IAMGOLD Corporation (IAG) Q3 2016 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD 2016 Third 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 would like to turn the conference over to Bob Tait, Vice President, Investor Relations for IAMGOLD. Please go ahead, Mr. Tait.

Thank you. And 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 COO; Carol Banducci, Executive Vice President and CFO; Craig MacDougall, Senior Vice President, Exploration; and Jeff Snow, General Counsel and Senior Vice President, Business Development. Our remarks on this call will include forward-looking statements. Please refer to the cautionary language regarding forward-looking information in our disclosure documents and be advised that the same cautionary language applies to our remarks during the call. The slides that are referred to, during the presentation, can be viewed on our website. I will now turn the call over to our President and CEO, Steve Letwin.

Thank you, Bob. Good morning, everybody. Well, this quarter was excellent, a very, very strong third quarter, strong operating numbers and strong financial results. Net earnings were up $102 million from a year ago and up $29 million from the second quarter. Attributable gold production of 210,000 ounces was 7% higher than the second quarter, with production at Essakane increasing 17%. All-in sustaining costs were $1,046 an ounce. Cash costs $714 an ounce. We improved our cash costs guidance for the year by reducing it to a range of $740 to $770 an ounce with lower operating costs among the reasons. We expect all-in sustaining costs to range between $1,050 and $1,100 an ounce. With production year-to-date at nearly 600,000 ounces we’re confident we’ll finish the year close to the top of the range of 770,000 to 800,000 ounces. The third quarter saw a number of positive developments. We signed an agreement with the government of Suriname to acquire the Saramacca property near Rosebel. This is an important achievement for us, as the historical data indicates Saramacca could become a significant source of soft rock for Rosebel. We completed US$230 million financing, we reduced long-term debt by 23%. We increased our financial capacity to internally fund growth. So let me clarify our growth plans. On Slide 5, you will see the potential growth profile that we’re now putting out. By 2020, we are targeting 1 million ounces in production with all-in sustaining costs between $900 and $950 an ounce. We will do this by building on the assets we already own. The growth initiatives for all these assets will be internally funded. What this chart doesn’t show is the growth potential from our Côté Gold asset, one of Canada’s largest undeveloped gold deposits, nor does it show the growth potential from our exploration pipeline, including the attractive Loma Larga project in Ecuador formerly the Quimsacocha project, which we have an indirect interest in Loma Larga through our 36% equity ownership of INV Metals. Turning to the growth plans from our - for our existing mines in Slide 6, Rosebel is gaining its luster. Grade reconciliation has improved and we are seeing the benefits of performance optimization. The growth focus at Rosebel is on securing additional sources of soft rock, which is why our agreement to acquire Saramacca is the significant milestone. Saramacca lays approximately 25 kilometer southwest for the Rosebel mill, located adjacent to the previously optioned Sarafina property. It consolidates a large land package with high potential for soft rock within the vicinity of the Rosebel mill. Past exploration suggest that Saramacca could have anywhere from 0.5 million 1.4 million ounces of gold. The Rosebel exploration team is into the third month of a drilling program with four rigs at the site. Our intent is to declare an initial resource estimate before the end of 2018. At the same time, Rosebel is seeing positive results from drilling the saddle zones between its existing pits, which would give us access to another source of lower-cost oxide resources. Given the proximity to the mill and the low strip ratio, we expect these mining zones as early as next year. We expect Essakane will continue accounting for the largest share of production despite approaching a 100% hard rock next year. An important focus for future growth is our Falagountou satellite deposit. The western part of the deposit already accounts for about 15% of the mill feed and now we are seeing good grades and soft rock at Fala East. So there is a lot of potential here. Westwood is making significant headway with underground development, production is expected to double - nearly double next year with a full ramp-up in 2019. Our confidence in this asset is increasing day by day. The most significant organic growth opportunity will be our Sadiola Sulphide Project. Last quarter we announced our intention to move ahead with the project by the end of the year. Our alignment with AngloGold, our partner, is full and complete. We are walking together moving towards the initiation of this expansion. Our plan would be to have a construction start to prevent any gap in production, once the milling of oxides comes to an end in early 2019. We are currently in discussions with government of Mali to ensure that our metrics line up and will be completing those negotiations and negotiations hopefully by the end of December. As most of you know mining the sulphides would extend the life of Sadiola by 10 years with our share of annual production of approximately 130,000 ounces. I’ll now turn you over to Carol for a review of our third quarter financial results.

Good morning, everyone. We had a very strong quarter. Strong operating performance drove earnings and operating cash flow higher. Revenues increased by 36% to $282 million. This was due to both a higher average realized gold price and higher gold sale, mainly at Essakane and Westwood, which accounted for 42% of the $75 million increase. As shown on Slide #9, operating costs actually declined by 1.5%, although revenue was up 36%. The increase in cost of sales was due to higher royalties reflecting a higher gold price. Operating costs were lower due to a number of factors, including workforce reductions at Rosebel at the end of 2015 and the devaluation of the Surinamese dollar relative to the U.S. dollar. Also at both Rosebel and Essakane, we experienced higher capitalized stripping and lower field prices. At Westwood operating costs were higher due to increased production. Net cash from operating activities in the third quarter was $127 million, up $117 million from the year before as shown on the left hand side of the slide. On the right, we show operating cash flow before changes in working capital. The $77 million increase to $112 million, reflects a significant improvement in quarter-over-quarter earnings. The next slide highlights the steady improvement in operating cash flow this year. While we benefitted from an escalating gold price, our continued focus on managing costs has allowed us to keep pace. Net earnings attributable to equity holders in the third quarter were $17 million. Adjusting for the normalization of Westwood’s costs, the again on the purchase of our bonds and other items not indicative of our underlying core business, adjusted net earnings were $22 million or $0.05 a share. The gold margin in the third quarter was $612 an ounce, compared to $330 an ounce in the same period in 2015. $282 per ounce increase was due to the 18% increase in our average realized gold price and the 10% reduction in our total cash cost to $714 an ounce. During the third quarter, we completed two financial transactions that strengthen our financial capacity for moving ahead with our growth projects. In August, we completed an equity financing raising $230 million in gross proceeds. With the net proceeds of $220 million we purchased $146 million of our outstanding senior unsecured notes. This reduced long-term debt by 23% to $489 million and saves us $39 million in interest expense over the remaining term to maturity. The remainder of the net proceeds increased our financial capacity to internally fund our organic growth projects including Sadiola, as well as you may have noted both Moody’s and S&P have revised our outlook to positive. Wrapping up, we believe our balance sheet ranks amongst the strongest in the industry, if not, the strongest. Cash and cash equivalents at the end of the quarter totaled $627 million. Adding the available credit facility of $168 million brings total liquidity to $795 million. Overall, a very strong quarter reflecting outstanding operating results. And with that, I’ll turn it over to Gord.

Well, thank you, Carol. Operating results in the third quarter point to the outstanding work by the site operating teams to optimize mill performance and increased productivity. We talk about this every quarter, because it’s enabling us to extract greater value from our assets. Third-quarter production of 210,000 ounces increased 13,000 ounces from the previous year, bringing year-to-date production to 598,000 ounces. Total cash costs and all-in sustaining costs were $714 and $1,046 per ounce respectively. The continued normalization of cost at Westwood reduced consolidated cash costs and all-in sustaining costs in the quarter by $30 an ounce. Although cash costs were 10% higher than the same quarter last year and gold sales were higher, all-in sustaining cost per ounce increased by $19, this was due to higher sustaining capital, including capitalized stripping. We said last quarter that all-in sustaining cost would trend lower in the second-half of the year and they have. Compared to the second quarter, they were $68 an ounce lower and we expect them to come down a bit more in the final quarter. Looking at Slide 18, Essakane had an outstanding third quarter. Compared to the second quarter attributable production rose 17% to 104,000 ounces a result of both higher grades and higher mill throughput, compared to the third quarter of 2015, production declined by 3,000 ounces despite a 6% increase in the grade. This was due to lower throughput with the higher proportion of hard rock. The percentage of hard rock increased to 77% from 61% the year before. The other factor contributing the slightly lower production versus 2015 was lower recoveries due to higher level of graphite in ore. In addition to an ongoing metallurgical study to improve recoveries, Essakane commissioned the intensive leach reactor in the third quarter, which should help improve gold recovery in the fourth quarter. Grades are expected to be lower in the fourth quarter. However, which will offset the impact of higher recoveries. Also during the third quarter, Essakane commissioned a carbon fines treatment plant, which allows for onsite processing of the gold contained in the carbon fines. In the third quarter gold sales at Essakane of 126,000 ounces, included 12,000 ounces of gold from the carbon fines built up as inventory. Total cash costs of $624 dollars an ounce in the third quarter, were $123 lower than in the same quarter 2015. The improvement reflected a 4% decline in operating costs due to lower fuel prices and the capitalization of a higher proportion of stripping costs. All-in sustaining costs of $815 an ounce were $107 an ounce lower than the same period in 2015, due to lower cash costs and lower sustaining capital expenditures other than capitalized stripping. At Rosebel, attributable production for the third quarter of 72,000 ounces was virtually flat with the second quarter and up slightly from the same quarter in 2015. The 2,000 ounce increase from 2015 was mainly due to higher grades and higher throughput. Throughput rose slightly despite the proportion of soft rock in the mill feed, declining from 40% to 20%. The proportion of hard rock is expected to be higher in the fourth quarter compared to the third quarter. Rosabel’s cash costs and all-in sustaining costs per ounce in the third quarter included a supplementary labor cost of $40 and $43 respectively. The collective labor agreement signed in the third quarter provided support to the employees in the form of a performance bonus intended to offset the impact from the devaluation of the Surinamese dollar relative to U.S. dollar. The collective labor agreement included a 15% increase in base salaries, and lump-sum payments covering the period January 2015 through August 2018. Despite the supplemental labor cost, cash cost of $728 an ounce in the third quarter 2016 were $138 an ounce lower than the same quarter last year. This was primarily due to lower labor costs following the reduction in the workforce at the end of 2015. The devaluation of the Surinamese dollar against the U.S. dollar, lower fuel prices, lower fuel consumption and higher capitalized stripping. All-in sustaining costs were $72 per ounce higher than the same quarter of 2015. This was due to higher sustaining capital expenditures, including an increase in capitalized stripping, partially offset by lower cash costs. Rosebel has been sequentially implementing performance enhancements to drive down operating costs. As previously described, the power flex drive for the SAG mill was added in the first quarter, which increased the capacity for processing hard rock, and reduced power consumption on a unit basis. This was followed by larger grinding media and new SAG mill liners in the second quarter. In the fourth quarter we commissioned a secondary crusher with further optimization plan in 2017. In addition, the site is evaluating an option on a second pebble crusher in 2018 and configuration changes which could increase the efficiency of the three ball mills. The cumulative effect of these enhancements is significant. Even at 90% hard rock, we expect to maintain a processing rate of 9 million tonnes per year, rather than see a decline to 6.9 million tonnes per year, as we would have experienced without these initiatives. In addition to benefiting performance today, this ongoing focus on performance optimization will increase the profitability of mining new deposits in the future or even the deep resources from the existing pits. Steve talked about the signing of the agreement to acquire Saramacca. The exploration team has been working on the property to advance known zones in mineralization to a resource stage as soon as possible. Additionally, we’re drilling saddle zones between the existing pits that are largely soft rock and offer good blending potential. This could partially offset the increasing proportion of hard rock in the ore mix in the future. The other benefit of mining saddle zones is it provides access to higher grade zones at depth, so mining of these areas at Rosebel given more optionality. At Westwood, production from the planned mining blocks continues to be on schedule with 47,000 ounces produced year-to-date, underground development to open up new mining areas is progressing on schedule. All of the five bypass strips providing access to the 104 mining block are now open, and we expect to begin milling the ore from that area in early 2017. All-in sustaining costs for Westwood are expected to be higher in the second-half of this year, due to the timing and allocation of capital spending along with the timing of sales. All-in sustaining costs for the full year continue to be on target with the ramp-up progressing well. Whilst the total capital run rate continues to be the same as in prior quarters as planned, higher proportions of the total capital spend are being allocated to sustaining capital in Q3 and Q4 2016 due to mine sequencing. We expect that the normalization of costs at Westwood, we’ll see in early 2017. In keeping with the formats that we’ve used since the beginning of the year, this slide presents a brief snapshot of underground development progress at Westwood. More than 6,100 meters of underground development was completed in the quarter, bringing the year-to-date number up to the end of the third quarter to nearly 20 kilometers, and we have subsequently surpassed that milestone. The development rate of nine meters per day per jumbo crew continues to be better than planned, and ranks among the best in the industry. By the end of this year, we expect to have completed about 23 to 24 kilometers of underground development. We continue to expect to wrap up the full production of 180,000 to 200,000 ounces annually by 2019. Looking at Sadiola, Sadiola produced 17,000 ounces in the third quarter with grades slightly higher than the previous year. Although the cost of inputs were lower including fuel contractor costs and other consumables, the processing of a higher proportion of high-grade ore stockpiles in Q3 2016 versus Q3 2015, when more marginal ore was processed, resulted in higher cash costs year-over-year. This is because the marginal ore stockpiles were expensed at the time of mining as waste in prior years compared to the expensing of the higher grade stockpiled ore in the same period as it’s processed. Mining at Sadiola is expected to continue into early 2018 and milling of oxides into early 2019, which takes us to the Sadiola Sulphide Project. As you heard from Steve, we’re fully aligned with our partners at AngloGold Ashanti and are moving this project forward. The project would take about 18 months to build, assuming a start date in early 2017, and with the milling of oxides expected to continue into early 2019 we would avoid any gap in production. On Slide 23, looking at our guidance, as we approach the end of the year, we confirm our initial production guidance of 770,000 to 800,000 ounces, and are confident we will be at the high-end of that range. We lowered and narrowed our cash cost guidance to $740 to $770 an ounce due to lower operating costs and production at the higher end of the range. I will point out that this range is slightly above our Q3 year-to-date cash cost of $738 an ounce. This is due to expected higher cash costs in the fourth quarter driven by a dip in grade at Essakane and harder rock at Rosebel. All-in sustaining costs for 2016 are expected to fall in the range of $1,050 to $1,100 per ounce. Capital expenditures for the full year 2016 are expected to be $275 million, which is at the higher end of our previously stated guidance. This is due to higher sustaining capital at Essakane, Rosebel and Westwood. The change at Essakane reflects additional resource drilling at the Falagountou East deposit, down payments on long-lead production drills required in early 2017, and higher spending on fleet components, due to higher than planned maintenance. The change at Rosebel reflects a shift in resource drilling on the saddle areas between the existing pits, an unexpected shovel loss requiring an immediate replacement to avoid a slowdown in the mining rate, and higher capitalized stripping for mine sequencing that will provide better access to the ore in 2017. And at Westwood, the spending level reflects the focus on developing zones that are expected to provide production in 2017. That completes the operations review. Craig will now give an update on explorations.

Thank you, Gord, and good morning, everyone. I’ll keep my remarks brief this quarter. Our greenfield projects continue to advance very well. Results to date have confirmed the expansion of targeted mineralized zones and previously recorded high grades at several projects. The results I refer to today have been previously disclosed in accordance with securities regulations and signed off by the qualified persons within the company reporting them. At our Boto Gold project in Senegal, we continue to advance technical and environmental studies. On September 15, we reported final results from the diamond drilling program at the Malikoundi deposit completed prior to the rainy season to confirm wider intervals of hybrid mineralization in the footwall as well as the extension of high grade mineralization along strike to the north of the deposit. These results are being evaluated for their potential impact on current resources, will guide the next phase of drilling, which is expected to commence in Q4 this year. At Pitangui in Brazil, the drilling program along strike to the southeast of the São Sebastião deposit has confirmed the presence of iron formations similar to those hosting the main deposit, which means they could potentially host additional mineralization. Drilling continues to evaluate prospective iron formation targets on the property. At the Siribaya joint venture project in Mali, the focus in the first-half of the year was on increase in the confidence in the active resource as well as extending the deposit at depth below the current resource pit shell and to the north along strike beyond the existing resources. Reported drilling results have confirmed extensions of mineralization in the resource area as well to the north. These results will be used to guide further drilling with the objective to expand the existing resources. Drilling is expected to recommence in the first quarter of 2017. At the Eastern Borosi joint venture project in Nicaragua, the 2016 drilling program continues to focus on evaluating and expanding the multiple zones of high-grade gold silver vein system. On September 15, assay results included those from a new zone at Veta Loca target, which returned 6.3 meters, grading 10.2 grams gold per tonne and 6.9 grams of silver per tonne. This new discovery complements the numerous discoveries already made on the project. At Monster Lake in Quebec, geological and structural mapping, and geochemical and geophysical surveys continued to advance in advance of a follow-up diamond drilling program. We expect drilling to commence in the first quarter of 2017 to take advantage of favorable winter conditions. Lastly at the Nelligan project in Northwestern Quebec, an orientation soil sampling program was completed in the third quarter over known mineralized zones along with the geological compilation and interpretation of all drilling results in preparation of future drilling, which is expected to resume during the fourth quarter of this year. With that, I’ll hand you back to Steve to wrap up.

Thanks, Craig. Well, I think we’ve all said excellent quarter, strong operating numbers, strong financial results, promising exploration projects and a growth strategy that is very, very clear. We have our General Managers in from our sites for budget week as we get ready for 2017 and we had them at a dinner last night with our Directors. And we had each one of them stand up and talk about what’s in store for 2017. And I was very, very proud and excited about the passion that each one of these General Mangers talked about their sites, and of course, Gord with his leadership and we now have Joe here in Toronto, Joe Forlat [ph]. Omar was in town from West Africa. All this to tell you that we are very pleased about the way our assets look. And I think they are much better than anyone expected, because we’ve been relentless about taking on two major challenges that always faced this company. One was our cost structure. And we’ve done a lot of bring that in line, and we are continuing to bring down our cost. And I want to tell you that we will continue to be relentless in bringing down the costs as we move forward. And you saw that with the objective of getting it down towards $900 all-in sustaining costs. The other challenge we’ve had has been our mine life. And what a great job we’ve done on the exploration side, particularly in and around our infrastructure. And we’ve heard us talk about this before where our greatest returns are the leverage we get off of adding resources around infrastructures that’s in place. Essakane is an excellent example of that, where we leverage offer infrastructure with the significant exploration discoveries at Falagountou East and West, and we continue to see some great potential in and around Essakane. Rosebel has had a transformational change as a result of some significant exploration success not only on our concession, but in and around our concession. And with Saramacca now in the game, we expect that to be a game-changer for Rosebel. Westwood is moving ahead as planned. And as I’ve said in the past Westwood will be measured quarter by quarter. This isn’t about us trying to project Westwood. This is about performance every day, every month, every quarter. And you get to measure it along with us. And so far we’ve seen some fantastic progress. And last night when Sylvain Lehoux talked about the progress they continue to make, my confidence in Westwood continues to be at very, very high level. And as you know, we’ve had many tours at Westwood, many people going out and touching Westwood to confirm its future. Sadiola sits out there as they add on to our production. They give us about 1 million ounces by 2020 along with the ramp up of Westwood that’s looking extremely attractive. And we really haven’t factored in the pipeline post-2020, which would include Côté Gold. And many of the other exploration projects that Craig MacDougall has very successfully brought to the company including Boto, Diakha, Siribaya, Pitangui to name a few. So when I sit here at the end of the third quarter, I feel very good about the progress we’ve made. We’re not going to sit and drink around whisky, hereabout how good we become. It’s a challenge day to day. We haven’t forgotten where we’ve come from. We haven’t forgotten that our cost structure needs to be continuously worked on. We haven’t forgotten the fact that we have to continue to explore and add resources to our current portfolio. We haven’t forgotten the lessons of the last four years. We’re going to continue to work very, very diligently to move this company forward, and I’m extremely excited about the look we have moving ahead. So on that note, I’ll pass it back to Bob.

Okay, Helene, if you could initiate the question period, that would be appreciated.

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] And the first question comes from Tony Lesiak of Canaccord Genuity. Please go ahead.

Good morning, everyone. A question for Steve, can you confirm that the Anglo Board has formally approved the Sadiola expansion project?

I cannot confirm that. What I can confirm Tony is that I talked to Venkat and I’m not exaggerating every day. And I can tell you that he and I and Anglo’s management team and our management team are totally aligned on the path forward, but our technical teams have been working diligently for the last eight months, and we are in complete agreement on the design of the expansion. We’re in complete agreement on what we need to get from the government to move it ahead. I was in Bamako with Venkat last week. And we walked together into the government’s offices, we ate together, we rode together. And we are one as we move this forward, which is the first in the six years that I’ve been here, where we’ve had such a strong relationship and a strong bond to move this project ahead. So I can’t tell you whether he was successful or not. You would have to ask him. But based on everything that I experienced last week, he is fully supportive of moving this ahead. And again, we’ve got some work to do with the government. But we’re confident that we’re going to be able to get what we need to move this ahead.

Okay. You’ve been talking of Côté a little more aggressively now. I mean, what’s the change there in terms of some of the project parameters?

There were some massive changes. And Jeff Snow is sitting here. He hasn’t said anything as he’s just here to monitor what we say. So I have to be careful here. But Jeff Snow was instrumental in doing a number of things with that project in the - what I call the dark years of the gold business here, when we saw gold head towards a $1,000. Jeff did some deals in and around Côté to enhance our - basically enhance the design of Côté. We had companies that were in and around our concession, which I would say impaired our design somewhat. It didn’t kill it, it impaired it. Jeff’s removed that. The Canadian dollar has moved quite a bit in our favor, since we bought this in 2012. Gord has been hard at work at looking at an optimal capital structure in terms of the design. And Carol has been looking at the financing. And I would tell you that with the infill drilling that we’ve done, where we moved it from about 1.5 million ounces on a resource level to close to 8.5 million ounces in the last four years. This deposit and we’re just up there about three weeks ago, this deposit looks extremely attractive. And for all the reasons we’ve said in the past, Tony, the infrastructure is close at hand. The rock is softer, although still hard and definitely going to be challenging going ahead. The environmental permits become less of a challenge, because of the rock formation there. We already have the federal permits. We’re expecting to get the provincial permits here in the next month. It has a real nice look to it and it probably wouldn’t be the size that we initially thought in 2012. It would probably be half the size, half the capital, but very manageable and very attractive economically $1,200 gold. And, Gord, maybe you want to add to that.

No, I think you’ve sort of covered a lot. But I think we never stopped working on Côté, when the prices were low. We didn’t talk about it as much, because we got beat upon every time we did. But we continued to de-risk. We’ve moved the permitting forward. We’ve examined a couple of different development scenarios and we have something in front of us now that’s starting to look fairly attractive. So we’re pursuing that a little more aggressively. And we are five years further down the road, and as we look at our overall production profile going forward, we see the decline in assets within the strategic timeframe that we need to start addressing now.

Okay. Just on the potential to kind of go forward at Côté, I mean would you be looking at maybe low-teens in terms of a potential IRR at 1,200, given the favorable jurisdiction or are you more in the mid-teens?

We’ve done a preliminary PEA it’s sort of in the mid-teens at current gold oil prices. But it is PEA and it does require a little more work. It’s certainly attractive enough for us to want to go to the next level of study. But it’s an option, we we’re not at an investment stage right now, and we probably won’t be at an investment stage until 2018 give or take.

Great. Thanks very much.

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

Hello, good morning. Just Randgold had some pretty high profile tax issues with Mali. Carol, maybe you could just talk and, Steve, maybe talk a bit about what kind of safeguards you’re looking for? I remember Larry Phillips talking about how the Mali government was frequently looking for a larger piece of the pie, so how do you safeguard?

Maybe I’ll start - in terms of relationship with the government of Mali, I mean, they’ve lived up to the arrangements that we had with them. And I think as it pertains to Rand, I can’t talk to their specific situation other than to say it’s very specific to them. And you would have to ask them around those circumstances. But we don’t share the same sort of challenge in that regard.

Yes. We have had a long history there. It goes back to 1996. We’ve mined 9 million ounces from Sadiola and Yatela. It’s been an extremely good investment for us. It’s been an extremely good investment for the government of Mali, $1.2 billion in cash flow for the government of Mali. So we have a very, very good relationship. Canada itself has an extremely strong relationship with Mali. I don’t know if many people know, but we donate over $100 million a year as a country to Mali. So we’ve got very good relationships, we have a very strong embassy there. Ambassador to Mali is extremely strong, great relationship with the Malian President, Prime Minister and Minister of Finance. So, look, it’s like any country we’re in today. It requires constant vigilance and due diligence. And we have probably the best team that I know of to do that. Our corporate affairs, our corporate social responsibility teams, our finance team is second to none, and it requires a lot of face-to-face meetings which we do. And I would tell you that our relationship is extremely strong.

Great, okay. So it sounds like a typical part is that it is specific to Randgold, their issues.

I would say so.

Gord, on Westwood, have you encountered any ground problems over the last quarter or couple of quarters?

Nothing material, we like any mine in the world have ongoing sort of micro-seismic events, but certainly no ground control issues that are - that I would characterize as anything out of the normal. The production is going very well. The development is going really excellently. No, I guess is the short answer.

So it’s been more than a year since the last problem, and is your sense you have the formula right now for how to work in these ground pressures?

Yes. We certainly are hack of a lot smarter than we were in the middle of 2015 with respect to ground control. We have some additional tools in our tool box to look at ground controls through time. We are - we’ve adapted our designs to work through the problem and to make sure that the people at the appropriate level in the organization are reviewing all the designs before we go out and dig the round. We’ve got ground control packages that are specifically designed for the risk - the hazard in the areas - in every area. And beyond that, we’re now starting to look at our - as we ramp up to stoping over the next couple of years and really expand the amount of stoping we’re doing. We’ve got the same geotechnical people and some additional geotechnical and mining people in working with the engineering teams at site there to really look at our sequencing in the future and ensure that we can achieve the ramp ups that we’re laying out.

Okay. And I think last quarter you were saying it was going to be, was it the second-half of 2017, you’ll have every horizon opened?

We will have - by the second-half of 2017, we will be in - we will have development into zones 1, 2, 3 and 4; 5 and 6 below the shaft is in the future. So I don’t want to say every horizon, but certainly the four upper horizons will all have access into them, and we will be starting stoping I think at all horizons either by the end of 2017 or early 2018.

Okay. And then, lastly, I know you have the managers in town now for your budget process. But is the 2016 mine plan for Westwood still looking achievable?

2016 looks very achievable. We’ve made some…

But you laid out a life of mine or at several years.

Oh, the LOM plan, yes, we continue to update it. The current LOM plan is very similar to the one you had. I mean, obviously there is some detail differences, but on a material basis it’s effectively the same plan.

Perfect. Great. Thanks, guys.

The next question is from David Haughton of CIBC. Please go ahead.

Good morning, guys. And thank you for the update. So just looking at Sadiola, should we be referring back to the 2015 43-101 as the basis for the agreements that you seem to have reached between yourself, Steve and Venkat, as to how this plan could look.

I would suggest that would be a good reference point for sure.

Yes. I mean, this is Gord. We’ve been working obviously very, very closely with the AngloGold Ashanti project development team. We’ve made a couple adjustments to that plan. We’re looking at an alternative tailing to that position method specifically looking at putting the tailings in one of the exhausted satellite pits, which actually saves us little bit of money. And we’ve been tweaking the mine design, and I think the mine design is slightly better than the one that you see in that 43-101. However, by and large it’s the same project.

Okay. So I presume that part of your discussions with the Malian government and the bureaucrats there is just to move things along to make it smooth for the permitting side of things. Are the ducks lining up for you on that?

Slowly, but truly.

Yes, as Steve mentioned, we were all there. It’s actually the week before last, and we met with the minister of mines, met with the minister of energy, met with the minister of finance. And, yes, we’re moving it forward. I mean, our basic request is just to reinstate all of the approvals that we already had in place a couple of years ago which had lapsed for us. So we’re not looking for anything new or fancy. We just want to continue to move forward with what we had already agreed to with our partners and the Malian government.

Okay. So AngloGold’s got their quarter coming out next Monday. Is it your expectation to Sadiola at that stage?

I have no idea. And it’s something you’ll have to ask them, David, I mean all I can tell you is that, I think Venkat would tell you this if he was on the call with us, because we’re totally aligned. We have the same objective. What he says publicly about his board is up to him. But from where we said the relationship is very strong, and we are pointed in the same direction. So that’s really all I can say right now.

Nobody is stomping on the brake pedal.

Yes.

Alrighty, just moving to a different topic then if that’s okay. You’ve picked up the pace on your capitalized strip at Rosebel and Essakane, some commentary that that might extend into the next quarter. Can you tell us what your expectations are as far as the extent to which doing capitalized stripping and what we might to see as the benefit of that strip going into next year?

I mean capitalized stripping is - it is a timing issue, and it can go up or down in a quarter depending on what phase you’re in. It tends to be a little more steady at Rosebel just because we’re working on multiple ore bodies. So there’s typically always one pit that’s in capitalized strip. But we do adjust it within the year. Overall, as we look forward to next year, I don’t have the numbers in front of me, but I believe the level of capitalized stripping next year for the whole company is slightly down, although I think at Essakane it actually is up at that one operation, because I know we’re starting a new phase in the Essakane main zone, which will obviously lead to some capitalized stripping. At the end of the day, I sort of tend to focus on the total mining cost. And it either gets allocated to cash costs or gets allocated to sustaining capital, and I’m not projecting any change in the total level of mining, any material change anyway from the total level of mining between those - for next year at those operations.

Yes. That kind of speaks to the improvement you had on the cash cost guidance, but although the all-in sustaining costs guidance is narrowed, not as big a change here. That’s really what’s driving part of that though, isn’t it?

Yes, definitely. And also at Westwood really, as we’ve been developing this year and as we’re looking at next year as we get into second-half of the year, a lot of that developed - more of the development anyways that we’re doing is in zones that we will be mining within the next year. Therefore, the allocation changes from capitalized development into sustaining capital development versus expansion capital development.

Okay. And last question maybe for Carol, so at Essakane in particular, so that step-up as Gord referred to of the sale as gold in inventory still got quite a reasonable amount of gold in inventory, it seems to me at Rosebel and Essakane. Do you anticipate any catch-up sales in the fourth quarter?

Nothing, I mean, I was looking at this quarter. It’s a good question, David. I think a slight but not significant, I mean, again, based on just the processing there’s a certain amount of inventory that that is sitting in the processing. So it’s something that we’re going to be watching carefully and working with the sites on. But Rosebel - there wasn’t so much at Essakane. But at Rosebel there is a little bit of buildup. So we do expect some of that to come through on sales. But it’s something that we’ll work through within the sites during the quarter on. That’s a good question.

Okay. Thank you, everybody.

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

Yes. Thanks very much. And maybe, Carol, just to follow up on David’s question on the excess sales at Essakane, what was the cost allocated to the 12,000 ounces? Had that already been expensed or was there a low cost attributed to that, just given the…?

No, I would - there is a cost of it sitting in inventory. So I mean we produced it. But it was sitting in inventory. So that cost would have been inventory. And so when the sales went through the appropriate cost associated with that production would have gone through at the same time. So you hit sales and you hit cost of sales. And it will be in line with some of our other production. So it was a proportion - significantly proportionately lower.

Okay. So driving the lower operating cost quarter-over-quarter and versus the first half of the year, it’s really the improvement in grade and the lower amount of strip that has been expensed versus capitalize. Is that correct?

That’s right. That’s correct. And we also have the benefit of what we talked about earlier in terms of the workforce reduction at Rosebel, the Surinamese dollar, the Canadian dollar, lower fuel consumption. So there’s a number of sort of activities that went into contributing to the lower cost.

Okay, perfect. And just at Rosebel, the $40 an ounce that was allocated this quarter for the new Collective Labour Agreement, you do mention the word lump sum payments over 2016 through 2018. Is this $40 an ounce representative all the lump sum payments, or should we expect our lump sum every sort of annually through the next couple of years?

No, it was a one time for the next - it was part of the CLA settlement. So that was a lump sum of free payments taking place last quarter, this quarter and next quarter and that was all put through and expensed in Q3.

Okay, perfect. And could you just confirm what portion of the onsite cost at Rosebel right now are labor related under the collective agreement?

So it’s about 15% - well I would say about 15% for local labor. So that’s the way I would look at it. So if you take a look at the operating cost of 15% is SRD - tied to the SRD.

Okay. And Just given the improvement in the underlying cost structure you’ve been seeing to date, given the improvement in the metal price environment, as well as some potential savings going forward on lower oil prices as you come off this year on your options. Where do you guys see the sustaining capital spend going forward? Are you willing to allocate more to sort of ongoing exploration after a couple years of pullback? But you’ve obviously added some this year, should we expect some higher sustaining exploration going forward??

Brownfield at the operating side, other than the work we’re going to be doing at Saramacca. Right now, we’re still budgeting the same levels of sustaining exploration spend. So I’m not seeing a lot of change there, versus where we are. There was at both Rosebel and Essakane this year, and it goes back to the capital comments I made earlier. Boto’s operations came in with pretty skinny budget this year and at midyear based on success came back and requested some supplementary filing. So, I think, it’s sort of a prudent way to run our Brownfield exploration group in that, it sort of success driven rather than just giving them a large budget and coming back to us at the end of the year. The total allocation I don’t think it’s a materially larger number, right now. We’ll continue to look at it. We do have - we have had ongoing programs at both those sites for a long time. And at Westwood right now, and really focusing within the mine life and marginal increases to those, which has been pretty good for us, not looking for an increase right now.

Okay, perfect. Thank you very much.

And this concludes the amount of time available for the question-and-answer session. I will turn the call back over for - to Bob Tait for closing remarks.

Yes. Thank you very much for dialing in today. We’ll be watching the election for the rest of the day. I’m sure see how that changes our world, and if you have any further questions, please contact myself or any of my team and we’ll be happy to help you. Thank you very much.

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