IAMGOLD Corp (IAG) 2021 Q3 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Third Quarter 2021 Operating and Financial Results Conference Call. (Operator Instructions) The conference is being recorded. (Operator Instructions)

I would now 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 Third Quarter 2021 Operating and Financial Results Conference call. I'm pleased to have joined the IAMGOLD team this weekend to host this call today. Joining me on the call are Gordon Stothart, President and Chief Executive Officer; Daniella Dimitrov, the Executive Vice President and Chief Financial Officer; Craig MacDougall, Executive Vice President, Growth; and Tim Bradburn, Senior Vice President, General Counsel and Corporate Secretary.

Our remarks on this call will include forward-looking statements. Please refer to the cautionary statement included in the presentation under the heading cautionary statement regarding forward-looking information and be advised that the same cautionary language applies to our remarks during the call. Non-GAAP measures will also be referenced on the call, and we direct you to review the cautionary statement included in the presentation and the reconciliations of these measures, included in our most recent MD&A, each under the heading non-GAAP performance 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, Gordon Stothart.

Well, thank you, Graeme. Good morning, everyone, and thank you for joining us. And for those of you that joined us on the Cote tour, thanks again for that. That was great. So in the third quarter of 2021, we saw an improvement in our operating performance. We produced 153,000 ounces of gold on an attributable basis, supported by the continuing strong results at Essakane. Rosebel performed in line with the revised plan and year-to-date attributable gold production of 448,000 ounces, and our updated full year guidance remains at 565,000 to 605,000 ounces.

Cash costs and AISC are expected within guidance, although certain cost pressures continue, including higher logistics and consumables costs, including fuel. We continue to monitor and opportunistically execute on various hedging transactions, including currency, in line with our input cost risk management practices. Year-to-date, operating capital expenditures were $166 million and are expected to be below guidance of $260 million, primarily related to timing of spending on capital improvement projects.

At Cote, while we expanded $72 million in the quarter, we actually incurred approximately $123 million with the delta sitting in working capital. Capital expenditures at Cote in 2021 are expected to be approximately $350 million. At a corporate and the strategic level, we have approximately $748 million in cash, cash equivalents and short-term investments and approximately $1.2 billion in total liquidity. IAMGOLD generated $31.9 million in mine site free cash flow during the quarter with an adjusted loss of $20.1 million or $0.04 per share.

We are very pleased to have announced our inaugural greenhouse gas initiative as part of our zero harm vision, with a commitment to achieve net negative emissions by no later than 2050. And in line with our board renewal strategy outlined earlier this year, we have strengthened our board with 2 very experienced professionals with extensive technical, operations and sustainability experience. From a growth perspective, as indicated in our October Q3 update and Cote quarterly update news releases, construction activities at Cote continue to progress per schedule, reaching 36% project completion and 85% detailed engineering complete at quarter end. We were pleased to host an investor and analyst site tour in mid-October, just as the first deal installation of the process building commenced, and you can find the presentation from our site visit on our website.

At Gosselin, we achieved a significant milestone with the release of an initial mineral resource estimate totaling 3.4 million ounces of gold in the indicated category and another 1.7 million ounces of gold in the inferred resource category. IAMGOLD continues with its commitment to achieving high standards in environmental, social and governance practices, which are reflected in our long-held zero harm vision. As noted earlier, we announced our inaugural greenhouse gas initiative with a commitment to achieve net negative emissions by no later than 2050, and we expect to provide a more detailed road map and interim targets as we go into 2022.

In partnership with Giants of Africa, a 4-year program aimed at youth development in West Africa. We are very pleased to jointly complete and unveil a new basketball court at the City Youth Center in Ouagadougou, Burkina Faso, this month this past month. During the quarter, we also published our 2020 sustainability report in accordance with GRI and SaaS B reporting standards. We have committed to also report in accordance with TCFD guidelines by the end of 2022. And I have already mentioned the strengthening of our board with 2 new additions, Dr. Ann Masse and Kevin O'Kane. For each of our sites, we have continued with our proactive management of COVID-19 in implementation of established protocols. At Essakane, Covid management remained stable with 60% of the workforce fully vaccinated.

The COVID-19 situation in Suriname and its site remains fragile. Mandatory antigen testing continues to be in place, among other mitigating controls, and approximately 24% of the workforce is fully vaccinated. At Westwood, the COVID-19 situation remains stable. And at Cote, some cases were experienced by a small number of workers during the quarter, resulting in a heightened testing and implementation of additional constraints on-site circulation, which limited the number of cases and had no material impact on project activities.

At Boto, testing and contact tracing protocols remain in place with no material impact on project activities. We continue to be proactively focused on safety, implementing a number of initiatives to promote a safe working environment. At Cote Gold, we had achieved another milestone with over 2.9 million hours and 1,100 days without a lost time injury since October of 2018. Our year-to-date DART, which stands for days away restricted and transferred duty, frequency rate of 0.38 and the TRI or total recordable injuries frequency rate of 0.74, respectively, per 200,000 man hours worked, continue to outperform our consolidated annual targets of 0.51 and 0.85, respectively.

I will now review our operating performance in more detail. So asset can continued to perform strongly in the quarter with attributable gold production of 106,000 ounces at cash costs of $878 per ounce sold and all-in sustaining costs of $1,033 per ounce so. Production benefited from an increase in mill throughput and improved gold recoveries as positive impacts of the mill debottlenecking project are being realized. As noted in prior quarters, the improvement in capacity from the mill optimization project is important as Essakane moves to greater volumes of transition and hard rock versus softer rock in the coming years. As reported on Friday last week, a security incident involving shuttle buses carrying personnel took place on root to the Essakane mine. We are very pleased that all of the personnel involved in the incident are secure and safe.

We continue to assess the security situation and make appropriate precautionary adaptations. Engagement with relevant authorities and partners continues with no material impacts to date. IAMGOLD remains strongly committed to ensuring the health, safety and security of our personnel and operations.

Looking forward to the balance of the year. Year-to-date attributable gold production was 314,000 ounces, trending towards the upper range of our production guidance of 390,000 to 400,000 ounces for Essakane. Certain cost pressures are expected to persist, including transportation, security and consumables.

At Rosebel, following a very challenging second quarter, attributable gold production improved by 60% to 40,000 ounces, as the operation achieved its highest mill throughput since the pandemic and was supported by higher grade as pit conditions and access after the rainy season improved. The COVID-19 situation remains fragile and continues to impact workforce productivity. We continue to monitor and implement mitigating measures to reduce the impact on operations. To date, since the start of the pandemic, close to 1/3 of our workforce has tested positive for COVID-19 at one point or another, although the majority -- a large majority of those individuals have subsequently recovered. This has required significant flexibility of our operating teams to manage productively with our COVID-19 protocols to ensure the safety of our workers and of our communities.

The mechanical condition of the gravity and leach/CIP circuits has been negatively impacting recoveries and is resulting in higher than normal levels of in circuit gold inventory, in turn, impacting gold sales. The ongoing project to improve the efficiency of our ADR circuit is expected to be completed by year-end, with improvements in both recovery and reduced in process inventories expected to be realized starting next year. The maintenance backlog of mining and mill equipment continues to impact availability, deliveries of new equipment aimed at improving availability have commenced. Recurrent pit intrusions by illegal miners continue to impact production at Royal Hill, collaboration with the government task force in local communities is ongoing in an effort to reduce intrusions and implement long-term and sustainable solutions.

Cash costs of $1,796 per ounce sold and all-in sustaining cost of $2,156 per ounce sold were impacted by higher costs and a net realizable value of gold inventory stockpile write-down, which accounted for approximately $300 per ounce increase to both cash cost and AISC for the quarter and lower gold sales. At Saramacca, construction of required infrastructure is continuing at the facility pad, the sedimentation dams, haul road and public road crossings and works on the West dump grain, all to be completed in Q4. We expect certain cost pressures, including higher logistics and energy costs to persist.

In addition, we have been working on a new geological model to form the basis of an updated mineral inventory estimate to be released in the first quarter of 2022. Based on currently available information and given the negative impact of certain factors, including higher costs, we expect that mineral resources will likely decrease and mineral reserves may decrease by more than depletion. Westwood produced 7,000 ounces in the third quarter, with the mill processing mainly Grand Duc open pit or supplemented with underground or from East zone where mining restarted in June.

Mill throughput was impacted by lower availability due to an increase in the ratio of Grand Duc hard rock, solutions to improve processing of Grand Duc hard rock or being investigated. Although underground mining productivity is improving, production continues to be impacted by labor shortages as well as the impact of implementing additional safety measures. The company is using additional training, schedule changes and focused hiring activities to mitigate the challenging labor market conditions and productivity rates.

We do expect to provide a 3-year operating plan update with the release of 2022 guidance and continue to evaluate the optimal path forward for the company and our site workforce. I will now provide an update on the construction progress at our Cote Gold project. As of September 30, the project was 36% complete, with detailed engineering reaching 85%. The project expanded $71.6 million in the quarter and $264.6 million since July 1, 2020, when the project was announced. While incurred costs for the quarter were 122.7 and $368 million since July 1, 2020. The remaining project costs from October 1 onwards are estimated at between 860 and $910 million.

Progression of earthworks activities, including ongoing haul roads construction, water realignment channels work and construction of dams occurred during the quarter. We completed the 2021 fish relocation program within the open pit footprint, which was very critical for mining sequencing. The TMF water management infrastructure is currently being installed, including coffer dams and pumping stations. Pre-stripping work continued with open pit drilling, blasting and crushing and mining reached the key elevation of 382 meters above sea level, which had originally been targeted for year-end 2021. Plant civil works progressed with the combined placement of precast and cast in place concrete. Most of the process building structural steel is on-site and pre-assembly started in Q3. First deal installation of the plant building shell commenced in mid-October and is progressing well.

The permanent camp has also progressed with commissioning now at 95%, currently accommodating over 800 workers at site at the end of the quarter. Operational readiness advanced, focusing on a number of areas, including organizational design, hiring strategy and technology as well as spare parts for critical equipment and training plans for autonomous haul trucks, among other elements.

For the balance of the year, the work plan will continue to focus on earthworks, including the first ore excavation and concrete works progressing with the installation of the process plant building, initiation of mine facilities construction and completion of the remaining works for the camp while switching the camp to grid power. Remaining capital costs in 2021 are expected to be approximately $150 million.

As previously disclosed on October '18, operating metrics for the Cote Gold project as outlined in a technical report that will be published by December 2, reconfirm Cote's robust Tier 1 low-cost and long-life asset. At a $1,600 gold price, the project has an NPV of $1.6 billion with a 19% IRR on a 100% basis. Life of mine production is expected to remain at an average of 367,000 ounces on 100% basis and is expected to average 489,000 ounces per year over the first 5 years. ASC is expected to average approximately $802 per gold ounce sold.

We remain on track for reaching commercial production in the second half of 2023. And this slide shows a number of pictures illustrating the progress achieved at site. You may also access a virtual 360-degree tour of the site by following the link at the top right corner of this slide, and that is accessible on our website.

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

Thank you, Gord, and good morning, everyone. I will now provide an update on development and exploration projects. On October 18, we announced the results of a major objective in 2021, which was the completion of an initial mineral resource estimation of the Gosselin deposit located immediately to the northeast of the Cote Gold deposit. Reported mineral resources are comprised of 3.35 million ounces in an indicated category and a further 1.71 million ounces in an inferred category at overall grade similar to the Cote Gold deposit and reaching the upper end of our initial exploration target.

The addition of the Gosselin deposit to the total mineral resources in the Cote District represents a 33% increase with respect to ounces in the measured and indicated categories and a 45% increase with respect to ounces in the inferred category. A couple of other highlights before I leave this slide. Since the Cote project was acquired in 2012, our exploration efforts have now increased total resource ounces by nearly 3x, certainly with potential to continue to increase this rate of resource growth. I also want to highlight that the discovery and delineation cost of the Gosselin deposit, currently sits at $1.67 per ounce, which I think you will agree is a remarkably low discovery cost investment.

I think you'll also find this next slide very interesting, showing the proximity of the Gosselin resource pit shell and the Cote resource pit shell. First, you will note that the Gosselin zone remains open along strike to the Northeast to the right of the slide, and the deposit has only been drilled to about half the depth of the Cote deposit and remains open at depth where a number of our drill holes ended in mineralization. Also note the overlap of the 2 independently derived resource pit shells, which provides opportunity for an optimization of a combined pit shell selection, which may unlock ounces in the overlap area. So overall, we feel the potential to expand the resources remain quite positive as we have previously demonstrated at Cote itself, and this will be a focus of future drilling programs.

Finally, to wrap up on exploration. We have a number of ongoing programs at both operations and resource stage projects focused on the delineation and expansion of resources. But most of the industry, we are seeing impacts, however, on our programs relating to the availability of drilling contractors and lengthy assay turnaround. And with that, I will pass the call over to Daniella.

Thank you, Craig, and good morning, everyone. The following are some key highlights of our third quarter financial results. We reported adjusted EBITDA of $82.5 million from sales of 165,000 gold ounces on a 100% basis at an average realized gold price of $17.87 per ounce. We reported adjusted net loss of $20.1 million or $0.04 per share for the quarter. And we also reported mine site free cash flow of almost $32 million, an improvement over the prior quarter and totaling $121.6 million for the 9 months ended September 30, 2021. In terms of our financial position, we ended the quarter with cash, cash equivalents and short-term investments of $748 million.

We continue to maintain a largely undrawn credit facility of $500 million maturing in January 2025, resulting in total available liquidity of approximately $1.2 billion at September 30. As Gord mentioned, we continued to opportunistically enter into Canadian dollar currency hedging transactions in the third quarter to derisk Cote's Canadian dollar project cost exposure during the construction phase. Hedges at a rate between 1.28 and 1.47, together with Canadian cash on hand, now cover 100% of Cote's estimated Canadian dollar exposure in the fourth quarter. Hedges at rates ranging between 1.3 and 1.48. together with Canadian cash now covers 75% and 48% of Cote's Canadian dollar exposure in 2022 and 2023, again, as it pertains to project construction costs.

Additionally, we have hedged 100% of the project's total expected fuel cost for the construction period. Please note that the updated hedging program slide at the end of our presentation presents the consolidated hedging program for the company. So for example, the percentage of Canadian USD hedge represents the percentage of our consolidated exposure versus just Cote Gold, which is the figures I just presented to you.

Looking forward, cash cost and all-in sustaining costs are expected to be within the 2021 guidance range. Cost pressures experienced year-to-date, including higher logistics and consumables, including fuel, are expected to persist. Operating capital expenditures are expected to be below the $260 million guidance, primarily due to timing of spending on various capital improvement projects.

Capital costs in the fourth quarter at Cote Gold are expected to be approximately $150 million. Taking a closer look at our cash flows in the third quarter, our cash balance decreased by almost $83 million, primarily resulting from the advancement of construction at Cote Gold. Cash generated from operating activities of $88.6 million was partially offset by income tax paid of almost $10 million. Movements in non-cash working capital items and non-current ore stockpiles resulted in an outflow of $1.1 million, reflecting an increase in inventories and non-current ore stockpiles of $13 million, primarily due to higher cost of production at Rosebel, and this was partially offset by an increase in accounts payable and accrued liabilities of $11.6 million.

Outflows from investing activities reflected capital expenditures of almost $139 million and capitalized borrowing costs and other investing activities of $3.7 million. Net cash used in financing activities reflects payments of lease obligations, dividends paid to minority interest, principal and interest payments on equipment loans and the impact of FX fluctuations on cash in the period. As noted earlier, our cash position at the end of the quarter was $748 million. Net cash was $213.6 million, with total available liquidity of over $1.2 billion at September 30.

I will now pass the call back to Gord to conclude.

Well, thank you, Daniella. So looking ahead at Q4 and into 2022. At Essakane, the mill optimization project continues to demonstrate improvement in hard rock or processing capacity, which is expected to continue over the balance of the year and stabilize to provide additional crushing capacity for hard rock throughput.

At Rosebel, we continue to implement a number of initiatives to address the operational and COVID-19 headwinds encountered year-to-date in 2021, and we are progressing on the remaining Saramacca infrastructure. At Westwood, we have restarted mining in the East zone and continue to assess the optimal path forward. At the Cote construction project, we're at 36% overall project completion and 85% detailed engineering and construction is progressing aggressively as we move forward. We continue to derisk moto. And in exploration, we have completed our objective of releasing an initial mineral resources for Gosselin in 2021.

Thank you to everyone for joining us today, and I will now pass the call back over to the operator for Q&A.

(Operator Instructions) Our first question comes from Tanya Jakusconek from Scotia bank.

I just have a couple, if I could. Gord, can I start with you? Just wanting to understand a little bit about the cost inflation that you are seeing, and I appreciate that you haven't given 2022 guidance, but you keep coming back to higher logistics, energy costs, consumables. So I get that the energy cost consumables, higher logistics is that come around just what's happening with security at Essakane and some of the logistics at Rosebel? And can you kind of give us an idea of what that would be, like per ounce sort of additional costs we're incurring?

I don't have the exact dollar per ounce that we're incurring for logistics, Tanya, but we'll dig that up and get back. I can say you're effectively correct. We are seeing additional logistics charges for security and some of the other measures we've taken. We did, I think, at an earlier date, released some numbers around the amount of impact we're seeing in the neighborhood. It's below $20 an ounce at Essakane, I believe. But like I say, we'll come up with the numbers. But beyond that, generally, certainly, consumables, grinding steel, especially cyanide and fuel. But additionally, shipping rates are up, and that does impact surcharges for a lot of the bulk materials we receive and/or parts.

So there's generally a lot of friction in the supply chain system, which is generating some spiky results. We're looking at that really hard. We're trying to understand which of those cost increases is systemic and which is a little more ephemeral as we look at 2022. And obviously, as we come out with our projections for and our guidance for 2022, will be speaking a little more detailed to what our expected impacts are. I mean, we do have some offsets. We do have -- we continue to have a pretty comprehensive fuel hedging program, which does help us. But that being said, there's a lot of areas where this cost inflation is creeping in.

And we've been on a number of calls and heard your peers talk about 5%, 6% inflation in costs in 2022 over 2021. Would that be a fair assumption for you? Should I be looking for that? Or is it?

I think that's not an unfair assumption. If you're looking on a dollar per unit rate, so $1 of per tonne mined -- per tonne milled. We're probably seeing those sorts of numbers, maybe slightly higher, but not a lot higher. Obviously, on a dollar per ounce basis, given where we are this year and some of the challenges we've had this year with production, it's a little harder to relate it directly. And our -- as we're looking at 2022, we really need to aggressively pursue production as well to help offset some of that increase.

Okay. And maybe just carrying on to Westwood. Gord, just appreciate the new mine plan is coming out with 2022 guidance is just the wording around your Westwood in terms of your kind of reviewing sort of the mine plan and what to do with the workforce. And I just kind of wonder, the way you worded it, are you looking at possibilities of selling this asset? It's just the wording that confused me. So I'm just kind of trying to understand what are your options on this asset?

Look, within our portfolio, Westwood is our smallest asset. As we've said, I think a number of times over the past number of quarters. We really do have to understand how Westwood sits in the portfolio. Obviously, our first and foremost goal is to make it a safe, profitable mine going forward. That being said, we need to review how it sits in the portfolio.

Okay. And then maybe my last question for you. Just on Rosebel. Appreciate. We'll get the updated reserves and resources come year-end. I think you mentioned that we may not, on the reserve basis, replace depletion this year, so I remove 1 year of mine life. Is that a reasonable assumption? Or could it be like a couple of years that we're looking to be impacted?

Right now, we're still looking at that really, really hard. Given the nature of Rosebel, the cost pressures we've seen, Rosebel, a very mature operation, mature pits. So reserves automatically come with pushbacks. We need to understand within the cost structure we have and what we project going forward, what the reserves at Rosebel look like. We're working really hard to make sure we come up with the correct business case for ourselves going forward, and we'll reflect that at that time. I really don't want to speculate as to the quantum.

(Operator Instructions) Our next question is from Anita Soni with CIBC World markets.

I just want to ask about Westwood and the vaccination rate. Is that correct that it's only -- it's 19% for confirmed cases? And i.e. for confirmed double backed employees? And could you just elaborate on that? Because that's a fairly low number considering the availability of vaccines, in Canada?

I don't have a lot of details on that one. I believe it is the -- that's people self-reporting on vaccines. It doesn't necessarily mean that, that's what the vaccine rate is. Obviously, obviously, the rate in Quebec overall is significantly higher than that. I don't know what the regional rate is. It's an area where we continue to obviously work with our employees a very relatively young demographic at Westwood, but we continue to work with them. I mean, importantly, I think for us, is the protocols we put in place for testing and managing the work underground, and we really have not seen Covid cases at this point in time of any significance. But it is an area that we're having a good hard look at, Anita.

Yes. I mean I only ask that because you're having these labor challenges, and I'm obviously, wondering if it's related to the vaccination rates that you have there. And then second...

I don't think it's the vaccination, right? It's the labor market in the Abitibi right now.

Okay. And then just moving on to the capital spend. Could you give us an idea -- you understand on -- and you've indicated that it will be lower for the sustaining capital than the $260 million guidance that you have put out and you're on, I think, $165 million or so year-to-date. Can you give us an idea what the Q4 spend quantum would be like how much underway be for this year? And then maybe some like sort of idea of where that understanding is coming from. Obviously, costs are higher. So the underspending is probably due to a lack of labor and what the implications are, it is a really long question. What the implications are for your production outlook, if you haven't done the work, what does that mean for next year's and which operations?

Okay. I'm going to let Daniella speak to it. She has those details. Daniella?

In terms of the impact on '22 production, we do not expect that impact to be material. And we will release updated production guidance at the beginning of 2022 with respect to 2022. The -- obviously, particularly at Rosebel, where some of the impact is resulting from COVID, and we have had -- if you look at the -- you track the cases in the country, there was a pullback towards the end of Q2 in better numbers in August, however, the numbers rose, again, through the third quarter, and Gord touched on the impact on our overall workforce over the course of 2021. So some of that pullback in the CapEx spend, particularly there is a result of that. In terms of where we're going to end up as compared to the $260 million guidance, we've not provided that updated guidance. In a sense, we have indicated that we are trending lower on that front. And we'll see what further impact, if any, the circumstances at Rosebel and at Westwood have on that total spend number?

This concludes the time allocated for -- on today's conference call for Q&A. I'll now turn the call back over to Graeme Jennings for closing remarks.

Thank you, again, operator, and thanks to everyone for joining us this morning and for your continued engagements with IAMGOLD. We look forward to having you join us again for our fourth quarter and full year 2021 results conference call in February. Goodbye.

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