IAMGOLD Corporation (IAG) Q4 2018 Earnings Report, Transcript and Summary

Welcome to the IAMGOLD 2018 Fourth Quarter and Full Year 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 Indi Gopinathan, Investor Relations Lead for IAMGOLD. Please go ahead, Indi Gopinathan.

Thank you very much. And welcome everyone to the IAMGOLD conference call. Joining me today on the call are Steve Letwin, President and CEO of IAMGOLD; Gord Stothart, Executive Vice President and Chief Operating Officer; Carol Banducci, Executive Vice President and Chief Financial Officer; Craig MacDougall, Senior Vice President, Exploration; and Jeff Snow, General Counsel and Senior Vice President, Business Development. I'll turn you to slide number 3, our cautionary statement. 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 referenced on this call can be viewed on our website. I will now turn the call over to our President and CEO, Steve Letwin.

Good morning, everybody. Well, the cover slide basically shows you a picture of our haul road from our Rosebel mine to Saramacca and Gord will update you on that. But that's going extremely well. And it's fitting because our theme song is building a cash flow pipeline. 2018 was a transitional year for us as we build our company for the future. We remain focused on creating superior shareholder value through operational improvements and a disciplined approach to realizing the value of our portfolio and by maintaining a strong balance sheet and ensuring a robust and geopolitically diverse pipeline. On slide 6, in addition to achieving guidance on 2018 production at 882,000 attributable ounces of gold and on 2018 all-in sustaining costs $1,057 per ounce sold, we increased proven and probable reserves by 23% for a three-year increase of 129% and delivered robust feasibility studies for both the Côté gold and Boto gold projects. Began commissioning of the hot oxygen plant at Essakane and the carbon in-column plant at Rosebel. These low capital, quick return projects at low cost marginal ounces to production. In 2018, we declared reserves at Saramacca and commenced development to deliver that ore to the Rosebel mill. We consolidated the district as well, acquiring rights to Broklokono expiration. We also announced initial resources at Monster Lake, Eastern Borosi and Gossey and enjoyed significant greenfield success at both Nelligan and Diakha-Siribaya. In addition, we are building a framework for the role of technology in mining. In 2018, we completed a 15 MW peak hybrid solar thermal power plant for our Essakane operation. This installation is expected to save approximately 6 million liters of fuel per year and reduce carbon dioxide emissions by 18,500 tons annually. In fact, for the period ending December 31, 2018, we exceeded expectations with Essakane, saving approximately 3.9 million liters of fuel and reducing carbon dioxide emissions by approximately 12,000 tons over seven months of service. So, on a pro rata basis, we're well ahead of our estimates. We invested in enhanced systems to identify that our gold production is ethically sourced. We believe the future is showing our commitment to the highest standards of ethics through traceable production and differentiating our product on that basis. Subsequent to the year-end, based on feedback from our shareholders, we announced we would defer the Côté construction decision. This was not an easy decision for us as a company as you might expect, but we spent a great deal of time listening to investor concerns and absorbing that information to arrive at the conclusion that this is not the right time, given market conditions, to make a construction decision on Côté. We will continue, however, to progress early works, and you'll see that in some of the capital we're spending, and engineering, so when the time is right, we'll be ready to start. We simply are continuing to de-risk the project and we have no intention of making a construction decision on Côté in the near term. Upcoming in 2019 are significant milestones in our ongoing operational improvement work. We anticipate the Essakane CIL feasibility study in the first half of the year, with Saramacca first production, maiden Nelligan resource and an updated Westwood plan in the second half of the year. We're also conducting a scoping study on the underground potential of Saramacca, which may substantially reduce waste volumes. When I joined the company almost nine years ago, our reserve life was less than eight years. Today, assuming a production rate of 1 million ounces a year, we have about 18 years of reserve life. We have doubled our life of mine, setting the stage for a long future for the company. I'd like to thank Craig MacDougall and Gord Stothart, who are sitting here with me. Thank you, gentlemen, for your efforts in making this happen. This is an outstanding achievement. These two individuals have led our company from a very small margin around life of mine in terms of time into the future to a very significant increase in cushion to protect our assets and our shareholders going forward. We maintained our financial strength – thank you, Carol Banducci – with over $750 million in cash and cash equivalents. Kudos to you and your team for ensuring this continues to be a strength of our company and always will. We have a tremendous organic pipeline which we continue to advance and expand. Robust operations, a strong balance sheet and great people making it all happen. I just want to say a few things about strategy before I turn it over to Carol, and I know that we're going to get a number of questions. So, let me just talk a little bit about our strategy because, logically, people are asking us, okay, well, what next that you've deferred Côté. Without naming names, I had a lot of good input, not only from our shareholders, but a number of analysts that have been very, very, I would say, helpful in giving us feedback and helping guide us as we look at our strategy going forward. And this is, I think, part of our culture at IAMGOLD. We may not always agree with everything that's being said, but we do listen. And one analyst who is a very senior individual in the industry said to me, "you know, Steve, you really do need to work off a proof of concept strategy where the market today really wants to be shown that you can add value on a step-by-step basis going forward. They don't like big bets right now. They not in the mood to see more risk. There has been a lot of big missteps over the last couple of years with various project, which gives the market a lot of concern." I understand that. And we're not going to sit back here at IAMGOLD and be stubbornly inattentive or unattentive to views of our shareholders and analysts. So, when we look at the strategy, we literally are going to go, what I would call, a greater emphasis on short-cycle economics. So, Stothart, who is one of the best operations guys I've ever worked with and certainly technically superior from what I can tell to most in the industry, he is going to be focused on making sure Saramacca delivers what we are expecting it deliver. We're going to focus on making sure that that haul road gets completed and that we can start moving ore into the mill, which runs like a charm, thanks to John Grignon down at Rosebel, who I call magic man, working to get that ore into the mill in the second half of 2019. And that will boost economics at Rosebel significantly and add to the value of our shareholders. At Essakane, we're going to be doing debottlenecking, enhancing our CIL network and the oxygen plant as an example to enhanced recovery. All these things that add to short-cycle boost in economics are where we're refocusing. At Côté, this was not easy. Believe me. Personally and for Jeff Snow, who is sitting across from me today who is our Henry Kissinger on negotiating this, and Gord Stothart who has team of people, some of the best I've ever run into to build this, and Craig MacDougall who has done such a great job building those ounces from less than 2 million to close to 10 million M&I. Listen, this is not an easy decision, but it's the right decision. And we do what's right. So, do we have a partner who doesn't agree with this? Of course, we do, but we'll deal with that. They are a good partner. They are a strong partner. But we have to make sure we do what's right for our shareholders and for all of our stakeholders. So, we will be focusing on short-cycle economics, boosting our returns, reducing our costs, improving our cash flow and improving returns. The fact that we have an inventory of resources that is not matched by anybody in our peer group, thanks to some great success, we have 18 million ounces of reserves. And this is a huge improvement from where we were just three years ago. And our mines, because of our focus on leveraging off our asset base, have got an economic picture that's far more robust than it was three years ago. So, I think that's why people have buy ratings on us. They see us as a great opportunity, as a leverage to gold prices. We're going to take that advice, we're going to take that good counsel from both analysts and shareholders and we're going to put it to work. We haven't come out with a new plan on what our volumes are going to look like as we're still working on it. Gord Stothart is working diligently on a Westwood update, but he's going to do it right, and these things take time. We will finish derisking Côté. And by the way, we have a lot of interest in Côté outside of us, outside of our company. So, I want to make sure that asset is as clean, has got as much potential as possible. We need to finish off permitting. We need to finish off things that basically put that asset as shining and new as possible going forward. So, we need to spend a little money to do that. So, I'm happy with the strategy. We had to make a tough decision. We made the decision. We made that decision with some great feedback from a lot of people, our key shareholders being part of that. And we listened to our shareholders. So, that's where we're heading. More news as we move along. And I'd like to say news at 11 because we will update you as we go forward as we get the right information to make sure you are as knowledgeable as we are about what our overall strategy is. We are very transparent, as you know, with our reporting and we're going to continue to be that way. So, on that note, I'll turn it over to Carol.

Thank you, Steve. And good morning, everyone. Turning to slide 8, 2018 was another solid year of performance while we continued to advance our various projects. We continue to have a strong balance sheet, which provides us with significant financial flexibility, and we've taken some steps during 2018 and subsequent to the year-end to improve our capital structure which I'll speak to in a few minutes. This slide presents key performance highlights for the fourth quarter and the full year 2018. Revenues of $274 million in the fourth quarter were down 6% from the same period in 2017. Revenues for the full year of $1.1 billion were up slightly from 2017 on stronger Essakane sales volumes and a higher realizable price during 2018, partially offset by lower sales volumes at Rosebel and Westwood. Gross profit in the fourth quarter decreased to $24 million, primarily due to lower sales volumes combined with the lower realizable price. For the year, gross profit was down 10% to $137 million, primarily due to slightly higher cost of sales. The adjusted net loss for the fourth quarter was $16.1 million or $0.03 per share. For the full year, adjusted net earnings were $29.8 million or $0.06 per share. Net cash from operating activities was $23 million in the fourth quarter and $191 million for the full year. The decrease of net cash from operating activities from the same period in 2017 was primarily due to an increase in non-cash working capital items and non-current ore stockpiled and lower earnings of non-cash adjustments, partially offset by lower income taxes paid. For the full year, net cash from operating activities before changes in working capital for 2018 was $288 million, down $5.6 million from 2017. For the fourth quarter, net cash from operating activities before changes in working capital was $56 million, down $13 million from the fourth quarter 2017. Turning to slide 9, changes in working capital. I'm focusing on the full-year 2018 in this graph. The $97.3 million change in movement in non-cash working capital items and non-current ore stockpiled was due to four main drivers. The first driver was a $48 million increase in mine supplies at Rosebel and Essakane. This amount resulted from a number of maintenance initiatives to improve equipment availability at a lower cost and the strategic decision to rebuild our in-house rather than outsourcing. Both these initiatives are in the early stages of being realized and we do expect to see benefits going forward. And we will be focusing on bringing that working capital on supplies down during this year. The second driver was a $32 million increase in total ore stockpiled due to planned increases in ore productions at Rosebel and Essakane and the buildup of low-grade heat bleach ore stockpiled at Essakane. The third driver was an $11 million temporary increase in that receivable at Essakane solely due to timing over year-end. And finally, the fourth driver was a temporary increase in $7 million in finished goods inventory due to the timing of shipments primarily at Essakane. The next slide summarizes our hedge position as of December 31, 2018. For our fuel hedges, we have hedged between 49% and 90% of our annual WTI oil consumption for the next five years and between 50% and 90% of our annual Brent oil consumption for the next four years. We use zero cost option collars in both cases. For our FX exposures, we have hedged between 75% and 50% of our Canadian dollar expenditures for 2019 and 2020 respectively and 75% of our euro expenditures for 2019. This was done using zero collar options as well as opportunistically purchasing Canadian dollar and euro to add to our foreign account balances. Turning to our financial position, we had $734 million in cash, cash equivalents and short-term investments as of December 31, 2018. Our net cash position at the end of the year was $334 million. In the fourth quarter, we amended our revolving credit facility [indiscernible] amount of $500 million and extend the term out to January 2023 with an option to increase commitments by $100 million as well as provide leasing for up to $250 million. On January 15, 2019, we entered into a forward gold sale arrangement and received $170 million in December of this year in exchange for delivering 150,000 ounces of gold in 2022. The prepay provides additional liquidity to IAMGOLD at attractive terms, while also mitigating any downside price risk below $1,300 an ounce on 150,000 ounces of production. Including our undrawn $500 million credit facility, total liquidity exceeded $1.2 billion at the end of the year. As Steve said, our focus is on creating superior shareholder value. We are executing on our operational improvements and hold an enviable pipeline of growth projects and we will continue to manage our business in a prudent and disciplined manner. I would now like to turn it over to Gord.

Thanks, Carol. So, we continue to focus on safety and improving our performance in this area. Based on 200,000 man hours, our total recordable injury rate, or TRI, for 2018 was 1.13, slightly above target 1.09. The DART rate, or days away restricted or transferred duty, was 0.66, also above our objective of 0.50. We are working to meet or exceed our safety goals, implementing several initiatives, including behavior-based safety programs to ensure a safer working environment. On February 19, we released our 2018 year-end reserves and resources statement. This slide compares reserves and resources year-over-year. Our gold price assumptions at our owned and operated mines remain unchanged. All reserves numbers, including the Côté gold and Boto gold projects, are based on $1,200 an ounce. M&I resources are inclusive of reserves. And resources for Essakane, Rosebel and our resource stage projects were based on $1,500 per ounce and, for Westwood, $1,200 per ounce. Reserves and resources estimates at Sadiola, prepared by our joint venture partner, use price assumptions of $1,200 per ounce for reserves and $1,400 per ounce for resources, both unchanged from 2017. Proven and probable attributable gold reserves after depletion increased by 23% year-over-year to 17.9 million ounces from 14.5 million ounces at the end of 2017. The main drivers were an increase in reserves at Rosebel as we declared initial reserves at Saramacca of 1.0 million attributable ounces on September 18, plus further additions due to upgrading resources at the [indiscernible] deposit to reserves. Essakane saw an increase of 29% net of depletion to 3.9 million attributable ounces primarily due to the pre-feasibility completed in June incorporating heat leach ore, increases in reserves attributable to IAMGOLD at Côté of 0.9 million ounces, and at Boto of 0.3 million ounces primarily due to successful infill drilling campaigns to support the feasibility studies released during the second half of 2018. Attributable measured and indicated resources, inclusive of our reserves, increased by 13% to 27.9 million ounces. The increase was mainly due to a 24% increase in M&I resources at Côté to 6.5 million ounces and a 16% increase at Boto to 2.2 million ounces as part of the feasibility studies, combined with a 24% increase at Essakane to 4.8 million ounces as part of the prefeasibility studies. Even with the increase in M&I resources through conversion, we maintained attributable inferred ounces at a comparable level to 2017 at 8.7 million ounces in the inferred category due to discovery of additional resources. Turning to the production and cost summary for 2018, consolidated attributable production was unchanged from 2017 at 882,000 ounces, which was at the top end of guidance. All-in sustaining costs of $1,057 an ounce came in at the top of guidance and we were up $54 an ounce from 2017. Note that all-in sustaining cost at the consolidated level include corporate G&A costs. Now for a recap of performance site by site, starting with Essakane. So, Essakane in 2018 achieved record production for the second consecutive year at 405,000 attributable ounces, up 4% compared to 2017, and fourth quarter attributable gold production of 103,000 ounces, up 1% compared to Q4 of 2017. The higher production was due to ore feed being sourced from higher-grade zones. The impact of higher grades was partially offset by lower realized throughput, caused by a higher proportion of hard rock in the mill feed as well as lower mill availability due to planned major maintenance shutdowns on the crushing and grinding circuits. Full-year all-in sustaining costs were $1,002 an ounce, an increase of 5% from the previous year, mainly due to higher sustaining capital, partly offset by lower cost of sales. Q4 AISC was 13% higher than in 2017 at $1,114 an ounce for the same reasons. Dry commissioning of the oxygen plant started in December and the plant is now operational. We expect overall recoveries to increase by a minimum of 0.5% as a result. Essakane continues to work at improving fleet availability through a planned maintenance initiative designed to support increased mining volumes, while decreasing maintenance costs. In 2019, we're guiding to 375,000 to 390,000 attributable ounces at Essakane. We are focusing on CIL optimization with the heap leach facility planned after CIL rather than in parallel as this scenario yields superior economics. The 2019 mill debottlenecking project at Essakane will increase CIL capacity to 13.5 million tons per annum at 100% hard rock, representing a 13% increase to current capacity and a 25% increase above the original 10.8 million tons per year nameplate capacity. Top projects include replacing the secondary pressure, modifying the coarse ore screening system and enhancing the recovery circuit through additional screen capacity. Optimizing the gravity circuit is expected to deliver an increase in the overall CIL recovery. A feasibility study is expected to be completed in the second quarter, which will outline opportunities to further optimize the CIL in addition to end-of-life heap leach processing. I'll talk more about the expected capital numbers in a few moments when we get to the CapEx summary slide for 2019. Turning now to Rosebel, attributable gold production for 2018 was 85,000 ounces in the fourth quarter and 287,000 ounces for the full year, 8% higher and 5% lower compared to same prior-year periods respectively. For the quarter, the difference was primarily due to higher head grades and recoveries, partially offset by lower throughput. Our mine sequencing took us into higher grade zones, but also harder rock. For the year, production was lower due to higher planned maintenance level which impacted throughput. All-in sustaining costs for the quarter and full year were $981 and $1,006 per ounce respectively. For the quarter, costs were 4% lower compared to the same prior-year period, primarily due to lower sustaining capital expenditures, partially offset by higher cost of sales per ounce. Year-over-year, costs were 8% higher, primarily due to higher cost of sales per ounce, partially offset by lower sustaining capital expenditures. 2019 attributable production at Rosebel is forecast to be in the range of 315,000 to 330,000 ounces. Key efforts for this year include strategic pit pushback to unlock higher grade ore zones and mill improvements to improve recoveries and throughput, including the addition of the carbon in-column plant and revisions to the sag mill liner. In 2019, Rosebel is conducting a study on enhancing the mill design by running an open circuit sag mill combined with a secondary pebble crusher to enhance hard rock throughput and increased gold production. While mill throughput in 2019 is expected to be at levels consistent with 2018, head grades are expected to improve, benefiting from the commencement of ore deliveries from the Saramacca deposit in the second half of the year. At Saramacca, construction continues on the 23 kilometers of new haul road, linking the deposit to the Rosebel mill, with targeted completion by mid-2019. The construction of infrastructure items at Saramacca is expected to commence in the second quarter of 2019 and Rosebel is also conducting a study to evaluate the underground mining potential at Saramacca, which could substantially reduce waste volumes and, thereby, reducing overall costs. Open pit mining with saprolite in the initial years will continue as planned, with future potential for underground mining once hard rock is reached. Moving at Westwood, gold production at Westwood was 28,000 ounces for the fourth quarter 2018, 3% lower than the same prior-year period, primarily due to lower head grade. Gold production for full year 2018 was 129,000 ounces or 3% higher than the prior year, primarily due to higher throughput, partly offset by lower head grades. The lower grades reflected mining activity that sequenced through lower grade stopes as part of the mine plan. Head grade, including marginal ore for the fourth quarter and year ended 2018, was 6.78 gram per ton gold and 7.6 gram per ton gold respectively. During the quarter, development continued to focus on the ramp breakthrough on level 132. In line with our safety protocol, three new bolting equipment units, which can operate remotely and reduce worker exposure in challenging ground, [indiscernible] in the quarter. Infrastructure development continued in [indiscernible 0:30:28] of $1,334 for the fourth quarter and $1,073 for the full year ended 2018 were higher compared to the same prior-year periods by 31% and 10% respectively, primarily due to higher cost of sales per ounce and higher sustaining capital expenditures. 2019 production guidance is 100,000 to 120,000 ounces for the year as mining and development activities continue to progress. Sadiola attributable gold production of 14,000 ounces for the fourth quarter and 59,000 ounces for the year ended 2018 was lower by 22% and 6% respectively compared to same prior-year period, primarily due to lower head grades as a result of greater drawdowns of marginal ore stockpiles. All-in sustaining cost per ounce total of $871 for the fourth quarter and $930 for the full year ended 2018 were lower than compared to the same prior-year periods as a result of lower sustaining capital expenditures. Mining activity ceased at Sadiola during the second quarter of 2018, while processing of ore stockpiles continued from the second through fourth quarters. Processing of the oxide ore stockpiles is expected to be completed by midyear 2019, at which time the operation will be suspended. While not included in the slide set here, I will add that the Yatela mine, which is on residual leach, IAMGOLD, along with JV partner AngloGold Ashanti, has entered into an agreement with the government of Mali for the sale of the partner's 82% indirect interest – sorry, 80% indirect interest in the Yatela mine for $1 subject to conditions and a one-time payment to cover costs related to rehabilitation, closure and social programs. At the Côté gold project here in Ontario, we announced a positive feasibility study with 2P reserves of 7.3 million ounces and M&I resources, including reserves of 10 million ounces on 100% basis. Highlights for the extended mine plan include a mine life of 18 years with average annual production of 372,000 ounces at an AISC of $703 per ounce sold, low strip ratio and a 15.4 IRR at a gold price of $1,250 per ounce, with a 4.4 year payback. Following our announcement to defer the construction decision on the Côté gold project pending improved and sustainable market conditions, we plan to refocus on further de-risking the project in 2019 through advancement of engineering, permitting and definition drilling. We also announced positive feasibility study results for the Boto gold project in Senegal. Highlights included reserves of 1.9 million ounces on 100% basis, mine life of 12.8 years, average production of 140,000 ounces and a life of mine all-in sustaining costs of $753 per ounce sold, with a 23% return and a 3.4-year payback. For 2019, our global guidance includes total owner operated production of 709,000 to 840,000 ounces, with total attributable ounces including joint venture production of 810,000 to 870,000 ounces; a projected total cash cost of $765 to $815 per ounce, with our AISC guidance at $1,030 to $1,080 per ounce. Turning to our capital expenditure outlook for 2018, we are guiding to $355 million, plus or minus 5%. The significant increase over 2017 is due to the advancement of our growth projects. Sustaining capital is expected to be similar to 2017 at $150 million. Of the $75 million of sustaining capital for Essakane, $40 million is recapitalized waste stripping. Non-sustaining CapEx is estimated at $195 million, with $75 million allocated to Rosebel for the development of Saramacca and $50 million at Essakane for tailings, liners, dams and a thickening plant, as well as the mill debottlenecking upgrade. Westwood's $30 million is mainly for expansion development. The $40 million for corporate and development projects is inclusive of our 70% proportional expenditures at Côté for further de-risking activities as well as Boto work. I will now turn the presentation over to Craig to talk about exploration.

Thanks, Gord. And good morning, everyone. Before I begin, please note that the results I talk about today have been previously disclosed in accordance with securities regulations and signed off by the qualified persons within the company reporting them. Also note that any references to exploration target potential, including potential quantity and grade, are conceptual in nature and insufficient exploration work has been completed to define a mineral resource and there can be no certainty that an exploration target will result in a mineral resource being delineated. As Gord noted, in 2018, we continued the trend in increasing the company reserve and resource profile with a 23% increase in proven and probable reserves, combined with a 13% increase in measured and indicated resources. When combined with 2017's reserve increase, this represents a 129% increase in 2P over the prior two years. Achieved with our own organic projects, this is a significant achievement and is in contrast to the current state the industry. Not only have we been able to upgrade resources to reserves, we've been able to more than replenish and grow our resource ounces, including the declaration of initial resource assessment at multiple projects during 2018. Starting with Rosebel and the surrounding land packages, during 2018, we declared initial attributable reserves at Saramacca of 1 million ounces. During the fourth quarter, we announced drill results of the 27 drill holes totaling just over for 4.5 kilometers along the Saramacca-Broklokono trend, with highlights 7.5 meters grading 4.58 grams per ton gold and 10.5 meters grading at 1.73 grams per ton gold. During 2018, we completed approximately 56 kilometers of reverse circulation and diamond drilling. In 2019, we plan to continue these exploration efforts along the Saramacca-Broklokono trend as well as on the Rosebel concession, with approximately 45 kilometers of reverse circulation and diamond drilling. We continue to evaluate potential resource expansion and exploration targets in the vicinity of the existing operations. At Essakane, exploration focused on extending the mine life beyond 2030. During 2018, approximately 56 kilometers of reverse circulation and diamond drilling was completed on the mine lease and surrounding concessions. Drilling was focused on infill and resource conversion at the Essakane main zone to support the ongoing feasibility study and infill drilling at Falagountou West to improve the resource models. At the Gossey prospect, we announced an initial resource estimate of 10.5 million tons of indicated resources, grading 0.87 grams per ton gold for 291,000 ounces and 2.9 million tons of inferred resources grading 0.91 grams per ton gold for 85,000 contained ounces. 2019, we will continue our efforts in evaluating other potential prospects along the Gossey- Korizena trend. At our Diakha-Siribaya project in Mali, the attributable indicated resources increased by 539,000 ounces to 668,000 ounces, while our inferred resources more than replaced the upgraded ounces and remained relatively unchanged at 1.1 million ounces. During 2018, as part of our infill program, we completed over 14.5 kilometers of reverse circulation and diamond drilling, which included highlights such as 13 meters grading 6.05 grams a ton gold and 13 meters at 11.6 grams per ton gold. We plan to continue our efforts to validate the mineralization north and south of the current pit field, with a further 10 kilometers of drilling planned in 2019. As I always like to remind our listeners, Diakha is the same mineralized trend as their own Boto project in Senegal as well as B2Gold's Fekola project in Mali, which continues to impress with strong reserves upside. At Pitangui in Brazil, we completed approximately 17.6 kilometers of drilling to evaluate potential resource extension at the São Sebastião deposits, as well as test priority targets elsewhere on the property for additional zones of mineralization. We continue to incorporate these results in the resource model and drive ongoing drilling programs. At our Eastern Borosi joint venture project in Nicaragua, the drilling program in 2018 focused on testing selected vein structures for mineralized extension. In early 2018, we announced the updated resource estimate comprising 4.4 million tons grading 5.7 grams per ton of gold equivalent for 812,000 gold equivalent ounces. In addition to that, we completed just under 11 kilometers of diamond drilling, of which highlights include 15.9 meters grading 5.75 grams per ton gold and 34.3 grams per ton silver, as well as 8 meters grading 10.9 grams per ton gold and 859 grams per ton silver. Lastly, moving to our Monster Lake and Nelligan projects in Québec. At Monster Lake, we reported an resource estimate, assuming an underground operation of 1.1 million tons of inferred resources grading 12.15 grams per ton gold for 433,000 contained ounces. Subsequently, we released highlights from additional drilling from 8.3 kilometers of drilling, which included high-grade results such as 2.6 meters grading 72.17 grams per ton gold and 5.3 meters grading 40.9 grams per ton gold. The team will complete approximately 6 kilometers of drilling in 2019 to continue to evaluate target areas with potential to host additional zones of mineralization. At Nelligan, we completed 13.4 kilometers of diamond drilling to evaluate the resource potential of the Renard zone, which intersected wide zones of alterations and associated mineralization. Highlights reported from the 2018 program include 42.1 meters grading 3.6 grams per ton gold, 27.8 meters grading 5.7 grams per ton gold and 82.6 meters grading 3.3 grams per ton gold. During 2019, we plan to drill between 12 kilometers and 15 kilometers of infill to test the continuity of the mineralization of the Renard zone, which will be integrated to complete the initial resource estimate during 2019. To wrap up exploration, you have seen that we have not only advanced projects successfully to the feasibility level, but have also advanced our greenfield projects through discovery to initial resource stage and we continue to conduct exploration programs on a number of medium and long-term discovery stage projects, which we hope will become the future catalysts for the company. We plan to build on our 2018 exploration successes. We will work to advance some of these early stage projects, including amazing resource at Nelligan, while continuing to support our near-mine exploration to leverage our existing infrastructure. With that, I'll pass it over to Steve to wrap up.

Thanks, Craig. So, just to repeat what I said earlier, we've got a very focused strategy going forward. We've listened to our shareholders agreement. We've listened to all of our stakeholders. And our aim simply is to create as much superior shareholder value as possible by building strong cash flows from our current operations, while maintaining a disciplined approach to realizing the value of our portfolios. We have almost 30 million ounces in measured and indicated resources and we're at a market cap of CAD 2.3 billion. Our company has a lot of inherent value that can be realized. And thanks to the hard work of the operations and financial team, we not only have a very robust inventory of resource, we have a very strong balance sheet to support it. So, from an operating perspective in the near term, this simply means, again, back to the proof of concept strategy that we're putting in place, with debottleneck of the Essakane mill, we're going to continue the Saramacca development, we're going to progress the development of Westwood, and we're going to complete the Essakane CIL feasibility study. For our development growth opportunities, this means finishing up the work of engineering and permitting at Côté and pausing, as we said. We are not going to be making any kind of construction decision at Côté. Expecting delivery of the mine permit at Boto. Issuing a maiden resource for Nelligan and making sure we get that first production from Saramacca in the second half of 2019. Again, proof of concept. With a strong balance sheet, robust pipeline of projects and balanced geopolitical risk, plus the commitment and skill of our people at all our sites and offices, we're very confident with the belief that we can achieve our goals. Thank you for joining us for happy. We're happy to take questions.

Thank you. [Operator Instructions]. Our first question comes from Fahad Tariq with Credit Suisse. Please go ahead.

Hi. Good morning. Thanks for taking my question. Just one for me. In the release, you mention $34 million of growth CapEx in the first half for Côté for engineering, permitting and drilling. Were these contracts that you are locked into and couldn’t get out of, even though you shelved the project? Any color on that would be helpful? Just trying to figure out why the CapEx for that particular project went from under $20 million to $34 million in the first half? Or am I missing something in the numbers? Thanks.

Maybe I can start off answering that question. So, the outlook that we had originally for Côté included the spend up until really the first quarter because we said that we would be making the construction decision in the first quarter. And so, we had nothing forecast for Côté beyond that spend initially identified for the first few months.

I'll let Gord answer it, but it's one of those things where we've got a great asset there. We're not moving ahead with it. So, I don't want anybody seeing it as a signal that we're sort of tucking it a quarter and going to surprise anybody. We're not surprising anybody here, but we need to finish off of what we started. We do have some commitments. We're deforesting now because we need to do it now given environmental constraints. We have permitting we have to finish. We have work with the First Nations. We need to clean it up. And that's what it's going to require to put it in the kind of shape that we want to put it in. And, Gord, maybe you can add to that.

We've never use the word shelves. We said deferred. The project needs to be put in a shape in an orderly fashion. It's not like you pull the lights and unplug the refrigerator and run away from the house. There's a lot of work needs to be done to put it in the right shape.

Our next question comes from Mike Jalonen with Bank of America. Please go ahead.

Hi, Steve and everyone. Steve, going to your original comments at the start, talking about what happen at Côté, talking to your shareholders, talking to analysts. I guess, maybe a philosophical question for you, a bit unfair when you hear the comparison, but it brought me back to 1989, January of '89, when American Barrick announced $900 million bets post-development plan. At the time, bets posted had about 5 million ounces of gold. It was going to produce 900,000 ounces and had a lot more resources. But this plan faced huge criticism from the buy and sell side. And autoclaving wasn't really a known technology. In fact, a year earlier, at autoclave in Nevada had blown up at one of the mines, dewatering. There was analysts saying you couldn't dewater 40,000 gallons per minute. And the capital cost of $900 million. That was eye-opening for that era. Remember, this was after the market crash of 1987 when confidence in the market was low. Bob Smith, the CEO then, I remember talking to him, saying he believed in his team, that they could deliver this. And, obviously, with the benefit of hindsight, it worked out. But I remember investors back – I had a buy on Barrick – telling me that I was going to ruin my career if I put a buy on it because this wouldn't work. Well, I'm still here and they're not. So, I guess, it's more philosophical for you. Obviously, Goldstrike turned out to be one of the best mines ever, but that was an example where the buy and sell side were against this. A lot of people. And they were wrong. So, I just wonder what you think about that in terms of Côté now.

It's an excellent commentary. And you've been around a long time and you're one of the guys we listen to the most and we always appreciate, whether it's over a beer or a coffee, what you have to say because you have a lot of fantastic advice for us. I'll very simply tell you –I think you guys know me by now after nine years on this job, we try to be truthful as we can without selective disclosure, but this is probably one of the toughest things I've had to do, certainly at my career at IAMGOLD, and I've had to make similar decisions in the oil and gas space when I was there. We have a tremendous team of people that have been working on this and a tremendous group of people from Sumitomo and a relationship with Sumitomo which we treasure. But I was very worried when we – we weren't scheduled to make a decision until before the end of the first quarter. And when we did the gold prepay because we knew investors were concerned about the gold price and the fact that our ASIC sits higher than average, we're worried if that gold price fell, it would squeeze our margins and it would drain our cash. So, the $1,300 to $1,500 collar that we put in place with the prepay was meant to not only protect our margins, but also give us extra cash to complete the project. And it's not new news that market saw that as an indirect decision on Côté, which it wasn't, but in many respects, it was good to see the reaction to Côté. And in fairness to our investors, we started to hear rumblings of concern back at the Denver gold show. We had gone from, geez, Côté, let's move ahead to hang on, maybe you need to go to the sidelines. But when you look at a company like IAMGOLD with 18 million ounces in reserves and close to 30 million ounces of measured and indicated resources valued at a very attractive price and the fact that we dropped almost 20% in two days after the prepay announcement – and now, in fairness, that was also tied to the revision we had or the expected revision – not expected, but a revision to the expectation around Westwood, it put us into a territory where we could have easily lost the company to bids from others seeing a value buy at a deep discount. So, you have to make a hard choice and protect your shareholders. And I'm the biggest independent shareholder of IAMGOLD, as you know. So, I have a lot of skin in the game. And I think I can think like a shareholder given how many shares I have. I just said, look, we believe in this project. We think it's an asset that's going to add a lot of value to our shareholders over time. But I'm not going to be bullheaded and move ahead with a decision on this in the face of shareholder discontent and lack of support. And I may – Gord Stothart, two years from now, may say to me, I told you, we should have gone ahead with it, you dope. Because he says that to me every morning. But my job as CEO is to take a balanced approach and maybe it's wrong decision right now. But it's the right decision for our shareholders and our stakeholders, and I would do it again because my job is to protect our shareholders. And, right now, in the short term, nobody wants to hear about large CapEx, bulk tonnage opportunities in Canada. They just don't want to hear about it. They want us to focus on our near-term, short-cycle economics and produce as much cash flow as we can with 18 years of mine life at 1 million ounces a year. We have the luxury of doing that where we're not going to hurt ourselves economically by doing that. So, that's what we're going to do. But was this easy for me? Not at all. But I want to underline, and for everybody on the line, what we said we are going to do – we're not going to surprise anybody. We're not going to come out and surprise them with some sort of decision here to the contrary of what I just talked about. This is the path we are following. And if there's a change in the market conditions out there, if there's a change in the sentiment, if somebody wakes up in the morning all of a sudden and the markets start saying, we need to go back to a longer cycle growth prospect, then we can do that with the support of the market. But, right now, I think it would be foolhardy to go against where the market sentiment is. And again, we can do what we're talking about without losing any value for our shareholders because of the robust resource base we have and the strong technical capability that we have at our site. That's a long answer. But it was a great question, Mike, and I appreciate you asking it.

Thank you for the response. Good luck. Thank you. Our next question is from Don MacLean with Paradigm Capital. Please go ahead.

Well, good morning, guys. Yeah, comment from another fossil out there like Mike. I think I like the way Gord put it that it's deferred, not shelved, Côté. And I think most of us who've been around for a while know that there's a cost of doing that. But there's a value de-risking the project and make it ready to progress quickly into production when the times are right. But that understood, when one takes a look at Boto, that's a good-looking project, how does that fit into the development strategy and schedule now?

Boto is an extremely attractive project and we haven't worked out the sequencing yet of what we're going to do now that we have deferred the construction decision on Côté. But, again, we are looking at a proof of concept strategy. And all I can say right now is that, if the economics of Boto holds, and we're able to get the kind of permits that we need to move ahead and our shareholders support that kind of strategy which is far less capital-intensive than Côté, then we are going to take a hard look at whether we should move it ahead or not. And again, we don't want to lose value because it's great value. But it will be a consultation process where we get feedback, and we have the balance sheet to do it. And we certainly have the resource, both human resource and technical support around the resource, to move ahead. So, we haven't decided, Don. Bur it certainly would be an attractive project for us to pursue if everything lines up.

And, Gord, how straightforward is the permitting that remains to be done?

Well, it's the fact that we've been in negotiation with the Government of Senegal. There, we've had several meetings with them. They're going very well. We're still apart on a few specific issues, but it's certainly a collegial negotiation. Just remind everybody, there is a presidential election underway in Senegal, I believe, this week. So, that will obviously cause a little bit of disruption to the regulatory bodies there for a period of time, especially when you're talking about it a negotiation of a mineral lease. We're still projecting that sometime mid-year, second half of the year, that that negotiation and that should be completed and we'll have that lease in hand.

Great, thanks. And then, one last comment while I got you, Gord, this underground potential at Saramacca. Maybe that should be [indiscernible].

Well, obviously, with the grades and thicknesses done that we see there, there's quite an opportunity for us with the underground potential. The rock conditions are very favorable. The geometry of the main structure is very favorable to us. So, we see quite an opportunity there. And we're currently evaluating how far that means [indiscernible] below the current resource bit. And as those results kind of come into hand, our team will be looking at that with a kind of a scoping study approach to see what it's going to do. Gord has already foreshadowed that if we are able to go underground, it does fundamentally change what kind of pit we need, how much weight stripping, what kind of weight [ph] stockpiles will be around this thing. So, there's some big impacts and there are a lot of moving parts. The first thing we've got to deliver to them, though, is some grade over thickness of depth. which is what we're trying to do. And then, he'll turn his engineers on it and we'll be able to compare the outcomes from the two scenarios. But on first blush, looks pretty interesting to us.

Your ounces per vertical meter are below the resource may stand up well?

We think they're going to stand up well, yes.

Thanks, guys.

Our next question is from Tanya Jakusconek with Scotiabank. Please go ahead.

Hi. Good morning everybody. I have more technical questions for you. Maybe a quick one. Just on the Essakane mill debottlenecking upgrades, Gord, how much is that in total capital to be spent this year and next?

We've allocated about $15 million.

$15 million?

$15 million, yes.

And that's it for the whole program?

Yeah.

Okay. Okay, that's an easy one. And then, just turning to Westwood, appreciate that you're going to have a new life of mine plan coming out at the end of the year. But just from a high level, what triggered the change to getting this new mine plan? Is it the difficult ground condition and seismicity? Are we looking at potentially a more selective mining method, obviously, impacting throughput and grade and costs? Maybe a little bit from you're approaching it?

I guess the short answer is yes. So, yeah, we are looking at the seismicity. We are looking at mining methods. And we will be examining the opportunity to use differential mining methods in different parts of the deposit. The whole deposit is not affected by seismicity, but there are some specific areas that are. And we need to be able to deal with that. We'll be looking at what's the size of the workforce, what's the development rate. And selectivity is a very significant piece of what we'll be looking at.

So, can we assume, Gord, that that 180,000 ounces ramping up longer-term is probably too optimistic for this asset from what we know today?

I'm not assuming that yet. Again, I've put it in the hands of the team. And my job is to sort of give them the space to come up with the answers.

Okay. And when you say year-end, is that with the year-end results or is it in calendar 2019 that we will actually get this life of mine plan?

Hopefully in calendar 2019. That's the goal that's been put in place. And it will be an interim plan. We actually feel it will probably take a little longer to put all of the bells and whistles on it, but we will certainly have a good indication by the fourth quarter of this year.

Okay. And that helps. And then, maybe, Steve, just for you. And I appreciate you've got the deferral of Côté. I know you've come back and said a few times on pending market conditions. Maybe just for us to understand, we appreciate the large capital and investors and analysts don't want you to build it, but what would it take for you to go ahead with it? You mentioned market conditions. Is it a gold price? $1,350 long-term if we stay here for a year? Is that enough or what do you see going ahead? What will it take?

Well, Tanya, you're one of the people as well that we pay a lot of attention to and you've always given us good advice. I know your advice was to certainly hold off on Côté. I got that messaging. And, again, we're very appreciative of the feedback. And I know you've been here as long as I've been here. And I know when I first joined from the oil and gas side, the complete focus of the industry was on ounces. In fact, you will recall, in 2011, the euphoria around this industry, $8 billion in equity raised that year. You can't raise a dollar today. And I remember selling [indiscernible] and demanding for $666 million after-tax and getting criticized for selling ounces, even though the deal was unbelievable for us. So, it's almost going to be a place where our shareholders stand up and say, you know what, depletion is running at a very high rate relative to replacement in the industry. We believe that it makes sense to move ahead and add more production to the system. We want to see you take your cash flow and invest it in a mine in Canada. That's bulk tonnage, low grade, but surrounded by infrastructure and has all the bells and whistles that we believe it has. So, I honestly, Tanya, will probably be talking to you, will be talking to Mike, Don and our shareholders, Don Smith, Tocqueville, , Fidelity, the guys over in London Ruffer, we spend a lot of time with them and we garner their feedback. And it's important to me. I don't run the company by consensus, but when the majority of our investment community is opposing a large CapEx project, I'm just not going to stubbornly go ahead and do it just because I think I'm right. At 63 years of age, I've learned that it's best to listen and take everybody's feedback and make the right decision. So, I don't know when that decision, the construct is going to be made. I do know – I don't see anything in the near term that would move us in that direction unless there is a change at our company, unless we get bigger in some fashion, unless somebody comes up to us and says, boy, we can help you really de-risk this. It's going to be basically tied to a bunch of the factors that enhance the attractiveness to the market that we haven't seen yet. So, right now, we're on the sidelines.

Okay, thank you.

Our next question comes from Dan Rollins with RBC Capital Markets. Please go ahead.

Yeah, thanks very much. Appreciate the candor, Steve, around Côté. Not to nitpick or sort of continue on this focus, but I think the last cycle – I think we can all agree and a lot of investors are – there are some long-term investors; there are some short-term investors. What we call saw in the last cycle was more of a flavor a day approach where people were telling companies, pay a dividend, lever up, build, and then everyone complained when everyone built atop the market and there was write-downs. Towing companies say a dividend lever up bills and then everyone complained when it was built atop the marketers write-downs. Do you think listening fully to investors and not going with the project right now is the best way or maybe when the environment is ripe for people, that's when the attitudes change and everyone wants growth, but then you potentially miss – you top-pick the cycle and then you basically turn on Côté during a down cycle where then you have to reflect the write-downs. Is there not a – where you'd say, okay, I know we didn't – it's not the right time to build it now, but we think gold is going in the right direction. We know we still have a lot of people who don't like the project, want to go with it, but we think it's the right time to build it. Are you going to come to a period where that's going to be the argument from a company basis or are you going to make the decision based on what investors are telling you to do with Côté?

Gord has been here longer than I have. He's forgotten more than what I know about building mines. And I value – when I met him at the Royal York when I first came to join the company, he was extremely patient with my complete ignorance about the industry. And he says to me, we should be building in the low part of the cycle, this is the way you make money. You build it in the low part of the cycle. And then, when the gold price moves up, we're going to lever off of that and our shareholders will make tons and tons of money. And the problem with that, right now, Dan – and you know this as well as anybody – is that we make that decision, our stock, because people don't want to our own stock today if we're taking risk on Côté, they're going to wait to buy our stock two years out when we finally prove and we can build. And so, what we're going to get is a bunch of people saying, well, why would I want to own IAMGOLD with all the construction risk that goes with Côté, why wouldn't I just wait? That makes us extremely vulnerable to unsolicited offers for the company at a very low share price. That isn't doing our shareholders any favors today. And it's the shareholders today that I have to worry about the most, not shareholders of tomorrow. So, I am driven, without a doubt, by the shareholders of today. And I'm one of them, by the way. And I sure don't want to see our share price whacked 20% to 25% and then have a company come in and say, at a 30% premium, I can take all these resources, all these projects, all these enhancements for $0.50 on the dollar. That isn't happening. So, not going to do it. We're going to focus on adding value on the short cycle time until we see some evidence that our shareholders are willing to walk with us and support us on a bigger project that they aren't going to exit on and make us vulnerable in the short term. So, that's where my head is. I'm not deviating from it. Do I get beat up every morning over it? Yeah, I do internally. And from our partner, by the way. But I'm big enough and old enough to deal with that and we are sticking to that strategy.

Okay. That brings me to my next point -- question is, basically noted the differential between short cycle investment horizon and the fact that mining is a multi-decade game. And those two strategies sometimes compete viciously against each other. And it sounds like, right now, you don't have the free cash flow within the current portfolio to support the development of Côté Gold at this point in time. Does that open IAMGOLD up to deploying its excess cash and strong balance sheet towards adding, producing mines through non-core asset sale that could come up over the next two to three years to build the base, which then would justify and help support the development of Côté in three to four years.

The short answer would be yes. And we're always looking at those opportunities. I don't know whether or not – I think there is a fallacy when Krystal [ph] gets up and talks about disposing of 2.5 million ounces of production and Gold Corp., Newmont talk about $1.5 billion of assets, you've been around long enough, generally, those are the straps and roadkill that you get that they don't want. And I am not – we will always look at these opportunities, but I'm not optimistic that anybody's going to get deals of the century from the sale of these assets. I think that's naïve. Having said that, we have an obligation and fiduciary responsibility to look all these opportunities, and we will. We always do. So, if they come up for sale, we're going to take a look at it. And we always have done that. I don't know whether or not that'll give us an opportunity or not.

Okay, that's great. Appreciate the color.

Okay. Thanks, buddy. And thanks for all your feedback.

This concludes time allocated for questions on today's call. I will now hand the call back over to Indi Gopinathan for closing remarks.

Thank you very much. And thanks everyone for joining us this morning and for your continued interest in IAMGOLD. We look forward to having you join us for our Q1 2019 conference call in early May. Thank you.

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