TORONTO Nov 4, 2015 (Thomson StreetEvents) -- Edited Transcript of IAMGOLD Corp earnings conference call or presentation Wednesday, November 4, 2015 at 1:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Bob Tait IAMGOLD, Corp. - VP, IR * Steve Letwin IAMGOLD, Corp. - President, CEO * Carol Banducci IAMGOLD, Corp. - EVP, CFO * Gord Stothart IAMGOLD, Corp. - EVP, COO * Craig MacDougall IAMGOLD, Corp. - SVP, Exploration ================================================================================ Conference Call Participants ================================================================================ * Anita Soni Credit Suisse - Analyst * David Haughton CIBC - Analyst * Rishav Puri Golden Tree - Analyst * CJ Baldoni Principal Global Investors - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by. This is the Chorus Call conference operator. Welcome to the IAMGOLD 2015 third quarter operating and financial results conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions) At this time, I'd like to turn the conference over to Bob Tait, Vice President, Investor Relations for IAMGOLD. Please go ahead, Mr. Tait. -------------------------------------------------------------------------------- Bob Tait, IAMGOLD, Corp. - VP, IR [2] -------------------------------------------------------------------------------- Thank you. Welcome to the IAMGOLD conference call. Our remarks today will include forward-looking statements. Please refer to the cautionary language regarding forward-looking information in our disclosure documents and be advised that the same cautionary language applies to our remarks during the call. During our opening remarks, we will refer to slides which can be viewed on our website, IAMGOLD.com. Joining me on the call today are Steve Letwin, President and CEO; Gord Stothart, Executive VP and COO; Carol Banducci, Executive VP and CFO; Craig MacDougall, Senior VP, Exploration; and Jeff Snow, General Counsel and Senior VP, Business Development. I'll now turn the call over to President and CEO, Steve Letwin. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [3] -------------------------------------------------------------------------------- Thanks, Bob. Well, as we all know, we continue to operate in tough times and because of that, there has been no break from our drive to further reduce costs. And there's no decision we make that doesn't consider the impact on our balance sheet. Our total cash cost per ounce for the quarter were $791 and all-in sustaining of $1,027. So we continue to improve from the previous year and from the second quarter. Essakane's performance in particular was outstanding. All-in sustaining costs were $922 an ounce, $227 an ounce lower than the previous year. Though our continuous improvement efforts continue at other sites where the emphasis is on streamlining and reducing overhead costs. Rosebel is an excellent example of this, having recently begun the process to reduce the number of employees by 10%. This will better align its labor costs with production levels. The excellent progress that we have made to further reduce our all-in sustaining costs has allowed us to lower our cost guidance for 2015. Total cash costs for the year are now expected to range between $825 and $865 an ounce and all-in sustaining costs between $1,050 and $1,150 an ounce. Turning to production, Essakane achieved record production in the third quarter with a 29% growth year-over-year. The additional ore from the Falagountou satellite deposit was a significant contributor, a great example of the upside potential of our existing assets. At the consolidated level, we produced 197,000 ounces in the quarter, bringing year-to-date production to 607,000 ounces. We maintained our production guidance for the year at 780,000 to 815,000 ounces. Great work continues on the exploration side. Several projects at the resource delineation stage are moving forward, including an initial resource estimate expected for Diakha by the end of the year. A resource update will be completed for Boto by year-end. And we recently amended our earn-in option agreement with TomaGold, enabling us to acquire an immediate 50% interest in the Monster Lake project in Quebec. Our balance sheet remains very strong with $683 million in cash and bullion. And we continue to maintain good access to capital. Jeff Snow and his team continue to evaluate investment opportunities that would offer attractive returns with the potential for enhancing near-term cash flow. While Carol will provide some clarity on the deployment of cash from the sale of assets, I wanted to emphasize that we do not expect to be required to purchase any [other] bonds at par next year. As we head to the final quarter of the year, we will continue to focus on cost reduction and capital preservation. At Westwood on slide 5, the focus over the past several months has been on rehabilitation and underground development. A thorough review was completed, enabling the development of a revised mine plan. The team has done outstanding work on that and Gord will tell you more about it. Obviously, I'm very excited about what lies ahead, not just for Westwood, but for all of our mines. This will become more evident in the coming months, with the completion of our mine plans by the end of the year. In January 2016, we plan to communicate positive news about the forward pass for Westwood. And early in the new year, we will provide an update on our mine plans for Rosebel and Essakane. Together, they will bring greater clarity around our future and I'm extremely excited about the way this looks. With that, I will now call on Carol to talk about our financial results. -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [4] -------------------------------------------------------------------------------- Thanks, Steve, and good morning, everyone. As Steve mentioned, we continue to manage our business prudently in a volatile gold price environment. Our balance sheet remains strong with a net cash position. We are looking to refinance our credit facility, but given the cash amount that we have on our balance sheet, as well as our view not to pay fees for capacity that we don't intend to use, we'll be looking for a smaller amount. We've done well to further reduce costs and will continue on that track. In the third quarter 2015, we reported a net loss from continuing operations of $85 million. Note the two significant adjusting items, the $20 million unrealized derivative loss related to [field] contracts and the $15 million adjustment to normalized Westwood's cost, given the interruption in production. Together, these two items had a per share impact of $0.09. After normalizing earnings for all the one-time items, the adjusted net loss was $0.12 per share for the third quarter 2015. This compares to an adjusted net loss of $0.03 per share in the third quarter of 2014. The year-over-year variance in adjusted net earnings was a result of the lower operating earnings. While cost of sales was down 13%, revenues declined by 28%. Revenues from continuing operations in the third quarter 2015 were $208 million, down from $287 million the year before. And this was mainly due to the lower gold sales and a 12% decrease in the gold price. Gold sales were lower by 40,000 ounces due to lower production at Westwood and Rosebel, as well as the closure of Mouska in the third quarter 2014. Commercial production at Westwood began in the third quarter of 2014. The production interruption in the second quarter of 2015 limited production and sales in the third quarter to 2,000 ounces. Rosebel sales were lower due to a decrease in production resulting from lower grades and throughput. Partially offsetting the lower sales from Westwood and Rosebel was a 15% increase in sales at Essakane. And this reflects a 29% increase in production partially offset by a temporary delay in an end-of-quarter shipment. Sales from that shipment were recorded in the fourth quarter. Cost of sales declined to 13% year-over-year. This reflects Rosebel and Essakane's success in lowering mining and milling costs, including energy costs and consumables. Depreciation expense increased $4.5 million from the previous year. This is mainly due to higher production at Essakane, partially offset by lower depreciation at the other sites. Based on where depreciation is tracking year-to-date, we've lowered depreciation guidance for 2015 to $270 million to $275 million. Net cash from operating activities after removing the impact of changes in working capital was $35 million or $0.09 a share. The year-over-year variance was the result of lower earnings from operations including the absence of earnings from Niobec, which was $12 million in the previous year. At the end of the third quarter, cash, cash equivalents and gold bullion were $783 million. Together with the current $500 million unused credit facility, total liquidity was nearly $1.3 billion. IAMGOLD's long-term debt is not due until 2020. Year-to-date, we've purchased $15 million of bonds representing the face value, leaving a carrying amount of $635 million. On a net debt to EBITDA, our net debt to EBITDA is zero, and that's well in compliance with our loan covenant of 3.5 times. I'm going to take a moment to talk about the bond covenants governing the use of proceeds from the asset sale. As set out in the bond indenture, we are required to use the proceeds from asset sales to reinvest, or commit to reinvest, in our business and/or repay debt obligations. Reinvesting or committing to reinvest must be done within 365 days from the date of sale. The proceeds from the sale of Niobec and the Diavik royalty can be used in a number of ways such as capital expenditures, acquisitions, the unwinding of derivative obligations and the retirement of capital leases. If after 365 days, remaining proceeds exceed $50 million, it's only the excess amount that would have to be used to purchase the senior unsecured notes at par. And as we've mentioned in our disclosure, and as Steve also mentioned, we do not expect that to be the case. Turning to production and costs for the quarter, attributable to gold production in the third quarter 2015 was 197,000 ounces. And this reflects record production at Essakane with a 29% increase driven by higher grades, higher throughput and additional softer ore from Falagountou. Production was lower at Rosebel due to lower grades and we had the production interruption and a shift to the mine development at Westwood. Compared to the second quarter of this year, overall production fell slightly although Essakane's production rose 20%. Rosebel was virtually flat quarter-over-quarter. And Westwood was down, as I noted earlier. Turning to cost, all-in sustaining costs of $1,027 per ounce in the third quarter 2015 were $88 per ounce lower than the same quarter 2014. Compared to the second quarter 2015, they were $49 an ounce lower. As of the previous quarter, unit costs included realized hedged and non-hedged derivative losses. The impact on all-in sustaining costs in the third quarter of 2015 was $73 an ounce on the hedges. Note as well that as a result of the interruption of production at Westwood, costs attributed to inventory were reduced by $15 million in the third quarter to normalize the fixed overhead allocated on a per-unit basis. The $15 million relates to the full 3 months of the quarter. As a result, cash costs per ounce and all-in sustaining costs per ounce were reduced accordingly. And at the consolidated level this reduced all-in sustaining costs by $80 an ounce sold. While we expect costs to trend higher in the fourth quarter, due to increasing hard rock at Rosebel and Essakane, for the full year, we've lowered our cost guidance at the consolidated level. Gord will now provide an update on operations. -------------------------------------------------------------------------------- Gord Stothart, IAMGOLD, Corp. - EVP, COO [5] -------------------------------------------------------------------------------- Thanks, Carol. Looking at the third quarter for IAMGOLD, this was very productive for us on several fronts. Essakane fired on all cylinders with record production and lower costs. Rosebel took steps to reduce its cost structure to better align with production. Westwood completed a comprehensive review and [Evian] has to lay out the plan for moving forward, and Sadiola continues to be a cost-effective operator. Additionally, we continue to develop and refine our long-term plans at all the operations to incorporate the improvements realized and to ensure that our business is viable, even in a sustained low gold price environment. We plan to be in a position to share some of the longer term picture with the market in the new year. Beginning at Essakane, we had a record quarter on all key production metrics. Production increased 20% from the second quarter and 29% from a year ago. The record production year-over-year was due to higher throughput and higher grades. [No] throughput increased 22% as the proportion of soft rock was 19% compared to 5% the year before. That might seem somewhat contrary to our previous messaging that the percentage of hard rock is increasing, so let me explain. In the first and second quarters of this year, we benefited from satellite stockpile drawdown and fed to the mill. And in the third quarter, we benefited from the satellite ore coming from Falagountou encountering additional ore that was initially modeled and at higher grades. We currently estimate that there is sufficient satellite at Falagountou to take us through to the end of this year. In addition to the positive situation at Falagountou, we also encountered additional transition ore at higher grades than planned in the new pushback area at the north end of Essakane main pit. We expect that early in 2016 the percentage of hard rock milled will move over 90% as the north pushback area and the Falagountou satellite pit mine deeper into fresh rock zones. Compared to the same quarter a year ago, cash costs of $747 per ounce were 13% lower and all-in sustaining costs fell $227 to $922 an ounce. Beyond the higher production and sales, unit costs were driven lower by lower fuel prices, lower mill consumables and improved operating efficiency. Operating expenditures fell 11% and sustaining capital expenditures were down 24%. Ongoing [long] planning at Essakane continues to demonstrate a robust, profitable operation going forward. I'll add here that the political disruption in Burkina Faso in the third quarter was short-lived. Not only was there no impact on production, but it was, as I've just described, the best quarter to date for Essakane. Given the record production in the third quarter, we've increased the production guidance for Essakane to 365,000 to 380,000 ounces for 2015, which translates into expected production this year being 10% to 14% higher than last year. Moving to our Suriname operation, Rosebel produced 70,000 attributable ounces of gold in the third quarter of 2015, virtually unchanged from the previous quarter. Production was down from the third quarter of 2014 due to lower grades and throughput. The decline in grade year-over-year was due to pit sequencing which offset the benefits from better dilution control through RC drilling. Throughput was lower than the previous year due to an extended timed mill shutdown in the quarter and the treatment of a higher proportion of hard rock than we saw a year ago. Total cash costs were $856 per ounce in the third quarter of 2015. Although essentially unchanged from the second quarter, they have increased year-over-year due to lower production. All-in sustaining costs of $1,111 per ounce were up only slightly from the second quarter, but up 6% from the third quarter a year ago due to both lower sales and higher sustaining capital. Success at improving operating efficiency, the lower power costs, lower fuel costs and a decrease in consumables have helped mitigate the impact of lower grades on production. Rosebel's total operating costs in the third quarter of this year are down 24% from the third quarter of 2014. I mentioned last quarter that much work has been done to redesign the business plan at Rosebel including the recently announced labor cost reductions to better align with the production profile. Rosebel will continue its focus on improving productivity, reducing dilution and optimizing throughput. The operating and planning team has done an exceptional job putting together a viable business plan going forward for the next 7 years or so, despite an increasing proportion of hard ore and reduced gold prices and without relying on any additional soft rock being identified through exploration. This provides a platform from which to go forward if and when additional soft rock is identified. Looking at Westwood, in our news release for the quarter, we provided an update as to what has transpired at Westwood over the past 5 months. An exhaustive review was completed to improve our understanding of the seismic event and to determine the path forward. The effort was carried out by a team of internal experts and external consultants. Data was collected in a multitude of areas including seismic history, geologic characterization, stress distribution, and mine sequencing. Based on this data, a recovery plan was developed to rehabilitate the affected area and to enhance the design strategy for ground control and for mining of new areas. The pace of production during the quarter was moderate. Many employees who previously worked on [sloping] activities were refocused on development. The site underwent a reorganization to support the revised mining plan including a reduction in contract employees and some rationalization of the mill workforce, given the low level of production. A review of the study of recommendations by an independent panel of geotechnical experts had a positive outcome and is now before the provincial authorities. We plan to communicate Westwood's revised life of mine plan to the market in January 2016. The interruption of production since the seismic event resulted in distorted unit costs. Carol has already covered the adjustments to cash costs and all-in sustaining costs as a result. We continue to expect Westwood's all-in sustaining costs to be within the range of $1,300 to $1,400 an ounce for 2015. With the limited production in the third quarter, Westwood's production guidance for 2015 has been reduced to 55,000 to 65,000 ounces for 2015. At Sadiola, attributable production of 17,000 ounces in the third quarter of 2015 was 19% lower than the previous year. This was the result of lower grades. Sadiola was our lowest-cost operation in the third quarter and unit costs continue to fall with cash costs of $[661] an ounce and all-in sustaining costs of $695 an ounce. Lower prices for fuel and consumables and favorable foreign exchange rates have offset the impact of lower production. At the end of the second quarter, we said that we had initiated a reverse circulation drilling program to test oxide targets at Sadiola. Since then, results have been encouraging and will be evaluated as part of our year-end reserves and resources update and incorporated into our revised mining plan. A preliminary assessment indicates the potential to continue mining and milling of oxides at Sadiola into early 2018. We continue to update the feasibility study on the [south] side expansion project and with our partner, AngloGold Ashanti, look at options to extend the life of the mine. That concludes my comments and I'll pass the call over to Craig for an update on exploration. -------------------------------------------------------------------------------- Craig MacDougall, IAMGOLD, Corp. - SVP, Exploration [6] -------------------------------------------------------------------------------- Thank you, Gord, and good morning, everyone. In the face of budget pressures and cost-cutting initiatives across the industry, our exploration program continues to deliver positive results with a number of our projects advancing as planned. Year-to-date expenditures of $36 million were 27% below what they were in the same 9 months last year. For this reason, we've lowered our spending outlook for 2015 by $6 million to $50 million and we will continue to look for more savings. As I give you an update on our exploration projects, please keep in mind that the drilling results have been previously disclosed in accordance with securities regulations and have been duly signed off by the qualified persons within the Company who reported them. I'm going to begin with the Monster Lake project in Quebec. On Monday, TomaGold announced an amendment to the earn-in option agreement that we had with them respecting the Monster Lake project. Our original agreement with TomaGold commenced in November of 2013. That gave us an option to earn a 50% interest in the Monster Lake project by completing exploration expenditures totaling CAD17.6 million over 5.5 years to 2019. The amendment to the agreement gives us the option to earn an immediate 50% undivided interest in the project for a one-time cash payment of CAD3.2 million. This means we will acquire a 50% interest now rather than waiting until the completion of the expenditure commitment. In addition, we now have the option to increase our interest to 75% by spending a further CAD10 million in exploration expenditures by the end of 2021. The amendment to this agreement underscores our confidence in this new discovery stage project based on the encouraging results we've seen to date. As most you know, the excellent grades that have been reported from our drilling results to date follow previous drilling programs that reported similar high-grade intervals. High-grade Megane 325 zone extends the depth and several new gold-bearing structures have been identified for further exploration. In the third quarter, we completed a summer field program, the results of which have been used to prioritize future drill programs. A 4,000-meter drilling program is currently underway, targeting the Megane 325 zone as well as other priority targets. Turning now to the Diakha prospect under the Surabaya joint venture project in Mali, the final assay results from the delineation and drilling program completed in the first half have been received. Reported highlights included 11.99 grams per tonne gold over 34 meters, which included an interval of 18 meters grading 18.1 grams per tonne gold. All results are now being incorporated into a geological model to support the estimation of a [43-101] compliant mineral resource estimate by year-end. To support this estimate, preliminary metallurgical testing has also begun in an independent lab to evaluate the gold recoveries. At our Boto Gold project in nearby Senegal, having completed the infill delineation drilling program at the Malikoundi deposit in the second quarter, work in the third quarter has focused on validating and incorporating the drilling results into a revised resource model. This will be used along with updated pit parameters to update the resource estimate. Metallurgical testing also continued during the quarter and technical and environmental studies are in progress to advance the economic evaluation of the project. At our wholly owned Pitangui project in Brazil, the resource delineation program to upgrade the resource within the core area of the South Sebastian deposit has also been completed. Again, these results are being incorporated into an updated resource model. Following the completion of the drilling program, drilling commenced to begin testing various electro-magnetic anomalies that have been previously identified on the property. These anomalies, which are similar to the ones observed at the South Sebastian deposit, represent priority exploration targets for future drilling programs. Moving on to the Eastern Borosi project in Northeast Nicaragua, where we've been focused on drill testing select gold and silver vein systems. In the third quarter, we received final assay results from the Diamond drilling program completed in the previous quarter. Highlights from results on the Blag system reported in July included 5.4 meters grading 2.99 grams per tonne gold and 31.6 grams per tonne of silver; and 4.6 meters grading 7.8 grams per tonne of gold and 6 grams per tonne of silver; and a 19.2-meter interval grading 1.1 grams per tonne gold, and 223.4 grams per tonne silver. With the 2015 program now complete, the focus will be on compiling these results to determine the direction of future programs. Overall, we've made excellent progress moving our exploration projects through the pipeline and we have three projects at the resource delineation stage, which are the direct result of discoveries from IAMGOLD exploration programming. This is an outstanding achievement by the exploration team and especially so given the current environment. With that, I'll turn you over to Steve. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [7] -------------------------------------------------------------------------------- Thanks, Craig. Well, look, in closing, as I said at the beginning, our plan is to continue to focus on cost reduction and cash preservation. We can't do anything about the price of gold; it's out of our control. And we can't do much about the sentiment. But what we can do is work to continue to focus on our cost. So that's what we're going to continue to do. We're going to focus on cash preservation and we're going to make sure the balance sheet stays strong. And as you heard from Gord, there's a lot of optimism about our mine plans going forward, which we're going to be communicating in January with specific emphasis on Westwood. So we'll continue to do what we always do. And on that note, we'll take questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you. We will now begin the question-and-answer session. (Operator Instructions) Anita Soni, Credit Suisse. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [2] -------------------------------------------------------------------------------- Just a couple of questions first with regard to the use of proceeds from the Niobec sale. Could you give a little bit of color on -- on maybe for color in terms of just sort of allocating out exactly where you guys are planning to spend that $600 million. I know you've said that you will not be using it to pay back anymore debt. I was just wondering what are the capital plans for that? -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [3] -------------------------------------------------------------------------------- Sure, Anita. If we just take Niobec as an example and use $500 million, well, right now, based on where we're tracking for our capital expenditures this year, and based on what we expect to commit for next year and spend in the first half of the year, we're looking at somewhere of approximately $300 million. And on top of that, we would look at our capital leases, the settlement of our hedges. And then what we announced earlier this month was the EURO Resources acquisition and Craig spoke to Monster Lake. So when you add up all those components, you're looking at somewhere around $170 million. And so when you add the $300 million capital to the $170 million with these other components, and of course, we've got others. There are other applications of those funds, that satisfies the requirement of the covenant. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [4] -------------------------------------------------------------------------------- All right. So then at this time, there's no plans to -- I think obviously previously, you guys had been talking about looking to acquiring (inaudible) to the production profile there. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [5] -------------------------------------------------------------------------------- Well, we were -- we definitely were -- have been looking; we continue to look. The challenge we seem to have in the environment -- and it's probably the same challenge everybody else has -- is finding assets that are cash flow generating, positively cash flow generating after you take a look at paying a premium, etc. So not too much out there. We're much better off investing in our own assets and organically improving our cost structure and maximizing revenue because we just can't seem to find anything out there that we can add to our portfolio right now that is going to be generating cash as opposed to using cash. Lots of development projects out there, Anita, but we -- the last thing we want right now is a development project. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [6] -------------------------------------------------------------------------------- Right. And then moving on to Westwood, I just wanted to get some color on the plans. I know that you're going to reveal that in January and it's before the provincial authorities at this point. But do you anticipate an impact to production levels in 2016 and 2017? My experience usually tells me that generally you have to take it a little bit easy and slower when you have issues of this kind. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [7] -------------------------------------------------------------------------------- Yes, as we said, we'll talk about it at some length early in January. Yes, it's a ramp-up schedule. The preliminary plans we've seen get us back to where we were supposed to be that we had talked about previously more or less in similar sorts of timeframe. So there is a ramp-up to it and it looks quite promising. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [8] -------------------------------------------------------------------------------- All right. Thank you very much. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- David Haughton, CIBC. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [10] -------------------------------------------------------------------------------- Just a high-level question for you. You must be growing through your budget planning cycles right now. Last year, your reserves were at $1,300. I'm just wondering what your thinking is firstly for your budget planning, what sort of gold price you're assuming. And secondly, for reserves, what kind of price you might [adopt there]? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [11] -------------------------------------------------------------------------------- I'll back it up and turn it around for you. On reserves, we've done a fair bit of analysis and we are right now planning our reserves at $1,200 looking forward. So it is a drop from where we were at last year. We're still quite comfortable that that's an appropriate level for reserve planning. And our costs are -- sorry -- the price we're looking at in the near term are below that, but climbing over it sort of longer in the 5-year timeframe. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [12] -------------------------------------------------------------------------------- And I appreciate one of the things that you're looking at within your budget, notwithstanding you've got some things to spend like the Westwood development, etc., that your goal here would be to go free cash flow positive in 2016? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [13] -------------------------------------------------------------------------------- It certainly is. Notwithstanding what we need to do at Westwood, everything else is more than focused in that direction. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [14] -------------------------------------------------------------------------------- Okay. And by counting from $1,300 down to $1,200, I presume to the extent that you've got a stronger U.S. dollar and softer domestic currency, that would help that step-down in the gold price assumption. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [15] -------------------------------------------------------------------------------- Yes, there's some offsetting movement certainly for North America and West Africa, fuel prices and obviously, another offset for us that's working in our favor. And the really good work the sites have done in bringing down their costs to date is also working in our favor. By coincidence, we've spent a fair bit of work at the open pits, operated open pits anyways, Rosebel and Essakane, over the past years, looking geo-technically at our slope designs and have received a fair bit of joy with respect to that. So at least something is breaking in our favor. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [16] -------------------------------------------------------------------------------- Okay. Just going over to Essakane, good to see the contribution from the satellite and the (inaudible) [light] from there could extend into at least to the year-end and maybe even to the new year. What kind of sort of throughput should we be thinking about? You had 35,000 tonnes a day in the September quarter. Clearly, that's not sustainable as your percentage of hard rock goes up, but can you see it in the, say, 32,000 tonnes, 33,000 tonnes kind of range for the next couple of quarters? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [17] -------------------------------------------------------------------------------- We're actually trying to find ways as best as possible to sort of stick at the number that you're talking about long term even with higher rock percentages. We've done a -- we did a fair bit of investment obviously in the front end of the circuit in 2013. And now we're optimizing that, so looking at primary crushing, secondary crushing and what we can do there. And also spending a lot of effort right now on looking at our blasting practices and seeing what we can do fragmentation-wise with that. Our long-term goal would be -- we'd like to be running around 10% above our nameplate capacity. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [18] -------------------------------------------------------------------------------- Okay. And just a reminder, that nameplate is 30,000 tonnes a day? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [19] -------------------------------------------------------------------------------- The nameplate is 10.8 million a year. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [20] -------------------------------------------------------------------------------- 10.8 million, okay. All right. Just going over to Westwood, I know that you're going to come out with more detail in the next quarter. But just looking at getting to your target for the year, that implies something like 10,000 ounces, 15,000 ounces in the December quarter. Are you still comfortable with that given where you've been and the kind of remedial work that you've had and the uncertainty of seismicity? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [21] -------------------------------------------------------------------------------- Yes, we are comfortable with it and that's a question that I've asked repeatedly of the (inaudible). There are some positive things. We have a fair bit of ore, reasonable grade ore, in the surge system right now, so working through that and understanding the exact slopes that are in front of us right now, and also looking at some cleanup of some surface material. We're comfortable we'll fall comfortably within that new range. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [22] -------------------------------------------------------------------------------- And just more generally, what do you understand are the triggers and the causes and ways to avoid the seismicity that you've seen recently? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [23] -------------------------------------------------------------------------------- The triggers and causes, it was really a localized weak vein that was over-stressed and ruptured. It was a rock-burst incident. It was not a movement along a surface plain. I just looked through or translated about 400 slides worth of technical information for our board. So it's not a simple thing to describe in a 2-minute answer. What our opportunities are going forward specifically is in designing our new areas, ensuring that we're in the right ground, that we're not moving parallel to [shiftocity] when we're driving [drifts], and installing the appropriate ground control package for appropriate areas, avoiding stacking of intersections and keeping away from four-way intersections. So there's been a lot of design criteria come out of it and reviewed by a very distinguished peer review group. So we're pleased we can go back in and that our people will be safe and that we can reach the productivities that this mine needs to have. And we're happy it's going to be around for the next 20-plus years. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [24] -------------------------------------------------------------------------------- Okay. So is there a certain location within, say, looking at the plan view of Westwood that you need to avoid or you need to be more careful of? Is there an area where you have more jointing or [systocity] or some other structure that you've got to stay away from? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [25] -------------------------------------------------------------------------------- It's not an area we have to stay away from, but we have to understand how to develop it appropriately. But yes, there are specific zones that are -- that require a greater amount of technical attention to be mined appropriately. It's not that they can't be mined; it's just we need to pay attention to them. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [26] -------------------------------------------------------------------------------- And just one last one if I may over to Carol, please. You've got $150 million worth of bullion on the books. What's your intention there? Do you just want to keep it status quo or do you want to top it up or sell it down? What's your thinking? -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [27] -------------------------------------------------------------------------------- Our thinking right now, David, is to keep it status quo. Again, it provides our investors with greater leverage to the build price and we're confident at some point that we'll see the commodity rebound. But we're not, as Steve said, counting on it, but you know what? If we need to access it, as we did when we acquired Essakane, we'll access it. So to us, it's equivalent to cash or cash equivalent. So it's there for us to access and use within the business as we deem appropriate. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [28] -------------------------------------------------------------------------------- So when we see a gap between production and sales, it's not you putting it into the vaults? It just happens to be a slipped shipment by 1 week or a day or whatever it happen s to be at the end of the quarter? -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [29] -------------------------------------------------------------------------------- Absolutely, absolutely. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [30] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [31] -------------------------------------------------------------------------------- We don't play those games. -------------------------------------------------------------------------------- David Haughton, CIBC - Analyst [32] -------------------------------------------------------------------------------- Okay. Thank you very much, everybody. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Rishav Puri, Golden Tree. -------------------------------------------------------------------------------- Rishav Puri, Golden Tree - Analyst [34] -------------------------------------------------------------------------------- Hey, guys, you made it pretty clear that you're not going to be buying more -- any bond at par, but will you be buying any bond in the open market? -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [35] -------------------------------------------------------------------------------- That's a good question. We're being very proactive about how we manage our capital structure and as we noted, we purchased $15 million already. So it's something that we'll continually look at as we reach maturity. So it's something that is available to us and if we have the -- as Steve said, the priority right now for us is maintaining our liquidity and using those funds right now to invest in the business to drive more attractive returns, to enhance the cash flows for the long term. But it's something that we will continually look at and if appropriate, we'll see whether it makes sense. -------------------------------------------------------------------------------- Rishav Puri, Golden Tree - Analyst [36] -------------------------------------------------------------------------------- All right. Thanks. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- CJ Baldoni, Principal Global Investors. -------------------------------------------------------------------------------- CJ Baldoni, Principal Global Investors - Analyst [38] -------------------------------------------------------------------------------- I guess touching on what you just said about maintaining liquidity, I was curious about your comments earlier about refinancing your credit facility and reducing the size. It would seem that commitment fees are -- it's like it's a pretty small cost to pay as an insurance policy. -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [39] -------------------------------------------------------------------------------- Well, when we take a look at the overall capacity and again, as I said earlier, we're sitting with close to $800 million of cash and bullion. And these facilities are quite expensive and we're not talking hundreds of thousands; we're talking about millions of dollars. And so as we look at our 5-year outlook and what our intentions are, the current facility has not been drawn. And we take a look at our outlook over the course of the next 5 years, it's not our intention to draw on that facility. So it's there as capacity, and so that's factored into our decision. -------------------------------------------------------------------------------- CJ Baldoni, Principal Global Investors - Analyst [40] -------------------------------------------------------------------------------- And what kind of a reduction and extension of maturity or -- should we be thinking about? -------------------------------------------------------------------------------- Carol Banducci, IAMGOLD, Corp. - EVP, CFO [41] -------------------------------------------------------------------------------- We're currently -- we've launched the new syndicate. So it's in process right now and I'll be able to talk more to that in the next quarter. -------------------------------------------------------------------------------- CJ Baldoni, Principal Global Investors - Analyst [42] -------------------------------------------------------------------------------- Okay. Thank you. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- Anita Soni, Credit Suisse. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [44] -------------------------------------------------------------------------------- Just a little bit more on Westwood -- I was wondering in the areas that you need to, I guess, pay a little bit more extra attention to, is there a difference in the grade from the outlying areas that you're currently lying in? I noticed that the grade has dropped [if you've] not been doing mining in the areas that were affected. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [45] -------------------------------------------------------------------------------- Look, the couple of lenses that were immediately affected by the seismic incident, yes, they're higher grade lenses. That being said, there's a wide variety of grade materials that are available in both the (inaudible) areas and in the more massive areas. It is high grade specifically there and that's one of the reasons we were there and mining, and also one of the reasons why it's impacted our production. But it's by no means disproportionately higher grade in that area versus other areas. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [46] -------------------------------------------------------------------------------- And then my understanding is that you have a couple of horizons including that one that's been impacted that you've opened up at this stage. Ultimately, what -- how many mining horizons do you plan to get to? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [47] -------------------------------------------------------------------------------- Main horizons? Just let me count them in my head. There's about seven main mine horizons. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [48] -------------------------------------------------------------------------------- And then in terms of stacking the intersections, that's interesting commentary. Is that going to necessitate moving some of the -- sort of staggering some of the infrastructure that you have already in place? You've got sort of a ramp winding down and I think that's where some of the issues happened. So will there be a plan now to stagger some of that or what (inaudible)? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [49] -------------------------------------------------------------------------------- Yes, there's a bunch of things we can do. I think it will take us away from more conventional layouts that require some thinking, but it doesn't take us that far out. It's all completely manageable both from an operational standpoint and a geometry standpoint. It just requires a lot more rigor at the design stage to make sure that we're not putting ourselves in a situation that's going to cause us problems. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [50] -------------------------------------------------------------------------------- And then lastly on development capital, is that -- how do you see that impacting your Westwood development CapEx for next year? -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [51] -------------------------------------------------------------------------------- That's exactly what we're working through right now and our budgeting is how much we want to do. We feel -- and the site has recovered their -- the cadence, if you will, with respect to development. So we're hitting nice development numbers right now and the opportunity to ramp up and also to develop multiple areas, so that we're not as exposed to a single incident in the future. That's part of the recovery plan. So we're looking at what the appropriate level of development we need over the next couple of years to get us up to the design rate that we're looking for. -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [52] -------------------------------------------------------------------------------- Yes, usually this requires a bit more flexibility in terms of being able to mine on different fronts. -------------------------------------------------------------------------------- Steve Letwin, IAMGOLD, Corp. - President, CEO [53] -------------------------------------------------------------------------------- Exactly, and -- -------------------------------------------------------------------------------- Anita Soni, Credit Suisse - Analyst [54] -------------------------------------------------------------------------------- So good luck, you guys. Thank you. -------------------------------------------------------------------------------- Operator [55] -------------------------------------------------------------------------------- This concludes today's question-and-answer session and the conference call. Thank you for joining us. You may disconnect your lines. Thank you for participating and have a pleasant day.
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