Iamgold Corporation Ordinary Shares

Thank you for standing by. This is the conference operator. Welcome to the IMGOAL third quarter 2022 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'll 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 then zero. I would now like to turn the conference over to Graham Jennings, VP Investor Relations and Corporate Communications for IAMGOLD. Please go ahead, Mr. Jennings.

Thank you, operator, and welcome everyone to the IAMGOLD Third Quarter 2022 Operating and Financial Results Conference Call. Today, joining me on the call are Marie Selanger, Chair of the Board and Interim President and CEO, Martin D'Souza, Interim Chief Financial Officer, Bruno Lemelin, Senior Vice President, Operations and Projects, Craig McDougall, Executive Vice President, Growth, and Tim Bradburn, Senior Vice President, General Counsel, and Corporate Secretary. Our remarks on this call will include forward-looking statements. Please refer to the cautionary statement included in the presentation under the heading Cautionary Statement Regarding Forward-Looking Information and be advised that the same cautionary language applies to our remarks during the call. Non-GAAP measures will also be referenced on the call, and we direct you to review the cautionary statement included in the presentation and the reconciliations of these measures included in our most recent MD&A, each under the heading Non-GAAP Financial Measures. With respect to the technical information to be discussed, please refer to the information in the presentation under the heading Qualified Person and Technical Information. The slides referenced on this call can be viewed on our website. I will now turn the call over to our Chair and Interim President and CEO, Maryse Belanger.

Thank you, Graham. Good morning, everyone, and thank you for joining us today. Iron Gold reported another strong quarter building on operational and productivity initiatives put in place earlier in the year. Based on the exceptional performance of our operating teams, we forecast that 2022 production will exceed the top end of our guidance. Consequently, we increase our production guidance for the year to between 650 and 705,000 ounces, up from 570 to 640,000 ounces as previously guided. On behalf of the Board and the Executive Team, we applaud the tireless efforts of the I Am Gold teams for their continued commitment to operating safely, responsibly, and consistently. The Cote Gold project saw a significant ramp-up in activity and is advancing well. It is following the schedule and cost rebase line provided to the market in the summer. Currently, Cote is over 64% complete, and is nearing peak manpower capacity with approximately 1,500 workers at site. The site recently celebrated 6.9 million hours without a long-term injury, which is a testament to the safety commitment, skills, and dedication of the Cote d'Ivoire team. the company took a significant step in addressing its funding requirements for the Cote Gold project with the announcement of the sale of our interest in the Roosevelt Mine Complex to Zijin Mining for $360 million in cash and $40 million in assumed liabilities. The transaction also showed the strong support from our lenders as they provided consent to release Rosabelle from their security package. The remaining funding alternatives are well advanced, and we expect to be able to provide further updates in the fourth quarter. I am 100% confident in our ability to address the near-term challenges in order to deliver COTA on its updated schedule for initial production early in 2024. Our goal remains the same, to be a leading high margin gold producer, and we will better position IAM Gold as a more resilient and agile company. Now starting with health and safety. Our performance continues to improve and tracks below our annual targets with a days away restricted and transferred with a rate of 0.27 and total recordable injury rate of 0.72. Ensuring all of our employees go home safe after every shift is fundamental and core to our business. Every gold ounce produced has to be done safely. In the third quarter, Iron Gold reported 184,000 ounces of attributable production, achieving the highest quarter of production in over two and a half years. This performance was driven by record production at Etiketan, steady performance from Roosevelt, and early signs of operating improvements at Westwood. The strong production results in sales volumes translated to cash costs of $1,126 per ounce sold and all-in sustaining costs of $1,559 per ounce sold. We have seen continued cost pressure from inflation, though these pressures stabilized during the third quarter of 2022 relative to the first half of the year. Further, the impacts of these cuts pressures on mining and processing cuts were partially mitigated through the production performance of our operations. Based on the strong operating performance this year, the company expects that annual production will exceed the top end of the previous guidance range of 570 to 640,000 ounces, and is revising its guidance upward to between 650,000 and 705,000 ounces. The primary driver of this increase is at Essakian, where we have increased guidance to 410 to 430,000 ounces, up from 360 to 385 ounces previously. We also adjusted guidance on cost, allowing sustaining cost forecast to be below original expectations, coming in between $1,600 to $1,650 per ounce sold, down from the original $1,650 to $1,690 per ounce. As noted on the prior slide, we have seen continued cost pressures from external market forces, which have shown story to stabilize and have been partially mitigated through our operating performance. Further, we continue to see benefits from our oil and foreign exchange hedges. For example, this year, we have a 80% hedge ratio on WTI and a 70% ratio on Brent contracts at price points between $38 and $65 per barrel. These hedges further insulated us from rising costs in the first nine months of the year. I will now turn it over to Martin to walk us through financial reviews.

Thank you, Maurice, and good morning. The following are some key highlights of our third quarter financial results. Gold revenues in the third quarter totaled $343 million for a year-to-date total of just over $1 billion. The average realized sales price for gold for the quarter was $1,690 per ounce, and that includes the impact of delivering 37,500 ounces at $1,500 per ounce under our 2019 prepay arrangement. We have 37,500 ounces remaining to be delivered in the by arrangement. Adjusted EBITDA came in at $103 million for the quarter and excludes the $74 million after-tax non-cash impairment charge recognized to align the carrying value of the Roosevelt cash generating unit with the sales price of the asset, as well as the impact of unrealized non-hedge derivatives and foreign exchange losses. in Canadian dollar. Year-to-date adjusted EBITDA was $350.6 million. The company reported a third quarter net loss of $129.1 million and an adjusted net loss of $13.7 million or $0.03 per share, bringing the adjusted earnings Operating cash flow changes in working capital was $108.8 million for the quarter and $336.6 million for the year to date, and mine site free cash flow increased to $59.2 million in the quarter and totals $189.3 million for the year to date. In terms of our financial position, we ended the quarter with approximately going down 380 million year-to-date, and accounting months of future expenditures, and unless it can, the company uses dividends and intercompany loans to repatriate funds from its operations, and the timing of dividends is usually in the second and third quarter of every year. As a result, we typically hold We continue to expect that iGold will require additional liquidity in 2023, in addition to the proceeds expected to be received from the sale of Roosevelt to complete the construction of the project. The company is actively pursuing various alternatives to increase its liquidity in capital resources, including the options listed here. The funding alternatives are advancing well, and we expect in the Van Buren region of West Africa, is active and ongoing, and we will provide further updates in due course.

Thank you, Martin. Now on operations. So we'll talk first about ESACAN. ESACAN achieved its highest quarter of production ever, reporting attributable gold production of 115,000 ounces. The mine continues to benefit from the higher-grade mineralization in the lower portion of the Phase IV PEP with a higher amount of coarse gold. Mining activity of 12.6 million tons increased from the prior quarter as mining operation resumed at full capacity in September thanks to an easing of supply chain challenges in-country and abroad. Milk throughput increased in the third quarter to 3 million tons, benefiting from improved grind size and a higher plant availability at 93%. Head grades were reported at 1.5 grams per ton and recoveries at 90%, remaining at the same level as seen in the second quarter. As announced subsequent to quarter end, there were political developments in Burkina Faso with a change of leadership within the military-led government. All IM Gold personnel were safe and the SACAN operation continues to operate as per the business plan. The company continues to take proactive measures to ensure the safety and security of our in-country personnel and we continue to adjust protocols and activity levels at site according to the security situation. As we look to the end of the year, we have increased our production guidance for ESACAN to between 410 and 430,000 ounces, up from 360 to 385,000 ounces previously. ESACAN is well positioned to have its best production year ever, and that's the best year on record. We are continuing to review the positive reconciliation between head grades and the updated block model, while we are also executing on targeted operational improvements. Recent initiatives focus on increasing milk throughput and recovery with improved blast fragmentation and enhanced gravity circuit recoveries through the planned addition of a double-deck screen. Now turning to Roosevelt. Operationally, the turnaround at Roosevelt has continued with Q3 attributable production of 50,000 ounces. This is the fifth progressive quarter of higher production as a result of the infrastructure improvements initiated at the end of last year, and the new Life of Mine plan announced earlier this year. It outlined a roadmap to return Roosevelt to being a 300,000 ounces plus producer by 2025. Subsequent to quarter end on October 18, the company announced that it had entered into a definitive agreement with Zijin Mining Group to sell its interest in the Roosevelt mine for total consideration of $401 million with cash consideration of $360 million and the assumption of $41 million of liabilities related to equipment leases. When we initiated our strategic review process for Roosevelt, our goal was to find a new owner committed to the future of the Roosevelt complex and who would make the necessary investments in the operation and place it on the path for long-term success. Roosevelt has been an important contributor to Ion Gold, and we are pleased that a company with the capabilities and reputation of the Genie, a leading global mining company, will be taking over this operation for the benefit of all stakeholders. The transaction is expected to close in the first quarter of 2023, or earlier, subject to some regulatory approvals. With the exceptional diligence and efforts of our Roosevelt employees and management, Roosevelt is expected to produce 175,000 to 200,000 ounces, up from our prior guidance of 155,000 to 180,000 ounces. Cost pressures remain in Syrda. The country is heavily exposed to the U.S. dollar, and a net importer of goods, though oil prices continue to be partially mitigated by our existing hedge program. On Westwood, gold production was 19,000 ounces in the quarter as a result of higher volumes of underground oil at a higher grade and higher tonnages from the Grand Duke satellite open pit. Laboral development in the third quarter was 951 meters, lagging from the previous quarter due to continued labor constraints and lower mechanical availability of underground equipment. However, underground rehabilitation progressed at the planned rate despite challenging ground conditions and impacts from supply chain challenges. Underground mining activity in the third quarter focused on accessing additional stope sequences in the eastern zones to supplement the recently opened higher-grade western and central zones in order to secure multiple ore faces, which will allow for simultaneous exploitation underpinning the 2023 production plan. As a result of the improvement seen in Q3 and expectations for Q4, we raised the bottom end of our production guidance to 65,000 to 75,000 ounces, up from 55,000 to 75,000 ounces previously. Now turning to coated gold, the project has made significant progress over the last few months. Progress rates are currently at peak levels, in line with the updated project plan. The site is currently near capacity with approximately 1,500 workers. I was on that site a couple weeks ago, and I have to commend the project management team for their diligence and focus to keep everyone on task. As of September 30th, the company's estimated attributable remaining project spend to complete construction and bring Cote Gold into production is $1 to $1.1 billion net of leases and working capital. It is worth noting, considering current markets, then this estimate also assumes a Canadian to U.S. exchange rate of 1.25 to 1. So any further strength in the U.S. dollar provides a benefit to Cody Gold's construction costs as our contracts and expenses are Canadian dollar denominated. The company is putting in additional Canadian dollar foreign exchange hedges in addition to its existing hedges, to increase exposure to current rates over the construction period. The project at the end of September was 64.2% complete, with monthly project advancement estimated to be approximately 3 to 4% per month during this big construction period. Detailed engineering is now 100% complete, so all focus is on execution and mechanical installation. Key progress milestones in the third quarter include ramp-up of structural, mechanical, and piping activities in the processing plant, with the ball mill now mounted on the reception cradle and the pump box set in place. Significant progress on the tailings management facility, water realignment channels, polishing pan dam, and other water management infrastructure dams. The handover and assembly of the autonomous control room. Completion of the primary crusher concrete to the 409 elevation, with just one more vertical lift remaining, and concrete foundations for the HPGR secondary crusher screening building, and fine orbit ended over to SMPEI contractors. So Kodi Gold continues to track well to the updated project schedule towards initial production in early 2024. Iron Gold and our partner Sumitomo are aligned and focused on building Kodi safely Anton, and to the current scope and budget. At this time, the critical path for the project continues to be through the processing plant, and all teams are focused on ensuring outdoor work has been executed to facilitate mechanical installation within the plant once the winter season hits. The company cautions that potential further disruptions including, without limitation, caused by COVID-19, the Ukraine war, weather, potential labor disruption, and the tight labor market could continue to impact the timing of activity, availability of workforce productivity and supply chain and logistics, and Consequently, could further impact the timing of actual commercial production and project cost. Now, right next to Cote, Gosselin. At the end of last year, we announced an initial resource for the Gosselin deposit, which is located immediately adjacent to Cote. Gosselin contains 3.4 million ounces of measured and indicated resources, and an additional 1.7 million ounces of inferred resources. Notably, Gatlin has only been drilled to half the depth of Cote, and is open among strike and adapt. This year, we conducted a 16,000-meter diamond drill campaign, targeting further delineation of the modeled resource, an extension of the mineralization zone outside the resource boundaries. Results of this program will be reported once complete. It is worth reminding everyone that the Cote d'Ivoire Life of Mine Plan, as defined today, is based on mineral reserves of 7.2 million ounces contained within the coating department. Taken together, Cote and Gosselin have a total of 13.5 million ounces in measured and indicated resource. We firmly believe that Cote Gold is not just a project, but the start of a new mining district. And there is significant upside to be uncovered as there has been minimal historical exploration targeting these Cote-Goslin-style intrusion-hosted deposits within our 596-square-kilometer land package. With that update, I would like to pass the call back 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 1 on your telephone keypad. You'll 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 2. Our first question comes from Tania Juskunik with Scotiabank. Please go ahead.

Great. Good morning, and thank you for taking my questions. Marise, Martin, thank you for the insights. Marise, can I ask a couple of things? I have three questions. So I'm going to start, number one, on inflationary pressures. I want to get an understanding that, you know, are you starting to see any easing of inflation in your costs? in either labor and or diesel and or consumable. Just are you starting to see that ease a little bit? That's my first question.

Morning, Tanya. If you don't mind, I'll answer the question. I've seen shop increases like appears in the first half of the year with inflation for oil, or grinding media, in Q3 we started seeing those costs plateau. So we have not seen further increases, but the costs remain elevated at those levels that we saw in Q2.

Okay. All right. And where would you – so you're seeing it mainly in diesel and other consumables related to fuel, petrochemicals and other?

Yes. requires energy to produce.

Okay. Nothing in labor? No. Okay. My second question, again, is another technical question, which has to do with the reserves. I'm just interested to understand what exactly is happening at ESICAN that, you know, you're getting this positive response. block model reconciliation on the grade. Like, what do you think is happening with this complex geology? And my second part would be, you know, as you look at your reserves in year-end 2022, are you thinking about adjusting the gold price upward to reflect these additional or higher costs? I don't know, Martin, you or Marie is on that one.

Okay. I'll take the question in a second. We've had a few consecutive months of positive reconciliation at ESACAN. It is linked to really cause gold in the phase four PET. And that cause gold, in fact, seems to report directly to gravity. So we have great benefits from that. And we are in the process of validating those blocks, our block model. And further, we are now drilling and trying to better understanding, you know, the type of mineralization and what's going on. So I would suspect next quarter we would be able to provide more visibility to what we see ESACAN adapts. And talking about cost and all of the technical aspects, we have not seen any changes to our cost grade at ESACAN.

What about the company itself for 2022 year-end?

Sorry, Nania, would you please repeat?

I guess it was just you're only left with really Westwood, so it's an underground operation. That's fine. I just answered my own question there. So my last question, if I could, was just on the additional liquidity that you're looking to put in place by year-end. You mentioned that the BOTO and expiration is well-advanced. I thought my understanding was that you wanted to get all of that drilling done and then sort of get additional, you know, like a resource and or other, you know, before that would be sold. Does it appear that you can get all of this done before your end to give us an update in Q4?

Sonia, so our discussions with the various bodies is commercially sensitive, but what I think we can say assets, we continue to make sure that we get the value for the assets as part of the sales process and that it's not a buyer's sale. So we are looking closely at the process and the underlying value that that part is offering for it.

Okay. So you feel you could get this done in Q4? Yes.

Okay.

And then I noticed in your language in your release that you removed joint ventures off as one of your options. The joint venture partnerships, we had mentioned these on previous calls. So we're still looking to keep 100% of ESSECAN and Westwood. Is that a fair statement?

Yes, it is, Dania.

Okay. And then my last question, just on this funding gap, is just, you know, once we sell or get value for BOTO and other exploration, would you put your packing order as options on royalties and streams as a preferred option to debt and or equity? I'm just trying to understand the ranking of the remaining funding.

So we are looking at the options with the various solutions in the capital structure and is a trade-off between the cost of capital and the permanency of solutions. So we have not decided a picking order. We are looking through the various options with that competitive tension between the cost of capital and the permanency of the solutions.

Okay, I guess I'll stay tuned. Do you think you will have the full funding, so including your other options, in addition to the sale of Boto and other by year-end? Okay.

Yes, we will be able to communicate this to the market before year end.

Okay, that's good. Great. Congratulations on the progress.

Thank you, Dania.

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

Good morning, everyone. Thanks for taking my questions. First question, you mentioned the amount of cash that is held between Essecaine and Cote. Could you give us a breakout of that? I think it's critical to my thinking in terms of how much is actually put ahead for the Cote construction already.

So, Anita, why does the Cote... all cash calls work is we have to provide two months of funding, but the cash calls is on the beginning of the month. So at the end of the month, we have approximately one month of expenditures remaining and then we need to fund on the next day. So we see it as two months of cash. I would say that... in the MD&A.

Okay, so 50-50 between Essocane, and how long does it take you to upstream cash from Essocane to go into Tecote?

It doesn't take us long at all. However, we only can do it in a certain window, and that window is normally Q2 and Q3. So that's why the cash balance builds up in Q4 and Q1, and then we start repaying cash again in that window.

All right. And then as I look to just a minor point, but going into Q4, the guidance for the year at Efficane would imply a week or quarter, so somewhere around the range, I think it was about 85,000 ounces or so. And you did mention that you'd be focusing on stripping to prepare yourself for the grade profile in 2023 and 2024. So, Is that accurate, my assumption, that you'd be focused more on stripping and less on delivering ore to the mill at FK and Q4?

Anita, thanks for the question. First of all, we do expect grades to normalize closer to reserve grades in the fourth quarter. We also... expect the mill to be processing 100% hard rock as opposed to a combination of samarite and hard rock. And also, we have noted the security situation in the country. That's putting a bit of pressure on our people. The situation is managed. But at this point, I would rather be a little conservative when it comes to SACAT.

And then just moving backwards to the funding gap and the bamboo package of assets, I believe you carry it on the balance sheet right now for about $258 million. Is that an accurate assumption of the value that you're trying to achieve when you sell that, or is there something else that we should be thinking about?

Anita, thanks for the question. It is very commercially that is not our carrying value of these assets on our balance sheet. For Boto, it's closer to $80 million.

Oh, no, I meant the package of assets. All of them together were $258, I thought. But Boto itself is $80 million, you said?

So the other assets is exploration assets, and we don't – we expense our exploration expenditures. We don't have significant value on the balance sheet. but the value of the carrying, the accounting carrying value is not representative of the value of the package in our view.

Okay. All right, okay, thank you very much.

You're welcome.

Once again, if you have a question, please press star then one. The next question is from Lawson Winder with Bank of America. Please go ahead.

Hi, good morning, and thank you for the update On the African asset sales, I just wanted to sort of drill down a little bit more on your previous comment. So, when you say you expect to have some sort of announcement with regard to the strategic alternatives for West Africa by the end of Q4, do you mean for OTO plus the two smaller exploration stage assets?

Yes. Yes, it would be for the package. It would be for the three properties, yes.

And is the idea that they would all be sold together as a package or, you know, could there be multiple buyers for each of those assets within that package?

They could be sold separately, two of them, three of them together. It really depends on where we see the value and where we can create some value for the company. So no definitive answer yet on this, and it's still a work in progress.

Okay, got it. That's great. And then just on Roosevelt, with the higher guidance, I mean, I think it's great that you're getting the benefit of that improved guidance. What I want to understand, will there be any sort of adjustments upon closing as a result of that higher guidance, or why I'm going to be able to fully benefit from that?

Good morning, Lawson. So for Roosevelt, the purchase price is $360 million. would not be adjusted based on the agreement, but there is certain working capital adjustments that will be made based on the standard working capital, and the company also receives the cash on the balance at the time of the sale. So if there is overperformance, it could result in an increase in proceeds. In our negotiations, we have shared these results forecast with the purchaser as well. So it's in line with what they are seeing as well. Okay, excellent.

And then just going to ethic and with the CAP Act now running at $175 million of sustaining CAP Act. As you look into 2023, I mean, and even beyond, is that kind of the correct level for maintaining that operation?

We are currently working on the budget Lawson right now. I think it's too early to tell. There will be some stripping to be done in 2023 and 2024 for sure. But again, to give you the best level of the capital for the coming years, we are actually finalizing our budgets.

Okay, well, stay tuned for that. And then just finally, I'm not sure if, Marie, you can provide any color on the search for a permanent CEO. Is there sort of any sense of timing at this point?

Well, the CEO search is active and ongoing. And the board has been conducting an extensive process because we really want to find the right candidates for the job. And I would say in terms of timing, we expect to be able to make an announcement before the end of the year.

Okay. Excellent. Thank you very much for answering my questions.

Thank you.

We have a follow-up question from Anita Stoney with CIBC World Markets. Please go ahead.

Hi, can I just get some, I guess, some color? I'm sure I could probably find it in the technical report if I looked, but the working capital requirements that you would have for Cote sort of leading up into the, I guess, leading up into the commercial production declaration early 2024. Could you give me a ballpark number of what you're looking at there?

The technical reports, does have information in there. I think what is important because it's an unincorporated joint venture we will continue to have to fund two months of expenditures going forward and then each partner gets the gold credits back. So the working capital is included in the cost assumptions for the construction period but also in the technical report once it's in operation.

Okay, thank you.

So from an adult perspective, we need to continue to fund the cash calls for the ongoing cash outflows of the project.

All right, thank you. Our next question is from Sean Wandrak with Deutsche Bank. Please go ahead.

Hi, good morning. Thanks for taking my questions. Just the first question. I believe you provide a liquidity bridge on slide nine. Your cash balance went up about $130 million quarter over quarter. Can you just describe what exactly drove that? Sorry if I missed it.

We drew down on our credit facility at the end of September, and that was We also drew down a bit more and for a bit longer period to take advantage of savings in an increasing interest rate environment. So we drew down more on the facility than we needed in the short term.

Okay, that makes sense. Thank you. And then as I take a look at your income statement, it does appear that exploration and SG&A expense both came down a little bit. Is this a fair run rate to use moving forward?

We are working through our updated plans and budget process, and we would be giving an update on that in our guidance. So I don't think we're in a position to say that that is our run rate, and we're also kind of looking at our exploration expenditures and levels based on what happens with complete our assessments of our plant activities.

Understood, understood. And then is there any concern out there, you know, around the Roosevelt sale closing? You know, anything in particular that, you know, could slow the closing or gives you any pause with it?

At this point, no, there's nothing that gives me pause. We have the normal regulatory requirements and we are proceeding through those. As a matter of fact, I'm on my way to Suriname today with the Zijin representatives to do a joint visit and It's really just about customary regulatory approvals at this point.

Okay. Thank you very much.

This concludes the time allocated for questions. I'd like to hand the conference back over to Marisa Belanger for closing remarks.

Thank you very much, operator, and thanks to everyone for joining us this morning and for your continued engagement with IBM Gold. As always, should you have any additional questions, please do not hesitate to reach out to myself or Graham Jennings if you would like to set up a meeting. Thank you all, and have a great day.

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