TORONTO Sep 4, 2015 (Thomson StreetEvents) -- Edited Transcript of IAMGOLD Corp earnings conference call or presentation Tuesday, August 13, 2013 at 12:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Bob Tait IAMGOLD Corporation - VP IR * Steve Letwin IAMGOLD Corporation - President & CEO * Carol Banducci IAMGOLD Corporation - EVP & CFO * Gordon Stothart IAMGOLD Corporation - EVP & COO * Craig MacDougall IAMGOLD Corporation - SVP - Exploration ================================================================================ Conference Call Participants ================================================================================ * Michael Scoon Stifel Nicolaus - Analyst * David Haughton BMO Capital Markets - Analyst * Anita Soni Credit Suisse - Analyst * Pawel Rajszel Veritas Investment Research - Analyst * Dan Rollins RBC Capital Markets - Analyst * David Olkovetsky Jefferies & Co. - Analyst * Zach Zonders - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen. Thank you for standing by. Welcome to IAMGOLD Corporation's 2013 second-quarter financial results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (Operator Instructions) I would like to remind everyone that this conference call is being recorded on Tuesday, August 13, 2013 at 8.30 AM Eastern standard time. I would now like to turn the call over to Mr. Bob Tait, Vice President, Investor Relations. Please go ahead, sir. -------------------------------------------------------------------------------- Bob Tait, IAMGOLD Corporation - VP IR [2] -------------------------------------------------------------------------------- Thank you, Dan. Welcome to IAMGOLD's conference call for the second quarter of 2013. Last night, we released our financial results for the quarter, which along with the accompanying financial statements, notes and MD&A can be found on our website at IAMGOLD.com. Joining me on the conference call today are Steve Letwin, President and CEO of IAMGOLD; Gord Stothart, Executive Vice President and Chief Operating Officer; Carol Banducci, Executive Vice President and Chief Financial Officer; Craig MacDougall, Senior Vice President - Exploration; and Jeff Snow, Senior Vice President and General Counsel. Our remarks today will include forward-looking statements. I refer you to the cautionary language regarding forward-looking information in our disclosure documents, and advise you that the same cautionary language applies to our remarks during the call. We have prepared slides which can be viewed via our website, and I'll now turn the call over to our President and CEO, Steve Letwin. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD Corporation - President & CEO [3] -------------------------------------------------------------------------------- Thank you, Bob, and good morning, everyone. Well, all of you have had a chance to look at our results, and I'm very encouraged by what we've accomplished since we last spoke. Tumbling gold prices have put the industry in a very, very tough position, as you know. And fortunately, we've acted swiftly on our priorities. This has allowed us to deal effectively with the challenges plaguing our industry. On slide 5, you can see that we're executing on all fronts. We're making sustainable reductions to our cost structure. By the end of the second quarter, we had achieved 55% of our $100 million cost reduction target. Cash costs, including royalties for the second quarter and year-to-date have come in at $787 an ounce. This is the second quarter in a row that total cash costs have been below the bottom of the guidance range. It's about $100 below what we were forecasting about eight months ago. So a lot of success, and that success we've had at delivering on our cost reduction initiatives, has had a significant impact on mitigating the rising costs that come with mining an increasing proportion of hard rock. It's given us the confidence to lower our 2013 cost guidance. You've seen this in the release. Our total cash cost guidance moves down to a range of between $790 and $840 an ounce, from the previous range of $850 to $925. All-in sustaining cost guidance is lowered to a range of $1,150 to $1,250 an ounce, from a range of $1,200 to $1,300. Overall, our operations are performing as expected, and we should see production trending higher in the third quarter. Westwood production, including Mouska, is ramping up, and on track to producing 130,000 to 150,000 ounces for the year, and we are maintaining our production guidance at 875,000 to 950,000 ounces. On slide 6, you see our priorities. We made it very clear what our priorities were heading into the quarter, and we are seeing the results. In addition to cost reduction, we continue to focus on optimizing our existing operations and related expansions, while deferring capital projects where the rates of return would not be warranted in this gold price environment. Our dividend remains intact, and we will do what is necessary to preserve cash and a good liquidity position. We believe the tide will turn eventually, and when it does, we have no intention of abandoning these priorities. The evolution of our industry is such that this is how we must manage the business all the time. On slide 7, our cost reduction around our new power agreement in Suriname. I can't tell you how pleased I am about the progress we've made in Suriname. And managing costs better is at the top of our list in the country. Our power costs have been one of our greatest challenges, given the transition to harder rock, and at Rosebel, we've been paying $0.20 a kilowatt hour. Late last week, we announced an agreement with the government of Suriname to reduce the power rates supporting our existing operation. This new agreement complements the joint venture agreement announced in April of this year. While the joint venture targets softer ore in areas surrounding the current mining operation, this agreement applies to our current operation and its future expansion. I'm heading down to Rosebel at the end of the month. Going to spend a week with the President. Our next priority is to look at those satellite deposits that are within the joint venture, and as you know, at $0.11 a kilowatt hour, are very attractive in terms of operational costs. So I'm going to be down there looking very aggressively at how we can move that softer rock into the mill, and when we combine that with the fact that at the current mineral agreement, we're going to be paying significantly less for power, it reinvents Rosebel. It restructures Rosebel, and it makes Rosebel a much more viable entity, with a lot more attractive economics. And the power agreement is an extremely important development. As it will lead to this improvement in margin and extend the life of the mine. The reduced power rates under this agreement will potentially reduce costs at Rosebel in the current mineral agreement, by up to $50 an ounce. And as we bring in softer rock, I hope even more. The reduced power rates will be factored into the feasibility study that's been under way at Rosebel to determine the optimum expansion scenario moving forward. We expect to be able to announce the results at the end of the third quarter. Results like this can go a long way to reshaping our cost structure, and it will be initiatives like this that will continue to take priority. On slide 8, you can see that 55% of our $100 million target has been achieved. At our operating sites, we've achieved about 40% of the $54 million target. Gord's going to highlight some examples from across our sites that have moved us to this point. For exploration, we're at the $30 million mark and are well on track to meeting the $40 million target by the year end. Craig's here and he's going to talk about those details. At the corporate level, we've achieved about 50% of our goal. So when cost cutting becomes something you talk about every day it starts to become a part of your culture and that's what we're seeing. While we're taking advantage of opportunities to defer spending in some areas, our main focus is on realizing sustainable cost savings. On slide 9, we talk about our disciplined capital allocation strategy. Our decision to commit capital to future expansion and development projects will depend on a number of critical factors. Project returns must meet our hurdle rates, and that will depend on the price of gold at the time when we're ready to make decisions. So you cannot assume any capital spending beyond the capitalized stripping, and that which is essential to maintain the current operations. Our ability to defer capital spending speaks to our liquidity position, which at the end of June, was $1.4 billion. And with that, I'm going to turn it over to our Chief Financial Officer, Carol Banducci, for a review of our financial results. -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD Corporation - EVP & CFO [4] -------------------------------------------------------------------------------- Thanks, Steve. And good morning everyone. Turning to slide 11, revenues in the second quarter 2013 were $301 million, down from $365 million in the second quarter 2012. Falling gold prices accounted for two-thirds of the decline, or $42 million, as the average realized gold price was down $220 an ounce year over year. The balance of the revenue decline was due to lower gold sales. Gold sales were down, mainly due to lower production at Essakane and Rosebel, as throughput and grades declined, as expected. This was partly offset by a significant increase in sales from the Doyon division, as production in the previous year was minimal, with the plant undergoing refurbishment. Adjusted net earnings in the second quarter were $30 million or $0.08 a share, compared to $75 million or $0.20 a share in the second quarter 2012. Adjusted net earnings exclude such items as impairment of investments, write-down of receivables, gains and losses on both derivatives and foreign exchange, and changes in estimates of asset retirement obligations at closed sites. Adjusted net earnings also excludes the interest expense on long-term debt. Nearly 54% of the interest on the high yield debt was capitalized in the second quarter. Based on projected capital spend for the year, approximately half of the annual interest will be capitalized. In total, these items reduced reported earnings per share by $0.16 in the second quarter 2013. The $39 million impairment of investments in 2013 included changes for the declines in the market value of both marketable securities and equity investments. The value of marketable securities declined by $16 million, and the value of our equity investments in Galane Gold and INV metals declined by $23 million. As in the first quarter, the decline in the value of these investments had a significant impact on our tax rate in the second quarter, given their limited tax deductibility. After adjusting for the impairments and other items, our adjusted effective tax rate for the second quarter was 45%, and on a year-to-date basis, 39%, which is pretty much in line with our 2013 guidance of 38%. Income tax paid in the second quarter was $40 million, compared to $14 million in the first quarter. As we've explained previously, taxes paid in the second quarter include the final payments for the previous year, along with the estimated income tax installment for the current year. Turning to slide 13, net cash from operating activities before changes in working capital was $68 million in the second quarter, or $0.18 a share. This compares to $74 million, or $0.20 a share in the second quarter 2012. This decline was mainly due to lower revenue and higher cost of sales, partly offset by lower income taxes paid. Attributable gold production of 224,000 ounces in the second quarter was up 20,000 ounces from the second quarter of 2012. The increase in production reflects the ramp-up in production at the Westwood plant, as we batch processed ore from Mouska and Westwood. The Mouska mine produced 41,000 ounces in the quarter, compared to 2,000 ounces in the previous year, as the ore was being stockpiled during the refurbishment of the plant. While Mouska is a commercially-producing mine, Westwood is still operating at pre-commercial levels, and produced 10,000 ounces in the quarter, which is included in the 224,000 ounces. The higher production from the Westwood plant was partly offset by the lower production at Essakane, which was down 19,000 ounces, and Rosebel, which was down 12,000 ounces, due to lower grades and throughput. As we said in the first quarter, grades at Essakane this year are expected to be 10% to 15% lower than the life of mine average, as we processed the lower grade, softer ore stockpiles in the previous years. Gord will get into that a bit more. Looking ahead, the ramp-up of Westwood, we are on track to meeting our annual production guidance. Attributable gold sales of 201,000 ounces in the second quarter lagged production by 13,000 ounces, when excluding the 10,000 pre-commercial ounces from Westwood. Mouska accounted for most of the variance, as 6,000 ounces were produced late in June, and were not sold until the first week of July. The balance was due to timing of shipments at Essakane and Rosebel. Keep in mind that the contribution from the sale of pre-commercial ounces from the Westwood mine will be netted against capital expenditures. Turning to slide 16. Total cash costs for all gold mines were unchanged from the first quarter at $787 an ounce. A retroactive adjustment to the power cost accrual at Rosebel had a positive effect on the cost in the second quarter. Excluding the amount of the adjustment related to previous quarters, total cash costs for the second quarter were $838 an ounce. The increase in total cash costs year over year is mainly due to higher cost of hard rock processing, and expected lower grades from production. To partially offset the impact on costs, mine sequencing at Rosebel was changed to enable access to higher-grade ore. Without doing this, grades would have been lower. On an all-in sustaining cost basis, we reported $1,133 an ounce for the mines owned and operated by IAMGOLD, which is up 13% from the year before. In addition to the reasons just mentioned, the increase reflects the higher sustaining CapEx to support the higher hard rock capacity at Rosebel and Essakane. Including the joint ventures, all-in sustained costs for the quarter were $1,196 per ounce. In recognition of how IAMGOLD's overall cost of production benefits from the cash flow generated by Niobec, we're also reporting all-in sustaining costs, net of Niobec's contribution. By subtracting Niobec's operating margin, net of its sustaining CapEx, our all-in sustaining costs, inclusive of the joint ventures, will drop from $1,196 an ounce to $1,143 an ounce. As you've heard from Steve, the lowering of our guidance for total cash costs and all-in sustaining costs reflects the successful execution of our cost reduction program to date. With 55% of our target met, we are well on track to aligning our cost structure, with annual savings of $100 million by the end of the year. Gold margins fell to $586 an ounce in the quarter, from $856 an ounce a year ago, as our average realized gold price fell $220 an ounce, and total cash costs rose 7% over that period. Turning to Niobec. Niobium revenue was $50 million in the second quarter, up slightly from the second quarter of 2012. While production was unchanged year over year, a 13% increase in the operating margin was mainly due to improvements in operating efficiency. Niobec continues to be a very stable business, with prices and volume holding steady. As we previously pointed out, approximately 97% of our 2013 production has been sold forward. This last slide shows our liquidity position at $1.4 billion, as of the end of June 2013. The reduction in cash and cash equivalents was expected, as we approached the tail end of our capital spending for Westwood and Essakane. Looking ahead, we are confident that by sticking to our plan to reduce costs and limit capital spending, that we'll be able to preserve our financial strength. With that, I'll now turn it over to Gord for a closer look at our operations, and for an update on our cost-cutting initiatives. -------------------------------------------------------------------------------- Gordon Stothart, IAMGOLD Corporation - EVP & COO [5] -------------------------------------------------------------------------------- Thank you, Carol. I'll now walk you through the performance of each of our operations, along with examples of how we've cut costs at each of our sites. Keep in mind that these are only examples. On average, we have anywhere between 30 to 40 cost cutting initiatives under way at each of our sites. Looking at Rosebel, lower production is attributed to lower throughput, grades and recoveries, as was expected from the increasing proportion of hard rock. Hard rock currently represents about 25% of the ore mix, and we expect that to reach about 30% by the end of the year. The commissioning of the third ball mill at the beginning of the second quarter has had a positive impact on throughput, with levels increasing 5% from the first quarter. So we expect to see continued improvement, even with the increase in hard rock. Total cash costs of $745 an ounce in the second quarter reflect the benefit of the power cost adjustment Carol referred to earlier. Excluding the portion pertaining to prior quarters, total cash costs were $880 an ounce. As guided in the first quarter, we expect costs to be higher in the second half, due to higher maintenance and fuel costs associated with longer hauls and the mining of harder ore. As in the first quarter, mine resequencing, enabling access to higher grade material has helped to mitigate cost increases to some extent. With respect to the future plan for Rosebel to address the transition to 100% hard rock by 2016, we expect to be able to announce that at the end of the third quarter. Now that we have a new power agreement for our existing operation, we can incorporate the reduced rates into our feasibility study to determine the optimum expansion scenario, including the optimum grinding and crushing configuration. With the joint venture agreement targeted at the softer ore resources in the surrounding area, we have to acquire additional properties and further delineate surrounding resources, before we can assess what work needs to be done to bring those resources into production. In addition to the reduced power rate, which is expected to reduce total cash costs by $50 an ounce, we have multiple initiatives under way to lower costs at Rosebel. We've reduced equipment standby time through better management of shift changes. Through business processes, and operating efficiency improvements we've been able to lower staffing requirements. We've replaced smaller trucks with larger trucks with greater capacity. This is boosting productivity, and the improved technology of the new trucks is reducing maintenance costs and fuel consumption. The frequency and cost of preventative truck maintenance have been reduced through installation of a new oil renewal system. We've also increased throughput to the gravity circuit at Rosebel, following the commissioning of the third ball mill, and this in turn has reduced cyanide consumption. We are increasing drilling and blasting efficiencies by using increased bench heights in the operation. And by improving and redesigning the mine roads, we are improving tire life and reducing haulage distance and maintenance costs. Looking at Essakane, lower production was due to the expected processing of lower grade saprolite ore stockpiles, along with lower throughput, due to the increase in the proportion of hard rock. The drop in throughput for the quarter reflects the five day mill shutdown in April, necessary to accommodate the commissioning of the new pebble crusher and tie-in of the additional CIL tanks related to the mill expansion. With this, we are now seeing a positive impact on recoveries and throughput, even with harder ore blends, and expect production to improve in the second half. As previously stated, the processing of lower grade softer ore stockpiled in prior years is expected to result in ore grades for 2013 that are 10% to 15% lower than the life of mine average. As stripping continues with the pushback of the main pit, we are stockpiling some higher-grade ore in anticipation of the start of the expanded plant. As we move into hard rock, and we're expected to reach about 90% by the end of 2014, higher grades will mitigate the impact of higher energy consumption required to treat harder ore, and bring grades in line with the life of mine average. The plant expansion is on track for the completion at the end of this year, and the project costs are on plan. Cost cutting initiatives at Essakane include implementation of a transition plan to replace more expats with nationals, the consolidation of contracts for employee transport, to and from the site, resulting in a 5% rate reduction. Negotiated price discounts from local suppliers at Essakane, including food and security. Reduced consumption of energy and steel in the SAG and ball mill grinding process, through accelerated commissioning of the pebble mill at Essakane, and the replacement of consultants with an in-house technical services team. Looking at the Abitibi, production at the Westwood plant ramped up through the quarter, with batch processing of both stockpiled ore from Mouska and ore from Westwood. Recoveries on the Mouska ore were still slightly below plan, but offset by a positive reconciliation on the total ounces from the 2012 stockpile. We began processing ore from the Warrenmac zone of the Westwood mine with 10,000 pre-commercial ounces produced in the second quarter. On the Warrenmac ore, we're seeing a lower mining dilution, significant positive reconciliation in grade, and better recovery than planned. The mill continues to produce at planned rates of 2,000 to 2,300 tonnes a day, and we are on track to meeting 2013 guidance of 130,000 to 150,000 ounces on a combined basis from the two Abitibi mines. Toward the end of the second quarter, the service hoist at Westwood mine was out of commission, due to a software malfunction. The costs for the repair work was covered by warranty, and the hoist is back in operation. The impact from this incident was significantly reduced, since during the repair period, we were able to use both the Doyon shaft and the Warrenmac ramp to move ore and waste to surface. The Westwood operation continues to focus on improving development productivity, as this is not only key to running a successful operation, but will be key to lowering costs as the operation moves into full production. At Sadiola, operating efficiency continues to improve, and mined ore grades exceeded plan for the first half of the year. The 13% increase in throughput year over year and the improvement in recoveries, which were up 11%, offset lower grades, resulting in a net 9% increase in production. Compared to the first quarter, production was up 26% and throughput 19%. The portable crushers that have been installed have been effective at improving mill feed performance, especially in dealing with the hard nodes contained within the saprolite in some pits. Lower reagent and maintenance costs, together with increased production, drove total cash costs down 26% from the second quarter of 2012. Looking at Niobec, we had a seven-day planned maintenance shutdown in the second quarter. Production of 1.2 million kilograms of niobium was unchanged from the prior year, and from the first quarter. Although throughput increased 7% from the second quarter of 2012, as was in line with the first quarter. We saw recoveries improve in Q2 versus Q1, although this improvement was somewhat muted by results in June, when recovery was sacrificed somewhat to overcome some concentrate quality concerns related to minerology. Improving operating efficiencies contributed to higher operating margins, compared to last year and the fourth quarter. With respect to cost reduction initiatives, Niobec is focusing on improving underground development productivity and blasting efficiency. Also, in the converter, the operation has introduced larger melting vessels to improve overall productivity and reduce costs. Now, Craig MacDougall will talk about our exploration efforts. -------------------------------------------------------------------------------- Craig MacDougall, IAMGOLD Corporation - SVP - Exploration [6] -------------------------------------------------------------------------------- Thanks, Gord, and good morning everyone. As announced in the first quarter, we scaled back our exploration program significantly this year, as part of the corporate-wide cost cutting program. As you saw in an earlier slide, as at the end of June, we had achieved $30 million of the targeted $40 million reduction to our exploration program. This has been achieved through cuts to both greenfield and brownfield exploration programs. To give you an idea where the most significant cuts are coming from, we have reduced the size of our greenfield exploration teams by approximately one-third, with most of the down-sizing occurring at West Africa, Suriname, and Brazil. We've also down-sized an exploration team at Cote Gold, where we have reduced or deferred certain elements of both the exploration program and the ongoing pre-feasibility study. We've also scaled back our drilling programs in Mali, Burkina Faso, and Suriname. This reflects our decision to reprioritize or defer projects, and to place a greater emphasis on resource drill programs, specifically the Boto project in Senegal and the Pitangui project in Brazil. At the same time, we continue working on development work around our existing mines, and on select greenfield projects in South America and Canada. Let me give you a brief update on the status of some of these projects. In our Essakane mine, we continued to advance exploration work on the Falagountou satellite deposit, with a goal to begin mining softer oxide transition ore sometime in 2014, which is about six months sooner than originally anticipated. In the second quarter, we commenced and largely completed site evaluation drilling, which will lead to an update of the resource estimate. Additionally, an infill drilling program has been completed on the South East prospect, located about 1.5 kilometers to the south east of the Falagountou satellite deposit. This prospect is a blind discovery discovered in 2011-2012, under shallow sand cover. The initial results are encouraging, and will be evaluated to see if they support the estimation of additional resources. In addition, an agreement respecting the relocation of the affected community has been finalized, and the implementation is in progress. In Senegal and Brazil, we continue to advance our two key greenfield projects. On July 29, we issued a news release announcing the maiden resource estimates for the Boto gold project in Senegal. The vast majority of the estimate is in the indicated category, which contains just over 1.1 million ounces at a grade of 1.62 grams per tonne gold. The estimate includes resources for five deposits. A significant proportion of the estimate is derived from the newly-discovered Malikoundi deposit, which overall displays higher grades than most of the previously discovered zones. Malikoundi and several of the other deposits are still open to [long strike and at depth], so we are planning further drilling with the goal of expanding the size of the resource. Although the 2013 drilling program has stopped with the onset of the annual rainy season, we intend to resume drilling as conditions improve in the late fall. Our plan will be to continue advancing the project towards commissioning of a scoping study in 2014. At the Pitangui project in the state of Minas Gerais in Brazil, in-fill drilling at the Sao Sebastiao prospect continues, and we plan to complete a mineral resource estimate in the fourth quarter, if results remain encouraging. Three kilometers from there, initial assay results from first pass drilling on another target have also confirmed the presence of gold mineralization, similar to the Sao Sebastiao prospect. This continues to highlight the potential for multiple discoveries. Turning to Cote Gold, while we've deferred certain aspects of the work to be done, the winter drill program was completed as planned, and we expect to complete the pre-feasibility study by the end of this year, and permitting by the end of 2014. This will be followed by a feasibility study, which we would expect to complete by mid-2015. As for the steps after that, we've made it very clear that a decision to proceed will depend on project economics, which will be a reflection of the gold price at the time. Operating on a reduced budget has required that we reassess our exploration projects, deferring some, while advancing others with the greatest near-term potential. So it's been a matter of setting priorities. I'll now turn you back to Steve to wrap up. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD Corporation - President & CEO [7] -------------------------------------------------------------------------------- Thanks, Craig, Carol and Gord. Our success at executing on our priorities is what has enabled us to withstand what could have been a much tougher quarter. We operate in a very tough and challenging environment today, so we're going to keep our nose to the grindstone and do what we have to do. We will continue to cut costs. We will be disciplined about capital spending. The Essakane plant expansion will be completed by the end of this year, and on budget. Westwood is ramping up well, and we can look at a future for Rosebel with lower power rates and access to softer rock and potentially higher grade ore. So for all these reasons, on slide 30, I'm confident our cost structure will continue to improve. That is why we've lowered our cost guidance. And I intend to see that we meet our guidance this year. So let's open it up for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- At this time, we'll begin the question-and-answer session. (Operator Instructions) Our first question comes from Michael Scoon. -------------------------------------------------------------------------------- Michael Scoon, Stifel Nicolaus - Analyst [2] -------------------------------------------------------------------------------- First question on Westwood, just kind of a bookkeeping item here. Looks like the capital spending to date has been about $95 million, and the guidance for the year, if I'm not mistaken, is $100 million, which would imply pretty minimal spending in the second half. Am I thinking about that correctly, or am I mistaken? -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD Corporation - EVP & CFO [3] -------------------------------------------------------------------------------- The way that you have to look at it, Michael, is the fact is that we're going to be producing and selling ounces, but the revenue and the costs get netted against the capital, until we actually reach commercial production. -------------------------------------------------------------------------------- Michael Scoon, Stifel Nicolaus - Analyst [4] -------------------------------------------------------------------------------- So $100 million is net of revenue. -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD Corporation - EVP & CFO [5] -------------------------------------------------------------------------------- Exactly. -------------------------------------------------------------------------------- Michael Scoon, Stifel Nicolaus - Analyst [6] -------------------------------------------------------------------------------- Okay. Understood. And then secondly, on Rosebel, what are the -- can you give me any idea what the conditions are with the new power rate agreement, as far as when you'll start to realize a lower rate? Is there an investment hurdle that you have to clear? I understand it's a win-win for both you and the government, but just understanding the structure and timing of when those power rates will begin to drop. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD Corporation - President & CEO [7] -------------------------------------------------------------------------------- Well, it's Steve Letwin, Michael. On 13 megawatts of our -- we're currently consuming around 30 megawatts. So on 13 megawatts of the 30, we're going to be paying basically $0.09 a kilowatt hour, which is extremely attractive. And then on the aggregate amount that we're looking at, we're trying to get to a blended rate that's around $0.14. So the savings for us is significant. What we've agreed to do is, we're going to invest in some of the power infrastructure in Suriname. That would be about a $50 million investment over the next couple of years. We're looking at a solar facility, for example, that's probably going to be at our mine site and potentially some thermal generation capacity. The economic return on that is obviously extremely attractive for us, given that we're saving somewhere in the order of about $22 million a year in operating costs. So the payback is very quick, and over a 10-year mine life, the attractiveness of the investment is very high. So this is just an outstanding opportunity for us at Rosebel to, A, cut our costs, and B, take advantage of the joint venture agreement that we signed, which gives us a 45-kilometer radius around our mill, accessing a lot more deposits that are lower -- softer rock and hopefully higher grade than what we see in our current mineral agreement. So we talked about the restructuring, the reinvention of Rosebel. I'm extremely pleased at the progress we've made there, and I'm going down there again. This will be my seventh trip, and you need to be on-site to do it. You can't do it over the phone, to push very hard to get the satellite deposits up and ready to move into our mill. Craig MacDougall's coming down with me, and we're going to be taking a hard look at how we can accelerate that. So it's all very, very positive. And as we said in the script in the call, we'll be taking a look at what we do with Rosebel going forward, but it's obviously a much more attractive mine site than it was six months ago. -------------------------------------------------------------------------------- Michael Scoon, Stifel Nicolaus - Analyst [8] -------------------------------------------------------------------------------- Thanks for that color, Steve. Sorry, just to confirm here, so on the total consumption of 30 megawatts, today, you're paying around the $0.20 per kilowatt hour? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD Corporation - President & CEO [9] -------------------------------------------------------------------------------- Right. Exactly. -------------------------------------------------------------------------------- Michael Scoon, Stifel Nicolaus - Analyst [10] -------------------------------------------------------------------------------- And you're targeting $0.14 ultimately, but you're not realizing $0.14 this quarter? Is that right? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD Corporation - President & CEO [11] -------------------------------------------------------------------------------- No, we're actually going to be lower than that. Because we got $0.09 at 13 megawatts, and probably -- yes, it's going to be lower than that. Stothart's shaking his head at me. We've got 13 megawatts at $0.09, and the other 17 megawatts, I think it's sitting at around $0.16 to $0.20. It's going to be in and around the $0.14, maybe a little bit lower. But the end goal is on -- if you look at an expansion scenario of Rosebel, you're looking at probably 42 megawatts, and the idea, and the goal, and certainly what we plan to move ahead with is about a $0.14 all-in rate, which as I said earlier, is extremely attractive for us. And keep in mind that anything that comes from the area outside the current [mineral] agreement is at $0.11 a kilowatt hour. So if we start bringing in deposits outside the current mineral agreement, that will blend with the $0.14 at $0.11. So it should bring the overall cost even lower. So again, it's very, very attractive for us. -------------------------------------------------------------------------------- Michael Scoon, Stifel Nicolaus - Analyst [12] -------------------------------------------------------------------------------- Okay. Thank you very much. I'll turn it over to someone else. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- And our next question comes from David Haughton. -------------------------------------------------------------------------------- David Haughton, BMO Capital Markets - Analyst [14] -------------------------------------------------------------------------------- Just follow up on Westwood. You had 10,000 ounces coming out from that project. What kind of tonnage and grade were you able to achieve in a pre-commercial condition? -------------------------------------------------------------------------------- Gordon Stothart, IAMGOLD Corporation - EVP & COO [15] -------------------------------------------------------------------------------- From Westwood? -------------------------------------------------------------------------------- David Haughton, BMO Capital Markets - Analyst [16] |