IAMGOLD Corporation (IAG) Q3 2017 Earnings Report, Transcript and Summary

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the IAMGOLD 2017 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. [Operator Instructions] At this time, I would like to turn the conference over to Ken Chernin, Vice President, Investor Relations for IAMGOLD. Please go ahead, Mr. Chernin.

Thank you, Kyle. Welcome to the IAMGOLD third quarter conference call. Joining me on the call today are Steve Letwin, President and CEO of IAMGOLD; Gord Stothart, EVP and COO; Carol Banducci, EVP and CFO; Craig MacDougall, SVP Exploration; and Tim Bradburn, Vice President, Legal and Corporate Secretary. 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, Stephen Letwin.

Thanks, Ken, and good morning, everybody. Well, we had another great quarter. And great quarter doesn’t just mean solid financial results which we experienced and Carol is going to talk to that, but it also involves continued focus on our cost reduction and continued execution of our strategic initiatives. So, Carol, Gord, and Craig will take you through the highlights, but first a few words about our strategy. Recently, I put out a paper on our continuing transformation and its underlying achievements and the catalysts ahead. It’s on our website, and I encourage you, if you have the time, to read it. Last month, I was on a mining industry panel on Innovation and Transforming Business Strategies. And as I think everybody on the call knows, there is a huge shift in thinking around the concept of innovation. It’s easy to think that when we talk about innovation in mining that we’re only talking about technology; that isn’t completely true. And although technology is a big part of any kind of innovation, it also involves new approaches to problem solving et cetera. And with us, as I’ve described a number of times now, our business model is built around growth opportunities in both short cycles and long cycles. And it’s putting us on a very deliberate path as we move towards 2020 and 2022 of 1.5 million ounces in production and a very significant reduction in our costs, all-in costs to production as we target an $800 all-in sustaining costs. So, this is exciting for IAMGOLD when you take a look at where were and certainly where we plan to be. We’re going to be measured every quarter. It’s tough in the mining business as all of you know to give new catalysts and new growth. But I think we’ve been able to show you and demonstrate quite exceptional innovation so far, to-date. And I’ll tell you that as we go forward, there are going to be additional significant catalysts as we move towards that larger production and most importantly, greater margins and lower all-in costs. So, on slide four, where we talk about a new gold district. On the short cycle, Rosebel is in the lead. [Ph] Following the substantial increase in resources at the end of July which included an 80% increase in reserves, we confirmed Saramacca to be an outstanding discovery. The initial resource estimate reported on September 5th comprised just over 1 million indicated ounces and 0.5 million inferred ounces. And as you know, this is well beyond our expectations, everything from the size of the resource, the grade and the significant proportion of soft rock, so, the huge potential for expansion. And Craig is going to talk more about that, but the deposit remains open along strike in both directions. And we continue drilling there and we continue to work to bring Saramacca into production as soon as possible. Gord is going to talk about the next steps to get us there. Our strategy basically is to create a new gold district anchored by Rosebel. And Saramacca is just the beginning as we continue to work at consolidating other land packages within the vicinity of the mill. This truly is going to be transformational for Rosebel. For those of you that made the trip to Rosebel, and I thank you for doing that, I think you’ve got a bird’s eye view of what we’re talking about. But, it is significant and it is transformational. At Essakane, on our next slide, heap leaching and satellite prospects could add years to its life expectancy. Production from heap leaching could begin by 2019. That alone could add 3 to 5 years to a life that under the current mine plan would end in 2025. And that doesn’t even include the growth of potential for multiple satellite prospects on Essakane’s large land package. So, Essakane, like Rosebel, we see extending its mine life well beyond 2030. Westwood is continuing to ramp up production. Once operating at full capacity, we expect it to have the lowest unit cost of any of our operating mines today. The Côté Gold project, now joint venture with Sumitomo is expected to be a low-cost, long-life mine advancing towards development. Potentially, it could begin production in the first half of 2021. I’m on a plane on Saturday; I’m going over to Tokyo this Saturday to meet with Sumitomo and the number of Japanese funds that have taken a significant interest in IAMGOLD, thanks to Carol Banducci and Jeff Snow who made a trip a couple of months ago. I would tell you that Sumitomo is a great partner. We’ve had many meetings with them. They were here a couple of weeks ago. I’m extremely pleased and excited about what the look is like going ahead with Côté and certainly excited about a partner like Sumitomo being with us as we move forward in terms of growth and acquisition opportunities in the space. So, we’re really pleased about that relationship, a very solid partner, and again, looking forward to the trip and additional meetings next week. And then, the batting lineup, if you want to look to the Houston Astros, my hometown team here. Options for longer term growth, Greenfield exploration projects at varying stages, some with declared resources and others getting closer. So, great work being done there, and you’ll hear more from Craig. So, not only on the short-term cycle do we have some great opportunities but on the long cycle economics, our pipeline is quite robust. Regarding the Sadiola Sulphide Project, and again this isn’t new news. Discussions with the government of Mali continue as we try to work towards a resolution on the terms that are critical to moving the project forward. And we are very committed to Sadiola. I personally believe it will move ahead. Remember that we have this concession until 2024 and we have our right to move it during that timeframe. Obviously, we would be disappointed if we didn’t move fairly quickly to get Sadiola going ahead. But in the same breath, as you will hear, we have lots of opportunities to put our money across the Company, whether it’s Saramacca, Brokolonko, whether it’s at Essakane with heap leach and other discoveries that we’re around Essakane, whether it’s like Côté, there is a plethora of opportunities for us to put our cash. Yes, we’re disappointed with Sadiola, but I would tell you we are not going to bend our principles around economic returns and we are not going to bend our principles around our risk appetite. So, if the government of Mali doesn’t come on site, we will delay the project. If the government of Mali does come on site, we would be excited moving ahead with what we think is a very attractive project. With that, I’m going to call in Carol to review the financial results.

Good morning, everyone. So, turning to our results, as Steve said, we had a solid quarter. Steve talked about the excellent progress on our growth initiatives. So, I want to emphasize the importance we’ve placed on discipline around cost and capital allocation. Not that this is any different from the past, but it becomes increasingly important to balancing the need to invest in our business with the need to maintain a strong balance sheet. So, this next slide presents the snapshot of our performance for the quarter. Gold production was up 7,000 ounces from the prior year, cash costs and cost of sales per ounce were higher due to lower capitalized stripping associated with the removal of waste material at Essakane and Rosebel. All-in sustaining costs were 7% lower than the previous year, as a result of lower sustaining capital expenditures. Revenues were down, mainly due to lower sales at Essakane as the prior year benefited from the sale of 12,000 ounces of gold from Carbon fines built up in inventory. The lower gold price had an impact but was a much smaller factor. Partially offsetting were higher sales at Westwood with the doubling of production and higher sales at Rosebel. Gross profit, although lower than the previous year due to lower revenue, has increased in each of the past three consecutive quarters, reflecting our ongoing focus on cost discipline. Net operating cash flow was down due to lower operating earnings, lower dividends from joint ventures and increase in taxes paid. Adjusted net earnings attributable to equity holders excluding items not indicative of our core business was $34 million or $0.07 per share in the third quarter. Note that the $11 million tax adjustment mainly related to foreign exchange gains and losses. So for accounting purposes, the foreign exchange gains and in jurisdiction were largely offset by foreign exchange losses in another jurisdiction, but the tax impact for each of these jurisdictions did not offset. The next slide presents the Company’s hedge position as of October 31, 2017, so effectively where we stand today. The Canadian dollar and euro are hedged out to 2018 and our fuel hedges out to 2020. Approximately 77% of our liquidity position is comprised of cash, cash equivalents and short term investments in money market instruments. So, based on third-party data, this ratio compares very favorably with many of our peers who have liquidity position but heavily weighted on undrawn credit facilities. So, very healthy balance sheet, well positioning us to internally fund many of our organic growth initiatives. So, with that, I’m going to turn it over to Gord.

All right. Thanks, Carol. So, looking at operations, our operating performance continues to benefit from major mill improvements and ongoing continuous improvement. Year-to-date production of 654,000 ounces is up 10% from the year before. Turning to the quarterly numbers. We produced 217,000 attributable ounces in the third quarter. All-in sustaining cost of $969 per ounce was 7% lower than the previous year. The positive trend this year is related to lower levels of sustaining capital expenditures in the first three quarters and continued cost containment success at our operations. Sustaining capital expenditures are expected to be higher in the fourth quarter, reflecting the timing of expenditures, particularly on capital spares and no maintenance. The next slide presents our annual production and cost guidance for 2017. We maintained production guidance at 845,000 to 885,000 ounces for the full year 2017 and we’re on track as well to meet our cost guidance and expecting due to better on all-in sustaining costs for the full year of 2017 than anticipated at the beginning of the year. We’ve lowered the top end of guidance by $40 an ounce, which narrows the range to $1,000 to $1,040 per ounce. Turning to our CapEx outlook, we lowered guidance for 2017 by $25 million to $225 million plus or minus 5%. The main reason for the decrease is a $30 million reduction in sustaining capital expenditures attributed to lower capitalized stripping at Rosebel and Essakane. This was partially offset by a $5 million increase in non-sustaining capital due to installation of the tailings liner at Essakane and the heap leach prefeasibility study, and the capitalization of exploration expenses at Rosebel related to Saramacca partially offset by lower spending on the Sadiola sulphide project. Now, turning to the operating results of each of our sites and starting with Essakane. Essakane produced 93,000 attributable ounces in the third quarter, down 11% from the same quarter in 2016 which had unusually high grades. The decline was due to lower grades, partially offset by higher throughput and recoveries. Throughput rose 8% year-over-year, despite the increasing proportion of hard rock content with hard rock content reaching 90% in the third quarter of this year compared to 77% in the same quarter a year ago. The mill continues to perform well above nameplate capacity reflecting the benefit of major mill improvements and improved operations. The continued improvement in the recovery rate reflects increased mining in non-graphitic zones. However, graphitic ore zones still exist in our future mine plans. And once we complete the geometallurgical study by the end of this year, we’ll be better able to characterize and mitigate the impact of those graphitic ores. The installation of the oxygen plant, which we expect by the end of next year, will help us well. The heap leach prefeasibility study is going very well and we expect that it will be completed by the second quarter of 2018. All-in sustaining costs at Essakane were $944 an ounce in the third quarter. A 16% increase over Q3 2016 was due to higher cost of sales and lower sales volume partially offset by lower sustaining capital expenditures. Cost of sales per ounce increased with the lower capitalized stripping costs due to mine sequencing, higher fuel prices and higher processing costs due to harder rock. The inclusion in the previous year of 12,000 ounces of gold from the sale of carbon fines, as Carol described, accounted half of the year-over-year decline in the volume of sales and about $45 per ounce in the year-over-year AISC variance. Looking at Rosebel, attributable production of 75,000 ounces in the third quarter was up slightly from the same quarter in 2016. Although the percentage of hard rock in the mill feed increased to 44% from 37% year before, mill throughput increased 5% due to the major mill improvements completed in 2016. All-in sustaining costs were $898 per ounce in the third quarter 2017 for Rosebel, 24% lower than the same period last year. This was mainly due to timing of sustaining capital expenditures, which was 66% lower in Q3 than they were in the previous year. Again, as I mentioned earlier, the fourth this year is expected to see higher AISC associated with the timing of fleet and mill maintenance. Costs of sales in Q3 were slightly lower, mainly the result of the inclusion of the one-off supplementary labor cost adjustment related to the modified collective labor agreement in the third quarter of 2016, which had a $43 per ounce impact, partially offsetting were higher fuel prices and lower capitalized stripping. At Saramacca, permitting work is progressing well including the environmental and social impact study. So, we expect to have all this completed in the first half of next year. Preliminary engineering work on the mine design and infrastructure is underway, and we’ve initiated additional more comprehensive metallurgical testing, which will help refine the recovery assumptions, test the crushing and grinding characteristics of the ore, and determine the metallurgical variability of the ore deposit. We expect to begin new mine design soon based on the new resource model published in September and to integrate scheduling with the main Rosebel resources. With the Saramacca resource having a much higher grade than Rosebel and with 60% of that resource hosted in soft rock, we expect significant positive impact on unit production costs. As for timing, we are working to advance the deposit towards a production start in 2019. Moving to Westwood. Westwood continues to ramp up with the volume of tonnes mined and milled double that of the same quarter last year. As I pointed out last quarter, the grade mined underground is much higher than total reported head grade; this is because we are processing marginal surface ore stockpiles to take advantage of available mill capacity. When we exclude the marginal surface ore, the underground head grade in the third quarter is actually 7.4 grams per tonne gold, 11% higher than the combined number reported. With the underground development, our focus continues to be on ramp breakthroughs and infrastructure development at lower levels. With nearly 15 kilometers of development completed year-to-date, we expect to achieve 18 kilometers by the end of this year. All-in sustaining costs in the third quarter of $907 per ounce were down 9% in the second quarter. As production increases, Westwood’s unit costs are expected to trend lower. At our Sadiola joint venture, attributable gold production continues to decline with the lower grades partially offset by higher throughput. Steve has already commented on SSP, so I’ll just add here that retrenchment plan at Yatela is expected to be completed by early 2018. Turning to Côté Gold, at our joint venture with Sumitomo, the feasibility study should be completed by the first half of 2019. Delineation drilling started in the third quarter with the objective to upgrade inferred resources to indicated and to evaluate the grade variability in the starter pit. Subject to acceptable results from the feasibility study, a favorable development environment and a positive construction decision, we expect commercial production to begin in the first half of 2021. I’ll now turn you over to Craig to talk about exploration.

Thank you, Gord, and good morning, everyone. Exploration has had a very productive year so far. The number of meters drilled year-to-date is up 65% from the previous year. We’ve increased our spending outlook for this year, excluding feasibility and other studies by $9 million to $56 million. This additional spend is mainly due to the ongoing exploration activities at Saramacca, a result of our outstanding exploration success to-date. Please note that the results I will talk about today have been previously disclosed in accordance with securities regulations and signed off by the qualified persons within the company reporting them. I’ll begin with Saramacca. Saramacca’s resource estimate not only exceeded our initial target but has significant expansion potential. The deposit is estimated to contain just over 1 million indicated ounces of gold, the average grade is 2.2 grams of gold per tonne, and is a 120% higher than Rosebel’s average reserve and resource grade. The inferred resource is estimated at 518,000 ounces. In addition to higher grades, this deposit is primarily soft rock with approximately 60% of the resource hosted in shallow, softer laterite and saprolite mineralization. Having covered a lot of detail on our conference call in early September, I’ll focus more on the continuing exploration activities around expanding the resource. Our objective is to have a preliminary reserve estimate for Saramacca during the first half of next year. During the third quarter, we resumed the drilling program and expect to complete an additional 20,000 meters of diamond and reverse circulation drilling by the end of the year. We’re targeting the conversion of as much of the inferred resource to indicated as possible along with expansions to the existing resource and the discovery of potential new zones and mineralization. As we’ve said before, the deposit is open at depth, so we have the potential to go deeper and there has been no drilling beyond the end of the conceptual resource pit. So, the deposit remains open along strike in both directions with drill holes at each end intersecting significant mineralization. We’re seeing a trend developing at Saramacca that extends northwest under the Sarafina property and beyond. Much of our future work will be focused on this prospective area. Turning to our Greenfields projects, at our Boto Gold project in Senegal, drilling continued throughout the quarter to evaluate potential extensions of the Malikoundi deposit and to determine the potential for additional resources within the Boto 5 and 6 zones. As well an 1,800 kilogram sample prepared from core composites were sent to an independent laboratory in Canada for further metallurgical testing. At Pitangui in Brazil, we’ve been focused on the up-plunge extension of the São Sebastião deposit where there is potential for additional resources. During the quarter, we completed more than 3,100 meters of diamond drilling. These results will be used to update the mineral resources at the end of the year. Technical studies to advance the economic evaluation of both Boto and Pitangui projects are ongoing. At our Siribaya project in Mali, core logging and sampling activities were completed in the quarter for the drill holes completed throughout the year. Approximately 19,500 meters of diamond and reverse drilling has been completed at Siribaya so far this year. The objective is to confirm the geometry of the known mineralized zones of the Diakha deposit and extend mineralization north and south along strike where previous exploration work has shown encouraging results. The drilling results will be incorporated into a deposit model and used to update the mineral resource. At our gold and silver Eastern Borosi joint venture project in Nicaragua, 22 holes were drilled this year for approximately 7,300 meters. In the third quarter, results from the final eight holes were reported. An updated 43-101 resource estimate is planned by the end of the year which will incorporate a total of 26,000 meters of drilling completed over the last four years. Turning to our Monster Lake project in Quebec. Early in the quarter, we reported final assay results from 25 holes drilled during the winter campaign. During our second quarter call, I touched on the highlights, which show continuity of high grades associated with the Megane zone. During the third quarter, a further 1,800 meters of diamond drilling was completed, largely targeting a lower zone, which is a developing mineralized zone running parallel to the Megane zone. Assay results were received and reported on November 1st. These results will also be used to guide future drilling and will be incorporated into a deposit model to support the completion of an initial resource estimate in 2017 if the results merit. In August, we also acquired approximately 20% equity interest in TomaGold, our joint venture partner with whom we share 50% interest in the project. At the Nelligan project south of Monster Lake, the final drilling results were reported for the remaining drill holes of an approximately 7,700-meter drilling program completed in the first half of the year. The main objective of the program was to follow up on encouraging results from the 2016 drilling program and to further explore a newly discovered mineralized zone located to the north of the previously known mineralization. These results are being assessed to help to fund the future objectives of the next phase of exploration. With that, I’ll call on Steve to wrap up.

Thanks, Craig. Well, let me leave you with five key messages. First of all, we’re going to continue execute on our transformational strategy. Second, we’re on track to meet production and cost guidance for the year, which were very good targets for us. And as Gord described and Carol and Craig have described, we’re well within the range. And in fact, on the cost side, we’ve reduced the high end of it. We have the liquidity, thanks to the Carol’s leadership on the balance sheet, to support many of our growth initiatives. Number four, do not underestimate the value of the Sumitomo partnership. It is very strong and it’s very positive, and it’s a big asset for us moving forward. And the last is our commitment to grow production and reduce costs over the next four to five years is huge. And we can do this organically. We don’t have to do any acquisitions. We have these opportunities in our backyard. And the opportunities for short cycle economics is very significant where we can bring projects on very quickly, add cash flow at very high rates of return with limited capital. This is a huge catalyst for us. And on the topic of catalyst, because I get asked this many times, what are you going to do for me next? There are number of things that we’re going to do. So, first of all, the preliminary reserve estimate for Saramacca, as Craig talked about, in the first half of 2018, is going to be coming out, and we’re going to be targeting production starting in 2019. So, we’re going to have another update with Saramacca and surrounding areas in a very short period of time. Some of that information is going to be coming out before Christmas. Consolidation of additional concessions at Rosebel, expect to hear additional announcements around consolidation at Rosebel. This is very prolific very robust for the Company. Heap leach prefeasibility Q2 2018, an outstanding opportunity at Essakane, and surrounding Essakane further exploration success that will be put out in 2018. Westwood is going to continue to ramp up. The Feasibility study for Côté will be coming out in the first half of 2019. Côté production will start potentially in the first half of 2021. And as we continue with this robust longer life cycle opportunities we have, we’re going to have continuous resource updates for exploration projects like Boto, like Siribaya, like Diakha, like Monster Lake and Nelligan on an ongoing basis. So, I’m very pleased with the portfolio of opportunities that are out there. And again, these are all organic opportunities. We’re excited about the end of the year in terms of what we’re looking to see before we reach Christmas, and we’re exceptionally excited about 2018 in terms of what lies before us. Thank you very much. We’re happy to take questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Dan Rollins of RBC Capital Markets. Please go ahead.

Yes. Thanks very much. Steve, I was wondering if you could comment on Saramacca and potential to increase your ownership stake there before above 70%, maybe get it back to 95%, in line with the regular Rosebel, the main concession there?

I would say, Dan, there is as an excellent opportunity to do that.

Okay. And is this -- is the UJV structured on a concession-by-concession basis or if you were to trigger a larger increase would have to be for all the concession?

It would be on a concession-by-concession basis. But, I would tell you the relationship with the government is very strong. I would say, it’s the strongest it’s ever been. And I would tell you that the potential to form a new gold district there is very high. And we’re hopeful that we will be able to progress that. But, it’s not just about Saramacca, it’s about the extension of Sarafina that Craig talked about, and there are concessions around Saramacca that look as prolific or greater in terms of potential resources. And it’s an opportunity for us, 20 to 25 kilometers from a mill that was paid for seven years ago, to really leverage the economics at Rosebel. So, I would tell you that there is great opportunity there. And we’re well in to discussions to try and move that ahead. I can’t promise anything, there are no guarantees, as you know, but I would tell you the structure of this would be great for the government of Suriname and certainly great for the shareholders of IAMGOLD.

Okay. And just given the talk around Sarafina and some of the other confessions, does this indicate that you sort of moved towards building a rail as the ultimate linkage for the transport system there or are you still in progress to between rail and trucking?

Yes. It’s Gord here, Dan. That’s a subject of a study [ph] that’s underway right now. And obviously, part of the consideration there is the potential to add additional ore tonnes in the district and how does that influence the decision. So, it’s a key piece of the analysis. I mean, we did preliminary analysis early on sort of desktop stuff going at it a little more completely together with an external firm right now.

Okay. And Steve, maybe you could comment on. I know you put some numbers, you’ve talked about it and I understand the situation there. But, when do you actually have to make a hard decision to put this mine on care and maintenance to preserve the optionality there, like what’s that deadline. I know, like we talked last year with sort of beginning of this year sort of the drop dead date and now we’re sort of pass that. How long can you continue this sort of back and forth with the government before you have to start to play hardball?

Well, we’ve been playing hardball, Dan, and it’s not long into the future before we’d have to go to care and maintenance, which again when you look at IAMGOLD’s portfolio -- I just want our people on the phone to understand two things. First of all, we would be very pleased to move ahead with Sadiola under economic terms and conditions, especially around sustainability that makes sense for our shareholders. We’ve all seen examples of what’s happened in the mining industry when you move too quickly and don’t have the right economic parameters or more importantly, the right legal remedies if governments don’t behave properly. So, we’re not going to put our shareholders at risk. In the same breath, we have this property for the next seven years. And there is a great opportunity to expand it and keep employment for 1,300, 1,400 people there. It’s been there for 20 years. And you know that the economic value that could be added going forward is significant for the government and for us. But, a long answer to, I am done talking to the Minister of Finance on this. It’s up to him to come to the table. We have a very reasonable proposal for him to act on. If he doesn’t act on it, we will go to care and maintenance. That decision isn’t very far away. It doesn’t hurt our company, it doesn’t hurt our shareholders and in fact opposite to that it frees up $200 million for us to invest in something like Saramacca, Sarafina, Brokolonko, Côté, and projects that add very, very high rates of return for us. So, yes, I’m disappointed. But, does it hurt us? No, it doesn’t. Is it still on the table? Yes, it is. Do I believe it’s going to come back on the table? I believe it will. But it needs to come back on the table at terms and conditions that our shareholders would say, Steve, Gord, Carol, Craig you did a good job getting the right terms and conditions going forward. So, you’re protecting shareholders on all fronts.

Okay. And then, I don’t know if you have the numbers but -- or you’re willing to provide them, but what would typically cost if you put this asset on care and maintenance?

We’re still working on defining that, Dan. There is lot of different angles to that. It’s significantly less than what we’ve spent by dragging out the better end of the existing resource and not building the expansion platform.

Okay. And then, Steve, again, if we’re sitting here the time next year and the asset is on care and maintenance or you’re still in the discussions, I’m sure Côté Gold probably would be green lighted by then. Then, that really puts our project other two years down the road because it’s just in [indiscernible] by an asset that’s less encumbered and something that you guys can move forward freely. Would that be a correct statement?

Well, it’s not just Côté. I mean, you’re going to see announcements for us around Essakane and Rosebel which are literally outstanding. And we are seeing on a short cycle basis, significant opportunities at those two mines. So, it’s not just Côté, Dan, it’s a whole bunch of opportunities that our guys are in town putting forward right now. And, yes, unfortunately Sadiola falls in the Q and because of the behavior of the government of Mali, we were hurting a lot of people in that country; it’s sad. But, again, for our shareholders, we have to do what’s right for our shareholders. And I think our shareholders at the end of the day are going to very pleased with where we’re going to allocate our capital. And if the government comes back in line, we will consider it. And it’s a great project as we all know. But, we’re not going to compromise our principles. So, lots of things to do in the absence of Sadiola.

Okay, great. Thank you. That’s all the questions I had.

The next question comes from Andrew Kaip of BMO. Please go ahead.

Good morning, Steve and team. Look, just a couple of follow-up questions on Sadiola. I’m not as familiar with Mali. So, can you talk to me a bit more about, if the operation goes on care and maintenance and what kind of retrenchment obligations would be involved in that?

Typically, when you go on care and maintenance and if you do redundancies, you’re obligated to pay a severance that’s equivalent to what you would have paid, if you were shutting down the operations. It’s no different than the obligations under a closure. So, it varies. We use contract mine there. So, a good proportion of the work for us, are actually the contractors obligation, although we do have an underlying obligation to support that. I don’t have the hard numbers for you, Andrew. But, it’s -- we’re not talking tens of millions of dollars, it’s certainly much less than that.

Okay. Thanks. And then, with respect to Westwood, you had an incident over the last quarter, and I’m just wondering if you can get us some insight into what you’ve learned regarding the rock mechanics in the area that was affected and how that is changing your operating practices at Westwood?

Yes. I mean, the incident was in an isolated infrastructure drift that was being prepared for future development. It wasn’t a priority drift and it wasn’t a short-term issue. It’s a complex ground where we have interbedded brittle and plastic rock. As we mined into it, the softer rock was disaggregating as we mined into it, which was shedding stress onto the brittle rock and eventually exceeded the strength of that brittle rock and we had an explosive rock burst, it’s limited areas. So what it’s changed is we’re upping our work on characterization of different development areas. It’s important to note, this is not in the orezone, this is in the footwall access areas. And like I say, it’s not particularly ubiquitous. We also are working to understand the relationship with existing major structures like the Bosque [ph] fault and what rolls they play in the stress distribution. With respect to our operating practices, our initial response was to close a few operating areas. Thankfully, we were ahead in our development and actually have planned to reduce the amount of development required this year, based on our mine plans going forward. Most of those areas have reopened. We are studying -- we visited a number of other mine sites that have similar issues, some of them in the [indiscernible] and some of them in other areas in North America. And we are looking into buying some equipment that would allow us to develop safely through these more complex zones on an as needed basis. So it’s not a complete -- by any means a complete revamp of what we do development wise and ground control wise. But, it’s looking at putting sort of specialty package that will allow us to address these very, very specific areas.

Okay, thanks. And then, just final question. I mean, are the results of the inspection that were done by the government authorities, completed?

Yes.

Okay. And came out with these results, I presume?

Yes. They’ve been completely informed all along the results of the investigations and are aligned with our plans moving forward.

All right, thanks very much. I’ll leave it to somebody else.

Thanks, Andrew.

Our next question comes from David Haughton of CIBC. Please go ahead.

Good morning, Steve and team. Thank you for the update. Just going over to Essakane and thinking about the heap leach, I that you’ve got the PFS underway. Now, I think previously, you’d mentioned that the heap leach you’re looking at kind of 0.6 gram ore. I’m just wondering, is this ore that you’re re-handling or stockpiling, or would this open up the potential for other, as you untapped it?

So far the work has been confined to the Essakane main zone. We’re not saying that it isn’t applicable to other pits. We just thought that was the immediate opportunity. And so that’s where we focused the effort. The current cut off grade to the CIL plant in the long-term is 0.6. What we are considering is sort of material in the 0.3 to 0.6 range. There is a marginal stockpile already sitting on surface around 14 million tonnes of that kind of material. Going forward, if we did not have the heap leach, we would continue to stockpile some marginal material, but not to as lower grade as we can see with the heap leach. So, there is material that would have gone in the marginal piles for processing at the end-of-life with the CIL. But there is also even additional material below that in grades that from a heap leach standpoint is economic. The primary target we see is a further expansion beyond the last reserves that we -- last set of reserves and life-of-mine plans that we published on Essakane in the main zone. It’s a major pushback. What the heap leach facilitates is it unloads material that was previously defined as waste or marginal material for end-of-life processing, and just significantly improves the economics of that material, which in turn unloads additional high grade material for the CIL plant, especially at depth.

Okay. So, I guess in the very first instant, it would be, I guess preparing the pads, moving that marginal material over to the pads and then on an ongoing basis sort of have the trucks either going to the mill or to the heap leach, depending upon the grades they’re carrying. And could that potentially reduce the strip ratio that we’re seeing life of mine as well?

Definitely, that’s the primary impact. It will reduce stripping ratio. And look, I mean, obviously, we’re still in the midst of studying what that heap leach plant will look like. I’m not letting any cats out of the bag but we’re also evaluating what the opportunity would be to do some dump leaching, just to see if that has any opportunity. If you’re going build the processing facility for the heap leach, if you run a dump leach in parallel, so a three-process system with no crushing and no further combination, [ph] there may be some additional potential there. So, the team at site and the team is working with our consultants on the heap leach prefeasibility study are in the divergent thinking phase right now, let’s put it that way.

Okay. So, has it -- the tests that you’ve done on the material [ph] now, is it without additional cushion, i.e., dumping amenable to leaching and do you get reasonable recovery out of it?

Some mythology seem to be very, very amenable to it especially if we over blast it. You know from personal experience, that’s something that I had a lot of success with at copper leach plants in South America is just really working on your blasting technique on the lowest grade material to improve the fragmentation at that phase and then just dump leaching. You just create a series of internal cut off grades at different levels depending on grade.

And beyond the PFS mid next year, how long would it take to prepare the pads and with or without the additional cushion et cetera before you got into production…

Well, our current timeline would be looking to get it in the production in Q4 of 2019. I haven’t seen any revised timelines on that. But, we would look to be doing that as quickly as possible. Like you say, given the fact that we have -- we already have some surface stockpiles, we may be able to telescope it a little bit. But for conservatism purposes, we’re talking towards the end of 2019 right now.

Our next question comes from Steven Butler of GMP Securities. Please go ahead.

Thanks, operator. Question, Gord, for you on Côté, like reason for maybe pushing out the feasibility study timing from half two 2018s to sort of half one 2019, is that just sitting down with your new partner and looking at a realistic timeline now? Are there any reasons for pushing that feasibility study completion out?

I mean, actually, we’re in the process of reviewing it. And the focus has really been on when we can get it into production, not necessarily when we complete the intermediate steps. Production gives us value, not the intermediate steps. So, as we looked at it, there are some issues around getting the power supply lined up with Ontario Hydro or whatever the new name of them is, these days; they seem to change it every couple of years. And that’s impacting. With respect to With respect to the drilling and the design of the plant, all the work we’re doing on mine engineering, all of that stuff is actually progressing more quickly than we originally anticipated. But there is a few elements around power supply and looking at the permitting schedule with the governments to make sure that we have sufficient time. It’s a bit of an exercise in underpromising and overdelivering here.

And then, coming back to Essakane on -- the question I had is on the carbon side of things. Is there enough carbon in the ore, at least locally that -- would that be any threat to your reserve base at the end of this year as you go through the characterization of ore type there? And what effect is the organic carbon or carbon in the ore having on your recoveries?

So, it’s an interesting question. It does not really impact our reserves and resources. Because the reserves and resources, the work done from the diamond drilling exercise and the modeling is not based on a whole rock assays. It’s based on leach well this is bottle roll technique. So, what we find in the graphitic area is the leach well underestimates the total gold contains. When we take it into the mill, at that point, we’re starting to do whole rock fire assays on heads and other products within the mill circuit. So, our calculated recoveries on that material can be down, typically say 5% to 7% on a total gold basis. However, we see a positive reconciliation in head grade between the mine and the mill because the mine grade itself was based on the other assaying technique. So, in terms of reserves and resources, we’re not uncomfortable with it. Obviously, nobody likes to see recoveries go down to this lost opportunity. So, what we’re focusing on with the geometallurgical work is to analyze where those graphitic zones occur. And it’s not just graphite, it has to be activated graphite, which is not -- in and of itself, it could create some challenges, but, what can we do then to maximize recoveries when we do get into those zones. To your original question, it’s not a reserve and resource issue, it’s an opportunity loss issue.

And the oxygen in plant, would that help things in any way versus the carbon?

Yes, it will. Because oxygen improves the kinetics in the leach circuit. It allows us to delay addition of cyanide to later on in the circuit. So, currently, we add cyanide in the grinding circuit. The problem with adding cyanide in the grinding circuit is you’re starting to leach gold in the presence of graphite with no carbon. So, the little bit of the pre-grobbing is occurring at that stage. If you can delay the graphite until you’re actually -- or sorry, the cyanide until you’re actually in leach, and that’s accelerated by the use of oxygen to improve the kinetics, you can leach it much faster when you have carbon already in the tanks. I mean, the activated carbon is a better absorber of gold than graphite. But, in the absence of activating carbon, the graphite will have an impact.

Okay. Thanks for the chemistry lesson. Craig, this is for you on Saramacca. I mean, would there plan be to release an updated resource before or maybe at the same time as initially declaring reserves for Saramacca really next year?

It will probably come out at the same time. So, I mean, typically, we would have the resource statement would come out. So, you would see the total endowment of deposit. And then of course the engineers run the spreadsheet over that and tell me how many ounces are still leaving behind. And then, I’ll challenge them to get more. But, you’ll probably see both come out mid-year next year.

Okay. And are you having some joy in drilling along strike here and where you focused both ends of Saramacca long strike?

So, I mean, the initial part -- remember, we had 0.5 million ounces sitting there inferred that I want to make sure we get to indicated, so they can be used in the LOM study. So, the initial first focus was to really target some of that in shallow areas of the pit where we anticipate the pit should be able to go deeper and we just didn’t have the drilling for that. So, if you recall the longitudinal section, we had a couple of deep plunges in some high grade areas that the pit dug for and some shallow areas. So, we’ve really been working on that. And then, we’re just starting to do the step-outs now. So, overall, that program, the 20,000 meters is about 80% complete, physically drilled but the initial assays are just starting to come in now.

Okay. Thanks very much, guys.

Our next question comes from Anita Soni of Credit Suisse. Please go ahead.

Hi. Good morning, guys. Just to follow up on Westwood. I was just wondering what has the union actually commented on the incident you had, at this point?

Yes. I mean, obviously the union is involved in all of our discussions. We had deck meetings with all of our employees and have ongoing discussions with the union.

And they’re okay with the plan going forward at this point?

Yes. I mean, we keep them very well informed of what the investigation results are showing and what our plans are for going forward. So, yes, they’re aligned with what we’re doing.

Okay. And as a follow-up, as I recall, Westwood went to about 200,000 ounces of production and I think 2021, 2022, and those areas have not been drilled out in terms of sort of getting an understanding of the different rock type, and there would be the geology and sort of the strategic hit that you’re going to be working with which would have an impact on the rock mechanics. So, I’m just wondering, is that now -- is that work ongoing to understand that or is that still an area -- how do you view that as having a risk in terms of getting to 200,000 ounces of production, given the lack of information there?

Look, I mean, we lift nameplate as 180 to 200, there were some earlier LOMs that got up around 200; we continue to work at it. I mean, obviously, we’re looking to get profitable ounces as much as possible. Ongoing drilling, we’re drilling 110 kilometers this year and we’re on plan to achieve that. So, definition of the orezones is ongoing and basically on plan. Our goal really over the next two to three years is to have 1 million ounces or basically the first five years of any LOM plan in reserves. And it also from a timing perspective one of the reasons we’re driving developments, so we can get out and do that drilling so that we can properly characterize the zones before we get into the near the finer development, the production development, if you will. What we’re adding right now, and sort of when I was speaking with Andrew earlier mentioned it, spending more effort on characterizing the footwall zones, especially looking to identify areas where we get into this intercalated drill and hard rock material, so that we can identify those areas and deal with them before we get there.

Okay. And then, one last question just before the end. In terms of Côté, can you remind me again, is it the PFS or is it the feasibility study that you’re working on now in the first half of 2019, is that what it is?

Yes. So, we’ve released the PFS results in June, at the same time we announced the deal with Sumitomo. We spent the summer together with our partners working on some technical trade off studies on a few specific issues that arose out of the PFS. And three weeks ago, with Amec, now called Wood, we launched the feasibility study.

All right. What was the initial investment for Sumitomo, and that was dedicated to doing this feasibility study right, some portion of that, right?

Yes. It’s an equity interest, it went into general fund. I mean, the feasibility study, total cost is around C$30 million and that’s being split 70-30 between them and us.

All right. Thank you very much.

This concludes time allocated for questions on today’s call. I will now hand the call back over to Mr. Ken Chernin for any closing remarks.

Thank you very much, Kyle. And thank you ladies and gentlemen for your continued interest in IAMGOLD. We look forward to having you join us for our fourth quarter conference call in February 2018.

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