IAMGOLD Corp (IAG) 2021 Q4 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD 2021 Fourth Quarter and Full Year Operating and Financial Results Conference Call and Webcast. (Operator Instructions)

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

Thank you, operator, and welcome, everyone to our conference call today. Joining me on the call are Daniella Dimitrov, President, Chief Financial Officer and Interim CEO; Craig MacDougall, Executive Vice President, Growth; Bruno Lemelin, Senior Vice President, Operations and Projects; 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 statements 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 financial measures.

With respect to the technical information to be discussed, please refer to the information in the presentation under the heading qualified person and technical information. The slides referenced on this call can be viewed on our website.

I will now turn the call over to our President and Interim CEO, Daniella Dimitrov.

Thank you, Graeme, and good morning, everyone. Thank you for joining us. The last 12 months have been a transformative period for the company as we reposition for the next chapter with new leadership, the advancement of Canada's next Tier 1 generational gold project, Cote Gold and the assessment of opportunities to uncover value at existing operations.

The theme of renewed leadership began at the beginning of 2021 when the Board adopted new diversity and renewal guidelines with a view to ensuring an optimal mix and diversity of skills, experience and expertise at the Board level. We had 4 new directors join us in 2021, followed in 2022 by the retirement of Gord Stothart as our CEO and Director; Don Charter as our Chair; Richard Hall and Ron Gagel, as members of the Board. In addition, Tim Snider, one of our long-standing directors is not standing for reelection at our next AGM in May. We would like to thank these individuals for their dedication and commitment to the company and wish them well.

In step with these departures, we announced the appointment of Maryse Belanger as a Director and the Chair of our Board, as well as the appointment of 2 new directors, David Smith and Ian Ashby. We are pleased to welcome Maryse, David and Ian to IAMGOLD. Their combined knowledge, perspectives and experiences will be invaluable to the company and comes at a very important phase in our evolution.

Leadership changes also came outside of the Board with the year-end appointment of Jerzy Orzechowski as Executive Project Director for Cote Gold. Jersey assumed management of the project at the beginning of this year and he brings a wealth of experience in delivering large projects, adding significant horsepower to our project teams. Ensuring the delivery of Cote Gold is a keystone for bridging the value gap between our valuation today and potential value growth for the company tomorrow.

Our search for a permanent CEO continues with our CEO search committee comprised of Maryse Belanger, David Smith and Kevin O'Kane with the support of a global search firm retained by the company in January. We will start our review with health, safety and sustainability. IAMGOLD continues to strive to achieve high standards in environmental, social and governance practices, which are reflected in our long held zero-harm vision. This is our commitment to reach the highest standards in human health, minimize our impact on the environment and work cooperatively with our host communities. Ensuring all of our employees go home safe continues to be a key focus for the company.

Last year, our DART frequency rate was 0.37 and the total recordable injuries rate was 0.76, coming in below our global annual targets of 0.51 and 0.85 respectively. At Cote Gold, we achieved another milestone with over 3.4 million hours without a lost time injury to date. We continuously assess opportunities for investing and partnering with local host communities near our operations. At both Essakane and Rosebel, we established and are seeding community funds.

At Rosebel, we have committed to make an annual contribution of 0.25% of gold production to the Suriname Environmental and Mining Foundation in addition to the existing 0.25% of annual revenues contributed to the Rosebel Community Fund. At Essakane, we continued our participation in the mining fund for local development in Burkina Faso, as well as advancing the public private partnership with the Canadian government, One Drop Foundation and Cowater on the Triangle d'Eau Project to bring potable water to an additional 75,000 people in the region.

We recognize that mining activities are energy-intensive and generate significant greenhouse gas emissions. In September, we announced that we have set a global target of reaching net negative GHG emissions by no later than 2050 and we plan to provide a more detailed road map and interim targets later this year. We have and will continue to enhance our reporting under reporting frameworks by continuing to report under GRI and SASB which we did in 2021 and committing to also report under TCFD by the end of 2022. Our efforts and track record on ESG matters are well established and continue to be recognized, and we are very, very proud of the work of our teams in this critical area that contributes to value creation.

Turning to our operating highlights. Last year, we produced 601,000 ounces of gold, which was at the upper end of our updated guidance targets announced in July. Essakane continued to be the engine of the company, reporting record annual attributable production of 412,000 ounces and exceeding our guidance range of 390,000 to 400,000 ounces, which was raised midyear. Rosebel produced 154,000 ounces in 2021 on an attributable basis, also at the upper end of our updated guidance range of 140,000 to 160,000.

Earlier in January, we announced a new life of mine plan with a path to return the operation to an annual production rate of over 300,000 ounces by 2025 on a 100% basis with a need for increased capital investment in stripping and processing plant improvements over the next few years. At Westwood, we restarted operations underground midyear and we have seen steady improvement while ensuring the safe and secure restart. 2021 production was 35,000 ounces coming in at the lower end of updated guidance of 35,000 to 45,000 ounces. The ramp-up continues into 2022.

Cash costs came in at $1,132 an ounce, and all-in sustaining costs came in at $1,426 an ounce, which was in line with updated guidance estimates. Cash costs and all-in sustaining costs were impacted by a $50 per ounce noncash net realizable value or NRV write-down on ore stockpiles and finished goods. This write-down primarily relates to Essakane and Rosebel and is due to an increase in the estimated cost to process ore stockpiles after adjusting for cost increases, stockpile grades and gold price assumptions.

Looking forward to 2022, we are forecasting production to be in the range of 570,000 to 640,000 ounces. Essakane is expected to continue its strong performance with attributable gold production of 360,000 to 385,000 ounces. Head grades are expected to normalize closer to reserve grades this year, which will be offset slightly by higher recoveries as mining moves into areas with lower graphitic ore content. Rosebel attributable gold production is expected to be in the range of 155,000 to 180,000 ounces, with improvements expected in recoveries from the ongoing refurbishment initiatives at the mill complex while stripping activities ramp up as outlined in our life of mine plan, which we will get into later.

Lastly, Westwood is expected to produce between 55,000 to 75,000 ounces from the complex. This assumes the safe restart of the Central and West underground zones in the first half of 2022 as part of the continued ramp-up of underground mining activities, coupled with increasing grade from the satellite Grand Duc open pit. Cash costs for the year are forecasted to be between $1,100 and $1,150 per ounce, and all-in sustaining costs are expected to be between $1,650 and $1,690 per ounce.

Our cash cost guidance incorporates assumptions related to inflation as we are forecasting the cost of our main consumables consisting of explosives, cyanide, lime and grinding media to be between 5% to 7% higher on average compared to 2021 pricing. This translates to an approximate 1% to 2% increase in cash costs and has been incorporated in our cost guidance. The increase in all-in sustaining costs is primarily due to an increase in sustaining capital expenditures resulting from a higher proportion of stripping costs classified as sustaining capital rather than expansion capital in alignment with World Gold Council guidelines.

For example, at Essakane, we are guiding towards total capital spend of $170 million, of which $165 million is classified as sustaining, primarily consisting of capitalized stripping. Previously, there was a higher proportion of stripping classified as expansion capital. The end result is a higher all-in sustaining cost figure, yet there are minimal impacts on net cash flow from the operation.

Turning to our financials. The following are some key highlights of our fourth quarter and year-end financial results. Gold revenues in the fourth quarter totaled $294.6 million and $1.2 billion for the year, with an average realized gold price of $1,790 per ounce. Adjusted EBITDA came in at $90 million for the quarter and $356 million for the year, excluding the noncash impairment charges at Rosebel and the NRV write-down our stockpiles and finished goods at Essakane and Rosebel. This translated to adjusted net earnings of $44.3 million or $0.09 per share in the fourth quarter and adjusted EPS for the year at $0.06 per share.

On an operations basis, operating cash flow before changes in working capital was $76 million for the quarter and $293 million for the year, which after accounting for capital expenditures, ex development projects translates into mine site free cash flow of $12.3 million in the fourth quarter and almost $134 million in 2021. In terms of our financial position, we ended the year with $545 million in cash and equivalents and $7.6 million in short-term investments.

In addition, we had almost $0.5 billion available on our secured credit facility, which matures in January 2025. This, taken together with the cash balances, resulted in total available liquidity of $1.1 billion at the end of 2021. We started the year with $941 million in cash and equivalents, and this balance decreased by almost $400 million over the course of the year.

Cash generated from operations of $293 million was partially offset by an $8 million outflow from movements in noncash working capital items, including an increase in inventories of almost $37 million, primarily related to higher stockpiles and finished goods inventories at Rosebel and Westwood. This was offset by a decrease in receivables and an increase in accounts payable and accrued liabilities of almost $29 million.

Outflows from investing activities reflected capital expenditures of almost $625 million, primarily related to Cote Gold construction and almost $7 million for other investing activities and capitalized borrowing costs, partially offset by the sale of a portfolio of royalty assets completed earlier in 2021. Net cash used in financing activities reflects payments of lease obligations of almost $19 million, dividends paid to minority interest, repayment of equipment loans at our operations and the impact of FX fluctuations on cash.

We are scheduled to complete the remaining construction of Cote during 2022 and 2023, resulting in significant additional capital expenditures that, together with sustaining and expansion CapEx at our existing mines, are expected to exceed total current cash and cash generated from operations. As a result, we expect to make the first drawdown on our credit facility in the first half of 2022 and we expect to draw down most of this facility over the course of 2022 and 2023.

Assuming no significant changes in Cote Gold cost and assuming the continuation of prevailing commodity prices and exchange rates and operations performing in accordance with the 2022 guidance and 2023 plan, we believe we should have adequate liquidity with our existing credit facility and the Cote equipment leases we previously disclosed to implement near-term operational plans and complete the development of Cote Gold. The strength of the Canadian dollar impacts Cote project costs as they are primarily included or incurred in Canadian dollars and we have put currency and fuel exposure hedges in place as part of our risk management during the construction period. Updated information relating to our hedges is contained in the presentation.

In addition, during 2021, we entered into gold sales prepayment arrangements in respect of 150,000 gold ounces with an average forward contract price of $1,753 per ounce on 50,000 gold ounces and a collar range of $1,700 to $2,100 per ounce on 100,000 ounces, which is being funded in -- over the course of 2022 at $1,700 an ounce. This will result in a total prepayment of $236 million to be received over the course of '22 and the requirements on our part to physically deliver 150,000 gold ounces over the course of 2024.

This prepay arrangement has the effect of rolling the 150,000 ounce gold sales prepay arrangement that we entered into in 2019 from 2022 to 2024 after completion of the construction of Cote Gold. To illustrate how this is working for us on a monthly basis, in January, we received $2.5 million in cash and delivered the first 12,500 ounces of gold into the 2019 prepay. And separately, we received $19.7 million in cash under the 2022 prepay. And we're expecting similar occurrences over the course of the rest of 2022.

We will now walk through our operations in more detail. The COVID pandemic continued to evolve in the fourth quarter and in 2022 and remained a significant focus for us. At Essakane, the management of COVID-19 remained stable, although we did see increased cases into 2022. Vaccination rates of our workforce of 64% continue to be well above the country average, which is under 4%. The COVID situation in Suriname and at Rosebel started to stabilize and improve in the fourth quarter. However, the new omicron variant remained a concern in December and January 2022.

To give you an idea of the impact, cases in Suriname in January were the highest recorded since the start of the pandemic. Cases in country and at Rosebel are now declining and the government is moving towards normalization. Vaccination rates at our site has increased with approximately 41% of our workforce fully vaccinated, which is really right in line with the country average of about 40%. At Westwood, the COVID situation in the fourth quarter was stable, though we saw absenteeism in January associated with the new variant.

About 77% of our workforce has reported that it is fully vaccinated, a step-up from previous reporting, likely due to federal and provincial mandates having a positive effect on this statistic. Through most of last year at Cote, we saw minimal impact due to COVID-19 at site and we talked about previously the protocols that we implemented, including the regular testing of wastewater. Starting in December, with the rapid rise in cases in Ontario and in other provinces, omicron began to have an impact on project activities.

COVID outbreaks during the holidays and in January forced a slower remobilization of the site workforce. Site staffing was approximately 60% of plan through a part of January with a large number of infections in various pockets of the workforce, including in the steel installation team and the earthworks team. Site staffing has continued to ramp up since then. And by mid-February, we returned to full plan rates of about 750 to 850 personnel. We implemented a number of site restrictions, and at this time, we expect such restrictions to be lifted by March 1. We introduced a mandatory vaccination policy in January and by February 1, 100% of the site personnel had at least 1 dose of vaccine and 2 doses are required under the policy by April 1.

Moving on to Essakane. Essakane had a strong finish to the year, producing 98,000 ounces in the fourth quarter, translating to record attributable production of 412,000 ounces for the year, a notable achievement considering the challenges present in 2021. During the year, Essakane mined [16] million tonnes of material, an increase year-over-year as a result of operational efficiencies and reduction of cycle times achieved from the modification to the hauling fleet.

The strip ratio of 2.8% in 2021 was higher by 12% than the prior period -- than the prior year as a result of continued focus on stripping campaigns in the upper benches. Mill throughput of almost [13] million tonnes was modestly higher than 2020, yet with higher grades of 1.31 grams per tonne. The improvement in capacity from the mill optimization project is really important as Essakane moves to greater volumes of transition and hard rock versus softer ore in the coming years.

Cash costs and all-in sustaining costs of $895 and $1,074 were lower by 4% and 2%, respectively, compared with 2020, primarily due to higher production and sales, partially offset by higher operating costs, including the NRV write-down noted previously. All-in sustaining costs sold also included higher sustaining capital expenditures of $51 million versus $37 million in 2020. Last year, we reported on certain security incidents in Burkina, followed by the military coup in January.

All of our personnel continues to be safe and associated supply chains have not been significantly impacted by the security situation or change in government. The workforce has been increased to close to normal levels following a temporary reduction towards the end of 2021. We continue to monitor the situation as we assess returning to full workforce capacity towards the end of the first quarter. Additional investments in infrastructure in the region and at mine site are being made to further strengthen security measures, while we continue to engage with relevant authorities and other partners in Burkina in relation to security in the region, including supplies and transportation routes. These measures and investments are captured in our cost guidance presented earlier.

Production in 2022 is expected to be between 360,000 to 385,000 ounces, relatively steady over the year. We have moved into the execution phase of our IM All-in operational improvement program, focused on executing on opportunities to increase mill and mine productivity. Our workforce is very engaged in this program with several initiatives underway, including in the area of equipment maintenance to improve availability rates, mill recoveries and inventory management. This is a program we will be rolling out to Rosebel next.

Turning to Rosebel. 2021 presented numerous challenges, which have been described in our continuous disclosure documents. The operation reported attributable production of 154,000 ounces, which is a 27% decline from 2020. Fourth quarter production of 42,000 ounces demonstrated quarterly improvements as ground conditions dried up and productivity initiatives were launched in the latter part of the year. Mill throughput of 2.4 million tonnes was down 8% compared with the prior quarter due to the maintenance-related work and improvements in the ADR circuit, which were nearly completed at the end of the year.

Recoveries of 86% improved quarter-over-quarter as a result of higher grades of 0.78 grams per tonne in the fourth quarter and we expect to see a continued lift in recoveries into 2022 as a result of these improvements. I can share with you that in the first 2 months of the year, we have averaged 90% recovery. Cash costs of $1,533 and all-in sustaining cost of $1,859 per ounce sold were 48% and 52% higher respectively than in 2020 due to lower annual production and sales, as well as the noncash NRV write-down, which has weighted almost $120 per ounce sold at Rosebel.

This year, Rosebel is expected to produce 155,000 to 180,000 of attributable gold ounces weighted to the second half of the year following the rainy season. Mill refurbishments, improved sequencing, increased stripping under the new life of mine plan are expected to improve operating performance compared to 2021.

In response to challenges at Rosebel, we conducted an assessment culminating in an updated mineral resource and reserve estimate and corresponding updated life of mine plan, prepared in partnership with external third-party engineering firms, SRK Consulting and WSP Canada, which we released on January 12.

The updated Rosebel mine plan outlines a path to ramp back up to an estimated 300,000 ounces per year by 2025 on a 100% basis. The mine plan was based on revised geological models, incorporating drilling results over the last two years, accounting for cost increases the operation has experienced and incorporating current capital allocation of the company.

2 of the key priorities for Rosebel relate to stripping and mill capacity to treat hard rock. Considerable stripping is required to access deeper, higher grade ore in existing pits at Rosebel, resulting in the necessity for material capital outlay in the next 5 years. The capacity for the mill to deal with the Rosebel ore hardness could be alleviated by the replacement and expansion of 2 crushers at a cost estimated in 2021 of approximately $30 million, which capital has been built into the updated mine plan.

We are looking to start allocating capital towards this improvement starting in the fourth quarter of 2022, and this has been incorporated in our guidance. The investment into stripping is proceeding, forming the basis for the increase in production guidance with $140 million in capital allocated to this operation in 2022, of which $105 million is sustaining with a majority of that being allocated to capital stripping.

Turning to Westwood, gold production of 35,000 ounces was 56% lower than in 2020 due to the underground operations being under care and maintenance for the first half of 2021. Q4 production was 13,000 ounces or 86% higher than in the prior quarter, benefiting from higher underground grades, coupled with an increase in the grade of material sourced from Grand Duc.

Although underground mine productivity is improving, the pace of the ramp up remain cautious as we continue to prioritize the implementation of enhanced ground support and additional safety measures, coupled with ongoing training to increase productivity rates.

Ore production of the Westwood complex is expected to be in the range of 55,000 to 75,000 ounces in 2022. And this assumes the safe restart of the Central and West underground zones in the first half of 2022. Production levels are expected to progressively increase quarter-over-quarter, benefiting from higher grade underground ore.

Turning to Cote. 2021 was the first full year of construction of what will be IAMGOLD's keystone assets. Project completion was 43% at the end of December 2021 and detailed engineering is now nearing 100% completion, with planned civil and concrete deliverables principally complete. In the fourth quarter, we expanded $147 million, in line with previous guidance, bringing the total spend in 2021 to $359 million and total incurred costs to $412 million with a balance between spent and incurred costs relating to timing of payments and working capital items.

Key activities over the fourth quarter and into January are well described on Slide 19 and in our MD&A. We have seen productivity for earthworks lagging targets and mitigation plans are in place and continue. Equipment delivery is ongoing and inventory on site continues to increase. Major components of the ball mill such as motor, chillers and shells have started shipping. We continue to closely monitor global logistic risks and, at this time, we are not expecting material impacts although challenges in the global supply chain continue to persist.

As discussed earlier, the COVID outbreaks at the end of December and into January forced a slower remobilization of the site workforce and absenteeism in the first part of January was high. This impacted the cladding process of the processing plant building, which lagged in January and February, although it is more than 50% complete, as you can see from the pictures. We have put in place mitigation measures to ensure that the cladding is no longer on the critical path and we are now optimizing for the mechanical erection access date.

The focus is on driving the start of the concrete works inside the building so mechanical erection can commence in the second quarter. We will complete the building cladding when appropriate resources are available and the logistics do not interfere with the critical path work inside the building.

We have highlighted the key remaining targeted milestones on Slide 21, which include the initiation of processing plant equipment installations that I have just discussed. The Cote project continues to be on track for commercial production in the second half of 2023. This estimate assumes no further disruptions caused by COVID-19 and related impact on the timing of activity, availability of workforce, productivity and supply chain and logistics. And consequently, we do caution that further disruption could impact the timing of actual commercial production.

Our previously disclosed estimate of remaining cost to completion, net of leases from January 1, 2022 onwards, was approximately $710 million to $760 million. And as of January 31, our estimated cost to completion continued to be in this range. However, inflationary and other cost pressures have been identified impacting earthworks execution, electrical and instrumentation components, operation spare parts and key consumables freight costs, indirect costs and EPCM services. This has put pressure on the budget, with project cost curves trending upwards above the high-end of the range of the previous estimate.

Our contingency has decreased from $85 million last July to $25 million going into March, forming a trend that we are flagging today. Trend reports continue to be updated and refined weekly. With the appointment of the new Executive Project Director and as a result of the circumstances we discussed, the project team is in the process of evaluating these impacts by completing a risk analysis of the cost and schedule.

In step with this assessment, the team is also evaluating potential offsetting mitigation and/or optimization opportunities in various areas, including earthworks, processing, the life of mine plan and operations during initial ramp up. This evaluation may result in a potential cost and schedule re-baseline, which may include an increase in cost to completion. This assessment has commenced and we intend to provide an update before the end of the second quarter.

I know that the first question on this matter would be what range are we expecting. And the answer is, it is too early to quantify at this time. The evaluation involves over 50 personnel from our own team and the EPCM and it is complex. In terms of schedule, at this time, we are not seeing anything material around the corner that could result in initial production not being achieved in the second half of 2023.

Our Board, Management, Executive Project Director and all of the Cote teams are focused on ensuring Cote is brought across the finish line on schedule and as close to the cost guidance as possible.

Taken together, IAMGOLD is at a critical juncture at Cote as this is a project that is, by all definitions, a transformative asset for the company. Cote is a generational asset with average production of nearly 500,000 ounces on a 100% basis in the first 5 years at all-in-sustaining costs of below $800 in the first 5 years and an initial mine life of 18 years based on current reserves of 7.2 million ounces with another 6.4 million in measured and indicated.

In addition, we believe we are still in the early innings of uncovering the full potential of Cote. We announced in October an initial resource at Gosselin, a deposit which is located immediately adjacent to the Cote pit and we reported an initial resource of 3.4 million ounces of indicated and 1.7 million ounces of inferred. Gosselin remains open in a number of directions and has only been drilled to half the depth of Cote.

We do have a lot more work to do to bring Gosselin into a conceptual mine plan and are excited about the potential to extend a higher grade period of Cote beyond the first 5 years. After year-end, we released additional drill results which compare well with predicted grades from the resource block model and in some cases have extended the mineralization outside of the resource boundaries of the mineralization model.

Our planned drilling program in 2022 will target areas with potential for resource expansion. Cote and Gosselin are located in a large land package of over 540 square kilometers. This is a massive gold bearing system and we're confident in the potential for additional discoveries in the region. There is no doubt that high quality Canadian assets, once clarity, predictability and stability is demonstrated, trade at a premium in this market and we believe Cote is the next such Canadian asset.

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

(Operator Instructions) Our first question is from Carey MacRury with Canaccord Genuity.

Just wondering if you could add a bit of color on what you're looking at in terms of potentially adding more liquidity to the balance sheet. I'm just noting that RCF seemed to be against asset sales. Are those still something you're considering?

As we noted, capital allocation for the company continues to be a key priority of ensuring that we allocate capital to generate the highest return on invested capital. As we noted in our MD&A and press release, assuming no significant change in the Cote gold cost and the continuation of prevailing commodity prices and our operations performing, we believe we should have adequate liquidity. We've also noted that we continuously assess our liquidity, our operational performance, the continuation of the development of the Cote project and capital markets and that we may take measures to increase our liquidity. At this time, we don't know the outcome of this evaluation, and we will provide more information by the end of the second quarter.

And next question is from Fahad Tariq with Credit Suisse.

Just a follow-up on the liquidity. Can you touch on the gold price assumption that's baked into the adequate liquidity comment you made?

Our budget price spec for 2022 is $1,700.

And could you share what it is for next year? Or is it the same $1,700?

$1,700.

And then, my second question just on the Cote costs, I appreciate that you can't comment too much on it. But could you just tell us like high level, like given the detailed engineering is 92%, complete, procurement is 87% complete, 79% of the contracts have been awarded. Where is the surprise factor coming from in terms of at least the uncertainty around the overall cost, remaining costs?

So a portion of the remaining costs that we have left to spend are in a sense fixed. So to give you an example, the autonomous vehicle fleet or the autonomous drills, we entered into those commitments in 2021, and those costs are relatively fixed. We haven't expended those costs as we will start to do that in 2022. And so, there is no risk around a component of the remaining cost left to be spent.

A big component of the remaining cost relates to actual construction and the impact of different productivity rates than what would be assumed in the plan would have an impact on the remaining costs to be incurred. As a number of the contracts such as earthworks, for example, are time and materials contracts rather than fixed price contracts.

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

I'm going to start with a really quick one, if you don't mind. You mentioned, I think, in the MD&A that the cladding of the building is no longer critical path. I think you mentioned that earlier. What is the critical path? Maybe can you just talk a little bit about where you see the bottleneck at this point?

Yes. So, the cladding of the processing building was on the critical path as a result of the necessity to actually do work inside the building, including concrete work to actually get to what is really on this critical path, which is the mechanical erection of the necessary equipment inside the building. So, we were at about 32% completion on the cladding at year-end and that progressed into January and February at about -- were over 50% of the building cladded.

However, as a result, particularly of our contractor that is responsible for putting up the steel cladding on the building, really being negatively impacted by COVID in January and actually continuing into February, we've pivoted and have made arrangements to be able to actually work inside the building and progress what is really on the critical path, which is the ability to progress with ultimately the mechanical erection installation inside the building.

And so, as a result of focusing on that and on those logistics, the cladding is going to be completed at a time and with resources and more importantly to not impact the logistics of what was actually happening in the building. We expect that we will complete the cladding into the second quarter. And at the moment, we're really focused on what's happening inside the building.

And my second question, I'm sorry, is a little bit of a compound question, I think, but can you comment on the timing, I realize this risk analysis at Cote is necessary to do to make sure that you have appropriate budget, but the timing just seems a little bit funny to me, given you're currently undergoing a CEO search and you've got a pretty big push for board renewal going on. Can you talk about how the risk analysis would coincide with a new CEO coming on board and if you would envision any kind of further changes or if the new CEO might have some ability to influence this before it's completed?

The risk analysis started at the beginning of January and is driven by a number of key factors. One was just the overall impact happening on site and with the workforce and that impact. And the second factor is really the start of a new Executive Project Director with Jerzy on board. That risk analysis of cost and schedule that we talked about also includes opportunities for mitigation and optimization. And we're really looking at the next 36 months in the life of the project through completion of construction and into the ramp up to look for offsetting mitigation opportunities in the evaluation and doing this assessment.

Our new directors have been and are in the process of being oriented. We spent some time last week and into this week doing that and that will continue. I don't expect the timing of the completion of this assessment to really be delayed on that in the sense that the project is moving and it's got to move forward. And we've got to manage the schedule and the costs on that front.

(Operator Instructions) Our next question is from Josh Wolfson with RBC Capital Markets.

Just a couple of questions on the financing outlook. So, first off, in terms of the debt and the expectation to be able to draw down in the first half of this year, is it safe to say that that assumption is based on and a requirement to draw down is based on the Company being fully funded to completion based on the most up to date capital estimates?

So, we've been having discussions with the financial institutions and our lending syndicate for some time. We've been indicating, I think, from certainly the third or fourth quarter of last year that we expect the drawdown under the facility in the first half of 2022. We have also indicated previously that we intend to maintain a minimum cash balance of at least $200 million and at times that minimum cash balance might be higher.

We do have certain cash management requirements, particularly in relation to our prepay, so for example, we deliver the physical ounces under the 2019 prepay at the beginning of the month, and then we receive payment under the 2022 prepay closer to the end of the month, and then with respect to the hedges that we put in place for our risk management strategy. Some of our hedges, we've got to gross settle rather than net settle and therefore that impacts our cash balance on that.

Our credit facility is a secured credit facility. I'm going to say it is fairly covenant friendly. We've got 2 financial covenants, net debt to EBITDA 3.5 times, and an interest coverage ratio, which is the one that we're not concerned about. In the calculation of the net debt to EBITDA financial covenants, the prepays, do not count as debt although I certainly treat them as debt, since we've got to pay them back. However, for the purposes of that net debt to EBITDA calculation, they do not count. And so, that obviously helps us manage the covenant going forward. Not sure, if I have answered your question.

Partially. So I guess, I'm trying to more directly ask in the event that the capital estimate changes and there is a funding shortfall, are you still able to draw down on the credit line?

Yes. The credit facility is not like project driven or construction driven. And the drawdowns are not, we do not expect the drawdowns to be impacted by a capital or liquidity shortage on that front. And we do have headroom in our financial covenants to, let's say, assume additional debt, if we do need additional capital and we determine to obtain that additional capital in the form of debt.

And then, the last question, when you are looking at the available options in the event that liquidity is required beyond asset dispositions, of which there is a number of opportunities that might be out there, is the company considering or would it consider more hedging or gold forwards in place or is that at the upper end of the upper limit at this point?

We do have some restrictions in the credit facility with respect to the volume of ounces that we can sell forward under a prepay arrangement. We are not at that headroom yet with 150,000 ounces that we have under the 2 prepay arrangements that we're juggling, and we do have the capacity under our various instruments to do additional hedging of gold.

This concludes the question-and-answer session. I will now hand the call back over to Graeme Jennings for closing remarks.

Thank you very much, 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 first quarter results conference call in May. Goodbye.

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