IAMGOLD Corporation (IAG) Q1 2018 Earnings Report, Transcript and Summary

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the IAMGOLD 2018 First Quarter Operating and Financial Results Conference Call and Webcast. [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, Ariel. Welcome to the IAMGOLD 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 Jeff Snow, General Counsel and SVP, Business Development. Our remarks on the 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'll now turn the call over to our President and CEO, Steve Letwin.

Thanks, Ken, and good morning, everyone. Well, as you can see from Slide 4, we had a very exceptional start to the year, with a significant increase in net earnings. Our operating performance was outstanding, with Essakane and Westwood delivering record production. And we improved on all of our cost metrics. Our balance sheet remains very strong. Our growth projects are on track, and we confirm production and cost guidance for the year. We have our General Managers in town this week as we have our AGM, as some of you may know, later this afternoon, and I can just tell you there's a very strong sense of pride around what's happening at the sites. And I know Gordon and Craig are going to talk about that a little bit later on, but we're seeing some very strong leadership at our sites, which has obviously resulting in some fantastic results. So Carol, Gordon and Craig are going to review these quarterly results with you in a moment, but I just wanted to focus on a few execution and strategic issues around our go forward strategy. The first slide is maybe a little bit unusual for this conference call, but I want to reinforce it - it's the world's largest hybrid solar thermal power plant. This is a 15-megawatt solar power plant at our Essakane mine in Burkina Faso. It's the largest hybrid solar thermal plant in the world. And the reason why I bring it up - and we were just there. Carol and I, Don Charter, our Chairman, for its unveiling. It's a very large - 130,000 solar panels, that really in my estimation will transform our mine at Essakane. And as we go forward and potentially build additional mines that are more remotely located, the fact that we have this technology, which we're very proud of, will really help a lot as a hedge against hydrocarbon cost. And as you know, Carol and her team have done a tremendous job protecting our cost from what I would call sudden changes in currencies and in oil and fuel oil. This particular technology is very permanent in the sense that, as we go through time, we will be able to reduce our use of hydrocarbons significantly and also leave a legacy for people who live in the region, especially in and around Essakane in this case, or in and around our mine at Suriname. It's got a minimum life expectancy of 25 years. It's about $0.17 a kilowatt hour cost. We didn't put up any of the capital for this. We didn't build it and we don't operate it. We have a long-term take-or-pay 9-1/2 years, which is well short of what the mine life is. But I really would like to reinforce the fact that this is a major step forward for this company, and as we look to the future, I'm encouraged that we should be able to see expansions of this particular asset. We have lots of room to expand, as you might realize, up at - in the Sahel. For those of you who are going to be going there in June, you can see it, where it's placed in front of our mill and our infrastructure. There's lot of room to move ahead and lots of room to continue to reduce our dependency on hydrocarbons. So don't forget about this. I certainly have not. And we're going to be pushing this ahead at a fairly aggressive rate. And we're very, very excited about it. And kudos to the people at site who successfully executed on this. It's up and running and we're seeing the benefits of it already. On Slide 6, this slide, when it comes up - it's not coming up. Here we go. It's my favorite slide. It really gives you a very clear view of what our objectives and timing is with respect to upcoming catalysts that you saw on our news release. At Rosebel, we're seeing the execution of our consolidation strategy going ahead very well. We expect the mineral reserve estimate for Saramacca in the second half of the year, and this will be followed by a production start in the second half of 2019. At the Brokolonko property, 15 kilometers northwest of Saramacca on the same mineralized trend, we're working towards confirming the gold potential and moving to a resource stage as soon as possible. The prefeasibility study for the Heap Leach project at Essakane as part of our expansion of the mine is nearing completion and we look forward to announcing the details this quarter. Near mine exploration continues at Essakane with the mineral resource estimate for the Gossey prospect just northwest of the mill. We expect to announce that in the fourth quarter of the year. Westwood continues to make excellent progress with the ramp-up, putting us on track to reach full production in 2020. The Cote Gold Project is on track. We're working with Sumitomo to complete the feasibility study by the first half of next year. We continue to target a production start in 2021. Cote is a particularly exciting project because we have the opportunity to make it a flagship digital mine. And you probably saw our press release earlier - a few weeks earlier about our recent joint venture in the - particularly in the block chain area. We're very excited about the steps that are being taken at the company and the dedication of resources to make sure that we take as much opportunity to automate when we're designing and building this new line versus trying to retrofit advanced technology afterwards. So it's a real unique opportunity for us. At our other operations, we're looking at varying levels of digital transformation, and although these operations are already benefiting from a range of productivity improvement initiatives, we continue to work on it. With Westwood ramping up to full production, we plan to take advantage of opportunities to bring in more automation and advanced mining technologies to that operation as well. The feasibility study for the Boto Gold Project in Senegal is on track. I had dinner with one of our young guys last night who is driving the Boto project along with Craig MacDougall's leadership. He's working out of our Longueuil office. All I can tell you is that the news continues to get better and I'm really, really excited about the improvement that we're seeing in the overall economics of Boto. Once we get all of this completed, we can make a decision around our strategy. But right now it looks really positive. Craig and his team continue to build on last year's outstanding exploration successes. We now have initial resource estimates for Monster Lake and Eastern Borosi, with an initial resource estimate expected for Nelligan in the fourth quarter of this year. So by the end of 2018, all of our advance greenfield projects will have a confirm resource. This is a first for this company, and again it's very exciting. With our success in growing reserves and the continued execution of our growth projects, we can expect to be producing between 1.2 and 1.3 million ounces by 2022. While we are a much leaner company today than ever before, we continue to improve and are targeting below at $8.50 an ounce all-in sustaining cost four years from now. And before I leave this slide, I want you to - at least this is what I think of, because, as you know, I'm the largest shareholder of IAMGOLD, an independent shareholder now, and I've been buying shares for the entire 7-1/2 years I've been here literally every day, if you want to look at it that way. When I look at this production growth that we're seeing from 2018 to 2022 and you combine that with the fact that we're reducing costs significantly, we literally go from a operating cash flow - and I'm going to use $1,300 as the benchmark - of around $300 million to an operating cash flow in excess of $600 million - in fact closer to $650 million. That's in four years. All of this being in our control, all of it organic. We don't have to do any kind of M&A to reach these targets. And what's the most important part of this company - and some I know they're saying, "Hey, IAMGOLD has hit all of their major exciting parts, so let's move on and look at something else." The amount of excitement at the company is really reflected on that chart, and you will see if we execute properly - and execution is absolutely critical - and we communicate properly, our share price is going to move up significantly. And it's in our hands to have it do so. We're not dependent on anybody else. There's a lot of hard work in front of us. And we can't forget about where we came from in terms of cost structure. But I'm extremely confident with the leadership we have with Gord Stothart, with Craig MacDougall, Carol Banducci, Jeff Snow, Ben Little, that we're going to be able to reach those targets and maybe even better than that. So you're seeing it in our results as we go forward. We want to under-promise and over-deliver. That's our theme song here. And I'm really, really pleased with the quarter. I'm very grateful for the hard work of everybody on the executive team. And I'm going to shake as many hands as I can with the GMs that are in town this week and just say thank you, because they continue to deliver outstanding results. So with that, I'll turn the call over to Carol.

Thanks, Steve, and good morning, everyone. We had a strong first quarter. The financial results reflect outstanding operating performance as well as a higher gold price. The combined operating earnings from Essakane, Rosebel and Westwood doubled from the same quarter last year and each operation generated positive free cash flow. The next slide presents our key financial highlights for the first quarter compared to the same quarter in 2017. Revenues of $315 million, increase by 21%, reflecting higher sales volume at Essakane and Westwood and a higher gold price. In comparison, cost of sales were up only 6%, leading to 117% increase in gross profit from the same quarter in 2017. Gross profit has increased for the past five consecutive quarters. The substantial increase in net earnings drove net cash from operating activity higher by 58%. Turning to the next slide, adjustments to earnings in the quarter were minimal - were, adjusted net earnings attributable to equity holders of $40 million or $0.9 per share. The next slide presents our hedges as of March 31, 2018. The Canadian dollar and the euro are hedged out to 2018 and oil hedges extend out to 2022. In addition, during the first quarter, we purchased CAD 60 million at $1.3090 earmarked for 2019. Our balance sheet remains strong, with $856 million in cash, cash equivalents, short-term investments and money market instruments as well as restricted cash. This is a $41 million increase from the end of 2017. Allowing for $400 million of long-term debt not due until 2025 and $25 million in restricted cash, the net cash position at the end of the quarter was a strong $431 million. Including our credit facility, we had more than $1 billion in liquidity available at the end of the quarter. Liquidity will be further strengthened by the final $95 million cash payment that we're scheduled to receive from Sumitomo at the end of this year as a final installment on last year's sale of the 30% interest in the Cote Gold Project. Maintaining a strong balance sheet and achieving greater cost efficiencies will become increasingly important as we grow the business. And with that, I'll turn over to Gord.

Thanks, Carol. So operating results in the first quarter were outstanding and on plan or better for virtually all of our KPIs. Our GMs and their teams have been relentless about optimizing performance and ensuring that initiatives remain on track to improve profitability and extend the mine life of each of our assets. Zero harm comes first and we are always looking to improve where we can. This year we are accelerating the deployment of a new health and safety management system and new prevention initiatives across all the sites to keep our HSS programs fresh and relevant. The next slide shows our production profile over the last few years. Our guidance for 2018 remains unchanged at 850,000 to 900,000 attributable ounces. In the first quarter, we produced 229,000 ounces, up 7% from Q1 '17 and reflecting record production at Essakane and Westwood. Beyond the first quarter, we expect production in the second quarter to be at a lower level than the first and to trend upwards from there in the second half of the year. Production in the first quarter benefitted from planned mining of high grade zones as well as significant positive grade reconciliation at both Essakane and Westwood. In the second quarter, we expect production to be impacted by scheduled mill maintenance activities at both Rosebel and Essakane, as well as the seasonal rains at Rosebel. Looking at Slide 14, all-in sustaining costs are showing improvement over time. We maintain our full year guidance of $990 to $1,070 an ounce for 2018. In the first quarter, all-in sustaining costs were $953 an ounce, benefitting from higher sales volume. Throughout the remainder of the year, we expect all-in sustaining cost to move higher in the second quarter before trending downwards in the second half. Now, turning to each of our sites. Essakane had another record quarter. Attributable production of 109,000 ounces increased 17% from the first quarter of 2017. The increase was mainly a result of higher grades and recoveries. The head grade was 15% higher than the previous year, the result of positive grade reconciliation and the planned mining of higher grade areas, as I mentioned earlier. Mill performance continues to benefit from major enhancements last year. Although the proportion of hard rock in the mill feed was at 85%, the mine continues to operate at a cadence well above the nameplate capacity of 10.8 million tonnes per annum. Gold recovery improved from 87% to 92%, where it's been holding for the past three quarters. That reflects an increase in the mining of zones without graphitic material and better management of our more metallurgically challenging ores. We expect recoveries will further improve once the option plant is commissioned in the fourth quarter of this year. All-in sustaining costs were $914 an ounce, down $59 an ounce from the previous year. The improvement reflects higher sales volume with the increase in production. This was partially offset by a significant increase in capitalized waste stripping associated with mine sequencing. While first quarter production benefitted from higher planned grades and significant positive grade reconciliation, mill maintenance is scheduled during the second quarter so expect production to be lower. Turning to the various projects underway at Essakane, we're on track for completing a Heap Leach prefeasibility study as part of our expansion of the mine this quarter and are targeting a production start for 2020. The 15-megawatt peak solar power plant, as Steve referred to earlier, was completed on schedule and has been integrated with our 57-megawatt thermal power plant. At the Gossey satellite project, just 15 kilometers to the northwest of the Essakane mill, we expect an initial resource estimate in the fourth quarter of this year. Turning to Rosebel, first quarter production was 65,000 attributable ounces. Although 12% lower than the previous year, Rosebel has closely followed its mine plan. Mine sequencing is the main reason the production results vary from quarter to quarter. Additionally, Rosebel was augmenting the mill feed with lower grade stockpiles in the first quarter, so that too contributed to lower grades. We expect production to be highest in the second half of the year, as seasonal rains in the second quarter typically restrict access to the higher grade zones at the bottom of the pit and mill maintenance has been scheduled for the second quarter as well. Grade improvement is expected in the second half of the year, which will help mitigate the increasing proportion of hard rock. Rosebel's all-in sustaining costs were $914 an ounce in the first quarter compared to $886 in the first quarter of 2017. The increase reflects the lower sales volume, partially offset by lower sustaining capital expenditures. Work at Saramacca is progressing well, with the mineral reserve estimate expected in the second half of this year and a production start in the second half of 2019. Work at Saramacca during the quarter focused on advancing resource drilling and modeling, working through the SIA studies, and moving from scoping level engineering to feasibility level engineering. Metallurgy, pit geotechnical and hydrogeological studies have all been advanced through the period. Westwood had an exceptional start to the year. First quarter production at 40,000 ounces was at a record high. The 33% increase over the previous year was a result of a 25% increase in throughput and significant positive grade reconciliation. The 10% improvement in all-in sustaining cost reflects higher sales driven by the higher production. Westwood's production is expected to be more heavily weighted in the first half of the year with the mining of some nice high grade stopes. Production for the year is expected to range between 125,000 and 135,000 ounces. Underground development continues to progress very well, continuing to average 35 meters a day. Overall, great progress at Westwood, putting us on track to achieve full production in 2020. Turning to our Sadiola joint venture, attributable gold production for the first quarter 2018 was 15,000 ounces. With the mining of the oxide ore now depleted, mining activities have ceased and the mill is processing stockpiles. Once those are exhausted in the second half of 2019 and if we still have no agreement to advance the Sadiola Sulphide Project, Sadiola will then be placed on care and maintenance. Turning to our Cote Gold Development Project, the feasibility study is progressing well and it's targeted for completion in the first half of 2019. As part of the study, a drilling program has been carried out with the primary objectives of improving ore model competence for the early years of production and converting some shallower in-pit inferred tonnage again applied at prefeasibility stage. Additionally, geotechnical work is underway to refine the pit slope stability assumptions and to investigate proposed locations for key project infrastructures. Once a feasibility study is completed and a decision has been made early next year to proceed with construction, we will work towards a commercial production start in 2021. The feasibility study for our Boto Gold Project in Senegal is on track for completion in the second half of this year. This study contemplates a mill throughput that's 25% higher than that used for the prefeasibility study, which would mean production and project returns higher than were indicated in the PFS. Exploration work is still ongoing to support the feasibility study and priority targets with the potential for additional resources are being evaluated. I'll now turn you over to Craig to talk about exploration.

Thanks, Gord. Good morning, everyone. Before I begin, please note that the results I talk about today have been previously disclosed in accordance with security regulations and signed off by the qualified persons within the company reporting them. We had a busy first quarter, announcing the mining assay results from the 2017 Saramacca and Diakha drilling programs, as well as the disclosure of resource estimates at Monster Lake and Eastern Borosi, both commissioned in Q4 of 2017. Our 2018 program is also off to a good start, with a number of our planned exploration projects commencing during the quarter. With these programs firmly underway, we are expecting initial results to start coming in in the second quarter. Let me start with Saramacca and Brokolonko and then we'll walk through some of the other exploration projects. The Saramacca delineation drilling has been ongoing since last September to further refine the resource model and standard price of the resource. In the first of this year, we announced assay results from the remaining 60 diamond drill holes completed in the fourth quarter of 2017. Highlights included 11.73 grams per tonne over 46 meters, 3.7 grams per tonne gold over 31.5 meters and 22.9 grams per tonne over 15 meters. So we're continuing to see high grade intersection and the end results will allow us to further refine our resource model as move towards upgrading the project's reserve status in the second half of the year. Turning to Brokolonko, we've commenced work to upgrade the access road. Geological mapping is ongoing along with outcrop sampling and an auger geochemical survey to validate historic results. We've also commence the preparation of drill pads for a first pass RC drilling program scheduled to begin this month. Moving to our Siribaya project in Mali, the drilling results announced at the end of January were covered during the fourth quarter conference call, so I won't repeat them here. Our drilling program this year continues to focus on confirming resource expansions at the Diakha deposit and on evaluating other priority targets. During the first quarter, we completed approximately 5,300 meters of diamond and reverse circulation drilling. We'll be working towards a resource update for the end of this year. At Pitangui, in Brazil, we completed just over 2,800 meters of diamond drilling with the objective to expand the São Sebastião deposit and to continue testing priority targets for the presence of other mineralized zones. At our Eastern Borosi project in Nicaragua, we reported an updated resource estimate incorporating the results of an additional 26,000 meters of diamond drilling completed over the last four years. This included initial resource estimates for the Blag, East Dome, Guapinol and Vancouver veins, as well as updated mineral resource estimates for the Riscos de Oro and La Luna veins. The resource models assumed open pit extraction for La Luna and underground mining extraction for the other veins. On a 100% basis, the underground resource estimate comprises inferred resources of 624,000 ounces of gold grading 6.03 grams per tonne, and nearly 11 million ounces of silver grading 104 grams per tonne silver. The open pit resource estimate comprises inferred resources of 76,500 ounces of gold grading 1.98 grams per tonne gold and 601,000 ounces of silver at a grade of 16 grams per tonne. In total, this equates to just over 800,000 ounces on a gold equivalent basis. This year, our drilling program is targeting select mineralized zones for potential extensions as well as other priority vein targets to evaluate their resource potential. During the first quarter, we completed approximately 1,800 meters of diamond drilling. On March 28 of this year, we announced an initial resource estimate for the Monster Lake project in Quebec. The estimate comprised on a 100% basis of 1.1 million tonnes of inferred resources grading 12.14 grams per tonne gold for 433,000 ounces of contained gold. Although not yet a large resource, we continue to be encouraged by the high grades demonstrated to-date. We completed approximately 8,300 meters of additional diamond drilling during the quarter. The focus of this program is on infill drilling targeting the upper part of the 325-Megane zone, testing for extensions along strike and depth, and evaluating the resource potential of newly discovered areas of mineralization adjacent to the 325-Megane Zone. Lastly, turning to Nelligan project in Quebec, we have now consolidated a 51% interest in the project with an option to take that to 75% and then 80% thereafter. During the first quarter, we commenced the 2018 diamond drilling program. Our objective is to evaluate the resource potential of a recently discovered large mineralized system, now referred to as the Renard zone, which is located immediately north of the previously known Liam and Dan zones. By the fourth quarter of this year, we expect to have an initial resource estimate for Nelligan. Overall, our advanced exploration projects are progressing at a great pace and we look forward to providing further updates during the year. With that, I'll hand you back to Steve.

Well, thank you very much, Craig, Gord, Carol for that very excellent and comprehensive review. And we're in the last slide, which shows growth catalysts. And I know - again, I've had feedback from a number of Canadian analysts in particular about what's in front of us, which has been very positive. And we do have a good slot of people coming over to Essakane here in June. Ken Chernin is quarterbacking that. And we have got a number of new fund managers coming over as well from Asia and Europe. And it's very good to see that because, as most of you know on the phone, the interest has been a little bit weak over the last few years. So just reinforcing, we're going to extend our discussion around Saramacca with a reserve estimate expected in the second half of this year and everything is on target. I'm heading down to Suriname here in the next month to do a full review. I know Gord has been down a number of times with Craig. Craig's also looking at advancing exploration and extending to the northwest at Brokolonko, which is exciting. We should have a few holes down there by the end of the year hopefully. We're going to continue to consolidate additional concessions at Rosebel. It's a large land package, as you know. It extends 45 kilometers in every direction from the mill. The Heap Leach at Essakane, this looks extremely exciting for the company, an expansion of our current mine, extending mine life, adding reserves, reducing cost. This is all as a direct result of innovation at the site. Westwood, we were just there, continuous ramp-up, looking very good under new leadership of Martial Tremblay. We have the feasibility study for Cote by the second half - oh, sorry, by the first half of '19 and potentially starting up in 2021. We've got all hands on deck and we're really looking at some great improvements in the way it was designed and the technology around it. Every day it literally gets better. Boto, as I said earlier, a very exciting improvement in the overall look of Boto, which we expect to announce in the second half of this year. And then around the short cycle capacity strategy that we've had, which has been so successful, we expect to be able to announce a resource at Gossey, which is just northwest of our mine at Essakane, and also at Nelligan. And whenever I'm out - and I'm getting - as I said which is refreshing I think for our industry, getting a lot more calls now to go out and present our story, whether it's in Europe, whether it's in Asia. A lot of interest in the fact that the pipeline we have in the near-term is very robust and we also have some long cycle stuff which looks extremely attractive. So people ask me how do I feel about the company. We never - as I always say to the group, we never want to drink too much of our own whiskey here. Let's stay humble. Let's do the blocking and tackling. Let's execute. Let's communicate about our execution and keep delivering the kind of quarters that we're seeing to our investors and adding value. So on that note, we'll complete our discussion and go to questions.

[Operator Instructions]. The first question comes from Dan Rollins of RBC Capital Markets.

Team, I was wondering if you could provide just a little bit of color on Westwood. Obviously, strong - great reconciliation. Have you seen that level before within the mine? And then the second part on Westwood is, do you expect to continue to run some of the lower grade stockpiles to maximize the throughput of the mill in Q2?

Yes, Dan. It's Gord. Yes, we historically experienced strong grade reconciliation at Westwood, especially in the zone two corridor. There's some really interesting sort of short strike length ladder veins as we get in and we start to develop the deposit. And we're also seeing sort of some secondary veins in a couple of the stopes that aren't being picked up on the initial drilling, or if they are picked up, they are not necessarily recognized as having the continuity that we're seeing. So, yes, year-to-date this year we're positive 20% on ounces, most of that actually coming from additional tonnes as we picked up some of these additional zones and mines stopes a little wider. The ramp-up continues to go well and the operation is looking pretty good.

And do you expect to continue to run some stockpiles in Q2?

Sorry. Excuse me. Yes. Yes, we'll run those low grade stockpiles. We have spare capacity. We are negotiating with a third-party to reinstate some custom milling. We don't reflect it obviously in our production results, but it certainly does help us with respect to our milling cost.

Yes, for sure. And then just maybe, Steve, just on Sadiola, could you maybe provide a little bit of color on what the current situation is there? I know I ask every quarter and every quarter it seems to be you are in discussions, but no resolution with the Malian government. Obviously, now with active planning ceasing, when do you get to a point where you need to make a hard choice, just not on only care and maintenance next year, but starting to retrench some of the employees at the mine site?

Well, well, it's a good question, Dan. So you should ask it. It's disappointing for us that this very attractive project isn't moving ahead more rapidly. We're very blessed with the fact that we have other projects that are robust and we get to our 1.3 million ounces over the next four years without Sadiola. But I would love to see this project go ahead. We have an election in Mali in June-July. I'm not sure how that's going to turn out. But as we've said over and over again, we can't accept a mining code that doesn't give us the proper protection from government changes and philosophy around fiscal metrics. And as a shareholder, I would expect that if we did obtain that, if we did get satisfaction, then we would move ahead with the project. But that is an integral part of our discussion, and unless we see some improvement in those discussions, then we've already done one set of retrenchments, we will continue to do those retrenchments. We'll go to a state where we minimize costs. And there are many alternatives that would be in front of us. Hopefully, negotiating with the government in a positive way would be the first choice, but then other alternatives would come to the table, which I'm sure you would understand. So I spent a fair amount of my time on this as Gordon, Craig and Carol and Jeff are on other topics. But Ben Little and I are spending some more time on this. I've got a group working with me to try and resolve it. But it's probably going to be fairly quiet until the election is over. Then I would suspect, which is in the next couple of months, and then we'll have a better read of where we can go. So that's kind of where we are. I wish - I apologize for the Groundhog Day response, which is the same response you get every time you ask the question. But hopefully we're going to see a change in that, and it's not for lack of trying. But after so many years in this resource and mining business, we just aren't going to take a deal for the sake of doing a deal. It's got to be a good deal for our shareholders. And luckily for us, we have such a plethora of projects in front of us that we don't have to really put ourselves in any kind of a precarious position just to get the project going and we wouldn't do that in any event.

And then one last one for me. Just with respect to the feasibility study at Cote Gold, obviously we saw some recent capital cost inflation of mines being built in Ontario. We're starting to see energy prices moving higher and we've started to see a number of unit cost sort of move up at a couple of key assets now in production in Canada as well. Are you taking that into consideration in the feasibility study and maybe you could talk about some of the initiatives you're taking to potentially offset those rising inflationary pressures?

Yes, we're obviously keeping a very close eye on all of the things you mentioned, capital cost pressures and things of that nature and operating cost pressures. The feasibility study for the most part looks pretty - quite similar to what was in the PFS. We are taking a couple of alternative tacks. One, we're looking at about 10% higher throughput, so that will give us a few economies of scale. The feasibility study is looking at automated haulage trucks and automated drilling, which actually delivers some very nice both capital and operating cost benefits. It was actually a little bit of a surprise to me. On the construction side, we're working to find some innovative ways to build this thing as cheaply as possible, including looking at some - making sure we're in the right queue. We haven't seen so much inflation on the capital side, but we are - yet it will come. We are concerned about availability and lead times. So we're keeping a really, really close eye on that to make sure we don't screw that up. We're looking at potentially LNG power for the haulage trucks, a number of different options. And so far, the capital costs have sort of stayed in line with what we talked about previously. However, we are seeing some strong benefits to operating costs. We're talking to the Ontario government right now and to Hydro One about the power rates and the power supply. So that will be one of the key items we'd like to have resolved here before we make an investment decision. I mean, all the stuff you mentioned there, Dan, is front of mind for us and the team is working very diligently to resolve or make sure we stay in front, if you will, of those pressures.

Our next question comes from David Haughton of CIBC.

Perhaps starting off with Rosebel, if that's okay, we've had the first hint there as to what a higher content of hard rock can do for the throughput. And wondering, Gord, what your expectation of throughput would be for the balance of the year? Is the first quarter representative of what we should be seeing, notwithstanding the fact that you've got some downtime in Q2 for maintenance?

Yes, the throughput does drop off little bit. It's not hugely different, but we do still see - we do see some attenuation as we head into the second half of the year at Rosebel in terms of throughput. However, we will also see at the same time better grades in the second half of the year. So we are, because of sequencing, getting into some better rock, towards the end of the year throughput dropping.

And for the Q2 maintenance, how much downtime are we talking about here?

For Rosebel, we took - in April I think we took I want to say 2-1/2 down days on the SAG mill. We have some ball mill re-linings that are coming later in the piece here and that will impact us a little bit. At Essakane, we took two days each I believe for each the two main lines and I think we took about 2-1/2 days on the primary crusher.

So over to Essakane, a record quarter, which is pretty impressive to see. A lot of it driven by the grades. The throughput staying around about that 37,000 tonnes a day. As far as the throughput going forward, what should we be expecting there? Is it in that order that we saw in the first quarter or coming back a touch?

Yes, we're planning to be able to hold those throughputs. As you mentioned, we are seeing - I mean, there were two factors really going on in Q1. One, we were mining higher grade areas per plan, but also in those higher grade areas we saw positive reconciliation and somewhat better recovery than we had expected. So throughput through the remainder of the year will sort of stay in that sort of 37,000 tonnes a day range. Grades are, depending on sequencing, up and down a little bit. For our forecasting purposes, we don't carry a mine call factor forward. So even though we've seen some nice positive reconciliation news, our forecast typically work off of block model grades.

And as far as the improvement in recoveries that you're expecting from the oxygen plant coming in at the back end of this year, could we see the recoveries being sustained at the 92% or have you got higher ambitions from that?

I have higher ambitions for next year, but it's going to be coming in - it will be Q4. So the impact on 2018 will be marginal. But certainly for 2019, I believe what we put in the AFE was a 0.5%, but the team is actually counting on about double that once the plant comes in.

Our next question comes from Josh Wolfson of Desjardins.

Just wanted to slip over to Saramacca. With drilling finished for the upcoming initial reserve, broadly speaking is there any expectation to see resource growth with that - with the next update and then are there any targets for the initial reserve estimate?

Well, the second half campaign or the post resource campaign that Craig and his team worked on completed in January. However, the mine team is now back in doing infill drilling to improve the confidence level and to convert as much of the inferred material as we can. I don't want to get too aggressive around resource increases. We do expect to see some modest resource increases. However, please remember that most of what we're talking about is infill drilling, so - the definition we had initially is holding well, and as we infill, the team is really focused on bringing those resources into reserves. Meanwhile, Craig and his team are off on the strike extensions. And fingers crossed, we'll start to see some joy there by the end of the year. Any comment?

No, I think that's pretty well an update. I mean, one thing I would point out is that the exploration program does suffer from the same seasonal rains that the operation does, so second quarter our activities certainly in the bush slowdown a little bit. But that said, we are advancing our programs. And as results come to hand and we validate them, we'll certainly be looking to report them.

And has there been any development of discussions related to potentially increasing the company's interest in the project?

I would say that right now we're quite happy with the structure of it. The government has, as you know, 30% skin in the game. That's not to say, Josh, that we wouldn't increase our ownership just from an efficiency standpoint. But to be honest with you, I quite like the structure because we're all holding hands, if you will, accelerating this development in a safe way. And I would tell you the relationship is very strong and very good right now. So I'm quite happy with it.

And a question on oil and energy prices. I think typically historically you've seen a lag between what the mine site pays either because of the structure of how oil is purchased in a country or because of inventories. Can you comment on whether you're seeing I guess spot prices in the market as the same prices received on site or is there a lag that we can expect to see a bit of inflation in forward quarters? And I understand obviously the hedge protects you from the financial side of that.

Yes. I mean, as you point out, the hedge does protect us. Surprisingly, I think everybody in the crowd would be just shocked at this, but when prices move up, we tend to see that a hell of a lot more quickly than when they move down. They tend to reflect that almost immediately. There is a natural lag at Rosebel with respect to the thermal portion of the power contract because it's based on a six-month trailing average price for gold. So we do see a little bit of lag. However, we are already starting to see that pressure coming on. And thankfully we do have that hedge sort of balancing stuff. But, yes, when prices move up, they - for some reason they seem to be able to react quicker than when they move down.

Understood. And the...

Yes. And Carol has done a tremendous job, Josh, as you know, on both the currency and the oil side of protecting us out to 2022. So we feel very comfortable with the insurance we have right now in the company to mitigate any increases in the fuel oil or heavy oil side.

Yes. No, it's a certainly good job capping the risk side of that. And maybe last question on the cash balance that continues to grow and obviously an additional payment expected later this year. When it comes to capital allocation, it seems like the company has a number of projects that could use a majority of that cash. And it sounds like M&A is a lower priority. But given that there's a lot of flexibility and several different opportunities, how would you sort of characterize your motivation to use that cash or maybe even the pressure to use that cash given how quickly it's growing?

Are you talking about using cash to do a deal, Josh?

Well, yes, either I guess asset development or M&A or returning cash to shareholders, stock buybacks. In terms of allocating that cash balance, what do you see as being bigger sort of motivators I guess?

Well, I'll turn it over to Carol here, but I'll just say philosophically and we can just go back to the diagram that we don't put up anymore around what we call our short cycle capacity and long cycle capacity - and I would just tell you that our investments in the short cycle side have been so attractive and the returns are so high. As we are moving forward, as much as we can leverage off of our current infrastructure we're going to do that. And on the long cycle with things like Cote and Boto out there, which are getting more attractive economically every day, the allocation of our cash to those projects are far more attractive for our shareholders than any kind of any other activity. So - but I'll turn it over to Carol to talk about what we have on the balance sheet and what her philosophy is.

Sure. I mean, I'm going to reiterate what Steve just said, which is we've got some tremendous projects ahead of us, Cote, Saramacca, the Heap Leach project, Boto. So we want to make sure that we've got sufficient liquidity to meet those requirements. And so I think we're well positioned. We've got the flexibility. We've got - we always sit with some level of liquidity on the balance sheet in the event that something else crosses in front of us that we want to pursue. But as Steve said, we've got tremendous growth opportunities here and we've got the liquidity to ensure that we are able to execute on those opportunities.

This concludes time allocated for questions on today's call. I would now like to hand the call back over to Ken Chernin for closing remarks.

Great. Thank you very much, Ariel, and thank you, ladies and gentlemen, for joining us today and for your continued interest in IAMGOLD. We look forward to you joining us for our Q2 2018 conference call on August 9th. Thank you very much.

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