IAMGOLD Corporation (IAG) Q4 2014 Earnings Report, Transcript and Summary

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the IAMGOLD 2014 Q4 and Full Year Operating and 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 to the IAMGOLD conference call. Hopefully last night you received our industry leases regarding our 2014 financial performance and our 2014 statement on reserves and recourses. Our conference call slides are posted on our website if you need to refer to those as we go through the presentation. 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 Jeff Snow, General Counsel and Senior Vice President Business Development. Our remarks on this call today will include forward-looking statements. Please refer to the cautionary language regarding those statements in our disclosure documents and be advised that the same language applies to our remarks during the call. During our opening remarks, we will refer to those slides by number on the website. I’ll now turn the call over to our President and CEO, Steve Letwin.

Thanks, Bob, and good morning, everybody. As you can see from our results, I'm very, very pleased to how we executed our plan in 2014. We had planned to achieve operational excellence, we made excellent progress meeting or exceeding all of our operating targets. In 2015, we build on those achievements with the sale of Niobec we began the year fresh with cash, our plan for achieving profitable goals and confidence in our goal to be free cash flow positive by the end of 2015. So reflecting on our achievements over the past 12 months, let's take a look at some of the slides. On Slide 5, we produced 844,000 ounces of gold, which is within our guidance. We reduced all-in sustaining costs steadily throughout the year. By the fourth quarter, we were $121 in ounce down more than $200 an ounce from the same quarter a year ago. So basically we cut about $170 million at the cost side of our structure. For the year all-in sustaining costs were $1,101 an ounce, which is $49 an ounce better than guidance. On Slide 6, we underwent a corporate restructuring. We cut our G&A cost and did what was necessary to make us linear and more nimble. Looking at the operation side of our business, we achieved total savings of $59 million in operating costs at our three gold mines in 2014. This was the result of sustaining the cost savings from 2013 and realizing additional savings from new initiatives in 2014. The cost benefits from a number of initiatives implemented that Rosebel last year have yet to be realized and we expect to see that this year. On Slide 7, our fiscal discipline continues around capital spending. In 2014 we spent $325 million which was down 51% from the year before and 10% lower than guidance. For 2015, our capital budget is $230 million, 29% lower than 2014. On Slide 8 as our unit costs were falling in each consecutive quarter, production was increasing. Essakane was the star performer in 2014 with 33% growth in production. The expanded mill drove throughout higher and grades increased by 21%. This year we will start mining the Falagountou satellite pit and rolling-out initiatives that were effective at optimizing performance at Rosebel last year. Westwood produced 70,000 ounces in the first six months of commercial production and reported grades of 8 grams per tonne of gold. This operation is performing very well. In January as you know, we had a localized rock burst, no one was injured. There was no interruption in production. Our production outlook for Westwood remains unchanged for 2015. Rosebel's performance improved throughout the year. Grades increased by 14% in both the third and fourth quarters and we are now beginning to realize substantial cost benefits from the many operational enhancements implemented in 2014. We are also seeing some benefits from lower fuel prices. So when you look at the key performance indicators, I'm very pleased with the progress of Rosebel. On Slide 9, our exploration projects are making excellent traction. We are seeing positive high grade drill results and resource upgrades at a number of projects. Craig will walk you through some of the highlights including the Boto gold project for which our year end R&R statements shows an [8%] [ph] increase in the estimated indicated resource and the Diakha project in Mali, where we are targeting our main resource estimated by the end of this year. Craig MacDougall and his team have done a great job in prioritizing projects in light of the cut backs and exploration spending. While our year end results were impacted by $100 per ounce decline in our gold price assumption, our average resource grade increased by 9% and the average reserve grade by 8%. On Slide 10, we talk to our cash position. As you all know, our balance sheet remains very strong, Carol Banducci and Jeff Snow did an outstanding job executing the sale of Niobec with the US500 million and proceeds driving our cash and bullion to about 800 million we have the financial means to invest in our existing portfolio, as well as to pursue growth opportunities. As I said before, we are really interested in acquiring or producing our near team producing mine that will enhance our portfolio and contribute to positive free cash flow. I don't know what the size will be or whether it might be a standalone business or bolt-on, it could involve a combination of cash and shares. It could involve bio products. Regardless we are not in a rush. We will take our time. We will be disciplined. We will do our due-diligence. On Slide 11, turning to guidance for the year we expect to produce between 820,000 and 860,000 ounces, using our gold price assumption of 1250 an ounce. The numbers reflect the ramp up at Westwood, continued strong performance at Essakane as the benefits from the higher grade and expanded mill and continued progress at Rosebel and improving grades in optimizing performance. The outlook for Sadiola is inline with the depleting supply of soft rock. In 2014, the operation accounted for 10% of our production. If we do secure a partner for a potential expansion, and we do get the government to agree to the conditions around the power, then we can look to Sadiola to bring another 2 million ounces of reserves in the production. Just a small footnote there, with the fall-in in fuel prices, the economics at Sadiola without government guarantees become actually much more attractive. So we are continuing to look at Sadiola as a very attractive investment for us. The key for us right now is dealing with Anglo and trying to find the partner to replace them. So given our progress in reducing costs and increasing operating efficiencies, we have set all-in sustaining cost guidance $75 in ounce less, than the bottom of the guidance range last year. So we are looking at a range of 10.75 to 11.75 an ounce. Our goal this year is to be free cash flow positive at the consolidated level. So that takes into account our corporate G&A, our exploration and our financing costs. And with Essakane and Rosebel already there, I'm confident we’ll make that happen. With that, I'm going to turn over the call to Carol for a review of our financial results.

Thank you, Steve, and good morning everyone. Our 2014 financial results reflect continued success in reducing cost as steady growth in gold production drove revenues above $1 billion. We ended the year with a strong balance sheet and we began 2015 with a very strong cash position as Steve said, following the sale of Niobec. You should note that net earnings from Niobec represented separately as net earnings from discontinued operations. The comparable period have been adjusted accordingly. Turning to Slide 13, I'll begin with the reported bottom line results for 2014 which were impacted by three significant non-cash charges. First, the estimated cost of our asset retirement obligations mainly related to the Doyon mine was $49 million for 2014. Our review of our asset retirement obligations is conducted annually to update estimates of future closure costs. For the Doyon mine closed in 2010, it's tailing ponds and open pit are being used by Westwood until the Westwood mine closes. So given the long life expected for Westwood, the bulk of the rehabilitation activities unless the cash outlays associated with them will not occur for another 17 years. Second, we've recorded $56 million in unrealized derivative losses mostly related to hedging a portion of our new contract during the period of falling oil prices. Following an initial declines in oil prices we entered into contracts which extend over the next three years. Subsequently, oil prices decline further. This resulted in the unrealized losses which, if and when oil prices recover can potentially reversed. The third significant non-cash adjustment item is included in the line items tax impact of adjusted items. Income tax expense from continuing operations for 2014 was $118 million of which $114 million was deferred. Given the company's loss from continuing operations, we would expect a income tax benefit rather than an income tax expense. However, we had significant loss carry-forwards valued at $76 million that recorded as a deferred tax asset but with the sale of Niobec we no longer had the benefit of the projected future taxable income that would have offset the taxable losses in Canada. Thus we brought off the entire asset in the third quarter in accordance with IFRS and this resulted in a deferred tax expense. Other factors impacting deferred taxes were higher mining duty tax rates and due to the strengthening of the U.S. dollar, our reduction in the tax base of mining assets in foreign jurisdictions that had the effective lower rate, future tax deductions when translated into U.S. dollars. So while the non-cash charge reduces the value of our deferred tax asset, it is not indicative of the economic value of the underlying tax pools which may be used to reduce cash income taxes in the future. So what we've done this quarter is, because of the complexity around deferred taxes, we have provided guidance for 2015 for cash taxes and as such, we expect cash taxes to range between $17 million and $22 million for 2015. So once again to conclude, the asset retirement obligations, the unrealized derivative losses and the deferred tax expense, all these items I just talked about are non-cash charges. After normalizing earnings for all the items not representative of our underlying business, adjusted net earnings including, discontinued operations with $33 million or $0.09 a share in 2014. For the fourth quarter, it was $10 million or $0.03 a share. The decline from comparable periods was mainly due to higher cost of sales, partially offset by higher revenue and lower exploration expenses. On the next two slides, I’ll talk about the drivers behind the growth in revenue and cost of sales year-over-year. Revenues from continuing operations excluding revenue from Niobec rose 6% to $1 billion in 2014. The increase was due to an 18% increase in gold sales, partially offset by a 10% decrease in the average realized gold price. Gold sales are driven higher mainly by a 34% increase at Essakane and the 65,000 ounces from Westwood in its first six months of commercial production. Partially offsetting the increase was the impact of the Mouska closure. Turning to the other side of the equation, cost of sales increased 34% year-over-year. Pre quarters of increase was due to higher operating cost, a balance was due to increased depreciation. The significant increase in operating cost was associated with the startup of commercial production at Westwood, increased throughput at Essakane, following the commissioning of the extended mill and the increase in the volume of harder rock and lower capitalized stripping at Rosebel. Partially offsetting, we've lower cost at Mouska as a close down operations. Depreciation increased by $61 million to $205 million. This is mainly due to the startup of commercial production at Westwood, the commissioning of the expanded mill at Essakane and higher amortization of capitalized stripping at Rosebel at Essakane. 2015, we expect depreciation expense to increase by approximately 40% to a range of $285 million to $295 million. This reflects a full year of commercial operation at Westwood, higher amortization of capitalization stripping cost at Rosebel, lower reserved at Essakane and Rosebel, and timing of capital additions. Turing to cash flow, our initiative over the past 12 months to convert non-cash working capital accounts to cash contributed by more than $50 million to our cash position in 2014. Net cash from operating activities including discontinued operations was $312 million up 27% from 2013. In addition to paying significantly lower income taxes, we benefited from our $51 million reduction inventory levels and managing vendor payment terms. Moving the impact of changes in working capital net cash and operating activities per share increased by $0.03 to $0.84 a share. Our financial position remains very strong. Cash, cash equivalents in gold bullion was $321 million as of December 31, 2014. The bar on the right side of the graph shows the pro forma cash position of more than $800 million when you include the $500 million in cash proceeds from the sale of Niobec. Together with our undrawn credit facility, our liquidity remains very strong. Maintaining an optimum capital structure continues to be a priority. This month we completed $50 million Canadian growth to share financing to find further development work at Westwood and exploration in Ontario, Quebec. And we’re continuing to look at opportunities for entering into attractively seen arrangements at our site. Attributable production grew consistently throughout 2014 reaching 241,000 ounces in the final quarter. On the slides you can see the main drivers behind the growth in each quarter including mill expansion at Essakane, commercial production at Westwood and improving grades. Attributable gold production for the year was 844,000 ounces up 9,000 ounces from 2013. This was due to a 33% increase at Essakane and higher production at Westwood. Partially offsetting these increases were lower ounces for Mouska, Essakane to close, Rosebel mainly due to lower grades partially offset by higher throughput in the joint ventures. Excluding the pre-commercial ounces from Westwood, attributable commercial production was 834,000 ounces with gold sales virtually the same. Our projection was growing throughout 2014, costs were declining. All-in sustaining cost per ounce sold for 2014 was $1,101 down $121 an ounce from the previous year. Next slide shows the consistent downward trend in all-in sustaining costs throughout the year, at $1,021 an ounces in the fourth quarter, this represents a $209 per ounce reduction from the same quarter in 2013. Despite the drop in the average of realized gold prices in the fourth quarter - from the previous quarter, the spread between price and all-in sustaining costs improved by 15%. This significant reduction in sustaining capital expenditures and the progress we've made in reducing cost and mitigating the impact of harder rock, all contributing to the improving trends we are seeing in our cost. We expect to benefit from the falling oil prices and the stronger U.S. dollar which you will hear more from Board as to what initiative are underway to further optimize performance at out operations. As we continue to growth the business, we will do so with our financial discipline demonstrated by our continued success in reducing costs. As Steve said, our gold this year is to achieve positive free cash flow at the consolidated level, and I’m confident we're going to get there. Our cost structure has improved, we're effectively managing our working capital and we have a strong cash position. And with that, I’ll turn it over to Craig for a closer look at our exploration programs.

Thank you, Carol, and good morning, everyone. The exploration team has had a very successful year and continues to work on developing the strong pipeline of growth projects. This is particularly noteworthy given the fiscal constraints as the team has worked under as part of the companywide cost cutting initiative. In 2014, we spent 68.9 million which was 26% lower than the previous year. A decrease reflects the smaller planned exploration program as well as project prioritization. In 2015, our exploration budget is $56 million of which $16 million will be capitalized. It should be noted that the capitalized portion is included in our $230 million capital spending guidance for 2015. We continue aggressive infill drilling programs intended to upgrade current resource estimates at key projects and have reported assay results showing some very attractive grades from a number of Greenfield projects for which further exploration is planned. Please note that in this section, I will discuss our advanced exploration projects with highlights that include some of the more significant intercepts from our recent drilling programs. All of these intercepts along with other assay results from these projects have been previously disclosed in accordance with security regulations. The contents has been duly signed-off by qualified persons within the company that reported them. Yesterday along with our 2014 financial results, we also disclosed our 2014 statement of reserves and resources. Predictably, our reserves were lower than in the previous year due to changes in economic and geotechnical parameters and a reduction in our gold price assumption from $1400 to $1300 per ounce. And of course, the depletion impact of our 2014 production. This was offset by success we are having at our advanced exploration projects which I will speak to know. At our wholly-owned Pitangui project in Brazil, 24,500 meters of diamond drilling was completed in 2014 to confirm the continuity of gold mineralization within the core area of the São Sebastião deposit. 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. We continue to focus on upgrading the resources within the core area of the deposit and to test for extensions. Assay results will be incorporated in an updated resource model once all results have received and validated from the current program. In addition, an airborne survey completed during the fourth quarter identified a number of conductive targets with characteristics similar to the São Sebastião deposit. These targets will be prioritized for future drilling programs. One of our most exciting projects is the Boto gold project in Senegal. With the year end reserve in resource statement, we have upgraded our initial resource estimate of 1.1 million ounces to 1.2 million ounces in an indicated category with the average grade improving from 1.6 grams per tonne to 1.7. Inferred resources have increased nearly eight fold from an additional 635,000 ounces grading 1.8 grams per tonne. Ongoing drilling is focused on converting this inferred resource to an indicated category. On February 3, 2015 we reported final assay results from our 2014 drilling program, highlights included 9 meters grading 10.5 grams and 44 meters grading 4.46 grams per tonne gold. These results which are not included in our year end resource estimate continue to demonstrate wide intervals of high grade mineralization from the core of the Malikoundi deposit, which is so far the largest deposit discovered today. During the year, we also completed the scoping day to examine a range of development options and help to define an exploration target threshold. In 2015, we plan to complete our ongoing 50 by 50 meter infill delineation drilling campaign which we started in 2014 for the purpose of upgrading the resource at the Malikoundi deposit. The results will be incorporated in a further resource estimate to support ongoing technical studies. Our 2015 exploration target objective for the Boto gold project based on the drilling completed today is to increase the indicated resource to a range of 1.5 million to 2 million ounces at a grade of 1.8 to 2 grams per tonne. I must caution you that the potential quantity of the grade is conceptual in nature and the insufficient exploration has been completed to confirm with any certainty to targeted objective. We are also active during the year on a number of joint venture projects which achieves some notable exploration successes. At the Siribaya project in Mali, nearly 11,500 meters of drilling of diamond and reverse circulation drilling was completed at the Diakha prospect. A new discovery located on the southern extension of our Boto Malikoundi mineralized trend that crosses the western border of Mali into Senegal. As was reported during the year, the drill program confirm the presence of multiple zones of gold mineralization with significant widths in grades including 34 meters grading 4.85 grams per tonne gold, 19 meters grading 7.3 grams per tonne gold and 12 meters grading 10.99 grams per tonne gold. The primary focus of the 2015 program will be to complete infill delineation drilling program to enable a declaration of initial 43101 compliant resource estimate by the end of 2015 as the results warrant. During the year, our Phase 1 diamond drill program was completed on the Eastern Borosi project in Northeast Nicaragua. In total, 40 holes tested five gold, silver vein systems over a strike length of 3 kilometers within 176 square kilometer land package. In addition to positive drilling results announced in 2014, on January 21, 2015 our joint venture partner announced the final assay results from 17 of the 40 holes. Highlights included 5.1 meters grading 13.44 grams per tonne gold and 14.49 grams per tonne silver and 2.8 meters grading 26.48 grams per tonne gold and 24.2 grams tonne silver. Our Phase 2 diamond drilling program for 2015 will focus on testing remaining priority targets and delineating the 2014 discoveries by testing for extensions to the mineralized shoots interested to-date. At our Monster Lake project in Quebec, we completed 12,700 meters of diamond drilling targeting selected areas along a 4 kilometer long mineralized corridor in the Abitibi Greenstone Belt. The results completed despite of our first exploration program at Monster Lake have been encouraging and that they not only extend the high grade 325 zone at depth below previous drilling where it remains open but it is also identified several new gold drilling structures for further explorations. Historically, previous exploration work had reported a number of high grade drill intersections ranging between 25 to plus 30 grams per tonne. On February 5, 2015, we reported assay results from the final 17 drill holes of the 26 hole program, highlights from the 325 zone included 9.18 meters grading 46.33 grams per tonne gold, 3.42 meters grading 18.68 grams per tonne, and 7.1 meters grading 6.74 grams per tonne gold and this zone remains open at depth. That concludes my review. The important message is that we are continuing to advance key projects and we're seeing promising results from a number of our early stage projects, which is a credit to the great work being done by our exploration teams. I will now turn the call over to Gord for his update on operations.

Thank you very much Craig. For each one of our operations, I'll review performance in 2014 and discuss the outlook for 2015 beginning with Westwood. So after achieving commercial production as guided on July 1, Westwood produced 70,000 ounces of commercial production at a cash cost of $822 per ounce and all-in sustaining task of 1,031 per ounce for 2014. During the fourth quarter at Westwood, the mill processed on average more than 1500 tonnes per day, had grades averaged over 8 grams of gold per tonne, the recovery rate was 96%. The result that Westwood produced 35,000 ounces at a cash cost of $845 an ounce and an AISC of $1,119 per ounce. When we announced to start the commercial production, we estimated that cash cost would average between $750 to $850 per ounce in the second half of the year and we met that goal. As Westwood ramps up over the next few years, we expected to be the strongest contributor amongst our existing assets to provide growth in both gold production and operating cash flow. On January 22, 2015, Westwood experienced a localized rock burst. A news release was issued to issuer the local community and investors that they were no injuries and that there was no impact to current and future production. We continue to benefit from the weaker Canadian dollar. As mentioned for the third, quarter, there are ongoing cost reductions at Westwood including a rigorous tier replacement program and the reuse of certain electrical equipment following the closure of Mouska. The long term plan for Westwood demands the pace of underground development to ensure of positive free cash flow throughout the life of the mine. And as mentioned by Carol, we were able to secure flow through financing to fund the expansion development work at Westwood this year, as well as exploration in Ontario and Quebec. For 2015, the Westwood is expected to produce between 110,000 to 130,000 ounces of gold. We do expect some variation in production levels from quarter-to-quarter, due to the sequencing of underground development as we work to expand the number of working areas and to provide operational flexibility to the mine operating team while stabilizing the short term variability of the production results in future. We expect that the first and fourth quarters of 2015 to be the lightest, while the second and third quarters accounting for approximately 60% of the year’s production. Turning to Slide 30 at Rosebel, Rosebel produced 325,000 attributable ounces of gold in 2014 at a cash cost of $804 per ounce and an AISC of $1045 per ounce. Lower grades in the first half of the year offset higher throughput. We worked throughout 2014 on improving our grade control including a change to use RC drilling rather than the blast hole sampling for grade control. The result has been positive as dilution has decreased and grade reconciliation has improved. Head grade improved in the fourth quarter to 0.96 grams per tonne pulling the average for the year up to 0.86 grams per tonne. At Rosebel, in the fourth quarter of 2014, the mine stripping ratio was 2.9, throughput was a 3.3 million tonnes bringing the 2014 throughput slightly over 13 million tons, and the mill recovery rate was 96%. With the result in production of 94,000 attributable ounces at a cash cost of $678 per ounce, and all-in sustaining cost of $916 per ounce for the fourth quarter. Several factors played a role in improving the operation. Rosebel implemented a number of technical measures stemming from the grade control audit in the first half of year including the introduction of RC drilling for grade control, mentioned earlier, and establishing a pre production stockpile where materials of variable rock hardness are blended to reduce variability of the mill feed. As a result, we have seen a reduction in the consumption of power and reagents as well as increase in gold recovery. We have also implemented better blasting practices to provide better measurement of blast heave leading to reduced dilution. In parallel, our cost and productivity improvement that I talked to you about last quarter, continues to reap benefits including improved drill, loading unit and truck-haul productivity, better mill availability together with an improved ratio of planned to unplanned maintenance, and an improved correlation between the mine plan and actual mine performance. In 2015, we expect to continue to realize the benefits from these initiatives and others. Our priorities continue to be on improving grades and increasing operating efficiencies. In 2015, we estimate the attributable production to be in the range of 290,000 to 300,000 ounces at Rosebel. On Slide 31, we look at Essakane. In 2014, Essakane produced 332,000 attributable ounces of gold, an increase of 33% from 2013. This was realized due to a 21% increase in grades and 12% increase in throughput. The cash costs were $852 per ounce with an all-in sustaining cost of $1060 per ounce over the full year for 2014. Throughputs for the year was 11.9 million tonnes well above the name plate capacity of 10.8 million tonnes per annum. The commissioning of the expanded mill early in 2014 enabled the processing of a significantly higher proportion of hard and transition rock, which we expect will remain at over 90% of the mill feed going forward. At Essakane in the fourth quarter of 2014, the stripping ratio was 3.1 bringing the annual ratio up slightly to 2.7. The grade was 1.28 grams of gold per tonne and no recoveries when 92%. Result in production was 89,000 ounces of attributable gold at cash cost of $828 an ounce and an all-in sustaining cost at $955 per ounce. We feel the greatest opportunity to reduce our cost structure at Essakane may come from process improvement initiatives, actively being implemented in 2015. Essakane's attributable production in 2015 is expected to be between 360,000 and 370,000 ounces due to the benefit of a full year production from the expanded plant and allowing for increased processing of higher grade hard rock. At our Sadiola joint venture in Mali, attributable gold production was 84,000 ounces in 2014 with 20,000 ounces of that being produced in the fourth quarter, slightly lower from the previous quarters due to grades partially offset by higher throughput and recoveries. A decision respecting the future expansion at Sadiola to accommodate hard rock processing has not yet been made. As any future expansion requires a willing partner and a long term supply of lower cost reliable and uninterrupted power. In 2015 we will deplete the existing supply of soft rock and throughput is expected to rapidly decline thereafter. Slide 33, when we look at Niobec which produced 5.6 million kilograms of Niobium in 2014, an improvement from the prior year mainly as a result of improved grades and recoveries. Operating margins were additionally impacted by operational efficiencies that helped to reduce cash costs and by a stronger US dollar relative to the Canadian dollar. Reported in our statements of discontinued business, Niobec contributed positive cash flow throughout 2014 and for the first three weeks of 2015. On January 22, 2015, we sold Niobec for a total consideration of $530 million, $500 million of that in cash upon closing a significant and immediate realization of its future value. I’ll now turn you back to Steve to wrap up.

Thanks Gord. As you can tell, we've made some huge progress in our cost structure. The ultimate goal is to get as close as possible to an all-in sustaining cost that's closer to $1000. We’re well on our way to doing that. Our reserves show us at least a ten year mine life across the board and on average I should say and we are producing in the order of 840,000 ounces of gold a year. So, obviously very highly levered both cost reduction and gold price. So, our value proposition continues to improve. We are seeing more shareholders come into the stock and more institutional players increase their positions. So, we are quite pleased with the progress we have made and we continue to work very hard to obtain those targets and get towards that cost structure that makes us more and more attractive to investors. So, we are very pleased with our operations in 2014. Our focus on achieving operational excellence through cost reduction, capital discipline and cash preservation we call it the 3 Cs, is producing very solid results. We are really seeing some great robust growth at Essakane. I can’t tell you how pleased I am with the performance that we are seeing with [indiscernible] at Essakane right now I just got back from a trip in Essakane in Burkina Faso, and the transformation of Essakane has been significant. We are seeing ramp up in production at Westwood [indiscernible] and the amount of productivity improvement at Westwood has been huge. And we are seeing better grades at Rosebel, and Rosebel itself represents a game changer as we have talked about it at IAMGOLD we are continuing to drill in and around the mineral concession. We are seeing some great innovative techniques in improving our grade reconciliation and Gord is headed down there this week to do some further work to ensure that we are seeing the same progress at Rosebel, as we have at Essakane and Westwood. So, all-in-all we are very consistent in our progress to reduce all-in sustaining costs and of course you heard Craig and his very, very encouraging exploration results. I can’t tell you how pleased we all are and our Board is with Craig's team where he has reduced his budget so significantly and yet has delivered such strong result. All signs of very solid progress and our expectation is that of course he is going to continue to do that. So, this year has the underpinnings for a particularly transformative one. It's going to be an exciting year for IAMGOLD. We reinvest in the further optimization of our portfolio. We continue to see some very good success at each of our mines and we avail ourselves of any M&A opportunities that has to be accretive for shareholders. So we are in the enviable position of having closer to $900 million in cash. As I said, it’s not going to burn a hole in our pockets. We are not in any kind of a rush. We are going to be very disciplined. We are going to be very careful. We are getting lots of ideas as you can imagine from a lot of people, lots of suggestions. So, but we are going to take our time. We are going to make sure whatever we do makes good sense for our shareholders. So on that note, thank you for listening and we are in a position now to take some questions.

[Operator Instructions] First question today is from Brett Levy with Jefferies. Please go ahead.

Potential M&A opportunities, have you thought a little bit about how you’re going to pay for it equity, debt, cash et cetera. And then sort of rough size in terms of, I don’t know total cost of the acquisition obviously it’s going to be something that kind of move the dial.

I think the perfect storm for us would be a situation where we have a company out there, a gold producing company that has got some very, very good opportunities to increase production, near term production, but don't have the balance sheet to support it. So there are a number of companies out there that have had some good success where they either brought deposits along or have brought deposits to a point where they are near production. But they are struggling because as you know in today's world, very difficult to raise equity without taking huge discounts. So, our perfect situation would be where would be able to pick some opportunity around that potentially use our paper to acquire the entity and then our cash on a consolidated basis to bring those deposits that are near term in production – in their production – it's a win for the company that we acquire, it's a win for IAMGOLD shareholders. And let's not forget that at Sadiola, where we have our 41% interest along with Anglo and the Malian Government. We have a huge investment opportunity there. We don't want to take a 100% of that particular project just from an overall risk management standpoint, but that project in itself would add, would bring us back up to about 160,000 ounces of production worth about a US$250 million investments. So there's organic growth that we're seeing at IAMGOLD, highlighting something like Sadiola. There's also opportunities out there for companies to get together with us in some former fashion to increase production at a very attractive economic rates.

So when you say, use your paper, you mean potentially debt and equity or equity to buy and then cash to ramp it up?

Debt and equity, and again with the strength of our balance sheet, we’re getting all sorts of innovative ideas coming from our friendly bankers on how that might work but we're not going to put our balance sheet in any kind of jeopardy. As I’ve said time and time again, the balance sheet is something that we treasure in terms of making sure it stays strong. So we're not going to put that in any kind of harms way. But at the same time, we’ve done a good job at conserving cash, building cash and we’re now in a position to hopefully see something that will add some significant value. So at the same time that we cut our cost at our mines, which we've done a great job at over the last couple of years, if we could find an opportunity that has an all-in sustaining cost that's lower than our portfolio average rate now, we obviously create margin for our shareholders. And At the end of the day, it’s all about cash flow and in this business and that's we’re looking for opportunities to bring at free cash flow so that we can comfortably grow our business.

Can you talk a little bit - you said free cash flow by the fourth quarter. Is that after CapEx, what do you see as CapEx for the ongoing post Niobec sale -

That's everything. All of our capital, so right now two of our three mines are cash flow positive both Rosebel and Essakane are cash flow positive. Westwood right now, is still burning some cash is because it's in its development stage as it ramps up it’s commercial production, it will become cash flow positive as well. So what I want to do and what I've asked the team to do is, not just look at our mines and say we’re cash flow positive in aggregate, which we are by the way today. What I want to be able to say to our shareholders is that, taking into account our corporate G&A, which we've cut from $59 million to $40 million. Taking into account our financing, which runs at round that $40 million mark, taking into account our exploration that runs at around $40 million and I’m rounding here. So there’s an additional $120 million to burn on top of what we use at our mines that I want to neutralize with good costs, good discipline. And so what we're saying to our shareholders is that, by end of 2015 we want to be cash flow positive on a consolidated basis and that's a huge achievement for IAM GOLD because our major - our major arbitrage has been our, the factor mines, couple of our mines are very tough in terms of grade and hard rock. And our operations and our exploration people have just done a tremendous job in reducing that cost structure. So all-in, I want to see as producing cash after we've taken every dollar of expense right up to the corporate level.

Thanks very much guys.

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

Hi everyone, congratulations on solid results. Couple of questions from me. First on Falagountou deposit, can you please outline the tonnage, the grades and how much are the mill feed will make up in 2015?

The average grades there - I don't have it handy right now, but I believe it's similar to the average reserves grade, slightly higher. It’s in the neighborhood of 1.05 to 1.1, somewhere in that neighborhood. Total contained ounces there within the total reserve is around 225,000 ounces. We are working on establishing haul road over there and we’ll be doing some pre stripping this year. I don't believe there's a material amount of production coming from Falagountou this year. It is somewhat softer rock, but most of it I believe starts hitting the mill next year after doing our infrastructure construction this year.

Okay, thanks. And on Rosebel, can you possibly elaborate on the potential heap leaching option there, specifically what are you thinking in terms of production and when it begin contributing, how much capital will it need and are you going to publish any sort of study on this?

I’ll answer your last question first. When we get to the point where we’re prepared to make a decision in investment, we certainly will publish some sort of report on what we're thinking there. It's really fairly early days right now. We've set out a number of samples from the different pits and zones at Rosebel, up to the United States to one of sort pre-eminent heap leach consulting and test laboratories. Those tests are ongoing right now. Some areas look very attractive and others less attractive. On a conceptual level, what we’re thinking about would be to add a heap leach as a marginal operation looking at the lower grade hard rock material to reduce the amount of operating cost - you lower you don't need concrete, you don’t need cement, and that sort of thing. That is sort of at the high level concept would be to augment what would be going to the mill by taking out lower grade portion provided its economic. The second concept we're looking at is for satellite deposits specially ones within EJBA [ph] that are further out. Obviously, haulage cost but a bigger part of the equation for those operations. So, for all of those operations, we will be evaluating heap leach as an alternative exploitation method, should we able to encounter some attractive deposits out there. At the end of the day, its early days, we're testing hard and the guys are still going at it very aggressively. But I would not expect to see anything definitive at least till the third, fourth quarter of this year.

Okay, great. And lastly on Sadiola. You sound more upbeat about the possible extension here. Is this more of a function of improved economics or your discussion with Anglo gold.

We have always been very optimistic, the origins of IAMGOLD start with Sadiola. It's a 1.7, 1.8 gram deposit. We've been there over 17 years together with Anglo we had purchased about $150 million with equipment that was to be dedicated towards the expansion. We have 18 megawatts of power generation at the site today. So we have a long history in Mali and we've never had any kind of operational issues that have been tied to any of the political issues in Mali. So as much as Mali has a high data in terms of its political system, for us it's been a very strong contributor to IAMGOLD over the years. We've mined over 7 million ounces over that deposit. So, we see a lot of opportunities at Sadiola. Anglo because of their financial position, doesn't have the where withal to make the investment. And I can't speak for [van CAT] [ph], he and I have become much closer in terms of our strategic discussions and business discussion and we are trying to help each other. And one of the things that we would like to do is help the Anglo buying the partner to come in and work with us for we would operate presumably with our expertise. We are the ones who design the expansion, and yeah we see that 1250 gold we see a project that has 17%, 18% after tax variable return. And we would move that production figure from sitting around that 200 mark, back to around the 400 mark that it seem on average through the year. So, answer to your question is, we see Sadiola as an excellent organic opportunity for IAMGOLD. It's an area we know well and I think we can leverage very well after current infrastructure. We can leverage off the current expertise and we can add real value. So, it's one of the situations where if we can help Anglo move this ahead, we will do it and we have been doing that. So the government of Mali obviously would like that to move ahead as well. So we have a number of people and I think van CAT would tell there is the same that I have been looking at it and he hasn’t been - he has been very public about the fact that he would like to find somebody to replace him there. So, that's why we continue to do.

Thanks Steve. Just a quick follow up on that, can we - with your balance sheet now and the strong liquidity obviously, can we possibly see or maybe take a larger stake in Sadiola and not 100% but largest stake and find the minority partner to replace Anglo gold?

My strong preference there is the key [indiscernible] the 41% maybe go to 51%. We've got our technical people looking at whether or not we can do a smaller expansion and make sure that it's economic. The results of that review haven't been completed. But given the fact that Essakane is going to be producing 400,000 ounces and we’ve got Mali potentially going up to 400,000 and then Rosebel will hopeful is going to be able to maintain or grow production. We have a large percentage of our production in one geographic area and my strong preference would be to try and make us more balanced between North America, South America and West Africa. So we don’t have any kind of severe allergy to expanding in West Africa. We like West Africa. Our history is in West Africa but from a risk management standpoint, I just think it's good - we will good governance to try to spread out a little bit. So rather keep our percentage or build it a little bit more, but right now we are not really looking at taking on 100% at Sadiola.

Okay. Thank you very much for taking my questions.

Your next question is from Steven Green with TD Securities. Please go ahead.

Good morning, everyone. This one I guess is for Gord. If you can just tell us - I guess expand a bit on at Westwood why the quarterly difference in Q2 and Q3 respectively stronger are you expecting shutdowns in Q1 and Q4?

Its actually Q1 and Q4 that are lighter and Q2 and Q3 are higher. It's really to do with sequencing speed. The nature of the deposit there is some very high grades stuffs and very low grade stuff are not very lower grade. And depending on how those sequenced in, given the current amount of development we have in place, the timing is such that we’re in slightly lower grade materials here in the first part of the year. There is a shut down scheduled over the third quarter and we are not planning on taking on in the first quarter right now. As we go forward and overtime, and as the reach of the development starts to spread out into multiple operating areas, we’ll be able to I think stabilize the fluctuation on grade through time a little bit. But right now given that's its still fairly early in the life, we have limited options as to which steps we can take when.

Okay, great. That's helpful. Thanks.

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

Good morning guys. Just quick question on Westwood reserve. I'm just trying to understand, why the grade declined to 7 gram per ton versus the previous 9?

When we came out with the reserve last year, I think we were bit aggressive, our dilution assumption. I mean the resource grade is around 13 and at that point in time we had put a 35% dilution on reserves. As we've been doing LOM this year and we've done four iterations of the LOM during 2014. So we are doing a lot of work on it. And we thought that was more prudent for right now about 50% dilution. I've reported previously in conference calls that in fact above where dilution is hitting for 2014. It's more or less on plan. We do see some opportunities to improve it. Right now, what the operation is focusing on is, as I sort of answered for Steve there, is really making sure we have operational flexibility and access to multiple working areas and we do expect as we look forward there are some really interesting opportunities to reduce that dilution figure in future. With all results there, we are seeing very nice positive reconciliation on both tonnes and grade as we are mining. It's early days, it's not statically significant and not for us to apply to stock use yet but its certainly positive what we’re seeing so far. So we - prudent to put a relatively conservative dilution factor on the reserves.

And then just moving on to the inferred category there, at that point what's embedded in the calculation there in terms of dilution it's already in the 10.86?

There is the natural dilution of – the orebody are done at a minimum list of 2.5 meters, whereas a lot of the veins are actually around 2 meters. So there are all diluted to about 2.5 meters if you will.

Okay. And your minimum cut off I read was 2 meters 6 gram per tonne material right.

Yes, exactly.

I guess second question would be on Rosebel. And I know I ask this every single quarter, but how much softer ore do you have left and what are your plans going forward in terms of the hard rock material?

Last year I think we ran around 31%, 32% hard rock, this year plan has us around 35% hard rock. Moving forward we get up to around 80% hard rock, I think about 2018. So there is still some significant amounts left but it's depleting rapidly. And it is the focus of our exploration activities in the area to locate additional soft rock. What happens in practice Anita is, that’s what is in our reserves and our resources. When we actually go in mine, we typically get a pretty strong pick in tonnage especially in the soft end transition, while we do get some in the hard rock as well. So when you do the reconciliation from the block model into the mine, great control model, we gain these extra tonnes more on the soft end. So I can tell - I told you sort of what's in the plan, what happens in practice is we tend to push it out a little bit further because we find additional soft rock.

All right. Thank you very much.

Thank you. I think that takes us to the end of the hour and I know there are other conference calls today that our audience will want to run to. So thank you very much for participating on the call. If you have any follow-up questions, the IR team is here to take your calls for those of you who are still in queue on the questions. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines. Thank you for participating. Have a pleasant day.