IAMGOLD Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2024

There are 7 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Third Quarter 2024 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

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

Speaker 1

Thank you, operator, and welcome, everyone, to our conference call today. Joining us on the call are Bruno Adams, President and Chief Executive Officer Martin Knusen, Chief Financial Officer Bruno Lemelin, Chief Operating Officer Tim Bradburn, Senior Vice President, General Counsel and Secretary and Dorena Quinn, Senior Vice President, People. We are joining today from Iron Gold's Toronto office, which is located on Treaty 13 territory on the traditional lands of many nations, including the Mississaugas of the Credit, Anishinaabe, Chippewa, Hootenishoni and the Wendat peoples. At IONVOLD, 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 included in 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 in 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, Rodol Adams.

Speaker 2

Thank you, Graham, and good morning, everyone, and thank you for joining us. The Q3 was another exciting quarter for IAMGOLD as our operations performed well, demonstrating safe, stable production and strong cash flow growth. Gold production year to date for the company totals 490,000 gold ounces, driven by the strong year to date performance at Esakane and the turnaround of Westwood, both assets which are poised to achieve the near the upper end of the production guidance estimate. Kozigol meanwhile is taking significant strides as the mine continue its ramp up and achieve multiple milestone in the quarter, including reaching commercial productions on August 2nd, demonstrating the capability to operate at or above nameplate throughput level, completing key maintenance to improve the availability of the plant and achieving its Q1 of a positive free cash flow production. Cote remains on track towards our goal of the mine achieving 90% nameplate throughput exiting the year.

Speaker 2

With 2025 just around the corner, a surprising 7 weeks away, IAMGOLD is rapidly moving closer to our goal of becoming a leading modern Canadian gold producer with a strong balance sheet and asset that are poised to generate significant value for our stakeholder, partners and investors, further enhanced by the backdrop of Sture's gold price action. By the middle of the next year, we anticipate we will have our gold prepayment facility behind us. Cody will be nearing nameplate production and Esakan and Westwood will be capable of generating near records cash flows. This will conceptually position IAMGOLD uniquely amongst the mid tier space with significant cash flow generation and some very valuable near term growth to uncover at Go2Go. Looking at a highlight for the quarter.

Speaker 2

Starting with health and safety, which is a fundamental pillar of IAMGOLD's visions of 0 harm and our commitment to people and the places in which we operate. In the Q3, our total recordable injury frequency rate was 0.46, an improvement from the prior quarter led once again by a Sakena team who achieved 000 for safety incident in September, a testament to the professionalism and commitment to a safety culture by our people in Burkina Faso. In the Q3, IAMGOLD produced 173,000 attributable gold ounces from our 3 of its operation, well above the 109,000 ounces achieved in the same period last year. This year over year production growth was driven by continued stable operation at Esakane, the successful turnaround at Westwood and the ramp up of Cote. On a cost basis, IMGOR reported 3rd quarter cash costs and all in sustaining costs of $11.65 per ounce and 1756 dollars per ounce respectively.

Speaker 2

While costs were lower than the prior year period, the cost increase quarter over quarter was in line with expectation and our guidance as we will discuss in a moment. Sustaining capital expenditure increased in the 3rd quarter to $84,700,000 up from $50,400,000 the year prior. As Code achieved commercial production in August, which allowed for the relocation of capital expenditure related to operation to sustaining for the mine. Looking at our targets for the year, IMGOL reiterated its guidance estimate in the Q3. As you will recall, last quarter, the company increased its production guidance and lowered the cost guidance targets following a very strong first half performance from our Esakane and Westwood mine.

Speaker 3

Esakane and Westwood are well positioned to achieve the upper end of their production guidance ranges this year, with combined production year to date of

Speaker 2

428,000 ounces versus guidance of 495,000 to 540,000 ounces. The 2024 forecast guidance for Essakane and Westwood combined is unchanged and is expected to be on the low end of the range of $11.75 to $12.75 for cash cost per ounce sold and $1700 to $18.25 for AISC per ounce sold. Costs are expected to be higher in the 4th quarter at Esakane, as Esakane is expected to report a lower head grade from an increased production of stockpile material in the mill and Westwood conduct a scheduled maintenance plan shutdown in the quarter, both in lines with our expectations. On a macro level, inflationary pressures have continued to ease, though key input including labor remains elevated as well pricing for certain consumable including cyanide and grinding media are in line with the level of experience in 2023. With that, I will pass the call over to our CFO to walk us through our financial results and position.

Speaker 2

Martin?

Speaker 3

Thank you, Renaud, and good morning, everyone. In terms of our financial position, IAMGOLD ended the quarter with cash and cash equivalents of $553,400,000 and our credit facility remains undrawn, equating to total liquidity of approximately $959,300,000 We note that within cash and cash equivalents as of September 30 this year, dollars 83,400,000 was held by Cote Gold and $135,300,000 was helped by EsaCann. Notably, EsaCann declared a dividend during the Q2 of $180,000,000 for which the minority interest portion and withholding taxes were paid during the 2nd quarter. And $136,300,000 was received by the company in the 3rd quarter and the balance of $15,600,000 was received in October for a total dividend received by Ayngold of $151,900,000 On September 30, 2024, the company provided Sumitomo with the required 60 days formal notice to exercise the right to repurchase the 9.7 percent interest in Cote Gold and the transaction is expected to close on November 30, 2024, which will return IAMGOLD to its full $70,000,000 interest in Cote Gold. The repurchase price is approximately $377,000,000 and includes $23,700,000 for the repurchase option fee accrued during 2023.

Speaker 3

The payment will be funded using the proceeds from the $300,000,000 board deal completed during the Q2 2024 and with available liquidity. Additionally, as of today, the company has completed a third of its gold prepaid obligations, having delivered 37,500 ounces in the 3rd quarter and 12,500 ounces in October. The company received $13,300,000 in cash as part of the delivery of the obligation. The company has remaining 100,000 ounces to deliver on this gold prepay arrangements from November 2024 to June 30, 2025. The prepay arrangements were funded at the time of entering into the arrangements through though the company will receive certain cash payments at the time of delivering into the gold prepay arrangements based on the market price of gold at the time of delivery as follows.

Speaker 3

In Q1 in Q4, of the 37,500 ounces that will be delivered, 22,500 ounces will receive the difference between the spot price and $1700 per ounce, capped at $2,100 per ounce, with the remaining 15,000 ounces pre funded. Then in Q2 of next year, for 31,250 ounces that will be delivered through the period of April to June, the company will receive the difference between the spot price and $2,100 per ounce capped at $2,925 per ounce. Please refer to the liquidity outlook section of the MD and A for further details. Looking at our 3rd quarter results, we saw the impact of strong production at near record realized gold prices, resulting in the company realizing higher margins, generating higher operating cash flows and adjusted EBITDA at an important time for the company. The higher gold price is helping set up the company to potentially expedite its plan to reduce debt levels and debt carrying cost.

Speaker 3

Revenues from operations totaled $438,900,000 from sales of 184,000 ounces on a 100% basis at a record average realized price of $2,391 per ounce. The realized price includes impact of gold prepay arrangements in place during the quarter that reduced the realized price by $107 per ounce from $2,498 per ounce. Net earnings was $598,100,000 during the quarter and includes a reversal of a previous impairment on Westwood of $462,300,000 The impairment reversal mainly results from the update to the long term gold price assumptions. The strong third quarter operating results and gold price resulted in an adjusted EBITDA of 200 and $21,700,000 which was a record quarter for the company. This brings the year to date EBITDA to $565,200,000 with Cote still in the early stages of its ramp up.

Speaker 3

Adjusted earnings per share was $0.18 for the quarter compared to $0.16 in the previous quarter and a $0.01 loss in the Q3 of 2023. Operating cash flow before working capital changes was $161,000,000 in the 3rd quarter. Operating cash flow does not include the pre funded cash flow received as part of the gold prepay arrangement and is $64,400,000 lower than what it would have been without the impact of the deferred revenue recognized as part of delivering into the gold prepay. Looking at mine site free cash flow, which is calculated as cash flow from mine site operating activities, there's capital expenditures from operating mine sites. Essakane reported 3rd quarter mine site free cash flow of $76,600,000 and Westwood of $20,800,000 It is worth highlighting again, as Renaud mentioned in his introductory comments, this was the Q1 for Cote to contribute positively to mine site free cash flow with $23,300,000 in the quarter, which represents Iron Gold's 60.3 percent portion of the cash flow.

Speaker 3

And with that, I will pass the call back to Renaud. Thank you, Renaud.

Speaker 2

Thank you, Martin. We will start with Cote, which you can see here on the left image on the slide with a view of active mining activity early in the summer. Last month, we announced the Koda's preliminary Q3 operating results ahead of what was a well attended mine tour by analysts and institutions. I want to take this moment to once again thank all the attendees for the great turnout and thank our Cote team for hosting what was a very engaging tour. Looking at the quarter, our highlight for Cote was the 1st quarter of positive free cash flow as Martin just highlighted

Operator

from

Speaker 2

productions of 68,000 ounces on a 100% basis. However, I believe the real advancements were on the progress of the ramp up and improved understanding of the operation. I am very proud about the progress we achieved in the 3rd quarter as we saw a definitive sign that the improvement that were deployed throughout the quarter and during the shutdown in September are having a miserable and meaningful positive impact on operation. Mining activity totaled 10,400,000 tons in the Q3 of 2024, in line with the prior quarter and our ton mined increased to 3,200,000 tons during the period with an associated decrease in the strip ratio to 2.3:one waste to ore. The average grade of mine ore was 1.02 grams a ton in line with the mine plan.

Speaker 2

The reconciliations between the grade control and reserve model is also in line with expected tolerance. Within the pit, the mine currently has 2 CAT 6060 electric shovels and 18 Cat 793 Autonomous haul trucks in operation with an additional 3 haul trucks to be commissioned before the end of the year. Utilization rates of the primary mining equipment has been improving. Drilling and blasting activity has seen months over months improvement from enhanced drill fleet performance with better blast pattern preparations resulting in a higher level of thin blasted ore inventory available for loading and hauling. The current mine plan is using multiple stockpile segregated by grade with the 40 three-1 101 estimating a total of 78,000,000 tons of re handle ore mill feed over the life of mine.

Speaker 2

This strategy is proving to date to require higher than expected amount of re handling which are seeing indication of flowing through to mining costs. Year to date, mining costs have averaged 3.7 $7 per ton. This is higher than expectation due to the rehandling as well as higher contractor costs to support the ramp up of the mine. We expect to see unit mining costs decline as we bring in the full fleet and reduce the need for external support. Further, we are looking at refining some aspect of the mining strategy to optimize ore handling and move towards more of a bulk mining scenario when economically possible and as the mill continue to increase its overall throughput.

Speaker 2

The ramp up of the plant was the primary technical focus of our efforts in the quarter with a headline milestone of achieving commercial production midway through the quarter as well as multiple days of achieving above nameplate production. Mill throughput in the 3rd quarter totaled 1,600,000 tons, a notable improvement quarter over quarter, though throughput was impacted by the mid September planned shutdown and an unplanned shutdown at the end of the month from an electrical failure in a motor control center. At grade of 1.41 grams a ton were in line with the mine plan, which require feed material from a combination of higher grade direct feed ore and higher grade stockpile. Recoveries in the plant averaged a wonderful 93% in the quarter. As we noted on the last call, the main component of the processing plant including primary, secondary crushing, HPGR, conveyors, ball mill, leaching, etcetera, all have now proven their capability to operate at or above design low when provided with stable condition.

Speaker 2

During the ramp up, the primary areas of our focus for the plant were 1, the crushing circuit before the course hard dome and 2, everything else after the course or dome or the downstream circuit, which is the HPGR tool to the west side of the plant. With the coarse or dome fill, the downstream processing circuits demonstrate very strong performance and availability and capacity. So we have focused on the crushing circuit to improve the availability and capacity. In September, the company has completed an 8 day mill shutdown at Cote to deploy key optimization and improve the operating availability of the plant in support of the goal to ramp up throughput to 90% of nameplate by the end of the year and achieve nameplate in 2025. The priority of the work performed during the shutdown was to stabilize the crushing circuit and attend to the primary causes for low availability in the Q2, which include in replacing 90% of the shoot with higher abrasive resistant material to reduce the level of wear and using new type of and sizes of screen in the coarse core screening area.

Speaker 2

These improvements have made a difference and the plant has seen further increases in availability and performance of the secondary crusher and screening over the last few weeks, achieving multi day performance above 40,000 tons per day in the crushing plant. We are now well positioned to ramp up the overall processing facility to our 90% of nameplate objective as we exit the year. In October, we averaged just under 80% of the nameplate as daily throughput. Achieving the additional 10% at Cote is primarily about stability. The objective is to eliminate daily variances and processing as we already know that we can meet nameplate capacity of 36,000 tons per day and potentially more.

Speaker 2

Every downtime brought new information and an opportunity to further improve. It is really now about achieving stability, more consistency. This is how we will earn the additional 10%. Furthermore, we will be installing a second cone crusher in the second half next year at the low capital requirement to provide additional capacity and redundancy in support of the operation and throughput maximization. Lastly, and as we noted previously, CoteGol added a mobile crusher unit and conveying system that act as a dome refeed system.

Speaker 2

This addition provides flexibility and redundancy in time of shutdown by delivering up to 1,000 tons per hour to the dome and can operate in parallel with the crushing circuit for extra daily capacity once vertically required. Based on the year to date ramp up progress, we maintain our guidance set last quarter for animal production to be at the lower end of the previous guidance range or closer to 220,000 ounces on a 100% basis. At the exit rate of 90% throughput, we estimate that cash costs will at that time average approximately $700 to $800 per ounce and all in sustaining costs to be approximately $1100 to $1200 per ounce. We know though that cost may exceed these ranges depending on the timing and a one time cost of initiatives and improvement implemented to achieve the ramp up target. Looking into 2025, we will advance coated towards the nameplate throughput rate of 36,000 tons per day while looking for easy win to increase the processing plant capacity.

Speaker 2

As we have noted in the past, several component of the plant has been designed for 42,000 tons per day and we have seen multiple days above 40,000 tons per day early on in the lifecycle of the project. The addition of the 2nd cone crusher next year is aligned with our strategy of unlocking maximum value by monetizing at low capital requirement a maximum number of tons of ore mined as they become available for processing. Alongside this, as mentioned, we are evaluating the potential to adjust certain aspects of our mining plan at Cote to potentially shift over time to a more bulk mining approach as the mill throughput capacity is unlocked, which offers numerous efficiencies advantages including reduced rehandling, improved pit sequencing and less reliance on segregations for the mine plan and more on maximizing mill throughput and monetizations of gold mine. Over the current life of mine, the mining rate of ore was estimated to average approximately 50,000 tons per day and this compared to our processing rate of 36,000 tons per day. The Koli deposit has estimated mineral reserves of 7,600,000 ounces that form the basis of the current economics of the project.

Speaker 2

On a measured and indicated resources basis, the Kode zone is currently estimated at a total of 12,100,000 ounces as seen here in the dark blue pit shell at the bottom left. This does not include mineralization outside of the pit shell highlighted in red and what we will unofficially call the Cote Norte Zone. Further to the adjacent Gosselin Zone has an additional 4,400,000 ounces of measured and dedicated resources and nearly 3,000,000 ounces of inter, bringing the project to a total of 16,500,000 ounces of measured and dedicated and an additional 4,000,000 ounces of inferred. The size of Cote and Gosselin together put the project in a very exclusive category amongst large scales producing Canadian assets. We need to consider what Cote will be when it grows up.

Speaker 2

And that is to say, we need to consider Cote not as a 7,600,000 ounces project, but as a significantly bigger deposit and how to bring this value to the market. Our exploration program on Gosselin and at depth under the Coty and Gosselin zone progressed well this year, demonstrating extensions of mineralizations outside of the resource pit shell. Next year, we will plan to further increase our drilling efforts to upgrade the mineralization in Gosselin and the Cote zone in support of a potential updated study intended for the latter part of 2026. Turning to Westwood, our other Canadian asset. It was another strong quarter for the mine as underground activity are now able to focus on operations and less on legacy rehabilitation.

Speaker 2

It may surprise some to say, but Westwood so far this year has generated $53,100,000 in mine free cash flow and the 3rd quarter at a cost profile below Issacar. Looking at operation, Westwood produced 32,000 ounces in the quarter for a total of 99,000 ounces year to date. Ore mined from underground continued to play a more pivotal role in a higher grade with 84,000 tons in the 3rd quarter at an average head grade of 9.09 grams a ton. The mill throughput was relatively flat quarter over quarter at 289,000 tons processed at an average blended head grade of 3.67 grams a ton and 93% recovery. The plant availability in the quarter of 90% was higher than the same period the same prior year period of 86%.

Speaker 2

With plans to further improve availability through an ongoing maintenance program in addition to an annual mill shutdown plan in November. The margin for Westwood continued to improve with a strong gold price and stabilizing costs. Cash costs averaged $11.50 an ounce and all in sustaining costs averaged $16.17 an ounce in the 3rd quarter. Looking ahead, Westwood production is expected to be at the top of the guided range of 115,000 to 130,000 ounces, while costs are expected to be at the low end of the range of $1200 to $1300 for cash cost per ounce sold and $17.75 to $1900 for ASIC per ounce sold. 4 quarter unit costs are expected to be higher than the Q3 due to the scheduled shutdown mill shutdown in November.

Speaker 2

This is to better position the operations for next year. Later this month, we will be issuing an updated technical report and mine plan based on reserve only for Westwood, which should demonstrate the value that has been created by the Westwood teams over the last 3 years of rehabilitation, redesign and operation. Finally, looking at Essakane, it was a steady quarter at the mine with operation being able to perform effectively to plan in the quarter. Pesachana reported attributable gold productions of 100,000 ounces in the Q3 bringing the year to date total to 329,000 ounces. Mining activity totaled 12,200,000 tons in the quarter with only 1,900,000 tons of ore mine as mining prioritized waste stripping sequences in support of the 20 25 production plan including the opening of the upper benches of Phase 7.

Speaker 2

Head grades were 1.26 grams a ton in line with estimates. Average head grades decreased in the 3rd quarter from level in the first half of the year and are expected to continue to trend towards reserve grade in the 4th quarter as the volume from phases 6 and 7 increase and from increased proportion of stockpile are included in the mill feed. On a cost basis, Esacana reported 3rd quarter cash costs of $12.23 per ounce and all in sustaining costs of $17.30 per ounce, an increase quarter over quarter on lower ounces sold with both cash costs and AISC on track to be at the low end of our cost guidance range. Looking ahead, Essakane attributable production is expected to be at the top end of the guidance range of 380,000 to 410,000 ounces. The mill is expected to continue operating at nameplate capacity and the positive reconciliation of Phase 5 is expected to continue.

Speaker 2

However, the average field grades are expected to decrease during the Q4 as mining activities continue to transition into the next phases of the pit, resulting in a lower level of ore mine requiring ore feed to be supplemented with low grade stockpile material. The focus in the 4th quarter will be to further enhance the phase positioning in the pit for a strong start next year. As we begin to look into next year, Esa Canetu continues to be a significant cash flow contributor for IMDO. With a current mine life through 2028, this operation has the capability to generate over $1,000,000,000 of cash flow at current gold price and is a significant part of our Lartan plan to deliver the company. Looking beyond the mine plan, we are continuing to examine opportunity to extend the mine life at Essakane, targeting options within defense to ensure the safety of our team.

Speaker 2

So thank you all and I look forward to an exciting year ahead. With that, I would like to pass the call back to the operator for the Q and A portion of the call. Operator?

Operator

We will now begin the question and answer session. Our first question comes from Lawson Winder of Bank of America. Please go ahead.

Speaker 4

Yes. Thank you, operator, and good morning, everyone. Thank you, Renaud and team for today's presentation. Can I actually just start off with a pretty basic cash flow question on working capital? Martin, I mean, there's been a moderate headwind of free cash flow in 2024 year to date, something like $90,000,000 From working capital build, first of all, at what point do you expect that to stabilize?

Speaker 4

And then assuming flat gold prices from here, what does the working capital build look like for Q4? And then what about 25?

Speaker 3

Good morning, Lawson. A big part of the working capital this year was at Cote. We had considerable accounts payable balances due to the construction, still outstanding. And we've been paying those down over the course of the year as we are closing out those contracts and paying back holdbacks. That will continue in Q4, but then we will be at the back end of that.

Speaker 3

We part of the working capital is also some of the taxes that's building up and then we're accruing taxes at Essakane that is increasing because of higher gold prices. But other than that, we expect it to our accounts payable still to decrease, specifically at Cote and then stabilize after that from next year onwards.

Speaker 4

Okay. And then just thinking about your net debt. So I mean, well, look, it's spot gold. Like I think I'm gold could be in a net cash position by year end of 2025. What or how are you thinking about what is a sufficient debt reduction target?

Speaker 4

At what point is your net debt level efficient? First question, yes.

Speaker 3

Yes. So the first part of our so we will be looking at our debt as it comes to you when we look at that and using excess cash and liquidity to deal with that. But we've restarted paying debt this quarter already by delivering into the gold prepay, and we'll continue doing that over the course of this year and the first half of next year. Based on spot gold prices, that has a significant impact on cash. So getting that off our balance sheet is important for us.

Speaker 3

Then in the middle of next year, our second lien notes becomes callable. And we have an opportunity to pay that back at $20,000,000 increments with excess liquidity when we can. So that would be our next target using excess liquidity. And then after that, the biggest portion of our debt that remains is our high yield notes. And that is a 5.75% coupon.

Speaker 3

We won't be in a rush to pay that down off of our balance sheet. And then lastly, the leases that we have about $133,000,000 or $130,000,000 at the moment and we expect to increase that slightly still. We will pay that down just based on the scheduled payments. So that's kind of our ROI that we look and then based on the debt agreements we have, start needing to make amendments, that's what we can do.

Speaker 4

Great. Yes, that's very good. I appreciate that detail tremendously. Okay. So looking beyond that repayment, which I mean, it will be mostly wrapped up by some point in the second half of next year.

Speaker 4

What would be the capital priority considerations at that point? And I mean, at what point do you start thinking about a dividend or share buybacks?

Speaker 2

Before we go to the share buyback, it is the most important thing once we put the prepaid behind us is to really turn the company into a net positive cash. So that's the priority number 1. So this would add out. 25% for us is a rather continuing to ramp up of Cote and quite frankly Westwood and Essakane should be like in a pretty steady state type of year, maximizing cash flow. As we enter 'twenty six, as I mentioned, there could be some opportunity of extending the life of mine at Esa Canes, so where you would remain always positive cash flow, but maybe you could take a little bit less in 6, 7 and extend the life of mine.

Speaker 2

So I think once we turn the company on a positive cash flow side, we'll be capable to first look at unlocking additional organic growth at the asset as everyone will be capable to take care of themselves and that's what would be. I've mentioned opportunities at Cote as well at the low capital requirement, the crusher, we'll eventually look back after that on the website is there any some opportunities. But net net, this company should not be answering any additional important capital allocation more than benefiting from the free cash flow of each asset to further unlock some potential and continue to improve on the balance sheet. Even though Cote has is poised with some opportunity to increase, we do not see this as a potential important capital allocation, but rather benefit just from the free cash flow.

Operator

Hope this clarifies.

Speaker 4

Okay. Yes. No, that's very clear. And then just one final thought. Like at some point, it might really benefit IAMGOLD shareholders to consider increasing IAMGOLD's ownership of Cote Gold.

Speaker 4

Are there certain milestones or timelines or pre established economic considerations that would allow IAMGOLD to even marginally increase that position from 70% at some point in the future?

Speaker 2

I would say at this stage the main limiting factor is this whole thing was designed at a seveneight30, right? So we do have a partner and we're very happy on the partnership we have. Should it be any opportunity down the road with our partners in Miu Telmo, for sure we would be considering to increase. But at this stage, we design that was designed at a seventythirty, which we should be back soon. But Colte is from far our best opportunity, right?

Speaker 2

So any opportunity we would see that makes a lot of sense and generate return, we'll be looking at improving our positions or the NAV or any unlocking any organic growth. That would be always our priority on the line, Cotigot.

Speaker 4

To number 1, Cortego.

Operator

The next question comes from Anita Soni of CIBC World Markets. Please go ahead.

Speaker 5

Good morning, Renaud and team. A couple of questions. So just firstly on Westwood, you said there was a mill shutdown in November. Could you tell us how long that mill shutdown would be for, how many days?

Speaker 2

Yes, we're targeting 5. If we see further opportunity, we'll do it. I would say 5 to 7, but hopefully we do it in

Speaker 5

2025 look like there. Q4 you indicated that you're going to be pulling more stockpiles as you are focusing on stripping waste. Could you just give us an indication of what the strip ratios would be both the operating and the capitalized strip ratio?

Speaker 2

Renaud is yes, yes. So next year we'll be back on more standard. So I could already tell you that it's a year where we should see reductions of total capital as well as aligned with the 483-1 101. And the Q4, we should normally increase. It's going to be like a much lower grade mine.

Speaker 2

So we could go probably as far as probably 4 or 5 to 1 depending on how it goes and the opportunity in the base positioning. But in 2025, we would be back to a more regular in line probably with what we've done this year or even now 1.

Speaker 5

So around 2, is that correct or?

Speaker 2

2 to between 2 and 3, always seizing the opportunity. Like this year, what we've done considering the very positive year, the free cash flow. So we took advantage to push, improve the positioning at a bit, do more ways, but you can start towards maybe a 2%, 2.5% plan and you could go a little bit higher. So follow the mind, the 40 three-1 101, which I think remains very relevant for 2025.

Speaker 5

Okay. And then last question on esokine would be the grade reconciliation. I know you tried to do work on it in the past, but it's clearly beating and continuing to beat. I think the plan for Q2 was lower grade, plan for Q3 was lower grade and it's still hanging in there well above the reserve grade. So how should we think about that on a go forward basis?

Speaker 5

I know you'll probably tell me to use the reserve grade, but I mean is that realistic at this point?

Speaker 2

Well, as I mentioned in my opening comment, I mean, one of the big contributors, the Phase 5 and we've seen like some extension that's going to prolong in 2025. So on that point of the Phase 5 is along, it would bring normally opportunity beyond the 40 three-1 101. So we'll look at this for next year. Now we're not at the beginning of the Phase V, but we should benefit at least another quarter, if not more, from the Phase V. So yes, we should normally should the Phase V continue, as I mentioned, we should normally be able to improve beyond the 40three-1 101 in term of rate for next year.

Speaker 5

Thank you. I'll pause there and let someone else ask questions. Thank you.

Speaker 2

Thank you so much.

Operator

Our next question comes from Tanya Jakusconek from Scotiabank. Please go ahead.

Speaker 6

Great. Thank you. Good morning, everyone. Thank you for taking my questions. Renaud, maybe just to circle back on Lawson's question on capital allocation.

Speaker 6

Is it did I understand correctly that the priorities for you in 2025 are obviously paying down the prepaid and the notes and some of the leases, etcetera, etcetera dealing with the debt side. And then you have some capital that you put into Cote on the plant side. And is it safe to assume and you want to extend the mine life as it can? So that's 2025. And so as we go into 2026, do you think at that point you will have any additional free cash flow to look for returns to shareholders?

Speaker 6

I'm just trying see whether returns to shareholders via dividend and or share buyback is a 2026 part of your review. It's not 2025 is what I'm understanding.

Speaker 2

Thanks for your questions because our shareholders obviously means a lot and will always be taking into account. So my capital allocation answer was really focusing more on what we see as real kind of mine site capital needs, which we still see within. But as you mentioned and as we have mentioned in previous quarter, as we turn this company positive cash flow and address properly level of debt reductions, we'll continue to generate excess free cash flow. And we have mentioned in the past that we will be looking down the road to how could we find a better way to reward our shareholders. This is not for a 2025.

Speaker 2

We will see how the gold market goes, but I'm expecting this company to be in excess of cash flow as we advance 26, 25 and beyond and which will represent some opportunity. We don't have any decision made. This is all part of strategic approach as we advance in time. But I'm looking at 2024, looking how we are advancing. I'm very excited about what this company could be next year towards the Q3.

Speaker 2

There are some big priority that would make a difference for the shareholders. As you know, the second lien is very expensive and we must find a way to reduce cost of that. But after that down the road, once you adjust your balance sheet, I think there would be a portion for the shareholders. So thank you for this question.

Speaker 6

Okay. Looking at 26 and beyond for that opportunity?

Speaker 2

Yes. That cannot really be before that because we do have so I think as we advance 26 and beyond looking at the needs, the excess cash flow, we'll be looking at what could be done.

Speaker 6

Perfect. And then Renaud, my second question is just on Westwood. I know the 40three-1 101 technical study is coming. And I think Anita asked this on one of the other calls. But can you just remind me what you have kind of said long term production target and cost target for this asset?

Speaker 6

Was that 150,000 ounces?

Speaker 2

Yes, please.

Speaker 6

If you could do that, that was great.

Speaker 2

Yes, thanks for your questions, because we will be filing the 40 three-1 101, but in all fairness, the 40 three-1 101, by the nature of the mines, a deep mine, there is quite a bit of ounces not quite in the reserve category. So you're seeing the reserve at the end of December is about the 1,000,000 ounce and the 42,101 is based on reserve only. But there is quite a significant amount of other ounces that, of course, part of the life of mine and so forth. So an average of 130, 40, so I like to say I see this mine down the road at a steady 125 to 150 type of range. And this is just with the current life of mine.

Speaker 2

But once the Grand Jik is done, there will be further opportunity and extra capacity at the mill down the road that could be. So I would say as a base case, it's probably 125, 140. And in term of cost, I would wait for the $43,100,000 to highlight a little bit more of that. So I don't want to be ahead of my ski here. So a few weeks will be a better answer to these questions.

Speaker 2

But you will see a drop from the current range just because of the level of rehabilitations that would ease down, so that would lower some costs. So if we do 1600 today, you should expect down the road the mine to be capable to do better than that.

Speaker 4

Okay. Looking

Speaker 6

forward to getting. And then maybe my final question. I just wanted to circle back, Renaud, on something you said earlier, which was on inflation, very focused on this. I think 35% of your cost structure is labor, correct me if I'm wrong. Can I just understand number 1, what is your labor inflation currently and how are you thinking about that into 2025?

Speaker 6

That's my first question. So is 35, Martin, the right number as a percentage of cost for labor and then inflation?

Speaker 2

I'll pass it to Martin for more sort of detail now.

Speaker 3

Good morning, Tanya. So 35% is still the amount for labor and contractors in our cost structure. That will change slightly as Cartier becomes a bigger part of our organization now going forward, because Cartier has less labor than it can, for example. When we look at our budget, which we're still working on and we look at what industry is doing as well as CPI, we're seeing like 3% to 3.5% increases for labor on average. And I think that's in line with what other people are seeing as well.

Speaker 6

And as we go forward with that 35% move to 40% in labor or would it be higher like with the contractor? I'm just trying to understand what that 35% would move to?

Speaker 3

I think the 35% would maybe decrease because of the labor component, higher labor component in Essakane than at Cote. But we're just working through those numbers as well. So It should not increase. It should not increase.

Speaker 2

It should not increase. It should not increase. It should not increase. Yes.

Speaker 6

You're saying the percent, that 35% includes your employees and labor and your contract in that 35%? Correct. Okay. Can you give me the split of what that is now? So what is your result and what is contractor in that 35

Speaker 3

So based on our plan for this year, I've not checked the actuals recently, but it was about 25% -ten percent 25% of the 35% and then 10%. So labor, 25% contractors, 10% of that 35%.

Speaker 6

Okay. Thank you for that. And then that 10% should increase as the next year, how I understood?

Speaker 3

Yes.

Speaker 6

Yes. Okay. And still within the 35,000,000,000. It's just the shift of contractors increasing versus your employees. And then, Renaud, do you mention

Speaker 3

It's more that sorry, Tanya. It's more that we our total the percentage of labor of our cost structure to 35%, we expect to maybe slightly decrease as Copse becomes a bigger part of our overall cost structure. The split between labor and contractors may not change, but it depends on how we operate the business.

Speaker 6

Okay. And so when you look at overall and I think, Renaud, you mentioned that consumables is in line with you're not seeing depreciation in that portion of the cost structure, obviously, the higher gold price impact royalties that you see. So as you think about 2025 and you have this labor inflation that's at 3%, 3.5% and and let's say flattish on some of the other stuff plus you have a higher gold price for the royalties. Would we be thinking like 5% would be a reasonable assumption for year over year change 25% to 24%?

Speaker 3

There's lots of other price inputs as well like we need to look at oil and that's been changing, so energy costs. So we will be providing our guidance early next year, and we're still working through our budgets and plans as well. So it's hard to confirm that number at this point.

Speaker 2

Yes. And the thing is that you may have some like Cote for instance, right? Like Cote is a good example. The 1st year is a ramp up. So you're looking at your consumptions that are not optimized.

Speaker 2

So you may face some increase in your and some unit price paid, but you have further possibilities. So I think 2024, 2025 will do anything possible to offset any possible increase. But as Martin highlighted, so we'll be more specific at the start of the year, but I definitely do not because Cote has so much of improvement and opportunities, I think we still can target to offset most of that most of the increase other than the labor.

Speaker 6

Yes. Got it. Okay. Really appreciate that. Thank you for taking my questions.

Speaker 2

Thank you.

Operator

Our next question comes from Simon Wildsmith of Canaccord Genuity. Please go ahead.

Speaker 2

Hey guys, good morning.

Speaker 1

Thanks for taking my question and congratulations on the quarter. Maybe for Martin, with strong gold prices and then what seems to be an improving balance sheet, is there an opportunity to refinance the relatively high cost term loan early?

Speaker 3

Good morning, Simon. That line becomes callable or we can start repaying it now, but there is a prepayment penalty that's quite large at the moment. So in May of next year, that reduced 204%. So to do anything before then, if you look at the cost of new debt and all of those costs, we don't believe that, that is the best way to increase value and reduce our debt carrying costs. But by middle of next year, that's when there would be an opportunity to do that.

Speaker 4

Okay.

Speaker 3

And we are still delivering into the gold pre by now as well. So that is using a lot of the extra free cash flow and high gold price.

Speaker 1

Okay. Okay. Sounds good. That was my only question. Thanks guys and congratulations again.

Speaker 3

Thanks. Thank you.

Operator

This concludes our time allocated for questions on today's call. I will now hand the call back over to Graham Jennings for closing remarks.

Speaker 1

Thank you very much, operator, and thank you everyone for joining us this morning. As always, if you should have any questions, please reach out to Renaud or myself. Thank you all. Be safe, and we will see you next quarter in 2025.

Operator

This brings to a close 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 Q3 2024
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