IAMGOLD Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 12, 2023

There are 11 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD's First Quarter 2023 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 At this time, I'd like to turn the conference over to Graeme Jennings, Vice President, Investor Relations and Corporate Communications for IAMGOLD.

Operator

Please go ahead, Mr. Jennings.

Speaker 1

Thank you, operator, and welcome everyone to the IAMGOLD's Q1 2023 operating and financial results conference call. Joining me today on the call are Renaud Adams, President and Chief Executive Officer Martin DeDusen, Chief Financial Officer Bruno Lemelin, Senior Vice President, Operations and Projects Craig McDougall, Executive Vice President, Exploration Jerzy Orzechowski, Executive Project Director, Cote Gold and Tim Bradburn, Senior Vice President, General Counsel and Corporate Secretary. Before we begin, we are joined today from IAMGOLD's Toronto office, which is located on Treaty 13 Territory on the traditional lands of many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa and the Haudenosaunee and the Wendat peoples. At IAMGOLD, we We believe respecting and upholding indigenous rights is founded upon relationships that foster trust, transparency and mutual respect. Please note that our remarks on this call will include forward looking statements and refer to non IFRS measures.

Speaker 1

We encourage you to refer to the cautionary statements and disclosures on non IFRS measures, including the presentation and the reconciliations of these measures in our most recent MD and 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'll now turn the call over to our President and CEO, Bernal Adams.

Speaker 2

Thank you, Graham, and good morning, everyone, and thank you for joining us today. First off, I want Thank you and congratulate the IAMGOLD teams, including our Chair, Marise Belanger our Board of Directors and Management our Operations, finance and business development teams and everyone at the organization for positioning the company to where it is today. The company reported a strong first quarter responding to challenges with 113,000 ounces of attributable gold production from continuing operations while diligently focusing on managing our cost inputs. Have been asked by many stakeholders since I joined the company, what brought me to IAMGOL and what do I see this company over in the future. I can tell you before officially starting in the beginning of April, I spent several weeks behind the scenes getting up to speed on the company and learning about the achievement and progress of the operations and Cote.

Speaker 2

It was clear to me then and even more so now that IAMGOLD is on the cost of turning the corner towards of being a leading mid term high margin goal for the Easter. Our Sakami mine has been performing well with the teams in country demonstrating great initiative and resiliency. Our Westwood mine is starting to make real gains on completing underground rehabilitation work and development in support of the future mine plan that is highlighted by formative initiative. And of course, all eyes are on Cote, where the project continues to advance rapidly towards initial production early next year. The project was approximately 80% complete at the end of March and is ramping up to peak activity levels with a clear roadmap in front of us to achieve success.

Speaker 2

The impact of Cote Gold on this company will be absolutely substantial with the long life low cost assets shifting our production base to Canada. I'm excited and eager to turn our end of market focus from looking back to looking ahead of what is to come. We will soon be making the transition from fixing operations and managing constructions towards the real value drivers in our business in demonstrating execution success, operation optimization and unlocking growth potential, all to the benefit of our stakeholders. With that, I will now walk us through the quarterly results and highlights. I'm on Slide 5.

Speaker 2

Starting with health and safety, while our metrics in the Q1 has tracked of our internal targets, this year remains in line with our peers. With a days away restricted transfer duty rate of 0.6 and total recordable injury rates of 0.84 based on 200,000 hours worked, ensuring that all our employees and contractors go home safely will always be the primary focus of IAMGOLD. As we like to say, every gold ounce produced has to be done safely and we continue to amend our systems safety protocol to ensure we achieve 0 harm. On production, in Q1, The company produced 113,000 ounces of gold on an attributable basis from continuing operations, putting us well on the path of our production guidance target of 410,000 to 470,000 ounces this year. As we will get into a moment, the production results were driven by higher than expected grades at Issacam and a continued ramp up with SWET.

Speaker 2

The relatively strong production results and sales volume translated to cash costs of $10.94 per ounce sold and all in sustaining costs of $15.25 per ounce, so lower than our guidance estimate of $11.25 to $11.75 per ounce for cash costs and $16.25 to $1700 per ounce of all in sustaining costs, mainly due to lower than planned stripping in Issacauga. Our costs were higher than in the same period of last year as the inflations in our sales the industry experienced in the second half of last year raised the general cost of doing business and are unlikely to decrease at the same pace. While Q1 while the Q1 costs were below guidance, I will note that we expect to see our cost increase in the second and third quarters of this year due to a higher volume and of waste stripping plant at Essakane during this period. I'm now turning to Slide 6. Turning to El Takane.

Speaker 2

The mine reported attributable gold production of 92,000 ounces with higher than expected head grades due to continued positive grade reconciliation and the direct feed of material from the bottom of Phase 4 of the pit. Mining activity was impacted by ongoing disruptions in the in country supply chain with Isakan Mining just over 1 point of 6,000,000 tonnes of ore and 4,600,000 tonnes of waste for a total material of minus 6,300,000 tonnes versus the 15,200,000 tons in the same period last year. As we saw during the period last year, Mining fleet could not be operated at full capacity during January February as a result of disruptions and the field supply resulting from the security situation. It should be noted though that the situation improved during March and the mining fleet was operating at near full capacity during April. Mill in the Q1 was 2,200,000 tonnes at an average head grade of 1.6 grams a tonne, with throughput 31% lower than the same period the same prior year period.

Speaker 2

The decline in throughput and lower plant utilization during the quarter is primarily due to the fuel supply constraint discussed. The mill achieved recovery of 91% in the Q1 as the plant continues to benefit from recent improvement to follow blending practices and the gravity segment. Recovery from the gravity continued to increase over historical levels and we are planning on installing additional screening in the second half of the year to target even further potential improvement. On a cost basis, the second to report cash costs of $9.64 per ounce, an increase from the $7.81 an ounce last year due to inflationary pressures being offset by lower mining and milling costs as a result of lower activity level at higher grades. All in sustaining costs were $11.57 an ounce, coming in below estimate as we were unable to undertake planned stripping program.

Speaker 2

Looking ahead, the Sacane is on track to achieve its gold production guidance range of 340,000 to 380,000 ounces ago. Mining activity is trending towards normal operating levels in April and is expected that we will be able to operate near the normal levels during the remainder of the year, including the planned waste stripping in the second and third quarter to provide access to the required mining areas in order to meet to 2024, 2025 production plans. Mill throughput is expected to return to normal level with head grades expected to decrease over the course of the year as the mill feed and copper is lower grade material from stockpile. Turning to Westwood. Gold production was 21,000 ounces of gold as a result of higher volume in our grades from underground as well as the contribution for the Grand Jacob effect.

Speaker 2

Underground development in the Q1 experienced near record development rates with 14 94 meters of lateral development completed to secure safe access to multiple ore phases, including high grade past producing area, which will allow for increased operational flexibility and support of the 2023 production plan. I was on the ground at Westwood last month, spending in some of the key stokes in the central zone and it is absolutely impressive what the teams have done to bring access back into this area. With a strong Q1, Westwood is is well on track to achieve its guidance range of 70,000 to 90,000 ounces of gold this year. And we expect to see an increasing proportion of ore source from the underground mine as the year progresses. Mill feed will continue to be supplemented from available surface deposits and we should know that our guidance includes supplemental mill fees from satellite deposits, including from the Payone property in the second half of the year.

Speaker 2

Cash costs and all in sustaining costs continue to remain high at Westwood Complex with a very high sensitivity to mine output. But as the production volume increased and the rehabilitation work decreased, we expect to see significant cost step down with the goal of positioning the asset for free cash flow starting towards the end of the year on time for a better and profitable 2024 and beyond. Turning to COVID-nineteen. And as mentioned by Graham in the operating remarks, I am pleased to have our Executive Project Director with us today, and I will hand off the call to him in a moment. One of my first initiatives was when I started was to be at Cote, where I spent time at site with the team.

Speaker 2

It is very exciting to see the progress the team has made and see the work and I could see the projects firsthand. Codigold, once up and running, will be Canada's 3rd largest gold mine. And the impact that Codit will have on this company will be substantial, with the long life, low cost assets shifting a significant proportion of our production base to Canada. Code is now ramping up to peak activity. Now that the Springbond is nearing completion and there is a clear roadmap in front of us to achieve success.

Speaker 2

Looking at the project spending, in Q1, the project JV incurred $158,600,000 in project expenditures on a 70% basis, bringing the project to date expenditures to $1,370,000,000 on a 70% basis are $1,960,000,000 on a 100% basis. Coating all remains on schedule and the made at attributable cost to complete the construction on a 70% assuming a U. S. GAAP rate of 1.32. Accounting for the submittal funding agreement, which Martin will go into more detail.

Speaker 2

IAMGOLD is expected to fund $460,000,000 to $535,000,000 during the remaining of 20 to bring the project to production based on its stated 60.3 percent ownership and the joint venture. With that, I will turn the call over to our Executive Project Director for additional remarks. Go ahead, Jerzy.

Speaker 3

Thank you, Renaud. As mentioned, the Q1 saw important progress for the project, achieving significant milestones in networks, Process on Plant and Operation Readiness. At the end of the quarter, the project was 80% complete, having achieved 7% progress in the Q1 of this year during which was a cold winter season. We currently have over 1700 workers on-site, having recently added an additional to 64 beds to support additional work for us for peak SMPI construction activities, commissioning, operation resources this spring summer. On Earthworks, we have achieved the first target on the TMF reaching the elevation of 392 in March in preparation for the spring Fresh Ed to allow for the water accumulation to support commissioning activities later this year.

Speaker 3

Having reached the Freshpet milestone with the scheduled float in the earthworks, we have used this opportunity to slow down a bit the earthworks' progress to advance more aggressively with the progress on the process plant construction. Our focus in Q2 and Q3 will be on completing the construction of the portions of the plant and starting pre commissioning activities. Q4 will be focused on finalization of recommissioning and preparation for the ore introduction to achieve first goals in Q1 and sustainable production this year. Let me give you a quick commentary to the pictures on your screens. Taking it from the top left corner, this is the status of the high voltage incoming substation.

Speaker 3

We are planning to start early commissioning activities in the year in this area early Q2 in preparation for utility connection of the primary power in August. Moving clockwise, this is a grinding area. You can see the ball mill which installed BM gear and vertical progress.

Speaker 4

We have a very good

Speaker 3

progress in our fleet assembly and commissioning. All procurement is essentially complete and we currently have 14 capped 793 whole trucks, to 994 loaders and 40 10 dozers delivered, which are simply quite advanced on the first electric shovel. We have started the autonomous operation in the pit in early January with 4 to 6 trucks operating depending on the material delivery target area. And we are running autonomous fleet during the day and are planning to start 24 hour operation in Q3. Finally, you can see in the bottom left corner the birds' eye view from the tank farm side.

Speaker 3

This is another area which we are pushing for of recommissioning activities. Moving to the timeline, This is the high level view. Copacol continues to track well with the updated project schedule towards initial production in early 2024. We are welcome in close alignment with our parts in Itomo and our contractors to ensure that is built safely on time and on the current budget and scope. At this time, the critical part of the project continues to be through the processing plant as mining operations are well advanced.

Speaker 3

A key event this summer will be collection of the Kota substation to the power line. This will allow for electrification of the equipment in the plant as well as the rope shovel in the pit. Hi, everyone. Our lines have been completed to site and to substate and make significant progress in the quarter. We are very much reliant on our workforce and are a major employer in the region.

Speaker 3

So I want to tip my hat to our human resources team ensuring The project is well stuffed up. We are only as good as our people and I'm impressed with the team on the ground. With that, I will turn back to you, Renaud. Thank you. Thank you, Jose.

Speaker 2

Of course, we cannot talk about Cody without talking about Gosselin. Earlier in the quarter, we reported as a result from the 2022 drill campaign, which successfully intersected mineralization to the south and below the current resource boundary of the deposit. Gosselin with his mining and resources of 3,400,000 indicated ounces and 1,700,000 ounces inferred continue to be in the early stage of discovery. The deposit has only been drilled with a fraction of the meters compared to coal vein and to half the depth and remains open along strike and on debt. When you look at the Skol and life of mine, there is a step down in productions in the year 2030 to 2,033, which could be a logical fit to bring Gosselin into the mine.

Speaker 2

While there is still a lot of work to do in order to realize this year, we will be advancing technical studies to start reviewing our targets for potential inclusion of Goscelin into a future Kodi life of mine. We believe we are in the early days of the Cody district and believe that Cody Gold is not just a project, at the start of the mining camp with substantial upside to be recovered within our nearly 600 square kilometers land package. Now I will pass the call over to our CFO to walk us through the financial review. Martin?

Speaker 4

Thank you, Renaud, and good morning, everyone. It was a busy quarter for the company, following the strategic announcements at the end of last year. Before we look at the earnings, cash flows and liquidity picture, it is probably worth a moment to review the transactions and associated implications. Early in the Q1, we closed the sale of the Rosebel mine with total cash proceeds received of 386,400,000 we still expect to receive an additional $9,800,000 by the end of the second quarter related to the cash still held at site and related working capital adjustments. Subsequent to the quarter end, on April 26, we announced the closing side of our Bamberg assets for pretax gross proceeds of $197,600,000 The closing of the other assets of this deal, including the assets in Guinea and Mali are expected to close in the Q3.

Speaker 4

The Sumitomo funding agreement announced at the end of last year began to take effect in the Q1 with Sumitomo contributing $189,000,000 of the total 250,000,000 of the Iron Gold funding obligations during the quarter. This effectively equated to a 7.5% transfer of interest in the project to Sumitomo. Subsequent to the quarter end and as of May 1, Sumitomo has contributed the remaining 61,000,000 to bring their project interest to 39.7 percent and ungod's interest to 60.3%. As a result of their increased interest in the project, Sumitomo contributed $7,100,000 in incremental funding for project construction. Over the remaining construction timeline, Sumitomo will outlay approximately 82,800,000 for a total of $90,000,000 of incremental expenditures based on their increased 10% exposure to construction costs.

Speaker 4

As a reminder, IAMGOLD has the right to repurchase this 10% interest at 1 of 7 future dates up to November 2026. And we want to reinforce that it is ours and Sumitomo's intention for OnGold to ultimately return to a seventy-thirty joint venture structure in the future. With regard to the accounting for the transaction, Eingold will continue to account for 70% of the assets and liabilities of Cote D'On our balance sheet and the transferred interest will not be recognized as a sale due to the existence of the repurchase option. We have recognized a repurchase option liability that represents the amount that Sumitomo contributed on behalf of OnGold that is also equal to the amount that OnGold needs to pay Sumitomo to repurchase our transferred interest and eventually return to 70% interest in the unincorporated joint venture. And this is us at March 31, 2023.

Speaker 4

After achieving commercial production, we will account for 60.3 percent of the revenue and costs in our income statement and receive 60.3% of the cash flows. Turning to the Q1 financials. Revenues from continuing operations totaled 200 $26,200,000 from sales of 119,000 ounces at an average realized price of $18.93 per ounce. Adjusted EBITDA from continuing operations was $83,000,000 for the year, translating to an adjusted earnings per share of $0.05 Net cash flow in Q1 from operating activities was 28,100,000 and this includes investments in working capital related to the buildup of the stockpiled of Curtin and the reduction in accounts payables. Net cash from investing activities for the Q4 was 160,600,000 and includes $386,400,000 in proceeds received from the disposition of Rosebel, offset by capital expenditures of $215,100,000 Net cash used in financing activities for the Q1 after a $2,100,000 adjustment to foreign exchange rate impacts on cash and cash equivalents was $64,400,000 This includes the repayment of the credit facility of $255,000,000 offset by proceeds received through the Sumitomo funding arrangement of $196,100,000 of which $189,000,000 related to the funding obligation and $7,100,000 of incremental funding associated with Sumitomo's increased project interest.

Speaker 4

In terms of our financial position, we ended the quarter with $532,100,000 in cash and cash equivalents and $257,300,000 available under the credit facility after $255,000,000 repayment in order. Taken together, this translates to approximately $759,400,000 in available liquidity at the end of Q1. We note here that approximately $260,000,000 of our cash and cash equivalents is held by at Sakota UJV and EsaCann. As Sakota UJV requires its joint venture partners to fund in advance 2 months of future expenditures. And at ISAKAN, the company uses dividends and intercompany loans to repatriate funds from its operations and the timing of dividends is usually in the second and third quarter of every year.

Speaker 4

We typically hold and guide our investors to account for between $200,000,000 $250,000,000 of cash being held on our balance sheet for these normal course business purposes. As we discussed, we expect to see the land book assets to close by Q3 this year

Speaker 3

for a total of

Speaker 4

282,000,000 of proceeds on a before tax basis, and we are guiding this will translate to approximately $240,000,000 to $250,000,000 on an after tax basis. The closing of the sale of Senegal assets was completed in April, dollars 497,600,000 we received $165,700,000 in cash

Speaker 5

with the

Speaker 4

remaining $32,000,000 expected by the earlier of 6 months and the closing of the remaining transactions. And we expect the remaining transactions to close during the Q3. When we look at the funding picture for Cote, as we note outlined earlier, we estimate the remaining funding requirement by Antoine to complete Cote d'Ivoire for $460,000,000 to $535,000,000 with the projects still on schedule as outlined by Jersey. Based on the pre filing market conditions, which could impact project expenditures and operating cash flows, the company believes that its availability of liquidity at March 31, 2023, combined with the cash flows from operations, the Sumitomo funding arrangement and the expected proceeds from the sale of the Bambuq assets that is sufficient to complete construction and ramp up of the Cote Gold project based on the current estimated cost and schedule. We continue to advance additional financing initiatives to strengthen our balance sheet and improve liquidity in order to place the company in a strong position to return to 70% interest in the Cotrigal project.

Speaker 4

Thank you, Remark.

Speaker 2

Thank you, Martin. And I want to take A moment here to thank everyone on the Iron Gold team for their special thoughts or our construction team at Cotech for their tireless efforts and dedication as we continue to position the company for success. This is a real exciting time for this company. With that, I will pass the call back to the operator for the Q and A portion of this call. Operator?

Operator

Thank you. We will now open the lines for questions. Will hear a tone acknowledging your request. Our first question is from Mike Parkin with National Bank. Please go ahead.

Speaker 6

Hi, guys. Thanks for taking my questions. Just with respect to Cote, Can you give us an idea of what the split is between mining overburden versus hard rock in the open pit Like currently?

Speaker 2

I don't have Michael Reno here. So I don't have There's numbers right now in front of me, but I can tell you that the overall strip ratio of the project is in the range of the 2 to 1 as we forward. But I don't have the numbers and the detail with me now, but it comes to overburden versus the waste rock and our Marty, for periods, but I'll follow-up with you. Just hold on, maybe Jersey has some more detail on

Speaker 5

it. We've Really looking in

Speaker 6

terms of like how are you progressing with the pit? Is it You're going as expected, are you coming across, especially with spring breakup, is there any kind of challenging parts of the pit or are you able to kind of And you'll stay in Hard Rock while things kind of dry up and then getting back into overburden. Any kind of color that you can share on that would be appreciated.

Speaker 3

Sure. As you've seen from the picture, we've managed Fresh Ed very well in the pit. There was some which worked very well. So we didn't really get affected this year at all by the franchise season. We have accumulated just shy of 1,000,000 tons on the various ore stockpiles up to now.

Speaker 3

And obviously the blend between the rock for construction over Bergen is now very little left And the ore is changing dramatically over time because we are transitioning out of construction and more into the mining activities. So it's a very dynamic situation, I would say, but that should give you the color where we are and the

Speaker 2

overall progress there. So Michael, what I can add to this as well, I was there not a long time ago and Obviously visited the mining operations. And as you know, I've been involved in previous lives with us at the early days and following Freshitts. And quite frankly, it looks extremely good, very impressive to see Those autonomous trucks operating, it really looks like a solid operations. And quite frankly, even though after the recent pressures, it looks pretty dry and we're going to be What I'm seeing now is I'm seeing in all the operation meeting, the objective and can wait for the electric So I will send for 2 join the dance.

Speaker 2

So now it looks very good.

Speaker 6

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

Speaker 4

Good morning, Mike. It's Martin. We are seeing inflationary pressures easing and certain costs are in line with what we experienced in Q4, but not necessarily lowering. The decrease in oil price is not reflected in our Q1 cost due to the lagged impact of oil prices on the local pump prices, especially at Isakan. The impact of oil price changes also led due to our hedging program that already offsetted some of these increases previously recognized.

Speaker 4

We are seeing price pressures on explosives at the mine, the cost of cyanide as well as grinding media which is related to steel in line with what other people have seen.

Speaker 2

Maybe, Jose, I just want to comment.

Speaker 3

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

Speaker 6

Okay. And then just switching gears over to Essakane, can you give us an idea of what your inventory capacity is there? Is it Like how often do you need to at a minimum bring in delivery of fuel? And if you had to kind of Lockdown due to a potential security heightening situation there. Could you You kind of operate on an isolated basis for a month to get through any kind of challenging surrounding issues?

Speaker 2

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

Speaker 5

Yes. Thank you, Renaud. For the fuel inventory, we've been seeing some tightness in terms of supply chain. However, in April, we were able to resume more convoys to the site and we were able to also replenish our stocks. So we have 4 big vessels and we're ready for now to operate close to full capacity for now.

Speaker 5

Obviously when we have difficulty to get and secure these stocks, Those are the ones that get depleted and we have to slow down the mining or mining activities while prioritizing our milling activities and we have enough rock stockpiles close to the mill to be able to come to co production.

Speaker 6

Okay. Thanks. That's it for me.

Speaker 2

Thank you, Mark.

Operator

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

Speaker 7

Good morning, everyone. And firstly, Renaud, congratulations officially on your appointment to CEO at IAMGOLD. And then my first question, tailings dam 12, I'm just looking at the chart at Cote and it seems like those to particular aspects as well as a couple of the power projects are a little bit delayed. Can you talk about what the key like key I guess key items that you need to get those back on track. I would assume it's the rope shovel for the tailings dam and Once that's assembled, you can get moving a little bit more on tailings.

Speaker 2

Well, thank you, Anita, and thanks for your kind words. And I'll let Jerzy comment more on the critical path forward.

Speaker 3

The power is under control. The connection of the power grid to the power grid in August is actually not on a critical path. Yes. The substation commissioning, as I said in my opening notes, was scheduled to start in early Q2. It did start as planned.

Speaker 3

So we don't see that as a risk piece. The TMF itself, we still have to finish raising the dam before for the end of the year, but there was a float and that's what I said. We defocused on this area and pushed harder the process plant, the critical background to the process plant current, which is the Pricing with crushing and then grinding and fights.

Speaker 7

Okay. So the TMF is not on the critical path, but I mean, how much capacity are you would you have by the end of this year for the Taylor

Speaker 2

brand? On the capacity, so basically, after this year, we'll be planning for execution of arrays next year. And we're going to be operating like this on a face by face basis.

Speaker 7

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

Speaker 3

The current construction is downstream. The next year basis are centerline.

Speaker 7

So next year is our centerline? Yes. All right. And then the second question on ethacaine. I'm just trying to understand the sort of overall cost Sure.

Speaker 7

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

Speaker 7

I just I'm trying to understand, would that like be prior to like the overall guidance, would that be prior to adjusting out fuel disruption costs or is that including the fuel disruption costs?

Speaker 2

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

Speaker 2

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

Speaker 7

Okay. Thank you. I'll get back in the queue for the questions. Thank you very much.

Speaker 2

Thanks.

Operator

The next question is from Farooq Ahmed with Raymond James. Please go ahead.

Speaker 8

Thanks, operator. Hi, good morning. My question really was I just wanted to maybe contextualize and understand the additional Sumitomo funding that you had at the beginning of the year that's now reached $250,000,000 and will, I guess, by the end of this year reach $340,000,000 So I'm just trying to understand kind of the cost of this funding. So based on the fee that you'll be paying, which is the SOFR plus 4%. Does that work out to basically somewhere in the kind of high 8% range for the fee that you're paying on that Funding and so by the end of the year, are we looking at something like $30,000,000 a year in funding costs for that Sumitomo funding?

Speaker 8

That's the

Speaker 4

Good morning, Farooq. So yes, the Funding that they've made, the $250,000,000 that is the cash flows that I'm Gold was supposed to make. They We submitted our cash flow and the $250,000,000 is the amount that then reduces our interest in the project. So that is now complete. So the 60.3 ownership won't change further as we continue on.

Speaker 4

Because they now are 9.7 percent extra on the project, they are actually contributing more to the project than what it was before. The reason we mention it is this approximate incremental contribution by them of 90,000,000 it's important to understand IAMGOLD's liquidity position because on the 70% basis, the UJV required funding of $800,000,000 to $875,000,000 and Sumitomo is effectively funding $340,000,000 of that. From a cost perspective, the charge would be on the $340,000,000 Based on SOPR, it's between 89%. So yes, we've had $2,600,000 of a fee in Q1 on that. And then we expect that to be about $13,000,000 as you said by the end of the year.

Speaker 8

Okay. Okay. So thanks. That's helpful. And then, so that's The next question was really what's the frequency of the payment like, will you have to pay that on a quarterly basis or kind of what's the cadence over how you'll be paying those fees?

Speaker 4

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

Speaker 8

Okay. I see. So you're saying that 2023 fee will only get repaid when I'm going to exercises the repurchase option, but 2024 through 2026 that will be an annual payment?

Speaker 4

Correct on the 23 piece. In 2024, it will be a quarterly payment.

Speaker 8

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

Speaker 4

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

Speaker 8

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

Speaker 4

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

Speaker 8

All right. Well, that's understood. Thanks very much.

Operator

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

Speaker 9

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

Speaker 4

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

Speaker 9

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

Speaker 2

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

Speaker 2

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

Speaker 9

Thanks and congrats on a great quarter and Renaud, congrats

Operator

on your new The next question is from Tanya Jakusconek with Scotiabank. Please go ahead.

Speaker 10

Good morning, everyone, and Renaud again. Congratulations on your new appointment and I look forward to working with you. I'm sorry, I just got on the call as I was Stuck on another call this morning. But maybe just circling back to a couple of things. One is just on this additional source of funding.

Speaker 10

So what I heard from the previous question is that you didn't want to impair the asset any further Cote within those first five years because of the significantly higher production coming out. So can I assume from that that an additional royalty and or stream on that asset is not something you're looking at? And then I'm just trying to understand like the priorities of your additional funding options. Would it be selling of assets maybe Westwood and or Essakane first and then it would be equity and then it would be streams. I'm just trying to understand priorities of your options and what specifically the options would be?

Speaker 2

A wide 1st and foremost, thank you for your kind words. And as Martin was highlighting, You know, Koti is going to be the cornerstone asset of this company moving forward. And the 2 priorities, is first eventually being a possibility and the positions to get back to our 70% future joint venture. And as we see it as a cornerstone asset, I think the last thing we want at this stage is to add anything on top of the curve. So this is not really what we see for this asset.

Speaker 2

Now how exactly we're going to be are capable over time to address the additional financial flexibility that Martin was talking about the 70%. There is a wide range. But I think the way we're looking at this company moving forward is to make sure to not make any move that will position us for the long term. And that's what I can say at this stage. I think the focus of this is to make sure that as we move forward, we keep improving the product as we move forward and not at the early stage being in a position to maintain or to position this asset with anything that would It remains in time.

Speaker 2

Martin, if you want to add anything to this?

Speaker 4

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

Speaker 10

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

Speaker 4

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

Speaker 10

Okay. That's great. Thank you. And then maybe, Renaud, and I apologize I was late on the call again. Maybe if you could just and I know you've just been on the roll for a month and a half or so.

Speaker 10

Maybe if you could just outline sort of your 3 key strategic focuses for IAMGOLD for, let's say, the next few months or the rest of 2023, just so that I can try and understand as you look at the year, what are your 3 priorities?

Speaker 2

Well, the first one is, of course, Well, health and safety and I really don't want anyone to think that it's just a financial exercise. So Sustainability ESG Health and Safety people would always remain. But I think your questions goes more like to the business side. So the priority number 1 is obviously the completion the successful completions of Cote and the very successful ramp up as we move into 2024. If there is one objective, it's to achieve a very successful ramp up.

Speaker 2

So completing the construction in a way that would allow together with the operating readiness of that is what we really is the key on the business side of this company as a priority number 1. But equal to that, When you're looking at Sahesacana, for instance, like what this asset has provided to us over the past, yes, there's been some Security, but I think we're turning slowly the corner. I've seen significant progress. I see the Bruno mentioned in the previous questions, our fuel inventory has increased to a level that we haven't seen for a while. That kind of thing is where like the team is focusing.

Speaker 2

So if there is one thing that I would like to achieve before the end of the year is to see the asset returning to his 100% capacity, generating the free cash flow that he was planned to, see the drill, if possible, been back at play as well and start working on extending the life of mine. And I must say that I remain So you're not optimistic to the Westwood. But what I've seen at Westwood when I visited the asset, I think is an unprecedented like set of initiative. And whether it's how we look at the ground control, how we look at Specificity and the control of that, how we look at how we mine the sequencing of that, I've seen for the first time a team that is addressing the situation in a different way. Sometimes you need to stop and have the courage to stop and think and bring in all different views.

Speaker 2

And I think that remains a very, very important objective for us to work towards returning not returning, but positioning the asset to the free cash flow towards the end of the year, so we can start looking at of bright future for Westwood. So those are really the 3 assets. Martin talked about the financial piece of it. We're well funded. We have no concern about our ability to complete the constructions of Ecote to ramp it up.

Speaker 2

We're good at that, but this is a cornerstone asset. I wouldn't tell our stakeholders and shareholders that we're not going to be looking at alternative to how we could improve our financial flexibility and eventually position this for a successful return to the 70%. So this is all a lot of activities ongoing, but we have strong team in Every pieces of the puzzle and my role is to make sure that we achieve all of them and working and supporting the team. I hope this answers your question.

Speaker 10

Great. It gave me some clarity on it. Thank you very much. And again, congratulations and welcome.

Speaker 2

Thank you. Thank you.

Operator

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

Speaker 1

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

Operator

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

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Earnings Conference Call
IAMGOLD Q1 2023
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