher is an activity that will bring us to a position where we will see after that a decline in the mine in the milling cost.
Speaker #11: And also in the mine cost because it will have a reduction in the rehandling. Maybe the last comment on this is I know we talked about costs, and I know it's, you know, it's all about this industry to remain very disciplined and so forth.
Speaker #11: So again, we see those additional costs kind of temporary, you know, and not really. But what I like about our cost structure, even though we're just in the first year, if you look at our targeted, you know, cost for the mine cost for the year, $3.50.
Speaker #11: Target is eventually towards the $3. So we're not that, that far. You still have about a 30 cents, you know, build-in. And rehandling, which will reduce all your mining processes with continued to improve.
Speaker #11: So ou're not that far. You're like barely 10%, you know, of improvement down the road to get to your objective. And we're ing to get there.
Speaker #11: And we're mining at the 12 million tons run rate. So that's the 48 and continue to improve. So we're very confident on the mining side.
Speaker #11: Reconciliation works well and so forth. On the milling side, if you could break down basically line by line, there is one line that really outstands, you know, the other.
Speaker #11: It's the contractor's use of external services to continue support. That is a one-liner on its own, considering about four to five dollars. So as we move forward, this is the line we target.
Speaker #11: It's not like all the cost structure is on the control. Actually, it works extremely well. You know, all the variable consumption versus cost and.
Speaker #11: So if you would, you would say at ultimate target of 1050, the difference in between is basically we achieve something like 1480. And in June, as a milling cost.
Speaker #11: So we're very, very confident. We take the hit in the short term. We're going to continue to bring some additional value. But down the road, we're extremely confident and positioning the cost structure where we want.
Speaker #10: Okay. And one final question, and apologies, Smith. I want to know, my last question is with respect to the Gosselin Integrated Study. I think I was expecting it nearer to the end of this year or early next year.
Speaker #10: And I ink you mentioned by the end of 2026. So that is, is that a change? I think you ioned in the opening comments that the, sorry, that quota itself would sustain about 20 years of mine life.
Speaker #10: Is that just to give you more time to drill or was I wrong that? Yeah.
Speaker #11: No, let's separate reserve from resources, right? So the plan is that we're going to extend our drilling to the end of the year, maybe even June, January.
Speaker #11: So for the reserve resource estimate, don't expect anything more than a kind a depletion exercise at the year end. We're going to complete maximize our drilling up to probably January.
Speaker #11: Then update our new resource base within that. From that new resource base, which we're geting late Q1, maybe early Q2 for disclosure, this is a resource base where we're targeting to have after the completion of the drilling a 20 million ounces plus of measure indicated, which will form the base of the mine plan in a new reserve and all this the final will be released.
Speaker #11: And the latter part of 2026. But the resource will be earlier in the year.
Speaker #10: Okay. Thanks for clearing that up. That's it for my questions.
Speaker #11: Thank you.
Speaker #4: Our next question comes from Matthew Murphy with BMO. Please go ahead.
Speaker #12: Hi. Just a few more questions on quota. How's the HPGR holding up at point? Are there any risks? You know, when you do this maintenance, it's a chance to take a look at how wear rates have been and so on.
Speaker #12: Or do you already have a good grasp of how it's faring?
Speaker #11: So, I’m sure Renaud, I see a little smile because Renaud and I, we definitely see this like on a very, very glass half full and not half empty.
Speaker #11: It is true, you know, that as we mentioned earlier the other day, the abrasive sniffing so far may look like, you know, we're going to achieve maybe less hours on the tires.
Speaker #11: But the performance of the machine is extraordinary. And to a point, that when we feed the wet, we're capable to to process and crush more with HPGR and we can actually extract.
Speaker #11: We're using external, you ow, for longer, but for the machine is operating very well. Yes. Matthew, this is Bruno. What we see is we see a very good performance from the tires, although they are wearing fast.
Speaker #11: Due to the abrasiveness of the ore. But we see performance succeeding very often like beyond 40,000 tons per day. So it's not a matter of daily performance.
Speaker #11: I think the team is managing those roles better. They understand now the behaviors of the equipment. Right now, what we're doing is we're going to be ultimately replacing those tires with a new generation, which will have longer studs.
Speaker #11: So we hope that is going to increase the longevity. So it's more like a longevity issue than performance issue. And they will be after that another generation of tires with larger diameter of the studs.
Speaker #11: So all in all, we believe that the HPGR actually is a piece of equipment that is bringing a lot of value for quota. The team has been trained and educated as to how to operate the HPGR, it works well.
Speaker #11: Right now, it's just like we need to change those tires more often that than if firstly expected. But the goal is to get there eventually.
Speaker #11: I've been told that two things are important. With the addition of the second cone crusher, we should be in a position to re-stabilize even further, crushing a little finer.
Speaker #11: Feeding the HPGR more and is sweet zone. Sweet spot zone. So we might see a reverse back to better life. But how are we going to bypass all this?
Speaker #11: We're not so concerned as long as it doesn't bring, you know, additional downtime. So as we mentioned, you know, this additional improvement on the refeed system will be allowing us, as we crush, to extract and refeed.
Speaker #11: And this is all going to be doing in-house. So we're going to just to that, but the performance of the machine is extraordinary.
Speaker #12: Okay. That's great. And then I'm just trying to understand some of these temporary costs. Sounds like a pretty abrupt drop-off in extra costs once ou get the secondary additional crusher up and running.
Speaker #12: Are there any sort of temporary costs that you see persisting into 2026?
Speaker #11: I like to say that it is absolutely possible that all in all, if you would compare like a SAG milling operation, let's say with an HPGR, you might have to face a little higher maintenance cost or replacement of your wear part.
Speaker #11: But, as we mentioned, this would probably be offset anyway by additional benefits brought to us. That is the only thing. On the website, there is absolutely nothing that I see remaining.
Speaker #11: Once you're positioned to extract and refeed internally from your course and you find you'll take care of that. We had a lot of additional extraordinary costs, you know, of repair.
Speaker #11: You know, extraordinary repair, which we've seen super, you ow, like much, much, much better now in stabilizations and so forth. So a lot will disappear, but it could be possible that $10 a ton as normally for 10 million asset like that should be doing could be a little shy.
Speaker #11: But other than that, I'm pretty confident.
Speaker #12: Okay. Thank ou.
Speaker #4: The next question comes from Steven Green with TD Securities. Please go head.
Speaker #13: Yeah. Morning, everybody. Just a quick one on the new agreement at Sakane, the new framework deal with government. Obviously, better to have good to have the better certainty on the cash ows.
Speaker #13: Is this something that you were seeking or is this something the government was looking to do in terms the new agreement?
Speaker #11: I'll pass it to Martin.
Speaker #14: Morning, Steve. If so, the government wants to have a maximum dividend. And our goal wants to make sure that we have an efficient structure to continue to be able to move excess cash out of the country.
Speaker #14: And basically, by declaring the full distributable profit from the past, we were able to pay the maximum dividend to the government. So we achieved the objective.
Speaker #14: And now what I'm goal has is instead of waiting and only being able to pay dividends during the third quarter every year, we have this intercompany loan structure where as Sakane generates free cash flow in the next period, we can repay that loan using that free cash flow.
Speaker #14: And Sakane, quite a lot of taxes and other working capital amounts in Q2, but now going forward, we expect Sakane to continue to produce good cash flows.
Speaker #14: And that is then available for us. So we achieved both benefits and we work well with the government on this.
Speaker #13: Okay. Thanks. And is there a stability agreement associated with this?
Speaker #14: So the government is a 15% shareholder. So these things are done in board meetings as shareholders. So it's not that there's a specific agreement, but there is, of course, agreements with Sakane.
Speaker #14: For these type of instruments and the government had to agree to these things as a shareholder.
Speaker #13: Okay. Great. And I guess just larger picture, with this in place, with this new agreement in place, would is there a potential for Sakane to be to be something that you would look to divest at some point, just given your focus on on Canada and quota now?
Speaker #11: I would say at this stage, all eyes are on the focus of cash flow and the repayments. So this is a very good cash flow.
Speaker #11: Strategically, as we move forward, we continue to believe that Sakane is capable, you ow, to bring, you know, good ounces cash flow. And an opportunity, you know, to further reward our shareholders down the road.
Speaker #11: And this is what we see. I mean, we reached a point with 800,000 ounces attributable. We have expectations to pay down quite a bit of our debt this year and next year.
Speaker #11: So we could be in a position where we're mid-next year, and if you would have this excess cash available, you also be in the possibility to increase the reward to shareholders.
Speaker #11: So it's very strategic as we move forward. But we're extremely pleased now. And with this vehicle in place, we'll be capable to have more predictable and so forth.
Speaker #11: Down the road, we continue to monitor the situation.
Speaker #13: Okay. That's helpful. Thanks a lot.
Speaker #4: Our next question comes from Tania Jakuskonek with Scotiabank. Please go head.
Speaker #15: Hi. Good morning, everybody. Thank you for taking my three questions. A lot of them have been answered, but just some follow-ups on some of the ones that were asked.
Speaker #15: So just finishing off on Sakane, if I could. Renaud, how do you see the mine life there? We've got this higher gold price. So I'm just thinking about as we get to year-end, your reserve pricing and resource pricing.
Speaker #15: And you know, how does Sakane look in terms of extending beyond the technical study that you filed?
Speaker #11: Well, let's start first by looking a bit of the regulation attached to this. So it is a bit of our understanding, you ow, that renewal of permit, you know, down the road could be, you ow, for a period of five years.
Speaker #11: So let's see now we're focusing on looking beyond 28 up to 30 2033. So it looks extremely well. So like if we want it to stay, you ow, when develop and increase the life of mine and invest, you know, to extend, we're pretty confident we could easily bridge, you know, the first five years extension.
Commend your mind more than the mailing but not to the extent of what we see. Again, a big portion of the re handling as well, takes place at the aggregate plan or around, you know, you move the or quite a few times. So that's 1 thing. So it's more at 26, Danielle. I think we feel stronger, we probably can exit in an average of about 350. And as we continue, I see about half of it is about. We handling and half of it is about just continuing Improvement, volume
bigger than nominator type of to bring us to the 3 dollars eventually. So it's more. It's more 26.
Okay. And then on the processing side once we get um we eliminate these contractors and these other you know get this the more stabilized and get the secondary Crusher. And are we looking at this 12 a ton also like in the second half of next year. I'm just trying to understand when the mind I would like it earlier than that. I would like it earlier than that, but, you know, we'll be commissioning. It should be straight forward commissioning of the second. The second cone at that point. You know, we would have already improved the in-house or receipt system on the on the on the fine side. Maybe a little bit of improvement on the feeding system on the course sign. But yes technically you'll be in a position already in q1 next year to see a reductions of those costs but it could go to the mid year, you know, where you would stabilize her in the long run.
We would continue to improve beyond the 12, but I think it's a fair call.
by mid next year, we should stabilize their
okay. So hopefully mid next year Mining and processing where where you are or close to where you want to be and and we'll move forward from that. Would that be a fair comment?
Yep.
Okay, that's that's helpful. Thank you. And and then finally, thank you for your question.
For for us to can, and, and Q3 Q4 and similar grades. But you have that maintenance downtime in August and then you have the secondary Crusher going in. Should I be thinking that the quarters would be evenly distributed? I just don't know how long you think the secondary Crusher is going to take to, to to install. So should I be thinking Q3, you know, a little bit better than Q4. I'm just trying to understand how Cote looks for for the the next
Yeah, a little bit of the same. I guess, like, like Bruno mentioned like this quarter. We had a we had a plane shut down and all then Q4 is a tie in
I will be capable to reduce those by using some. So I would say go take all this, probably more a kind of a lookalike. If you 3 Q4, it's a strong boat and it's a kind of know, you probably expecting Q4 a little higher. Yeah, the uh, the maintenance at uh a second in August is is we are uh we have a 24-hour maintenance on like a and a 16 hour maintenance on my diesel.
the impact is going to be somehow marginal, so
okay, I mean
Okay, no, no, that that's fair enough. So really. It's as a can that has a stronger Q4 and does Westwood as well with the grade. I'm just trying to see if that quarter over quarter Improvement, Q3 Q4 still stands.
No, you're absolutely right. It's a you, you can take the view that if I can and what's what will have a stronger Q4 and Q3 and Cody should be about
more or less the same.
And Westwood as well, more or less the same.
No Westward and just like, as I kind of should have a stronger Q4 as you continue to improve on the grid.
Okay. So quarter on quarter Improvement. Still, okay, well that's very helpful. Thank you.
Good luck with getting all. Thank you very much.
The the secondary Crusher and as well for, uh, Co that would be great to see.
Working on it. Thank you. Thank you.
The next question comes from Muhammad s with National Bank Financial, please go ahead.
Good morning, Ron team and thanks for taking my question. Um, so maybe just on the second half expected as, as a cane. Um, just wanted to know if you could provide us with a little bit more color on some of the grades You're Expecting out of phase, 7, or should. We also anticipate a little bit more increase of throughput in the second half versus the first year. Uh, thank you.
Bruno. Yes. Uh, good morning my um yeah.
For you know what I used to be.
The GM as I can and it's not necessary the first time that we see.
Uh, lower grade material at the upper benches of new phase so it's not like, it's not new.
Um, so what we expect in the second half is that as we dig deeper, we're going to enjoy uh higher grade material and post subsequent to to this quarter. This is what we see and we expect great to to pick up and to increase and also that reconciliation to be passed to after a month and
So our our plan are somewhat conservative but we are anticipating still a stronger. Uh H2
Thanks, Bruno. Uh, and then the second question, would you just be, uh, on the taxes paid and the increased guidance there. Could you give us maybe some call on the cadence, uh, that we can expect for Q3 and Q4? Um, I know it's impacted by the dividend and declaration that just came. But, uh, should we expect Q3 to be higher versus Q4, or how should we look at that? Thank you.
Okay. Uh, good morning, uh, Ahmed. So in Q3, or in July, we actually paid the resulting taxes on the dividend, um, that was just over 40 million and then the rest of the tax payment should be equal over the the rest of the quarter.
Great. Thanks for my question. The rest have been answer.
Thank you.
This concludes the time allocated for questions. On today's call.
Hi. I will now hand the call back over to Graham Jennings for closing remarks.
Thank you very much, operator, and thanks to everyone for joining us this morning. As always, should you have any additional questions, please reach out to Renaud or myself. Thank you. All be safe and have a great day.
This concludes today's conference call, you may disconnect your lines. Thank you for participating and have a pleasant day.