Iamgold Corporation Ordinary Shares

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD second quarter 2021 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. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. At this time, I'd like to turn the conference over to Indi Gopinathan, Vice President, Investor Relations and Corporate Communications for IAM Gold. Please go ahead, Ms. Gopinathan.

Thank you, Gaylene, and welcome everyone to the IAM Gold Second Quarter 2021 Operating and Financial Results Conference Call. Joining me today on the call are Gordon Stothert, President and Chief Executive Officer of and Daniela Dimitrov, Executive Vice President and Chief Financial Officer. 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. During the call, non-GAAP measures will be referenced and we direct you to review the reconciliations in our disclosures relating to these measures. With respect to the technical information to be discussed, please refer to the Technical Information and Qualified Persons slide. The slides referenced on this call can be viewed on our website. I will now turn the call over to our President and CEO, Gordon Stothert.

Well, thank you, Indy. Good morning, everyone, and thank you for joining us. The second quarter of 2021 was extremely challenging for IAMGOLD, and we will walk you through both the challenges and mitigations in our discussion today. Attributable production guidance was reduced to between 565,000 and 605,000 gold ounces due to lower actual production in the first half of the year from Westwood and Roosevelt and their lower anticipated output for the second half of the year. This is partially offset by higher production at ESSECAN. We increased cash operating cost guidance mainly to reflect the lower production, cost pressures, and stronger Canadian dollar and euro versus the U.S. dollar. All-in sustaining cost guidance also reflects increased sustaining capital spending in the second half of the year. Total capital expenditures for 2021 are expected to increase by about $35 million, primarily due to expected capital expenditure increases at Cote Gold. Site capital expenditures are expected to be lower, primarily due to an unexpected reduction in planned work at Essican and Roosevelt. Cote Gold's estimated 2021 capital expenditures are expected to increase by $75 million to $430 million. So I'll now touch on a few items in this slide. At a corporate and strategic level, IAM Gold generated $1.9 million in mine site free cash flow during a period with an adjusted loss of $3.6 million or one cent per share. We have approximately $830 million in cash, cash equivalents, and short-term investment, and approximately $1.3 billion in total liquidity. And during the quarter, we effectively rolled forward our 2019 gold prepayment arrangement from 2022 to 2024. From a growth perspective, as indicated in our July update news release and Cote quarterly update, we have adjusted capital at the Cote Gold Project, with total project costs recast to $1.125 billion to $1.175 billion, based on a number of factors, which I will discuss in more detail shortly. We continue to progress per schedule, with the project achieving 27% completion overall at quarter end. We've also achieved over 2 million hours without a lost time accident at COTEA. and consolidated company safety metrics are tracking better than targets in the first half of the year. We continue to develop our districts with work done in the quarter to de-risk Bodo and delineate Gosselin. I Am Gold is committed to achieving high standards in environmental, social, and governance practices, which reflect our long-held zero-harm vision. At the end of June, the company, the Métis Nation of Ontario, and Sumitomo Metal Mining Company Limited celebrated the signing of an IBA related to the Cote Gold project. This completes the IBAs that we were expecting to sign for Cote. At the Boto Gold project and the exploration program in Senegal, the company is committed to investing 3.4 million in local community development activities over the 2020 to 2023 period. The program, developed with local stakeholders, will focus first on responding to the development of priority infrastructure to meet the basic needs of the communities and initiatives aimed at the long-term empowerment of the community by initially focusing on the implementation of local employment and local procurement strategies. We are proud to share that at the end of the quarter, Corporate Nights released its Best 50 list, which identifies the top 50 Canadian corporate citizens across all sectors, evaluated based on up to 24 environmental, social, governance, and economic key performance indicators. IAMGOLD placed 44th across all corporate sectors and eighth out of 122 companies in the mining sector. And in April, we were upgraded to a AA rating on the MSCI ESG assessment, placing IAMGOLD in the top 15% of precious metal companies. For each of our sites, we have continued our proactive management of COVID-19, However, we did have an increase in COVID-19 cases in Suriname and corresponding increase in cases at Roosevelt, with mandatory antigen testing now in place, among other mitigating controls. The second quarter also saw an increased number of COVID-19 cases in the Timmins area. Although some cases were experienced by a small number of workers at Cote during this wave, heightened testing and additional constraints on site circulation were implemented, which which strongly limited the number of cases experienced. Subsequent to the end of the second quarter, several contract workers at Bodo tested positive for COVID-19 and remain under observation before being released into isolation. Testing and contact tracing has been undertaken and the situation is being monitored. At this time, the company does not expect material impact on project activities. The previously implemented protocols across our operations and offices globally remain in place, and there have been no other material impacts on our operations, construction and development projects, or exploration sites during the second quarter. Our DART, or Days Away Restricted and Transferred Duty, frequency rate was 0.35, and the TRI, or Total Recordable Injuries Frequency Rate, with 0.70 respectively per 200,000 man-hours worked. And the Kote Gold Project had achieved over 2 million hours without lost time. We continue to implement several initiatives, including I Am Safe, the revamped health and safety management program to promote a safe work environment. I will now review the operating performance at each site in turn. So Essex N continued to perform strongly in the quarter with attributable gold production of 106,000 ounces for the quarter at an all-in sustaining cost of $1,060 per ounce sold, consistent with the prior quarters. Production reflected above planned grades, partially offset by lower gold recovery. We have completed the mill optimization project with an anticipated 10% improvement in hard rock processing over the course of the year, from an annualized 10.8 million tons to 11.7 million tons. As noted last quarter, this improvement in capacity is important as ESSACAN moves to greater proportional volumes of transition and hard rock versus softer rock in the coming years. We have also renewed a three-year collective bargaining agreement with our unionized ESSACAN workforce in July, which will be, in effect, for three years until the end of June 2024. Looking forward to the balance of the year, we have revised production guidance at Essacan upward to 390,000 to 400,000 ounces to reflect the production from higher grades achieved in the first half of the year and which are expected to normalize in the second half. The mill feed is expected to be supplemented by ore stockpiles in the third quarter to offset the impacts of seasonal rain. and we will have higher capital spend in the second half of the year for strategic pushback work as previously planned a number of events negatively impacted roosevelt this quarter beyond the unusually heavy rain output fell as of a significant increase in cobit 19 cases in the region and because of challenging industrial relations up to the point of the resolution of the collective bargaining agreement in may which resulted in multiple lockdowns, illnesses, and impacts on workforce availability that affected operations. At the Saramaca pit, management of the high clay content ore exacerbated by the heavy rains negatively impacted the ore handling and mill throughput. As a result, attributable gold production for the first quarter was 25,000 ounces, with all-in sustaining costs of $2,237 per ounce sold, reflecting lower sales volumes higher cost of sales, and higher sustaining capital. Due to the collective impact of these challenging factors, among others, and continued uncertainty related to the COVID-19 situation, we have reduced Roosevelt's 2021 guidance to 140,000 to 160,000 ounces. At Saramaca, construction of required infrastructure is continuing with the infrastructure pad and sedimentation dams scheduled for completion in the fourth quarter of 2021. and the west dump rock drain, dewatering wells, and bypass road phase two scheduled for completion toward the end of the year and into 2022. We expect certain cost pressures to persist in the second half of the year, and we are continuing to assess what, if any, ongoing impacts our challenges may have on ore sequencing in 2022 production. In addition, we have been working on a new geological model to form the basis of an updated mineral inventory estimate to be released before the end of 2021. Based on currently available information and given the negative impact of certain factors, we expect a total mineral resource estimate will decrease. To address the issues we have encountered in the second quarter, we are implementing a number of initiatives. To manage the increase in COVID-19 cases at Roosevelt, we have implemented mandatory antigen testing safely now accommodate the necessary workforce, having commissioned the 360 additional beds that we've previously spoken to. To improve production rates, the operation is undertaking, among other activities, pit dewatering, geotechnical assessments, optimization of the mine design and sequence, and in-pit road haulage improvements. These activities are expected to reestablish and increase pushback access in the second half of 2021, provide additional productive faces at Roosevelt, and increase the overall mine grade over the remainder of the year, albeit still below reserve grade. Conditions in the pits are being improved and the operation has met its updated plan for July. To improve equipment availability, we have ongoing improvements to the maintenance program, while additional mobile equipment is scheduled to arrive by the end of the year. This is expected to improve equipment availability, loading, and reduce reliance on higher-cost hauling contractors. To address processing plant challenges, Roosevelt has initiated an asset integrity program with multiple improvement initiatives to be run over the next 18 months and to bottleneck congested mill areas. And the ongoing adsorption-desorption project is intended to improve the efficiency of the carbon management circuits. Westwood produced 8,000 ounces in the second quarter of 2021, with the mill processing Grand Duke open pit ore while mining in East Zone Underground restarted in June, albeit at a more tempered pace in order to implement recommended and enhanced safety measures. Slower productivity in underground mining activities reflect the implementation of additional safety measures recommended by a group of external experts in conjunction with our own internal experts. mining and geotechnical experts. In addition, and also with a focus on safety, we will be implementing additional egresses in the planned zones of extraction. Open pit mining at Grand Duke, sequenced through a small pushback with access to higher grade zones, was delayed by a slowdown of ore haulage due to ore stockpiling limitations at the mill. All-in sustaining costs for the quarter were $2,412 per ounce sold primarily due to higher costs of sales and higher sustaining capital expenditures when compared to the prior quarter. Costs of sales were higher than prior periods, primarily due to lower sales volume and higher mining costs due to the start of underground mining. We have reduced Westwood 2021 production guidance to 35,000 to 45,000 ounces, primarily to reflect the additional safety measures noted, as well as a slower than planned ramp up of personnel. Development, rehabilitation, and extraction activities are expected to ramp up in the second half of 2021, and we are assessing the impact of all of these factors on 2022 planning. Work on a medium-term three-year operating plan is expected to be completed before year-end as we continue to evaluate this asset to identify the optimal path forward for the company and for our site workforce. I'll now provide you an update on our construction project at Cote Gold At Cote, as previously disclosed, we identified certain estimated project cost increases from a project review resulting in our 70% share of updated project costs from July 1st, 2020 net leasing to be now estimated at $1.125 billion to $1.175 million. Given expenditures to date, our remaining 70% share of project costs from July 1st, first 2021 forward based on these assumptions is estimated at $930 to $980 million. As we disclosed and based on available information and work completed to date, which is ongoing, the change in the project cost estimate was primarily driven by increased structural, mechanical, piping, electrical and concrete estimates for the processing plant facility and increases in earthworks and concrete estimates representing collectively almost 50% of the increase. Additional increases were estimated in mine facilities costs, including the, with the inclusion of a portion of the camp costs previously that had been earmarked in operating costs as a lease. Resulting increases in indirect costs, EPCM and owner costs, direct costs related to COVID-19 and changes in the currency exchange rate, partially offset by the transfer of certain costs to the operating period. The revised project costs range includes new contingency amounts for the remaining expenditures estimates. These revisions result from increases in estimates, including quantities and manpower, changes in scope, the negative impact of COVID-19 on labor productivity, and due to inflation. As of June 30th, detailed engineering for Cote has advanced to approximately 82% complete, Cote has advanced to 27% overall project completion. The project expanded $89.7 million in the quarter and has expanded $193 million since July 1st, 2020. Activities in the quarter included progression of procurement and expediting of major equipment contracts with a logistics contract awarded. Progression of earthworks with roadwork, water pumping, fish relocation, and the completion of the tailings management cofferdam and drill and blast activities in the open pit. Plant site blasting has been completed, and the final level adjustments are ongoing. The concrete batch plant was commissioned and is in production. With concrete pouring and form work started, we focused on the ball mill and vertical mill foundation work. The permanent camp has also progressed with about 60% of the planned permanent capacity commissioned at the end of July, accommodating over 700 workers at site. For the balance of the year, the work plan will continue to focus on earthworks, haul road construction and water management infrastructure around the pit site. Pre-stripping work in the pit is expected to continue during the third quarter. Permanent camp is expected to be fully commissioned as well in the third quarter. civil works currently underway at the plant site are expected to continue with the placement of precast and cast in place concrete as well as the prep as well as preparation for the plant building shell erection updated 2021 project costs are 430 million dollars with about 301 million dollars remaining in the second half of the year and we expect to have an initial mineral resource on the gosselin zone in the fourth quarter This slide summarizes our progress to date. We remain on track and are working steadily to meet our targets. This slide shows a few pictures highlighting the construction progress at Cote. I'll now switch over to a discussion on our development and exploration project. From a development perspective, we continue to de-risk the Bodo project infrastructure, including the year-round access road and airstrip, engineering for critical plant equipment, and the implementation of local sustainability programs. We are assessing these activities and the associated capital spending and timing. Our brownfield exploration focus is on drilling to evaluate and assess resource potential of targets near Essex and at Roosevelt, with surface drilling at Westwood focused on evaluating the resource potential between the Grand Duke and the old Doyome pit, and underground drilling focused on supporting the restart of underground mining operations. And with that, I will pass the call over to Daniela.

Thank you, Gord, and good morning, everyone. The following are some key highlights of our second quarter financial results. We reported adjusted EBITDA of 85 million from sales of 135,000 ounces at an average realized gold price of $1,800 per ounce. For the first six months of the year, adjusted EBITDA was $185 million from sales of 288,000 ounces at an average realized gold price of 1788 per ounce. Net loss was $4.5 million, or one cent per share, and adjusted net loss was $3.6 million, or one cent per share. We generated $1.9 million in mine site free cash flow in the second quarter, reflecting the operating challenges in the quarter that Gord discussed. For the first six months of the year, mine site free cash flow was $91.4 million. In terms of our financial position, we ended the quarter with cash, cash equivalents, and short-term investments of $830 million. We continue to maintain a largely undrawn credit facility of $500 million, maturing in January of 2025, resulting in total available liquidity of approximately 1.3 billion at June 30. We entered into further gold sale prepayment arrangements this quarter, but at a weighted average cost of 4.45% per annum in respect of 150,000 gold ounces with an average forward contract price of 1753 per ounce on 50,000 gold ounces and a caller range of 1700 to $2,100 per ounce on 100,000 gold ounces. These transactions have the effect of rolling all of the 2019 prepayment arrangement on 150,000 ounces from 2022 to 2024 after the completion of the construction of the Cote Gold project. The new arrangement will result in total cash prepayment to the company over the course of 2022 of $236 million on 150,000 gold ounces. In respect of the 150,000 ounces that we pre-sold in 2019 under that particular prepayment arrangement, we will receive $30 million in cash payments over the course of 2022, assuming the gold price remains above $1,500 per ounce. In the quarter, we also continue to further manage our Canadian dollar risk exposure, and entered into a target accrual redemption forward or a TARF structure on $120 million Canadian, assuming the USD Canadian exchange rate is below the strike price of $1.30, and that's to risk manage the $1.30 FX on which our assumptions are based. This is described in further detail in RMDNA. Looking forward, Total per ounce cost guidance for 2021 has been increased, mainly to reflect the lower total attributable production guidance and cost pressures experienced in the first half of the year, certain of which are expected to continue in the second half of 2021, along with a stronger Canadian dollar and euro. All unsustaining cost per ounce sold guidance is expected to be impacted by the factors that we've discussed, and also reflects increased planned spending on sustaining capital investments in the second half of 2021 at our operations. Taking a closer look at our cash flows in the second quarter, cash generated from earnings of $76.2 million was partially offset by income tax paid of almost $21 million. Movements in non-cash working capital items and current ore stockpiles resulted in an outflow of $17.6 million, reflecting the use of cash in receivables and other current assets of $6 million, primarily due to new claims for VAT. Outflows related to inventories and non-current ore stockpiles of $23 million, primarily due to higher cost of production at Roosevelt. and an increase in accounts payable and accrued liabilities of almost $12 million, primarily due to the timing of payment of suppliers. Net cash used in investing activities reflected capital expenditures of almost $152 million and capitalized borrowing cost of $9 million, partially offset by cash received from the second and final closing of our royalties portfolio sale of $10 million. Net cash used in financing activities reflects interest paid on our outstanding senior notes, leases, loans, and dividends paid to minority interests. As noted earlier, our cash position was $830 million at the end of the quarter, and net cash was $292.3 million. with total available liquidity to the company of $1.3 billion at June 30. Assuming the continuation of prevailing commodity prices and exchange rates and operations performing in accordance with updated guidance mine plans, we believe we have adequate liquidity to implement near-term operational plans and complete the development of the Cote Gold project. The company may take additional measures to ensure adequate liquidity and flexibility in support of our strategy, taking into consideration market conditions, ongoing operational and financial performance, and project development progress. I will now pass the call back over to Gord to conclude.

Thank you, Daniela. Looking ahead, At ESSICAN, the mill optimization project has already demonstrated improvement in hard rock ore processing capacity, which is expected to continue over the balance of the year and into the future, and to stabilize and to provide additional crushing capacity for hard rock throughput. At Roosevelt, we are implementing a number of initiatives to address the headwinds encountered in the second quarter, and we are progressing on the remaining Saramaca infrastructure. At Westwood, we have restarted mining in the east zone. At the Kodak construction project, we are at 27% overall project completion. At Bodo, we continue to de-risk. And in exploration, we are targeting a maiden resource for Gosselin later this year. Thank you to everyone for joining us today. I will now pass the call back over to the operator for Q&A.

Thank you. We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then one. Sorry, star then two. Our first question is from Josh Wolfson with RBC Capital Markets. Please go ahead.

Good morning. Just sort of focusing on the Cote capital number, I'm curious to understand what specifically changed. Obviously, I know there's impacts from inflation and from COVID, but obviously, the historical guidance had been fixed price contracts in place, a lot of hedging. So I'm just wondering what beyond those items resulted in the overall change in capital?

Thanks, Josh. Well, as we stated in our disclosure, we undertook a project review during the quarter, in parallel, obviously, with advancing the detailed engineering and procurement work. And through this process, we identified additional costs, some of which were most significant and unexpected. The biggest impacts are related to structural mechanical piping, electrical instrumentation, we call that SMPI, and earthworks and concrete costs, which together accounted for roughly 50% of the increase. So there were estimate changes that included increases in both quantities of material and manpower. Additionally to those impacts, which were, as I said, quite significant, And as you commented, we did see some impacts to the inflation, some minor changes in scope and growth projects. We do see impacts of COVID-19 on productivity assessments, as well as some direct COVID costs and impacts of currency exchange. And additionally, we've done a probabilistic reassessment of the remaining work and applied a prudent contingency to those numbers. So there are a number of sources of change. The bigger changes were with the SMPI and the concrete, with some changes on earthworks and others.

Okay. And what's the, I guess, either percentage or dollar amount of the new capital number for this contingency now?

We're not going to release that contingency number at this point in time, but we feel it's prudent and has really looked at us applying a number that allows us to complete the remaining project within the revised estimate.

Okay. And then for the actual construction activities, what's Are the critical path items today to keep this second half 2023 scheduling?

Critical path, I guess, is really for us around completion of the process building. So we're working on foundations, foundation mats for the larger processing equipment, the ball mill and the Verde mills. That's ongoing. We're also... building the foundation materials both cast in place and precast for the structure of the building itself. Our current timeline for the process building enclosure is in Q1 of next year. We're working very aggressively to see if we can improve upon that. Other timeline, you know, other critical path timeline, We are working through the pre-stripping on the pit. We expect to start owner mining in Q3 next year. It's not fully on the critical path because there's certainly some ability to accelerate it if we need to later on. However, it's one of our key activities right now. And we're getting into tailings dam foundation work. Again, tailings specifically is not on the critical path. But it's obviously an activity that we need to get out of the way. Most of the critical path goes through the process building.

Okay. And then for the operating cost targets, for the, I guess, $800 per annum, could you remind us what the forecast unit cost items are, if you happen to have those numbers?

Actually, right now, Josh, we are reworking and re-looking at what our operating cost model is looking like. We aren't ready to release that right now. There's obviously been some short-term inflation issues that we are reviewing. That being said, we are going back in zero basing and really, really looking at what the operating cost impacts are. When we made the announcement in July of last year and through the technical session, we did go into a fair bit of detail as to where we saw the operating cost sitting and updated them from what had been used for the feasibility study. Again, I don't have those numbers for you today, but we are looking to enhance that model and update that model. and we will release it when we have that information available.

Okay, and I apologize for taking up so much airtime here. Last one just on Westwood. Is there any sort of additional insight as to when the company could receive approval for mining in some of the other areas, I guess the west or central area, and then if there's visibility on when a new mine plan comes out or new projections there?

Yeah, so a couple of questions there. With respect to the west zone and the central zone, currently we are expecting to be able to restart those early next year, although they will be staged. We're doing some additional design work and rehabilitation and working through our work in the east zone to understand the implications of all of that. as well as looking at the design with a real focus on safety as we move into those new areas. The team is working very hard on a medium-term mine plan that we plan to have out before the end of the year.

Great. Thanks so much.

Thanks, Josh.

The next question is from Mike Parkin with National Bank. Please go ahead.

Thanks, guys, for taking my questions. Following up on some of the stuff that Josh mentioned, I know you're reviewing the OPEX. The June 2020 on Cote had ASIC at $771. In terms of what you've transferred over to cost, do you have a sense of what that will do on a per ounce basis with this update in terms of CapEx with some flowing over to OpEx?

Thanks, Mike. Actually, as we look at the numbers, there were some transfers to the operating period of some of the capital, mostly some additional mine tons that have been pushed into the operating period and some equipment to go with it. On the flip side, there were also some changes coming from the operating cost side back into the capital period. I think, you know, we mentioned in the disclosure that the part of the camp cost had been assumed to be a third party lease, which would have been born by the operating period. And now that is being taken in the capital period. On a minor basis, there's also a similar sort of assumption or change with respect to the assay lab, smaller dollar number. Overall, the balance between those two changes is close to negligible. With respect to the transfers into the operating period, we're not anticipating a big impact on the all-in sustaining costs from that transfer. We are reviewing, along with our operating costs, we're obviously reviewing our sustaining capital at the same time. And when we're ready to come out with operating costs, we'll be able to speak to sustaining capital at the same time. That includes capitalized stripping. Obviously, any impacts we see on operating costs will bear directly on the cost of capitalized stripping. And as well, reviewing the construction sequence for the tailings dam and working to understand what opportunities or changes might come out of that. So it's sort of a complete package, and we're working through that right now, Mike.

All right. Are you seeing any – like I recognize it's pretty early days, but are you seeing any signs that your estimated costs on either tailings dam development or early – strip work on the pit are showing signs that your life and mine estimates are too low? Or is that too early to say?

It's pretty early to say. You know, there are both gives and takes we're seeing. You know, we're really focused on assessing what the impact of the inflationary pressures are on some of the input costs. At the same time, as we're looking at our productivity assumptions for operating and other measures of that nature, there are actually some opportunities and some improvements we expect to see out of that. So there's a few moving parts. I don't want to speculate as to what the net impact will be, but it is something that is being assessed for sure.

Okay. And then with the comment around the project review and identifying additional costs, was any of that you realized you need more cement or concrete work or steel work?

Yes, effectively yes. As we reassess the volumes and we We did the re-estimate. We saw there were some significant changes from the original estimate on those volumes as being applied to the cost estimate. So, yes, we have seen some increase in concrete and steel versus what was used in the original estimate. And that, in fact, is driving a lot of the overall increase, significant increase.

And what drove that in terms of concrete volumes? Is that as you got down into bedrock for foundation work, you just realized you had to go a bit deeper? Or is it a structural stability change that additional foundational materials required?

There's some of that, not a significant amount of that. There is also some scope change, if you will, within the building. We wanted to put additional reinforcement in and around the primary, sorry, the crusher aisle and some of the structures around some of the larger pieces of equipment. So there was a little bit of scope change there. But a lot of it is just going back to the original estimate and how that estimate was done versus as we got into the details with the more advanced engineering and going through it. It's not scope change as much as it is that the estimate needed to be redone and identified that there was certainly additional materials and labor required to install it.

Okay. And then just the last question for me, your partner Sumitomo is reviewing these changes. What's the path there? Is there anything where they can come back and challenge the scope changes or are their hands kind of tied and they have to kind of come to the table with their share of the capital?

Look, our JOV agreement with Sumitomo is, I think I would describe it as relatively standard with respect to this. Like us, they are very keen on the reconciliation exercise we're going through and understanding it. We have majority vote as the senior partner on the budget going forward for construction. We do expect them to challenge the assumptions just as we expect our own owners team on an ongoing basis to challenge the assumptions and look for opportunities for savings. That being said, as you'd well imagine with a project moving forward, the senior partner, the majority partner, basically has the ability to push forward the project. Okay.

Thanks, guys. That's it for me.

And next question is from Anita Soni with CIBC World Markets. Please go ahead.

Good morning, everyone. Thanks for taking my call. So, Gord, can I just ask, in terms of your near-term capital plans, are there any changes to the the outlook for the spending at BOTO at this stage. Would you consider deferring that or plan to go ahead with that kind of spend? And could you remind us how much that is in 2022?

So I believe the guidance, and I will confirm it with you afterwards, Anita, but I believe the guidance for 2021 for BOTO is $55 million of new spend. There was some overlap from the prior year. That being said, we are obviously, given the revised guidance and given the cost increase at Cote, we are looking at all of our expenditures around the company and Bodo among them. We've always reiterated that the spend at Bodo is on behalf of de-risking that project and providing the opportunity to execute it at the appropriate time when we want it. So understanding that and understanding the scheduling, our focus is on COTE, on executing and completing that project. So we will be looking at BOTO amongst other capital requirements and we want to make sure that we're solidly founded in order to complete COTE as per plan.

Sorry, I just had to put myself on mute there for a sec. The second question, I guess, is with regards to operating costs. Josh asked this a little bit, but is there any – I think I ask this every time Kote comes up, but how confident are you in that mining cost per ton number and the efficacy of these HPGRs when they come on stream? That's a relatively low mining cost number relative to some of the other bigger operations in Canada and what they've been able to achieve. So I just wanted to get your latest thinking on where that could go. And then secondly, how that would impact your assumptions on reserves. Can you remind me, are we doing the base case scenario or the extended case scenario in your current life of mine plan? And I think the extended case has 0.93 gram per ton material versus 0.98 as the average.

Yeah, the extended case scenario, It has some additional low-grade at the very end, so it may have that. We are using extended case in our model. The impact is really just, I think, an extra year and a half of low-grade ore handling at the end of the mine life. With respect to the cost estimate, as I said, we're reviewing it and have been doing so on an ongoing basis. From a productivity standpoint, we think we're comfortable and The numbers we're using are conservative, both on the mining and the milling costs. With respect to the inputs, the consumables and so forth, we do recognize that there has been some relatively sharp inflation in some of the input, the consumables numbers, and we need to assess what the impact on costs will be for that. With respect to HPGR and milling, Um, you know, again, we, we are comfortable there. There are several HPGR, um, installations around the world. Uh, so there's a fairly good database of understanding, um, what the, uh, what the impacts of that are and, and quite typically, um, HPGR versus SAG from a cost per ton basis, especially for brittle orders, like we have at Cote, um, is, is, is significantly superior from a, from an operating cost standpoint. both in terms of energy consumption, but also consumables like steel consumption. And that was part of our rationale for moving to HPGR for this project versus sag milling. The ore sort of told us where to go with it.

Okay. And then just in terms of the tailings facility, could you remind me what kind it is? I'm assuming it was central line. Or was it modified centerline in your current thinking on the design?

Yeah, it's modified centerline. I mean, I believe the first couple of lifts are downstream. Once the pond is up and established, it moves to centerline at the top. But the first couple of lifts are typical downstream construction.

Okay, and last, probably a little bit ignored with this release, but could you just remind us – or kind of give us some indication of the amount, how you see Roosevelt unfolding into 2022, given the issues that you've had in the first half of the year with the camp and the labor and productivity rate. So how should we think about carryover impacts into 2022 for Saramaca and Roosevelt?

So we're currently assessing what 2022 is going to look like. I don't want to speculate on what those final numbers will be. And at the end, some of it will be determined by the success of our remediation plans that we're putting in place or activities that we're putting in place right now at Roosevelt. So as we build those back and as we get a little further on, We will be having a very good look at what 2023 and the remainder of the life of mine for Roosevelt looks like and understanding what that deposit can give us. We have a new block model as well that we are focused on and incorporating it. We do want to make sure that we have appropriate conservative estimates as we move forward with Roosevelt. That's a bit of a stay tuned, and as we move forward here, we will be providing additional color on what Roosevelt looks like.

Thank you for answering all my questions.

Thanks, Anita.

The next question is from Tanya Jakuskanik with Scotiabank. Please go ahead.

Good morning, everyone, and thank you for taking my call. Maybe just starting on just some of the smaller items. Just on BOTO, you said you're looking at all options to enhance value, optimize value there. Is selling the asset one of your options?

Look, Tanya, we really do like BOTO and what it provides for us as well as the regional opportunities there. That being said, it's part of our role as stewards of this company to assess all of our assets at any given point in time. And the current situation really demands that we have a good hard look at each and every asset in the portfolio and understand what the appropriate path forward is for us to achieve sort of the longer term strategy. I'm going to leave it at that, but we are looking at what's possible with Bodo just like we're looking at what's possible with Westwood and other assets.

Okay. Maybe then just moving on, I know we've asked quite a number of questions on Cote and we'll wait for as you get through your costs, reviewing your costs, but maybe what you can share with us is right now inflation-wise, can you review with us what you are seeing inflationary pressures in your costs in jurisdictions you're operating? So Canada, Africa, and South America, like labor consumables, et cetera.

I don't have all of the percentages for you, Tanya, but we are seeing... Increased fuel prices, certainly. Some of that is offset by our hedging program that we have run for several years in managing our fuel costs, primarily at the open pit operations, but also managing the input fuel costs for the Cote construction project. So we are seeing some pressures there. We are seeing some general supply chain pressures on costs, I think, in a few areas, both on the expediting and transport. Obviously, the shipping industry out there in the world is a little bit topsy-turvy, so we have seen increases in that. Consumables like steel, as everybody's well aware, The price of steel is up right now. We do have fixed-term contracts on grinding media and liners and that sort of thing, but they're not longer term. So as we look at it, we would expect to see some pressures there. Major inputs like explosives as well have been affected by the increase in fuel prices, but also by the you know, by the transportation cost increases. On the positive side, we were able to resolve our collective bargaining agreement at Roosevelt. And so those, you know, those numbers are baked into our current estimates as we move forward. Likewise, with respect to ESICAN, albeit it was a much shorter period of time required to resolve it, We were also able to sign off on the collective bargaining agreement at SACAN during the year for a three-year term. So those things are going to serve us well from that side. Productivity, contractor costs, there are inflationary pressures out there right now. And unlike everything, and I imagine like a lot of our competitors, evaluating whether they're permanent inflationary impacts or temporal inflationary impacts, kind of like we saw with lumber here in Canada, is, you know, it's a challenging analysis to say, are these numbers up and are they going to stick? Or is it something that's a bit ephemeral and will go away in the near term?

Maybe just the labor costs in Canada, then, Gord. What are you seeing there?

Yeah, no, labor costs in Canada. I mean, we were looking at labor cost inflationary statistics out of the government here as part of the work that we're doing right now in analyzing Cote. And there has been... inflation of labor costs above and beyond what is the general inflation uh in canada i i believe um you know the number i saw was some i believe in the order of of five and a half six percent something like that uh over the past year in in labor costs uh industrial labor costs um i i i I don't have the exact figure at the tip of my tongue, but I'm certainly happy to report that back to you. Westwood is under an existing CBA, so we're sort of managed there, although there is a degree of indexing to CPI. At Cote, we don't have any kind of a specific labor agreement for the operation. We do have some agreements in place with respect to the to the construction programs. So, you know, it's one that's out there, and as we move to the operating period, we're going to need to understand it. I think, you know, one of the things that we did at Cote, specifically understanding the Canadian labour market, was the move to automated haulage and automated drilling, really to help us mitigate somewhat our exposure to Canadian labour rates.

Okay. And then maybe if I could just ask on Roosevelt, because there's a lot of things happening there, you know, from the pit to the mill. You have change in management at the mine site. You're still dealing with illegal miners. Just a bit concerned about everything going there. So maybe if you could just review from the pit to the mill to all the management changing and the illegal miners, just what has happened?

Well, In some ways, a bit of a perfect storm, if you will, Tanya, at Roosevelt. As we reported, I'll start with the weather because it was one of the biggest smacks in the head. So to the middle of the year, Roosevelt is experiencing a – it's beyond a one-in-20-year event, probably closer to – a one-in-100-year event in Suriname in the month of May, nearly three-quarters of a meter of rainfall was experienced at Roosevelt. So that had a number of impacts. And, you know, to delineate them in the Roosevelt pits, it obviously impacted our ability to dewater the pits and forced mining at Roosevelt more into the expansion phases, which are lower grade and restricts our access into the bottom of the pit. Overall rain impacts obviously affected just our ability to mine generally in the pushbacks at Roosevelt as well because the pushbacks tend to be in softer rock and access is difficult. At Saramaca, it had some very strong effects, the rainfall during the quarter. Again, mostly in-pit. You know, the main haul road between Saramaca and Roosevelt is built out of rock and is well-drained and generally performed very, very well despite the high rainfall. But the access areas within the pit itself were very, very challenging for the quarter. Saramaca is all saprolite. There is no hard rock there. to help with road bedding. The team has been working on a number of technical solutions to improve the in-pit access, but it was impacted. And as a result, part of what was done at Saramaca during the quarter was a move to a small satellite lower-grade pit, which was easier to access, while they worked on reestablishing the access into the pit. We are backhauling a lot of rock from Roosevelt into Saramaca. And as we move forward, we really do see we'll get that footing in place. Another important impact, given the nature of the process at Saramaca, there are typically sort of two or three re-handles of the ore before it hits the mill. And that was the original plan. The additional rain coupled with the high clay nature of the ore that we're mining right now, meant that that ore was becoming saturated and extremely sticky and had follow-on effects at the mill. So that was the primary mill effect. We are working on the carbon management system at the mill. The one we have in place has been there for a while and needs some work. So we do have a program in place to really bolster the capacity of the mill to manage sticky rock as well as hard rock and to treat the carbon effectively. So we're expecting that capital project to be completed by the end of the year. It's not a big capital project, but we are very much looking forward to the expected recovery impacts we'll see out of it. I guess the other key impact, obviously, for the quarter was COVID. And COVID impacted us in a lot of different ways. COVID directly, you know, there was a big wave in Suriname towards the second half of the second quarter. And that led to a number of countrywide shutdowns. It led to some unrest and some civil unrest in and around the country, some blockades. which did challenge us. So at a macro level, we had those COVID impacts locally within the mine. We also had COVID impacts. And just like everyone reads the news around how COVID impacts areas, you get clusters within a mine site just as you get clusters within the general population. And for Roosevelt, some of those clusters occurred in the maintenance departments. So it's not like if you're down 10%, every department is down 10%. You can be down 10% and have some departments much, much more drastically affected by COVID, not only from direct infection, but also contact tracing and contact isolation. And for Roosevelt, the maintenance departments, both in the mine and mill, were impacted. And that's driven a backlog in maintenance required in both of those areas. And that's been incorporated into the plan going forward. As you pointed out, we have sent in some reinforcements. We've made a few management changes and are significantly reinforcing the maintenance team so that we can pick up on that backlog both in the mail and with the mining group. And the last one, and we are working through it, we did have a protracted collective bargaining negotiation with the union at Roosevelt, and it was finally resolved in May. But prior to that, we did see some impacts on productivity. As we look at the remainder of the year, And throughout the organization, we are implementing a cost savings and productivity improvement exercise called I Am All In. It started at ESECAN. We're already starting to see some nice opportunities there going forward, and very shortly we'll be implementing that at Roosevelt as well. So, you know, the confluence of all of these factors really put us behind the eight ball. Not only impacted the production, obviously, very severely for Q2, but also impacted our sequencing and our ability to react going forward and hence the reduction in the forecast for the remainder of the year. I'm happy with the team we have in place. and we are working very aggressively to get Roosevelt back on its feet as quickly as possible.

And maybe just on the illegal miners and what we're doing there to just keep them away from the pips.

Yeah, with respect to illegal miners, we've been working very closely with the government. You know, we have signed some agreements with the government with respect to security. We overall... versus prior years are seeing a steady decrease in the number of illegal minors that we have at site. That being said, they are challenging. We are implementing some additional security measures to allow us to manage that situation better. We're also obviously working very hard with the communities on our community development programs and other opportunities to provide alternatives for people who are being impacted by devaluation and inflation in country and are obviously looking to find a way to generate some income for themselves. So it's not only the immediate reactionary work we're doing to manage that issue, but it's also going back to the root cause behind that issue and working closely with the government and with our communities to find ways to reduce it to a manageable level in the long term. They may be illegal, but they're not necessarily bad miners. They know where high-grade material is, and they're pretty creative in their tactics. we need to find a way to remove the incentive.

Okay. Well, good luck at Roosevelt.

Thank you very much, Donya.

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

Thank you very much, Gaylene. And thanks to everyone for joining us this morning and for your continued engagement with I Am Gold. We look forward to having you join us again for our third quarter conference call in November. Goodbye.

This concludes today's conference call. Thank you for participating and have a pleasant day.