IAMGOLD REPORTS THIRD QUARTER 2020 RESULTS; GENERATING $105 MILLION IN OPERATING CASH FLOW, REFLECTING A 45% INCREASE OVER THE SECOND QUARTER Delivers Mine Site Free Cash Flow of $80 million
TSX: IMG NYSE: IAG
NEWS RELEASE
IAMGOLD REPORTS THIRD QUARTER 2020 RESULTS;
GENERATING $105 MILLION IN OPERATING CASH FLOW, REFLECTING A 45% INCREASE OVER THE SECOND QUARTER
Delivers Mine Site Free Cash Flow of $80 million
All monetary amounts are expressed in U.S. dollars, unless otherwise indicated.
For more information, refer to the Management Discussion and Analysis (MD&A) and Unaudited Consolidated Interim Financial Statements for the nine months ended September 30, 2020.
Toronto, Ontario, November 4, 2020 - IAMGOLD Corporation (“IAMGOLD” or the “Company”) reported its consolidated financial and operating results for the quarter ended September 30, 2020.
“IAMGOLD performed well in challenging circumstances, generating $105.1 million in operating cash flows and producing 159,000 ounces of gold, resulting in $80.0 million in free cash flows from our operating mine sites.” commented Gordon Stothart, President and CEO of IAMGOLD.
“In the quarter, we successfully completed our new bond issuance, lowering our interest costs, extending the maturity to 2028 and enhancing our financial flexibility with a cash balance of approximately $900 million. This cash position, along with access to our largely undrawn $500 million credit facility, brings our total liquidity to over $1.4 billion, enabling us to cover our portion of Côté's capital expenditures. Project engineering at Côté is now 66% complete, as early works continue and permitting advances to enable construction activities. Looking to the fourth quarter, production will be underpinned by Essakane and by Saramacca’s contribution to Rosebel. As reported Monday, we had a seismic event at Westwood, with all employees safely brought above ground. I would like to recognize our Westwood team for their safe and successful response to this event. The Westwood mill is expected to restart operations in the next few days while the underground mine operations remain suspended.”
"Periodically, we review opportunities to return capital to our shareholders, including a dividend policy and share buyback program, in the context of market conditions, share price, our financial position, capital requirements, forecast performance and realized gold prices. IAMGOLD is committed to delivering superior shareholder returns, with the next thirty months centered on developing our top-tier Côté Gold Project. This project requires significant capital investment funded by our current strong cash position and future cash flows from operations. As Côté Gold becomes operational, dependent on the gold price environment, we expect to generate significant free cash flow. This will allow IAMGOLD to consider its dividend policy through instituting a sustainable dividend or a share repurchase program that would recognize the interests of our shareholders in the Company’s anticipated strong performance, while balancing capital allocation between future growth and distributions to shareholders."
THIRD QUARTER 2020 HIGHLIGHTS
- Attributable gold production from continuing operations of 159,000 ounces at cost of sales1 per ounce of $1,098, total cash costs2 per ounce produced of $1,006 and all-in sustaining costs2 per ounce sold of $1,206.
- Attributable gold sales from continuing operations of 162,000 ounces.
- Revenues of $335.1 million, reflecting an average realized gold price of $1,908 per ounce sold.
- Net loss from continuing operations attributable to equity holders was $11.6 million, or $0.02 per share.
- Adjusted net earnings from continuing operations attributable to equity holders2 was $52.1 million, or $0.11 per share2.
- Net cash from operating activities was $105.1 million, a 45% increase over the second quarter.
- Net cash from operating activities before changes in working capital2 was $108.4 million, a 37% increase over the second quarter.
- Mine-site free cash flow2 was $80.0 million, a 51% increase over the second quarter.
- IAMGOLD remains in a solid liquidity position with cash, cash equivalents, short-term investments and restricted cash increasing by $61.7 million over the second quarter to $928.0 million, as at September 30, 2020.
OPERATING PERFORMANCE
- Attributable gold production from continuing operations was 159,000 ounces, down 15,000 ounces from the same prior year period mainly due to lower production at Rosebel as a result of the work stoppage during July 2020, and up 4,000 ounces from the second quarter 2020.
| Attributable gold sales from continuing operations we | re 162,000 ounces, down 9,000 ounces from the |
| same prior year period, and up 9,000 ounces from the second quarter 2020. | |
| Cost of sales1 from continuing operations was $1,098 per ounce, up 11% from the same prior year | |
| period primarily due to lower sales volume and higher royalties as a result of an increase in the gold | |
| price and realized losses on input cost hedges, and up 7% from the second quarter 2020. | |
| All-in sustaining costs2 from continuing operations were $1,206 per ounce, up 6% from the same prior | |
| year period, and up 1% from the second quarter 2020. | |
| Total cash costs2 from continuing operations were $1,006 per ounce, up 12% from the same prior year | |
| period, and up 8% from the second quarter 2020 primarily due to lower production volume and higher | |
| royalties as a result of the increase in the gold price. |
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- Gold margin2 from continuing operations was $902 per ounce, up $320 per ounce from the same prior year period, and up $113 per ounce from the second quarter 2020.
FINANCIAL RESULTS
- Revenues were $335.1 million, up $60.7 million from the same prior year period, and up $50.5 million from the second quarter 2020, reflecting an average realized gold price of $1,908 per ounce.
- Gross profit was $78.1 million, up $55.3 million from the same prior year period, and up $21.8 million from the second quarter 2020.
- Net loss from continuing operations attributable to equity holders was $11.6 million, or $0.02 per share, compared to net loss from continuing operations of $10.2 million, or $0.02 per share in the same prior year period, and compared to net income from continuing operations of $25.5 million, or $0.05 per share in the second quarter 2020.
| Adjusted net earnings from continuing operations attributable to equity holders2 was $52.1 million, or | |||
|---|---|---|---|
| $0.11 per share2, compared to adjusted net loss from continuing operations2 of $7.2 million, or $0.02 | |||
| per share2 in the same prior year period, and compared to adjusted net earnings from continuing | |||
| operations2 of $20.1 million, or | $0.04 | per share2 in the second quarter 2020 | . |
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- Net cash from operating activities was $105.1 million, up $53.3 million from the same prior year period, and up $32.7 million from the second quarter 2020.
- Net cash from operating activities before changes in working capital1 was $108.4 million, up $43.0 million from the same prior year period, and up $29.4 million from the second quarter 2020.
- Mine-site free cash flow2 was $80.0 million, up $56.8 million from the same prior year period, and up $27.0 million from the second quarter 2020.
- Cash, cash equivalents, short-term investments and restricted cash totaled $928.0 million at September 30, 2020. Cash and cash equivalents were $890.6 million, short-term investments were $6.6 million and restricted cash was $30.8 million. $498.3 million was available under the credit facility.
GLOBAL COVID-19 CRISIS
- The global COVID-19 crisis continues to evolve including the continuing imposition of restrictions on the movement of people and goods, social distancing measures, restrictions on group gatherings, quarantine requirements and contact tracing. IAMGOLD has been closely monitoring and taking necessary measures to manage the impact of the COVID-19 crisis on its operations, development projects and exploration activities. IAMGOLD is managing the financial and operational challenges of COVID-19 while rapidly addressing the needs of its employees and the communities where IAMGOLD operates. IAMGOLD continues to work closely with local and national governments and communities on limiting the impact of the COVID-19 crisis on its people and business, and supporting the local efforts to manage the crisis.
- IAMGOLD has taken extensive steps, across its operations and offices, to protect the health and safety of employees, contractors and local communities in response to the COVID-19 crisis. These steps included: implementation of sanitary measures recommended by Health Authorities and COVID-19
prevention protocols. The protocols address risk controls, including: restricting site access to employees, contractors and incoming supplies; screening processes (introduction of Antigen test kits and the use of thermal cameras to check temperatures before entering the site); physical distancing; the use of personal protective equipment; arranging additional transportation buses and increasing on-site medical personnel. Along with these measures, 200 beds were added at Essakane and a project to add 300 beds at Rosebel is in development and planned to be completed in the first quarter 2021.
- Additional measures included reconfiguration of site facilities to accommodate physical distancing rules, setting up of a field hospital, 24/7 ambulance service and air evacuation plans for emergency situations at the Essakane mine site. As well, detailed safety procedures were developed, communication channels were created for questions and concerns, and regular inspections were conducted by internal site health professionals and by the local health authorities to ensure these measures were appropriately implemented and consistently followed.
| Given the surge of COVID-19 infections in the region, a number of personnel at the Rosebel Gold Mine | |
| operations in Suriname were diagnosed with COVID-19. | In conjunction with the Surinamese Health |
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Authorities, Rosebel implemented all required preventive measures, including the disinfecting of sleeping quarters and work areas. The beginning of the quarter showed a steeper curve of new cases as the measures were being implemented. These measures were proven to be effective with a flat curve of new cases through the remainder of the third quarter. Strict protocols ensured that personnel exhibiting flu like symptoms were immediately isolated and tested. Positive cases were managed by the Health Authorities, and isolated in governmental quarantine locations in Paramaribo. By the end of the third quarter 2020, 98% of affected personnel had recovered.
- In line with IAMGOLD's COVID-19 safety protocols, additional steps have been taken to protect the health and safety of employees and contractors at the Côté Gold Project which include screening of all personnel and visitors entering the site and the mandatory use of masks in vehicles, common areas, or where social distancing is not possible.
STRATEGIC DEVELOPMENTS
IAMGOLD’s transformational strategy centres on delivering the lower cost Côté Gold Project, de-risking the Boto Gold Project, optimizing our current operations and continuing to invest in our pipeline of brownfield and greenfield exploration. Together with our financial strategy of maintaining a strong balance sheet, opportunistically securing favourable hedges on cost inputs and protective hedges on a portion of gold production during Côté construction, we believe IAMGOLD is positioned to deliver on its goal of superior returns to shareholders.
Financial
- On September 8, 2020, IAMGOLD issued a notice to redeem its 7% Senior Notes due 2025 for a total amount of $421.3 million and funded the redemption on September 29, 2020 and the indenture governing the 2025 Notes was satisfied and discharged on this date.
| On September 23, 2020, IAMGOLD announced that it had completed its private offering of $450 million | ||
|---|---|---|
| aggregate principal amount of 5.75% Senior Notes ("Notes") due 2028. IAMGOLD used the net | ||
| proceeds from the offering of the Notes to fund the redemption of all of its outstanding 7% Senior Notes | ||
| due 2025 and for general corporate purposes. | ||
| The redemption of the 7% Senior Notes and issuance of the 5.75% Senior Notes will result in lower | ||
| interest expense over an extended term. The redemption also resulted in a cash loss of $21.3 million | ||
| that is expected to be offset by lower interest expense over the remaining term of the 7% Notes | . | |
| During the third quarter 2020, IAMGOLD implemented a gold hedging strategy to mitigate gold price | ||
| exposure and to further de-risk the balance sheet during the Côté Gold Project construction period. | ||
| IAMGOLD intends, under appropriate conditions, to hedge 15% to 20% of total production between 2021 | ||
| and mid-2023 through a combination of options and/or collars (see news release dated July 21, 2020). | ||
| During the quarter, IAMGOLD executed gold bullion collar option contracts with strike prices of $1,800 | ||
| to $3,000 per ounce on 114,000 ounces for 2021 and 18,000 ounces for 2022, for which premiums of | ||
| $5.3 million were paid. | ||
| Subsequent to the end of the third quarter 2020, IAMGOLD added to its gold hedge position for 2021 | ||
| with a zero cost collar with strike prices of $1,600 to $2,505 per ounce on 28,000 ounces as well as a | ||
| collar with strike prices of $1,700 to $2,800 per ounce on 50,040 ounces, for which a premium of $1.3 | ||
| million was paid. | ||
| During the third quarter 2020, IAMGOLD executed zero cost collar option contracts based on the | ||
| Texas Intermediate (" | WTI") benchmark, in the range of $33.80 to $50.00 per barrel, from January 2021 | |
| to July 2023 to hedge attributable fuel consumption related to the Côté Gold Project. These contracts |
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represent approximately 90% of anticipated attributable fuel consumption during construction. IAMGOLD also hedged C$65 million of the Project’s Canadian dollar exposure at an average forward contract rate of $1.3604 from April 2023 to July 2023. These contracts represent approximately 6% of the attributable Canadian dollar capital expenditures on the Project.
- Following the new bond issuance, both Moody's and S&P re-affirmed their ratings of B1 and B+, respectively for IAMGOLD.
- In a recent ESG assessment, Moody’s affiliate Vigeo Eiris ranked IAMGOLD 4th out of 45 sector peers,with notable strengths in community involvement, environmental strategy, health & safety and governance.
- IAMGOLD lowered its 2020 total attributable gold production guidance to the range of 630,000 to 680,000 ounces due to the suspension of operations at Westwood resulting from a seismic event subsequent to the quarter.
- IAMGOLD revised upwards its 2020 cost of sales1 per ounce sold and total cash costs2 per ounce produced guidance to the range of $1,045 to $1,075 and $980 to $1,010, respectively, to reflect higher costs incurred from processing lower grade stockpiles to compensate for lower levels of production as a result of the COVID-19 crisis.
- IAMGOLD revised upwards its 2020 all-in sustaining costs2 per ounce sold guidance to the range of $1,240 to $1,270 to reflect higher operating costs incurred to date, lower production at Westwood and higher royalties.
- IAMGOLD maintained its 2020 depreciation expense guidance range of $245 million to $255 million.
- IAMGOLD maintained its cash taxes guidance range of $30 million to $45 million.
- IAMGOLD reduced its 2020 capital expenditures guidance by $25 million to $315 million (±5%) primarily due to the timing of expenditures on the Côté Gold and Boto Gold Projects and lower expected capital expenditures at Westwood.
- IAMGOLD has withdrawn its 2021 production guidance and expects to provide its regular annual guidance in early 2021.
Exploration
| On August 11, 2020, IAMGOLD reported additional assay results from its 2020 diamond drilling program | |
| at the Nelligan Gold Project in Canada. Drilling highlights included: 39.1 metres grading 2.14 g/t | Au, 34.5 |
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metres grading 1.85 g/t Au, and 5.1 metres grading 2.81 g/t Au.
- On August 13, 2020, IAMGOLD reported assay results from its 2020 drilling program at the Monster Lake Project in Canada. Drilling highlights included: 3.8 metres grading 16.9 g/t Au, 2.82 metres grading 5.63 g/t Au, and 12.3 metres grading 2.09 g/t Au.
- On August 20, 2020, IAMGOLD reported additional assay results from its 2020 diamond drilling program at the Rouyn Gold Project in Canada. Drilling highlights included: 4.1 metres grading 10.4 g/t Au, 8.9 metres grading 4.3 g/t Au, and 7.4 metres grading 8.3 g/t Au.
Development and Operations
- On July 21, 2020, IAMGOLD, together with joint venture partner Sumitomo Metal Mining Co., Ltd. (“SMM”) announced the decision to proceed with the construction of the Côté Gold Project. During the third quarter 2020, Early Works activities were ongoing, including for the camp pad, fish salvage, site access roads and aggregate production. The permit to take water was received on August 21, 2020 as well as an Environmental Compliance Approval for dewatering the tailings management facility (“TMF”) ponds in time to begin the TMF fish salvage activities. Project engineering is approximately 66% complete.
- On August 5, 2020, IAMGOLD filed a National Instrument ("NI") 43-101 Technical Report for its Westwood mine, confirming the details of a safe and profitable operation and re-affirmed long-term production guidance originally disclosed in December 2019. The NI 43-101 Technical Report incorporated modified mining methods, operational practices and revised productivity assumptions. In this context, total attributable reserves decreased by 48% to 0.618 million ounces (2.698 million tonnes grading 7.1 g/t Au), with the balance of reserve ounces being reclassified to resource ounces. While overall mineral resources have remained largely unchanged at 4.764 million tonnes grading 10.2 g/t Au for a total of 1.557 million ounces in measured and indicated resources, mineral reserves were impacted primarily by more conservative geotechnical assumptions related to specific zones located in higher seismic risk areas. As is typical for underground operations, and supported by reasonable assumptions in-line with historical operating experience, IAMGOLD continues to work on converting its significant underground mineral resources to mineral reserves over time.
- The Rosebel mine in Suriname resumed operations on July 24, 2020 after a work stoppage initiated by the Rosebel Union on June 12, 2020 (see news releases dated June 16, 2020 and July 24, 2020).
Organizational Changes
- On August 5, 2020, IAMGOLD announced the retirement of Carol Banducci, EVP and CFO, effective March 31, 2021 and the retirement of Jeffery Snow, General Counsel and SVP Business Development, effective August 31, 2020. IAMGOLD's succession program is in progress.
Subsequent to the Quarter
- On November 2, 2020, IAMGOLD reported that a seismic event occurred at Westwood on October 30, 2020. All employees were brought safely above ground. The appropriate government authorities were notified and the cause of the seismic event is being investigated. IAMGOLD is expected to restart milling operations in the next few days to process stockpile and Grand Duc open pit ore. The Westwood underground mine operations are suspended pending the results of the investigation and while a business recovery plan is being assessed.
UPCOMING GROWTH CATALYSTS
- Over the fourth quarter 2020, IAMGOLD expects to obtain further key permits for construction work at the Côté Gold Project and advance Early Works in preparation for the Major Earthworks activities, which commence in the second quarter 2021.
- At Westwood, work is being done to evaluate the Fayolle deposit, which, pending permitting, is targeted to provide incremental feed commencing in the fourth quarter 2022 to the Westwood mill as part of its "hub-and-spoke" model. This model exploits the significant mill capacity available at Westwood to bring forward regional exploration value from assets like Fayolle and the optioned Rouyn Gold Project and enhance the overall value of Westwood with incremental production growth from such supplementary feed.
- IAMGOLD continues de-risking activities at the Boto Gold Project, by advancing engineering, building access infrastructure, and progressing with environmental and social programs to support the project development. Building on its exploration success along the Senegal-Mali Shear Zone with several other discoveries located within 15 kilometres of the Boto Gold Project in adjacent countries, IAMGOLD has also initiated a strategic study, referred to as the “Bambouk Gold Complex,” to advance resource evaluation and delineation at the Diakha-Siribaya and Karita projects to support the evaluation of various potential development scenarios and identify regional synergies.
- IAMGOLD continues to advance various ongoing and planned delineation and resource evaluation drilling programs at selected projects including the Nelligan Gold, the Monster Lake and the Rouyn Gold projects in Quebec, the Gosselin discovery on the Côté Gold property in Ontario, and the Karita Gold discovery in Guinea.
SUMMARY OF FINANCIAL AND OPERATING RESULTS
Three months ended Nine months ended September 30, September 30,
| Financial Results ($ millions, except where noted) | 2020 | 2019 | 2020 | 2019 | ||||
| Continuing Operations Revenues Cost of sales | $ 274.4 $ 251.6 | $ 771.9 $ 743.4 | ||||||
| $ | 335.1 | $ | 894.2 | |||||
| $ | 257.0 | $ | 727.9 | |||||
| Gross profit | $ | 78.1 | $ 22.8 | $ | 166.3 | $ 28.5 | ||
| Net loss from continuing operations attributable to equity holders of | $ (10.2) $ (0.02) | $ (69.5) $ (0.15) | ||||||
| IAMGOLD | $ | (11.6) | $ | (20.5) | ||||
| Net loss from continuing operations attributable to equity holders of | ||||||||
| $ | (0.02) | $ | (0.04) | |||||
| IAMGOLD ($/share) | ||||||||
| Adjusted net earnings (loss) from continuing operations attributable to equity holders of IAMGOLD1 | $ (7.2) $ (0.02) | $ (33.8) $ (0.07) | ||||||
| $ | 52.1 | $ | 68.6 | |||||
| Adjusted net earnings (loss) from continuing operations attributable to equity holders of IAMGOLD ($/share)1 | ||||||||
| $ | 0.11 | $ | 0.15 | |||||
| Net cash from operating activities Net cash from operating activities before changes in working capital1 | $ | 105.1 | $ 51.8 $ 65.4 | $ | 218.9 | $ 100.5 $ 141.3 | ||
| $ | 108.4 | $ | 260.2 | |||||
| Mine-site free cash flow1 | $ | 80.0 | $ | 23.2 | $ | 145.5 | $ | 3.7 |
| Key Operating Statistics | 171 174 $ 1,483 $ 986 $ 901 $ 1,137 $ 582 | 523 531 $ 1,368 $ 963 $ 894 $ 1,129 $ 474 | ||||||
| Gold sales – attributable (000s oz) Gold production – attributable (000s oz) Average realized gold price1 ($/oz) Cost of sales2 ($/oz) Total cash costs1 ($/oz) All-in sustaining costs1 ($/oz) Gold margin1 ($/oz) | 162 | 474 | ||||||
| 159 | 484 | |||||||
| $ | 1,908 | $ | 1,747 | |||||
| $ | 1,098 | $ | 1,061 | |||||
| $ | 1,006 | $ | 979 | |||||
| $ | 1,206 | $ | 1,209 | |||||
| $ | 902 | $ | 768 |
1 This is a non-GAAP measure. Refer to the non-GAAP performance measures section of IAMGOLD's MD&A.
2 Cost of sales, excluding depreciation, as disclosed in note 31 of IAMGOLD's consolidated interim financial statements expressed on an attributable ounce sold basis (excluding the non-controlling interests of 10% at Essakane and 5% at Rosebel).
THIRD QUARTER 2020 SUMMARY
Financial Performance
- Revenues from continuing operations for the third quarter 2020 were $335.1 million, up $60.7 million or 22% from the same prior year period. The increase was primarily due to a higher realized gold price ($74.4 million) and higher sales volume at Essakane ($9.8 million) and Westwood ($1.0 million), partially offset by lower sales volume at Rosebel ($24.7 million).
- Cost of sales from continuing operations for the third quarter 2020 was $257.0 million, up $5.4 million or 2% from the same prior year period. The increase was due to higher operating costs ($6.6 million) and higher royalties ($3.4 million) partially offset by lower depreciation expense ($4.6 million).
| Depreciation million or 7% | expense from continuing operations for the third quarter 2020 was $65.3 million, down |
| Westwood resulting from the impairment charge recorded in the fourth quarter 2019 |
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- Income tax expense for the third quarter 2020 was $9.3 million, up $0.7 million from the same prior year period. Income tax expense for the third quarter 2020 comprised current income tax expense of $19.1 million (September 30, 2019 - $15.8 million) and deferred income tax recovery of $9.8 million (September 30, 2019 - deferred income tax recovery of $7.2 million). The increase in income tax expense was primarily due to changes to deferred income tax assets and liabilities, differences in the impact of fluctuations in foreign exchange, and differences in the level of taxable income in IAMGOLD’s operating jurisdictions from one period to the next.
- Net loss from continuing operations attributable to equity holders for the third quarter 2020 was $11.6 million, or $0.02 per share, compared to net loss of $10.2 million, or $0.02 per share in the same prior year period. The increase in net loss was primarily due to lower interest income, derivatives and other
investment gains (losses) ($46.8 million), primarily due to the loss on redemption of the 7% Senior Notes, and higher other expenses ($13.1 million), primarily due to COVID-19 expenses, partially offset by higher gross profit ($55.3 million).
- Adjusted net earnings from continuing operations attributable to equity holders2 was $52.1 million, or $0.11 per share2, compared to adjusted net loss from continuing operations2 of $7.2 million, or $0.02 per share2 in the same prior year period.
- Net cash from operating activities for the third quarter 2020 was $105.1 million, up $53.3 million from the same prior year period. The increase was primarily due to higher earnings after non-cash adjustments ($51.9 million) and lower movements in non-cash working capital items and non-current ore stockpiles ($10.3 million), partially offset by the settlement of derivatives ($6.9 million)
| Net cash from operating activities before changes in working capital2 for the third quarter 2020 was | ||
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| $108.4 million, up | $43.0 million | from the same prior year period. |
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- Mine-site free cash flow2 was $80.0 million, up $56.8 million from the same prior year period, and up $27 million from the second quarter 2020.
Financial Position
- Our cash, cash equivalents, short-term investments and restricted cash were $928.0 million at September 30, 2020, up $63.2 million from December 31, 2019. The increase was primarily due to cash generated from operating activities ($218.9 million) and net proceeds from issuance of the 5.75% Senior Notes ($443.6 million), partially offset by the redemption of the 7% Senior Notes ($421.3 million) and spending on Property, plant and equipment ($186.3 million).
Production and Costs
- Attributable gold production from continuing operations was 159,000 ounces for the third quarter 2020, down 15,000 ounces from the same prior year period. The decrease was primarily due to lower production at Rosebel (13,000 ounces) as a result of the work stoppage during July 2020.
| Attributable gold sales from continuing operations were 162,000 ounces for the third quarter 2020, down | |
| 9,000 ounces from the same prior year period. | The decrease was due to lower sales volume at Rosebel |
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(16,000 ounces), partially offset by higher sales volume at Essakane (6,000 ounces) and at Westwood (1,000 ounces).
| Cost of sales1 per ounce from continuing operations for the third quarter 2020 was $1,098, up 11% from | |
| the same prior year peri | od primarily due to realized losses on input cost hedges, higher royalties as a |
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result of an increase in the gold price and lower sales volumes.
- Total cash costs2 per ounce produced from continuing operations for the third quarter 2020 were $1,006, up 12% from the same prior year period primarily due to lower production volume and higher royalties as a result of the increase in the gold price.
- All-in sustaining costs2 per ounce sold from continuing operations for the third quarter 2020 were $1,206, up 6% from the same prior year period primarily due to higher cost of sales per ounce partially offset by lower sustaining capital expenditures.
Commitment to Zero Harm Continues
- The DART rate3, representing the frequency of all types of serious injuries across all sites and functional areas for the third quarter 2020 was 0.36, below IAMGOLD's target of 0.57. IAMGOLD continues the implementation of several initiatives, including a behaviour-based safety program, to ensure a safer work environment.
COVID-19 Crisis
- In response to the global COVID-19 crisis, IAMGOLD has taken extensive steps to protect the health and safety of employees and contractors.
- As the global COVID-19 crisis evolved, IAMGOLD adjusted and expanded the extensive measures previously implemented to protect the health and safety of employees, contractors and local communities. These measures included training on new procedures and sanitary measures recommended by Health Authorities, adjusted work schedules, physical distancing and protective equipment, restricted site access, screening processes for employees, contractors and incoming supplies, use of thermal cameras to check temperatures before site entrance, and arranging additional
transportation buses and on-site medical personnel. In addition, the number of living quarters at Essakane and Rosebel were increased. Initially the on-site workforce was limited to essential personnel only. As IAMGOLD’s COVID-19 health and safety protocols were embedded in the operations, the workforce was expanded with Essakane now at normal capacity and Rosebel expected to reach normal capacity in the first quarter 2021.
ATTRIBUTABLE GOLD PRODUCTION AND COSTS
Total Cash Costs2 All-in Sustaining Gold Production Cost of Sales1 ($ per ounce Costs2,3 (000s oz) ($ per ounce)
produced) ($ per ounce sold)
| Three months ended September 30, | 2019 | 2019 | 2019 | 2020 | 2019 | |||||||
| 2020 | 2020 | 2020 | ||||||||||
| Continuing operations Essakane (90%) Rosebel (95%) Westwood (100%)4,5 | 96 55 23 | $ 925 1,122 915 | $ 866 968 889 | $ 1,021 1,198 1,033 | ||||||||
| 94 | $ | 1,050 | $ | 954 | $ | 1,054 | ||||||
| 42 | 1,049 | 987 | 1,164 | |||||||||
| 23 | 1,387 | 1,254 | 1,515 | |||||||||
| 159 | 174 | $ | 1,098 | $ 986 | $ | 1,006 | $ 901 | $ | 1,206 | $ 1,137 | ||
| Cost of sales1 ($/oz) | $ | 1,098 | $ 986 | |||||||||
| Cash costs, excluding royalties Royalties | $ | 912 | $ | 833 | ||||||||
| 94 | 68 | |||||||||||
| Total cash costs2 | $ | 1,006 | $ 901 | |||||||||
| All-in sustaining costs2,3 | $ | 1,206 | $ 1,137 |
Total Cash Costs2 All-in Sustaining Gold Production Cost of Sales1 ($ per ounce Costs2,3 (000s oz) ($ per ounce)
produced) ($ per ounce sold)
| Nine months ended September 30, | 2019 | 2019 | 2019 | 2020 | 2019 | |||||||
| 2020 | 2020 | 2020 | ||||||||||
| Continuing operations Essakane (90%) Rosebel (95%) Westwood (100%)4,5 | 274 195 62 | $ 926 976 1,079 | $ 878 925 866 | $ 1,035 1,121 1,062 | ||||||||
| 261 | $ | 1,036 | $ | 939 | $ | 1,076 | ||||||
| 158 | 1,045 | 980 | 1,194 | |||||||||
| 65 | 1,197 | 1,140 | 1,304 | |||||||||
| 484 | 531 | $ | 1,061 | $ 963 | $ | 979 | $ 894 | $ | 1,209 | $ 1,129 | ||
| Cost of sales1 ($/oz) | $ | 1,061 | $ 963 | |||||||||
| Cash costs, excluding royalties Royalties | $ | 897 | $ | 832 | ||||||||
| 82 | 62 | |||||||||||
| Total cash costs2 | $ | 979 | $ 894 | |||||||||
| All-in sustaining costs2,3 | $ | 1,209 | $ 1,129 |
1 Cost of sales, excluding depreciation, as disclosed in note 31 of IAMGOLD's consolidated interim financial statements expressed on an attributable ounce sold basis (excluding the non-controlling interests of 10% at Essakane and 5% at Rosebel).
2 This is a non-GAAP measure. Refer to the non-GAAP performance measures section of IAMGOLD's MD&A.
3 All-in sustaining costs include corporate general and administrative costs. Refer to all-in sustaining costs reconciliation on page 33 of IAMGOLD's MD&A.
4 Cost of sales per ounce sold for Westwood does not include the impact of normalization of costs for the three and nine months ended September 30, 2020 of $nil and $nil per ounce (three and nine months ended September 30, 2019 - $nil and $174 per ounce), respectively.
5 Total cash costs per ounce produced and all-in sustaining costs per ounce sold for Westwood include the impact of normalization of costs for the three and nine months ended September 30, 2020 of $nil and $nil per ounce (three and nine months ended September 30, 2019 - $nil per ounce produced and $174 per ounce sold, respectively).
OUTLOOK
| IAMGOLD Full Year Attributable Guidance1,2 | Revised | Previous |
| Essakane (000s oz) Rosebel (000s oz) Westwood (000s oz) | 350 – 370 | 350 – 370 210 – 230 85 – 100 |
| 210 – 230 | ||
| 70 – 80 | ||
| Total attributable production (000s oz) | 630 - 680 | 645 - 700 |
| Cost of sales3 ($/oz) | $1,045 - $1,075 | $990 - $1,030 |
| Total cash costs4,5 ($/oz) | $980 - $1,010 | $940 - $980 |
| All-in sustaining costs4,5 ($/oz) | $1,240 - $1,270 | $1,195 - $1,245 |
1 The revised outlook is based on 2020 full year assumptions with an average realized gold price of $1,750 per ounce, USDCAD exchange rate of 1.31, EURUSD exchange rate of 1.18 and average crude oil price of $40 per barrel.
2 The previous outlook is based on 2020 full year assumptions with an average realized gold price of $1,675 per ounce, USDCAD exchange rate of 1.36, EURUSD exchange rate of 1.12 and average crude oil price of $40 per barrel.
3 Cost of sales, excluding depreciation, is on an attributable ounce sold basis (excluding the non-controlling interests of 10% at Essakane and 5% at Rosebel).
4 This is a non-GAAP measure. Refer to the non-GAAP performance measures section of IAMGOLD's MD&A.
5 Consists of Essakane, Rosebel, and Westwood on an attributable basis.
GOLD PRODUCTION, COST OF SALES, TOTAL CASH COSTS AND ALL-IN SUSTAINING COSTS IAMGOLD lowered its 2020 total attributable gold production guidance to the range of 630,000 to 680,000 ounces due to the suspension of operations at Westwood resulting from the seismic event subsequent to the third quarter 2020.
To safely achieve the full year production guidance, IAMGOLD is expected to incur incremental costs including charter flights for gold shipments, increased number of sleeping quarters, adjusted work schedules and transport, expediting key supplies, additional security and screening measures, and personal protective equipment to protect IAMGOLD's workforce. Higher royalty expenses are expected due to the higher gold price expected in the year.
IAMGOLD revised upwards its 2020 cost of sales1 per ounce sold and total cash costs2 per ounce produced guidance to the range of $1,045 to $1,075 and $980 to $1,010, respectively, to reflect higher costs incurred from processing lower grade stockpiles to compensate for lower levels of production as a result of the COVID-19 crisis.
IAMGOLD revised upwards its 2020 all-in sustaining costs2 per ounce sold guidance to the range of $1,240 to $1,270 to reflect higher operating costs incurred to date, lower production at Westwood and higher royalties.
DEPRECIATION EXPENSE
Depreciation expense in 2020 is expected to be in the range of $245 million to $255 million.
INCOME TAXES
IAMGOLD expects to pay cash taxes in the range of $30 million to $45 million in 2020. IAMGOLD is subject to income tax in several jurisdictions, at various tax rates. However, the consolidated effective tax rate for IAMGOLD is subject to significant fluctuations period over period due to: expenditures and revenues recognized only for financial accounting purposes or only for income tax purposes; income tax unrelated to the income or loss before taxes for the current period, such as withholding taxes; and adjustments for deferred tax purposes that are not directly related to the income or loss before taxes for the current period, such as foreign exchange rate changes. In addition, adjustments to deferred income tax assets and/or liabilities may be recorded during the year.
CAPITAL EXPENDITURES OUTLOOK
| Revised | Previous | ||||||
|---|---|---|---|---|---|---|---|
| ($ millions) | Non-sustaining (Development/ Expansion)2 | Total | Non-sustaining Sustaining1 (Development/ Total Expansion)2 | ||||
| Sustaining1 | |||||||
| Essakane Rosebel Westwood | $ | 40 | $ | 70 | $ | 110 | $ 40 $ 65 $ 105 50 40 90 25 18 43 |
| 50 | 40 | 90 | |||||
| 15 | 10 | 25 | |||||
| Côté Gold (70%) Boto Gold | 105 | 120 | 225 | 115 123 238 — 77 77 — 25 25 | |||
| — | 66 | 66 | |||||
| — | 24 | 24 | |||||
| Total3,4,5 (±5%) | $ | 105 | $ | 210 | $ | 315 | $ 115 $ 225 $ 340 |
1 Sustaining capital includes capitalized stripping of $5 million for Rosebel.
2 Non-sustaining capital includes capitalized stripping of $50 million for Essakane and $15 million for Rosebel.
3 Includes $10 million of capitalized exploration and evaluation expenditures. Refer to the Exploration section of IAMGOLD's MD&A.
4 Capitalized borrowing costs are not included.
5 In addition to the above capital expenditures, $15 million in total principal lease payments are expected.
IAMGOLD reduced its 2020 capital expenditure guidance by $25 million to $315 million (±5%). Guidance for sustaining capital expenditures and non-sustaining capital expenditures decreased by $10 million and $15
| million, respectively, compared to | the previous guidance. The $10 million decrease in sustaining capital |
| expenditures was due to lower expected capital expenditures at Westwood. The $15 million decrease in | |
| non-sustaining capital expenditures was due to the timing of expenditures on the Côté Gold and Boto Gold | |
| Projects of $11 million and $1 million, respectively, and a $8 million decrease at Westwood, partially offset | |
| by a $5 million increase at Essakane. |
2021 GUIDANCE
IAMGOLD has withdrawn its 2021 production guidance and expects to provide its regular annual guidance in early 2021. IAMGOLD also expects to provide capital expenditure guidance in early 2021, which would include expenditures related to the Côté Gold Project construction decision on July 21, 2020, as well as higher capitalized stripping incorporating amounts deferred from 2020 due to the COVID-19 crisis.
IAMGOLD’s expected go-forward capital expenditures (exclusive of sunk costs) from July 1, 2020, for its 70% share of the Project construction costs, net of leasing, are in the range of $875 million to $925 million.
OPERATIONS ANALYSIS BY MINE SITE
Essakane Mine - Burkina Faso (IAMGOLD interest - 90%)
Attributable gold production for the third quarter 2020 was lower by 2% compared to the same prior year period due to lower mill throughput resulting from planned maintenance shutdowns for proactive replacement of critical parts. In addition, recoveries were lower by 7% due to ore mined from more graphitic zones. The impacts of lower throughput and recovery were partially offset by a 22% increase in grades compared to the same prior year period as mining crews focused on high grade zones. Gold sales for the third quarter 2020 were higher by 6% compared to the same prior year period.
Material mined in the third quarter 2020 was 2% lower compared to the same prior year period as a higher level of precipitation resulted in higher waste mining in upper areas of the pit and lower ore mining at the bottom of the pit. Approximately 96% of the equipment required for the Mill Upgrade Project (the “Upgrade”) had been received by the end of the third quarter. Despite the challenge of seasonal conditions, construction of the concrete foundation commenced as planned during the quarter. Due to delays in fabrication and international delivery schedules as a result of the COVID-19 crisis, the Upgrade is scheduled to be completed in the first quarter 2021.
As COVID-19 health and safety protocols were embedded in the operations, the workforce was expanded with Essakane now at normal capacity. To accommodate the increased workforce, a project to add 200 beds was completed in the third quarter 2020 for alignment with COVID-19 protocols.
Cost of sales per ounce sold for the third quarter 2020 was higher by 14% compared to the same prior year period primarily due to higher operating costs, reflecting increased cyanide consumption due to changing ore characteristics, earlier than expected replacement of mill liners and higher royalties resulting from higher realized gold prices slightly offset by higher sales volume.
Total cash costs per ounce produced for the third quarter 2020 were higher by 10% compared to the same prior year period primarily due to lower production volume and higher royalties driven by higher realized gold prices.
All-in sustaining costs per ounce sold for the third quarter 2020 were higher by 3% compared to the same prior year period, primarily due to higher cost of sales per ounce offset by lower sustaining capital expenditures.
Sustaining capital expenditures for the third quarter 2020 of $6.1 million included capital spares of $3.1 million, security of $1.2 million, mobile and mill equipment of $0.6 million, and generator overhaul and resource development of $0.4 million, and other sustaining projects of $0.8 million. Non-sustaining capital expenditures of $16.6 million included capitalized stripping of $12.6 million, tailings and liners of $2.3 million and other non-sustaining capital of $1.7 million.
Outlook
IAMGOLD maintained Essakane's 2020 attributable production guidance range of 350,000 to 370,000 ounces. The mine continues to proactively undertake several COVID-19 related risk mitigation measures to limit the level of interaction within the workforce to support safe continuation of operations. Capital expenditures are expected to be approximately $110 million, comprising $40 million of sustaining capital expenditures and $70 million of non-sustaining capital expenditures.
Rosebel Mine - Suriname (IAMGOLD interest - 95%)
Rosebel resumed operations on July 24, 2020 after a work stoppage was initiated by the Rosebel Union on June 12, 2020 (see news releases dated June 16, 2020 and July 24, 2020).
Attributable gold production for the third quarter 2020 was lower by 24% compared to the same prior year period due to lower throughput and ore mined resulting from the temporary work stoppage. However, the lower attributable production was partially offset by grades that were 25% higher compared to the same prior year period as access to the Saramacca pit resulted in ore feed of 544,000 tonnes containing a higher grade of 1.46 g/t Au.
The Saramacca haul road is expected to be completed in the fourth quarter 2020. Due to various COVID- 19 related delays, such as reduced camp space to maintain newly implemented social distancing requirements, additional non-critical Saramacca infrastructure will be completed during the first half of 2021. As COVID-19 health and safety protocols were embedded in the operations, the workforce recall was expanded with Rosebel expected to reach normal capacity and achieve 90% to 95% of mining capacity in the first quarter 2021. To accommodate the full workforce under the COVID-19 protocols, a project is underway that is expected to add an additional 300 beds by that time. The Mill was operating at its normal rate by the end of July with ore sourced mainly from stockpiles. Mine direct feed is planned to increase with the augmented manpower on site in the first quarter 2021.
IAMGOLD’s collective labour agreement with the Rosebel Union expired on August 15, 2020. Negotiations are underway on a new agreement.
Cost of sales per ounce sold for the third quarter 2020 was lower by 7% compared to the same prior year period. This was primarily due to lower mining and milling costs partially offset by decreased sales volume as a result of the temporary work stoppage.
Total cash costs per ounce produced for the third quarter 2020 were higher by 2% compared to the same prior year period primarily due to lower production volume resulting from the temporary work stoppage partially offset by higher royalties from higher realized gold prices.
All-in sustaining costs per ounce sold for the third quarter 2020 were lower by 3% compared to the same prior year period primarily due to lower cost of sales per ounce and lower sustaining capital expenditures resulting from COVID-19 related delivery delays and resource limitations.
Sustaining capital expenditures for the third quarter 2020 of $5.5 million included capital spares of $1.2 million, mill equipment of $1.1 million, building upgrades of $0.9 million, resource development of $0.9 million, tailings management of $0.5 million, and other sustaining projects of $0.9 million. Non-sustaining capital expenditures of $5.8 million included $4.4 million on the Saramacca Project, $0.9 million of capitalized stripping and $0.5 million on camp room capacity increases resulting from the COVID-19 crisis.
Outlook
IAMGOLD maintained Rosebel's 2020 attributable production guidance range of 210,000 to 230,000 ounces. Capital expenditures are expected to be approximately $90 million, comprising $50 million of sustaining capital expenditures and $40 million of non-sustaining capital expenditures.
Westwood Mine - Canada (IAMGOLD interest - 100%)
The mill optimization strategy has been a continued focus during the third quarter 2020, as the site supplemented higher grade underground ore with lower grade ore sourced from the adjacent Grand Duc satellite deposit. In line with this strategy, there are plans to begin permitting and detailed engineering on the Fayolle property which was acquired in the prior quarter.
| Gold production for the third quarter 2020 was consistent with the same prior year period as the impact of | |
|---|---|
| lower grades from the underground operations due to stope sequencing was offset by higher throughput | |
| from the Grand Duc satellite deposit. The mill experienced record throughput levels during the months of | |
| August and September | . |
Underground development continued to progress in the third quarter 2020 to open up access to new mining areas with lateral development of approximately 1,885 metres, averaging 20 metres per day.
Cost of sales per ounce sold and cash costs per ounce produced for the third quarter 2020 were higher by 52% and 41%, respectively, compared to the same prior year period, primarily due to additional costs from mining Grand Duc.
All-in sustaining costs per ounce sold for the third quarter 2020 was higher by 47% compared to the same prior year period primarily due to higher cost of sales per ounce sold and higher sustaining capital expenditures resulting from the replacement of a jaw crusher and increased deferred development in operating zones.
Sustaining capital expenditures for the third quarter 2020 of $4.7 million included deferred development and underground construction of $3.3 million, underground equipment of $1.3 million and other sustaining capital expenditures of $0.1 million. Non-sustaining capital expenditures of $3.2 million included deferred development and underground construction of $2.5 million and other non-sustaining expenditures of $0.7 million.
Westwood was placed on care and maintenance on March 25, 2020, along with other mining companies province-wide, as directed by the Government of Quebec in response to the COVID-19 crisis as mining was considered a non-essential business. Subsequently on April 15, 2020, Westwood commenced the restart of operations from care and maintenance following the April 13, 2020 confirmation from the Government of Quebec that mining is an essential business. The restart at Westwood was done in accordance with the standards set by the Government of Quebec, the Public Health Directorate and the Commission des normes, de l'équité, de la santé et de la sécurité du travail ("CNESST") to limit the risk of the spread of COVID-19. Ramp-up activities included training employees on new procedures and sanitary measures, adjusted work schedules and transport, and physical distancing and protective equipment.
On November 2, 2020, IAMGOLD reported that a seismic event occurred at Westwood on October 30, 2020. All employees were brought safely above ground. The appropriate government authorities were notified and the cause of the seismic event is being investigated. IAMGOLD is expected to restart milling operations in the next few days to process stockpile and Grand Duc open pit ore. The Westwood underground mine operations are suspended pending the results of the investigation and while a business recovery plan is being assessed.
Outlook
IAMGOLD lowered Westwood’s 2020 production guidance to the range of 70,000 to 80,000 ounces due to the suspension of operations at Westwood resulting from the seismic event subsequent to the third quarter 2020. The mine continues to proactively take several COVID-19 related risk mitigation measures to limit the level of interaction within the workforce to support safe continuation of operations underground and on surface. Capital expenditures are expected to be approximately $25 million, comprising $15 million in sustaining capital expenditures and $10 million in non-sustaining capital expenditures.
DISCONTINUED OPERATIONS Mali – Sadiola Mine (IAMGOLD interest – 41%)
On December 20, 2019, IAMGOLD, together with its joint venture partner, AngloGold Ashanti Limited ("AGA"), entered into an agreement to sell their collective interests in Société d'Exploitation des Mines d'Or de Sadiola S.A. ("Sadiola") to Allied Gold Corp. for a cash consideration of US$105 million. The transaction remains subject to the fulfillment, or waiver, of a number of conditions precedent, including the receipt of certain approvals and releases from the Government of Mali. In addition, upon the fulfillment or waiver of all conditions precedent to the transaction but immediately prior to closing of the transaction, Sadiola will pay a dividend of $15 million pro rata to its shareholders.