IAMGOLD Corp (IAG) 2023 Q1 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD First Quarter 2023 Operating and Financial Results Conference Call and Webcast. (Operator Instructions) The conference is being recorded. (Operator Instructions)

At this time, I'd like to turn the conference over to Graeme Jennings, Vice President, Investor Relations and Corporate Communications for IAMGOLD. Please go ahead, Mr. Jennings.

Thank you, operator, and welcome, everyone, to the IAMGOLD First Quarter 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, Senior Vice President, Operations and Projects; Craig MacDougall, Executive Vice President Exploration; Jerzy Orzechowski, Executive Project Director, Cote Gold; and Tim Bradburn, Senior Vice President, General Counsel and Corporate Secretary.

Before we begin, we are joined today from IAMGOLD's Toronto office, which is located on [313 territory] on the traditional lands of many nations, including the Mississaugas of the Credit, Anishnabeg, the Chippewa, the Haudenosaunee and the Wendat peoples. At IAMGOLD, we believe respecting and the holding indigenous rates 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 of 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.

Thank you, Graeme, and good morning, everyone, and thank you for joining us today. First off, I want to thank and congratulate the IAMGOLD teams, including our Chair, Maryse Belanger, our Board of Directors and management, our operations, finance and business development teams and everyone in the organization for positioning the company to where it is today. The company reported a strong first quarter responding to challenges with 113,000 ounces of attributable gold production from continuing operation while diligently focusing on managing our cost input.

I have been asked by many stakeholders since I joined the company, what brought me to IAMGOLD, and where do I see this company in the future? I can tell you before officially starting in the beginning of April, I spent several weeks behind the scenes, getting up to speed on the company and learning about the achievement and progress of the operations in Cote. It was clear to me then and even more so now that IAMGOLD is on the cost of turning the corner towards the goal of being a leading midterm, high-margin gold business.

Our Essakane mine has been performing well with the teams in country, demonstrating great initiative with resiliency. Our Westwood mine is starting to make real gains on completing underground rehabilitation work and development in support of the future mine plan that is highlighted by new and transformative initiatives. Then of course, all eyes are on Cote, where the project continues to advance rapidly towards initial production early next year. The project was approximately 80% complete at the end of March and is ramping up to its activity levels with a clear road map in front of us to achieve success. The impact of Cote Gold on this company will be absolutely substantial with the long life, low-cost assets shifting our production base to Canada.

I'm excited and eager to turn our and the market's focus from looking back to looking ahead of what is to come. We will soon be making the transition from fixing operations and managing constructions towards the real value drivers in our business and demonstrating execution success, operation optimization and unlocking growth potential, also the benefit of our stakeholders. With that, I will now walk us through the quarterly results and highlights.

I'm on Slide 5. Starting with health and safety. While our metrics in the first quarter as track above our internal targets, this year remains in line with our peers, with a days away restricted transferred duty rate of 0.6 and total recordable injury rates of 0.84 based on 200,000 hours worked. Ensuring that all our employees and contractors go home safely will always be the primary focus of IAMGOLD. As we like to say, every gold ounce produced has to be done safely, and we continue to amend our systems safety protocol to ensure we achieve Zero Harm.

On production, in Q1, the company produced 113,000 ounces of gold on an attributable basis from continuing operations, putting us well on the path of our production guidance target of 410,000 to 470,000 ounces this year. As we will get into a moment, the production results were driven by higher-than-expected grades at Essakane and a continued ramp-up Westwood. The relatively strong production results and sales volume translated to cash costs of $1,094 per ounce sold. And all-in sustaining cost of $1,525 per ounce sold, lower than our guidance estimate of USD1,125 to USD1,175 per ounce for cash costs and USD1,625 to USD1,700 per ounce of all-in sustaining costs, mainly due to lower net planned stripping in this account.

Our costs were higher than in the same period of last year as the inflation in ourself, the industry experienced in the second half of last year brings a general cost of doing business and are unlikely to decrease at the same pace. While the first quarter costs were below guidance, I will note that we expect to see our cost increase in the second and third quarters of this year due to higher volume and of waste stripping planned during these periods.

And now turning to Slide 6. Turning to Essakane. The mine reported attributable gold production of 92,000 ounces with higher-than-expected head grade due to continued positive grade reconciliation and a direct feed of material from the bottom of Phase I of the pit. Mining activity were impacted by ongoing disruption in the in-country supply chain with Essakane mining just over 1.6 million tons of ore and 4.6 million tons of waste for total material minus 6.3 million tons versus the 15.2 million tons in the same period last year. As we saw during the period last year, the mining fleet could not be operated at full capacity during January and February as a result of disruptions and the fuel supply resulting from the security situation. It should be noted though that the situation improved during March, and the mining fleet was operating at near full capacity during April.

Mill throughput in the first quarter was 2.2 million tons at an average head grade of 1.6 grams a ton, with throughput 31% lower than the same period -- the same prior year period. The decline in throughput and lower plant utilization during the quarter is primarily due to the fuel supply constraint discuss. The mill achieved recovery of 91% in the first quarter as the plant continues to benefit from recent improvement to ore blending practices and the gravity circuit. Recovery from the gravity continue to increase over historical levels, and we are planning on installing additional screen in the second half of the year to target even further potential improvement.

On a cost basis, Essakane reported cash cost of $964 per ounce, an increase from the $781 an ounce last year due to inflationary pressures being offset by lower mining and milling costs as a result of lower activity level at higher grades. All-in sustaining costs were $1,157 an ounce coming in the long estimate as we were unable to undertake the planned stripping program (inaudible).

Looking ahead, Essakane is on track to achieve its gold production guidance range of 340,000 to 380,000 ounces of gold. Mining activity is trending towards normal operating levels in April and is expected that we will be able to operate near the normal levels during the remainder of the year, including the planned waste stripping in the second and third quarter to provide access to the required mining areas in order to meet the 2024, 2025 production plan. Mill throughput is expected to return to normal levels with head grades expected to decrease over the course of the year as the mill feed and corporates lower-grade material on stockpile.

Turning to Westwood. Gold production was 21,000 ounces of gold (inaudible) as a result of higher volume in our grades from underground as well as the contribution from the Grand Duc open pit. Underground development in the first quarter experienced near record development rates with 1,494 meters of lateral development completed to secure safe access to multiple ore faces, including high-grade gas producing area, which will allow for increased operational flexibility and support of the 2023 production plan.

I was on the ground at Westwood last month, spending in some of the [Keystones in the Central Zone]. And it is absolutely impressive what the teams have done to bring access back into this area. With a strong first quarter, Westwood is well on track to achieve its guidance range of 70,000 to 90,000 ounces of gold. And we expect to see an increasing proportion of our source from the underground mine as the year progresses. Mill feed will continue to be supplemented from available surface deposits, and we should know that our guidance includes supplemental mill feed from satellite deposits, including from the Fayolle property in the second half of the year.

Cash costs and all-in sustaining costs continued to remain high at Westwood Complex, with a very high sensitivity to mine output. But as the production volume increase and the rehabilitation work decrease, we expect to see significant cost step down with the goal of positioning the asset for free cash flow starting towards the end of the year, on time for a better and profitable 2024 and beyond.

Turning to Cote Gold. And I was mentioned by Graeme in the operating remarks, I am pleased to have our Executive Project Director with us today, and I will hand over the call to him in a moment. One of my first initiatives was when we started was to be a Cote, where I spent time at site with the team. It is very exciting to see the progress the team has made and see -- and I could see the project firsthand. Cote Gold, once up and running will be Canada's third largest gold mine and the impact that Cote will have in this company will be substantial. With the long life, low-cost assets shifting a significant proportion of our production base to Canada. Cote is now ramping up to peak activity. Now with the spring thaw is nearing completion, and there is a clear road map in front of us to achieve success.

Looking at the project spending. In Q1, the Project UJV incurred $158.6 million in project expenditures on a 70% basis, bringing the project to date expanded due to $1.37 billion on a 70% basis or $1.96 billion on a 100% basis. Cote Gold remains on schedule and the estimated attributable cost to complete the construction on a 70% in incurred basis with $625 million to $700 million, assuming a U.S. cap rate of 1.32. Accounting for a Sumitomo funding agreement, which Maarten will go into more detail. IAMGOLD is expected from $460 million to $535 million during the remaining of 2023 to bring the project to production based on it's 60.3% ownership in the joint venture.

With that, I will turn the call over to our Executive Project Director for additional remarks. Go ahead, Jerzy.

Thank you, Renaud. As mentioned, the first quarter saw important progress for the project, achieving significant milestones and efforts of [recent plant] and operation readiness. At the end of the quarter, the project was approximately 80% complete, having achieved 7% progress in the first quarter of this year during which was a cold winter season. We currently have over 1,700 workers on site, having recently added an additional 264 beds to support additional workforce for SMPEI construction activities, commissioning, operational resources this spring and summer.

On earthworks, we have achieved the first target of the TMF reaching the elevation of 392 in March in preparation for the spring freshet to allow for the water accumulation to support commissioning activities later this year. Having reached the freshet milestone with the scheduled float in the earthworks, we have used this opportunity to slow down a bit the earthworks progress to advance less ability progress on the process plant construction. Our focus in Q2 and Q3 will be on completing the construction of the portions of the plant and starting recommissioning activities. Q4 will be focused on finalization of recommissioning of preparations for the ore introduction to achieve first gold in Q1 and sustainable production next year.

Let me give you a quick commentary to the pictures on your screens. Taking it from the top left corner, this is the status of the high voltage incoming substation. We are planning to start early commissioning activities in this area early Q2 in preparation for utility collection of the primary power in August. Moving to our points. This is a grinding area. You can see the ball mill, which is from (inaudible) and vertimill progress. We had a very good progress in our fleet assembly and commissioning. All procurement is essentially complete and we have fourteen CAT 793F haul trucks, 2, 994 loaders and 4 D10 dozers delivered with assembly quite unbalance on the first electric shovel.

We have started the autonomous operation in the pit on early January with 4 to 6 trucks operating depending on the material delivery target area. And we are running autonomous fleet during the day and are planning to start 24-hour operation in Q3. Finally, you can see in the bottom left corner the birds-eye view from the (inaudible) side. This is another area which we are pushing to start recommissioning activities.

Moving to the time line. This is the high-level view. Cote Gold continues to track well to the updated project schedule towards initial production in early '24. We are welcome to close alignment with our parts in (inaudible) and our contractors to ensure that public move safely on time and on the current budget and scope. At this time, the critical part of the project continues to be through the processing funds as mining operations are well advance. A key event this summer will be collection of electrical substation to the power line. This will amount for electrification of the equipment in the plant as well as their own shovel in the pit.

The Hydro One power lines have been completed to site and substation made significant progress in the quarter. We are very much reliant on our workforce and on a major employer in the region. So I want to [thank from heart] our human resources team, ensuring a project is well staffed up. We are all let as good as our people, and I'm impressed with the team on the ground.

With that, I will turn it back to you, Renaud. Thank you.

Thank you, Jerzy. Of course, we cannot talk about Cote without talking about Gosselin. Earlier in the quarter, we reported as a result from the 2022 drill campaign, which successfully intersected mineralization to [Tesaro and below] the current resource foundry of the deposit. Gosselin with main and resources of 3.4 million indicated ounces and 1.7 million ounces inferred continue to be in the early stage of discovery. The deposit has only been drilled with a fraction of the meters compared to Cote and to half the depth. It remains open along strike and I doubt.

When you look at the Cote life of mine, there is a step down in production in year 2030 to 2033, which could be a logical fit to bring Gosselin into the mine plan. While there is still a lot of work to do in order to realize that. This year, we will be advancing technical studies to start reviewing alternatives of potential inclusion of Gosselin into a future Cote life of mine. We believe we are in the early days of the Cote district and believe that Cote Gold is not just a project, but the start of the mining camp with substantial upside to be covered within our nearly 600 square kilometers land package.

Now I will pass the call over to our CFO, to walk us through the financial review. Maarten?

Thank you, Renaud, and good morning, everyone. It was a busy quarter for the company following the strategic announcements at the end of last year. Before we look at the earnings, cash flows and liquidity picture, it is probably worth a moment to review the transactions and associated implications. Early in the first quarter, we closed the sale of the Rosebel mine, with total cash proceeds received of $386.4 million. We still expect to receive an additional $9.8 million by the end of the second quarter related to the cash still held at site and related working capital adjustments.

Subsequent to the quarter end, on April 26, we announced the closing side of our Bambouk assets for pretax gross proceeds of $197.6 million. The closing of the other assets of this deal, including the assets in Guinea and Mali are expected to close in the third quarter. The Sumitomo funding agreement announced at the end of last year began to take effect in the first quarter with Sumitomo contributing $189 million of total $250 million of the IAMGOLD funding obligations during the quarter. This effectively equated to a 7.5% transfer of interest in the project to Sumitomo.

Subsequent to the quarter end and as of May 1, Sumitomo has contributed the remaining $61 million to bring their project interest to 39.7% and IAMGOLD interest to 60.3%. As a result of the increased interest in the project, Sumitomo contributed $7.1 million in incremental funding for project construction. Over the remaining construction time line, Sumitomo will outplay approximately $82.8 million for a total of $90 million of incremental expenditures based on the increased 10% exposure to construction costs. As a reminder, IAMGOLD with the right to repurchase this 10% interest at 1 of 7 future dates up to November 2026, and we want to reinforce that it is ours and Sumitomo's intention for IAMGOLD to ultimately return to a 70-30 joint venture structure in the future.

With regard to the accounting for the transaction, IAMGOLD will continue to account for 70% of the assets and liabilities of Cote on our balance sheet. And the transferred interest will not be recognized as a sale due to the existence of the repurchase option. We have recognized a repurchase option liability that represents the amount of Sumitomo contributed on behalf of IAMGOLD, that is also equal to the amount that IAMGOLD means to base Sumitomo to repurchase our transferred interest and eventually return to a 70% interest in the unincorporated joint venture, and this is as at March 31, 2023. After achieving commercial production, we will account for 60.3% of the revenue and costs in our income statement and receive 60.3% of the cash flows.

Turning to the Q1 financials. Revenues from continuing operations totaled $226.2 million from sales of 119,000 ounces at an average realized price of $1,893 per ounce. Adjusted EBITDA from continuing operations was $83 million for the year, translating to an adjusted earnings per share of $0.05. Net cash flow in Q1 from operating activities was $28.1 million, and this includes investments in working capital related to the bottom of the stockpile in Cote and the reduction in accounts payables. Net cash from investing activities for the fourth quarter -- for the first quarter was $160.6 million and includes $386.4 million in proceeds received from the disposition of Rosebel, offset by capital expenditures of $215.1 million.

Net cash used in financing activities for the first quarter. After $2.1 million adjustment to foreign exchange rate impacts on cash and cash equivalents, was $64.4 million. This includes repayment of the credit facility of USD255 million, offset by proceeds received through the Sumitomo funding arrangement of USD196.1 million, of which USD189 million related to the funding obligation and USD7.1 million of incremental funding associated with Sumitomo's increased project interest.

In terms of our financial position, we ended the quarter with USD 532.1 million in cash and cash equivalents and USD 257.3 million available under the credit facility after USD 255 million repayment in the quarter. Taken together, this translates to approximately $789.4 million in available liquidity at the end of Q1. We note here that approximately $260 million of our cash and cash equivalents is held by the Cote UJV and Essakane. Essakane to UJV requires joint venture partners to fund and advance 2 months of future expenditures. And at Essakane, the company uses dividends and intercompany loans to repatriate funds from its operations and the timing of dividends is usually in the second and third quarter of every year.

We typically hold and guide on base just to account for between USD 200 million and USD 250 million of cash being held on our balance sheet for these normal course business purposes. As we discussed, we expect to see the Bambouk assets to close by Q3 this year for a total of $282 million of proceeds on a before-tax basis. And we are guiding this will translate to approximately $240 million to $250 million on an after-tax basis.

The closing of the sale in Senegal asset was completed in April for $197.6 million. We received $165.7 million in cash with the remaining $32 million expected by the earlier 6 months and the closing of the remaining transactions, and we expect the remaining transactions to close during the third quarter. When we look at the funding picture for Cote, as Renaud outlined earlier, we estimate the remaining funding requirement by IAMGOLD to complete Cote of $460 million to $535 million, whereas the project still on schedule as outlined by Jerzy.

Based on prevailing market conditions, which could impact project expenditures and operating cash flows, the company believes that its available liquidity at March 31, 2023, combined with cashflows from operations, the Sumitomo funding arrangement and the expected proceeds from the sale of the Bambouk assets, is sufficient to complete construction and ramp-up of the Cote Gold project, based on the current estimated cost and schedule. We continue to advance additional financing initiatives to strengthen our balance sheet and improve liquidity in order to place the company in a strong position to return to 70% interest in the Cote Gold project.

Thank you, Renaud.

Thank you, Maarten, and I want to take a moment here to thank everyone on the IAMGOLD team [for the facial thought] for our construction team at Cote for the tireless efforts and dedication as we continue to position the company for success. This is a real exciting time for this company.

With that, I will pass the call back to the operator for the Q&A portion of this call. Operator?

(Operator Instructions) Our first question is from Mike Parkin with National Bank.

Just with respect to Cote. Can you give us an idea of what the split is between mining overburden versus hard rock in the open pit? (inaudible)

Don't have Michael, Renaud here. So I don't have those numbers right now in front of me, but I can tell you that in the overall strip ratio of the project is in the range of the 2 to 1 as we move forward. But I don't have the numbers in the detail with me now but it comes to over burden versus the waste rock and ore mining per periods, but I'll follow up that with you. Just hold on, just hold on, maybe Jerzy has some more detail on it.

We have (technical difficulty).

(technical difficulty) just really looking in terms of like how are you progressing with the pit? Is it going as expected? Are you coming across, especially with spring breakup, is there any kind of challenging parts of the pit? Or are you able to kind of stay in harder rock while things kind of dry up and then getting back into overburden? Any kind of color that you could share on that would be appreciated.

Sure. As you've seen from the picture, we've managed [for a shell] very well in the pit. There was some which worked very well. So we didn't really get affected this year at all [value differentiate] season. We have accumulated just shy of 1 million tons of the various ore stockpiles up to now. And obviously, the blend between the rock for construction over burdens now very little left. And the [core] is changing dramatically over time because we are transitioning out of construction and to do more into the mining activities. So it's a very dynamic situation, I would say, but that should give you the color where we are in the overall progress there.

So Michael, what I can add to this as well. I was there not a long time ago and obviously visited the mining operations. And as you know, I've been involved in previous lives with the early days and following freshets. And quite frankly, it looks extremely good, very impressive, very impressive to see this -- those autonomous trucks operating. It really looks like a solid operations. And quite frankly, even though after the recent pressures, it's looks pretty dry, and we're going to be continuing to happen. And what I'm seeing now is I'm saying all the operation making their objective and can wait for the [electric trouble and what you enjoying that the dance]. So now it looks very good.

Okay. That's great. And then we're finding a lot of companies are kind of reporting an easing of inflationary pressures, especially on diesel, but kind of commenting that price pressures on steel, concrete are stabilizing. Are you seeing any wins like obviously, the weak Canadian dollar is helping you. But is there any wins that you're kind of seeing -- starting to materialize as we move into 2023 where pricing is actually improving or stabilizing that's giving you a bit of a tailwind.

Mike, it's Maarten. We are seeing inflationary pressures easing and certain costs are in line with what we experienced in Q4, but not necessarily lowering. The decrease in oil prices is not reflected in our Q1 costs due to the lagged impact of oil prices on the local pump prices, especially at Essakane. The impact of oil price changes also led due to our hedging program that already offsetted some of these increases previously recognized. We are seeing cost pressures on explosives at the mine. The cost of finite as well as grinding media, which is related to steel in line with what other people have seen.

Maybe Jerzy, additional comment.

Yes. On the project, we have 100% procurement complete. We are 99-plus percent fabrication complete. So all these elements are not really affecting the purchase piece. There are inflationary pressures on the labor market, driven both by the wage raises and also by the tightness of the market. And I think that's for the biggest problems usually will be right now.

Okay. And then just switching gears over to Essakane. Can you give us an idea of what your inventory capacity is there? Is it like how often do you need to, at a minimum, bring in delivery of fuel? And if you had to kind of lock down due to a potential security tightening situation there, could you kind of operate on an isolated basis for months to get through any kind of challenging kind of surrounding issues?

Yes. As I mentioned, Bruno, Bruno is with us in the room. So please, Bruno comment on that.

Yes. For the fuel inventory, we've been seeing some tightness on the -- in terms of supply chain. However, in April, we were able to resume our (inaudible) to a site. And we were able to also replenish our stocks. So we have [4 big, less or more] and we're able now to operate close to full capacity for now. Obviously, when we have difficulty to get and secure these stocks, those reservoirs get depleted, and we have to slow down the mining or mining activities while privatizing our milling activities, and we have enough ore stockpiles close to the mill to be able to come in gold production.

The next question is from Anita Soni with CIBC World Markets.

And firstly, Renaud, congratulations officially on your appointment of CEO at IAMGOLD. And then my first question, tailings dam, 1 and 2. I'm just looking at the chart at Cote. And it seems like those 2 particular aspects as well as a couple of the power projects are a little bit delayed. Can you talk about what the key like key, I guess, key items that you need to get those back on track? I would assume it's the rope shovel for the tailings dam. And once that's assembled, you can get moving a little bit more on tailings.

And I'll let Jerzy comment more on the critical path forward.

The power is under control, the collection of the power to the power grid in August is actually not on a critical path. The substation commissioning, as I said in my opening notes, was scheduled to start in early Q2 and did start this plan. So we don't see it as a risk piece. The TMF itself, we still have to finish raising the dam for the end of the year, but there was a float. And that's what I said, we defocus from this area and pushed harder the process plan, the critical path forward for the process plant current, which is the [dry infection] with crushing and then grinding and refines.

Okay. So the TMF is not only critical -- sorry, the TMF is not on the critical path, but I mean how much capacity are you -- would you have by the end of this year for the tailwind dam?

On the capacity. So basically, after this year, we'll be planning for execution of a raise next year. We're going to be operating like this on a phase-by-phase basis.

Okay. For the next year, okay. And sorry, remind me what kind of a tailings dam is it upstream -- sorry, downstream or central line?

The current construction is downstream. The next year ranges are central line.

So next year is a central line.

Yes. Sure.

All right. And then the second question on Essakane. I'm just trying to understand the sort of overall cost structure. This quarter, you adjusted out some supply chain, I guess, fuel disruption costs. So when you're guiding to what you're guiding to right now, like I'm trying to understand, it's going to go up over the next couple of quarters, I think, is what I saw in the commentary. And then you're also saying that it will be at the higher end of what you guided to this quarter, you came in at the lower end. So I guess I just want a little bit more color about all of these moving parts with where we should be on our -- like on our costs for Essakane. I just -- I'm trying to understand, would that like be prior to like the overall guidance, would that be prior to adjusting out fuel disruption costs? Or is that including the fuel disruption cost?

Yes. So the first comment on this is, obviously, when you look at the current cost structure and you look at the capital ways, the capital component that was not achieved. And if you would do the simple math and additional capital but not to forget that even though the operation was not at 100%, there is a significant part of the fixed costs that are still there. So it's not a direct math. So as we advance and we bring back the operations to its full capacity, there will be an adjustment here on the ratio fixed variable.

Yes, there is a chance that by the end of the year, we might be more like towards the high end of the guidance. But -- but it's not like a direct math basically. So we're confident that our unit cost per instance on a per ton basis would lower as a highest volume and so forth. So we remain confident. But yes, there is a chance we're more on the high end on the Essa basis.

(Operator Instructions) The next question is from Farooq Hamed with Raymond James.

My question really was I just wanted to maybe contextualize and understand the additional Sumitomo funding that you had at the beginning of the year that's now reached $250 million. And well, I guess, by the end of this year, reached $340 million. So I'm just trying to understand kind of the cost of this funding. So based on the fee that you'll be paying, which is the SOFR plus 4%, does that work out to basically somewhere in the kind of high 8% range for the fee that you're paying on that funding. And so by the end of the year, are we looking at something like $30 million a year in funding costs for that Sumitomo funding? That's the first part of the question.

So yes, the funding that we -- that they've made, the $250 million, that is the cash goals that IAMGOLD was supposed to make, but they actually submitted our cash flow and the $250 million is the amount that then reduces our interest in the project. So that is not complete. So the 60.3% ownership won't change further as we continue on. Because they now own 9.7% extra on the project, they are actually contributing more to the project than what it was before. The reason we mentioned it is this approximate incremental contribution by them of $90 million is important to understand IAMGOLD's liquidity position because the -- on the 70% basis, the UJV required funding of $800 million to $875 million. And to the meantime, was effectively funding $340 million of that. From a cost perspective, the charge would be on the $340 million based on SOFR, it's between [8% to 9%]. So yes, we've had $2.6 million of a fee in Q1 on that. And then we expect that to be about $13 million, as you said, by the end of the year.

Okay. So that's helpful. And then -- so that's -- the next question was really what's the frequency of the payment? Like will you have to pay that on a quarterly basis? Or kind of what's the cadence of how you'll be paying those fees.

So during this year, the costs will be included in the repurchase price. So we have to pay [340-plus] this repurchase option fee that accrues during 2023. And then starting in next year, we'll be buying the option fee in cash. But the fee for '23 will only get paid once IAMGOLD exercises the repurchase option.

Okay. I see. So you're saying that 2023 fee will only get repaid when IAMGOLD exercise as the repurchase option. But 2024 through 2026 that will be an annual payment.

Correct on the '23 piece, in '24, it will be a quarterly payment.

On a quarterly basis. And that fee will basically be accrued and paid until you exercise the right to repurchase, correct?

Yes. And also this is not seen as interest. So it does not part of our covenant calculations.

It doesn't. Okay. And so then in terms of your ability to repay or your desire to kind of repurchase that 9.7% that you mentioned at the beginning of the call that it's your intent to repurchase it. I would assume that this source of financing is probably one of the higher cost of your capital structure. So when you talk about other financing alternatives, would you look at other financing alternatives to help finance the repurchase sooner rather than later?

So when we negotiated this deal, we wanted to ensure that we have multiple options and time lines to repurchase it. And for us, it would make the most sense to repurchase it, once the project is profitable because then going forward, you're buying free cash, 9% extra free cash flow. So we will be basing it based on that. And then that is kind of what's driving the economics of this deal as well, because once Sumitomo retains the additional 9.7% of project economics going forward, repurchasing that makes the deal more cost effective for us.

The next question is from Jackie Przybylowski with BMO Capital Markets.

Maybe I'll start by following up on Farooq's question. On the Sumitomo financing arrangement. I know you mentioned in the release last night and then again in your remarks that you're looking for other options to shore up your liquidity or maybe repay that sooner rather than later. Can you talk a little bit about what those options might look like in terms of where you see other sources of potential funding today?

So Jackie, we're looking at a broad spectrum of options. And when we analyze our options, we consider that the 5 years of Cote's production is a lot higher than the life of mine production profile with significant cash flows coming from that period. So when we look at options, we would want to -- we would prefer something that helps us to get back to a 70% interest, but that we can reverse something that is less permanently [venture] because Cote can repay high levels of cash flow. So we don't necessarily want to further encumber the asset with permanent type transactions.

Okay. And maybe a similar question. On Essakane, is there any thought at this point to selling Essakane in your portfolio? And I recognize that would probably not be possible today until Cote's up and running. But once Cote's up and running, do you think you will view Essakane as core to your operations still at that point?

Well, I can say that any asset that produces this amount of ounces of that kind of margin and the free cash flow is absolutely welcome. To be very frank, what we're really busy now is to really looking at all kind of alternative to extend the life of mine. We look -- we have to look at the business profile goal today as 2 mega mine capacity of generating significant free cash flow for this company. We do appreciate that we have some security disruptions in so far in the last month. But the focus of the company right now is to make sure that the operations is back on track with 100% capacity generates the free cash flow that it has.

And I'm sure in the opinion that the asset has a lot of capacity for extending the life of mine. And one thing that unfortunately has occurred in the last while has been the parking of our drill. So this is also one thing where we're looking at how could we get back the drill at play and how could we look at those -- this significant potential and so forth. What the future is going to bring to us as we advance in time is as we continue to design this company to become a long life company and high free cash flow, high margin. And so far, we'll see. I don't have a crystal ball on everything, but I can assure you that the focus of the company right now is to make all our portfolio working at its full capacity and potential.

Congrats on a great quarter and Renaud congrats on your new appointment.

The next question is from Tanya Jakusconek with Scotiabank.

And Renaud, again, congratulations on your new appointment, and I look forward to working with you. I'm sorry, I just got on the call as I was stuck on another call this morning. Maybe just circling back to a couple of things. One is just on this additional source of funding, so what I heard from the previous question is that you didn't want to impair the asset any further Cote within those first 5 years because of the significantly higher production coming out. So can I assume from that, that an additional royalty and/or stream on that asset is not something you're looking at.

And then I'm just trying to understand like the priorities of your additional funding options, would it be selling of assets, maybe Westwood or Essakane first, and then it would be equity and then it would be streams. I'm just trying to understand the priorities of your options and what specifically the options would be?

A wide range of possibility you're giving me. First and foremost, thank you for your kind words. And as Maarten was highlighting, Cote is going to be the cornerstone asset of this company moving forward. And the 2 priorities obviously is first eventually being a possibility and the decisions to get back to our 70% is our joint venture. And as we see it as a cornerstone asset, I think the last thing we want at this stage is to add anything on top side of the current. So this is not really what we see for this asset. Now how exactly are we going to be capable over time to address the additional financial flexibility that Maarten was talking about, the 70%, there is a wide range. But I think the way we're looking at this company moving forward is to make sure to not make any move that will position us for the long term. And that's what I can say at this stage. I think the focus of this company is to make sure that as we move forward, we keep improving the product as we move forward and not at the early stage being in a position to maintain or to position this asset with anything that would remain in time.

Maarten, if you want to add anything to this?

No, I think that's exactly the thing. So we look at our capital structure and future cash flows very closely when we make this assessment.

Okay. So I guess I get from that streams and royalties would be like the lowest down the pecking order of options and equity and asset sales would be higher. Would that be a fair statement?

We don't really want to say exactly. But yes, if we look at permanent stakes in our capital structure, [debt] is the least permanent. And then as you look at things like royalties if we can't buy it back, that would make it more permanent.

Okay. That's great. And then maybe, Renaud, and I apologize, I was late on the call again. Maybe if you could just -- and I know you've just been on the role for 1.5 months or so. Maybe if you could just outline sort of your 3 key strategic focuses for IAMGOLD for, let's say, the next few months or the rest of 2023, just so that I can try and understand as you look at the year, what are your 3 priorities.

Well, the first one is of course, health and safety and I really don't want anyone to think that it's just a financial exercise this. And so sustainable in the ESG health and safety people would always remain. But I think your question goes more like to the business side. So the priority #1 is obviously, the completion -- the successful completions of Cote and the very successful ramp-up as we move into 2024. There is one objective is to achieve a very successful ramp-up. So completing the construction and the way that would allow together with the operating readiness of that is [what we're in] is the key on the business side of this company as priority #1.

But equal to that, when you're looking at, as accounting for instance, like what this asset has provided to us over the past, yes, there's been some security, but I think we're turning slowly in the corner. I've seen significant progress. I see Bruno mentioned in the previous questions, our fuel inventory has increased the level that we haven't seen for a while. That kind of things you know is where like the team is focusing. So if there is one thing that I would like to achieve before the end of the year is to see the asset returning to his 100% capacity, generating the free cash flow that he was planned to see the drill if possible, being back at play as well and start working and extending the life of mine.

And I must say that I remain consciously optimistic to the Westwood. But [one last thing at] Westwood when I visited the asset, I think is an unprecedent like set of initiative. And whether it's how we look at the ground control, how we look at seismicity and the control of that, how we look at how we mine sequencing a bit. I've seen for the first time a team that is addressing the situation in a different way. Sometimes you need to stop and have the courage to stop and think and bring in all different views. And I think that remains a very, very important objective for us to work towards returning -- not returning, but positioning the asset to the free cash flow towards the end of the year. So we can start looking at a bright future for Westwood.

So those are really the 3 assets. Maarten talked about the financial piece of it. We're well funded. We have no concern on our ability to complete the construction of Cote, to ramp it up. We're good in that. But this is a cornerstone asset. I wouldn't tell our stakeholders and shareholders and that we're not going to be looking at alternatives to how we could improve our financial flexibility and eventually position this company for a successful return to the 70%. So this is all a lot of activities ongoing, but we have a strong team in every pieces of the puzzle. And my role is to make sure that we achieve all of them and working and supporting the team. I hope this answers your question.

Great. It gave me some clarity on that. And again, congratulations, and welcome.

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

Thank you very much, operator. Thank you, everyone, for joining the call this morning. As always, should you have any additional questions, please reach out to Renaud or myself. With that, we will end the call. Be safe, and have a great day.

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