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Edited Transcript of IMG.TO earnings conference call or presentation 8-Aug-19 12:30pm GMT

Q2 2019 Iamgold Corp Earnings Call

Oct 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Iamgold Corp earnings conference call or presentation Thursday, August 8, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Carol T. Banducci

IAMGOLD Corporation - Executive VP & CFO

* Craig Stephen MacDougall

IAMGOLD Corporation - SVP of Exploration

* Indi Gopinathan

IAMGOLD Corporation - IR Lead

* Peter Gordon Stothart

IAMGOLD Corporation - Executive VP & COO

* Stephen Joseph James Letwin

IAMGOLD Corporation - President, CEO & Director

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Conference Call Participants

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* Anita Soni

CIBC Capital Markets, Research Division - Analyst

* Fahad Tariq

Crédit Suisse AG, Research Division - Research Analyst

* Michael Jalonen

BofA Merrill Lynch, Research Division - MD

* Tanya M. Jakusconek

Scotiabank Global Banking and Markets, Research Division - Analyst

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Presentation

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Operator [1]

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Welcome to the IAMGOLD 2019 Second Quarter Operating and Financial Results Conference Call and Webcast. (Operator Instructions)

At this time, I'd like to turn the conference over to Indi Gopinathan, Investor Relations Lead for IAMGOLD. Please go ahead, Ms. Gopinathan.

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Indi Gopinathan, IAMGOLD Corporation - IR Lead [2]

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Thank you very much, and welcome to the IAMGOLD second quarter conference call. If we move to Slide 3, joining me today on the call are Steve Letwin, President and CEO of IAMGOLD; Gord Stothart, Executive Vice President and Chief Operating Officer; Carol Banducci, Executive Vice President and Chief Financial Officer; Craig MacDougall, Senior Vice President, Exploration; and Jeff Snow, Senior Vice President, Business Development and General Counsel.

Our remarks on this call will include forward-looking statements. Please refer to the cautionary language regarding forward-looking statements in our disclosure document and be advised that the same cautionary language applies to our remarks during the call. The slides referenced on this call can be viewed on our website.

I will now turn the call over to our President and CEO, Steve Letwin.

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [3]

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Well, Good morning, everyone, and thank you, Indi. Our second quarter demonstrated improved performance over a weak first quarter, with IAMGOLD's outlook stronger in Essakane and Westwood for the balance of the year. I'll touch on a few highlights from the second quarter.

From a financial perspective, our balance sheet remains very strong with $660 million in cash, cash equivalents and short-term investments. The exploration potential of our pipeline continues to be highlighted by ongoing drill results from Nelligan and Rouyn during the quarter, as well as Monster Lake, Gosselin, and Rouyn post-quarter. We continue to focus on costs as we build out our self-funding operating model across all of our sites. We have adjusted guidance and have reduced capital expenditures for 2019 including deferrals.

Production and cost guidance were adjusted to reflect the temporary suspension of mining in lower grades at Rosebel, while milling activities continue there.

From an operations perspective, at Rosebel, we had a very tough quarter and I will talk a little about that more later. I just returned from Rosebel yesterday.

We saw steady production in Q2 during a particularly challenging rainy season, as Saramacca continued to progress. Subsequent to the quarter, on August 1, we reported an incident involving local police and an unauthorized artisanal miner within the Rosebel concession which resulted in the death of an unauthorized miner. So we're very saddened by this and obviously have expressed our condolences to the family.

The incident also resulted in damage to equipment. As I noted, to ensure the safety and security of our workforce, mining activities have been temporarily suspended while the mill continues to operate. I was just there. Things have calmed down. We are in a secure position but it's being monitored literally on a daily basis.

And as I mentioned earlier, our thoughts are with the family and friends of the deceased at this difficult time.

At Essakane, we are positioning for a strong second half following a flat second quarter, and at Westwood production was on track in Q2 and we are expecting higher grades in Q4. Our projects are progressing within budget with Côté Gold de-risking and Boto Gold advancing project optimization.

On the exploration front, our successes highlight the district potential at our core sites. We are advancing the resource stage projects at Nelligan, Rouyn Gold and Pitangui, and maintaining disciplined program implementation.

As I mentioned in Q1, IAMGOLD is committed to returning to a self-funding model. Our specific task (technical difficulty) to generate returns after covering their operating, sustaining and site expansion projects, additionally covering corporate exploration and financing costs. We would only look at funding new growth projects once we have the model instituted, and Saramacca is online.

Our teams have been looking hard at the life-of-mine plans, identifying areas for improvement to achieve this mandate. And on Slide 7, you've seen this slide before, so I'll just highlight the updates. We are working to optimize performance through de-bottlenecking the mill and other projects at Essakane. The CIL and heap-leach feasibility study will be completed in the third quarter, following our review through the self-funding lens. And at Boto, we are well-advanced on our application for the mining concession.

I will now pass the call over to Carol to review our financial results.

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Carol T. Banducci, IAMGOLD Corporation - Executive VP & CFO [4]

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Thank you, Steve. This next slide presents key performance highlights for the second quarter. Revenues were $246.5 million in the quarter while cost of sales came in at $239.9 million, resulting in a gross profit of $6.6 million. Adjusted net loss was $15.5 million, or $0.03 per share. Net cash from operating activities before changes in working capital was $42.8 million in the second quarter, 27% higher than the first quarter.

Although the second quarter was an improvement from the first quarter, we do expect a better second half of the year at Essakane and Westwood. We continue to hold a strong financial position with cash, cash equivalents, short-term investments and restricted cash of $688.5 million at June 30, 2019. We experienced improved net cash from operating activities of $40.6 million in the second quarter compared to $8.8 million in the first quarter.

Our working capital has lowered overall due to increased accounts payable and decreased accounts receivable including Essakane VAT collection, and this is partially offset by an increase in finished goods inventory and specifically material in-circuit at Rosebel. And we plan to convert that inventory into sales before the end of the year.

Note that we discontinued normalization of Westwood at the onset of the second quarter. Gord will provide more details on mine site performance and guidance.

On a consolidated basis for 2019, we lowered our total attributable production guidance to the range of 765,000 to 810,000 ounces. We also revised upwards our total cash cost per ounce produced guidance to the range of $860 to $910. And finally, we revised upwards our all-in sustaining cost per ounce sold guidance to the range of $1,090 to $1,130.

We maintained our 2019 depreciation expense guidance of $260 million to $270 million, and we also maintained our guidance for 2019 cash taxes in the range of $45 million to $60 million based on the gold price assumption of $1,300.

We continue to enjoy a strong liquidity position with cash and cash equivalents of almost $610 million, short-term investments of over $50 million, and an unused credit facility of almost $500 million for a total of $1.2 billion of liquidity. This, of course, is prior to the receipt of the forward sale funds of $170 million slated for December this year.

We continue to exercise prudence in the allocation of capital, positioning the company to not only benefit from a rising gold market but to withstand the volatility.

I will now pass it over to Gord to discuss operations.

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [5]

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Well, thanks, Carol. Our top priority is the health and safety of our employees. We have established strong targets for safety performance and in Q2, we continue to perform better than target. We work every day to meet or exceed our safety goals, implementing several initiatives including a new comprehensive behavior-based safety program to ensure a safer working environment.

Total consolidated attributable production for the quarter was 198,000 ounces. All-in sustaining costs were $1,132 an ounce, and note that all-in sustaining costs at the consolidated level includes corporate G&A costs.

I will review each operation in turn.

Starting with Rosebel, attributable gold production for the second quarter 2019 of 72,000 ounces was improved compared to Q1 despite the heavy rainy season, while sales volumes were impacted by material still in circuit. We expect to extract this in-circuit material, in-circuit gold, over the balance of the year.

The carbon-in-column plant which became fully operational in the first quarter of 2019 continues to have a positive impact on recovery with an additional 2,100 ounces recovered from tailings and water during the quarter, bringing year-to-date tailings recoveries to 4,300 ounces. I'll note here that as these are recoveries from (technical difficulty) water and the ounces extracted will be variable each quarter.

We progressed development work at Saramacca in the quarter with tree clearing and the construction of essential infrastructure commenced, along with pre-stripping activities. The construction of the haul road has substantially progressed and we have started to receive haul trucks and graders.

Technical and engineering studies also continued during the quarter including pit slope design improvements, metallurgical testing to further optimize recovery, and site infrastructure engineering. We anticipate mining and stockpiling of ore in the third quarter with nominal production targeted for the fourth quarter 2019.

As we mentioned in the last quarter, Rosebel is also conducting a scoping study to evaluate the potential of mining hard rock underground following the planned saprolite open-pit mining as this could substantially reduce waste-stripping costs. Diamond drilling to support this study and work to continue to find the mineral resource is ongoing, and we released some attractive drill results last night that are directly relevant to this initiative, which Craig will speak to (technical difficulty) call.

At Rosebel, total cash costs of $915 per ounce were impacted by maintenance cost pressures and lower capitalized waste stripping due to mine sequencing. The site is focused on improving preventative maintenance practices. All-in sustaining costs per ounce sold for the second quarter 2019 were $1,116 due to higher cost of sales partially offset by lower sustaining capital expenditures. The higher cost of sales resulted from planned waste capital being reevaluated as operating waste which is then expensed.

Sustaining capital expenditures for the quarter totaled $9.8 million and included capital spares of $3.5 million and mill equipment of $1.8 million. Non-sustaining capital expenditures of $9.6 million for the quarter were related to the Saramacca project.

For Rosebel, we are guiding to attributable production for 2019 between 240,000 and 260,000 ounces. This follows on both lower grades in the first half of the year and the temporary suspension of mining following the incident we reported last week, which Steve discussed earlier. The mill continues to operate.

Capital expenditures are expected to be approximately $90 million, consisting of $40 million in sustaining and $50 million in non-sustaining capital.

At Essakane, attributable gold production for the second quarter 2019 was 88,000 ounces. Ore feed for the second quarter 2019 was primarily sourced from lower-grade zones and was slightly lower than Q1. Mill throughput favorably impacted in the second quarter 2019 versus Q1 by higher mill availability due to the timing of major mill maintenance activities.

Material mined for the second quarter 2019 was higher due to an increase on the fleet size and improved equipment availability. Essakane commissioned an additional truck loader and 2 excavators which has allowed for increased hauling capacity, improved equipment availability and reduced reliance on the contract mining fleet. In addition, ore mined was higher compared to Q2 2018, primarily due to the mining and stockpiling of lower-grade ore to support the construction of a proposed heap-leach facility at the end of carbon and leach operations.

The carbon and leach and heap-leach feasibility study at Essakane is progressing well and is expected to be completed in the third quarter 2019. As discussed previously the feasibility study is expected to support an investment in a mill de-bottlenecking (technical difficulty) which could increase CIL plant throughput by 6% to 11.7 million tonnes per annum at 100% hard rock, compared to the 2018 run rate of 11 million tonnes per annum.

The CIL crushing circuit would be used for the heap leach process at the end of CIL operations.

Optimization of oxygen distribution is ongoing at the oxygen plant which was commissioned during the first quarter of 2019. Total cash costs per ounce produced of $887 for the second quarter of 2019 was higher by 22% compared to the same prior year period, primarily due to lower capitalized stripping in addition to the impact of lower sales and production volumes.

Essakane also continued to face cost pressures with rising energy prices which were partially mitigated by the supply of energy from the solar plant and by IAMGOLD's hedging program. Operating costs were higher primarily due to increased mining activity and the continued utilization of mining contractors; however, a stronger U.S. dollar relative to the euro for the quarter helped to mitigate the impact of these cost pressures.

All-in sustaining costs per ounce sold of $1,077 were impacted by higher cost of sales per ounce, partially offset by lower sustaining capital expenditures in the quarter. Sustaining capital expenditures were within budget at $10.4 million and included capital spares of $2.1 million, capitalized stripping of $2.0 million, and mobile equipment of $1.5 million.

Non-sustaining capital expenditures of $16.6 million included capitalized stripping of $8.1 million, tailings, liners and tailings dam construction of $5.0 million and mobile equipment of $2.2 million.

We are guiding to a higher attributable production at Essakane in 2019 of between 380,000 and 390,000 ounces as we anticipate a stronger second half for the mine with steady improvement in grades as well as the increased capacity of the fleet moving forward.

Capital expenditures are expected to be approximately $110 million consisting of $40 million in sustaining and $70 million in non-sustaining capital expenditures.

Q2 gold production at Westwood was 24,000 ounces, a substantial improvement over Q1 at (technical difficulty) projected.

Despite closures of some headings in respect to the size of the protocol, underground development continued at planned rates in the second quarter of 2019 to open up access to new mining areas with lateral development of approximately 1.9 kilometers averaging 21 meters per day. Infrastructure development continued in future development blocks at lower levels. Total cash costs per ounce produced of $849 for the second quarter 2019 were lower following the Q1 reduction in labor costs. All-in sustaining costs per ounce sold of $990 were lower due to lower sustaining capital expenditures and lower cost of sales per ounce. As Carol discussed, normalization of total cash costs and all-in sustaining costs was discontinued at the onset of Q2.

Sustaining capital expenditures of $2.9 million in the quarter included deferred development of $2.0 million and underground equipment of $0.7 million. Non-sustaining capital expenditures of $4.4 million included deferred development of $2.9 million, development drilling of $0.8 million, and underground construction of $0.7 million.

To aid in the continuation of underground development while respecting safety protocols in place, for mining in areas where seismicity is present, 3 new bolters were received in 2018 which are designed to be operated remotely to manage our seismic exposure. These were commissioned during the first quarter of 2019 with training ongoing.

Westwood's production in 2019 is expected to be between 95,000 and 105,000 ounces, as we expect steady throughput with grades improving markedly in Q4. We are currently targeting positive cash flow at Westwood in Q4 on 2019 guidance and have seen $10 million to $15 million in savings from the reductions. In a line for self-funding, I'll note here that Block 3 is now targeted for mining in early 2020.

Capital expenditures are expected to be approximately $35 million, consisting of $15 million in sustaining and $20 million in non-sustaining (technical difficulty). We are studying various design approaches to Westwood with a permanent preliminary life-of-mine plan expected in the fourth quarter this year followed by a plan in accordance with NI 43-101 in the first half of 2020.

Our updated 2019 guidance reflects year-to-date progress and our expectations for the second half of the year. We have lowered the guidance (technical difficulty) full year 2019 total attributable gold production to 765,000 to 810,000 ounces from 810,000 to 870,000 ounces originally, primarily due to lower production expected at Rosebel resulting from the temporary suspension of mining activity subsequent to the second quarter and from lower grades realized in the first half of the year.

Additionally, we expect Sadiola to continue producing to year-end, resulting in an upward revision on production from the joint venture to 50,000 to 55,000 ounces from an original projection of 20,000 to 30,000 ounces.

As mentioned, gold production at Westwood is expected to continue improving progressively throughout the second half of 2019 compared to the first half and is expected to be strongest in the fourth quarter. Additionally, we are expecting a strong second half for Essakane with steady improvement in grades as well as the increased capacity of the fleet. Development at Saramacca continues with mining and stockpiling expected to begin in the third quarter and nominal production targeted in the fourth quarter.

Moving to capital, we reduced our capital expenditures guidance for 2019 by $80 million to $275 million. Both sustaining and non-sustaining capital expenditures decreased by $45 million and (technical difficulty) million respectively. The $80 million decrease was a result of deferral of $25 million in non-critical path infrastructure spend at Saramacca project, reduction in sustaining capital of $30 million at Rosebel primarily due to lower capitalized waste stripping as a result of mine resequencing; timing of spend at Essakane (technical difficulty) million dollars and a decrease in non-sustaining capital at Westwood of $10 million. These changes reflect our self-funding approach, realignment of priorities and adjustment of deferred spend.

I will now turn the call over to Craig to discuss exploration.

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Craig Stephen MacDougall, IAMGOLD Corporation - SVP of Exploration [6]

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Thanks, Gord, and Good morning, everyone. Before I begin, please note that the results I talk about today have been previously disclosed in accordance with securities regulations and signed off by the qualified persons within the company reporting them.

Drilling activities at active projects and mine sites total approximately 84,000 meters during the quarter. In Canada, we completed a delineation drilling program at both Nelligan and the Rouyn Gold projects both in the province of Quebec. At Nelligan, we announced the results from 22 diamond drill holes totaling 6,970 meters from the 2019 drilling program. Highlights included 37.4 meters grading 1.32 grams per tonne of gold; 73 meters grading 1.09 grams per tonne of gold; 6 meters grading 56.49 grams per tonne of gold which when tapped was 7.99 grams per tonne; and also 16.7 meters grading 4.04 grams per tonne of gold; 28 meters grading 2.11 grams per tonne of gold; and 45.9 meters grading 1.04 grams per tonne of gold.

At the Rouyn Gold project located 45 kilometers southwest of our Westwood operation, we announced first drilling results from our 2019 drilling program at the Lac Gamble Zone. Results were reported for 31 diamond drill holes totaling 8,400 meters and included highlights of 7.8 meters grading 11.02 grams per tonne of gold; 10.6 meters grading 8.21 grams per tonne of gold; and 29.7 meters grading 8.96 grams per tonne of gold which included 11.1 meters grading 17.49 grams per tonne of gold.

Subsequent to the quarter we reported further drilling results from our Rouyn Monster Lake projects in Quebec as well as our new Gosselin discovery at the Côté Gold project in Ontario. At Monster Lake, we intersected high grades over narrow intervals at the [ante zone] which is located northeast along strike of the 325-Megane Zone which opens up the new area for exploration.

Highlights included 0.8 meters grading 350 (technical difficulty) grams per tonne of gold and 0.5 meters grading 133 grams per tonne of gold.

At our new Gosselin discovery announced in the first quarter at the Côté Gold project, the results of our 29 (sic) [2019] drilling program continue to confirm the resource potential of this new zone. Drilling highlights included 342.5 meters grading 0.98 grams per tonne of gold; 248.3 meters grading (technical difficulty) 33 grams per tonne of gold; and 412 meters grading 1.28 grams per tonne of gold.

As Gord mentioned at Saramacca we initiated a drilling campaign to evaluate the underground resource potential below the current design fit of the Saramacca deposit as well as test for extensions of mineralization along strike.

Overnight, we released drill results from this campaign, highlighted 22.7 meters grading 8.54 grams per tonne of gold which included a 9-meter interval grading 15.23 grams per tonne of gold; and 24 meters grading 9.67 grams per tonne of gold which also included a high-grade interval of 6 meters grading 26.41 grams per tonne of gold.

I'll add that in support of our commitment to a self-funding model, we are revising our 2019 exploration expenditure guidance from $60 million to $49 million excluding project studies. As a result (technical difficulty) resource development and exploration program is expected to be reduced from between 250,000 to 275,000 meters of drilling, to between approximately 215,000 to 235,000 meters of diamond and RC drilling. Note that the 2019 planned spending for capitalized expenditures of 14 million is included in the company's capital spending guidance of $275 million.

Overall, our exploration program continues to advance some of our early stage projects including a maiden resource at Nelligan expected in the second half, while we continue to support our near-mine exploration to leverage our existing infrastructure.

With that, I'll now pass the call back over to Steve to conclude.

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [7]

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All right, well thanks, Craig. Look, there's no sugarcoating this. We had a very tough first half. And my main objective here and the reason I've been traveling is to make sure we resolve the unauthorized mining issue at Rosebel. And I -- I look back and I go back to the time between 2014 and 2015 where we went through similar challenges at IAMGOLD, both at Westwood and Rosebel. And we turned the company around and in 2016, we were the top performer on the TSX Gold side, and 2017, #3. So we had, I would say, 2.5 years of very, very good performance and we're very proud of it. And this last year, I mean, starting in 2018 with Rosebel, we've had some headwinds. We obviously had the Westwood hit at the end of 2018 and we've got to pull ourselves up and get out of this particular funk we're in at Rosebel and Westwood. Westwood's moving along nicely, and as you know our relationship with the government in Suriname is a strong one. I've known the president now almost 9 years. I met with him over the weekend and we have his full commitment to get this resolved as soon as possible. So I'm heading back down there in about 2 weeks' time, and I will continue to head down there until this is fixed.

We have a huge amount of potential at Rosebel. Saramacca, look, says you know, just to be an outstanding deposit. We're seeing some great results along that trend line. And Rosebel itself has got some near-term catalysts that are going to improve. Essakane CIL and heap leach feasibility study is also there in the Q3. And we've got some great projects in the wings, so we've got a lot of good stuff coming. We've got to put our -- roll up our sleeves here and focus on 2 main things. One, get Rosebel back to where we know it can be, and Gord and his team are working hard.

I will tell you Bruno Lemelin, [Martin Bojejure] who are both down there, are outstanding leaders. And they're -- if anybody can do this in a reasonable time frame, they can.

We've got to be very cognizant of the community issues down there which we have been, but as you know in some of these countries, these things rise up and need to be settled, and they need to be settled in the right way. And that takes time. And I'm doing it with some help from Ben Little's group, Carol's group, Ben, Jeff and Gord obviously, all the teams involved. And I have every confidence that we're going to be able to move this forward and improve the second half significantly.

And there really isn't much more to say there. We do see improved operating and financial performance on a stronger outlook in the second half. Our continuous improvement programs and implementation of our self-funding model is working. We disappointed people, and we're going to work hard with the people we have which is our greatest asset to bring this back in line and see some significant improvement.

So I'm going to look forward to speaking to you with Q3 in mind, with a much more, I think, positive view on where we're headed. So thank you very much for joining us.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Farhad Tariq with Credit Suisse.

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Fahad Tariq, Crédit Suisse AG, Research Division - Research Analyst [2]

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Just a bit more clarity on the Rosebel security issue. Can you provide some sort of detail on potential timeline to resume mining? Is the suspension of mining activities more to do with some sort of police investigation or damage to equipment, or is it both? Just more clarity on the nature of the shutdown and potentially when it could resume would be helpful.

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [3]

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So the nature of the shutdown was prudent to protect the security and safety of our workforce. Partially, we did lose a couple of pieces of equipment which we're in the process of replacing now. We are working with the government very, very closely as Steve mentioned, to restart activities. And our expectation is sometime hopefully within the next week or 2 we will get at least a partial restart of mining activities. And we'll continue to monitor the situation and work with the government to move it forward. We are still operating the mill. We have substantial lower-grade stockpiles at Rosebel, so that allows us to operate the mill for a long time on just stockpile feed. So we're hoping obviously to be able to return to full mining as soon as possible, but in the interim to protect the security and safety of our people, we'll approach it hand-in-hand with the government partners in a way that helps us manage that security and safety. And as we usually do, we've been very conservative in our guidance to make sure that we're not over-promising. We -- if we can get a quick restart, we potentially could do a little bit better. But right now that's where we felt we wanted to come in.

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Fahad Tariq, Crédit Suisse AG, Research Division - Research Analyst [4]

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Okay, and just a follow-up on the Rosebel CapEx. It looks like it's about, you said $25 million of CapEx deferral related to the Saramacca haul road and then non-critical infrastructure. On the haul road, I'm just trying to get an understanding of how and what was deferred, exactly. Wouldn't that be critical to moving the tonnes to the mill, or like, what part of the haul road can be deferred to 2020?

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [5]

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It's not too much deferral of haul road. We actually are seeing some savings in our capital on the haul road. However, and I sort of spoke to it last time I was here, there are some logging roads in the area that will sort of cross and interconnect with our haul road. If we get sort of the first 3 quarters done we can put together an alternative haulage for a period of time. We're being quite prudent in our expectations from Saramacca but we're still targeting to see if we can get some ore headed to the plant in Q4 using those alternative routes while we finish off the last section of the main haul road. Most of the deferral is with respect to other infrastructure, things like the maintenance repair shop, the permanent fuel installation, some communication structures and things that we can do without, especially in an early startup with new equipment. You don't have as much need for all the infrastructure that we will eventually put in place there.

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Operator [6]

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The next question is from Anita Soni with Credit Suisse (sic) [CIBC Capital Markets].

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [7]

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So I was just wanting to get a little bit more clarity on the reduction at Rosebel. So it seems like there was a couple of moving parts there, at least one, the grades declining at Rosebel and then the second, the temporary shutdown aspect. Can you give us sort of a breakdown of what's responsible for what? And also, is the production that you've got running through for Saramacca this year, is that in line with your expectation set? It would have been a little bit more than nominal production this year.

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [8]

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Yes. Look, again, we've gone to sort of the end of the stick here. I would say of the reduction in guidance probably 70% of it has to do with the shutdown and 30% to do with the lower grades that we saw in the first quarter, in the first half. You know, towards July and August, we were seeing a nice uptick in our grades and had seen some very nice uptick up until this event occurred. So it was unfortunate. The stockpiles we're hauling from -- you know, we were able to go a couple of weeks on high-grade stockpiles but as we forecast the rest of the year not knowing exactly when we'll be restarting. Sort of the lower end of our guidance is predicated on being running just stockpiles for the remainder of the year and with very limited input from Saramacca. The guys are still very hopeful we can do better with Saramacca. We're still targeting to get some tonnage out. There is ore right on surface and we will be starting to stockpile that ore fairly soon here. And so if we can find a way to haul it and protect our people and make sure that everybody is safe, we'll look at doing that sooner rather than later. You know, as we were putting together the guidance here over the last (technical difficulty) understanding where things were coming from. We've taken the view that we need to be very prudent so that we don't -- we don't set up a situation for another reduction down the road.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [9]

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Okay. And then in terms -- so that's to say that at this stage there's no impact to Saramacca's timeline for 2020 (inaudible) or is that --

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Carol T. Banducci, IAMGOLD Corporation - Executive VP & CFO [10]

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Sorry. Anita, you're not coming through clearly, unfortunately.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [11]

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Sorry, so let me speak up. So yes. So I just wanted to ask, do you think there's an impact to 2020 timelines for Saramacca at this stage, or are you still assessing?

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [12]

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No. No impact to 2020. We're very, very confident we'll be coming on very strong with Saramacca in 2020.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [13]

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Okay. And then could you just elaborate on -- and I understand there's sensitivities with loss of life here, but what -- how is it that equipment was impacted at the -- at Rosebel? I guess it might be a bit unusual when there's an issue with an artisanal miner, so I'm just trying to understand what happened there.

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [14]

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It is sensitive, Anita, and you -- you've been around so you know this. But as you know, I'm very -- I spend a lot of time in Suriname and you know, this death -- it doesn't -- to me personally, it doesn't matter that it's an illegal miner. It's a human being that lost his life. IAMGOLD employees had nothing to do with it whatsoever. And the reaction to the death was some damaged equipment. I don't want to really get into any more than that. I would just tell you that it's a -- we had a very -- we had a very strong and continue to have a very strong relationship with the local communities. We have an extremely strong brand down there. And there were some challenges within that group, not caused by us, that resulted in this influx. So none of this is tied to anything that we have done. But we have to live with the fact that there are some challenges, and we're working with those people. They're part of our community. They're our stakeholders. I personally put a lot of value on that. The president of the country who comes from the interior wants to deal with this properly, as we do. I spent most of, I forget what day it was because I lose track of time. Most of Monday, Tuesday, with him. And I will just tell you that he and I both, and Gord and the team, are committed to moving this ahead as quickly as possible. But we have to do it in a manner that's safe and sustaining. And both of those words are important to us, safe and sustaining. So you know, it was a hiccup in the sense of our operations. It was a loss of life which as I said earlier, it does -- to me personally, it doesn't matter who this person was in respect to our mine. It's a human being. And I don't want it to happen again. None of us want it to happen again. Even though the company really didn't have anything to do with it.

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Anita Soni, CIBC Capital Markets, Research Division - Analyst [15]

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All right. And then just last question, switching gears a little bit, with the gold price cresting over $1,500 gold as you think about your project pipeline and if we sustain these levels of gold price and you rectify the issues that you've been having currently what would you think in the pipeline that has the highest priority? Could you give us the top 3?

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [16]

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I would say Boto would be our top pick. Then I think we've got some very strong domestic opportunities in Canada. That would not include Côté. So right now we see other smaller projects. Look at -- we have priorities around -- let's get this operation running the way we know it can run. That's our top priority. Let's get our self-funding model working which we're making good progress in. And then let's take a look at which projects we can develop. And I would say, the message has been loud and clear from our shareholders. We want smaller projects, less capital-intensive projects that we can move ahead. Projects where we can add near-term cash flow are absolutely at the top of the list. So getting Saramacca tied in and working, improving Westwood performance, getting the Rosebel concessions back to where they should be, getting Essakane moving ahead with some of the optimization, creating enough of a pipeline of cash flow where we can confidently say we're self-funding and then we can look at development of projects that have the kind of appeal to the current investment community which is quicker payback, low CapEx, lower risk opportunities for our company. That's what we're looking at.

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Operator [17]

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The next question is from Mike Jalonen with Bank of America.

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Michael Jalonen, BofA Merrill Lynch, Research Division - MD [18]

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I just had a call on the pipeline again. I notice that Sadiola Sulphides is in the feasibility study category. And in the MD&A I also noted that your sales in AngloGold continue the process to dispose of the asset. So just wondering what the status of that, how that's going especially given there must be 20 gold mines for sale these days. And I wonder how a development project -- well actually, this is a mine -- how would it fit into all this?

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [19]

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Well, I think you know the history of it, Mike. You've been around a long time, had a few beers with me. And you know, Sadiola, it would be part of a long game. And if it ever materialized, we're still actively trying to dispose of it. So it has performed a little bit better than we thought lately. We do have interest in the asset. So our current look ahead does not include Sadiola adding to the mix for all the reasons that you've heard over and over again. So I -- I don't want to leave an asset that has 3.7 million ounces attributable to it in a state where we lose value, impair the value. So we have to do some work with it. But we have no intention right now of moving ahead with any kind of development related to Sadiola.

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Michael Jalonen, BofA Merrill Lynch, Research Division - MD [20]

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Yes, I guess I just kind of asked this because Royal Gold was trying to sell their Peak Gold project and they didn't meet the strategic or value expectations of the joint venture. So they're going to keep it and keep moving ahead on it. But -- so just trying to figure out those markets.

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Stephen Joseph James Letwin, IAMGOLD Corporation - President, CEO & Director [21]

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Yes, I know. I understand. “We're not going to lose money, we're not going to give it away”. We're sure not going to move ahead on it.

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Operator [22]

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Our next question is from Tanya Jakusconek with Scotiabank.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [23]

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I've got 2 technical questions for Gord. Just wanted to circle back to Essakane. Just as a bit of clarity on several numbers, one of them was I think in Q1 you talked about a de-bottlenecking project, seeing the CIL plant go to 13.5 million tonnes per annum on 100% hard rock. Then I thought I heard 11.7 million tonnes today on the call. And then I think we talked about at 15 million tonnes per annum processing study that was going to be done. So I just wanted a bit of clarity on all of these 3 numbers. Maybe I'm missing something, here.

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [24]

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No, your memory is very good, Tanya. We all know that. Look, the original de-bottlenecking concept was looking at 13.5. As we've been reworking our life-of-mine plans with this self-funding sort of focus in the near (technical difficulty) we felt it was better from a near-term cash flow point of view to scale back the de-bottlenecking a little bit and take it up close to 12 million instead of the 13.5 million. Specifically, it's not so much around the cost of the de-bottlenecking in the circuit, but more around the fleet and the stripping required to feed that circuit that is significantly less and more within the scope of the current fleet we have with a few smaller additions coming in the next little while, mostly replacements, actually. So from a holistic point of view and really trying to focus on cash flow and being self-funded there, we've taken the decision to come with a smaller project. The nature of the de-bottlenecking, as with a lot of de-bottlenecking projects, is actually it's a series of sub-projects. So we'll continue to evaluate it going forward. If we can find other ways to get the self-funding model working better, obviously looking at share price -- no sorry at gold price -- there is an opportunity and there is a payback potentially as we move forward to reinstitute some of those other sub-projects. The engineering is all in hand and ready to go. We understand what the impact will be on the overall cash flow picture including additional mine costs to feed that plant. So your numbers were right. The 15 million was an early concept and it will -- that opportunity is out there for us as we evaluated it more deeply. The impacts to the near-term mine capital are even more drastic under the $15 million case. So right now, that one is a much lower possibility.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [25]

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Okay. So basically then focusing on this 11.7 when you put this out in Q3?

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [26]

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Correct.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [27]

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Okay. Maybe turning on to Westwood. I'm just trying to get an understanding, what happened. Because I know we started with a revision to guidance with Q1. We've now revised guidance again for Q2. So what are you seeing underground? Is it just taking you a lot longer to access to this higher-grade material that you're looking for in Q4 that you're having to move slower? Or is something there that's -- yes. Maybe just some clarity on what's happening at Westwood.

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [28]

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I mean, there's a couple of things ongoing. We've moved out into the outside areas, and that – we, obviously, our production in Q1 was quite reactionary to the situation that was right in front of us. We've been able to stabilize it here in Q2, Q3. And we will see higher grades in Q4. Again, I think we're trying to be prudent here and make sure we're not over-promising. Certainly, my discussions with the site we're looking to be higher in that guidance range rather than lower. But we wanted to incorporate some risk adjustment into the analysis to make sure that if we did run into a problem late in the piece, that we're not struggling at the end to make a guidance that was not attainable. Underground, things are generally going very well. The study work ongoing with respect to the LOM is progressing very, very well and I'm really pleased with what I see there. The -- we're seeing improved safety performance. The new management team there is performing well. We do see an opportunity to move into these higher-grade areas. If we can move faster, we will. If we can't move faster, then our guidance will hold. We’ll (technical difficulty)

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [29]

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So maybe just to ask it a different way, in July and August, have you seen a great improvement yet or are we just waiting for that grade for Q4? Are you in similar grades to Q2?

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [30]

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We've seen a tonnage improvement but not a grade improvement so far. What -- one of the challenges -- not a challenge, it is what it is. As we've moved into some of these lower-grade areas, we're actually seeing wider ore zones. So we're getting a lot more tonnage in those zones than we were expecting. We're seeing a big pickup in total ounces. So it's allowed us to focus on those while we work on (technical difficulty) activity. Hopefully, that positive reconciliation continues for us. We've done some really interesting things in the mill. They've been able to improve the throughput in the mill there above what our design concepts were originally talking about. So that's allowed us to compensate a little bit more as well with higher throughput even if the current milling -- if the current mining is positive. I think for the second quarter, our average grade was about 5.5. As I look at July and August, we're still sort of maintaining that range.

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Tanya M. Jakusconek, Scotiabank Global Banking and Markets, Research Division - Analyst [31]

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Okay. So you just have higher throughput, so theoretically Q3 should be a little bit better than Q2 and then with the higher throughput and higher grade that Q4 should be a better quarter?

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Peter Gordon Stothart, IAMGOLD Corporation - Executive VP & COO [32]

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We're twisting some arms. We'll see where we get to.

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Operator [33]

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This concludes the allotted time for questions on today's call. I would now like to hand the call back over to Indi Gopinathan for closing remarks.

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Indi Gopinathan, IAMGOLD Corporation - IR Lead [34]

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Thank you very much, Gaylene, and thanks to everyone for joining us this morning and for your continued interest in IAMGOLD. We look forward to having you join us for our third quarter 2019 conference call in early November. Goodbye.

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Operator [35]

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This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.