IAMGOLD Corporation (IAG) Q2 2016 Earnings Report, Transcript and Summary

Welcome to the IAMGOLD 2016 Second Quarter Operating and Financial Results Conference Call and Webcast. As a reminder, all participants are in 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, Investor Relations for IAMGOLD. Please go ahead Mr. Tait.

Thank you, Joe and good morning, 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. Our remarks on this call today will include forward-looking statements. Please refer to the cautionary language regarding forward-looking information in our disclosure documents that we released last night, and be advised that the same cautionary language applies to our remarks during the call. The slides that we refer to today during the presentation can be viewed on our website. I’ll now turn the call over to our President and CEO, Steve Letwin.

Thanks, Bob, and good morning, everybody. Unfortunately I began on a sober note, we had a contractor fertility in Burkina Faso this morning involving a bus accident. We don’t have all the details on the accident yet, but it has been confirmed that involved our buses which transport employees doing from the mine obviously our hearts go to the families and we’ll be doing everything we can to support them during this very difficult time. Turning now to our second quarter results, as I’m sure you have read we had a great quarter with solid operating performance and strong financial results. Net operating cash flow was up 125% from the year before, and our gold margin increased 36% result of both the higher gold price and lower cash cost and I think I’m very tran kudos to Gord Stothart and his team because as the gold price has risen we have consistently seen a reduction in our cost, which obviously as Carol Banducci will point out has improved our margins significantly. So operations are performing with in line of expectations and underground development at Westwood is on track. With year-to-date production of 388,000 ounces and unit cost expected to be lower in the last two quarters we’re on track to meeting our full year guidance. Support for higher gold price continued in the second quarter, but the price surging after the Brexit vote, numerous factors are driving investment demand for gold. The full consequences of Brexit are yet to be determined we have negative interest rate policies, I believe now the numbers up to $16 trillion of negative interest rate territory. We have a looming and entertaining U.S. election and although market sentiment are shifted to a bullish outlook for gold, we will continue and let me emphasize this we will continue to work at reducing cost and improving productivity. We will not be slowing this down and we will continue to work very diligently at getting our cost structure lower. On slide five you’ll see that IAMGOLD is among the most highly levered companies to the price of gold $100 increase in the gold price increases our pre-tax cash flow by about $80 million, Rosebel and Essakane continue to generate positive cash flow and despite our capital spending need this year, the gold price remains above $1,300 we expect positive consolidated free cash flow in the second half of the year at a $1,350 gold price for the balance of the year we actually will have positive free cash flow for the full year 2016. When you go back to December 2015 when gold was $1,057 December 17th actually, and our stock price was at $1.50 you can see the leverage that we have sitting at close to $7 Canadian today. It’s obviously quite a positive event for all of our shareholders and all of our employees. On slide six the next slide shows the impact of the declining gold price back in 2013 on our gold margins, as you can see our cash cost have held quite steady, rising only slightly in 2014 as gold began to climb at the beginning of this year our cash cost actually came down. Our intention is to continue to lower cash cost, which will allow for maximum margin growth in a rising gold environment. On slide seven, as the founder of Nike said in his book, you grow or you die, I agree but in our industry the opportunities are limited, several years of spending cut backs in our industry have resulted in the scarcity of new resources and a low inventory of undeveloped project. For us the best growth projects and opportunities will be organic as we believe that each and every one of our assets has untapped potential for growth. Westwood is ramping up and on track to achieve full production in 2019, in fact I was just there on July 5th took a number of our directors to Westwood, I can’t tell you how proud I am of the progress that’s made at Westwood in the leadership of [indiscernible] and his team, it’s absolutely tremendous. We also intend to move ahead with Sadiola sulphide project by the end of the year. This as always is conditional upon the timely discussion of our partner to proceed but I have confidence that they will be there with us. This is a fantastic project that will significantly enhance shareholder value. The expansion would give us another decade of production, contributing over 130,000 ounces net to us a year and in Northern Ontario we have the Cote Gold project, one of Canada’s largest undeveloped gold deposits. And since acquiring Cote the estimated indicated resource has grown from less than 1 million ounces to more than 8 million ounces and the permitting process has been moving along very well. I will tell you the level of interest in Cote is extremely high. Gord will talk more in his remarks about the excellent optionality we have with both Sadiola and Cote. We’re also taking advantage of Brownfield expansion opportunities of both Rosebel and Essakane. At Rosebel we’re evaluating the [indiscernible] deposit to the north of the main concession as well as drilling on saddle zones between the existing pits. And at Essakane we continue to evaluate selected targets to reduce our exposure to oil price volatility for advancing of solar power project, which will be structured in a way that requires no capital outlay on our part. In fact this would be the largest hybrid solar project in the world and as you know I’m a huge fan of renewables personally a huge fan of them as well and I just look at this project and think how positive it’s going to be for our operation in reducing cost, environmentally very attractive. And from a legacy standpoint, will contribute well beyond the life of mine at Essakane, which has a solid 10 to 13 year mine life. This particular facility that we’re building is attributed to the employees of Essakane and Burkina Faso. Longer term, we have been sowing the seeds for growth through a robust exploration program. Three of our projects Boto, Siribaya and Pitangui have declared resources, which we continue to upgrade. Additionally discovery based projects are moving forward. Recent results at Monster Lake in Quebec and Boto and Senegal confirm high grades in newer expanded areas of mineralization. And again hats off to Craig MacDougall and his team who have seen a huge reduction in their exploration expenditures from a high of around 150 million, down to the mid-30s in terms of exploration and its success rate has improved and results have improved significantly. So by staggering the timelines of these organic growth opportunities, the cash flow generated from earlier projects can fund those that follow. As for the external growth opportunities, we are evaluating opportunities all the time and we will continue to do so. However, given the opportunities to grow internally, we’re not dependent on acquisitions to grow the company. We are fortunate to have a robust pipeline of projects with untapped growth potential. I will now turn you over to Carol for review our second quarter financial results.

Thanks, Steven, and good morning, everyone. Looking at our key financial measures for the second quarter, we reported strong results with significant growth in operating cash flow and gold margins. The gold price was a factor behind our positive results, but not the only factor. Effective cost management has played an important role in improving our financial results and we expect this to continue. Revenues in the second quarter increased by 3% to $233 million. The variance was due to a 6% increase in our average realized gold price, partially offset by a 3% decline in gold sales. Higher gold sale at Essakane were offset by lower gold sales at Westwood, where we’ve been focused development work and at Rosebel. As shown on the bottom line, on the next slide, cost of sales was down 9% quarter-over-quarter. The main reason was lower operating cost, which were down 11%, depreciation was slightly lower and royalties increased due to the higher gold price. All of our sites saw an improvement in operating cost with Rosebel and Westwood accounting for most of the decline. Rosebel’s cost were lower by 12% due to lower fuel consumption, lower fuel prices, the devaluation of the Surinamese dollar relative to the U.S. dollar and lower labor cost following the workforce reductions. Nearly half of the decline in operating cost was attributed to the reduced mining activity at Westwood this year. Net cash from operating activities from continuing operations in the second quarter increased by 125% to $71 million as shown on the left hand side of the slide. On the right we show operating cash flow before changes in working capital at $0.16 of share for the quarter, operating cash flow was up 42% from the same quarter in 2015, reflecting the improvement in earnings quarter-over-quarter. In the second quarter after adjusting for the normalization of Westwood’s cost and other items not indicative of our core business adjusted net earnings were $6 million or $0.01 a share, which is a significant improvement from an adjusted net loss of $0.08 a share in the same quarter of the previous year. The $15 million tax adjustment in the second quarter 2016 reflects the impact of significant currency fluctuations in the quarter on the deferred tax expense. The gold margin in the second quarter was $513 an ounce compared to $377 an ounce in the same period 2015. The 36% increase was due to both a higher gold price and lower cash cost. Total cash cost of $756 an ounce in the quarter were down 7% year-over-year. The average realized gold price was up 6%. And finally, turning to our financial condition, cash, cash equivalents and restricted cash were $626 million at the end of the second quarter, including our credit facility of $140 million total available liquidity is $766 million. On a final note, we expect to build on our strong financial results as Steve said earlier if gold remains above $1,300 an ounce we expect to see free cash flow positive in the second half of the year and this is after accounting for the capital we need to invest this year on development work at Westwood and the secondary crusher at Rosebel, as well as capitalized stripping at Essakane. I’ll now turn you over to Gord to review on financial operating results.

Thanks, Carol. We had solid operating results for the quarter. Our teams continue to realize the success at improving productivity and the benefits are reflected in our results. So let’s have a closer look at our operations beginning with the consolidated view. Total production in the second quarter was 197,000 attributable ounces, up slightly from the first quarter. This brings year-to-date production to 388,000 ounces. With higher production anticipated in the second half of the year we’re well on track to beat the guidance for 2016. In the second quarter total cash costs and all-in sustaining costs were $756 and $1,114 respectively. We continue to normalize costs at Westwood as we focus on underground development. On a consolidated basis this normalization adjustment reduced both cash costs and all-in sustaining costs in the quarter by $23 and $24 per ounce respectively. All-in sustaining costs were higher in the second quarter versus the same quarter last year due to higher sustaining capital. This was mainly due to capitalized stripping at Essakane being more heavily weighted in the first half of the year. Our all sustaining costs are expected to trend lower in the second half of the year. Turning to Essakane, second quarter attributable production was 89,000 ounces. This was flat with the previous year and slightly higher throughput in grades were offset by lower recoveries due to sporadic episodes of graphitic ore. The site kicked off the study to enhance our geo-metallurgy model for Essakane with a goal of managing graphitic ores through blending in the future. Compared with second quarter of 2015 the percentage of soft rock process declined from 18% to 3%, so Essakane is demonstrating that it can maintain high throughput rate even if rock hardness increases. Total cash cost of $679 an ounce in the second quarter were down $123 an ounce from the same quarter in 2015. Essakane continues to benefit from lower fuel prices, a stronger U.S. dollar relative to Europe and improved plant efficiency. All-in sustaining costs of $1,009 an ounce were higher than the same period in 2015, due to the capitalized waste stripping in the quarter. As mentioned earlier sustaining capital is expected to be lower in the next two quarters, which should result in an all-in sustaining cost for Essakane moving below $900 an ounce. To enhance operating performance Essakane is focused on improving recoveries, which were at 90% in the quarter. The construction of an intensive leach reactor and the fine carbon recovery and incineration system were completed in the second quarter. Testing is now underway and once the systems are fully operational we expect to realize better recovery in the gravity circuit and overall and reduce losses of loaded fine carbon detailing and reduced gold inventory and higher gold sales which continue its processing on a loaded carbon fine. At Rosebel, attributable production for the second quarter was 73,000 ounces up slightly from the same quarter in 2015 and virtually flat with the first quarter of the year. The small increase over last year was due to higher throughput partially offset by lower grades. Rosebel’s all-in sustaining costs of $1,051 an ounce were down 5% from the second quarter of 2015. The improvement was mainly the result of a decline in fuel consumption, lower fuel prices, the devaluation of Surinamese dollar against the U.S. dollar and lower labor cost following last year’s workforce reduction. Rosebel has done an outstanding work to improve mill efficiency and productivity, as well as a great job of mitigating the impact of the rainy season in Q2. Even though the proportion of hard rock in the feed increased 50% year-over-year, throughput has increased mainly due to the commissioning of a new flex power drive for the SAG mill, as well as the move to larger grinding media and a change to liner configuration also in the SAG mill. We are on schedule to complete the installation of the secondary crusher in the fourth quarter, which will be of significant benefit as the proportion of hard rock continues to increase going forward. At Westwood, production from the planned mining blocks continues to be on schedule with 31,000 ounces produced year-to-date. Underground development work to open up new mining areas is progressing on schedule. As you know, another important focus has been the rehabilitation work related to reopening the 104 mining block. Three of the five bypass drifts have now being completed with breakthrough imminent on a port. Multiple pieces of equipment were recovered from 104 area in good working condition, and with minimal damage. Production land mining is expected to resume in the 104 zone in early 2017. This next slide provides an update as to how we’re tracking on a number of important benchmarks at Westwood. First, Safety, we continue to maintain excellent safety record at Westwood, which has a very positive impact on productivity. Underground development is on plan, with approximately 13 kilometers of combined underground lateral and vertical development achieved in the first six months. A lot of mines will do 13 kilometers of development in a full year. The development rate of 9.2 meters per day per jumbo crew continues to be better than planned and ranks amongst the best in the industry. By the end of this year, we expect to have completed about 23 to 24 kilometers of underground development. And to carry out for the development work, Westwood continues to focus on infield drilling to inferred mineral resources to indicated reserves. We maintain our target of ramping up to full production of 180,0000 to 200,000 ounces per year by 2019. Sadiola produced 18,000 in the second quarter with grades up 5% from the previous year. Overall the cost of inputs were lower including fuel, contractor cost, and other consumables. The dry down from stockpiles drove unit cost higher year-over-year. Sadiola has produced more than 7 million ounces of gold on 100% aces since we began production 20 years ago. As stated previously the mining and milling of oxides at Sadiola is expected to end early 2018. An expansion of the Sadiola mine to accommodate the processing of sulphide that underlay the existing oxide pits could extend the life of Sadiola for another 10 years or more. As we heard from Steve we intend to move ahead with the Sadiola expansion project by the end of the year conditional upon the decision by our partner to proceed and the renewal of construction and operating permits, our power agreement and the fiscal terms related to the project as negotiated previously with the Malian Government. The technology report we filed earlier this year in support of our end of 2015 reserves and resources statement projects an after tax internal rate of return of 16% at a $1,270 life of mine gold price. Work continues to be done to refine and improve the project economics. Sadiola is an outstanding growth opportunity that would provide us with an annual attributable production of 120,000 to 160,000 ounces per year based on a 41% ownership in the mine. In addition to Sadiola with have a growth optionality with our Cote gold project in Northern Ontario, over the past three years extensive work has been done to move resources in the measured and indicated categories. As of the end of December 2015 M&I resources were estimated at 8.4 million ounces and inferred resources at 1.2 million ounces. In the second quarter 2015 we received a positive decision from the federal government on the environmental assessment work which has cleared the way for us to obtain the necessary permit. By the end of this summer we should have the result of the provincial environment assessment. We are reviewing the options around project construction and operations including right sizing of the process plant and the mining operation overall. We will continue advancing technical studies to advance the value of the project along with exploration to increase our flexibility with respect to future development decisions. So that completes the operations review. And Craig will now give an update on exploration.

Thank you, Gord. And good morning, everyone. The common denominator in reporting on exploration so far this year has been results confirming both expansion of mineralization and high-grades at our key projects. This reinforces our view that exploration is essentially to creating the growth pipeline in the future. The results I’ll refer to today have been previously disclosed in accordance with securities regulation and signed off by the qualified persons within the company reporting us. At our Boto Gold project in Senegal, we are moving to an economic evaluation of the projection, as we continue to work on various technical and environmental studies. During the second quarter, we completed a diamond drilling campaign at the Malikoundi deposit. The purpose of this program was to target mineralization in the foot wall that had not been previously completely drilled out and to test for potential higher grade extensions at depth. The results from our first 4 holes were released on July 5th were very encouraging. Both confirming an extension of the mineralization below the current resource model, and more importantly confirming high-grade below the current resource pit shell. Highlights include an intersection of 84 meters grading 4.12 grams of gold per ton, which included 22 meters grading 11.25 grams of gold per ton. At Pitangui in Brazil, we continue to test targets with the potential to expand mineralization or lead to the discovery of new zones. Our drilling campaign continued in the quarter, focused on targets along strike to the southeast of the São Sebastião deposit. Drilling so far confirms the presence of rock units similar to those hosting the main deposit. This is a positive indicator as it confirms we are exploring in a favorable sequence of rocks, which could potentially host additional mineralization. At Siribaya joint venture project in Mali, we’re continues to focus on increasing the confidence of the Diakha resource and expanding the mineralization along strike and a depth. More than 10,800 meters of diamond and reverse circulation drilling were completed during the quarter. On July 6th, results were reported from the first 41 RC drill holes. The results confirm the presence of mineralization in the northern extension area. Diakha is a promising new discovery with multiple zones of mineralization, so it’s encouraging to continue to see these positive results. At the Eastern Borosi project in Nicaragua, the 2016 drilling program continues to focus on evaluating multiple zones of high grade gold-silver vein systems. Year-to-date, drilling has extended mineralization along strike and down depth on two targets within the Blag system. On July 26th, reported assay results from drilling on the main Blag wing system included 5.6 meters grading 11.13 gram gold per ton and 13.7 grams of silver. Additional drilling this year will test extension to the parallel trending Guapinol and Vancouver vein systems. At Monster Lake in Quebec, we announced final drilling results from the 2016 winter drilling program, which focused on the main zone as well as adjacent structures. We are very excited by the results as they appear indicate that we’ve intersected a possible second zone of mineralization along the main structure. Highlights include 20.16 grams of gold per ton over 1.2 meters. Exploration activities are continuing through the summer to support future drilling campaigns. Lastly at the Nelligan project in Northwestern Quebec results from the winter drilling program were reported in the second quarter and have confirmed the presence of several new mineralized gold bearing structures. Highlights include 18 meters grading 3.2 grams gold per ton and 10.3 meters grading 4.43 grams of gold per ton. The summer program is now under way, which includes orientation soil to a chemical survey and geological compilation and modeling of the drilled results to again support future drilling programs. With that I’ll hand it back to the Steve to wrap up.

Thanks, Craig. So, in closing I want to reiterate the importance of organic growth opportunities. Longer-term we have Westwood with an estimated mine life that at least 20 years. In 2019 we expect Westwood to be at full production with 180,000 to 200,000 ounces. At approximately 130,000 ounces in annual production expected from an expansion at Sadiola and IAMGOLD’s total production should grow to more than 950,000 ounces in that year. In addition, we have the potential to add ounces from Brownfield exploration at Rosebel and Essakane and further out we have growth potential with Cote Gold and we have growth potential with our exploration projects that Craig just outlined. Our outlook for IAMGOLD is increasingly positive, we’re fortunate to have multiple options to grow internally, our financial performance thanks to Carol Banducci’s leadership have strengthened considerably this year and there are still opportunities to improve operating performance across the board. The gold price keeps rising, the outlook can only get better, we’re not counting on gold prices to rise but we are obviously in a perfect position to take of that. Thank you.

So at this time Joe we’ll turn it over to the question period. Thank you.

Perfect, thank you. We will begin the question-and-answer session. [Operator Instructions] The first question comes today from Nick Zamuzac [ph] with Stifel. Please go ahead.

Hi, good morning. Congratulations on a good quarter. I was hoping you could talk about the Niobec asset sale proceed and the status of having to repurchase the notes under the terms of the indenture.

Yeah I can address that. In terms of our requirements in the under the indentures and the proceeds and reinvestment in the business, we have that requirement and we have actually reflected that in our disclosure and our MD&A.

So just to be clear, is it going to be repurchased or has been year marked…

Yeah so there is no requirement under the indenture to do a repurchase and so the funds that we have available in the business will go towards what Steve and Gord talk to and Craig in terms of our organic growth opportunities and our exploration programs.

Okay, got it. Thank you.

Alright.

The next is from David Haughton with CIBC. Please go ahead.

Good morning, Steve and team. Thank you for the update. A couple of questions on Essakane and on Westwood if that’s okay. Just looking at Essakane you have got CapEx guidance for the year of $85 million you have already spend $65 million, just wondering why the second half would be slower have you got over some of your lumpy spend or is it just lower strip or what the story might be please.

It’s not lower strip so much as lower capitalized stripping. So under the formula we use for capitalized stripping the first half of the year was certainly highly loaded for Essakane as well we have the two projects I referred to the intensive lead circuit and the carbon fine incinerator that were all completed in the first half of the year and there was a couple of equipment purchases that were necessary for the mine to achieve its budget this year. So again we load them in the first part of the year. It’s a little unusual for Essakane, but that’s just the way it worked out this year, David.

Right. And I also saw in the text that there is some sort of environmental fine of $12 million. Just wondering whether you have to pay that? And if so how you treat whether it’d be part of OpEx or whether it would be an abnormal item, what you’re thinking might be?

So I think you added three zeros there, David, it’s $12,000.

I beg my pardon. Okay. Well that’s the relevant thing forget the question.

It wasn’t a fine, David, it was a settlement with the government.

Okay. So my misunderstanding. Sorry about that. And then you’ve got a bit of a shortfall 7,000 ounces of production versus sales at Essakane, I know these timing differences happen occasionally. Can you see a catch up in the balance for the year?

Better than a catch up in Q3.

Yeah for sure, David, it’s timing.

Okay and then over to Westwood if that’s okay. In slide 20 you showed what the mining cost was $184 per ton, wondering if you can give us some sort of inside as to what the milling cost might be?

I’m sorry which one?

For Westwood.

The milling cost at Westwood right now are running in the neighborhood of $25 to $30 a ton.

Okay. And I presume with higher volume going through that that would be reducing through time?

Yeah. With using or milling of the stockpiles pushes us to lower end of that range as well we have a small contract milling agreement with the third-party that is helping bring down our fixed cost proportion of the total cost.

Okay. And also noted for another quarter the normalization of your overhead cost at Westwood, wondering if you intend to continue that practice for the balance of the year and how long it will go on for?

Yeah David the expectation is that we will continue for the rest of the year and then starting 2017 that we’ll stop doing that. So that’s the plan.

Got you, alright. Thank you very much guys.

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

Good morning guys nice speed there and nice improvement. Couple of questions for Gord, I guess just on a broad basis still and one of the concerns most observers myself included to have here that in the downturn company’s deferred capital spending and particularly on the sustaining capital side. And that’s going to all have to be caught up again with the gold price starting to pick up. And we’ve noticed higher capital spend and the sustaining capital spend in the first half of the year. But could you just comment on that from a bigger picture standpoint where that catch up stands as far as IAMGOLD operations are?

Certainly Don and thank you very much for the question it’s a great one. So I think one of the concerns as people sort to look at our sustaining capital spend looking backwards as that especially at Rosebel and Essakane the last - the prior year certainly 2012 to 2014 were enormously high. So they don’t represent a standard for it. The issue certainly at Rosebel if people will recall Rosebel was built in 2004 with used equipment coming from the old mine Omai mine in Guiana. So a lot of our mining fleet in fact pretty much our whole mining fleet was rolled over between 2012 and 2014. So that’s comes into sustaining capital, for the definition of sustaining capital, but that’s not an ongoing expense that we deal with. I’m quite comfortable with the sustaining capital levels we have right now. Our sustaining capital numbers are typically really focused on capital stripping as we talked about earlier and capital spare parts for the mining equipment. Capital spare parts seems to be fairly flat and capital stripping is really tied to the LOM plants. For the next few years that both Rosebel and Essakane that capital stripping is relatively flat year-over-year. And at Westwood it’s driven by deferred development and we have a formula for how we assign what goes into expansion capital and what goes into sustaining capital. And I think we’ve been pretty transparent with those numbers for everybody in the past.

Great. And just sort of another maybe big picture thing, but this one is really focused on Westwood and the rock mechanics which we all know is as much an art as it a science. But looking back to and Loran [ph] had their round problems you were probably 6 to 12 months into production again before you had a sense that they had the situation mixed as far as understanding what they have do to keep stable ground conditions. Can you see that kind of appoint for Westwood where you can say okay well we’ve not advance this thing far enough, but yes we have these life mine projections, but we have now moved into a stage where we’re very comfortable from what we’ve seen that this is all achievable. Is there a point in time when with this project where you can look to that or is it just sort of a continuum?

No Don I think we’re there now and my head were there now. We really took a break after that incident and did a lot of work in really understanding what happened and how we mitigate it going forward. In my head was there now, I think we need to demonstrate to ourselves into the market that we can continue to deliver good quarters. I think Q2 was an incredible quarter there. And I’m really, really happy with the safety record that Westwood had. As Steve mentioned he was just up there about a month ago and saw all the great things that are going on together with a couple of board members. It’s an underground environment in a complicated area from a rock mechanic standpoint. It’s not an area that we can ever sort of let our foot off the gas on understanding and continuing to manage towards. However we have made some sort of fundamental changes in design and approach our mining methods, not mining methods, but our development strategy, as well as our ground control packages that we’ve put in ground. And I’m comfortable we’re in a good spot. And I think the site is more than prepared to demonstrate that on a continuing basis going forward.

: Great. I guess most of us will sit and watch and see how the production ramps up to get the same level of comfort that you have. Although, it’s good to see the development as productive as it is.

As you know Don, it’s Steve. We measure this every quarter. We’re very transparent with everybody about our - how we’re performing and our key performance indicators. We put out the KPIs. I don’t think anybody out there has as much disclosure as we do. And we want the world to see the progress that’s being made and there is nothing hidden here. We’re very, very transparent about what the challenges were a year ago and we’re transparent about the progress that’s may have been made. And you know, Gord started for a long time, he is very, very balanced in his risk side. And when he is feeling as robust as he is about Westwood it certainly gives the rest of us the lot of confidence.

Thanks, Steve and just one last question. I don’t want to monopolize it, but on the exploration front, looks to me like Boto is sort of best of the litter at this point. May be Craig and Gord, you could just talk a little bit about how close this thing is to the gold lines? What do you need in the way of reserve or resource I would say to get this thing into economic liability? How close are we?

Well, thanks Don for the question. I mean we continue to grow the resource. We continue to challenge ourselves to find higher grade within it you’ve seen some of those results. It’s been a very exciting project for us. And I wouldn’t say it’s the best of what we have. It’s the most advanced of what we have. It’s kind of like which silver do you love the most. I like them all I guess. But, so we have some other projects that are coming along very nicely. In the case of Boto, we are advancing our technical studies including the ground conditions for the pit. We’re trying to see how deep we can drive the pits on those high grades. So there is technical challenges to this. But I think we have a very solid project there. And I think within the next year or two with the gold price is working with it. So we’re going to have a very interesting project there.

: Sort of a one to two year time frame. You have to get the resource much larger, greater is it just finding the - finding higher grade?

Well, I always want to learn to resource and we will continue to do that with our ongoing exploration. We’re trying to marry in new results to an ongoing technical study. At some point you have to freeze the database and go with what you have. But the objective is always to grow and much like a mining operation, we continue to found a way at some adding ounces. So, I think we have a good project there. But I would love to have a bigger project. So we’ll continue to do everything we can to get it there.

And timing for resource update and a CEA?

Resource update for this project will probably come in our normal year end resource reporting in February of next year to effective December 31st this year. So, that would be the next update that I would expect for that.

That would probably likely include some sort of reporting on a technical study.

: Okay, great. Okay, thanks guys.

Next question is from Steven Butler with GMP Securities. Please go ahead.

Good morning, guys. A question on Cote Lake, I maybe missed the inter remarks Steve by you. Is Cote Lake a core asset or a core optionality asset or a core asset that you would consider building at a certain gold price? I know the quandary about - you said you’re not counting on higher gold prices necessarily, but we sort of have them to you or at least are getting them. So, what’s your current thoughts on Cote Lake? Is it really for sale or looking to just optimize and then sell or keep for a rainy or happier day?

Well, it’s a great question Steve. I would certainly mark it as a core asset for us, but close to $9 million ounces. It’s an hour and half from Toronto by flow plane and as you know we’ve proven out the resource, where we’ve got our federal permit we’re hoping to get the provincial permit soon here. So when we purchased Cote back in 2012 the outlook for gold by 21 out of the 22 analysts out there were $2,200 gold if we all remember that and our cash flow at the time was about $500 million a year higher than it was in December last year. And so we were obviously looking at an opportunity to grow in North America to balance our portfolio because of our geographic locations. That hasn’t changed at all, we’re obviously a lot smarter, I think as an industry and certainly as a company. I would use the term right-sizing when I’m looking at these opportunities. We will not put the company in a position where we can’t afford to build anything or buy anything. I think that Gord and his technical team and others have looked at Cote more recently and seen a resource that could be built for a far less capital than was being at least touted at that time and we have without getting into specific a lot of interest from other gold companies around the world and partnering on this asset. And I would never consider giving it up per se, but certainly we would look at partners and we’ve been approached very, very aggressively by a number of people about partnering with us. So I’m not saying it’s eminent, but when gold is bumping up to $1,400 and the outlook more importantly is positive then that becomes certainly a rest a piece for at least looking at putting it out there. And again we would never do anything to jeopardize the balance sheet of this company or put it in a position where we’re betting on one project. So I can’t tell you how pleased I am and when the time is right we’ll get out there with more information on Cote, but the way Cote looks right now is extremely positive.

All right okay thanks. Thanks for that chief. And then Rosebel I couldn’t resist could you shed some light on the solar panel project. What level of thinking are you at is it all still hypothetical or preliminary scoping or early engineering or what’s your thoughts on that and how could it potentially impact your operating cost at Rosebel?

Right actually Steve we do have a solar project at Rosebel, but it was completed a couple of years ago and is currently operating and delivering powered on a daily basis. What Steve referred to was actually a larger solar plant for Essakane we’re negotiating with a constructor and finance here a company out of Europe currently on that. It’s well advanced, the engineering is underway, we’re just really looking at finalizing terms of our deal and moving that forward what we’re on paper contemplating as a start is a 15 megawatt solar plant as an adjunct to our existing 53 megawatt HFO generation plant that we have there now. It’s well advanced we were kind of hoping we’d be able to announce something definitive by now, but I would expect in the next couple of months you’re going to see something definitive on that.

Yeah and the beauty of it is again you’re looking at probably a 20 year vehicle for providing $0.17 a kilowatt hour of power in a region that not long ago was at upwards of $0.34 a kilowatt hour. For us at least from what I said on the energy side is a game changer. And what’s fascinating is that three years ago you couldn’t build a solar farm like this, but solar panels, solar technology has improved exponentially. And more importantly now I think as some of you in the phone realize that as battery technology that’s supplementing this and we’re actually going to be a test site for putting batteries along with the solar facility so we can store solar from the day time sun obviously and use it potentially at night. So this has a huge implications for bringing our cost down at Essakane it also has huge implications for the communities there, who don’t have any source of power right now.

Okay, great. And Steve you said $0.17 would be the solar cost, if you will?

Yes. The all in solar cost.

Yes. Okay. Thanks very much.

The next question is from Steve Parsons with National Bank Financial. Please go ahead.

Yes. Good morning. Thanks for taking my call. Couple of questions on the Sadiola Sulphide. Could you talk to the process for renewing construction and operating permits there? Is there any additional work required or different environmental hurdles, or is this more administrative in nature?

Thanks for question. We have had these approvals in the past. The deals are all negotiated. It’s more a case of just going to the government and getting to re-ratify what we’ve already agree to in the past.

I’m actually heading to Mali at the end of the month. Steve Letwin here, and we’ve had certainly paper correspondence around confirmation of the sustainability agreement there. But for Gord’s comments, we don’t expect any issues.

Okay, perfect. And on that product as well, you had indicated your partner would be there for development. How does the joint venture arrangement work, if one party is keen to proceed and the other one less though. Is there any triggers in that agreement?

Well here is the issue, and I’m not sure, I said, they will be there. If I did, I - Venkat is listening here. I didn’t mean it Venkat. And what I meant to say is that, we’re hoping he’s going to be there. We don’t see any reason, why he wouldn’t be there. It’s a very attractive project for us. The issue at Sadiola is that we’re coming to an end of the life as it relate to the oxides. And as anybody that’s been in the mining business for any length of time would know is that, the last thing you want to have is the production gap in your project. So we’ve been very fortunate, and I will give kudos to Anglo, they’ve run Sadiola very well here in the last few years, especially in light of declining production. But we do need to make a decision. I would tell you that certainly our management team and Board are fully supportive of moving ahead. We can’t do that in the absence of Anglo, but I have every confidence in Anglo’s senior management that they will be timely fashion that will not affect the economics of the project. Obviously, we would not be happy, if the economics were affected by slow Toronto decision.

Right. Is there anything in the joint venture agreement that would force more timely decision from them?

I would just tell you that in business, there is always something that could force. We don’t expect to have to do anything like that, but it’s certainly something that, we have to protect our shareholder interest. And as I say, I’m very confident that they’ll be moving ahead, because logic will prevail. But this is an extremely attractive project. And the Malians are very supportive of it. It would be absolutely ridiculous, if we did not move forward in a positive way.

Got it. Okay. Over to Cote Lake you did indicated a view or maybe a motivation to right size the project. Are you seeing the potential for a higher grade starter area within Cote Lake that would enable to start small strategy?

Yes. That’s one of the things we’re looking at. We don’t need to change the short-term cutoff too drastically differently to get an attractive bump in the average grade. I mean you hit it right on the head, if we don’t have the feet on Monster plant, it allows us to pursue a little more strategic cut upgrade strategy that may hold the key to turning the project around. And on the flip side, looking at economies of scale and a number of other things that might help this project along, I’m feeling really bullish about Cote right now.

Do you have a feel for when we could see perhaps an updated report with a maybe higher grade or start small strategy?

I’m thinking probably next year. Although, as a potential you could see something at a higher level earlier at a more summary level earlier.

Okay. Thank you very much.

The next question is from Tanya Jakusconek with Scotia Bank. Please go ahead.

Yeah good morning, everybody and congratulations on coming back to profitability. I have a few questions. Can I just start on the overall guidance; I thought I heard and correct me if I’m wrong. I think Steve you mentioned that the second half of the year cash costs are expected to be lower than the first half?

Right all-in sustaining cash yeah.

All in sustaining cost and not cash cost?

Cash cost are more or less flat in the second half, but there is a certainly change in the sustaining capital spend.

Okay, well thank you for that clarity. And then I thought I heard Gord mentioned that we’re well in place to exceed our guidance on the production front.

With Westwood perhaps, but on an overall basis we’re maintaining the same guidance.

We’ll take a look at it next quarter again Tanya, but right now we’re sticking with our current guidance as we have provided to the marketplace.

Okay. So it was more on Westwood then Gord was focusing on. Okay so thank you for that. And then just coming back to the Sadiola sell side some of my questions have been answered. So clearly it looks like the government approvals are administrative. Can I ask from a joint venture perspective from an operating, has that management team from the Anglo side and Venkat is on the line I’m sure I’ll ask him on his call too. But has the management team agreed to it and from the Anglo Gold side it’s just the matter of board approval…

I can’t see that Tanya I’d like to be [indiscernible]. I mean we’re up and ready to go here. And I’m sure obviously Venkat and myself want to confirm everything with the Malian government, but we’ve see nothing. Keep in mind that this was signed with the Malians and it was us that basically moved out of the window that that approval was received. So the Malians have already confirmed all of this in the past and signed it. So we expect them to be able to come back to the table. We basically because of our delays in the fall in the gold prices we moved out of the window of that approval. So there is no expectation at least from our end that the Malians won’t be supportive. I can’t speak at all to Anglo. Anglo has been a very good partner here in terms of their performance at Sadiola. Venkat has done a tremendous job in bringing down the cost and maximizing cash flow. We’re really pleased about that and you’ve seen that in our results. We are becoming more call it anxious about getting this moving and moving it ahead, because it is still attractive to us. But when you are in a partnership or relationship these things take time. And that’s what’s happening right now.

Okay. Well maybe it’s been a question that you can answer. I think would be at what point is there a point of no returns like where we can we drag this decisions to a point that we don’t have a decision to go ahead. But we’ve got to close the mine down. Is that the end of 2017?

No it’s not so much where there is a point of no return what you get into unfortunately if you run out of rock oxide is that you have to reduce the labor force, you have to reduce the use of your equipment. And you get into all sorts of costs that you have to carry that you wouldn’t have to if you had a smoother transition between oxides and sulphides. And I would say we probably got eight months probably to do that to get it started. And we’re pushing pretty hard to do that. And we have to respect and we’ll respect Anglo’s need to go through their approvals. And our technical teams work very well together, we have a lot of respect for them. But it’s getting to a point where we need to in the next little while here next few months make a decision. And that’s about the best I can explain it.

Okay, thank you for that. I’m sure I’ll ask Venkat on his call. Just coming back to Cote Lake, you mentioned about optionality, optionality exists at various projects, at various gold prices. What would you put on what you know today the gold price trigger for Cote Lake?

There is a few moving parts here. Certainly on the construction side the Canadian dollar, U.S. dollar exchange rate has moved very, very strongly in our favor from a construction standpoint. I’m comfortable that at even current prices we can design a project that would certainly meet the hurdle rates and get everybody onsite, as low as I don’t know $1,300 there is probably a project at work here as we said it earlier and Steve sort of reiterate it we’re really doing a little bit of navel gazing here and going through a process to really understand what size makes sense and how can we positively affect the economic return on this deposit such that it makes sense for us and then how does one finance that project.

Okay, that’s helpful. Thank you very much.

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 very much gentlemen and thank you everyone for calling in. If there are some of you on the line who wanted to ask questions, please give me a call in the office. I’ll be there in a few minutes and certainly thank you for your participation today.

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