IAMGOLD Corporation (IAG) Q3 2014 Earnings Report, Transcript and Summary

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the IAMGOLD 2014 Q3 Financial Results Conference Call and Webcast. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time, I’d like to turn the conference over to Bob Tait, Vice President of Investor Relations for IAMGOLD. Please go ahead, Mr. Tait.

Thank you, Joe. Welcome everyone to the IAMGOLD conference call. Joining me on the call today are Steve Letwin, President and CEO of IAMGOLD; Gord Stothart, Executive Vice President and Chief Operating Officer; Carol Banducci, Executive Vice President and Chief Financial Officer; Craig MacDougall, Senior Vice President, Exploration; and Tim Bradburn, Associate General Counsel and Corporate Secretary. Our remarks on this call today will include forward-looking statements. Please refer to the cautionary language regarding forward-looking statements and information in our disclosure documents and be advised that the same cautionary language applies to our remarks during the call. During our opening remarks, we will refer to slides which can be viewed via our Web site. I’ll now turn the call over to our President and CEO, Steve Letwin.

Thanks, Bob, and good morning, everybody. As you read in our third quarter news release we had a pretty solid quarter. We have positive trends on a number of fronts. But as you know we’re in a cyclical business and right now in a trend that’s down, not up. So for two years we’ve been reducing costs, cutting back our capital spending and conserving cash, and as part of that we’ve had to make some tough decisions. This past Monday we announced a significant restructuring of our organization to reach the tough decisions necessary for this restructuring, we undertook a wide sweeping and comprehensive review of our corporate offices, confident that there was an opportunity to better align our organizational structure with the reality of our time. We benchmarked against best practices and the study took into consideration many external sources and prior internal studies. As a result, we’ve reduced the size of our executive team by 40% and reallocated responsibilities. This does not imply that corporate development or project development and safety, the domains of the departing executives are no longer important, but rather recognizes that the current gold environment is no longer supported the size of our management team and that a consolidation of roles was necessary. We’ve been getting a lot of calls and questions about particularly corporate development and people concerned were wondering whether or not we had eliminated that department. That’s not the case. We were simply rolled Paul Olmsted’s department under Jeff Snow’s leadership, so we’ll continue to have a corporate development team. It will be reduced in size and with the consolidation, we just saved dollars. So through this restructuring, we create a more efficient and effective organization we believe with the agility that a business like ours needs today. On Slide 5, we're staying focused on strategic priorities, concurrent with these changes we’re continuously reducing cost, cutting back on capital spending and conserving cash. These are not new priorities. They’re fundamental to how we must run our business in this environment. On Slide 6, you'll see our cost reduction. In 2013, we targeted $100 million in cost reduction, but achieved a $125 million reduction. The vast majority of the savings were sustainable and have been embedded in our cost structure. We continue to focus on achieving further cost savings, including our objective to reduce corporate G&A by 10%. If there is an opportunity to reduce costs, we will do so. That is why we withdrew from the World Gold Council. This is something that is necessary in times when we must focus on the essentials of running our business. And to date this year we’ve had excellent results. By the end of September, we had achieved $72 million in savings. Of that amount, $62 million is the result of cost reduction initiatives implemented at our operating sites. Gord will talk more about what we're doing at each operations, but overall the emphasis is on improving operating efficiency and increasing productivity. On Slide 7, you can see on this slide we’ve cut back on capital spending a lot. We had planned a lower CapEx forecast for 2014 than 2013, but now expect to spend even less. We’ve lowered our 2014 CapEx outlook by 10% to $360 million. So we plan to spend 46% less than we did in 2013, a $118 million less on sustaining capital and $190 million less on expansion and development. And we're doing this without having to pull the plug on a development project in Midstream or shutdown a mine. The Westwood development is behind us. The major mill expansion at Essakane is complete. These are projects that do not have to get -- there are projects that do not have to get done today. In this gold environment, we will reduce major activities associated with expansion and development other than certain select studies with critical timelines. Our focus is on operations, growing production, and making them more cost efficient. Our liquidity is phenomenal. Carol will speak to our third quarter financial results, but I do want to highlight that net operating cash flow was up 78% from a year-ago and up 19% from the previous quarter. Initiatives to better manage our working capital have been very successful. By the end of the quarter, we had driven our cash position up 42% from where it was at the start. Our liquidity position is strong at more than $1 billion, but with the sale of Niobec we’ll be even stronger. Based on current estimates, we expect to gain on the transaction to be between $50 million and $60 million. The bar on the right shows pro forma liquidity at $1.3 billion. Even accounting for this $650 million in debt due in 2020, we’d still have $700 million. People ask us what we intend to do with the $500 million in cash, once we close the deal to sell Niobec? Our plan is to invest in the proceeds, in the profitable growth of our gold business, which may include acquiring a producing or near-term producing mine that meets our criteria. It will depend on economic returns, and that will reflect the ability of the asset to improve our cost structure, great profile, and cash flow. So, on Slide 9, we’re very encouraged by the results of the third quarter and how we see the fourth quarter unfolding. We expect that the second half to outperform the first and that's what we’re seeing. We’re bringing down costs consistently and this includes corporate G&A. Both all-in costs and total cash costs have fallen for three quarters in a row. Our all-in sustaining costs are down $114 an ounce from where they were in the last quarter of 2013. We’re reducing CapEx. Production is growing. Westwood had a strong first quarter of commercial production. Essakane has benefited from the mill expansion, and now higher grades are expected to drive production higher in the fourth quarter. Rosebel grades are improving and continue to improve. With increasing net cash from operations and lower capital spending, we’re conserving cash. Sustaining this momentum will be critical as this is what will enable us to cross the line to positive free cash flow. Our goal is to be cash -- to be free cash flow positive in 2015. As we look Slide 10, at our final quarter of the year, we believe we’ll sustain the momentum that we’ve been building this year. Considering where we’re at this time, we’ve narrowed our guidance range, we lowered the range for Rosebel, given the great challenges early in the year, but increased our outlook for Essakane. We remain on track for producing at least 835,000 ounces of gold this year. Just off script, let me just say a few things about where the Company is going and where we intend to go. We’ve done a tremendous amount of work to reduce our costs. And when you're in a cyclical business like this, the commodity business where the outlook for the commodity isn't all that positive, we can't rely on gold prices to quote unquote save us. So we’ve to do everything in our power to reduce costs and conserve cash. Sale of Niobec was not an easy thing for us, but it was the right thing. And we got a very good price for it and we’re very pleased about it. We have one of the strongest balance sheets of our peer group, if not the strongest balance sheet. We do not have any major debt repayments for the next six years. We have an arsenal of cash that we can deploy in a very opportunistic environment. We have a very strong team and we’ve taken measures to ensure that we’re becoming efficient as possible. Our emphasis is on cash flow per ounce and you're seeing that result steadily every quarter. I'm extremely pleased with where we’re at, I’m extremely positive about where we’re going. We'll be opportunistic, we'll be patient, and we’ll continue to cut costs and conserve cash and strengthen our balance sheet. In a cyclical business, when you're in a downturn, that's what you do and that's what we’re going to continue to do. So with those remarks, I'll turn it over to Carol.

Thank you, Steve. As Steve said, underlying our third quarter financial results are some encouraging trends. Production is growing, costs have continued to come down, and we’re generating positive cash flow. During the quarter, we recorded a significant non-cash tax charge that affected our bottom line and I'll explain that further in a moment. Revenues in the third quarter were $342 million, up $48 million from the same quarter last year. The growth in revenues was mainly due to a 24% increase in gold sales, partially offset by a 5% decline in the average realized gold price. The growth in gold sales was mainly due to a higher production at Essakane, resulting from the mill expansion and the start of commercial production at Westwood at the beginning of the third quarter. Higher niobium sales also contributed to the growth with revenue from Niobec increasing 14% to $55 million. This next slide shows that we reported a net loss attributable to equity holders of $73 million in the third quarter compared to earnings of $25 million in the previous quarter. The variance was due mainly to lower earning from operations and higher income taxes. Income tax expense for the third quarter 2014 was $71 million. So with pre-tax income in the quarter of $3.4 million, a nominal income tax expense would have been expected. However, with the agreement to sell Niobec, we no longer had the benefit of the projected future taxable income from Niobec that would offset taxable losses generated in Canada. Accordingly, a non-cash deferred tax expense of $72 million was incurred in the quarter. So while the non-cash charge reduces the value of our deferred tax assets from an accounting perspective, it is not indicative of the economic value of the underlying tax pools that may be used to reduce cash income taxes in the future. So as we look at Westwood, we will be -- going forward, we will be required to pay mining taxes, but that will be several years before we will be required to pay any income taxes due to loss carryforwards. Earnings from operations were lower due to an increase in the cost of sales, partially offset by higher revenue. The main contributors to higher cost of sales were depreciation and operating costs. Depreciation expense was $71 million, up $24 million from the same period in 2013. The commencement of commercial production at Westwood at the beginning of the quarter accounted for $50 million of the depreciation expense. Rosebel’s depreciation also increased $6 million, mainly due to the larger mining fleet in 2014 and Essakane accounted for $3 million of the increase due to the commissioning of the second processing line earlier this year. We expect depreciation expense for the full-year to be slightly above the top end of the guidance range of $235 million. You should also note that effective October 30, 2014 Niobec’s assets are classified as held for sale and therefore no longer depreciated. So in the third quarter, Niobec’s depreciation expense was $7.5 million. Getting back to operating costs, the increase year-over-year reflects the start of commercial production at Westwood and a 44% increase in the volume of hard and transitional rock processed at Essakane. The harder rock drove up the consumption of fuel and other consumables. Also a contributing factor at Essakane was a decline in capitalized stripping costs as access to the ore zone on the south side of the pit was achieved in the second quarter of this year. In addition to the non-cash deferred tax expense, this slide presents other items not indicative of normalized operations, which are excluded from adjusted net earnings. And they include impacts from changes in estimates of asset retirement obligations at closed sites, unrealized gains and losses on non-hedge derivative, and the reversal of asset write-downs. After normalizing earnings for the non-cash deferred tax expense and other items not representative of the underlying gold in niobium business, the adjusted effective tax rate for the third quarter was 50%, which was consistent with our annual guidance. In the third quarter, we generated $115 million in net cash from operating activities, representing an increase for two consecutive quarters, up 78% from the same quarter last year. The positive trend in net cash generation reflects continued efforts to improve how we manage our working capital such as accelerating the collection of outstanding receivables and reducing inventory supply levels. A $23 million year-over-year decrease in income taxes paid was also a contributing factor. Removing the impact of changes in working capital, net cash from operating activities increased 32% to $89 million or $0.24 a share. The positive cash flow we generated this quarter net of that used in financing and investing activities, drove our cash and cash equivalents higher by 42% to $171 million compared to a $120 million at the end of June. Together with gold bullion at market, our undrawn credit facility, we maintain strong liquidity as Steve mentioned. Attributable gold production in the third quarter of 2014 was 225,000 ounces compared to 228,000 ounces in the same period last year. We had a 30% increase in production at Essakane, resulting from the commissioning of the new processing line and a 36% increase in grades. Production was lower at Rosebel due to the lower grades and Westwood had a very strong start to commercial production with 35,000 ounces. The production trend in 2014 is very positive. In the second quarter of this year increased throughput at Essakane following the mill expansion was a predominant driver behind the 20% increase in growth of production. In the third quarter, production rose 9% due to the ramp up of commercial production at Westwood, improving grades and higher throughput at Rosebel. At Essakane, while growth in the first quarter was due to the stronger throughput with the second processing line higher grades are helping mitigate the impact of harder rock in the second half of the year. Grades rose 22% from the second quarter, but the increasing proportion of hard rock lowered throughput, which is why we had lower quarter-over-quarter production. Turning to cost per ounce, both all-in sustaining and cash costs have declined for the third consecutive quarter. In the third quarter 2014, all-in sustaining costs for our gold mines were $1,115 an ounce and $92 per ounce reduction in one-year. The main reason for the improving trend is the successful implementation of our cost reduction program for the second-year in a row and Gord will talk more about the progress at each of our sites. Total cash costs for our goldmines in the third quarter were $851 an ounce, down $30 from the previous quarter. Westwood’s total cash costs in the third quarter were $772 an ounce and we expect them to be lower in future years. With that, I'll now turn it over to Gord for a closer look at operations.

Thank you very much, Carol. So as we go through each of our sites, I’ll give you a sense of how we’d characterize our performance so far this year and how we see production and costs trending for the remaining quarter. I'll begin with Westwood, our newest commercial operation. Westwood put in a strong performance in its first quarter of commercial production. We’re pleased with how smooth the transition has been. Underground development is progressing well. During the quarter, the mill processed on average more than 1,400 tonnes per day. Grades averaged 7.54 grams per gold -- grams of gold per tonne and the recovery was 94%. Production came in at 35,000 ounces at a total cash costs of $772 an ounce. When we announced the start of commercial production on July 1, we estimated that cash costs would average between $750 to $850 per ounce in the second half of this year, so we're doing well and we do expect them to trend lower as the operation ramps up going forward. All-in sustaining costs were $950 an ounce in the third quarter and are expected to trend higher in the fourth quarter as a result of increased underground development. As you saw earlier in one of Steve’s slides, Westwood accounted for 15% of the year-to-date cost savings achieved at our operating sites. We are benefiting from the stronger U.S dollar and are reducing costs through such initiatives as an improved tier replacement program and the redeployment of some electrical equipment following the closure of Mouska. And while still in the testing phase, one of things the -- the team is looking at our battery-powered scoops that could help us save on energy costs, as well as delivering benefits in ventilation, temperature management, and fuel distribution infrastructure. We know the market is waiting for the details of our mine plan for Westwood. We are still evaluating our range of production and cost profiles and once we’ve selected the mine plan scenario that we can -- that can deliver the best economic returns, we’ll release the details. I expect that we should be through the planning iterations in the first quarter of 2015 and ready to discuss the results, sometime in the first half of the year. We have narrowed our 2014 production guidance for the Doyon division to 95,000 to 100,000 ounces for 2014. To date, the division has produced 57,000 ounces, which includes the 10,000 pre-commercial ounces from Westwood and 12,000 ounces from Mouska before closure. Turning to Rosebel, we haven't been able to produce the number of ounces we had hoped for this year. However, we’re moving in the direction. We’re encouraged by the progress Rosebel team has made at tackling the great challenges and dealing with the higher proportion of hard transition rock. We still have a lot of work to do, but we’re getting there. Production in the third quarter at Rosebel increased 22% from the second quarter. Several factors played a role. Most important were grades, which accounted for about 60% of the variance. Grades increased 14% from the previous quarter, mainly due to the implementation of technical measures, stemming from the grade control audit in the first half of the year. Also a long haul road to the Rosebel pit, which contains higher grade ore was completed. So that too played a role in delivering the higher grades to the plan. About 30% of the production increase was due to a 7% increase in throughput, despite increasing the proportion of transition at hard rock, which is up 71 -- up to 71% now where it was at 55% in the second quarter. This was the direct result of optimizing the blend of rock hardness in the mill feed before it reaches the primary crusher. Total cash costs in the third quarter were down 12% from the previous quarter. The more consistent ore blend that I’ve just talked about has helped to lower cost. Not only does it help with the throughput, it provides for greater stability in the milling circuit, which in turn reduces the consumption of power and reagents as well as allowing us to increase recovery. Rosebel has been intensely focused this year on improving operating efficiencies. Improved operating procedures and their employee training have reduced the downtime of plant equipment and more training to employees on equipment maintenance has reduced our reliance on expensive contractors. In the pits we’re coordinating shifts better, so that our equipment sees little idle time. To quantify the impact of some of these initiatives, consider that a new system for cleaning and filtering the oil in our trucks and the elimination of redundant maintenance activities to reduce truck downtime have saved us $2.6 million so far this year, with an additional million expected before the end of this year. They add up, and if you include the savings that come from our lower power rate, the impact from the optimization of the mill feed blend and our focusing on localizing the workforce, year-to-date we saved about $23 million at Rosebel. And we expect a lot more in 2015 as we continue to realize the benefits from these initiatives and others that I haven’t yet made -- that haven’t yet made their mark. We are very proud to commission our new 5 megawatt solar plant at Rosebel during the third quarter. This is our first venture into this technology at an industrial scale, and we’re very pleased that the project was delivered on time and under budget and began producing power slightly above the design levels immediately upon commissioning. Rosebel has been an operational challenge, but we’ve addressed the issues head on and we’re seeing improvements as a result of the changes we’re making. While we expect grades in recoveries in the fourth quarter to be in line with those in the third quarter, the lower production, we experienced in the first half of the year was behind our decision to lower our guidance for Rosebel to a range of 315,000 to 320,000 attributable ounces. Turning to Essakane, great performance all around. And I want to emphasize that because of all of our operation, this is the one with the greatest near-term challenge when it comes to hard rock. The percentage of hard rock processed in the third quarter was 83% compared to 24% in the second quarter. In the first half of this year we had a robust ramp up in production with the mill expansion completion, a 15% increase in the first quarter was followed by another 35% in the second. In the second half of the year, we expect the throughput to be lower as mining focused on the heart of the deposit containing harder rock. But we knew the higher grades in the harder rock would be partially offsetting. Grades increased 22% in the third quarter to 1.2 grams of gold per tonne and we expect grades in the fourth quarter to be even higher. The combined effect of a strong ramp up in throughput in the first half and higher grades in the second half are behind our decision to increase our production outlook for Essakane this year. Previously, we expected production to increase by 25% compared to 2013, but we’re now projecting at least a 30% increase. Our new guidance range is 330,000 to 335,000 attributable ounces for 2014. Total cash costs in the quarter reflect the impact of the harder rock and reduced capitalized stripping as mining focused on lower elevations of the ore body in the southern end of the pit. With higher grades expected to drive up production in the fourth quarter, cash costs should benefit as well we expect operating costs at Essakane to benefit from lower oil prices. In terms of Essakane’s progress in reducing cost, the focus has been on optimizing mining and milling processes, and the negotiation of a better supply chain management contract has reduced the cost of both cyanide and grinding media. We feel the greatest opportunity to reduce our cost structure at Essakane may come from duplicating a number of the same process improvement initiatives that we’re implementing at Rosebel. Turning now to our joint venture, Sadiola, third quarter production was 21,000 ounces down from the previous quarter as a result of lower grades, partially offsetting with a 10% increase in the tonnage mine and mill and recovery rates remained unchanged from the previous quarter. As I look at Niobec, strong performance continued in the third quarter with 1.4 million kilograms of niobium produced. Operating margins rose 22% to $22 a kilogram, reflecting ongoing continuous improvement initiatives. Just to give you one example, the use of cyclones for size classification in the grinding circuit, which was previously done with screens has significantly reduced the amount of consumables required, as well Niobec like Westwood is benefiting from the stronger U.S dollar versus the Canadian dollar. As Steve said, we’ve been extremely disciplined this year with our capital spending. Considering our capital outlay to date this year, and our expectations for the last quarter of 2014, we expect CapEx to be closer to $360 million for the year, plus or minus 5%, which is $40 million less than previously guided. So that completes my review of operations, and I’ll turn you over to Craig for an update on exploration activities.

Thank you, Gord, and good morning, everyone. We have a lot of exciting work underway involving quality of projects at various stages. We continue to aggressively complete infill drilling programs that aim to upgrade current resource estimates and have reported assay results showing some very attractive grades from a number of projects. Overall, we remain committed to developing a great pipeline of projects with the potential to enhance a great profile. One of our most exciting projects is Boto, in Senegal. Since announcing our initial resource estimate of 1.1 million ounces in an indicated category, grading 1.6 grams old per tonne 16 months ago, the results keep getting better. Earlier in the year, drilling confirmed the continuity of the resource and extended mineralization associated with the Malikoundi deposit, which is the largest so far discovered on the property. And now infill drilling results as reported on October 20, show wide intervals of gold mineralization with significantly higher grades, including 64 meters at 3.4 grams per tonne, 45 meters at 2.6 and 16 meters at 7.7 grams per tonne. These results are expected to positively impact both tonnage and grade of the existing resources. To date we’ve completed 40 diamond drill holes and we'll incorporate the results into an updated resource model as part of the ongoing scoping study. At our wholly-owned Pitangui project in Brazil, our infill drilling program continues on the São Sebastião resource. As disclosed earlier this year, the initial resource estimate comprises an inferred resource of 638,000 ounces grading 4.9 grams of gold per tonne. Assay results released prior to the third quarter, confirm the continuity of the resource and identified high-grade intervals in the second zone. Results from the ongoing drilling campaign will be incorporated in an updated resource model. During this quarter, we expect to complete an airborne EM geophysical survey that aims to delineate conductive targets, which may represent additional gold mineralized systems on the property. And this will be exciting to see the results from the survey. In addition to our wholly-owned Boto and Pitangui projects, I'll give you a brief update of some of our joint venture projects. Starting with the one closest to home, what we like most about the Monster Lake project are the grades and the location in the prospective Abitibi Greenstone Belt, in Quebec. Historically, previous exploration work had reported numerous high-grade drill intersections ranging between 25 to 30 grams per ton. In the third quarter we reported the remaining results from the first phase of diamond -- the first phase of a diamond drilling program which completed over 4500 meters of drilling. Results are encouraging and confirm the presence of several mineralized structures. We’ve now undertaken the second phase diamond drill program of more than 5600 meters to test targets along the 4 kilometer long mineralized corridor. Moving on to the Eastern Borosi project in Nicaragua, we are targeting multiple vein systems within a 176 square kilometer land package. During the quarter our Phase I drilling program focused on three different vein systems intercepting high-grade mineralization. In September and October our joint venture partner announced the results of 18 drill holes. The drilling program was expanded from the original 35 to now 45 hole program, so that additional vein systems could be tested and to follow-up on the high-grade intercepts already received. At the Siribaya project in Mali, the focus has been on the new discovery referred to as the Diakha prospect. As subscribed last quarter, the significant geochemical anomaly is situated on an extension of the same mineralized trend that host our Boto gold deposit in Senegal and also B2Gold’s Fekola deposit further to the north. The phase II, reverse circulation and diamond drilling program included both infill and expansion drilling. The assay results confirmed significant gold mineralization with good grades throughout the area drilled, and the mineralized zones remain open in all direction. With these encouraging results we are targeting a maiden resource estimate in 2015. And finally we have the Caramanta project located in Colombia’s prolific Mid-Cauca Belt. In the third quarter we completed nearly half of a plan 4000 meter diamond drilling program to test a number of gold/copper/silver porphyry targets. We are still at a very early stage with this project. So, I look forward to providing more updates as we progress our exploration programs. Turning now to the highlights around our existing mines. At Rosebel, diamond and RC drilling with the objective of finding more soft and transition rock continued in the third quarter. We initiated drilling on the Mayo and Royal Hill deposits as well as testing potential soft rock targets along strike for known mineralized trends. On the Sarafina option property, we began diamond and RC drilling program in the third quarter. We have completed about 2000 meters of drilling and are currently awaiting assay results. At Essakane, drilling continued to upgrade existing inferred resources within and adjacent to the main Essakane pit. Results are encouraging with continuity of mineralization indicated at both the north and south ends of the pit. On the surrounding exploration concessions within a 15 kilometer radius of the Essakane mine results from exploration activity completed prior to the rainy season are being assessed to prioritize further exploration follow-up. That concludes my review. The important message is that we’re continuing to advance key projects. We’re seeing promising results, and I want to especially recognize and commend the great work of our exploration teams. I’ll now turn you back to Steve to wrap up.

Thanks, Craig. That was a very good account of our performance, and how we’ve been trending this year. The arrows are pointing in the right direction and we’re seeing consistency in some of the most important performance metrics. Essakane should finish the year with production 30% higher than last year, grades at Rosebel are improving, Westwood is delivering on expectations. We’re restructuring, reducing cost, spending less. All in sustaining costs are approaching our near term target of $1100 an ounce. Our cash and liquidity positions are strengthening and attractive exploration projects are moving forward. Confidence in the company couldn’t be higher and we’re very, very, very pleased with the progress that we’ve made to date. So with that, let’s open it up to questions.

[Operator Instructions] First question today is from Andrew Quail with Goldman Sachs. Please go ahead.

Good morning, guys. I just had a few questions, looks like Westwood is ramping up well. Just wanted to know what level of the mine you guys at actually mining yet?

The production right now is coming off the 84 level which is 140 meters below surface, and the 1040 level. So in those zones is where the primary production is right now.

And you guys will be there sort of into next year as well or?

Yes, I mean the objective there is really to develop five different production zones. So we’re in the first production zone, the area we’re accessing. And we’ll be continuing to be in zone one probably for five or six years, but we’ll bring on the other zones as we ramp up.

Okay. Great. Thanks. Just on the Sadiola, obviously we used the [indiscernible] a bit, I mean look; in your comments you obviously said you want to be free cash flow positive at your owner-operator. Is that means that Sadiola takes it back [ph] and do you sort of see any, I suppose trend in cost going up there, that wouldn’t be free cash flow positive in 2015?

Well when we talk about free cash flow positive we’re talking in aggregate, Andrew. So we may have some sites like Sadiola that are slightly negative. Certainly the outlook for Sadiola it gets challenged at $1,150 gold prices, and I don’t want to speak for Anglo, but I think Anglo probably is reevaluating where they are. Certainly six months ago at least they were very encouraged with respect to moving ahead. Gold prices were probably $100 or $150 an ounce higher then. So we continue to look at Sadiola very positively, very optimistically. It’s about a 1.7 grand deposit. There’s probably three million additional ounces that we can bring forward if we expand Sadiola. The Malian government has done some very positive things trying to move it forward including looking at the power arrangement we have. So it’s a great deposit to have available, should gold prices move in the right direction and look like they’re going to be sustainable. Right now we’ve got probably two years of stockpiles that we can move through and hopefully create at a minimum a cash flow that is neutral to positive, but that again will depend on where the price of gold is. But it’s not a major contributor plus or minus through our cash position.

Great. Thanks. So the last one is obviously with the sale of Niobec, you guys have -- it looks like a bit of war chest of cash. Is there, given the current environment it changed over the last sort of month or so. Can you talk about what sort of you guys might do with sort of paying down debt versus even looking at opportunities outside the organic growth plus all at the moment?

Well, we’ve got a very positive position now. Not only are we going to receive $500 million U.S. from the sale of Niobec. We’re increasing our current cash position which tells you we have the luxury of evaluating a number of alternatives. We have the alternative of investing Niobec proceeds in terms of reducing our overall aggregate cost by acquiring hopefully mines that are close to producing or near producing. We also will look at the alternative of reducing debt should that make sense. That’s a board decision that will come as we get closer and closer to Niobec, and we are certainly around the close which we expect to have fairly soon. So we really do have a plethora of options and we’re in a very strong position to evaluate a number of alternatives. We’ve had a lot of suggestions from our shareholders on what we might do with the cash. And we welcome those suggestions. We’ll be talking to our major shareholders about where they think we should deploy cash? How we should do it? Where we should do it? And we’re going to get feedback on their views after all they have been loyal shareholders for a long time. So, we’ve got time. We’ve going to be patient. We’re not in a rush as the gold price continues to weaken. And I think under your forecast its going to weaken even more. We should have opportunities to take advantage of that. So unfortunately for our brothers and sisters in the gold space this is a tough time for someone like IAMGOLD that is very cash rich, it offers splendid opportunities.

Okay. Thanks very much guys.

The next question is from Anita Soni with Credit Suisse. Please go ahead.

Just a couple of questions this morning with regards to Rosebel. I think you mentioned Gord in the -- in your commentary there was 71% transition in hard rock where as in the MD&A I think 33%, is the 33% solely the hard rock?

Correct.

Okay. And then, how much, I mean, well how do you see that profile going over the next couple of years?

Next year I believe we’re sort of in the 35% to 40% range, and by 2017 we’re up to around 70%, 75%. I’m talking just hard rock percentage now. There’s not a lot of soft rock in the current inventory. As Craig mentioned in his discussion we are following up on some interesting opportunities within the concession for some additional soft rock and within the larger UJV area we’re very aggressively looking for additional soft rock. But on the existing profile, sort of 2017 is when we get to nearly a full hard rock plant.

Okay. And then -- and in terms of the transition or how much additional sort of a 30% over the hard rock?

while [ph] (4:10):

And the throughput levels, how do you imagine that’s going to happen -- transition over the [indiscernible], we saw a drop in throughput obviously with slightly increase in the hard rock, but obviously -- it looks like the transition rock there was substantial increase there.

Yes. There was actually a slight increase in throughput in the third quarter over the second. We’re getting -- we’re using the engineered stockpile ahead of the crusher to create advantage. However obviously as we do crank it up, we need -- we only have so much installed grinding power and with the hard rock there’s a higher consumption of grinding power per ton. Longer term when we get up to a 100%, the current plant can probably do in the neighborhood of around eight million tons year, seven to eight million tons a year.

All right.

Yes. And then Anita, it’s Steve. Just to only make a comment there. We’re going to be spending about $10 million to $15 million in what I’m going to call brown field exploration to attempt to find higher grade softer rock. We’re not going to run Rosebel cash flow negative. And let me make that perfectly clear. So if we have to do things with the pit design, if we have to do things with the current structure of our mine sequencing, we’re going to do it to ensure that we’re cash flow positive. So we’re hopeful that we’re going to mine the soft rock and higher grade that Craig’s people are successful. And as you know we’re seeing some pretty positive results so far, but nothing definite. If we do in fact find that and we’re able to economically move it to the mill then we’ll reinvent Rosebel, and our confidence in doing that is high. But we’re not going to run this mine in the red from a cash flow standpoint.

Okay. Just on that point then, I mean, obviously if you’re going to maximize cash flow in the near term you’re going to be sterilizing some ore in the longer term, right?

If we’re in a position that we have to look at that, that’s what we’ll look at. And as I say, we’re not going to bleed the company’s cash position to run maximum ounces at a cash flow loss at Rosebel.

All right. And then just moving on to Westwood, question with regards to dilution. How is that coming versus your expectations in the first quarter of commercial production?

It’s still pretty early days. The dilution numbers we’re seeing are excellent, but I’m -- really from Missouri [ph] until we get some more ground opened up. The original stopes on some of these panels are holding together fairly well. We had a few challenging stopes, but on the majority we’re hitting our targets or better. It’s really a bit of an exploratory phase right now as we start to open up these stopes. I mean you can do all the work you want on a theoretical basis, but you need the practical empirical information going forward. We’re using I think reasonable estimates in the longer term and trying to do better.

And what was that estimate again?

We have looked at different scenarios depending on the size, but typically we’re looking at around 50% dilution.

That’s it for me. Thank you very much.

The next question is from David Haughton with BMO. Please go ahead.

Yes. Good morning, Steve, Gord, Carol. Thank you for the update. A couple of question’s, since we were talking at length, Gord, about the great expectations. Essakane very encouraging to see those higher grades associated with the harder rock. Mining above now the reserve grade, what's your expectation of that grade profile going forward?

Because it’s a phase design, phase long, it does go up and down over time. Right now obviously the prior 24 months we were mining significantly below reserve grade, now we’re slightly above. This should continue I think for the next year or two. And then we get into another low grade cycle although the mine is really looking at opportunities to phase that out as well as some of the exploration targets that Craig referred to evaluating the opportunity to schedule those into the long and keep the grades up. So we’re into a nice phase here for the next mile and that’s good, the timing is good for that. But where the -- I guess the longer term grade estimate for the deposit is still quite stable.

All right. So, I’ll put a little bit of profiling based on your guidance there. And then the converse, I guess is at Rosebel we’re currently mining below reserve grade, and clearly the discussion is going to go around the profiling again. Can you just walk us through the same kind of logic for Rosebel.

In Rosebel the first three quarters the grade was quite challenged there. This quarter, quarter-to-date were significantly better close, not quite up to reserve grade but a lot closer to reserve grade. We are doing a lot of work there on a lot of different areas around grade reconciliation. We’re doing -- we’ve changed the -- we’re in the process of changing over our grade control system to RC drilling rather than blast holes, and seeing some pretty encouraging results. Medium term the next couple of years the grades are slightly below reserve grades. Then we have I think two or three years where they go above and they do cycle up and down. I don’t want to be too far off reserve grade at Rosebel in the longer term as Steve says, we are reevaluating and re-planning Rosebel on an ongoing basis to make sure that we can make a viable business out of it, and at the same time really looking for opportunities to change the picture there with some new resources.

Okay, so by not being too far away from reserve grade based on that kind of profile what you suggested it would be within 10%, 15% of reserve grade up or down?

Definitely -- definitely.

That’s good. And then a question, I guess for Carol if that’s okay with you, Steve. Looking at Westwood, what kind of depreciation rate should we be using for that project going forward, Carol?

Yes, I think you should be guided by what you saw in this quarter, and we’re pulling together our budgets next week. And what we’ll be doing is providing some depreciation guidance in the New Year as we provide guidance on production cash cost. So, I think at that time David, we’ll be able to give you some further guidance.

Okay. And I guess a similar question for Rosebel. Its depreciation rate stepped up. It appears quite markedly during the quarter. Is that the kind of new norm now going forward?

I would say so because what happened there was we actually acquired some additional mining equipment, mobile mining equipment, and so as a result the depreciation was up by about $3 million. So that will stagger over the next few years. So, yes I would assume that.

All right. Excellent.

And it will be a function of production as well. So, you’ll have to keep that in mind.

Oh, yes, of course. Thank you.

The next question is from Botir Sharipov with HSBC. Please go ahead.

Hi. Most of my questions have been asked. I just have one question on Essakane. With the soft rock only making about 5% of the throughput, how much -- what are the proportions for the transition on hard rock currently? And do you see the current cost performance sort of in the near term to be around what we’ve seen in the last quarter given that the Essakane practically ramped it up to full capacity.

Well, yes, I mean soft rock is almost completely exhausted there right now. I quite honestly don’t have the split in my head between the hard and the transition right now. I do know that next year it goes -- the hard rock percent is something like close to 90% with 10% transition. So we’re effectively a hard rock mine at that operation. In terms of cost, this quarter I think was probably a little higher than I expect to see going forward. There is some initiatives in place to reduce some cost as well there were a few non-recurring sort of maintenance activities that were done during Q3 that won't be required in future. So, the cost at Essakane we’re pushing them hard. At the end of the day on a per ounce basis it will really be driven by the grades we’re processing at any given time.

Okay. Thank you very much.

The next question is from Dan Rollins with RBC Capital Markets. Please go ahead.

Yes. Thanks very much guys, and again good to see you guys continue to work on the cost side of things, proactive approach. I just wanted to sort of circle back to Essakane, Gord you mentioned the cost were a little it higher this quarter than you expected. But on a cost to sales basis there was a significant about $24 million acknowledging that the sales were a little bit higher. How much of the $90 million or roughly $95 million I guess whatever it is, was the one off item?

Carol, do you have that?

Yes, I mean -- we can follow-up with you Dan on that. We don’t have the breakdown right now, but I mean, a lot of that was sort of general operating cost. So, I’ll have to go back and take a look at it more specifically, so I can do that offline with you.

Okay. That will be great. I’m just trying to get a sort of a rough estimate a little longer and unit cost is going forward now that you’re sort of at full hard rock capacity. And then maybe just at Rosebel, Gord given that unless there is additional soft rock feed brought in to the mine plant over the next couple of years. What proportion of your milling costs are fixed 50%, 60%?

No, no. It’s not that high. It’s about 30% there -- 30%, 33%. We’re really driven by consumables and power, that’s the majority of the cost there. Fixed amounts are relatively normal I would describe [ph] on that sort of 30%, 35%.

Okay. Is that complete mine site or just processing?

Pardon me.

Is that for the complete mine site or is that just sort of …

Processing. The fixed cost for the whole site are somewhat below that. On a percentage basis, I’m thinking probably 25%.

Okay. Great. That helps. And then maybe just a broader question just on Essakane given you do generate your own power. Have you guys started to see some benefits of the lower fuel cost or when do you expect to -- start to see those benefits coming in on your HFO cost?

We are starting to see some benefit. It’s a bit of a slow cycle there given the location. We haven’t seen anything material but we understand there is some material improvements in the pipeline so to speak.

Okay. And then maybe just Westwood, the costs were pretty good for a given commercial production first quarter, maybe a little bit higher. Is this sort of -- should we expect cost to sort of trend at this level until you hit steady stage throughout, should it come down a bit? Or should we see a bit of a bump first and then come down?

What we’re looking at and I sort of said -- you’ll see a little bit of a bump for Q4. The costs were excellently less, but they’ve done a great job. A little bit of that was timing of some specific work that’s going in. But going forward, it’s pretty steady and we do expect within a couple of years we’ll be trending below that number, fairly materially below that number. That’s the -- that’s what we anticipate anyway.

Okay. Great. Thanks very much.

The next question is from Doug Dyer with Heartland. Please go ahead.

Hi, good morning everyone and great job on the cost control. We certainly like seeing that. I just want to start with a comment, and I think you know where we’re coming from here, but as significant long-term holders. When we look at the debt structure and look at these bonds which are now trading at $0.81 on the dollar to yearly 11%, we really think that a prudent use of capital and not all of it but just a portion of what you have would be to buy back some of those bonds. It just makes a lot of sense when they’re trading at $0.81 on the dollar here.

Doug I’m shocked that you raised that. Doug, look as I said to you before, we definitely we’re going to be looking at optionality and I guess, we -- we’re very pleased about our cash position and how much our cash position has improved. I can't commit on behalf of the Board of Directors of IAMGOLD as to what exactly our strategy is going to be. But as I promised you, it definitely is an alternative that’s being evaluated along with other alternatives and where we have the luxury of a very, very strong cash position even without the Niobec proceeds now that we’re building cash. So, we certainly appreciate your feedback on that, we’ve noted it, and we will evaluate it. And it’s an excellent point to raise, so thank you for continuing to do that.

Yes. And just one comment I made as believe from other situations that we’ve seen in the past that have been similar, that buying back debt sends a very powerful and positive message to the equity side of the market. My question would be, you’ve talked about making acquisitions and looking at mines that would be in production or near production. What are some of the hurdles that you’re looking for in an acquisition, and that would be getting at cost in mine life, what do you have to have to make something work?

Well clearly we’d be looking at something that would be at least pointing to all in sustaining cost below $1000 an ounce. The lower the better. Our portfolio right now as you know and we’ve been reducing our costs tends to be on the high range. So we get punished as the price of gold falls. The price of gold rises our leverages extremely high. Ideally what I would like to be able to do is create a suite of assets that we can have more optionality around. If the price of gold is low, then we would have the option of reducing production at certain high cost -- some higher cost mines, and increasing production at lower cost mines. So, with our suite of assets right now it limits our flexibility. So our strategy would be without impairing our balance sheet to look at an opportunity to create a suite of assets over the longer term that have a lower cost structure, we can do a lot and we have been organically with all the processes and procedures that you’ve heard about today and we’re continuing to do that. And then you get to a point where you get a certain amount of diminishing returns. But strategically as the gold price continues to weaken or potentially weaken, we think there will be opportunities to improve our portfolio from a cost structure basis that from a sustainability standpoint makes more sense. We’re going to be very careful. We’re not in any kind of rush. We’re going to valuate the suggestions that you put on the table for sure. And I just can't tell you how pleased I am today to be sitting in the position we are. I know we’ll get punished as that gold price falls. But when you think about it with our cash position and the fact that we have no near term debt repayments, we are in a potentially opportunistic position to improve our lot in life and that’s what we will do.

Yes, I would certainly agree with what you’re saying about being in a good position to do so. My question would be, with an environment where a lot of your peers are stressed, and in a stressed environment they’re going to want to shutdown the poorer property. So my question would be, with a higher quality property like you discussed with the parameters that you’re looking for, does something like that come to market right away? Or is that going to kind of be the last piece of property that somebody will hang on to?

Well, really the -- probably the perfect storm Doug would be companies that have attractive investment opportunities they can fund. And if we combine with them and bring cash to the table, we’re able to provide the cash that would develop a lower cost operation. But physically they can't achieve because they don’t have the balance sheet. Do you follow?

Yes. I do, yes. And thank you for that. All right. Thanks a lot. Keep up the work on the cost front.

Thanks, Doug.

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

Thank very everyone. I know there are few people still in queue on the questions, but our time allocation is done here. If you have other questions please contract me or the rest of the IR team. The replay of this call will be available for a month following the call, and thank you for your time today.

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