IAMGOLD - Q2 2024

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Q2 2024 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. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star, then zero. 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 (VP of Investor Relations)

Thank you, operator, and welcome everyone to the Q2 2024 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, and Tim Bradburn, Senior Vice President, General Counsel, and Corporate Secretary. 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 Mississaugas of the Credit, Anishinaabe, Chippewa, 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 on 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 will now turn the call over to our President and CEO, Renaud Adams.

Renaud Adams (President and CEO)

Thank you, Graeme, and good morning, everyone, and thank you for joining us. It was another exciting quarter for IAMGOLD, with the first full quarters of operations at Côté and another strong operating performance from Essakane and Westwood, putting us in a position to increase our overall guidance for the year. At a high level, I believe this quarter begins to paint a picture of what ultimately IAMGOLD would look like. Côté Gold is now ramping up, providing for higher production base, lower cost profile, and shifting the density of our value to Canada. At steady run, at steady run rate, Côté Gold will be among the largest gold mines in Canada and a model for mining, for modern mining done right and for many decades to come. This is then coupled with strong and predictable productions in cash flow from Essakane and Westwood.

In addition, as a company, we are seeing our financial position growing stronger quarter over quarter, with the potential for significant step change in improvement next year when Côté is running at full steam and our prepaid commitments are behind us. This will position us with a clear roadmap for success, with strong free cash flow generations, which will be essential to ultimately deliver the balance sheet and drive value accretions for our shareholders. In next quarter, we continue to improve the business and get closer to our objective. With that, we will now dive into the operating and financial results and highlights for the quarter. Starting with health and safety, IAMGOLD has continued to demonstrate an unwavering commitment to safety excellence. At IAMGOLD, it is our priority to ensure everyone goes home safely.

In the Q2, our total recordable injury frequency rate of 0.6, an improvement from the prior quarter. I want to commend and congratulate the Essakane team, which recently surpassed the record health and safety milestone of 5 million hours worked without recordable safety incident. Reaching triple zero over such a period is a monumental achievement in our industry and a testament to the professionalism and commitment to a culture of safety of our people in Burkina Faso. Looking at operations, on an attributable basis, IAMGOLD produced 166,000 ounces of gold in the Q2, bringing the year-to-date production to 317,000 ounces of gold. As we will get into in a moment, the Q2 production results were driven by Essakane being able to operate without disruption and benefiting from continued positive grade reconciliations.

The continued ramp-up of Westwood as the mine benefits from the rehabilitation of the underground and opening of new mining phases, and of course, the Q1 of production at Côté. The strong productions in sales volume translated to cash costs and all-in sustaining costs of $1,071 an ounce and $1,617 an ounce, respectively. Further, capital expenditure continued to step down quarter-over-quarter, totaling $119.7 million in the Q2, as Côté transitions into operations and setting the stage for IAMGOLD to see growing free cash flow moving forward. Looking at our guidance, the strong first half positioned the company to beat on our operating guidance for the year. Accordingly, we have increased our production guidance and lowered our cost estimate for the year.

On production, IAMGOLD has increased its 2024 attributable gold production guidance for Essakane and Westwood to 495,000 ounces to 440,000 ounces of gold, up from 430,000 ounces to 490,000 ounces previously, as both of these mines has a strong first half of the year. At Côté, we are maintaining our guidance of 130,000 ounces to 175,000 ounces on a 60% basis, but we now expect productions to come in the lower end of this range as improvements are made to mill availability. We will get more into this in a moment as we walk through each asset.

On operating costs, the 2024 cost guidance for Essakane with Westwood combined, is now expected to be in the range of $1,175 to 1,275 cash cost per ounce sold, and $1,700 to 1,825 AISC per ounce sold. This, compared to the previous guidance estimate of cash cost per ounce sold of $280 to 1,400 and AISC per ounce sold of $1,780 to 1,940. While we have brought our cost expectation lower this year, the updated guidance ranges are above our year-to-date performance, as the increased guidance reflects the outperformance we saw in the first half, and grades are expected to come down at Essakane as we enter new mining phases.

While inflationary pressures are easing, pricing for certain consumables, including cyanide and grinding media, remains in line with the level experienced in 2023. With that, I will pass the call over to our CFO to walk us through our financials, results, and position. Maarten?

Maarten Theunissen (CFO)

Thank you, Renaud, and good morning, everyone. In terms of our financial position, IAMGOLD ended the quarter with cash and cash equivalents of $511.4 million, and our credit facility remains undrawn, equating to total liquidity of approximately $915.7 million. We note that within cash and cash equivalents, $55.9 million was held by Côté Gold and $188.2 million was held by Essakane. Essakane declared a dividend during the Q2 of $180 million, for which the minority interest portion and withholding taxes were paid during the Q2, 2024. The net portion, due to the corporation of $151.9 million, is expected to be paid by the end of this year.

However, this is dependent on Essakane's estimated future cash flows from operations to leave a sufficient working cash balance in country. Any unpaid amounts will be paid during 2025. We continue to see a risk on the ability to recoup all of the VAT receivables, though the company was able to sell a small amount to a local bank in Burkina Faso during the Q2. The company still has considerable obligations and factors which will influence our liquidity during the next twelve months. During May, the company completed a bought deal equity financing for aggregate gross proceeds of approximately $300.2 million, or $287.5 million net of fees.

The company intends to use the proceeds from the financing to partially finance the repurchase of the 9.7 interest in Côté Gold from Sumitomo on November 30, 2024, with the difference funded from available liquidity. Additionally, the company has to deliver 150 ounces under its gold prepay arrangements from July 2024 to June 30, 2025. The prepay arrangements were funded at the time of entering into the arrangements. The company will receive some cash payments at the time of delivering into the gold prepay arrangements, based on the amount that the market price of gold at the time of delivery, as follows: For 50,000 ounces that will be delivered from July to December of this year, the company will receive the difference between the spot price and $1,700 per ounce, capped at $2,100 per ounce.

For 31,250 ounces that will be delivered during the Q2 in 2025, the company will receive the difference between the spot price and $2,100 per ounce, capped at $2,900 or $2,925 per ounce. Lastly, the company expects to receive $84.4 million in gross proceeds in 2024, in respect of the closing of the remaining transactions arising from the remaining Bambouk asset sales. Please refer to the liquidity outlook section of the MD&A for further details. Looking at our Q2 financial results, higher production resulted in lower unit costs, as our operating costs remained in line with costs incurred during Q4 2023 and Q1 2024. With costs remaining in line with prior periods, the higher realized gold price resulted in higher margins and higher free cash flow.

Revenues from continuing operations totaled $385.3 million, from sales of 167,000 ounces on a 100% basis, at a record average realized price of $2,294 per ounce. The realized price includes the impact of the gold prepay arrangements delivered into during the quarter that reduced the realized price by $60 per ounce.

The strong Q2 operating results, coupled with the high gold price, resulted in an adjusted EBITDA amount of $191.1 million, compared to $152.5 million in the previous quarter of the year, which is $127 million higher than the $63.8 million adjusted EBITDA number in the Q2 of 2023. Adjusted earnings per share was $0.16 for the quarter, compared to $0.11 in the previous quarter, and a $0.01 loss in the Q2 of 2023.

Looking at mine site free cash flow, which is calculated as cash flow from mine site operating activities, less capital expenditures from operating mine sites, Westwood and Essakane produced a recent high of $140 million, including Westwood, which returned its Q2 of positive mine site free cash flow since the restart after the June after in June 2020, bringing its year-to-date total for the mine to $32.3 million. At Essakane, we note mine site free cash flow in the Q2 was $118.2 million. That is $81.8 million higher than the $36.4 million dollars during the Q2 of 2023. And with that, I will pass the call back to Renaud. Thank you, Renaud.

Renaud Adams (President and CEO)

Thank you, Maarten. We will walk through our operating performance at Essakane and Westwood before we dive into Côté. At Essakane, the mine reported attributable gold production of 111,000 ounces in the Q2, up 26% from prior year periods, and bringing the year-to-date total to 229,000 ounces. This was another very strong quarter of operation for Essakane and made possible by our mining operation being able to perform to plan in the quarter, compound with continued higher than expected grades. Mining activities total 11 million tons in a quarter, with only 2.2 million tons of ore mined, as mining worked through a higher strip sequencing of the mine, coupled with limited mining in a part of phase VI, due to localizing stability, which required reinforcement and has been addressed since then.

That grade remained high at 1.46 grams a ton due to the continued positive reconciliations of grade from the reserve model as we continue to mine deeper into phase V. This positive grade reconciliation in the deeper portions of Essakane was seen previously in phase V and is continuing in phase V, as in phase IV and continuing in phase V. However, we are seeing head grades decline in line with the life of mine plan, as volumes from phases VI and VII increase and from increased proportion of stock pile ore included in the mill feed. On a cost basis, Essakane reported Q2 cash costs of $1,081 per ounce and all-in sustaining costs of $1,481 per ounce.

A slight increase from the prior quarter, way below our previous guidance due to strong productions in gold sales. With a strong first half of operations in 2024, Essakane production guidance has been revised upwards, with attributable production expected to be in the range of 380,000 ounces to 410,000 ounces. This compared to the prior guidance of 330,000 ounces to 370,000 ounces of gold. The mill is expected to continue operating at nameplate capacity, though at average, head grade slightly lower than in the first half of the year as per the mine plan.

The cost guidance for Essakane has also been revised onward and is expected to be in the range of $1,175 to 1,275 cash cost per ounce sold, and $1,575 to 1,675 for AISC per ounce sold. Approximately $100 to 125 per ounce improvement on both metrics due to the outperformance in the first half of the year. Capital expenditure guidance has been increased to approximately $175 million, primarily due to an increase in the strip ratio, not total tons mined, resulting in more mining costs being included in capitalized waste and equipment replacement. Essakane continued to be a significant cash flow contributor for IAMGOLD.

With the current mine life through 2028, this operation has the capability to generate over $1 billion of cash flow at current gold prices. We are continuing to examine the opportunities to extend the mine life of Essakane, targeting options within the fence to ensure the safety of our teams. Turning to Westwood. I want to congratulate the team on another improvement in the quarter, as the mine continues to test new highs in quarterly volumes from underground grades and production since the mine restarted in 2021. This improvement has meant that Westwood has generated, as Maarten noted, positive mine free cash flow of nearly $22 million in the Q2, bringing the year-to-date total to just over $32 million.

On operation, Westwood produced 35,000 ounces in the quarter, a significant 84% over prior year period, and bringing the year-to-date total to 67,000 ounces year to date. Our mine from underground continued to step up and at higher, at a higher grade, with 89,000 tons in the Q2, contributing to an average head grade from underground ore of 9.2 grams/ton. Mill throughput also increased in the quarter to 302,000 tons processed, at an average blended head grade of 3.92 grams/ton and 92% recovery. The increase in throughput was driven by improved availability of 89% due to the ongoing maintenance program. The cost profile for Westwood continues to decline as operations improve.

Cash costs averaged $1,131 an ounce, and all-in sustaining costs averaged a promising $1,663 an ounce in the Q2, continuing the trend of quarter-over-quarter cost improvements. Looking ahead, we have raised our guidance for this year, with Westwood now expected to produce between 115,000 ounces to 130,000 ounces of gold at lower cash costs of $1,200 to 1,300 per ounce and AISC of $1,775 to 1,900 per ounce. In the Q4, we will be issuing an updated technical report and mine plan for Westwood, which will provide an updated mineral resource and reserve estimate and life of mine, based on the last 2.5 years of mine optimization efforts at Westwood.

Turning to Côté Gold. We couldn't be more impressed with the work of our teams on the ground as they brought Côté Gold to commercial production only 4 months after the initial gold pour on March 31, 2024, which was achieved within 90 days of first pre-commissioning activity. The ramp-up of Côté Gold has seen the project hit significant milestones in its first few steps as a mine. We took the path of testing first the capacity of the main equipment that drive the ultimate nameplate objective, and then build availability as we ramp up. From early on, the primary components of the processing circuits, primary and secondary crushing, HPGR, conveyors, ball mill, leaching, etc., all have proven their capability to operate on their design load when provided with stable conditions.

During the same period, we also took the time to allow the team to stop and correct several deficiencies, that it is usually the case at early days of ramping up a large-scale facility. The first pick took about the whole first half, the Q2, but 45 days go fast. In the second half of the quarter, efforts were made on slowly but surely cranking up the engine and testing the stability and the overall availability of the processing facility, while identifying all potential limiting factor to objective of exiting the year at 90% nameplate. In early July, the team pushed the commercial production button and reached our objective 30 days later, with nameplate production of 36,000 tons achieved on August 1st, as the last day.

On the dry side, we can report that we are very pleased with the performance of our HPGR and believe that it will bring great value down the road. During the ramp-up phase, we have identified some improvement required on the dry side in order to achieve design availability and performance. The first one has to do with mitigating the effect of abrasiveness on wear parts. The ore at Côté is highly abrasive, which was always known, but with actual effect to be experienced. Availability of the crushing and screening circuits in the Q2 was somewhat impacted by accelerating wear on the liners, feeders, and chutes due to this abrasiveness. The new lining material has been identified and tested with good results in some critical areas. Second, the continued coarse screening performance was also limited during ramp-up, and new panel designs are being proposed.

Finally, dust management was challenging in the early days, and in particular in the screening building. While significant improvement has been made, more corrective action needs to be made. We have tested additions of suppression, both water and surfactant system in critical area with great results. So all in all, everything is solvable. We have identified corrective actions and we have initiated implementation of them. The company is planning a multi-day shutdown in September, at which time we will deploy key optimization to address all the bidding issues and improve the long-term availability of the plant. We are very confident in the ability of Côté to ramp up well this year once we address these issues. Further, the power requirement of the plant has been lower than anticipated, providing important available capacity for down the road.

In the Q2, mining activities achieved a new high of 10.5 million tons of total material mined. Further, grades mined are continuing to come largely in line with our grade control block model in the current life of mine. Mining costs in the quarter, despite not yet running at full run rate, were comparable to Canadian open pit peers at just under $4/ton. An increase from the prior quarter due to temporary optimization activities on blasting patterns and production drilling, as well as some power settlements experienced in June due to unseasonal heat wave. On processing, mill throughput in the Q2 was 834,000 tons at an average head grade of 1.4 grams/ton, for a total of 34,000 ounces produced on a 100% basis.

gravity circuit was successfully commissioned toward the end of the quarter, and recovery has responded well to the ramp up of the operations, averaging 90%. In July, Côté Gold processed over 620,000 tons of ore, with production of nearly 26,000 ounces of gold. We have maintained our guidance at Côté for this year, though we have guided to the lower end of the range of 220,000 ounces to 290,000 ounces on a 100% basis. As improvements in mill availability are made during the ramp up of operations, reducing expected downtime prior to completing those solutions. We believe that exiting the year at nearly nameplate will set Côté and IAMGOLD for huge success starting early 2025.

I will now hand the call back to Maarten for a brief update on project spending this year.

Maarten Theunissen (CFO)

Thank you, Renaud. I want to note that as we discuss project expenditures, all costs are being quoted on a 100% basis. Project and capital expenditures were $92.6 million in the Q2 and $288.9 million year to date. The expenditures include project expenditures of $30.7 million to support the completion of commissioning and certain scopes of non-critical path earthwork and infrastructure. Prior to the first gold pour on March 31, project expenditures were 151.7 million, totaling $182.4 million for the year. $24.5 million of operating expenditures related to milling and surface costs have been capitalized in the Q2, and $51.5 million year to date, in support of the commissioning and ramp-up efforts in advance of achieving commercial production.

Capital expenditures related to operations for the Q2 were $37.4 million and $55 million year to date. Capitalized waste stripping and capitalized operating costs are expected to be higher when compared to guidance, which is offset by lower capital related to operations, due to some of the equipment being purchased through our increased leasing facility. The total of all of our capital expenditures of $454 million, as well as the timing of the expenditures, are in line with the forecast and guidance for the year. Back to you, Renaud.

Renaud Adams (President and CEO)

Thank you, Martin. So, so that is that. Our goal this year is very clear. We need to ramp up the plant availability and utilization to exit the year at a throughput rate of approximately 90% of nameplate and start 2025 on a very strong footing. This brings us to the slide we always like to finish on, and this is what the future is for Côté. We are continuing to advance in our understanding of the impact of Gossan and potential of the project. At year end 2023, we updated the Gossan mineral reserve and resources estimate with an additional 35,000 meters of drilling, which was drilled over the two years prior.

This year itself, we are conducting a 35,000 meters drill program, targeting the central zone between the pit shell, where we see indication of continuation of mineralization and for the hydrothermal breccias, as well as some deeper holes to understand the continuity of the mineralizations below the current pit shell. When we look at the resource and reserve statement, the Côté deposit has estimated mineral reserve on a 100% basis of 7.6 million ounces. This reserve form the basis of the current economics of the project. On a measured and indicated resource basis, the Côté pit is currently estimated at a total of 12.1 million ounces.

The adjacent Gossan pit has an additional 4.4 million ounces of measured and indicated resources, and nearly 3 million ounces of inferred, bringing the project to a total of 16.5 million ounces of measured and indicated, and an additional 4 million ounces of inferred. The size of Côté and Gossan together put the project, the mine, in a very exclusive company among large-scale producing Canadian assets. We expect to have the results of this program later this year, which will greatly inform our understanding of how to incorporate Gossan and remaining measured and indicated into a potential future mine plan. So thank you all, and I look forward to a very exciting year ahead. With that, I would like to pass the call back to the operator for the Q&A. Operator?

Operator (participant)

Thank you. We'll now begin the Q&A session. To join the question queue, you may press star, then 1 on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, press star, then 2. The first question comes from Anita Soni with CIBC World Markets. Please go ahead.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

Good morning, Renaud, everyone. My first question is with respect to Côté. What are the main factors that drove the indication that you're going to be near the bottom end of the production guidance range at Côté? Is it throughput grade, recovery rate? And then the second one probably relates to that is: How long will that shutdown last in September?

Renaud Adams (President and CEO)

Yeah. Very thanks for your questions, and, as you're also the one that asked me early in the year how we set the original guidance. I would say that it's mostly a matter of the total tons of mills. So if you recall, we set the guidance early in the year under 220 to 290, but specifying that we were confident in the high grade, which is happening. But also, basically saying that at a perfect commissioning without any need, you know, for further downtime and so far, with the 6.5 million ton process or so, we'll set the 290. As I explained in my comments, we really did take the time in Q2 to properly stop and correct things as we move forward.

This has been our philosophy since day one, and, and I'm very pleased that it's paying maybe a little pain in the short term on the total ounces, but we're definitely going to shift, the profile starting in 25. So we did that in Q2, and as I mentioned, so, to your point is, originally speaking, we were probably thinking of the 5 days, in September, but, but we're prepared to go further. So if it takes, if it takes additional downtime, another 5, 7 days for a total of 10, 15, whatever it takes to correct all those issues. If it takes less, we may perform better than the lower end, but we just want to make sure that we're prepared to, to take the time in September.

So let's call for a 10 to 15 max, and, and, we'll see how it goes for the remaining of. So largely the term process, and, as we correct things, as we move forward.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

Okay, thank you. Then, I noticed you provided mining cost per ton for the Q2. Thank you for that. I know, and I also know that, you know, relatively short period of time since you've declared commercial production on August seventh. But can you give us an indication how the processing costs are going at this stage?

Renaud Adams (President and CEO)

Martin?

Maarten Theunissen (CFO)

Maarten, well, good morning, Anita. The processing cost on a total basis is actually well within our, our expectation and our plans. There is, of course, some additional costs being incurred as they are fixing or replacing certain things. But when we look at where we are, we expect the dollar per ton cost when we get to the end of the year to be in the ranges that we guided and disclosed previously. So in line with the 43-101, with slight increases because of inflation, but also just we, we won't be at 100% yet, but our, our expectation on the cost of the mill have not reduced at this or have not changed at this point.

Renaud Adams (President and CEO)

I think, Maarten, it's fair to say that, you know, the range of the 10 to 15, it's just a matter of the tons mill, right?

Maarten Theunissen (CFO)

Yes.

Renaud Adams (President and CEO)

So we were still low, globally low, with 839,000 tons of mill in the Q2, but with only one month of 620. So what we're expecting to get closer or, you know, to the 10 to 11 objective as we exit the year. But it's really a matter of time now.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

Okay. And that power, as you mentioned, that you're using less power or, is that factoring into that lower, I guess, benefit on cost?

Renaud Adams (President and CEO)

Yeah, but, but also, power, even though it's a massive, it's a big operations, power cost per kilo water would be extremely low at in Côté, as we manage peaks and, we're expecting one of the lowest, costs, you know, kilo water, you know, pretty much in the industry. So, yes, this is but the real benefit beyond, potentially saving is the opportunity of using this extra power down the road.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

Okay.

Renaud Adams (President and CEO)

As we well documented, there's some, you know, certain, you know, like the 72 MW, so you use it how you want, right? And, and this is what we're the most excited about, is we feel that the main equipment on the wet, on the wet side, may drive more tons down the road. That's the main play. It has to be proven on a steady basis, but what we've seen so far is we're definitely using less power for the same throughput.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

And then just an idea of, in terms of the build-out in the summertime, I noticed the mining rates on ore were similar to last quarter. So I'm just assuming you guys are a little bit more focused on, building the tailing dam over the summer months. Is that correct? And how much, how much, how many tons do you have to deliver to the tailing dam in Q3?

Renaud Adams (President and CEO)

I don't have the details of the tons, but if you recall, and as described as well in the 43-101, so we're basically executing the whole phase II, right? And this will, combined with the fact, you know, of the throughput, the ramp-up, will position towards the 18 months of capacity.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

And then my-

Renaud Adams (President and CEO)

And then as we move forward, this summer will add. But yes, we're completing the phase II that we've initiated last year. We're completing it this year. And then by fall, we should have minimum of 18 months ahead of us, and then we'll continue on a yearly basis to raise. And our objective is to be comfortably sitting at least on the 24 months beyond, ahead of us.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

My last question, just in terms of stockpile levels, can you tell us how many, how many tons of ore you have stockpiled ahead of the mill right now and what the average grade is there?

Renaud Adams (President and CEO)

Bruno, you got this?

Bruno Lemelin (COO)

Yes. Mm-hmm. Good morning, Anita. So, so far we have 8 million tons grading at 0.75. We have different category of stockpiles with-direct feed, high grade ore and high grade ore and low grade ore. So, so far we are pretty satisfied with the level of stockpile and also with the reconciliation on the high grade category.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

And then you mentioned, I think, in the, that you're directing more higher grade from the pit to the mill. What would that high grade be on average?

Bruno Lemelin (COO)

We define high grade, whatever is above the 0.7, 0.8 gram per ton category. So right now we have a good fair amount of stockpile at 1.6 gram per ton in front of us, and we have also some run-of-mine at 1.14.

Renaud Adams (President and CEO)

So we'll try to, we'll try to keep the mill towards, you know, the 15, till the end of the year. We did very well in July as well. So, so there is no, there is no, issues or reason to believe, you know, we won't deliver the grade. So it's, it's really about, cranking up, the tonnage through. But the mine has been doing very well so far.

Anita Soni (Managing Director and Senior Precious Metals Research Analyst)

Okay, thank you. That's it for my questions, and congratulations on hitting commercial production.

Renaud Adams (President and CEO)

Thank you so much.

Operator (participant)

The next question is from Wayne Lam with RBC. Please go ahead.

Wayne Lam (VP of Global Mining Research)

Yeah, thanks, guys. Morning, everyone. Just wondering, maybe at Côté, if you might be able to speak to the performance of the autonomous operations to date on the haulage and drilling, just where the challenges have been and how you've mitigated those risks?

Renaud Adams (President and CEO)

I wouldn't call too many risks to be mitigated. I think more every quarter that goes by, we get more comfortable with autonomous haulage. And it's been operating very well, and Bruno just mentioned the stockpile and everything that's been processed. So basically, every single ton that's been put on the stockpile, you know, has been with autonomous trucks. And it's been performing extremely well at a very high availability and so forth. So I honestly do not see any issues with them. And hopefully, over time, we could be even better and with our drilling automations as well. So working hard on both. But autonomous is absolutely working beautifully.

Not to underestimate as well the health and safety aspect of not having operators behind the steering wheels. It's not about cutting job; it's really about improving, modernizing our operations and make it safer, safer. So far, so good. Excellent. I'll give a very high score to the implementation of autonomous haulage. I will redo it anytime.

Wayne Lam (VP of Global Mining Research)

Great. Sounds like things are going pretty well. Maybe moving to Westwood, just on the grades there, which seem, you know, pretty positive relative to res, to, relative to the reserve. Do you see those grades continuing through the year? And then with the upcoming technical report, do you see upside to the targeted run rate from the underground, beyond the 900 tons per day? And given the strong performance of the mine now, with the underground now rehabilitated, do you envision that asset as one to keep in the portfolio longer term, or could it potentially be classified more as non-core?

Renaud Adams (President and CEO)

Although in order, my KPI is in every quarter, I've seen the asset ramping up with more tons from underground, the overall grade improving from underground. We're sitting on a reserve of roughly 10.4 grams a ton reserve, and that's the ultimate objective. You need to position yourself at some point where you start mining at the reserve grade at Westwood, and this is where you're going to feel that you have reached a certain stability and sustainably. So, pretty close to, we could be basically one quarter away of reaching. Once you get that, you want, like I said, you know, to to continue to operate along those lines. We're extremely, extremely pleased to how Westwood has performed and continue to perform and the cash flow.

So comfortable to say that at this, at this stage, you know, we're very pleased with it, with both Essakane and Westwood, and, we definitely can see these two mines continue being a big, big, collaborator, if you will, you know, to our, and contributor to our story. Having said that, I don't think we've seen the end of the optimization of Westwood. So we're gonna put the 42-101. We want to see what we could do, where we could get, and as I said, you know, strong production profile and improving and free cash flow. So we're very, very pleased. On the total tons we see, Bruno, getting ahead a bit here, so, what do you see down the road?

Bruno Lemelin (COO)

Thank you, Renaud. Actually, the performance from underground is getting better and better due to all the hard work we have done over the last 2.5 years. It's proved to be very beneficial for us and our ability to reach our targets at 900 tons per day. Of course, we have vision to increase this closer to the 1,100. Those are the kind of targets we're looking at. Again, with the new 43-101, we'll be able to express with more clarity what those targets are going to be, and also, the extent of the life of mine, with the new block model. So at that time, we'll be able to give more insight related to that mine plan.

Wayne Lam (VP of Global Mining Research)

Okay, great. Thanks. And then maybe just last one, just on the Bambouk assets, can you provide a bit more clarity on the final payment and whether there's any credit risk associated with that? Just seems like it's been a bit delayed and wondering what the risk is to that final payment coming in.

Renaud Adams (President and CEO)

Yeah, it's a fair comment that it's been a bit long, and I can assure you it's been a bit long for us as well. But I think we're making great progress, honestly. So we're still comfortable of the closing of Guinea in the second half. And following that, we'll address, you know, the closing in Mali. So can we close both? You know, we're still saying that. We're still saying that we're working towards closing both, remaining talking about roughly $80 million of gross proceeds for both. So it's meaningful, it's important. It's important for our people as well, because as you mentioned, we got to move on here and allow everyone to move on.

So, we're very active and remain confident we're going to close both this year.

Wayne Lam (VP of Global Mining Research)

Okay, great. Thanks. Thanks for taking my questions.

Renaud Adams (President and CEO)

Okay.

Operator (participant)

The next question is from Mike Parkin with National Bank Financial. Please go ahead.

Michael Parkin (Managing Director and Head of Mining Research)

Hi, guys. Congrats on the solid quarter. Most of my questions have been answered. Just a couple follow-ups. You gave us good color on expected shutdowns at Côté. Can you give us any guidance around shutdowns planned at Westwood or Essakane?

Renaud Adams (President and CEO)

Definitely nothing extraordinary beyond the regular. So you're looking at the average availability of Essakane and Westwood, we achieve 89%, so I think it's fair to think that we're going to try to maintain around that level to the end of the year. And this is basically done through planned shutdown, a little bit of on plan, but we don't have anything extraordinary. And I think the same comment goes for Essakane as well. There's always, of course, things to be addressed, but we're not planning beyond the regular availability. So both mines should be in the availability or better of what you've seen in Q2.

Michael Parkin (Managing Director and Head of Mining Research)

Okay. And then the target at Côté to be at 90% of nameplate by year-end, is that like, obviously, you put out a daily number just recently, that it's well at, you know, it's at nameplate, but what's the 90% based on? Is that like a trailing four-week average?

Renaud Adams (President and CEO)

I'll be very, very happy by accumulating 4 weeks. Let's say if what we've done in commercial, using 60% of nameplate, if we repeat that in December and we feel very strong, this is what we call exiting the year. So thanks for asking, but internally, this is how we would feel. It's not about a few days. We know we've done it one day. We know it's capable to be done, but as you ramp up, you want to make sure that you're solidly on the saddle, you know, and comfortably sitting on the saddle by the end of December. So let's call 30 days, averaging 90% will be our key objective in December.

Michael Parkin (Managing Director and Head of Mining Research)

Great. That's it for me, guys.

Renaud Adams (President and CEO)

Thanks.

Operator (participant)

The next question is from Carey MacRury with Canaccord Genuity. Please go ahead.

Carey MacRury (Equity Research Analyst)

Hi, good morning. Just a follow-up on the mill throughput. Obviously, you've hit commercial production. Should we be assuming that the mill is kind of going to run at around 60% through August, up until the shutdown, or is the mill performing a bit better than that now?

Renaud Adams (President and CEO)

Yeah, no, definitely. From the moment you hit the 60%, I would exclude September, because like I said, September is a big month, you know, where we're going to be making a lot. But yeah, so 60% has been reached and becomes the baseline now. So from that point on, we need to continue to improve August. September will be for the time of fixing, but definitely some kind of a steady ramp up with a little bit of a dip in September, allowing for the shutdown. But 60% is and will remain the new baseline.

Carey MacRury (Equity Research Analyst)

Okay, and then just maybe a question for Maarten on the Sumitomo buyback. I see the option there is, I think, $380 million. Given the ramp up, is that more or less where it's going to be, or is that, do you expect that to move around plus or minus?

Maarten Theunissen (CFO)

Good morning, Carey. We don't expect that number to change significantly, but it is dependent on the August cost and the August sales, because that still gets the July and August cost and sales, because that still gets incorporated into that, and the gold price has an impact. But we don't expect it to change materially from the $380 million expected previously as well.

Carey MacRury (Equity Research Analyst)

Great. That's it for me. Thanks.

Operator (participant)

The next question is from Steven Green with TD Securities. Please go ahead.

Steven Green (Senior Analyst, Gold and Precious Metals)

Yeah, good morning, everyone. Just a quick accounting question for you. Up until now, you've been capitalizing your interest on Côté. Can we expect that will all start being expensed after the August second date?

Renaud Adams (President and CEO)

Yes, we will start depreciating the asset, and we will stop capitalizing our borrowing costs after achieving commercial production, which would be either beginning August or beginning September, but probably beginning August.

Steven Green (Senior Analyst, Gold and Precious Metals)

Okay, great. That's all I had.

Operator (participant)

Once again, if you have a question, please press Star, then one. The next question is from Tanya Jakusconek with Scotiabank. Please go ahead.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Great, good morning. Thank you very much for taking my questions, and congrats on getting Côté commercial. I just wanted to come back. I know a lot of questions have been asked, and you did it quite a bit on, you know, starting off on Côté. Can I just go back to starting on the just on the pit, you said the grade meets the block model. Just remind me on, right now on the availability of your trucks, what are they operating at, availability-wise?

Renaud Adams (President and CEO)

We're definitely on the, in the stack, so 85%, you know, just confirm 85% or so, so this is how you want to see a usage behave, so.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay, and then can I ask, just looking at, so going back to the processing facility, oh, sorry, before the processing facility, just the stockpile. You gave us the 8 million tons for the 0.75. Can you just give me what the stockpile tonnage is for the 1.6 grams per ton? Because I know that's what you're going to be feeding in the short term to the processing facility. So what do we have in 1.6 grams per ton?

Bruno Lemelin (COO)

Hello, Tanya. We're talking about 7 million tons right now, and we have packets in front of us, directly at the, in the pit.

Renaud Adams (President and CEO)

Yeah, we use a bit of stockpile, of course, during the ramp-up, and the mine was getting in on new facing, prepare, and so forth. So we've entered, we've entered now much like good grade and long and continuous benching, so expecting pretty good grade till the end of the year.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

End of the year. Yeah, plus, then you mentioned the $1.4. Okay, perfect. And then as-

Renaud Adams (President and CEO)

Yeah, we did 1.4. Sorry, Tanya, just to clarify, so we did 1.4 in Q2, but now that we're primed, if you will, so we'll like to maintain more towards the 1.5 till the end of the year.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay, so you are gonna take a bit more of that higher grade stockpile through as well?

Renaud Adams (President and CEO)

No. Well, maybe, maybe, but also because the mine will be producing more until the end of the year. Of that, I agree.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay, that's helpful. And then as we get into the processing facility and we're down for that 10 to 15 days, just wanted to make sure, like, you know, you're tackling the liners, the screens. Do we have all of this inventory on site right now, or are we still having to purchase or have this come to site?

Renaud Adams (President and CEO)

A lot of that already, Tanya. Some will come later on in August. Some, the latest will be kind of very early September. So, we feel that we're gonna be fully equipped to address all those issues. So, we're not expecting any issues on the trail.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay. And then just on the dust that you talked about, was that just, you know, a lot of dust that you're, you know, having to fight against the permit? Or what was it about the dust in general that you needed to? You know, I understand you need to control dust, but I'm just wondering if it was a permit or if it was just a normal operating dust issue.

Renaud Adams (President and CEO)

I would say more operating things. I mean, like, the objective is very clear. You visited a lot of assets, so you know what it is. And the screening building and the crushing building, using a mask should be a second layer of protection and not the main layer. So that's the bar. It's like our commitment to health and safety. Rules are very strict as well, of course, in Ontario, as it should be. So we're gonna bring this to basically the zero dust, fugitive and dust and so forth. So we were not there at the beginning, of course, a lot of adjustment, but as we advance in August, we have some sectors now that really looks like a zero dust. So this is basically what has to do.

So most likely, we're just gonna extend to every single critical area, the suppression system. We're working with a manufacturer as well to make the dust collecting system more efficient as well, and some optimization. So the combinations of both, we're very, very confident that will solve the problem once for good in August, in September.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay. And just on the processing cost that was quoted, the $10 to 15 a ton, I just want to make sure that's USD?

Renaud Adams (President and CEO)

Yes.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

And then, thank you for that, all of my questions on, and congrats on getting this up. It looks like it's coming along nicely. Can I just move to my final question, which is just on the guidance for the remaining portion of the year for the company as a whole? We do have the lower grades coming in at Essakane. Is that coming in like, you know, slowly, i.e., Q3 is lower than Q2 and then a lower Q4? Or are we already in the low grade, and it's sort of even in the two quarters?

Renaud Adams (President and CEO)

Yeah, the first part, like July, was somewhat like a transition and remained good. And I think, you know, from there, like as we enter August, like slowly we see this ramping down. But it wasn't like a dry cut at the end of Q2, so we had a good July, and we continue, and now we're transitioning slowly, so. And on that, I know when you're looking at the guidance, as I mentioned, you know, it looks like we're performing better the year to date. And how we look at Essakane, as well as we set the guidance, there is some sort of a risk-adjusted effect as well there.

So we all understand the situations, and it would take only a month of interruptions of supply or LFO being used for power. So there's a bit of a risk adjustment. And just like happened in the first half, if the second half is very stable, you have no disruptions, and the mine operates according to his plan, there is no reason to believe that we will not perform extremely well under those new updated guidance.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay, so looks like Q3 a bit lower, and then Q4 will be the lowest. And then for Westwood, with the revised numbers, are we still looking at quarter-over-quarter improvement, Q3 over, and, and then better improvement in Q4 on the grade side?

Renaud Adams (President and CEO)

Yeah, but, yeah, but as I mentioned, you know, we're almost now already at reserve grade, right? So, so there would be a point where you don't want to over, you know, mine this. So, so you're gonna be following. So we're almost there. So if everything goes as well, well, Fayolle is over, so there's about 10,000 ounces of the first half of the year that came from Fayolle. So this one is... So we had a very good, a very good, grade in the Grand Duc as well in kind of the second half of H1. So that's also. So, so all those elements will maybe not be there in the second.

So when you're looking at, I think the underground will continue to improve, but you may lose a bit of grade towards the Grand Duc, and you won't benefit the ounces from Fayolle. So could we repeat H1 in H2? A little more challenging, but if the mine continues to ramp up well on the ground, we could be well positioned as well under this, the new guidance.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay. So it kind of looks like, you know, you're almost there on grade, so mainly evenly distributed for the second half.

Renaud Adams (President and CEO)

Yeah.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay. Thank you so much for taking all my questions. I really appreciate it, and congrats again.

Renaud Adams (President and CEO)

Thank you so much.

Operator (participant)

This concludes the time allocated for questions on today's call. I'd now like to hand the call back over to Graham Jennings for closing remarks.

Graeme Jennings (VP of Investor Relations)

Thank you very much, operator. 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.

Operator (participant)

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