IAMGOLD - Q3 2023

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Third 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. 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, Investor Relations and Corporate Communications)

Thank you, operator, and welcome everyone to our call this morning. 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 Thirteen territory, on the traditional lands of many nations, including the Mississaugas of the Credit, the 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 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 (President and CEO)

Thank you, Graeme, and good morning, everyone, and thank you for joining us today. This is really an exciting time for IAMGOLD. Over the summer, we saw the Côté Gold project make significant strides to where it is now, with our owner's team taking over the project, the mobilization of construction teams, and pre-commissioning activities ramping up towards production early next year. As we approach the production start at Côté, our intention is laser-focused on managing the ramp-up of the operation, with the goal in mind to make Côté one of the most successful large-scale mining startup to date in our industry. The importance of Côté Gold to IAMGOLD is clear. This is a project that is critical for the repositioning of this company.

As Côté online, IAMGOLD will have a higher production base, lower cost profile, with a strong foundation and long life of cash flow generations and growth opportunities in Canada. Turning to the quarter itself, I'm proud of the work that was achieved this year. To date, the total production from continuing operations of 329,000 ounces, putting the company well on track to meet its annual production guidance of 410,000-470,000 ounces of gold. We continue to see the resilience and professionalism of our Essakane team, with the mine on track for guidance this year, despite the complexities within the region. At Westwood, where our team's efforts to rebuild the mine underground has begun to show key improvement. We will walk through the quarterly operating results in more detail in a moment.

I want to be clear that our short-term goals for IAMGOLD are the following: bring Côté online with a focus on achieving a steady and sustainable ramp-up operations. Second, manage our operation at Essakane and Westwood with a focus on improving profitability while ensuring the safety of people and the community where we, in which we operate. In the longer-term, our goal, our goal remains that we want to become a low-cost, high-margin intermediate gold producer with a strong operating base in Canada. Financially, we will prioritize returning our 70% position in Côté with our partner, Sumitomo, as well as use our cash flows 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 has seen an improving trend year-over-year, with a days away restricted transfer duty rate of 0.36 and a total recordable injury rate of 0.66. This is all based on 200,000 hours worked. Ensuring all our employees and contractors go home safely would always be a 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, but also the places where we operate. On production, in the third quarter, the company produced 109,000 ounces of gold on an attributable basis, slightly higher than the previous quarter, bringing our year-to-date productions to 329,000 ounces of gold.

As we will get into in a moment, the production results were driven by Essakane performing effectively to plan, despite continued pressures on the supply chain, and an increase in tons from recently rehabilitated underground zone at Westwood. Despite these achievements, the third quarter saw a further increase in cost, with IAMGOLD reporting third quarter cash cost of $1,400 an ounce sold, and an all-in sustaining cost of $1,975 an ounce. On guidance, this bring our year-to-date cash cost to $1,288 an ounce, and an all-in sustaining cost to $1,803 an ounce, sitting above our prior guidance targets you see here on the bottom.

As a result, we have revised our cost guidance higher, with cash cost now forecasted to be between $1,250 and $1,335 an ounce, and an all-in sustaining cost to be between $1,750 and $1,825 an ounce. This increase in cost term and forecast is due to continued cost pressures at Essakane, resulting from the security situation, of which we will go more into detail. Furthermore, we have seen sustained elevated price from the recent inflationary period, and on that, we are seeing now some sign that prices are beginning to see some easing. However, the rate of easement never matches the pace of increase. Looking at our other guidance revisions, we have reduced in our sustaining capital forecast for Essakane and Westwood.

For Essakane, if you will recall, in the first quarter, we were unable to complete the planned stripping program due to supply chain issues, which was rectified in the second quarter, where the stripping program was in line with plan. This last quarter, we were able to start to recoup the shortfall in Q1. However, it does not appear we will be able to do so in time for calendar year-end. This spending will continue in 2024, in support of our 2024-2025 production plan. Likewise, at Westwood, we have reduced our sustaining capital as a result of increased visibility into end-of-year underground development and rehabilitation rates. With that, I will pass the call over to our CFO to walk us through our financial results and position. Maarten?

Maarten Theunissen (CFO)

Thank you, Renaud, and good morning, everyone. Looking at our Q3 financials, revenues from continuing operations totaled $224.5 million, from sales of 116,000 ounces at an average realized price of $1,937 per ounce. Adjusted EBITDA from continuing operations was $57.8 million for the quarter, translating to an adjusted loss per share of $0.01. In terms of our financial position, IAMGOLD ended the quarter with cash and equivalents of $548.9 million, and a fully undrawn credit facility, equating to total liquidity of approximately $1 billion. As noted in our MD&A, the company entered into a one-year extension of its credit facility yesterday, extending the maturity to January 31, 2026, from January 31, 2025.

As part of the extension, the credit facility was reduced or right-sized to $425 million, based on the company's requirement for a senior revolving facility on its overall business. The extensions allow for the credit facility to be available, as well as non-current during 2024, should we require additional liquidity when Côté has been commissioned and ramping up. We note that within cash and cash equivalents, $70.68 million was held by Côté Gold, and $54.6 million was held by Essakane. The company declared a dividend from Essakane of $120 million in the second quarter, which was received in the third quarter, net of minority interest and withholding taxes.

The company has to fund an estimated $325 million of the Côté project expenditures during the remainder of 2023 and into 2024, as the project is completed and commissioned, and plans to use the available cash and cash equivalents, undrawn amount under the revolving credit facility, and the remaining proceeds from the sale of the Bambouk assets. As we look forward to 2024, the gold prepayment is coming into focus. As per the arrangement, the company has to physically deliver 150,000 ounces over the course of 2024, with a collar range of $1,700-$2,100 per ounce on 100,000 of the gold ounces that will be delivered, and where the company will participate in the gold price within the collar range.

The company does not participate in gold price upside with the remaining 50,000 ounces of gold ounces that we need to deliver. While the gold prepayment arrangement reduces operating cash flow in 2024, the company could potentially roll forward a portion or all of the arrangement should the need arise. With that, I will pass the call back to Renaud. Thank you, Renaud.

Renaud Adams (President and CEO)

Thank you, Maarten. Turning to Essakane, the mine reported third quarter attributable gold production of 84,000 ounces of gold, bringing the year-to-date total to 264,000. This was down slightly from the 88,000 ounces produced in the second quarter on modestly lower throughput and grade. Mining activity totaled 10.6 million tons in the quarter, down from the prior quarter as the mining fleet did not operate at full capacity during August due to the disruptions in fuel supply resulting from the regional geopolitical issues, including the coup in Niger, as well as the continued challenges on the ongoing security situation within the country. The situation improved towards the end of the quarter, with the mining fleet operating at capacity during September and October.

Head grades remained effectively flat in the quarter at 1.1 g/t, which is below the reserve model grade, as mining activities worked through the upper benches of Phase V of the pit, and mined ore were blended with lower grade stock ground. We are seeing potential indications of grade improvement in the pit through September and October, as activity began to advance into lower benches of the Phase V. On a cost basis, Essakane reported cash cost of $1,370 an ounce, approximately $100 an ounce increase from the prior quarter due to higher volumes of operating waste, resulting from increased strip ratio as the mine enters new phases.

The impact of the security situation resulting in higher landed fuel prices, transportation and camp costs, as well as higher labor costs due to depreciation in the local currency. In addition to the fuel pricing pressures, power generation costs increased, as heavy fuel use normally was periodically substituted with more expensive light fuel to maintain operations when supply was limited. As mining activities improved into the fourth quarter, it is worth noting that at quarter end, there was sufficient full amount of fuel on hand to maintain normal levels of operating activity. Further, IAMGOLD at Essakane is expanding its fuel storage facilities by approximately 50% to mitigate the impact of potential limited fuel supplies in the future.

Despite the disruptions in August, Essakane was able to increase sustaining capital expenditures quarter-over-quarter, spending $36.6 million in the third quarter in support of the 2024-2025 production plan. While we revised our sustaining capital expenditure downwards to $125 million, following the challenging first quarter and disruptions in August, we are encouraged to see that a capital spending program was able to be deployed over the last two quarters. As a result, our all-in sustaining costs for the quarter were relatively high at $797.98/oz, sold reflecting the higher production costs and expanded capital program. The company continues to plan to file an updated technical report for Essakane that will also include an updated mineral reserve and mineral resources before the end of the year. Turning to Westwood.

Gold production was 25,000 ounces in the quarter, bringing the total production year to date to 65,000 ounces. This was an interesting quarter at Westwood, as we saw mining rates from underground take a step up, which resulted in a step down in cash costs. After the last 18 months of essentially rebuilding the underground mine, they are seeing now that Westwood can take the next step in production and cost reduction as we exit the year. Mining activity in the third quarter totaled 310,000 tons of ore, while underground contributing with 79,000 tons, which was the highest level we have seen since the reopening of the mine in 2021. This increase in underground t is attributed to the continued progress in rehabilitation and development of underground activities, which has resulted in an increase in production still available.

The mill throughput in the third quarter was 283,000 tons, an increase from the prior quarter when the operation was impacted from the early summer forest fires. The head grade increased to 2.94, 2.94 g/ton, benefiting from the increased production proportion of a higher grade ore feed from underground, in addition to the introduction of a higher grade material from the Fayolle open pit. Accordingly, cash costs stepped down in the quarter to $15.6 an ounce, so which notably includes an estimated $127 an ounce of cost related to the development incurred at the Fayolle, that was expensed due to the short life of the deposit.

Our all-in sustaining costs of $2,138 an ounce remain above the spot gold price, as the sustaining capital program continues to include development and rehabilitation work in support of the 2024-2025 mine plan. But as we noted in our MD&A in September, Westwood reported a major achievement, breaking even on an all-in sustaining cost basis. Looking ahead, Westwood is well on track to achieve the upper end of our 70,000-90,000 ounces of guidance this year. Production level and unit costs are expected to continue to improve into the fourth quarter, benefiting from the continued advancement of underground development, providing access to more and higher grade stocks. We are really excited to see the progress at Westwood.

I will note that we have deferred the release of our updated life of mine plans for Westwood into 2024, as the plan needs to be optimized based on the performance of the operation now that we are able to start mining in previously closed area of the mine. Turning to Côté Gold. I will pass the mic to our Executive Project Director in a moment to provide some highlights on the current status of the project. But first, I would like to draw your attention to the bottom of the slide. Since the commencement of the construction of Côté Gold and up to the end of September, $2.54 billion of the planned $2.965 billion of project expenditure has been incurred, with $425 million left to be incurred on a 100% basis.

The project remains in line with the budget. It is important to know that this total is for project completion, which includes the mobilization of initial production. Accordingly, we have noted that a portion of the project expenditures are expected to be incurred during commissioning and ramp-up next year. After accounting for the Sumitomo amended agreement to 61.3%, the working capital and leases, IAMGOLD has a remaining funding requirement to complete Côté Gold of $325 million. As a reminder, IAMGOLD ended the quarter with cash and cash equivalents of approximately $549 million, and total liquidity of nearly $1 billion. The company is sure well positioned to fund the remainder of the construction, commissioning, and ramp-up of Côté Gold. With that, I will hand it over to Jerzy.

Jerzy Orzechowski (Executive Project Director, Côté Gold)

Thank you, Renaud. The third quarter once again saw considerable progress at Côté, with great advancements in construction. But what was the most noticeable was a change in tone in the camp, as activities began to shift from major construction to finalization, pre-commissioning, and commissioning. At the end of quarter, the project was estimated to be 90.6% complete, and the construction at approximately 92% complete. I believe we hit peak camp capacity in the quarter, and since then, we have seen our numbers decline as certain contractors are being demobilized. Despite the crowds, our construction teams, contractors, and subcontractors continue to do a great job, as evidenced by the 13.2 million hours worked with total recordable injury frequency rate of only 0.68 project to date.

Looking at the site and moving from left to right, top to bottom, we have a bird's-eye view with the open pit mining operation in the top right picture, and the stockpile builder just below the Côté pit on the top slide. During the third quarter, the primary earthwork contractor was demobilized, successfully handling of its dewatering, pioneer drilling, and overburden stockpile activities to IAMGOLD operations and mining teams. There are now 14 Cat 793 autonomous haul trucks commissioned, and the autonomous drilling began in the quarter with the 4 Pit Vipers now in operation. Owner mining has progressed well, with nearly 1.6 million tons mined in the third quarter of 2024. The stockpiles surpassed 4 million tons at the end of October and is well on track to target build up of 5 million tons by the end of the year.

In the top center is a southwest view of the tailings management facility. As you can see, the second phase of the TMF is well on track, with the bulk fill material in place and at the target elevation, with some bedding and liner work going. At the end of October, we now have 1 billion cu m of water accumulated in the TMF, approaching our target of 1.1-1.5 million required for commissioning. Next, in the top right is a view of the north side of the plant, the high-voltage substation in the center. The primary power substation is operational, and energization is moving through the ground distribution network to the pit for shovel electrification. Bottom left is the conveyors and the crushing section. These are complete, with the first equipment testing started in October. But the middle is grinding.

Installation of the ball mill liners is complete, motors and sole plates are set. The mill has been turned on, but during testing, it was determined that the alignment on the ring gear of the ball mill was out of tolerance, so we have the OEM service team on site to address the problem. And finally, bottom right is the thickener and leach tank farm. Completion of the leach tanks is making progress following some delays. Leak testing commenced last month, and we are working through the progressive hydrotesting of this facility. Turning to the final of the timeline, Côté Gold continues to track well to the updated project schedule towards initial production in the first quarter of 2024. Our focus this quarter is completion of the processing plant and the ramp-up of the pre-commissioning and commissioning activities.

We are working in close alignment with our partner, Sumitomo, and our contractors to ensure that Côté is built safely, on time, and on the current budget and scope. With that, I will turn it back to Renaud. Thank you.

Renaud Adams (President and CEO)

Thank you, Jerzy. I would like to add that our focus is less on pushing to get the first gold bar out of Côté as early as possible, but rather ensuring that all the elements and preparation are in place for a smooth ramp-up of the project in the first half of next year. Our goal is straightforward: We want the ramp-up of Côté to be among the most successful project start-ups. We hosted an analyst and investor tour at the end of last month, and I believe it showed that we have hired people with the right experience and technical expertise for the commissioning, ramp-up, and operation of Côté. This is a team that has done it before, and I think we are well positioned to take the next step of the project.

Of course, when we're talking about the future, we need to continue to highlight Gosselin. At the end of last month, we announced the results of an additional 21 diamond drill holes at Gosselin that targeted the expansion potential of the deposit at depth, specifically below the east and west breccia body that a gap between these areas. The result confirmed the extension of gold mineralization in numerous drill holes up to 20 m vertically below the previous resource pit shell over an approximate 1 km strike length. The value of creative potential of Gosselin is clear. The deposit is right next to the Côté pit, with a minimum resources estimate of 3.4 million ounces of indicated and another 1.7 million ounces of inferred, and a high potential to grow this resource further.

Next year, as Côté ramps up production, we will continue to push the testing of Gosselin, including the advance of the metallurgical testing, mining and infrastructure studies, in order to begin reviewing alternatives for potential inclusion of the Gosselin deposit into a future Côté Gold life of mine plan. Côté Gold today is a project, but we believe strongly that this is the start of the mining camp and will provide a strong foundation for mining gold for many years to come. With that, I will pass, and I would like to pass the call back to the operator for the Q&A portion of the call. Operator?

Operator (participant)

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

Anita Soni (Managing Director)

Good morning, Renaud and team, and thanks for taking my question. So firstly, you know, at Essakane, you're talking about processing the stockpiles that you've built up there. I think it was 9.9 million tons over the life of the mine, and you're going to release a study on that. Could you remind me what kind of grades that you would see there? I know in the original heap leach, it was probably four times as much tonnage, but at lower grade. So I was wondering if you were going to be high grading that 9.9 tons of stockpiles.

Renaud Adams (President and CEO)

I'll ask Renaud to comment on that one, Anita.

Bruno Lemelin (COO)

Yeah, the stockpile for the heap leach was to be between 0.4 and 0.6 g/ton. We're actually studying the capacity to process that material to the CIL. That's the reason why we want to rejuvenate the technical report, taking this into account.

Anita Soni (Managing Director)

Okay. Wasn't that material, though, it was like 443 million tons, I thought, at 0.4 g/ton material. And you're only taking 10 million tons of it, so I was wondering if you were going to selectively upgrade it.

Bruno Lemelin (COO)

I can come back to you after this call.

Renaud Adams (President and CEO)

Yeah, I'm not sure, but the intention, of course, as would be highlighted, is to process all this ore, but in a conventional way rather than building capacity.

Maarten Theunissen (CFO)

It is the high-grade parts of the stockpile that is separated, that, that will be processed.

Anita Soni (Managing Director)

Okay. Or could it be that the 43 million tons is now just 10 million t, that you've used some of it over time? Anyway, we can take that offline. So in terms of Westwood, I was just wondering about the underground mining costs. Could you tell me what they were on a unit cost basis this quarter? I did notice a significant improvement in unit costs, and I wanted to get that into the model.

Renaud Adams (President and CEO)

Maarten?

Maarten Theunissen (CFO)

The mining cost was about $28 per ton for the total t before stripping, and it's about $90 per ton after you take out the development t.

Anita Soni (Managing Director)

$90, is that just the underground portion?

Maarten Theunissen (CFO)

Yes.

Anita Soni (Managing Director)

Okay. And then the deferral of CapEx-

Maarten Theunissen (CFO)

Sorry, Anita. Anita, apologies.

Anita Soni (Managing Director)

Mm-hmm.

Maarten Theunissen (CFO)

That is the total mining cost, including for the other areas.

Anita Soni (Managing Director)

Okay.

Maarten Theunissen (CFO)

I don't have that, that separated right in front of me, but we can get back to you on that as well.

Anita Soni (Managing Director)

Okay. Thank you. The deferrals of CapEx at Westwood and Essakane, would those move into 2024? Or, I think you said at Westwood there might be savings, but, but Essakane, I'm not sure what's, what's going to happen there, considering, you know, the shortened mine life. Is there, is there a thought that you probably won't do that stripping, or is that, is that ultimately going to be done in 2024 and 2025?

Renaud Adams (President and CEO)

Yeah, I think, I think, that's what we're going to be addressing. If you really look at the last three years, Anita, I mean, the mine has been systematically more on a strip ratio towards like between 2 and 3. And, as we mentioned in the earnings call, you know, there is effort now to increase that and catch up on some. So yes, you should expect 2024 and 2025 to come up more and the higher strip ratio to catch up so we could unlock in the further years the full resource.

Anita Soni (Managing Director)

... Okay. So what was the, what was the strip ratio like overall life of mine supposed to have been, and it was lower? I guess you said 2-3, so should have been more like a 4 or 5. Is that what it is, or?

Renaud Adams (President and CEO)

Yes, correct. So we intend to be more in the 4 or 5 and over the next 2 years.

Anita Soni (Managing Director)

Okay. Now moving to-

Renaud Adams (President and CEO)

And Anita-

Anita Soni (Managing Director)

Yep.

Graeme Jennings (VP, Investor Relations and Corporate Communications)

I'll just note that before the end of the year, we'll be coming out with that updated 43-101, which includes the full life of mine plan, so.

Anita Soni (Managing Director)

Okay. All right, now moving to Côté, my apologies to my colleagues, but there are a few questions I want to get down. So, maybe this is a question for Jerzy that the CapEx guide for the remainder of completion, I noticed, went from $825 million-$875 million, up to $875 million ±5%, which would imply a high end of the range at now $919 million. So I'm wondering why, why that increase, if it is indeed an increase, and what are the components of that?

The second part of that question, and this will be the last one, what would, how should we think about, first off, what remains in 2024 to be spent, like the breakdown between Q4 and then 2024 for initial capital of that $875 million? And secondly, what kind of sustaining capital are we looking at at Côté Gold in 2024?

Renaud Adams (President and CEO)

I think we'll pass it to, to Maarten for that.

Maarten Theunissen (CFO)

Hi, Anita. So, when we guided at the beginning of the year, we had a range, and the $875 million was the high end of the range. And that amount, based on what we've spent up to the end of 2022, would have gotten us to the $2.965 billion at 100% that we had in the technical report. Now that we are in November and close to the end of the year, we are indicating that we are still trending in line with the budget of $2.965 billion, and that the $875 million gets us there. So we've now just updated it because we're closer to the end of the project. We still have to incur $425 million at 100% to get to the $2.965 billion.

If you look at the amount that we incurred in Q3, it was $317 million. So we will continue to incur at that rate. But as we get closer to 100% construction, that tapers off, and that's why we are seeing costs being incurred in Q4 at around the same levels as Q3, maybe slightly lower, and then the remainder tapers off into Q1 of next year.

Anita Soni (Managing Director)

Okay. Sustaining capital question, can we get an idea of what that's gonna look like in 2024 now?

Maarten Theunissen (CFO)

We are working through our budgets on sustaining capital for next year. We are still guiding towards the technical reports with adjustments for inflation, but we will provide a detailed update on the production cost and sustaining capital early next year when we provide our 2024 guidance.

Anita Soni (Managing Director)

Okay. All right. Thank you very much. I'll leave it there.

Maarten Theunissen (CFO)

Thank you, Anita.

Operator (participant)

Once again, if you have a question, please press star then one. Being none, I'll hand the call back over to Graeme Jennings for closing remarks.

Graeme Jennings (VP, Investor Relations and Corporate Communications)

Thank you very much, operator, and thank you to everyone for joining us this morning. As always, if you have any additional questions, please reach out to Renaud or myself via phone or email. Thank you all. Be safe and have a great day.

Operator (participant)

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