IAMGOLD Corporation (IAG) Q1 2015 Earnings Report, Transcript and Summary

Welcome to the IAMGOLD 2015 First Quarter Operating and Financial Results Conference Call and Webcast. [Operator Instructions]. At this time I would like to turn the conference over to Bob Tait, Vice President, Investor Relations for IAMGOLD. Please go ahead, Mr. Tait.

Thank you, Bob. Welcome 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, Vice President, Legal and Corporate Secretary. Last night we published ours news release and as well posted our MD&A and financial statements to the website. Our remarks today include forward-looking statements. Please refer to those documents that I just mentioned, for the cautionary language there for forward-looking information and be advised that the same cautionary-language applies to our remarks during the call. Our opening remarks will refer to the slides that are posted to our website. I will now turn the call over to President and CEO, Steve Letwin.

Thank you Bob. Good morning everyone and thank you for joining us. On slide five, you can see we had a very solid start to the year. We said we were going to continue focusing on cost containment, capital discipline and cash preservation and we have delivered performing well across all key metrics. With attributable production of 208,000 ounces, up 21% from a year ago. We're trending towards the midpoint of our guidance. We should see higher production in the next two quarters. All-in sustaining costs were $1,113 an ounce, down 7% from a year ago. We generated $30 million net cash flow from operations, up 7% from last year. Our capital expenditures were 43% lower year-over-year and we ended the quarter with nearly $900 million in cash and bullion. Our exploration projects are delivering promising results and we're following through on strategies to grow the business and increase returns going forward. We have been very clear that our objective is to have our operations generate positive free cash flow. Rosebel and Essakane continue to do that and Westwood is being ramped up at a pace that will enable the operation to move to a free cash flow position sooner rather than later. Our operations continue to work hard at cost containment. Westwood's all-in sustaining costs were an anomaly in the first quarter and Gord is going to talk about how costs are expected to trend for the rest of the year and beyond. Once Westwood is running at full capacity, we expect it to be our lowest cost operation. Rosebel is benefiting from initiatives to increase operating efficiencies and Essakane with all-in sustaining costs already below $1,000 an ounce, is implementing a number of cost improvement initiatives this year. Our focus on cost containment is reflected in the decision to reduce the number of Directors on our Board from 10 to 7. Bill Pugliese, our founder of IAMGOLD and Board Chairman, will be retiring after 25 years. He founded the company with our first mine in Mali as you know. We're also going to see directors Guy Dufresne and John Shaw retire. They will not be standing for reelection after serving the Board for nine years. I want to thank all three of them for their dedication to this great company. With the positive operating results in the first quarter we maintain our production and cost guidance for the year. On slide six, we talk about growth for the past couple of years, our focus has been on building a strong foundation for growth. The operational excellence, lower cost structure and financial flexibility that we have today, are a result of prudent financial management and the decision to increase our focus on the gold business. On slide seven, our three growth strategies are aligned with our goal of achieving in the sustaining positive free cash flow and building a future pipeline for growth. Strategy number one is to continue optimizing the performance of our existing mines. Essakane will be the main growth engine over the next few years, with Falagountou expected to extend the number of years of peak production. There are some good opportunities to enhance profitability of Essakane and Rosebel and with Westwood ramping up as planned, the site is increasing its efforts to improve the cost structure. Strategy number two is to advance our exploration projects. Craig MacDougall and his team are doing a first rate job of advancing quality projects, with great potential to add to our reserves. Boto keeps looking better all of the time. We get the resource upgrade at end of last year and now positive results are being incorporated into a final resource model for the ongoing technical studies. By year end we're targeting an initial resource estimate at the Diakha prospect of Siribaya. Gord and Craig will talk more about how we're optimizing performance and advancing exploration, so I will focus on the third strategy which is to pursue growth opportunities through M&A, joint ventures and partnerships. On slide eight we talk about Sadiola as a potential organic growth opportunity, we have talked about Sadiola for a long time and to deploy the proceeds from the sale of Niobec over and above our capital commitments of $230 million this year, we're looking at several options that would improve our production and cost profiles. If we were to acquire Anglo's 41% share of Sadiola and proceed with an expansion, that certainly would be one of them. We have been having discussions with our partner for some time, about proceeding with an expansion that would enable the mining of the hard rock beneath the soon-to-be-depleted oxides. This would be an opportunity for organic growth from an asset that has been producing gold for over 20 years. We're looking at a modified expansion which is an option that we will consider. It would require half the capital outlay and preserve the strength of our balance sheet. Under the full expansion scenario, acquiring Anglo's share of Sadiola would increase our total reserves by 18% and our indicated resources by 13%. With an average reserve grade of 2.1 grams per ton of gold, Sadiola would be our highest grade open pit mine. It has the potential to increase production by up to 3 million ounces and extend the mine life up to 10 years. We expect the expansion to reduce all-in sustaining costs in the surrounding oxide satellite deposits, it would provide exploration upside potential. There is also the potential for stockpiles to sustain production during the transition period and there are options around financing, standalone financing, project financing and obviously partnerships. Sadiola is one of the growth opportunities we're looking at, but we will evaluate all options carefully and make a decision only when satisfied that our investment choice will generate attractive returns. Let me just go off script a little bit and talk about the strategy, because I know a number of our shareholders have had questions about what we're planning to do with our strong cash position. Our first objective is to look at our current mines and see where we can leverage off our infrastructure. Sadiola is an excellent example of where we have been in the country for over 20 years, we have produced over 7 million ounces. I have always said to you that we will not put the balance sheet in jeopardy by overspending and our plan is not to do that. I have been talking to a number of people that are interested in partnering at Sadiola. In the event that we're able to get a partner to replays Anglo, we will look at a full expansion. That will allow us to move our current production basically back toward the 350,000 to 400,000 ounces per year production. We would look to maintain majority control of that asset, i.e., plus-50%. If we can't find a partner we have the option of modifying our expansion to preserve our balance sheet. In other words, we would look at something smaller, still very economically attractive and move ahead on that basis. Again with all the - of the pluses of knowing the asset, having additional ounces added to our portfolio, it is a great pipeline for growth and also leaves the option for us to expand Sadiola at a later time, should we be able to get additional financing through partnership or other mechanisms. I just want to reinforce that preservation of our balance sheet is absolutely critical. It is something that we're going to make sure we do. At the same time because of these brownfield opportunities that we have available like Sadiola, we can leverage off our infrastructure and go with low risk investments that allow us to enhance returns for shareholders. Obviously the work that is being done by Craig MacDougall around Boto which looks to be a very attractive line a few years down the road will also add to our pipeline and create a look for the company that is very attractive going forward. On that note, I will pass it over to Carol and Carol can talk about our financial results.

Thank you Steve. As Steve indicated at the beginning, we had a strong start to the year. Our results reflect the prudent management on our operations in today's gold price environment. Reported net earnings in the first quarter including discontinued operations were $24 million. The most significant adjusting items, a $43.5 million gain on the sale of the Diavik royalty and the $37.8 million gain on the sale of Niobec. After normalizing earnings for these one-time items and other costs not representative of the underlying business, the adjusted net loss is $0.07 a share, compared to earnings of $0.03 per share in the same period last year. The variance is due to higher cost of sales, partially offset by higher revenues. The next two slides show how each of our operations contributed to the increases. The 13% increase in revenues year-over-year to $245 million in the first quarter 2015, was due to a 20% increase in gold sales, partially offset by a 5% decrease in the average realized gold price. Gold sales were driven higher by a 26% or 19,000 ounce increase at Essakane and the sale of 27,000 ounces at Westwood, compared to none in the first quarter of 2014 when Westwood was not yet in commercial production. Partially offsetting these increases were lower sales due to the Mouska closure and lower production at Rosebel. Turning to cost of sales, cost of sales increased 25% year-over-year to $232 million, due to higher operating costs and depreciation. Looking at operating costs, the $23 million increase was mainly due to Westwood, as its operating costs were not included in the previous year's operating results. Harder rock and lower capitalized stripping at Essakane had a small impact by comparison. Partially offsetting these increases were the closure of Mouska and lower mining and milling costs at Rosebel. With depreciation, Westwood accounted for half of the $24 million increase, as we did not begin depreciating assets until the third quarter of last year after commencing commercial production. The balance of the increase was due to higher production and lower reserves at Essakane and higher amortization of capitalized stripping at Rosebel. Net cash from operating activities including discontinued operations was $30 million in the first quarter 2015, up 7% from the first quarter 2014. In addition to paying significantly lower income taxes, we improved our working capital management processes. Removing the impact of changes in working capital, net cash from operating activities per share was $0.14 in the first quarter. Our cash, cash equivalents and gold bullion position was $889 million as of March 31st, 2015. In addition to the $503 million from the sale of Niobec, our strong cash position includes $39 million from the flow-through shares and $53 million from the sale of the Diavik royalty. Attributable production in the first quarter was 208,000 ounces, up 21% or 36,000 ounces from the previous year. The main contributors to the increase were Westwood which accounted for 21,000 ounces and Essakane with a 39% increase in grades, driving production up 31%. Production was slightly lower at Rosebel due to lower grades, partially offset by higher through-put and recovery. Compared to the fourth quarter 2014, attributable production was lower as we expected. We had guided that Westwood's production would be lighter in the first and last quarters of this year, due to the planned mining of the lower grade lenses. We anticipate higher production in the second and third quarters with the mining of higher grade zones. Rosebel's production was down from the previous quarter, due to mine sequencing resulting in lower grades. Essakane's production remained unchanged as higher grades were offset by lower throughput. All-in sustaining costs of $1,113 per ounce in the first quarter were $85 per ounce lower than the same quarter in 2014. This reflects an 18% increase in the volume of sales and a 5% reduction in total costs. Sustaining capital expenditures were the same in both periods. Compared to the fourth quarter, 2014 all-in sustaining costs were higher, with $64 per ounce in realized losses from fuel contracts and currency hedges included in the first quarter 2015. At an operating level Westwood's all-in sustaining costs in the first quarter reflect the costs associated with the rehabilitation activities in the areas affected by the localized rock burst in January. They are not indicative of what we expect going forward and for 2015 we expect Westwood's all-in sustaining costs to range between $1,100 and $1,175 per ounce sold. As production increases with the ramp-up, we should see a corresponding decline in unit cost. Substantial progress has been made at improving our cost structure at our other two owner operated mines. Many of the benefits from the cost efficiency initiatives implemented in 2014 are expected to flow through Rosebel in the coming quarters and at Essakane initiatives are underway to improve mining and milling efficiencies. Sadiola's all-in sustaining costs the best they have been in years, falling 17% from the fourth quarter to $914 per ounce. I'm confident that our continued focus on optimizing cash flow and our prudent approach to financial management will lead to stronger quarters ahead. And with that, I will turn it over to Craig, who will talk about exploration.

Thank you Carol. Good morning everyone. As we have previously stated, our 2015 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. During the quarter we were active with several aggressive infill drilling programs intended to upgrade current resources or establish a maiden resource at key projects. Recorded assay results have shown some very attractive grades from a number of greenfield projects, for which further exploration is planned. In the first quarter, expenditures for exploration and project studies totaled $14.4 million, of which $9.6 million was expensed and $4.8 million was capitalized. This represents a small increase of $400,000 in total exploration expenditures, compared to the same prior year period, reflecting the implementation of a similar level of planned exploration activities. Drilling activities during the quarter on active projects and mine sites totaled approximately 83,100 meters. I will now take the opportunity to discuss our advanced exploration projects, with highlights that include some of the more significant drill intercepts from our recent drilling programs. The drilling results from these projects have been previously disclosed, in accordance with the Securities regulations and have been duly signed off by the qualified person within the company who reported them. One of our most exciting projects and a priority for us this year is Boto Gold. The project comprises 236 square kilometers of exploration licenses located in eastern Senegal, along the Senegal-Mali border. The project posts an indicated resource averaging 1.7 grams of gold per ton, for 1.2 million contained ounces and additional inferred resources averaging 1.8 grams of gold per ton for 635,000 contained ounces. A significant percentage of the total resources are derived from the newly discovered Malikoundi deposit which is the largest deposit discovered to date on the property. Ongoing drilling has successfully expanded the resource base and continues to focus on converting the inferred resource to an indicated category. We reported final assay results from our 2014 drilling program in February. While these results were not included in the year end resource estimate, they continue to confirm strong intervals of gold mineralization exhibiting high grades over significant thickness from the core of the Malikoundi deposit. We have now completed the planned 50 by 50 meter infill delineation drilling campaign initiated in 2014, with the completion of 13,300 meters of diamond drilling in 2015. An updated resource estimate is anticipated in the third quarter, once the remaining assay results have been validated and incorporated into the resource model. Onsite, drilling continues in support of planned geotechnical and metallurgical sampling and testing programs which are due for completion during the quarter. Our exploration target objective for the Boto Gold project is based on the drilling completed to date, increase the indicated resource to a range of 1.5 million to 2 million contained ounces at a grade of between 1.7 grams and 2 grams per ton. I must caution you that the potential quantity and grade is conceptual in nature and that insufficient exploration has been completed [Technical Difficulty], with any certainty the targeted factors. Also in the first quarter of 2015 at the Siribaya project in Mali, approximately 9,700 meters of diamond and reverse circulation drilling was completed, as part of an infill drilling program on the newly discovered Diakha prospect. The Diakha prospect is located along the southern extension of our Boto Malikoundi mineralized trend that crosses the western border of Mali into Senegal. Final assay results from the 2014 drilling program were reported by our joint venture partner on February 27, 2015. Approximately 15,000 to 20,000 meters of reverse circulation and diamond drilling are planned this year to delineate the Diakha discovery and advance towards the completion of a maiden resource estimate by the end of 2015 as results warrant. At our wholly owned Pitangui gold project in Minas Gerais State, Brazil, we had previous reported an initial resource estimate comprising an inferred resource of 638,000 ounces, grade 4.88 grams of gold per ton. The resource delineation drilling program initiated in 2014 continued through the first quarter of 2015. Just over 5,400 meters of diamond drilling was completed in the first quarter. Programs continue to focus on upgrading resources within the core area of the Sao Sebastiao resource on a 50x50 meter drill hole spacing. The infill drilling program is expected to be completed in the second quarter and the result and assay results will be incorporated in an updated resource model, when all of the results are received and validated from this current program. In 2014 we optioned the Eastern Borosi project in northeast Nicaragua and completed 40 drill holes testing 5 separate gold/silver vein systems, within the 176 square kilometer land package. Final drilling results from the 2014 program were announced by our joint venture partner in January 2015 which continued to yield encouraging results. During the quarter drilling activities resumed, initially targeting additional vein systems. Approximately 2,600 meters of diamond drilling was completed in the first quarter. Assay results reported to-date include 4.1 meters grading 8.93 grams per ton gold and 57.4 grams per tons silver, from drill hole LS15-008 which was testing the Cadillac vein. The 2015 exploration program is anticipated to involve the completion of approximately 5,500 meters of diamond drilling, designed to continue to test selected vein systems at shallow depth, as well as target the depth extent of higher grade intervals identified from the 2014 program. At our Monster Lake project in Quebec, we announced the final drilling results from the 2014 program on February 5, 2015 which included a high grade intercept from the 325-Megane zone, grading 46.33 grams per ton gold over a 9.18 meter true width. Diamond drilling activities resumed during the quarter with approximately 5,000 meters completed by the end of the quarter. The program which took advantage of favorable winter access continued to target extensions of the high grade 325 zone at depth, as well as test prioritized areas along the projected main tier zone, posting the zone. Assay results are pending. That concludes my review. The important message is that our exploration program continues to deliver encouraging results from our key projects and we're continuing to advance them, building a solid pipeline of growth for the future. I will now turn the call over to Gord.

Thanks very much Craig. Our operating results in the first quarter were essentially on plan. Our GMs and their teams are working hard to optimize performance. They have done an outstanding job motivating the workforce to continually seek opportunities to optimize performance, while ensuring that the commitment to safety remains top of mind. Have a look at what they did in the quarter and what we can expect going forward. At Westwood we guided that quarterly production would vary during 2015, as we ramp up to full capacity over the next four years, the first and fourth quarters of this year are expected to be the lightest, accounting for about 40% of annual production. Higher production is anticipated in the second and third quarters. The reason for the varying levels of production relates to mine sequencing. Westwood has five mining sectors. The sector we're mining now has both high grade and low grade lenses. Our plan is to mine the lower grade Lenses in first and last quarters of this year and the higher great lenses in the middle two quarters. This explains the variability in grade which translates directly into gold production. Once we're developed sufficiently to allow mining of multiple sectors, the opportunity to blend over from high grade to lower grade zones should moderate grade variability. In the first quarter, Westwood produced 22,000 ounces. The mill processed on average 1300 tons per day. The recovery rate was 96%, consistent with the previous quarter and head grades averaged slightly over 6 grams of gold per ton. All-in sustaining costs per ounce were unusually high in the first quarter. Although this reflects the high level of stope preparation necessary to bring multiple sectors into production as expected, another factor were costs associated with the rehabilitation activities following the localized rock burst in January that we talked about last quarter. We expect costs to be lower in the next quarter and for 2015 on average at Westwood, we're looking at a range of $1,100 to $1,175 per ounce. Longer term, all-in sustaining costs will trend downwards corresponding with the ramp-up in production. Development advance rates in the quarter were 8.7 meters per day per crew. Slightly lower than the previous quarter due to rock burst, but excellent by industry standards. With development performance stabilized at planned levels, the focus is on reducing unit development costs through such initiatives aimed at improving drilling productivity and reducing stope cycle time and dilution. We're also testing electric mining equipment that could provide us with further cost savings. Outlook for Westwood remains very positive. We're on track to meet guidance this year and we look forward to issuing an updated life of mine plan in the third quarter. Looking at Rosebel, Rosebel produced 76,000 attributable ounces of gold in the quarter, at total cash costs of $850 an ounce and all-in sustaining costs of $1,037 per ounce of gold. Production was lower than the previous quarter, due to two factors, lower throughput reflected the decrease in proportion of soft rock from 27% to 16% of mill feed and lower grades were due to mine sequencing. With the higher proportion of hard and transition rock and lower grades expected this year, the operation continues to benefit from measures implemented in 2014 to reduce the variability of the mill feed blend and to improve grade control. Stabilizing the mill feed before it reaches the primary crusher has reduced power and reagent consumption and has allowed the operation to sustain gold recoveries at 96%. The maintenance team has been very effective in improving mill availability which is now running at 96%. Outstanding for any plant, especially one constructed 11 years ago from primarily used equipment. On the last conference call, I talked about how we were replacing blast hole sampling with RC drilling for grade control. This has helped reduce dilution, as we mine the harder fresh rock with more discrete contacts between waste rock and the ore. The operation is benefiting from productivity improvement initiatives introduced last year, in collaboration with our external consultant, for example, eliminating redundant maintenance activities has increased equipment availability and reduced costs. Improved shift coordination has reduced idle equipment time and a revamped system for cleaning ad filtering oil has reduced truck down time. You can appreciate that the positive benefits from many initiatives add up and have made a significant sustainable improvement to the cost structure. We have been successful at optimizing performance and until we secure a source of soft rock, we will be working even harder and creatively, to prolong the viability of this operation. Looking at Essakane. Essakane performed as planned in the quarter. The production of 89,000 attributable ounces was unchanged from the fourth quarter 2014, as an increase in grades to 1.33 grams of gold per ton, was offset by slightly lower throughput. The lower throughput was the result of a planned mill shut down in February, that we chose to extend so that we could complete several maintenance tasks originally scheduled for April. Having done this, we should see higher production in the next three quarters. I should add also that with mill recoveries at 91%, we see some good opportunities for improvement in that area. Essakane has become a model operation since commissioning the expanded mill in the first quarter of last year. We're at 85% hard rock, yet maintaining throughput levels above name plate capacity. The recent announcement of the significant increases in the estimated resource of the Falagountou deposit, further enhances the value of this mine, the 84% increase in the indicated resource to 613,000 ounces, and a 10% increase in the grade to 1.5 grams of gold per ton, should extend Essakane's peak production levels out further than the next four years. The site is continuing its resource development work at Falagountou along strike and down dip and completing mine design and scheduling work to bring the additional ounces into the mine plan. We should be ready to begin mining the deposit in the second half of this year, after completing the road to the mill which is now under construction. We also have a great story around costs. Total cash costs at Essakane were $761 an ounce and all-in sustaining costs were $988 an ounce. That is the second quarter in a row that they have been below $1000 an ounce. So great work from Gil Ferlat and his team and I want to emphasize that, because Steve has been adamant that we're going to get there this year. The site has a lot of initiatives underway to further reduce costs. They are looking at ways to improve power management, reduce the consumption of consumables and increase mobile equipment and mill availability. They are enhancing the logistics process to enable better tracking of shipments and the collaborative work with our external consultant is aimed at improving management systems and planning methods. As with Rosebel, some of the benefits will continue to build over time to flow through the cost structure in future periods. Turning to Sadiola. Attributable production of 19,000 ounces was little changed from the fourth quarter of 2014, as lower grades were offset by higher throughput and recoveries. Total cash costs have come down for the second quarter in a row ,and all-in sustaining costs were down $186 an ounce. Steve has talked about brownfield expansion opportunity there. With that, I will turn you back to Steve to wrap up.

Thanks Gord. A solid quarter all around. We're generating positive free cash flow from our two largest mines. Westwood is ramping up according to plan and we're continuing to improve operating efficiencies. We're getting ready to mine Falagountou and Boto is looking more and more promise. So we're on track to meet our production and cost guidance for the year and we will keep you posted on any material updates, including how we intend to deploy cash over and above our capital commitments. Thank you for joining us. Let's open it up for questions.

[Operator Instructions]. Our first question today comes from Brett Levy of Jefferies. Please go ahead.

Can you just sort of refresh our memory, what is the full version of the Sadiola investment and what would the partial version be, in terms of total amount invested and then you said you have target hurdle rates in terms of what your returns would need to be? Can you sort of talk about what the hurdle rate might be?

It is Steve Letwin. Without talking about the cost of the acquisition, the all-in expansion was in the range of $5 million to $550 million U.S.. That was for a $7.2 million ton a year expansion which would allow us basically to move our production back up. It is sitting around the 160,000 ounce range now and as you know over the next two years, it would essentially deplete to zero. With that investment, we were looking at moving it back up towards 350,000 to 400,000 ounces and at $1,300 gold, we were looking at somewhere between a 19% and 21% after-tax rate of return. Our idea here if we cannot find a partner and we're successful in negotiating the acquisition from Anglo, would be that we would modify the capital to basically cut that in half and therefore our modified expansion would look at somewhere around 180,000 ounces a year of production to 200,000 ounces and the after-tax rate of return at the $1,300 level would be closer to the 16% or 17% after-tax rate of return. So that doesn't include any of the upside that we believe surrounds that particular deposit. We have initiated some additional drilling for oxides there. As we speak, we're seeing more oxides than what we had initially thought. We believe we have a nice solution if we don't find a partner. If we find a partner, then we already have the design in place. And again, this assumes that we're able to successfully negotiate an acquisition with Anglo, who have publicly stated they want to get out of Sadiola or out of Mali. I guess it is a work in progress. News at 11.00 as to whether we're able to accomplish all of that. But we're hopeful we can. A lot of it depends on where Anglo ends up and we will have to wait and see where that is.

And then you have got a number of mines that have all-in sustaining costs that are very close to where the spot price of gold is now, close to $1200. Is there any assets that you guys would look at idling and sort of give us a rough sense of the math of what it takes to turn the mine off or on?

Right now, Essakane is below $1,000 an ounce and we're hoping to get Rosebel very close to that. The only mine now that is above the spot price is Westwood and it is ramping up. So I am not exactly sure which mine you are talking about.

Yes, I mean I was wondering a little bit about Rosebel actually. But Westwood, what is the target all-in sustaining costs at Westwood once you get everything up and running?

Target all-in sustaining there probably around $800 to $900.

And then Monster Lake?

Monster Lake is still in exploration phase. I can't speak to anything about that yet.

But it will be a low cost mining operation, as best as you can tell that is the idea?

Well, it is going be a hopefully a very high grade operation which typically translates into lower all-in sustaining costs when we get there, yes.

But just to caution Monster Lake is an early stage exploration project. We haven't defined any resources there yet.

Got it. All right and then in terms of just sort of maintaining liquidity is there a trough level of liquidity that you guys have drawn as a line in the sand that you wouldn't fall below?

I wouldn't say we have drawn a line in the sand, but I like a number like $400 million to $500 million in cash and bullion. That number sounds good to me.

The next question comes from Botir Sharipov of HSBC. Please go ahead.

A couple of questions from me. Does the potential buyout of AngloGold's stake in Sadiola restrict your ability to say, bid on another larger producing asset that may not need expansion capital and are you open to issue new equity or perhaps form a partnership with one of your peers for the right opportunity?

I guess our philosophy right now is to focus on what our brownfield opportunities are. We have put a lot of money over the years in Sadiola and Rosebel. Essakane is a great example of how we leveraged off of our infrastructure. We're not really looking at paying any kind of premium to acquire production right now or acquire another company when in our backyard, we have some very promising opportunities, including Boto, I might add which is looking more and more promising every day. So I think the attractive part about IAMGOLD is, we can move our production towards the 1 million ounce mark fairly quickly here, if we're able to accomplish our goals around Sadiola. We have a great opportunity in Boto in the three to four year time frame. Rosebel is looking better every day with our management team down there. Essakane is running on all eight cylinders with costs below $1,000 and all-in production at 400,000 ounces which looks like we can carry through to past 2020 now with that fantastic discovery we have seen at Falagountou or enhanced discovery. We really don't need to go out and acquire anything to get our growth profile back, get our costs down and keep our balance sheet exceptionally strong. And that is our goal.

It looks like it is focus on the internal growing here.

Yes.

Which brings me to my next question. From the Westwood presentation at the end of 2013, the plan was I believe to reach full production capacity by the end of 2016. Is now seems like more like 2018-2019. Could you perhaps elaborate on what changed in your outlook for the mine in just over a year? It is just slower planned development rates to manage liquidity which you have plenty of now and could potentially redeploy here?

Yes, prior we were looking to get to full production in earlier presentations we said I think sometime during 2017. We're in the current planning pushing that back. You hit the nail right on the head and as Steve mentioned earlier we would like all of our operations would be free cash flow positive and to do that at Westwood we decided to moderate the production ramp-up levels. That being said, we're constantly planning and replanning these operations and looking at the optionality of accelerating the ramp-up and what does that do to us in the big picture. So what we're presenting now is exactly like you described it.

All right. So I guess there is a potential with all of the cash that you have, to maybe speed it up a little bit at Westwood, given the focus on internal growth?

Correct.

The next question from Don MacLean of Paradigm Capital. Please go ahead.

I have three questions actually. First, maybe Gord on Westwood, if you can give us a bit more color on the rock burst that took place and we had at least a couple of these now, so most of us are wondering, what is the risk of others taking place going forward?

I mean we talked about it pretty extensively in the last analyst call there, Don. It occurred on a contact between a Brittle and a Ductile zone and it was a very localized rock burst, affected really only one sub level. We have been back in there and rehabbing it, we did incur some rehab costs this term. What we see in the longer term and this is not unusual for any of the mines in that part of the world, including our neighbors, it is a somewhat high seismic activity area. We're doing a lot of work with trying to understand the mechanisms that are triggering the rock bursts. We're doing a lot of work on our micro seismic infrastructure, so that we can track the seismic activity through time. The biggest opportunity for us at Westwood is really development. The more we can get out and develop multiple areas, the greater flexibility, operational flexibility the team there will have, to adapt to rock bursts if and when they occur. So I guess it is a blend of getting better on the predictive side, so understanding where they might occur. Certainly adapting our development sequence based on our understanding of the stress regime and what that will do to the mine over time, so it is forecasting the stress regime forward and then the third bed is getting the operation to a place where an individual event is less of a specific impact on the operation. That all being said, we're still looking to hit our guidance this year at Westwood. We said right after the rock burst and we stand by it, it doesn't have a material impact on production. It doesn't have a material impact on costs for us over the year for Westwood and no reserves or resources were lost as a result of the last one.

In the rehab, it all reacted as expected then?

Yes. The rehab has gone very, very well.

Okay. Second question I guess is maybe a mix of exploration and more maybe for you, Steve. Boto does seem to be tracking towards being a mine of 1.7 to 2 grams is a pretty impressive grade. Maybe we could talk about two things. Maybe talk about the qualities about this project, in terms of a potential mine, how does the metallurgy look in a qualitative sense? And then maybe for you, Steve, your comfort level with increasing your west African exposure? If you are looking at Sadiola plus this, this will significantly add to your exposure to that part of the world?

Don, it is Craig. I will address your exploration concerns. We have obviously been very pleased with the way Boto has developed, as we have gotten into the heart of the Malikoundi deposit, it continues to show us very high grades that were really atypical from the early exploration. So this is really the center of gravity from the property. It continues to remain open down plunge, we continue to see wide intervals of high grade mineralization, so we're very excited about that. Therefore the full potential of this thing is not fully realized yet. However, we're getting to the point now where see a threshold that could support a mining operation. The preliminary work that we have done on metallurgical recoveries, that is in the original 43-101 was in the order of the low 90s on average and we're obviously doing more sampling now within the heart of the Malikoundi deposit, to bring up the rigor of that metallurgical work. But right now we're not seeing any red flags out of that, it looks pretty straightforward. What we don't have there is a lot of oxide resource over the top of it and that is pretty typical of everybody around us, including the Facola deposit to the north. So from that point of view, we're very similar to what else is around us.

On the West Africa question, Don, that is a good question. Strategically as you know, geographically we have been trying to get a little bit more geographically diverse. Looking at what is available in North America and the premiums that are being sought after, makes it difficult for me to make the math work. The Cisco deal is a good example of that. We can't get in a game where we're going to pay that kind of money for that kind of mine. It was great mine and so on, but it just, for us the math doesn't work. So we go where we see the best returns. And right now we haven't seen any disruption to our production in west Africa from anything that has occurred over there. As you know, when you are at Bill's retirement last Thursday, we have been there for 25 years, we have never had one lost day of production due to politics. So yes, I mean I have said this many times, I would like to diversify geographically if we can. I'm not going to do it as a default to lower returns, though. So we go where we can get the best returns, taking into account the risk that the geography brings and west Africa we have always been comfortable with and if we can find projects like Boto, as you said at the beginning which is extremely attractive, the rates of return on that project are extremely high for us and realizable in the next three to four years.

And what is the timing for preliminary economics on this, Craig?

Well, we're currently involved in our technical studies right now. As I said, we just completed the infill program which will underpin the final resource estimates that will then be used to be the foundation for the rest of the technical studies. We're currently completing geotechnical studies, metallurgical studies and all of that is going to flow into the feasibility level documents, that we should have the first one completed probably by the spring of next year.

Great. We will look forward to that one. I guess as you say, Steve, you have to go where the opportunities and value creation are and you have been in that part of the world for a long time. Maybe just on that topic, Gord, maybe a bit of a political update around Essakane and the new government in Burkina Faso and how you feel that is coming along and way you are exposed to the government, but also maybe to touch on any issues about security around the mine site?

Sure, we continue to maintain a very close dialog with the current government and more, beyond just the current government, with the administration and the bureaucratic levels below the government. I and our Senior Vice President of Corporate Relations met with the current Prime Minister here a couple of weeks ago. He was on a tour to North America and we met him up in Ottawa and expressed where we were at, where our heads are at and what see, received a strong commitment from him to continue to manage the security situation as best as possible. I mean right after they had the coup at Halloween time last year, certainly some of the other mines in Burkina Faso had some issues with community relations and suffered a few demonstrations. We have worked very, very hard with our communities to have a very open dialogue on the one hand and on the other hand continue to work with the government to manage the security situation. If you notice, if you read back over the news, certainly over the past four or five months, the government recognized there was an issue there and spent a lot of effort talking to the communities and managing expectations, as well as bolstering the security presence of the operations. That has worked together to really quiet the situation. The government recognizes that mining is a very important part of their economy and it would be foolish to do anything to really interrupt that in the medium or in the short-term or the medium term. We're cautiously optimistic that the government will continue to fulfill its mandate. Currently we're looking at elections I believe are scheduled for October of this year. We continue to track that situation very closely and maintain our conversation with the authorities.

I'm heading there at the end of June, Don, for the official opening of Falagountou. And as you know, I go there on a remarking basis and from a security standpoint have no concerns whatsoever. The government has been extraordinarily progressive and cooperative in making sure that mine is well protected.

The next question comes from Doug Dyer of Heartland Advisors. Please go ahead.

With regard to the two options that you have or that you are looking at Sadiola, what do you think the all-in sustaining costs would be under each scenario?

Doug, we're really right in the midst of doing the analysis. Our target for the full expansion case would probably be around the $850 level life of operation that is where we would like to see the all-in sustaining go. With the smaller option it would be higher than that. We certainly would like it below $1,000, but we need to understand what the implications are for that. It is a work in progress, is how I would describe it, Doug. We do have the full expansion case and understand it much better, so that is the sort of longer range target. It is going to take a couple of years to get the numbers there, but it is an attractive investment for us, compared to our other operations it is higher grade or other open pit operations it is certainly much higher grade and a relatively attractive investment opportunity.

And just one quick comment. We're happy to see that some of the bonds are repurchased. We think is a great value. So thank you for that.

Doug, you are like E.F. Hutton, we listen when you talk. We went out there and followed your good advice. I'm glad to see them up at around 86, 87 now.

The next question comes from Mark [indiscernible] of RBC. Please go ahead.

Just a couple of questions on my end. So you had a good start to the year at Essakane. And the costs seem to be tracking better than where you were last year. And you have got a number of initiatives going on. Just wanted to know what your target or expectations for the rest of year were and where you think you could push them?

Well, we're maintaining our overall guidance for the year. Obviously we're challenging the sites to do better and better. With the way the economics of that deposit look going forward, there are some opportunities for improvement and we will certainly take them when they present themselves. But as of right now, we're keeping our guidance the same for the remainder of the year.

Okay. And I guess with the, you started to talk a bit more about reinvestment in your own portfolio and just wanted to get a bit of a sense of what you would think about putting into Rosebel and would it be similar to what you have been talking about before, on the scale of a couple hundred million or is there an optimization to that and where that--?

I will go first and then let Gord speak to it. I'm heading to Rosebel at the end of May. The elections are May 25 and I am going to land May 26. And once the President has been confirmed and we probably won't know that until July, it is a little bit like the election of a pope, when the white smoke comes up, we will know who the President of Suriname is. We have a very strong relationship with the current President and the current government and we expect them to be reelected. It is no secret that we need to reinvent Rosebel. We have been drilling at satellite deposits. We have our eye on Saramaka which is the anomaly M deposit south of Rosebel about 20 to 25 kilometers. That is now in government hands. We're running an operation at around 300,000 ounces of production, with basically some of the same labor levels that we had when we were running at 400,000. All of that comes to bear, when you are looking at the efficiencies and returns of an operation. We're seeing a new revitalized LOM that has come from the site which is very encouraging. If I had to tell you what my number one priority is for the rest of the year, it would be Rosebel. And I'm going to be relentless on making sure that we get every opportunity to change that operation around. We have done that at Essakane, I'm extreme pleased with the way Essakane is performing. I like the look of being able to expand our position at Sadiola, without compromising our balance sheet. Westwood is ramping up. My eyes, my ears, my energy is on Rosebel. And I don't care if I have to spend the rest of the year at Rosebel, I have told our Board and I have told the Management Committee, we're going to transform that operation, so that is continues to return the kind of numbers that we need to keep it going. And that message will be sent and delivered and we will act on it. That may be a combination of new satellite deposits coming into the mill, but I will tell you this, we will not be putting any money into that operation unless it makes sense for our shareholders. And that you can count on.

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 you, Bob. Thank you everyone for dialing in. If you were unable to get your questions in or unable to get in queue, certainly we will available for questions after the call, but keeping with our commitment to keep this call to an hour, we do cut it off here. Thank you again.

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