IAMGOLD Corporation (NYSE:IAG) Q4 2023 Earnings Call Transcript
IAMGOLD Corporation (NYSE:IAG) Q4 2023 Earnings Call Transcript February 16, 2024
IAMGOLD Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Fourth Quarter 2023 Operating and Financial Results Conference Call and Webcast. 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. [Operator Instructions] At this time, I'd like to turn the conference over to Graeme Jennings, VP, Investor Relations and Corporate Communications for IAMGOLD. Please go ahead, Mr. Jennings.
Graeme Jennings: Thank you, operator. And welcome everyone to the IAMGOLD fourth quarter and year-end 2023 operating and financial results conference call. Joining me today on the call are Renaud Adams, President and Chief Executive Officer; Maarten Theunissen, Chief Financial Officer; Bruno Lemelin, Chief Operating Officer; Tim Bradburn, Senior Vice President, General Counsel and Corporate Secretary, and Jerzy Orzechowski, Executive Project Director, Côté Gold. Before we begin, we are joined today from IAMGOLD's Toronto office, which is located on Treaty 13 territory on the traditional lands of many nations including the Mississauga of the credit, the Anishinaabe, Chippawa, Haudenosaunee, and the Wendat peoples. 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. We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures, including the presentation and the reconciliations of these measures in our most recent MD&A, each under the heading non-GAAP financial measures. With respect to the technical information to be discussed, please refer to the information in the presentation under the heading Qualified Person and Technical Information. The slides referenced on this call can be viewed on our website. I'll now turn the call over to our President and CEO, Renaud Adams.
Renaud Adams: Thank you, Graeme, and good morning, everyone, and thank you for joining us today. Last year, IAMGOLD made significant strides, towards our goal of becoming a leading mid-tier gold producer, leveraging its assets to build a mining platform, with a long-life cornerstone asset in Canada. As we will get into more detail shortly, Côté Gold saw remarkable progress in 2023, with the project starting the year, with construction approximately 64% complete, but ending the year at 98% complete. This progress included major milestones across the project scope, including the mechanical, piping, electrical, and instrumentation of the plant, completion of the first stage of the tailing facility, electrification of the site to the provincial hydro grid, and initiation, and successful ramp-up of our autonomous mining fleet, making Côté Gold North America's first gold mine to be designed and built for the usage of autonomous haulage, which is changing the face of mining today.
Côté is poised to start production shortly, with more than 5 million tonnes of stockpiling plate, commissioning activities ongoing, and a full hands-off of all primary facets of the project, to the ownership team this quarter. Our primary focus and efforts continue to be on positioning, the project for a steady ramp-up of gold production, through this year, to achieve commercial production in the third quarter. At steady run rate, Côté Gold will be the third largest gold mine in Canada, and it's critical for the repositioning of IAMGOLD as it runs online. Côté provides a higher production base, lower cost profile, and a long life of cash flow generation and growth opportunities in Canada. Further, over the last 12 months, the company has seen significant changes in leadership across the organization, with a renewed focus on operational excellence, and accountability while continuing to build on IAMGOLD's strong and widely recognized sustainability practices.
Operationally, I'm very proud of the team, with a tributary gold production from continuing operations of 465,000 ounces, which was the top end of the guidance range of 410,000 to 470,000. I really want to congratulate the Essakane team who achieved their targets, while facing considerable challenges within the region, and the Westwood team who continues to execute on the plan, to ramp up underground operation while employing industrial-leading underground seismic monitoring and management. Last night, we also announced an update to our year-end, mineral reserves and resources, with a net increase after depletion of Essakane Westwood reserves, extending the mine life of this asset. Mineral resources saw significant increases while driven by updates to Côté and Gosselin, as we grow our gold pipeline and future for the company.
Longer term, our goals for IAMGOLD remain, to be a leading intermediate gold producer with a portfolio of assets centered around a corner asset in Canada, that have a proven record and ability to generate strong, consistent free cash flows and attractive returns for shareholders. Build on our pipelines of project and strategic geographies and organically grow our assets. Establish ourselves as a leader amongst peers in health and safety, talent development and ESG, including biodiversity, tailing management, water stewardship, and community health and education. And of course, to be recognized as a leader in applying leading proven technologies that drives performance and sustainability across our business. Financially, we will prioritize returning to the 70% position in Côté with our partner Sumitomo, as well as use our cash flow to optimize our balance sheet and deliver the company to have a more efficient and balanced capital structure.
With that, we will now dive into the operating and financial results and highlights for the quarter. Starting with health and safety, the company continues to perform extremely well with the days away restricted transfer duty rate of 0.39, and total recordable injury rate of 0.69, both based on 200,000-hours work. I want to take a moment, to congratulate Essakane, which achieved its best ever performance in health and safety with a days away restricted transfer duty rate of 0.06. This is a testament to the professionalism and commitment to a culture of safety, for our people in Burkina Faso. Ensuring all of our employees and contractor go home safely would always be the primary focus for IAMGOLD. As we like to say, every gold ounce produced has to be done safely, and our goal continues to be Zero Harm, Zero Harm for the people and the places where we operate.
On production, in the fourth quarter, the company produced 136,000 ounces, bringing total annual productions to 465,000 ounces on an attributable basis, which was near the top end of our guidance of 410,000 to 470,000 ounces. As we will get into in a moment, the production results were driven, by Essakane being able to operate, without disruptions and benefiting, from positive grade reconciliation. And the ramp up, in rehabilitation of underground zones at Westwood. Our cash costs and all-in sustaining costs declined in the fourth quarter to $1,197 an ounce and $1,735 an ounce, respectively. This brings our year-to-date cash costs to $1,261 an ounce and an AISC to $1,783 an ounce, in line with our revised guidance estimates this year. On a year-over-year basis, we've seen a step up of cost, due to continued pressures of Essakane, as well as sustained elevated price, from the recent inflationary period.
We are seeing some sign of price easing on certain consumables, but on the whole, there are several costs that have a long tail and slow to decline. With that, I will pass the call over to our CFO to walk us through our financial results and position. Maarten?
Maarten Theunissen: Thank you, Renaud, and good morning, everyone. Looking at our fourth quarter financials, revenues from continuing operations totaled $297.6 million from sales of 147,000 ounces on a 100% basis at an average realized price of $2,005 per ounce. Adjusted EBITDA from continuing operations was $110 million for the quarter and $315.1 million for the year. Adjusted earnings per share from continuing operations was $0.06 for the quarter and $0.09 for the year. In terms of our financial position, IAMGOLD entered the year with cash and cash equivalents of $367.1 million and a fully undrawn credit facility, equating to the total liquidity of approximately $754 million. As further described in MD&A, the company entered into the one-year extension of its credit facility in November, extending the maturity to January 31, 2026 from January 31, 2025.
As part of the extension, the credit facility was also reduced, or right-sized to $425 million, based on the company's requirement for a senior revolving credit facility on its overall business. The extension allows for the credit facility to be available and non-current during 2024, should we require additional liquidity during the ramp-up of Côté and for working capital purposes. The company has received gross proceeds of $197.6 million from the Bambouk transactions and the remaining transactions related to the sale of the early-stage assets in Guinea and Mali, are expected to close this year for gross proceeds of approximately $84.4 million. We note that within cash and cash equivalents, $81.7 million was held by Côté Gold and $70.9 million was held by Essakane.
The Côté Gold UJV requires its joint venture partners to fund, in advance, two months of future expenditures and cash calls are made at the beginning of each month, resulting in a month-end cash balance approximating the following month's expenditure. Essakane normally pays a dividend in the second half of the year. As we will outline in a moment, the company's remaining funding requirement, to complete construction and commissioning of Côté Gold to bring the mine to first gold is estimated to be $142 million, which includes working capital adjustments. The company believes that its available liquidity at December 31, 2023, combined with cash flows from operations, the expected proceeds from the sale of the remaining Bambouk assets, and available liquidity provided by the credit facility, is sufficient for the company to fund its $60.3 million interest of the Côté an incorporated joint venture, to complete the construction and commissioning, and ramp-up of the Côté Gold project.
It should be noted that the company's ability to draw on the credit facility, is impacted by certain covenants, including the net debt to EBITDA and interest coverage ratios, of the company that could be impacted, by macroeconomic factors and the performance of the company's existing operations. We also announced amendments to our Gold prepay commitments in December. We entered into a new forward sale announcement and a partial amendment to one of our existing Gold prepay arrangements that effectively transfers the Gold delivery obligations out of the first quarter of this year into the first quarter of next year. This was an important measure to improve the financial flexibility for the company for a reasonable cost, while we were also able to benefit from - forward gold prices, particularly for the first quarter of this year while we are commissioning Côté head of production by the end of the quarter.
And with that, I will pass back to Renaud. Thank you, Renaud.
Renaud Adams: Thanks, Maarten. Turning now to Essakane, the mine reported attributable gold production of 108,000 ounces in the fourth quarter, which was the highest quarter of production for the year, bringing total attributable productions in 2023 to 372,000 ounces. Mining activities totaled 12.9 million tonnes in a quarter, an increase from the third quarter as operations were less impacted by the security situation within the country, with minimal disruptions in fuel supply. On an annual basis, mining operation moved 43 million tonnes, 13% lower than the prior year, due to the impacts to the supply chain in the first and third quarters. And on ore tonnes mined of 9.6 million tonnes, we are approximately 24% less than the year prior as a result of an increase in required waste stripping as mining activities moved into Phase 5, 6, and 7 of the bit in the second half of the year in support of the '24 and 2025 mine plan.
Head grades increased in the quarter to 1.32 grams a tonne, due to positive reconciliations, for the deeper benches of Phase 5. This positive grade reconciliation at Essakane is a trend that has continued in the early weeks of this year. However, head grades are still expected, to decline in line with the recent life of mine plan, as volume from Phases 6 and 7 increase, and from increased proportion of stockpiles ore. On a cost basis, Essakane reported fourth quarter cash costs of $1,132 per pound and an all-in sustaining cost to $1,548 an ounce, a significant improvement from the prior quarter, yet year-over-year, the cost profile has increased with 2023 annual cash costs of $1,181 per ounce and an AISC of $1,521 an ounce. This increase in Essakane cost profile, over the last 12 to 18 months, is attributed to a combination of the lagging impact on deflation, higher volumes of operating waste from increased strip ratios, as the mine enters new phases, the impact of security situation resulting in higher land and fuel prices, transportation and camp costs, as well as higher labor costs, due to appreciation in the local currency.
In addition, last year, we saw the government of Burkina Faso implement an updated royalty rate that we sell the in-country legal proceedings on the 2018 handling of carbon fine. Looking ahead, Essakane is expected to produce 330,000 to 370,000 ounces at a cash cost of $1,300 to $1,400 an ounce and an AISC of $1,675 and $1,800 per ounce. These metrics are in line with the updated 43-101 and life of mine plan we announced for Essakane in December. Under the current mine plan, 2024 represents the last year of significant sustaining capital, which is expected to decline notably in the later years of the mine plan, assuming no further extension of mine life. The updated technical report, we released in December demonstrated, the successes of teams have had delineating additional ounces - within the site security parameters, which contributed to an increase in our mineral reserve and resources inventory and more than offset mine production depletions in 2023.
As of December 31, 2023, Essakane has proven and probable reserve of 2.2 million ounces at an average grade of 1.1 gram per tonne, of which open pit reserve were estimated to be 1.8 million ounces, rating 132 grams a tonne. As a result, we were able to extend the mine life of Essakane an additional year, providing visibility for the next five years of operations, at the project with considerable cash flow generating potential, particularly as stripping requirements decline in the later years. We continue to seek opportunities, for further extension of the mine - the life of mine as we continue to advance in 2024. Turning to Westwood, the fourth quarter represented the highest quarter of gold production since the mine restarted in 2021, with 28,000 ounces of gold produced, bringing the total annual production last year to 93,000 ounces.
The higher production in fourth quarter is the result of the ramp up of underground operations, supplying increased volumes of higher grade ore for the mill feed and the introductions of higher grade material from the Fayolle deposit. Ore mined from underground totals 77,000 tonnes in the fourth quarter, contributing to an average head grade from underground ore of 7.92 grams a tonne, which is the highest grade from underground in nearly six years since Q1, 2018. As rehabilitation efforts have allowed access to previously closed higher grade underground stopes. The mill throughput in the first quarter - for the fourth quarter 2023 was 245,000 tonnes at an average head grade of - 2.9 grams a tonne. The mill availability in the fourth quarter was rather low at 78%, which compared with 95% in the prior year period.
This was due to unplanned maintenance of the SAG mill liners and apron feeder. The cost profile for Westwood continues to see improvement with the increase in production. Cash costs averaged $1,434 an ounce in the fourth quarter, which was also a record since the restart of operation, and notably includes an estimated $190 an ounce of cost related to the development incurred at Fayolle that was expanded, due to the short life of mining of the deposit. On an all-in sustaining cost basis, Westwood averaged an AISC of $2,049 an ounce in Q4, which compared well with the realized gold price of $1,989 an ounce. Further, when adjusted for positive working capital movement, Westwood actually returned positive mine site free cash in the fourth quarter, an important step in its return to profitability.
Looking ahead to this year, Westwood gold production is expected to be in the range of 100,000 to 120,000 ounces in '24, with an increasing proportion of ore sourced from the underground mine at higher grades. Production levels are expected to be higher in the first half of '24, due to mine sequencing in the underground mine, as the supplementary mill feed from Fayolle, is replaced with lower grade material from Grand Duc in the second half of the year. Cash costs at Westwood, are expected in the range of $1,250 to $1,375 per ounce sold, and the AISC per ounce sold, are expected in the range of $1,800 to $2,000, with a decrease driven, by the expected increase in production, and reduced underground rehabilitation. Sustaining capital expenditure this year are expected to be essentially flat year-over-year at approximately $65 million, as lower rehabilitation is offset, with increased underground development, as well as an increase in capital, for the renewal of the mobile fleet and fixed equipment.
Looking at the long section of the mine here on the right, we can see the increase in underground mining activity in the Central and West corridors, regions of the mine, which were essentially shut down prior to the rehabilitation program of the last two years. We currently have eight zones, but a total of 10 zones that we are targeting in 2024, utilizing a revised mining method of pillarless pyramid stope sequencing to deflect the seismic stresses to the outside of the operating areas. Since the reopening of the mine in 2021, we have now proven that we can mine in these higher grade zones, resulting in meaningful changes to Westwood's complex inventory. Westwood Mineral Reserves, including the Grand Duc open pit, increased 109% from 582,000 ounces to 1.2 million ounces, net of depletion, with grades increasing 26% to 7.14 grams a tonne gold.
Excluding Grand Duc, underground mineral reserves were estimated at 1.1 million ounces at an average grade of 10.6 grams a tonne gold. In the second half of the year, IAMGOLD plans to file an updated NI 43-101 technical report, detailing the results of ongoing mine optimization efforts and strategic assessment of the Westwood complex. Turning to Côté Gold, the project saw remarkable progress last year. Though, when you look at these pictures, you may not see significant visual change from last quarter, aside from the snow cover. As at the end of the third quarter, all major infrastructure was in place, and the focus was shifting to completion of piping, electrical, and instrumentation, as well as demobilizing certain contractors and ramping up pre-commissioning and commissioning activity.
With first gold on the horizon, we're now executing and ramping up commissioning activities, methodically working through the flow shift starting on the dry side before bringing it together with the wet circuits. Looking at the pictures, starting at the top left, is a view of the processing facilities, with four primary structures in yellow of note. The first is the primary crusher in the foreground, which you can also see and the photo beside the facilities photo in the top middle. This was commissioned in mid-January, where mines rock were delivered to the crusher via autonomous haul trucks. The crush material was then conveyed and screened for size through the screening building, which is the facility's photo in the building in the upper left of the picture and located between the wet processing building and the domes, before being conveyed and deposited in the Coarse Ore Dome, which you can see in the top right of the page.
We are now working on commissioning of the secondary crushing building, which comes in the HPGR seen in the bottom left. From there, the crushed ore is conveyed back and forth from the screening building before being deposited in the fine ore bin, which is the white silo you can see beside the secondary crushing building seen in the upper left picture. This step would account for a total of three of the four buildings and all conveyors having been commissioned. After this, the fine ore is conveyed into the processing plant, where it passes into the ball mill in the bottom center photo, and then through the remaining circuits of the plant, which is termed as the wet zone. As far as other progress of note, as I mentioned, we are nearing a major milestone with the full hand-off of all facets of the project to the ownership team.
Mining activities, which started with the first autonomous truck over a year ago, progressed very well over the year, with now over 5 million tonnes of stockpile available and in place. Final deliverables include the back end of the plant, where final mechanical completion of the detox and electrowinning circuit is nearing completion. Taken together, we are ready and very excited to turn the chapter on Côté and bring it online for the benefit of our shareholders. Maarten, you can walk us through the remaining project expenditure please, and capital outlook for the year..
Maarten Theunissen: Thank you, Renaud. Since commencement of construction and up to December 31, 2023, on a 100% basis, the Côté project has incurred $2.786 billion of the planned $2.96 billion of project expenditures. The remaining expenditures to achieve first gold is estimated, to be $179 million for the project as a whole at 100%, which will bring the total cost to first gold in line with the $2.96 billion estimate. There is an estimated $40 million of expenditures that will be incurred post the first gold date for additional required infrastructure and earthwork projects. Our remaining funding obligation for the project expenditure up to first gold, based on our 60.3% interest and incorporating changes of working capital, leases and adjustment to the cash balance held by the UJV is $142 million, which, as I noted earlier, can be funded with the $367 million of cash on our balance sheet, as well as operating cash flows, and other sources of liquidity we discussed earlier.
Turning to the high-level outlook for Côté, and everything I will be quoting here, is on a 100% basis, I will draw your attention to the top right, where we outlined an expectation for capital expenditures this year, in addition to the construction-related expenditures we just highlighted. We estimate that $40 million of operating expenditures relating to milling, surface cost, administration, and indirect costs that will be incurred during commissioning, ramp-up and up to commercial production, will be capitalized and reported as capital expenditure. These costs represents, the inefficiencies experienced while the project is ramping up and not operating at design capacity, while the operational team has been fully hired. The estimated capital expenditures related, to operations for 2024, excluding capital waste stripping, totaled $145 million.
These expenditures will be incurred through the year and include $60 million for the expansion of the next stage of the tailings management facility, $50 million for equipment purchases, including additional haulage trucks, drills and other mobile equipment, and $35 million related to other owners' cost capital projects. Then finally, we estimate $50 million to be incurred for capitalized waste stripping. It is worth highlighting that Côté capital's expenditures in 2024, are expected to be higher than the life of mine average, as the mine progresses with the completion of the construction of the full tailings dam footprint and increases volume of material mined. Over to you, Renaud.
Renaud Adams: Thank you again, Maarten. Production at Côté Gold on a 100% basis is expected to be between 220,000 and 290,000 ounces in 2024. This estimate assumes that following initial gold productions in late Q1, but the operations ramp up in the second quarter 2024 and commercial productions is achieved in the third quarter of 2024. The company defines commercial production as an average throughput of the mill of 60% over a period of 30 days. We are targeting Côté to exit the year at a throughput rate of approximately 90% of the nameplate. During the ramp-up of the project and until commercial production is achieved, it is rather difficult to provide a good indication of operating cost estimates. But as Côté Gold achieves 90% throughput exiting the year, we estimate cash costs at the time to be in the range of approximately $700 to $800 an ounce and an AISC of $1,100 to $1,200 an ounce sold.
With further decreases, as volumes increased and as we move through the lagging impact of the recent deflations on contracts for consumables. This brings us to what is the future of Côté. We announce an updated mineral resource and reserve estimate for Côté and Gosselin last night that some material increases in inventory at both of these deposits. At Côté, mineral reserve on a 100% basis increased by 436,000 ounces to 7.6 million ounces with grades increasing 5% to 1.01 grams per tonne gold. The increase in ounces was primarily driven by the increased grade of proven mineral reserve to 1.09 grams per tonne gold based on the increase in stockpiled inventory and the ongoing grade control drilling program. On a resource basis, Côté Gold measured and indicated mineral resources increased 1.9 million ounces or 18% to 12.1 million ounces of gold.
At Gosselin, the drilling completed since the maiden resources, has been extremely effective, with an updated mineral resource estimate on a 100% basis of 4.4 million indicated gold ounces and 3 million inferred ounces. This represents an estimated increase of 1.1 million ounces in indicated and 1.3 million ounces in inferred, representing a 32% and 74% increase respectively. This expansion of the Gosselin resource was the result of a 35,000 meter drill program completed over the last two years. This year, we are planning an additional 35,000 meter targeting the Central zone between the pit shells where we see indication of continuation of mineralization and hydrothermal breaches, as well as some deeper holes to understand the continuity of mineralizations below the current pit shells.
The updated resource at Gosselin is very exciting for the project. Gosselin is a very large scale deposit sitting immediately adjacent to Côté. That when combined together have an estimated total measured and indicated mineral resources of 16.5 million ounces, with an additional 4.2 million ounces of inferred, putting the project in exclusive company of large-scale Canadian assets. The August 2022 Life of Mine plan model, was built on mineable reserve of 230 million tonnes of material for just over 7 million ounces. However, when investors considered a combined global resource inventory of the Côté Gold project, with its size and scope and for a mine that is effectively built, this is a very compelling potential offer for our shareholders.
As I've said before, Côté Gold today is a project, but we believe strongly that this is the start of a mining camp and that it will provide a strong foundation for IAMGOLD for many years to come. With that, I would like to pass the call back to the operator for the Q&A.
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