IAMGOLD Corporation - Fourth Quarter Report
No. 5/10
IAMGOLD REPORTS FOURTH QUARTER AND 2009 YEAR END RESULTS; Delivers Record Net Earnings and Strong Operating Cash Flow
All amounts are expressed in US dollars, unless otherwise indicated.
Toronto, Ontario, February 17, 2010 – IAMGOLD Corporation (“IAMGOLD” or “the Company”) today reported its unaudited financial and operating results for the fourth quarter ending December 31, 2009. The Company reported adjusted net earnings(1) of $41.4 million or $0.11 per share for the fourth quarter, and $212.2 million or $0.60 per share for the year. Production in 2009 reached 939,000 ounces with an average cash cost(2) of $461 per ounce.
“IAMGOLD had a very good year in terms of profitability and production,” stated Peter C. Jones, Interim President & CEO. “IAMGOLD maintained its financial strength, while the Company’s significant exploration successes continue to improve its long-term growth profile.”
FOURTH QUARTER 2009 HIGHLIGHTS
- Adjusted net earnings(1) rose by 152% to $41.4 million ($0.11 per share). The net loss for the fourth quarter of 2009 was $47.4 million ($0.13 per share), which includes a non-cash impairment charge of $88.8 million for the Camp Caiman project.
- Operating cash flow of $67.4 million ($0.18 per share(3))
- Gold production of 234,000 ounces at a cash cost(2) of $488 per ounce
- Proceeding with the Sadiola deep sulphide feasibility study
- Increased ownership in Sadiola from 38% to 41%
FULL-YEAR 2009 HIGHLIGHTS
- Record full year adjusted net earnings(1) increased 97% to $212.2 million ($0.60 per share).
- Net earnings for 2009 were $114.1 million ($0.32 per share) including non-cash impairment charges of $98.1 million for development projects
- Strong operating cash flow of $257.0 million ($0.73 per share(3))
- Ninth straight annual dividend; $0.06 per share in 2009 totaling $22.1 million paid in January 2010
- Continued strong financial position with $422.7 million in available funds
- Gold production of 939,000 ounces and average cash cost(2) of $461 per ounce
- Record production at Rosebel of 392,000 attributable ounces at a cash cost(2) of $396 per ounce
- Gold reserves at record levels; increased by 17%, or 2.1 million ounces, to 14.5 million ounces
- Strong niobium sales of 4.3 million kilograms and operating margin(4) of $20 per kilogram
(1), (2), (3) and (4): Please refer to page 13 for explanation.
- Niobium reserves increased by 32%, or 43.5 million kilograms, to 181.3 million kilograms of contained niobium pentoxide (Nb2O5)
- Commitment to Zero Harm with 31% reduction in days away injuries
- Acquired, integrated and accelerated the Essakane project with commercial production scheduled in August 2010
- Westwood project is on schedule and on plan for commercial production in early 2013
“IAMGOLD remains committed to its vision of building a premier gold company through disciplined growth by means of exploration and acquisitions. We remain focused on controlling our costs and maintaining a solid balance sheet,” continued Peter C. Jones. “The project development team achieved our construction milestones at Essakane, in Burkina Faso, and Westwood, in Québec, with both projects on or ahead of schedule. Operations delivered superior results with record gold production at Rosebel, our flagship operation, and an extended mine life at the Doyon division.
Our priority to continuously improve our safety performance towards achieving our Zero Harm objective has led us to realize better-than-industry safety averages.
The start-up of Essakane later this year will further solidify IAMGOLD as a company that can acquire, develop, and manage our operations safely, responsibly, and profitably.”
Solid Financial Results
Fourth quarter gold sales of 233,000 ounces at an average price of $1,096 per ounce and strong niobium sales drove revenues of $265.3 million in the quarter as compared to $209.6 million in 2008. In 2009, full year revenues of $914.3 million increased $44.7 million from the previous year. A higher average gold price more than made up for the lower ounces sold with the closure of the Sleeping Giant mine in late 2008.
During the fourth quarter of 2009, the Company’s adjusted net earnings(1) were $41.4 million ($0.11 per share) compared to $16.4 million ($0.06 per share) during the fourth quarter of 2008. Adjusted net earnings in the fourth quarter 2009 were negatively impacted by $15.6 million ($0.04 per share) mainly due to changes in asset retirement obligations for closed properties and impairment of the carrying value of certain marketable securities.
On an annual basis, 2009 adjusted net earnings(1) nearly doubled to $212.2 million ($0.60 per share) as compared to $107.5 million ($0.36 per share) in 2008. The results included a net positive impact of $39.3 million ($0.11 per share) mainly the result of foreign exchange gains, and a gain on sale of gold bullion, partially offset by changes in asset retirement obligations for closed properties and impairment of the carrying value of certain marketable securities.
Net earnings for 2009 were $114.1 million ($0.32 per share) including non-cash impairment charges of $98.1 million mainly related to the Camp Caiman project in French Guiana. In 2008, the net loss was $9.9 million ($0.03 per share) including impairment charges of $117.4 million (net of tax). During the fourth quarter of 2009, the Company’s net loss was $47.4 million ($0.13 per share) compared to $96.4 million ($0.33 per share) during the fourth quarter of 2008.
Annual operating cash flow from 2009 activities was $257.0 million ($0.73 per share(3)), similar to $258.2 million ($0.87 per share(3)) in 2008. Operating cash flow for the fourth quarter of 2009 was $67.4 million ($0.18 per share(3)), similar to $68.2 million ($0.23 per share(3)) in the fourth quarter of 2008. Higher revenues and improvements in cash mining costs were offset by increased spending on exploration and corporate initiatives, and increased investment in working capital.
Strong Production and Cost Control Performance
Gold production for the fourth quarter of 234,000 ounces at an average cash cost(2) of $488 per ounce brought full year 2009 gold production to 939,000 attributable ounces at an average cash cost(2) of $461 per ounce. This production level was in line with the revised October 2009 guidance and 7% higher than original guidance for the year largely due to the impact of productivity improvements at Rosebel. IAMGOLD’s attributable gold production in 2009 decreased by 58,000 ounces or 6% compared to 2008.
Excluding the Sleeping Giant mine, production increased by 11,000 ounces during 2009. This relative increase is mainly a result of record gold production at Rosebel due to higher throughput realized from the expansion of the mill, higher production at Yatela due to higher gold grades, and higher production at Tarkwa due to the commissioning of a new CIL plant offset by lower production at Mupane.
The consolidated average cash cost(2) increased by $2 per ounce in 2009 to $461 per ounce compared to 2008. The Company’s focus on productivity gains, acquisition of royalty interests related to its operations, and favourable fluctuations in foreign currency exchange rates largely mitigated rising energy costs, lower gold production, lower grade and higher royalties due to the impact of a higher realized gold price. Cash cost per ounce of gold produced in 2009 was in line with the revised October guidance of $460 to $470 per ounce and lower than the original guidance of $470 to $480 per ounce.
Financial Position Remains Strong
The Company’s cash, cash equivalents, and gold bullion (at market value) position remains strong with $300.1 million available at December 31, 2009. In addition, the availability under the credit facility at December 31, 2009 was $122.6 million, for a total of $422.7 million of available funds. The credit facility availability increased during the year as the Company repaid $50.0 million of previously drawn funds.
Capital expenditures in 2009 were $452.6 million as the Company aggressively advanced construction of the Essakane and Westwood development projects and invested in production expansion at Rosebel through mining fleet improvements.
With $422.7 million in available funds, and expected operational cash flows, the Company is well-positioned to fund the continuing 2010 requirements of development and exploration projects. Capital expenditures of $373 million and exploration expenses of $38 million are planned for in 2010.
On July 29, 2009, the Company filed a base shelf prospectus with the securities regulators in each province and territory of Canada (except for Québec) and a corresponding registration statement with the SEC in the United States. These filings allow the Company to make offerings of common shares, warrants, debt securities, subscription receipts or any combination thereof of up to $700 million until August 29, 2011. This base shelf prospectus provides additional financial flexibility to the Company’s liquidity and capital resources for the future including acquisition opportunities.
Record Reserves - Increase by 17%
Proven and probable mineral reserves of gold after depletion increased 17%, or 2.1 million ounces, to 14.5 million ounces as at December 31, 2009. Please refer to the Company’s press release issued January 25, 2010.
The main contributors to the changes were:
- An updated geological model for Essakane yielding an additional 1.1 million ounces of mineral reserves (a 38% increase) and a higher gold price
• An addition of over 1.3 million ounces from Rosebel (a 37% increase)
- An addition of 0.9 million attributable ounces at Sadiola representing seven years of mine life
- A decrease of reserves of 1.1 million ounces related to the Camp Caiman project (refer to the Impairment charges section)
Total proven and probable mineral reserves of niobium increased 32% to 181.3 million kilograms of contained niobium pentoxide (Nb2O5). This increase was a result of infill drilling that allowed the conversion of inferred to indicated mineral resources. The increase follows significant gains in 2008 due to the approval of paste backfill project, which allows for much higher extraction ratios on the lower levels.
Development – On Schedule to Deliver
In 2009, the Company invested $345.7 million in capitalized and expensed expenditures incurred on development projects including Essakane in Burkina Faso, Westwood in Northern Québec, and Quimsacocha in Ecuador. The development projects are summarized as follows:
Burkina Faso – Essakane Project – Accelerated Early Production
In September 2009, the Company announced its plan to accelerate production at its Essakane development project by increasing the processing rate and optimizing the mine plan allowing for earlier access to higher grade ore. Gold production is estimated to be between 480,000 and 490,000 ounces from August 2010 (scheduled commercial production) to the end of 2011 with cash cost(2) expected in the $400 to $410 per ounce range. Life-of-mine production estimates remain at 315,000 ounces per year. Construction progress remains ahead of the original schedule with total planned capital expenditures of $443.0 million. Project expenditures since the February 2009 acquisition date were $245.5 million with a project to date total of $348.0 million. In 2010, 50,000 metres of delineation and resource expansion drilling is planned.
Canada – Westwood Project – Updated Preliminary Assessment Study
On December 21, 2009, IAMGOLD announced continued positive results from an updated preliminary assessment study (the “study”) on its 100% owned Westwood development project located two kilometres from the Company’s Doyon gold mine in the Abitibi region of Northern Québec. The results of the study provide further confidence to move forward on the Westwood project.
Construction progress at Westwood is on schedule and on plan with commercial production planned for early 2013. Project expenditures in 2009 totaled $81.4 million with significant progress regarding site preparation and construction of infrastructure.
During 2009, the exploration ramp was extended by more than 2,200 metres which will provide better drilling access to the upper part of the deposit (above the 84-0 level exploration drift) as well as providing future production access to the Warrenmac lens. The Bousquet fault was successfully crossed by an exploration drift on the 84-0 level significantly improving drilling access to the resources to the east of the fault. In 2010, over 70,000 metres of exploration, valuation and definition drilling is planned.
Ecuador – Quimsacocha Project – Ready to Resume Development
In November 2009, detailed Mining and Environmental Regulations relating to the Ecuadorian Mining Law passed in February 2009 were completed and approved by President Correa. The final step to allow the resumption of work at the Company’s Quimsacocha project is the review and confirmation of water permits for the project area. During the fourth quarter of 2009, the Company continued the advancement of engineering for the concentrator. The Company intends to resume drilling and other feasibility work once the necessary authorization is received. A feasibility study and an environmental impact assessment (at a cost of $14 million) are expected within 12 to 15 months of receiving the authorization to resume mining activity.
Exploration – Aggressive Organic Growth
The Company’s exploration focus areas are West Africa, Québec, the Guiana Shield, and the Andes and Brazil regions of South America. Additionally, the Company continues to search aggressively for advanced exploration joint venture or acquisition opportunities that will provide the foundation for future growth.
In 2009, the Company invested $63.8 million on exploration projects, a significant increase from $50.2 million in 2008. The 2009 expenditures were:
- Near-mine brownfield exploration and resource development expenditures of $32.9 million. This included a significant 85,843-metre, $12.0 million, resource expansion and delineation drilling program at Rosebel that directly led to a reserve expansion in 2009.
- Greenfield exploration of $30.9 million conducted at thirteen early-stage projects in ten countries of South America and Africa as part of the Company’s long-term commitment to reserves replenishment and growth.
2009 Acquisitions and Agreements
IAMGOLD was active in 2009 building its project pipeline through acquisitions and greenfield exploration. The Company acquired the Essakane asset from Orezone Resources Inc. and invested in additional targeted opportunities through agreements as noted below.
Orezone Resources Inc. (“Orezone”) – On February 25, 2009, the Company acquired all of the outstanding common shares of Orezone for a total consideration of $238.1 million. The principal asset of Orezone was a 90% interest in the Essakane gold project in Burkina Faso, including exploration permits around the mine concession. Construction is on schedule with commercial production expected to begin in August 2010.
Oromin Explorations Ltd. (“Oromin”) – In June 2009, the Company acquired 16,088,636 common shares for $10.3 million representing 17% of issued and outstanding shares of Oromin. Oromin is the owner of a joint venture interest in a large property in Senegal at the exploration and preliminary feasibility stage. Currently the holding represents approximately 15.7% of Oromin.
Additional 3% interest in Sadiola – On December 29, 2009, the Company purchased an additional 3% interest in Société d’Exploitation des Mines d’Or de Sadiola S.A. (“SEMOS”) for $7.1 million to increase the ownership interest to 41% in the Sadiola joint venture. The Republic of Mali has until March 31, 2010 to elect to take up its proportionate entitlement of 0.574% interest in SEMOS from the Company.
Avnel – Kalana Project – In August 2009, the Company entered into an option agreement to acquire up to an initial 51% interest in Avnel Gold Limited (“Avnel”) and its 80% interest in a small operating gold mining company in southwest Mali. The 51% interest in Avnel will involve spending $11.0 million on exploration activities over a threeyear period and delivering a NI 43-101 resource determination of at least 2 million ounces of gold. The Company believes there is the potential for a large bulk tonnage operation in the immediate mine area. IAMGOLD incurred $1.8 million in 2009 as part of a $2.5 million mandatory expenditure in the first year of the agreement.
Merrex – Siribaya Project – The Company is proceeding with funding the second year’s exploration program at the Siribaya joint venture project in Mali with Merrex Gold Inc. (“Merrex”). In November 2009, the Company exercised warrants and acquired additional shares for $1.8 million. The additional shares resulted in IAMGOLD holding a fully diluted interest of 8.9% in Merrex. The 2009 diamond drilling program was completed in the third quarter of 2009 and the Company met its first year’s work commitment of C$3.0 million in exploration expenditures.
La Arena Project – In June 2009, an option and earn-in agreement was entered into for the sale of the La Arena project in Peru. The Company received 8,024,511 common shares (10.6% interest) and 1,500,000 warrants of Rio Alto Mining Limited (“Rio Alto”) for a total value of $1.4 million. Rio Alto has the option to purchase all of the outstanding shares of La Arena S.A., an IAMGOLD wholly-owned subsidiary, for a cash payment of $47.6 million. During the option term, Rio Alto may also earn-in newly issued shares of La Arena S.A. up to a maximum of 38.7% by incurring up to $30.0 million in expenditures on the La Arena project. In 2009, Rio Alto was appointed the manager of La Arena S.A. and the La Arena project and spent $3.7 million on the project under the earn-in agreement.
Commitment to Zero Harm Continues
The Company’s objective to maintain the highest standards in health and safety continues, with a 31% reduction in days away injuries in 2009, as compared to 2008. The Company’s continued commitment to Zero Harm has provided a 64% decrease in work impacting injuries since 2006.
Outlook for Growth
On January 21, 2010 the Company announced guidance for 2010 as follows:
Outlook 2010 (issued January 2010)
| Attributable share of gold production (000 oz) Cash cost ($/oz) Projected gold price ($/oz) Projected oil price ($/barrel) Projected foreign exchange rate (C$/US$) Niobium production (millions of kg Nb) Niobium operating margin ($/kg Nb) | 940 - 1,000 |
|---|---|
| $490 - $510 | |
| $1,000 | |
| $75 | |
| 1.10 | |
| 4.2 - 4.4 | |
| $17 - $19 |
2010 Forecast Attributable Gold Production (000 oz) Africa 540 - 570 Canada 20 - 30 South America 380 - 400
TOTAL 940 - 1,000
The 2010 production level reflects the projected commencement of commercial production at Essakane in August 2010, the share ownership increase from 38% to 41% in Sadiola, and higher production at Tarkwa. This production level will be partially offset by the harder ore anticipated at Rosebel, lower grades at Sadiola and Rosebel, a reduced mining schedule at Mouska, and completion of mining at the Doyon mine in the fourth quarter of 2009. Niobium production at Niobec is expected to be between 4.2 and 4.4 million kilograms, slightly higher than in 2009, due to the mill expansion and paste backfill initiatives, with an operating margin(4) projected in the $17 to $19 per kilogram range.
The Company’s cash cost(2) per ounce of gold is expected to increase in 2010 compared to 2009, due mainly to lower production for the reason stated above, in addition to increased energy costs. The Company’s cash cost will be positively impacted when Essakane commences production in August 2010.
Cash cost estimates are based on assumptions including, but not limited to, those noted above. The current financial market volatility may affect future cash costs either positively or negatively through changes in gold price, oil price, overall operating costs, and currency rates. Changes in these assumptions may have a material impact on cash cost(2), results of operations, and overall financial position of the Company. Actual results may vary significantly from guidance. The following table provides estimated sensitivities around certain inputs that can affect the Company’s operating results, based on the Company’s guidance for 2010.
Impact on the annualized 2010 cash Change of cost by $/oz
| Gold price | $50/oz | $3 |
| Oil price | $10/barrel | $6 |
| Canadian dollar per US dollar | $0.10 | $2 |
As part of the Company’s focus on managing costs, the Company actively engages in hedging strategies with respect to its exposure to fuel price volatility, aluminum price volatility and foreign exchange rate volatility.
Capital and Exploration Expenditures
The Company plans to invest significantly in mine development and exploration in 2010. Capital expenditures of approximately $373 million are projected in 2010. The major planned capital expenditures in 2010 are as follows:
($ millions) 2010 Forecast Capital Expenditures
Development projects
Essakane (a) 116 Westwood (b) 102 Quimsacocha (c) 12 Sadiola Deeps 4
Mining operations
Rosebel 49 Niobec 74 Others combined 16
Total 373
(a) Includes construction, capital for operations, exploration and resource development
(b) Includes construction, exploration and resource development
(c) Level of capital expenditures dependant on resumption of mining activities. Refer to Development section of this press release.
Included above is $195 million for construction of development projects, $121 million capital for operations, $39 million for resource development, and $18 million for feasibility studies and other expenditures.
In addition, the Company plans to incur $38 million of exploration expenses in the Company’s exploration focus areas of West Africa, Canada, the Guiana Shield, and the Andes and Brazil regions of South America.
SUMMARIZED FINANCIAL RESULTS
| (in $ millions) | As at | % Change | As at December 31, 2008 | |||
|---|---|---|---|---|---|---|
| December 31, | ||||||
| 2009 | ||||||
| Financial Position Cash and cash equivalents and gold bullion • at market value • at cost Total assets Credit facility Shareholders’ equity | $ | $ | $ 269.1 188.2 2,151.7 50.0 1,655.7 | |||
| 300.1 | 12% | |||||
| 231.8 | 23% | |||||
| 2,991.3 | 39% | |||||
| - | (100% | ) | ||||
| 2,416.7 | 46% |
| (in $ millions, except where noted) | Three months ended | Year ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||||||
| 2009 | % Change | 2008 | 2009 | % Change | 2008 | |||||||
| Results of Operations Revenues | $ | $ | $ 209.6 | $ | $ | $ 869.6 | ||||||
| 265.3 | 27% | 914.3 | 5% | |||||||||
| Net earnings (loss) Impairment charges (net of related income taxes) | (47.4 | ) | 51% | (96.4) 112.8 | 114.1 | n/a | (9.9) 117.4 | |||||
| 88.8 | ) | (16% | ) | |||||||||
| (21% | 98.1 | |||||||||||
| Adjusted net earnings(1) | 41.4 | 152% | 16.4 | 212.2 | 97% | 107.5 | ||||||
| Basic and diluted net earnings (loss) per share ($/share) Adjusted basic and diluted net earnings per share(1) ($/share) | (0.13 | ) | (0.33) 0.06 | n/a | (0.03) 0.36 | |||||||
| 61% | 0.32 | |||||||||||
| 0.11 | 67% | |||||||||||
| 83% | 0.60 | |||||||||||
| Cash Flows Operating cash flow | 68.2 | 258.2 | ||||||||||
| 67.4 | (1% | ) | 257.0 | - | ||||||||
| Key Operating Statistics Operating results - Gold mines Attributable gold production (000 oz – IMG share) Attributable gold sales (000 oz – IMG Share) Average realized gold price ($/oz) Cash cost ($/oz)(2) Cash cost excluding royalties Royalties | 255 253 793 364 44 | 997 997 855 403 56 | ||||||||||
| 234 | (8% | ) | (6% | ) | ||||||||
| 939 | ||||||||||||
| 233 | (8% | ) | (5% | ) | ||||||||
| 944 | ||||||||||||
| 1,096 | 38% | 960 | 12% | |||||||||
| 439 | 21% | 419 | 4% | |||||||||
| 49 | 11% | 42 | (25% | ) | ||||||||
| Cash cost(2) | 488 | 20% | 408 | 461 | - | 459 | ||||||
| Operating results – Niobium mine Niobium production (000 kg Nb) Niobium sales (000 kg Nb) Operating margin ($/kg Nb)(4) | 1,056 974 24 | 4,396 4,201 19 | ||||||||||
| 1,236 | 17% | 4,106 | (7% | ) | ||||||||
| 1,451 | 49% | 4,347 | 3% | |||||||||
| 20 | (17% | ) | 20 | 5% |
REVENUES
Fourth quarter revenues reached $265.3 million, a 27% increase over $209.6 million for the same quarter of 2008. Revenues for the full year of 2009 reached a record $914.3 million, a 5% increase over the previous year.
Revenues for the fourth quarter of 2009 and for the full year increased, compared to the same periods in 2008, primarily due to higher realized gold prices, and increased niobium sales volumes.
MINING COSTS
Mining costs for the fourth quarter of 2009 increased, compared to 2008, as a result of higher operating costs mainly due to waste stripping at Sadiola, increased volume and inflation driven labour costs at Rosebel, higher diesel fuel prices, and adjustments to asset retirement obligations at Doyon due to changes to remediation plans. Movements in the average exchange rate between the Canadian and US dollar during the fourth quarter of 2009 negatively impacted mining costs for the Canadian operations compared to the same period last year.
Lower mining costs for the full year of 2009, compared to 2008, were mainly due to the disposal of the Sleeping Giant mine early in the fourth quarter of 2008, lower royalty costs as a result of the elimination of a royalty on Rosebel mine’s production in late 2008 and the stronger US dollar versus the Canadian dollar causing a positive impact on mining costs for the Canadian operations. These decreases were partially offset by higher volume, higher labour costs, plant and mine support overheads at the expanded Rosebel, and adjustments to asset retirement obligations.
DEPRECIATION, DEPLETION AND AMORTIZATION
Depreciation, depletion and amortization decreased from $169.6 million in 2008 to $153.8 million in 2009 due to the increase in reserves and the disposal of the Sleeping Giant mine in October 2008. The decrease was partially offset by the amortization of deferred stripping at Yatela, the depreciation of new equipment at Mupane and Rosebel, and the amortization of royalties acquired.
IMPAIRMENT CHARGES
Asset and goodwill non-cash impairment charges totaled $98.1 million in 2009. The Camp Caiman project accounted for $88.8 million of the impairment. The French authorities published a draft-mining framework in June 2009 but there has been no significant progress towards a final framework and no assurance that the final framework would permit the development of the Camp Caiman project. The results of the January 10, 2010 referendum, in which French Guiana rejected greater autonomy from France, supported the Company’s view that it is appropriate to record a non-cash impairment for the net carrying value of the project. In order to protect the interests of the Company and its shareholders for damages incurred to date, appropriate legal claims were prepared and, on September 28, 2009, the Company, through IAMGOLD Guyane S.A.S., its indirect subsidiary in French Guiana, sent a preliminary request for indemnification to the Prefect of French Guiana for €275 million. This was followed by a motion sent to the Administrative Tribunal in Cayenne, French Guiana on December 23, 2009, to appeal the Prefect of French Guiana’s implicit refusal to grant the preliminary request for indemnification.
In addition, an impairment of $9.3 million was recorded in the second quarter of 2009 relating to exploration properties in Tanzania.
CORPORATE ADMINISTRATION
Corporate administration expenses in 2009 were $49.1 million compared to $42.0 million in 2008. The increase in 2009 was due to certain costs relating to acquisition and financing activities and additional resources to support expansion and process improvement activities. In addition, the increased fair value of option granted resulted in increased stock-based compensation costs.
EXPLORATION AND DEVELOPMENT EXPENSES
Exploration and development expenses in 2009 were $39.8 million compared to $33.6 million in 2008. The increase in expenses is in line with the Company’s objective to search for new deposits.
FOREIGN EXCHANGE GAIN
The foreign exchange gain in 2009 was $27.0 million compared to a foreign exchange loss of $1.1 million in 2008. The foreign exchange gain in 2009 was due to the appreciation in the value of the Canadian dollar compared to the US dollar and the level of Canadian dollars held as a result of the equity financing during the first quarter of 2009.
DERIVATIVE GAIN
The derivative gain was $7.0 million in 2009 compared to a derivative loss of $4.3 million in 2008. These derivative gains/losses were mainly due to the market variation of derivative contracts and the valuation of warrants included in marketable securities.
GAIN ON SALE OF GOLD BULLION
During 2009, gain on sale of gold bullion totaled $36.6 million from the sale of 73,705 ounces of gold at an average price and cost of $901 and $404 respectively and generated proceeds of $66.4 million. There were no sales of gold bullion during 2008.
INCOME AND MINING TAXES
During 2009, income and mining taxes totaled $108.0 million compared to $68.4 million in 2008. The increase in 2009 was mainly due to higher taxable income realized by the Rosebel and Yatela mines. The combined federal and provincial statutory income tax rate was 33% in 2009 and 34% in 2008. There are a number of factors that can significantly impact the Company’s effective tax rate including the geographic distribution of income, varying rates in different jurisdictions, the non-recognition of tax assets, mining taxes, foreign currency exchange rate movements, changes in tax laws and the impact of specific transactions and assessments. A reconciliation of the Company’s statutory rate to the actual provision will be provided in the Company’s note to the annual consolidated financial statements.
The Company has significant cumulative tax losses and unrecognized tax valuation allowances. The realization of these unrecorded tax benefits is subject to the generation of profit in the jurisdictions and/or corporations in which these losses were incurred.
ATTRIBUTABLE GOLD PRODUCTION AND CASH COST PER OUNCE
The table below presents the gold production attributable to the Company along with the weighted average cash cost(2) per ounce of production.
| (Unaudited) Gold Production Total Cash Cost(2) | Gold Production Total Cash Cost(2) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three months Three months ended ended December 31, December 31, | Year Year ended ended December 31, December 31, | ||||||||
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||
| IMG Operator Rosebel (95%) Doyon Division (100%) Mupane (100%) Joint Venture Sadiola (38%)(a) Yatela (40%) | (000 oz) | (000 oz) 86 33 30 49 16 | $/oz | $/oz 404 419 271 351 512 | (000 oz) | (000 oz) 315 118 101 172 66 | $/oz | $/oz 466 548 367 389 514 | |
| 99 | 422 | 392 | 396 | ||||||
| 24 | 528 | 109 | 524 | ||||||
| 11 | 885 | 51 | 735 | ||||||
| 32 | 616 | 135 | 483 | ||||||
| 28 | 323 | 89 | 339 | ||||||
| 194 | 214 | 478 | 385 | 776 | 772 | 445 | 452 | ||
| Working interests Tarkwa (18.9%) 32 26 Damang (18.9%) 8 9 | 584 635 | 119 37 | 521 676 | ||||||
| 32 | 505 | 125 | 513 | ||||||
| 8 | 652 | 38 | 619 | ||||||
| 40 | 35 | 535 | 598 | 163 | 156 | 538 | 558 | ||
| Total excluding closed mine Closed mine (Sleeping Giant 100%) | 234 | 249 6 | 488 | 415 94 | 939 | 928 69 | 461 | 470 303 | |
| - | - | ||||||||
| - | - | ||||||||
| Total | 234 | 255 | 488 | 408 | 939 | 997 | 461 | 459 | |
| Cash cost excluding royalties Royalties | 439 | 364 44 | 419 | 403 56 | |||||
| 49 | 42 | ||||||||
| Cash cost(2) | 488 | 408 | 461 | 459 |
(a) On December 29, 2009, the Company announced it had purchased an additional 3% interest in Sadiola resulting in a 41% interest in the Sadiola joint venture.
ROSEBEL MINE, SURINAME
Gold production at Rosebel increased in the fourth quarter and for the full year in 2009, compared to 2008, by 15% and 24%, respectively. Record full year gold production was achieved through higher productivity, operational efficiencies, an expanded mining fleet and increased mill throughput resulting from the completion of the mill expansion project.
Cash cost per ounce increased 4% in the fourth quarter, compared to the same period last year, primarily due to higher wages and higher energy costs. Cash costs have declined by $70 per ounce on a full year basis due to higher production, lower diesel fuel prices, the introduction of contractor ore haulage for more distant pits and the acquisition of a participation royalty.
DOYON DIVISION, CANADA
Gold production at the Doyon division declined in the fourth quarter and for the full year in 2009, compared to 2008. The decline in production reflects the expected reduction in tonnage mined as the Doyon mine was closed in December 2009. In the fourth quarter of 2009, the Company approved a program to extend the life of the Mouska mine into early 2012.
Cash cost per ounce increased by 26% in the fourth quarter of 2009, compared to 2008, largely due to lower production and the impact of a stronger Canadian dollar on the operation. On a year to date basis, cash costs per ounce were 4% lower, compared to 2008, mainly due to higher gold grades, lower royalties, (resulting from the acquisition of a participation royalty), and favourable movement in the Canadian dollar.
MUPANE MINE, BOTSWANA
Gold production at Mupane declined in the fourth quarter and for the full year in 2009, compared to 2008, by 63% and 50% respectively. The decline in production was a result of lower mill throughput due to the non-availability of the ball mill for most of the second half of the year and lower grades. The ball mill became operational in December. Cash cost per ounce, for the fourth quarter and the full year of 2009, were sharply higher as a result of lower production and increased royalties on higher gold prices.
During the third quarter of 2009, Mupane delivered the final shipment of gold under the forward sales contracts. The 10,000 ounces of gold sales in the fourth quarter was sold at spot prices. The Company continues to review management strategies around the closure process at Mupane.
SADIOLA MINE, MALI
Attributable gold production for the fourth quarter and for the full year of 2009 was down 35% and 22%, respectively, compared to 2008, mainly due to lower gold grades. The lower grades are the result of satellite pits being mined following the completion of mining at the main Sadiola pit.
Cash cost per ounce of gold were higher in 2009, compared to 2008, due to the lower production, higher waste stripping and increased royalties from higher realized gold prices.
YATELA MINE, MALI
Attributable gold production for the fourth quarter and for the full year of 2009 increased 75% and 35% respectively compared to 2008. The increased production resulted from a higher gold grade from ore stacked in prior periods. Cash cost per ounce was lower in 2009, compared to 2008, primarily as a result of increased production. Improvements in mining costs were realized following the engagement of a new mining contractor in late 2008.
TARKWA MINE, GHANA
Attributable gold production for the fourth quarter and for the full year of 2009 increased by 23% and 5%, respectively, compared to 2008. A 63% increase in production from the CIL plant was mainly a result of the plant expansion completed in 2009. The production in the heap leach plant was lower in the fourth quarter and for the full year of 2009 due to lower gold grades and less ore crushed.
Cash cost per ounce of gold decreased in the fourth quarter and for the full year of 2009 by 14% and 2% respectively compared to 2008. Cash cost decreased primarily due to increased production, lower diesel fuel and power costs, partially offset by increased royalties from higher gold prices.
DAMANG MINE, GHANA
Attributable gold production for the fourth quarter and for the full year of 2009 remained relatively unchanged from the previous year. Processing of slightly lower grade ore was offset by higher gold recoveries.
Cash cost per ounce for the fourth quarter of 2009 were higher compared to the same period in 2008. Increased cash costs were a result of lower production and increased royalties from higher gold prices. Year over year cash cost per ounce decreased by $57 or 8% due to lower diesel fuel and power costs as well as slightly higher gold production.