IAMGOLD Corporation (IAG) Q2 2018 Earnings Report, Transcript and Summary

Thank you for standing by. This is the Chorus Call Conference Operator. Welcome to the IAMGOLD 2018 Second Quarter Operating and Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time, I would like to turn the conference over to Ken Chernin, Vice President, Investor Relations for IAMGOLD. Please go ahead, Mr. Chernin.

Great. Thank you very much, 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 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 being referred to during the presentation can be viewed on the website. I will now turn the call over to our President and CEO, Steve Letwin.

Well, thanks, Ken and good morning, everyone. As you probably have read or most of you have read, we had a very solid quarter. Our operations are very sound. They’re performing very well. Our balance sheet is strong and we confirm our production and cost guidance going forward. Our growth projects are on track and this is a key element of our success going forward, and as you know, our team is executing and communicate, so we’re going to be doing a lot of execution and a lot of communication. On slide number six, at our Investor Day in June, we covered a lot of ground around our growth projects and as we’ve mentioned, the successful execution is everything that we’re about. So our KPIs, our compensation strategy is all linked to make sure that we make these targets as we have communicated. But it’s also critical that as we go along, you know how well we’re doing and if we’re hitting any headwinds or whether or not we’re making better progress than what we expected. So to, me execution is obviously very critical, resources are very critical to achieve this and communication as to how we’re doing so that there are no surprises either way and measuring our progress along the way is absolutely essential. We’ve been very clear about our targets. We’ve been very clear about our timelines and we have been checking the boxes quite successfully, and our expectation is that that’s going to continue. Sometimes, we get asked how we’re able to execute growth projects with overlapping timelines. So let me talk a little bit about that. There are really three points that I want to make. First, we don’t execute projects really knowing. I think people that know us reasonably well, know that there are -- there’s a lot of structure around our projects. That doesn’t mean red tape, it means dedicated and highly capable project teams driving the execution. As you know, our culture at IAMGOLD is empowering people and we do a lot of that, and key to our success has been our ability to attract some critical talent over the last little while. And I’ll tell you with this some of the success that we have and we’re going to stay very humble and focused around that, we’re seeing some really talented people wanting to join our organization. Our turnover is down significantly. It’s probably the lowest, in fact it is the lowest in our history. So with these people and with this structure that we have in place, we’re making sure that dilution is mitigated. Our people are not spread thin. Second, and again those of you who know me, we measure everything and the devils in the details. But there’s a high level of scrutiny, our project reviews are rigorous. They involve the Board and they’re done at least quarterly and our trips involve usually going the Longueuil where we have a project development office. We have a group dinner the night before and then we spend the full day going through every line, every issue that we have by project. It involves our executive leadership team and sometimes our directors would like to take a look at where we are at. And third, our projects vary in scope and size. Our largest scale and most capital intensive projects is Côté Gold. This is our lead project and a top priority as we work with Sumitomo who are here today and tomorrow by the way, and every quarter we have a detailed review with our partner to make sure that we’re advancing Côté towards production in 2021. Another project Saramacca at Rosebel and Heap Leach project at Essakane, they are huge in terms of the benefits, but with the infrastructure already in place and we talk about this many times. There are smaller scale and less capital intensive. So I don’t want to take away from the importance of these projects. They are very important. But Saramacca and the Heap Leach we feel are very manageable and can be done at the same time that we’re looking at Côté. The expected incremental production will lag years to the life of our mine and I just keep coming back to the fact that because we are able to leave our half of the current infrastructure and makes our job much, much easier. Then we have our Boto Gold project, where construction decision is expected next year as exploration projects advance to the development stage, we can maintain a robust pipeline of future development projects. Overall, a very attractive geographically diversified portfolio of growth projects that vary in scope and size. So we’re going to keep checking off the boxes. I am obsessive about it. I am relentless about it. And then the second quarter, we completed the Heap Leach feasibility study for Essakane, which delivered a reserve increase far greater than what we expected. The additional ounces more than replaced this year’s expected depletion for the entire company and the reserves for Saramacca are yet to come. While reserve replacement is a huge challenge for our industry, our expiration success has put us on a different and very attractive path. But last year, we increased reserves by 86% and we’re continuing to build on that. So all of our projects are work in progress, you will hear more about it as we go along. Saramacca, the Essakane, Heap Leach, Côté, Boto, they’re all at a stage where we’re identifying opportunities to optimize project returns. The refining of project estimates and the deferral of certain capital expenditures to early 2019 led to a reduction in our CapEx guidance for 2018 and let me reinforce this has no impact whatsoever on our project delivery timeline. We remain extremely confident about what we’ve communicated, but due to timely issues and Gord can speak to that, we’ve been able to move the capital out to 2019. So we are executing as planned, our target of 40% to 45% growth in production over four years from now, with all-in sustaining cost below $0.15 ounce remains unchanged. I am -- I couldn’t be happier about where the company is, as you know, I am the largest independent shareholder of this company. I’ve done that with my own cash. I’ve done that over the almost eight years that I’ve been here. I continue to buy shares very aggressively. I am very confident about what we’re going to be able to deliver. I am very proud of what these people have been able to accomplish over the last three years and as I look forward, as I say to our shareholders, we have a very good look going forward. I am very pleased with it, and as I say, I applaud the team and the people at our sites for what they’ve done. With that, I’ll call on Carol to review our financial results.

Thanks, Steve, and good morning, everyone. Turning to our financial results, we had a solid second quarter. This next slide presents the key financial highlights. Revenues of $277 million were up in the same quarter in 2017. The increase reflected a higher realized gold price and higher sales volume at Rosebel and was partially offset by lower sales volume at Essakane. Gross profit was $30 billion. Net cash from operating activities before changes in working capital was $73 million up 8% from the same period in 2017. Adjusted net earnings for the second quarter 2018 were $13 million up 205% from the previous year. As shown on this next slide, the bottomline was impacted by a number of non-cash items including the depreciation adjustment and write-down of assets, write-down of a loan receivable related to the Sadiola Sulfide Project and unrealized foreign exchange losses. After the adjustments adjusted earnings per share were $0.03, up $0.02 from the second quarter of 2017. The next slide presents our hedges as of June 30, 2018, Canadian dollar and the euro are hedged for 2018 and 2019, and the oil hedges extend out to 2022. As detailed at the bottom of the slide, in the first quarter we purchased C$60 million at a rate of $1.309 earmarked for 2019 and during the second quarter, we purchased €150 million at an average rate of approximately $1.1975 earmarked for the second half of 2018 as well as 2019. Our balance sheet remains strong with $776 million in cash, cash equivalents and short-term investments in money market instruments and this excludes the restricted cash of $29 million. Now, if you net out our debt, our net cash position was $375 million at the end of the second quarter. By the end of this year, we’re scheduled to receive $95 million cash payment from Sumitomo, which is the final payment for their 30% stake in the Coté Gold project. So, total liquidity including the $249 million availability under the credit facility exceeded $1 billion, which gives us flexibility as we continue to execute on our growth projects. So, with that, I’ll turn it over to Gord.

Thanks, Carol. Well, our operations performed well in the second quarter, but that first quarter was a tough act to follow. Production in Q1 benefited from the planned mining of higher grade zones and significant positive grade reconciliation at both Essakane and Westwood, whereas Q2 was impacted by planned maintenance at Rosebel and Essakane and the planned mining of lower grade stopes at Westwood. Nevertheless, the performance was in line with our expectations. Production continues to attract post the guidance. Second quarter production of 214,000 attributable allowances brings us to 443,000 ounces year-to-date, which puts us just over the halfway mark of the midpoint of our full year guidance. As Steve said, our annual guidance is reiterated at $850,000 to $900,000 attributable allowances. All-in sustaining costs in the second quarter were $1,077 an ounce and $1,012 an ounce year-to-date. Full year guidance remains unchanged at $990 an ounce to $1,070 an ounce. Turning to our capital spending outlook for 2018, we are reducing our guidance by $40 million to $325 million plus or minus 5%. This was the net result of the $60 million decrease in non-sustaining capital and a $20 million increase from sustaining capital. The $60 million decrease in non-sustaining capital was primarily due to a $40 million decrease at Rosabel relating to the Saramaca project. As a result of more specific scheduling of construction work and equipment procurement timelines based on detailed engineering studies, we’ve been able to defer certain expenditures to 2019. There’s no change to the targeted completion date of the project, which has production starting in the second half of 2019. At Essakane, we reduced non-sustaining capital guidance by $25 million of that amount $20 million is related to the Heap Leach project. This was due to deferring procurement activities until after the feasibility study is completed in the first quarter of 2019. As with Saramacca, this does not affect the project delivery timeline. The change in non-sustaining capital guidance also includes a $10 million increase for the Coté Gold project reflecting the advancement of some detailed engineering and equipment design work. The $20 million increase to sustaining capital reflects a $15 million increase at Essakane due to higher capitalize stripping. Because this is a shift in expenditures from operating costs, there is no impact on all-in sustaining costs, it’s merely a categorization change. So to reiterate, these revisions to our 2018 capital spending guidance have no impact on our overall project timeline. The targeted completion dates for all projects remain intact. Moving on to each of our operations, starting with Essakane, attributable production for the second quarter at Essakane was 97,000 ounces down about 4% in the same quarter in 2017. This was mainly due to lower throughput resulting from planned mill maintenance. Gold recovery at 91% was consistent with the past four quarters. We do expect to see an improvement in recovery following the commissioning of the oxygen plant, we expected in the fourth quarter of this year. All-in sustaining costs were $1,003 an ounce in Q2, up $81 an ounce from the previous year. This is was mainly the result of higher sustaining capital expenditures and higher cost of sales per ounce. Cost of sales were higher due to a number of factors, including no maintenance, a weaker U.S. dollar relative to the euro and higher contractor costs due to the longer lead times on some new production equipment purchases. On June 5th, we announced the positive results from the pre-feasibility study of our Heap Leach Project of Essakane. The study represented a very positive scenario combined Heap Leach -- combining heap leaching in parallel with the existing CIL process plant. To recap the highlights, reserves increased by 39% or $1.3 million ounces on 100% basis before depletion. Please note that the technical report which was filed on CEDAR on July 19th, included depletion from January 1st to June 5th, whereas the reserves and resources reported on June 5th, were before depletion. While we knew that heap leaching would unlock ounces that would otherwise not be economical to mine, we didn’t expect to encounter the high grades that we did which accounted for one-third of the reserve increase. To appreciate the full benefits of this project you have to consider the combined benefits of heap leaching together with the incremental production from CIL processing. Incorporating heap leaching into the operation, results in additional CIL production that will extend the life of the mine three years from that reported in the 2016 technical report. Mine life is expected to be eight and a half years with CIL mill throughput of 12 million tonnes per annum and heap leach throughput of 10 million tonnes per annum. Once heap leaching begins, average annual production will increase by 16% from our previously disclosed plan to 480,000 ounces annually on 100% basis with peak production exceeding 500,000 ounces. A feasibility study is evaluating additional development alternatives such as a gravity circuit upgrade and an increase in grinding capacity to increase throughput and recovery of the CIL and gravity circuits, as well, the feasibility study will allow us to optimize the number of conservative assumptions that were included in the PFS, such as heap leach recoveries and manpower requirements. So, when you consider this reserve increase along with the additional ounces that could come from satellite resources, we believe there’s strong potential to extend Essakane’s mine life beyond 2030. As I said earlier, the feasibility study is on track for completion in the first quarter of 2019 followed by an expected production start in 2020. Turning to Rosebel, second quarter attributable production was 70,000 ounces. Production was lower than the previous year by 4,000 ounces due to planned mill maintenance and an increasing hard rock land. All-in sustaining costs were $1,035 an ounce. The increase from the same period in the previous year primarily reflected the planned mill -- mine and mill maintenance and the higher energy costs. At the Saramacca project development work is progressing well. The initial reserve estimate is expected in the second half of this year. Detailed engineering work related to site infrastructure in the haul road is nearly completed. The long haul trucks have been selected and orders placed and the environmental social impact study to support the permitting and engineering work was submitted to the National Institute for Environment and Development or NIMOS in Suriname last week on July 31st. So permitting should be completed by the end of this year. As I said earlier, despite pushing out some of the capital expenditures into next year, the timeline remains intact when the production starts in the second half of 2019. In the first four years to five years, we expect the mill to be exclusively saprolite with transition and hard rock in the following years. We see an optimal throughput rate of somewhere between 2 million tonnes per and 3 million tonnes per year additional. Annual attributable production from Saramacca could be between 70,000 ounces and 90,000 ounces a year over 10 years to 12 years of life. At Westwood, second quarter production was 31,000 ounces, down 2,000 ounces from the previous year, compared to record production in the first quarter with the mine of high grade zones, lower grade stopes remind in the second quarter as planned. As in previous periods, reported mill grades were lower than mine grades. This is due to processing of marginal grade or stockpiles in addition to the underground ore to utilize available mill capacity as the mine ramps up. Excluding this marginal lower, the head grade was about 32% higher than was reported for the mill in this quarter. All-in sustaining costs were $1,129 an ounce for the quarter. The year-over-year increase reflects a weaker U.S. dollar relative to the Canadian dollar and higher sustaining capital expenditures. Underground development continues to open up new mining areas. The focus is now on ramp breakthroughs on the center ramp and on level 132, which will provide access to high grade areas to be mined in 2019. Infrastructure development continues in blocks on the lower levels including the 180 West level from which production is expected next year. We may on -- we remain on track to reach full production rates in 2020. At our Sadiola joint venture, attributable gold production in second quarter 2018 was 16,000 ounces. With the mining of oxide ore now depleted, mining activities has ceased and the mills processing stockpiles. Once the stockpiles are depleted, which we expect will be around mid-2019 and if there is no agreement in place to advance the Sadiola Sulphide project, Sadiola will be placed on suspended operations. Turning to the Côté Gold Project, the feasibility study is on track for completion in the first half of 2019, our production start is targeted for early 2021. Results from delineation drilling completed in the first quarter will be reflected in the reserve and resource update that will accompany the feasibility study. Geotechnical investigations to evaluate pit slope stability and investigate proposed locations for key project infrastructure were completed in the second quarter and will be reflected in the project design. An important goal of the feasibility study is to identify opportunities for improving project returns. One change we’ve made in the feasibility study is to increase mill throughput by about 10% to 36,000 tonnes per day or around 13.2 million tonnes per annum. We’re committed to autonomous haulage and autonomous drilling as the base case and we are looking at other proven technologies that could be applied where it is advantageous to do so. And as I said earlier, detailed engineering and equipment design activities have been advanced as part of an early works program. Turning to the next slide, the feasibility study for the Boto Gold Project is on track for completion in the second half of this year. As with our other projects at this stage, we’re looking at opportunities to enhance project returns. For example, we’ve increased mill throughput by 25% from what was used in the PFS to 2.5 million tonnes per annum, we believe we can do this without increasing capital costs. Exploration work continues in support of the feasibility study and to identify potential targets for additional mineralization. And with that, I will now turn you over to Craig to talk about exploration.

Thank you, Gord, and good morning, everyone. Before I begin, please note that the results I talk about today have been previously disclosed in accordance security regulations and signed off by the qualified persons within the company reporting them. Also note that any references to exploration targets potential including potential quantity and grade are conceptual in nature and insufficient work has been completed to define a mineral resource and there can be no certainty then an exploration target will result in a mineral resource being delineated. Exploration had another productive and successful quarter. At Saramacca, we expect to reserve estimate in the near future. During the quarter, we completed an additional 8,000 meters of RC and diamond drilling primary -- primarily to infill the deposits and upgrade the resource. In addition to working on resource conversions to ultimately support the declaration of reserves, the drilling program has also extended some parallels zones to mineralization under the original resource pit shell, which we return some nice grades over solid intervals. This has potential to incrementally increase total resources. On the adjacent to Brokolonko property which is at a far earlier stage of exploration compared to Saramacca, we have initiated an exploration program including activities such as geological mapping, outcrop sampling and geochemical surveys to confirm the historic results and help prioritize targets. During the quarter, we also completed just over 4,500 meters of RC and diamond drilling as part of our first pass drilling program to test selected target areas for the presence of mineralization. The results will be validated and compiled as they come to hand to help guide further exploration on this prospective property. This next slide focuses on regional exploration at Essakane. If we can replicate the success we had at Falagountou with our other satellite targets. There’s great potential for extending the mine life beyond 2030, which is our objective. During the quarter, we completed almost 24,000 meters of RC and diamond drilling on the mine lease and surrounding concessions. This included in-fill drilling at the Essakane main zone in support of the ongoing Heap Leach pre-feasibility study. At the Gossey prospect, we’re targeting the main resource estimate in the fourth quarter of this year, with a geologic target potential of somewhere between 400,000 ounces and 600,000 ounces ranging between 0.8 gram per tonne gold and 1 gram per tonne gold. We have completed a second phase of drilling, which intercepted some wide zones of mineralization. Gossey also has a deeper than expected oxide profile locally much deeper than what we’ve seen at Essakane. So far, results confirm saprolite extending up to a depth of 50 meters, which is a positive development. There are also a number of other prospects to evaluate including Tin Taradat at the top of the Gossey Korizena trend and to Tassiri, Gourara and Sokadie clustered south of the Essakane main zone. For example at Tin Taradat, we’re seeing a structural setting similar to Essakane gold mineralization intersected in drilling over some good segments. Moving to Siribaya project in Mali, we’ve completed approximately 8,800 meters of diamond and RC drilling during the quarter. Our focus remains confirming and delineating resource expansions at the Diakha deposit in preparation of a resource update by the end of the year. At Pitangui in Brazil we continue to focus on expanding the São Sebastião deposit and testing other priority targets for the presence of mineralization. During the quarter we completed just over 4,900 meters of diamond drilling. Iron formation host of gold deposits like São Sebastião deposit and typical of the iron Quadrangle in Brazil can be very with attractive grades and often extend to great depth, which is why they are such compelling exploration targets, one of our objectives with this year’s program is to follow greater depth to see if we can extend the mineralization. At our Eastern Borosi project in Nicaragua, drilling continues to focus on potential resource extensions and to test other way in targets to evaluate their resource potential. During the second quarter, we completed approximately 4,000 meters of diamond drilling. Both Pitangui and Eastern Borosi are work in progress as we look to expand the size of the resources on both of those projects. Moving onto our projects in Quebec, during the second quarter, we reported further high grade results for our Monster Lake projects. These were from our winter drilling program, which focused on infill drilling and the upper portions of the 325-Megane Zone and testing for extensions. Highlights included 39.2 grams per tonne gold over 3.8 meters, which included 127.4 grams over 1.1 meter and 40.9 grams per tonne gold over 5.3 meters, which included 251 grams per tonne over 0.7 meters. We continue to be impressed by the continuity and high grades we’re seeing with the infill drilling. As I’ve said before, the structural setting suggests excellent potential for additional zones in mineralization along the Monster Lake structural corridor. Lastly, turning to Nelligan Project in Quebec, we’re over six months into the diamond drilling program, which is focused on evaluating the resource potential of a recently discovered large mineralized system now referred to Renard zone, which is located north of the previously known Liam and Dan zones. During the second quarter, we completed 3,700 meters of diamond building, as we work towards an initial resource estimate. Overall, great work by the exploration teams to keep these projects progressing up the rate there. With that, I’ll hand you back to Steve.

Thanks, Craig. So to wrap up slide 31, we’ve had a very successful first half of the year. Our operating and financial results have been very solid. We’re on track to meet guidance and the successful execution of our growth projects continues. We’ve checked off a lot of boxes in the first half of the year. We got some key boxes coming up in the second half as we expect to have reserve estimates for Saramacca, a completed feasibility study for Boto and a resource estimate for Gossey. So, with that, we will open it up to questions.

Thank you. [Operator Instructions] Our first question comes from Mike Parkin of National Bank.

Hi, guys. Congrats on the quarter. A couple of questions, regarding Westwood, just wanted to get a sense of how you see grades trending there for Q3, Q4, we saw in the press release that the actual mine grade was good, brought down in the mill by the lower grade stockpiles. Would we expect any improvement on the mine grade for the third quarter or fourth quarter?

Yeah. Mike, it’s Gord here. Yeah. Looking at the forecast right now Q3 is up slightly versus Q2 and Q4 is actually, we get back into some higher grade mining areas in Q4. So we’re expecting to see a nice rebound then.

Okay. And then just with the major shutdowns planned at Essakane and Rosebel in Q2, can you just give us any comments on how those assets restarted. Did everything come up relatively smoothly?

Yeah. Everything came up very, very nicely and we’re back to sort of the same throughput rates that we were enjoying in Q1 and in recent times it was just sort of that’s the position, we ended up doing all the SAG mills, I think in Q2 and a couple of the ball mills as well. So, it just sort of all added up, everything is running fine. I think just the last couple of months, availabilities for both plants are running 95% plus?

Okay. And then with the greater and greater hard rock feed at Rosebel, are you seeing any kind of wear pattern changes on the SAG at Rosebel or is everything kind of operating as expected?

I think it’s operating as expected. We do see obviously a little bit of increased where on a per tonne basis. I guess it’s increased, where on a time basis it’s not really that much different because the SAG throughput is really driven by how much hard rock you put in. So that’s what tends to cap it out and we sort to run it at maximum hard rock throughput there. The additional tonnage is really the softer rocks that get more or less a free ride through the SAG, not seeing a lot of a difference in the maintenance.

Okay. Super. That’s it for me. Thanks, guys.

Thanks Mike.

Our next question comes from David Haughton of CIBC.

Good morning, Steve and team. Thank you for the update. Just having to look at the guidance and your year-to-date performance, it does look as though Essakane has got the potential to over sheet your expectations, while Rosebel might be lagging a little bit. I am just wondering in the case of Rosebel, what you have in mind to have if you like a bit of the catch up in the second half?

Yeah. I mean, Rosebel plan for 2018 has always been a much stronger second half than the first half. We do see we are forecasting internally for some grade rebound there and do expect it to come back. We’re continuing to look at African and you’re right we are running a little bit above the cadence that we’ve guided to. We’ll reevaluate at the end of Q3 and if we need to make some changes in guidance we’ll do so at that time. But for right now we’re comfortable with where we’re at. And yeah, Rosebel does have a stronger second half.

Okay. So just looking at Rosebel, I presume you’re fairly comfortable with the throughput right of about 34,000 tonnes a day. So for the grade would it be kind of nudging up towards the 0.9 gram kind of level, a high 0.8 to maybe 0.9?

Yeah. Yeah. In fact it’s -- it’s in -- it certainly gets into sort of the ranges you’re talking about is not even a little better.

Okay. And the other thing I noticed with Rosebel is that your mining rates higher than your processing rate. So you’re building up a reasonable stockpile there. Is that so you can present better grade material to the mill or what’s the strategy there with the stockpile management?

It’s a bit of a long winded answer. Historically, we always see very strong positive reconciliation on our times at Rosebel particularly in satellite rock i.e. we find a lot more soft satellite ore then is identified through the diamond drilling models as we go in and we drill off the RC grade control on a tighter spacing we find this addition of -- these additional zones. We do exploit that and do use that to maximize the grades, the mill and stockpile, the lower grade materials. We have some fairly significant low grade stockpiles that build into the future. Because they’re softer rock though or primarily softer rock, we also use that to help offset and take advantage when there’s opportunities to get some slightly additional throughput through the mill there and feeding those lower grade stockpiles. And it’s an interesting question because it’s a discussion we’ve had with the team there as to how we manage the stockpiles over the next couple of years in terms of maximizing profitability.

Okay. Just changing topic slightly, you’ve got your CapEx deferral into 2019. Is there any risk of a change in price of those items that are pushed into the future?

No. And really I think the best explanation is when we did our budget for 2018 and we came out with our capital guidance for Saramacca and the other projects, because Saramacca was being fast track that was done before we even had a scoping study in place. So the team there put some thoughts together as to when they felt they were going to be spending money. We -- the assumption conservatively was that we would be paying cash upfront for equipment. As we got in and I did the more detailed engineering and procurement work, we recognized that the upfront capital is typically just down payment, but we’re locking in the prices that we expected. There’s some give and take again because just the level of engineering was not very advanced at the time we did the original budget. But we’re comfortable with sort of the capital envelope we’re working within and we’re also looking at some opportunities to do some leasing of that equipment. Well, it’s really just the timing of the expenditure, it’s not -- it hasn’t really changed the amount we’re expanding on that equipment right now.

Okay. And one last question, this one maybe for Carol. You’ve got some pretty sizable euro hedging there. What sort of percentage of the costs. I presume that Essakane are exposed to euro?

It will be like a significant amount, right. In terms of the -- it’s really the labor that would be the largest exposure there, obviously on the capital fiber, it’s still in the U.S. based, but it would be the labor component pay, but that would be the largest component.

So possibly 50% plus of the cost base at Essakane would be euro…

That’s a lower than that, about 30%.

30%. Okay. That’s it from me. Thank you.

Our next question comes from Dan Rollins of RBC Capital Markets.

Yeah. Thanks very much. Gord, maybe a question for you, caveat that realize every project is different, every company is different and some companies do a lot more work internally to get projects off the line quicker, but with Coté Gold, I was wonder if you could provide a little bit of color on some of the work that you’ve been doing behind the scenes as a company and with your team to sort of shore up the cost estimates, the production rates, the ramp up rates and sort of the capital cost spend for Coté? Just given the recent challenges that a couple of other assets Ontario and then if you look farther back down the road or behind us, there’s been another number of new startups here in Canada, both tonnage that have taken significantly longer to actually hit steady state than anticipated in the technical reports. Just wanted if you could provide a little bit color on what the IAMGOLD teams doing to shore up and take out that risk?

So, with respect to the construction timelines and construction cost estimates, we’ve -- we’re obviously -- we’re working with the feasibility study engineer who is Wood, formerly Amec. From their Vancouver office, we’ve done a lot of truth testing with respect to the capital estimates visited a number of sites that have recently installed equipment and looking at that. We’re pretty comfortable generally with evaluating those capital estimates. We have done a lot of construction ourselves in the past and can cast I think a pretty balanced eye on construction cost. We have done some -- a little bit more original or a little different way of approaching certain things on some of the major civil packages. We’ve actually brought in contracting outfits. This is not -- not bringing the contractors in on a bid basis to execute the work, but bringing contractors into the design team to sit down with our design elements and really challenge the capital estimates and the timelines have been put in place and we think that, that really gives us a much better handle on how we can execute those and what the final cost will be. With respect to ramp up, we have actually as part of the feasibility work we commissioned a fairly, fairly in-depth study on ramp-up. What people have been able to achieve in different parts of the world and how they achieved it and what issues sort of have caused challenges to ramp up schedules. So that analysis is being incorporated into the design. We just had a discussion with the team there yesterday on some of those results and what is being put in the feasibility study I think is appropriate. I think there is opportunity to do better, but we’re trying to make sure that we don’t sort of oversell the early years of production. I am not uncomfortable with the amount of effort we’re putting in. We’ve done a lot of work as well on and you will see it when the new reserves and resources come up, but we drilled. I think it’s around 47 kilometers of additional drilling as part of the feasibility study work and a fair bit of that was really focused on the first two years to three years of production, bringing a lot of that material from indicated status into measured status in a number of cases and doing a lot -- we actually did some very tight drill patterns, not quite to great control grids but almost great control grid over some sections to validate that we’ll be able to get the selectivity that we were hoping to get. So there is a lot of selectivity work going in, so that we don’t get in a situation where we can achieve the grades in the early years that we’re planning to achieve.

Okay.

Our next question comes from Michael Fairbairn of Canaccord Genuity.

Hi, guys. Just a question on Westwood, the ramp up appears to be going very well and it looks like you guys are still processing stockpiles at a fairly high rate. I was just wondering if you can give us an idea of approximately what remains in the stockpiles and what great there?

Yeah. I mean the grade of the stockpiles and it’s always a bugger to track and effectively estimate stockpile grades from old stockpile. It’s called PBT or very low grade material, most of it is old open pit material from the old Doyon pit and it’s actually sort of a twofold benefit. The grades we see there are sort of in the 0.9 to 1.1 range and that material as we re-handle it is also alleviating some of our future closure impacts because it’s higher sulfide material, so running it through the mill. And on a campaign by campaign basis, we do an analysis to make sure that we’re making money from it, but that’s the kind of grades we do have -- still have some relatively significant volumes. I will say additionally in last year, we did some custom milling with a third party again to utilize that spare capacity. That customer we had in the prior year’s decided to go elsewhere. However, last month, we started with a new custom milling client. So, on the basis of it we -- the custom milling is slightly better economics for us than treating the lower grade material. So, we’re happy to accommodate that client for the time period when we have that excess capacity. So moving forward between now and the extra -- the rest of the year, the mix from Westwood, from an IAMGOLD standpoint will be a little less of the low grades than we’ve seen in the past. You’re going to see the IAMGOLD grades come closer to sort of the underground grades for the second half of the year.

Okay. And to be fair to assume that the stockpile is remaining, you have more than enough to keep the mill full pretty much between now and 2020 when you’re filling it up pretty much entirely with the underground ore?

Correct.

Okay. Awesome. Thanks a lot. That’s all for me.

This concludes the time allocated for questions on today’s call. I will now 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 Q3 2018 conference call on November 7th. Thanks again.

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