Iamgold Corp Q2 FY2020 Earnings Call

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Second Quarter 2020 Operating and Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. Please refer to the Operator Instructions. At this time, I would like to turn the conference over to Indi Gopinathan, Vice President Investor Relations and Corporate Communications for IAMGOLD. Please go ahead.

Thank you very much, Claudia. And welcome everyone to the IAMGOLD second quarter conference call for 2020. Joining me today on the call are Gord Stothart, President and Chief Executive Officer; Carol Banducci, Executive Vice President and Chief Financial Officer; Bruno Lemelin, Senior Vice President, Operations and Projects; Craig MacDougall, Senior Vice President, Exploration; and Jeffery Snow, Senior Vice President, Business Development and General Counsel. 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. 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, Gord Stothart.

Well, thank you, Indi and good morning, everyone, and thank you for joining us. So last night, we issued solid operating results for the second quarter of 2020 demonstrating strong operating cash flows on increased margins, and further improvement to our already strong balance sheet. Subsequent to quarter, we announced our decision to go forward with the construction of Côté, a transformational growth project. And like all of you, we've been adapting to our new normal with COVID-19 changing the way we work and for some where we work. We will provide an update on our activities with respect to COVID-19 in a minute. Finally, we are providing updated guidance for the year taking into account the suspension of operations at Rosebel, and the resumption of capital sustaining expenditures. Before I move on to the next slide, I wanted to note here that last night we also announced the retirement of two key members of our executive leadership team. After 13 years with the company, Carol Banducci has advised us of her intention to retire from IAMGOLD on March 31, 2021. Carol has steadfastly seen the company through a bull market, a bear market, and several transitions. Her disciplined approach to financial management is the reason we have the balance sheet we have today. And her success in building an outstanding finance and accounting team has positioned the company exceptionally well today for both challenges and opportunities. I certainly wish her all the best in retirement and look forward to our continued work together over the next several months. In addition, Jeff Snow will be retiring from the company effective August 31, 2020. Jeff has had a storied 39-year career at the intersection of law and mining, and we will miss his wise counsel and wish him all the best in his well deserved retirement. These are both big changes for the company. And certainly, personally, I certainly enjoyed working with Carol since I came to IAMGOLD 12 years ago, and we've gone through a lot of battles together and she's been a great teammate. I started working with Jeff, I think in the early 1990s at Noranda Head Office in Toronto, and he's a – I count him certainly amongst my friends and certainly a valued colleague. The second quarter was really about learning to live in a time of COVID-19. At the end of the first quarter, we proactively implemented a multifaceted response, including screening, physical distancing, personal protective equipment and professional personnel policies. In the second quarter, we were able to re-change shifts at Essakane following the lifting of the local administrative quarantine. Westwood came back online in mid-April following a placement in care and maintenance in accordance with provincial directives. And as you know, we experienced COVID-19 cases at the Rosebel site, as we saw outbreaks in the region and notably Brazil. Fortunately, the cases at Rosebel are now largely resolved. We continue to work to enhance protocols and further expand camp facilities to support social distancing, as is the case at Rosebel. One of the more unique approaches at Essakane were we’ve been using drones equipped with loudspeakers to raise awareness of the coronavirus and our protocols to help ensure compliance, and of course, we have also considered COVID-19 protocols in planning our construction activities for Côté. From a community engagement perspective, I'd like to share a couple of stories. In May, the female employees of Essakane made a symbolic in-kind donation to the vulnerable communities surrounding Ouagadougou, the capital city of Burkina Faso, worth 2 million French francs or West African francs approximately Canadian $4,700. This contribution was the result of a fundraiser they initiated at the mine. The donation was made through local organizations and included 50 bags of rice, 50 cans of oil, sugar, and soap for 55 households in the Ouagadougou region. In Suriname, entrepreneurs from the community of Marshall Creek located near the mine site have been engaged to supply 1,000 non-medical mouth caps or masks for Rosebel. This follows on a 2019 community initiative led by the community relations department to help develop marketable skills and experience. IAMGOLD is committed to achieving high standards in environmental, social and governance practices which reflect our long held zero harm vision. IAMGOLD donations to local communities in response to the global COVID-19 crisis include cleaning equipment and supplies, hand washing stands, and hand sanitizing gel for the communities, medical protection equipment including masks, gloves, etc., as well as life support equipment such as ventilators and hospital beds. As we know, this equipment is essential in the fight against COVID-19 and is in very short supply in all countries, and especially in developing nations. IAMGOLD and our employees across the globe are proud to highlight through these donations our true and lasting partnerships with the governments, as well as our deep commitment to these countries and populations. Following the suspension of operations at Rosebel, we reviewed our 2020 guidance. As a result of this review, we've lowered our 2020 guidance for Rosebel to the range of 210,000 to 230,000 ounces. This change shifts attributable guidance for the company down to the range of 645,000 to 700,000 ounces for 2020. With this change to attributable reduction, we have adjusted cost guidance as follows: Cost of sales between $900 and $1,030 per ounce sold. Total cash costs of $940 to $980 per ounce produced, and all-in sustaining costs of between $1,195 and $1,245 per ounce sold. I would note here that all-in sustaining costs in the third quarter of this year are expected to be higher than the second quarter due to the resumption of sustaining capital programs with similar production levels. In addition, costs are expected to be higher in the third quarter as compared to the second quarter due to additional COVID-19 related expenditures. Our outlook for capital expenditures has also been adjusted. At Essakane, a reduction of non-sustaining capital to $65 million from an original $80 million due to lower level of capitalized stripping and timing of spends. At Essakane, a decrease of $10 million of sustaining capital, which reflects the delay caused by the suspension, as well as a $15 million decrease in non-sustaining capital due to the delay of capitalized stripping work, again due to the suspension. At Westwood, an adjustment in non-sustaining capital to $18 million from $15 million on additional development work. At Côté, our development capital expenditures for 2020 are $77 million, increased from $45 million earlier and reflecting early works on construction. At Boto, planned expenditures in 2020 remain the same $25 million. In total, these adjustments comprise a net decrease of $10 million in sustaining capital, and a net increase of $5 million in non-sustaining capital. Total capital spending 2020 is planned at $340 million, a net decrease of $5 million. While our 2021 guidance remains unchanged, we know that this continues to be under review, given the current global uncertainty with respect to the spread of COVID-19 and the effect it may have on the company's operations. Following the major significant catalyst, which was our decision to proceed with Côté construction, in addition to the recent filing of an NI 43-101 report for Westwood, along with reaffirmed production guidance originally released in 2019. We see the following catalysts for the balance of 2020. At Rosebel, we resumed long hauling Saramacca and work to complete the road. We expect to be at the target run rate for Saramacca later in the year. The mill optimization project at Essakane aimed at increasing throughput by about 10% is ongoing and we hope to get that online towards the end of the year or in early 2021. We continue to de-risk Boto with investment in local infrastructure. And in exploration, we are working on further resource delineation at various projects, including Neligan, the Rouyn project, the recently acquired Sale property in Quebec, Gosselin at Côté, and the new Karita discovery in Guinea. In 2021, we expect to see Westwood continue to expand production with supplemental feed from the Grand Duke open pit. We also see Rosebel production ramping up with Saramacca online for the full year and for an optimized Essakane mill to demonstrate increased throughput. In addition, the Côté work plan is focused on major earthworks, while we continue to de-risk Boto. And on that note, I will now pass it on over to Carol to review our financial results. Carol, I think you’re on mute.

Thanks, Gord. Listen, I’m going to go off script a little bit here and I just want to thank Gord for those kind words he said earlier. I think it's very much a personal decision to retire. And I'm confident that under Gord’s strong leadership that we have a strong path to transforming this company. We have a great company, we have great people, and we have a great future. So, with that, again, good morning, everybody and turning to the second quarter, the company continues the trend of strong gold margins in the second quarter with strong operating cash flows. The quarter also presented opportunities to execute favorable input cost hedges on both currency and fuel exposures for Côté. With the development of Côté, IAMGOLD will become a growing diversified Canadian company generating superior returns, while prudently managing risk. To achieve this transformational strategy, and in order to mitigate gold price exposure and revenue risks over the construction periods, the company intends under appropriate conditions to hedge 15% to 20% of its total gold production between 2021 and mid-2023 through a combination of options and collars. Following our construction decision announcement on Côté, credit agencies, S&P and Moody's reaffirmed IAMGOLD’s stable outlook. We continue to prudently manage our balance sheet with cash, cash equivalents, short-term investments and restricted cash of $866 million at the end of the quarter and our virtually undrawn credit facility of $500 million. As Gord mentioned, COVID-19 did impact us in different ways in the quarter. Working capital was higher due to our intentional increase in supplies inventory, as well as the buildup of finished goods due to timing of shipments and the higher cost of inventory. Expect depreciation expense in 2020 to be in the range of $245 million to $255 million, down $5 million from the previous guidance. Our cash taxes guidance remains unchanged at $30 million to $45 million. Revenues in the second quarter were $284.6 million due to strong gold prices, while cost of sales were lower compared to the same prior year period in the prior quarter. The adjusted net earnings for the quarter was $20.1 million or $0.04 per share. Net cash from operating activities before changes in working capital totaled $79 million, following the strength in gold prices, our prudent management of the balance sheet or liquidity excluding restricted cash and including the $500 million credit facility totals over $1.3 billion. Our $400 million in senior notes are not due until 2025. Next slide highlights the strength of our financial position relative to our peer group of gold producers. And as you can see, we continue to be in a net cash position with peer leading liquidity. I will now pass the call over to Bruno to discuss operations.

Thank you, Carol. On Slide 17, we are dedicated to the health and safety of our employees, especially during the global COVID-19 crisis. In the second quarter of 2020, we exceeded our targets for the DART rate, which measures days away restricted or transfer duties at 0.11. We strive daily to meet or surpass our safety objectives, implementing various initiatives to ensure a safer work environment, including a comprehensive behavior-based safety program. This slide outlines our quarterly results with total consolidated attributable production of 155,000 ounces. The cost of sales was $1,030 per ounce sold, total cash costs were $935 per ounce produced, and all-in sustaining costs were $1,189 per ounce sold for the second quarter. Now, I will review each operation in detail. At Essakane, we reported attributable gold production of 83,000 ounces for the second quarter, having mined higher grade zones, while also completing less capitalized waste stripping. All-in sustaining costs were $1,123 for the quarter. With the lifting of the local administrative quarantine, we saw improved productivity, allowing for a crew change after a particularly long prior shift where some employees were on-site for nearly two months. Looking ahead to the rest of 2020, we expect some graphitic ore which usually negatively impacts recoveries and anticipate the mill optimization project to be delivered late this year or early next year. Additionally, drilling at Tassiri has been completed, and we are compiling the results to evaluate resource potential. We are maintaining vigilance regarding COVID-19, with enhanced protocols in place to protect our workforce. The pictures on the slide illustrate the sanitation measures implemented at the site, such as frequent cleaning and disinfection, convenient handwashing stations, isolation zones, and a drone equipped with speakers to communicate awareness of protocols. At Rosebel, attributable gold production for the second quarter was 52,000 ounces, primarily affected by the mid-June suspension of operations. All-in sustaining costs were $1,150 for the quarter. The COVID-19 cases we encountered on site have mostly been resolved, with only a few active cases left, which our current teams are managing. Operations resumed on July 24, and we are processing stockpiles and high-grade materials from Saramacca. Moving forward, we expect slightly reduced production in the third quarter, mainly due to the suspension of operations until July 24. We have now implemented a one-person-per-room policy, maintaining the same person day and night, which limits the number of employees on site. These adjustments will require us to expand facilities to reach our pre-suspension run rate, which we hope to achieve by the fourth quarter. The fourth quarter is also expected to benefit from higher grade ore coming from Saramacca. Regarding health and safety, we have included images from Rosebel that showcase our improved physical distancing protocols in lunchrooms and the configuration of the maintenance shop. Slide 21 features several pictures of our progress at Saramacca. The Mindrinetti Bridge is now complete, and infrastructure work is ongoing at the Saramacca site. Westwood resumed mining in mid-April, producing 20,000 ounces in the second quarter of 2020 at all-in sustaining costs of $1,133 per ounce sold. We have recently filed our National Instrument 43-101 Technical Report for Westwood, outlining a safe and profitable long-life mine, and we reaffirmed our longer-term production guidance first disclosed in December 2019. Although reserve ounces decreased by 48%, overall resources, comprising reserves, slightly increased, which is typical for underground mines. Our guidance incorporates resource ounces assessed during our planned development and is founded on our historical operational experience. We've included a few images of our general manager meetings that reflect physical distancing protocols. Recently, we decided to proceed with the construction of the Côté Gold Project, believing in the transformational value it brings to IAMGOLD and all our stakeholders. This Canadian project enhances our production profile, increases geographic diversity for the company, and improves our overall cost profile. Côté is already well advanced as we made the decision to construct, with permits and approvals in place and strong relationships with our joint venture partner Sumitomo, indigenous communities, and local stakeholders. The project also has significant district potential with the Gosselin and Young Shannon discoveries. Notably, Côté is highly sensitive to gold prices. At the current gold price of $2,000 per ounce, the project's net present value at a 5% discount rate is $2.8 billion, with an internal rate of return of 27.6%. This slide includes pictures we shared a few weeks ago of our Chester construction camps, which can accommodate 264 people following the tree clearing completed earlier this year. I will now hand the call over to Craig to discuss exploration.

Thanks, Bruno 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. In 2020, our planned exploration spend was $52 million excluding project development activities and studies, and will involve the completion of approximately 190,000 to 210,000 meters of diamond and reverse circulation drilling to support resource development programs and exploration target evaluation. Although we are maintaining our outlook on our exploration program, we continue to reassess the impacts of the COVID-19 crisis going forward, and we'll adjust accordingly. As we have said before, reserve balances have been on a steady decline since 2012. IAMGOLD has been working hard to differentiate ourselves from this industry trend. Beyond just replacing reserve balances depleted from mine production, we have also achieved a significant increase in reserves over that time. In 2016, we have not only replaced every ounce mined, but also added over 8 million ounces more than doubling our reserve base. This is the result of a sustained commitment to exploration through the cycle, and the tireless efforts of our exploration and mine geology teams. We believe this is a significant competitive advantage for IAMGOLD and for our future. During the quarter, we announced further infill diamond drilling results from the Rouyn Gold Project as we work to delineate maiden reserves at the Lac Gamble zone, which we feel may have potential to provide satellite feed to the Westwood operation. Highlights include 9.8 meters grading 27.8 grams per ton gold, which included 4.4 meters grading 58.4 grams per ton gold, and another hole with 9.8 meters grading 10.4 grams per ton gold, which included a three meter interval grading 22.8 grams per ton gold. This, along with the announced acquisition of the Fayolle project some 35 kilometers from Westwood, continues to build on our Hub-and-Spoke model in the region centered on the Westwood operation. In Quebec, you will remember we announced the maiden mineral resource estimates for the Nelligan Gold Project in the fourth quarter of 2019 with resources on 100% basis totaling 3.2 million ounces in an inferred category at a grade of 1.02 grams per ton gold. In 2020, we completed nearly 5,000 meters of diamond drilling before activities were temporarily suspended due to the COVID-19 crisis. This program was designed to infill the deposits to improve confidence in the resource model, as well as tests for extensions of mineralization beyond the existing resources. Initial results reported during the quarter include 27 meters grading 2.86 grams per ton gold and 25 meters grading 1.87 grams per ton gold, both from infill intersections. As well, we reported a 10.5 meter intersection grading 10.5 grams per ton gold, which included 1.5 meters grading 69.1 grams per ton gold, and this from a step-out hole outside of the existing resources. Although we no longer have the advantage of the winter access for which this property is well suited, a summer drilling program has been designed and has commenced, which will continue to advance the objectives of this program. At the nearby Monster Lake Project located 15 kilometers north of the Nelligan Project, drilling activities also resumed during the quarter, completing an additional 1,400 meters of diamond drilling. The program focused on testing the Annie Shear Zone in an effort to extend the mineralization intersected during 2019. Assay results from this work will be reported once received, validated, and compiled. Although our drilling program to evaluate the resource potential at our new Gosselin discovery located 1.5 kilometers northeast of the Côté gold deposit was also suspended before completion as a result of the COVID crisis, we are logging and sampling on the holes that were completed, and we expect new results shortly. The remainder of this program is being redesigned utilizing a remote supportive drilling program, which should commence in August. In West Africa, exploration activities continued during the quarter focused on resource conversion and refinement of the reserve model at the Boto Gold Projects in Senegal, as well as testing for extensions to the Diakha deposit located to the south in Mali, and exploring selected high priority targets within a 20 kilometer radius of that deposit. Taking into consideration the current favorable gold price environment, you can certainly see the meaningful impact it has on Boto Project economics on a standalone basis. Building on our exploration success along this portion of the Senegal-Mali Shear Zone with several discoveries located within 15 kilometers of the Boto Gold Project in adjacent countries, the company has initiated a strategic concept study referred to as the Bambouk Gold Complex to advance resource evaluation and delineation programs at Diakha and the Karita projects, which support the evaluation of various potential development scenarios and identify regional synergies. Driven by increase in gold prices, competition for access to quality exploration projects is challenging for the industry. IAMGOLD has developed and continues to invest in a pipeline of early to advance Greenfield exploration projects to support our future growth, as well as support near mines, brownfield exploration with a view to lengthen mine life and leverage our existing infrastructure. With that, I will now pass the call back over to Gord to conclude.

Thanks very much Craig. So, from a strategic perspective, Q2 2020 was really a milestone quarter for the company with the announcement of Côté moving forward. We remain focused on lowering our consolidated cost profile to improve margins and cash flow, increasing our gold production, increasing our operational flexibility, enhancing the geographic diversity of our overall portfolio, and of course, improving returns to shareholders. To best achieve this, we believe we need to achieve self-funding at each of our existing operations to ensure exploration activities, corporate functions and financing obligations in aggregate are not a burden on our balance sheet, sequence development of our organic growth pipeline starting with the construction of Côté and continued de-risking Boto. We will also be planning for an exciting future with the advancement of our rich district brownfield and greenfield operation exploration prospects which include Gosselin, Karita and Diakha-Siribaya along with Boto in the Bambouk district in West Africa, Nelligan, Monster Lake in Northeastern Quebec, along the Saramacca Brokolonko trend in Suriname, and our Westwood Hub-and-Spoke model in the Abitibi. Importantly, this all needs to be accomplished while continuing to be leaders in ESG performance through relentless pursuit of our zero harm vision. We continue to guide our efforts in accordance with our vision to be the global leader in creating superior value for our stakeholders through accountable mining, supported by our experienced team of technical, operational and financial professionals. Thank you for joining us today and I will now pass the call over to the operator.

Thank you. We will now begin the question-and-answer session. Our first question is from Fahad Tariq with Credit Suisse. Please go ahead.

Hi, good morning. Thanks for taking my questions. Maybe first on Saramacca, can you remind us what construction is left for this year and whether the lower growth CapEx guidance for this year, does that mean there's some spill over of CapEx into 2021? Maybe if you can just give some context on what's left to do at Saramacca and what the CapEx could look like for next year? Thanks.

Bruno, can you address that please?

Yes, certainly. Hello, Fahad. So, the infrastructure that remains to be built is a water tank, maintenance shop, and some offices and the rest is just finalizing the paving of the road with the final framework and that's it. So, we don't expect to have much capital to be extended to 2021 as we speak right now.

Okay, great. That's helpful. And just one other question on Westwood, I know you reaffirm the longer-term guidance, but the reserves decline, how should we be thinking about the mine life now at Westwood?

So, we still expect mine life beyond 2030, and as we guided on December 2019, we’re doing a transition from 100,000 ounces to 125,000 and then to try to get to a run rate of 130,000 to 145,000 gold ounces. And we're pretty confident the target is to try to convert back resources and to resolve by adding in the north corridor and evaluating over the next few years. And so, we can upgrade and produce resource ounces to indicated measures and then finalize the mining plan so they can be put into reserve. And also, we have adjusted our reserve according to a grant condition by adding geotechnical risk adjustment factor and also in changing the dilution and recovery factors associated with our new estimates. However, we're going to continue to work around these sectors to improve our extraction strategy. So we can put some of those answers back into the reserves. So, when you look at it, all-in-all, with the resource base that we have and the conversion factor that we've had in the past, also looking also at the reconciliation history that we had from reserves to the mill, we are quite confident about our guidance that I just described and to go beyond 2030.

That's helpful. Thank you.

Our next question is from Josh Wilson with RBC Capital Markets. Please go ahead.

Thanks. First question on Westwood, just trying to understand what mining cost assumptions we should be incorporating longer-term? I did notice that the technical report had a mining cost for the mine plan of around CAD224, but the cut-off for reserves was about $50 lower in the 170 range?

Bruno, can you speak to that?

Yes. So, for the – we made some adjustments in calculating and just give me one second. I can then give you back the answer that you’re looking for. Just one second while I check the details.

Sure.

I can come back to you with the extra mining costs and because we have to transform the project in Westwood and also we have to establish a new cut-off grade mining cost, so I want to ensure that the difference between the two is clear before I give you the full context of that.

Okay. And on the capital side, so the CapEx is $200 million-ish is for the current reserve base. Should we be assuming a similar amount of capital for reserves that will be added? Or is there a lot more development that's required for the current reserve base that's been defined?

That's for Westwood?

For Westwood.

In fact, we’re going to continue to keep developing Westwood so associated to it you have natural development costs that need to be associated to this when you want to model the additional ounces for that.

Okay. And then, last question is related to Westwood, the shaft at one point that has been discussed historically, I don't believe that was incorporated for the current reserves. Is that still part of the plan longer-term? Or is that an access reserve that you would project out to the timeline beyond 2030?

Right now, we believe that the main access is sufficient as we speak, and again, we need to investigate the lower and the eastern side of the mine. Then, we'll be able to develop a mine plan in relation to that.

Sorry, Josh. As we've looked at it, because of the depth of the deposit, the shaft is starting to become a long way from the deposit, so we've evaluated other methods like ramps and declines and are going through that analysis now. Either one of those solutions still supports the declaration of resources. Obviously, as we get into reserves, we'll need to crystallize the current plan, the final plan.

Great. And then one final question. Sorry, I'm plugging on at your time here. For Saramacca, you know, at one point there was a discussion about coming out with an underground study, which would have been most beneficial early in the mine life to reduce some of that upfront stripping. Is that currently the plan? Or should we expect the study on that coming up?

Right now, we're still figuring out the best option whether to pursue with the open pits at the current price environment versus the underground. We still have some exploration to do for the underground to further understand the true value of this option. So, right now as we speak, it's still conceptual and we're still assessing our options whether to continue thinking with the open pit or converting it to the underground potential, but as we speak right now, it's too soon to tell.

Great. Those are all my questions. Thank you.

Our next question is from Jackie Przybylowski with BMO Capital Markets. Please go ahead.

Hi, thanks very much. I guess I'll start off, I noticed in the release last night; you didn't talk too much about the Sadiola sale. It was previously forecasted, I guess, to be completed around the end of April. So, I was wondering if you could give us an update on that. I'm guessing there's some delays due to COVID; do you have any idea when that might close?

So Jackie, yes, you're entirely correct. We have seen some delays due to COVID. Most of everything has been inked up. There is a little bit of political machinations going on in Mali right now, not with respect to Sadiola, but more just with respect to the overall politics in Mali and figuring out the path forward for the government. Everything is signed up and ready to go. We're just really just waiting for a new cabinet to be formed and a new Mines Minister and Finance Minister to be put in place. We anticipate that that may add a little bit of additional time as the new ministers familiarize themselves with the file, but from a bureaucratic standpoint and certainly from a business standpoint, between ourselves and AngloGold Ashanti and Allied, everything is ready to go, so we're just waiting on finalization right now.

Got it. And maybe if I could just ask a different question on Rosebel, you lowered the guidance and a lot of that looks like it's due to Rosebel. I understand that there is a strike and that you've got productivity hits from the social distancing. Can you quantify how much of the guidance revision, so 40,000-ounce guidance revision, how much of that is due to the strike and how much of that is due to the going forward productivity hitch? And I guess the question being, would you expect some productivity hits similarly to affect 2021 as well?

I mean, I'll let Bruno answer. From my perspective about 80% to 90% of it is due to the suspension. There are some productivity hits in the near term, although we are seeing better grades for the remainder of the year, so we are able to compensate some of that. But it's almost a direct one-to-one the changing guidance with respect to Rosebel being the suspension period. You know, that's the amount of production we would have had out of Rosebel. As we look to 2021, we're not anticipating any further productivity impacts. We have a plan in place to get back to our full complement of manpower through some additional camp construction. And once we're at full manpower, we'll see full productivity. I don't know if you'd want to add anything else, Bruno?

That's correct, Gord. About 90% of the changes are coming from the suspension of the operation and the rest is just the ramp up to our original run rate.

Got it. That's it for me. Thanks very much.

Thanks, Jackie.

Our next question is from Michael Parkin with National Bank. Please go ahead.

Thanks, guys. Most of my questions were answered, just one housekeeping one. The cash taxes guidance, what gold prices are based off of?

It’s $1,500 Mike.

Okay. And just a little bit on Westwood, with the change here, is there any additional labor changes like I know you've made some changes recently and we're seeing U.S. dollar operating costs come down. Just trying to get a sense of what we could expect going forward with the lower mining rates? Is that going to call for further reduction in manpower?

Bruno?

Yes. So, we don't expect any further decrease in the workforce. We did an adjustment a year ago to that. And however, for now, we believe we have the workforce to complete the life on mine that we have designed it, but a little bit more personnel is needed for the underground operation, but right now as we speak, we believe that the workforce is going to be quite stable, if not just increase a little bit. To come back to the mine operating costs for mining at Westwood, those are CAD224 per ton.

And then, will milling costs and site G&A costs be up?

Yes.

Just because of the lower throughput?

Yes. So CAD26.09 for milling and CAD42.95 for site G&A. So, it's all Canadian dollars.

What we're seeing, Mike, is actually with the additional rock that we're putting through from Grand Duke and we anticipate to put through from other areas, the administrative and milling costs are actually lower for the complex as we move forward on a per ton basis, that's assigned to Westwood.

Are you guys doing owner operated for the open pits or are those contracts?

Contracts.

And in fact getting reported through OpEx or is that…

Yes.

Okay. All right, that's it for me, guys. Thanks.

Thanks Mike.

Our next question is from Carey MacRury with Canaccord Genuity. Please go ahead.

Hi, good morning, everyone. Just had a question on 2021 CapEx the press release notes around $250 million for 2021, which isn't too far off from the 2020 guidance once you strip out, you know, Côté and Boto. So, I'm just wondering, you know, if Saramacca spending, you know, expected to be down, and I know that personally affects that lower stripping into 2021. Just how should we think about capital, that number relative to this year's number?

Bruno, do you have a thought on that?

Yes, I guess it's…

2021 versus 2020. But again, we would assume that capital should be down a bit, and then it notes that capital stripping should be lower in 2020, so just trying to understand the 2021 numbers.

Yes, that assumption of our sustaining CapEx for the remainder of 2020 is taking place in Q3 and Q4, while some of the capital projects in Q4 and some of the capitalized stripping also will take place in 2021. Right now, it’s a little bit early to see the full impact of the overall envelope. We don't believe that's going to be that material. We believe that we can keep having the same production level with a reasonable capital envelope.

And maybe I can add that, I mean, again, the 2021 guidance is under review given, you know, what transpired with COVID this year, and we did redo some of our capitalized stripping this year, so we'll have to look at the new mine plans as Bruno has alluded to. And so, we'll have to look at updating that, you know, perhaps in Q3, but it is under review and just something that we're looking at.

And maybe just on the mill de-bottlenecking at Essakane, just what the status of that is and if that can also flow over into 2021?

So, I mean, the current schedule we have right now, Carey, is to complete by the end of the year. There is a possibility it gets pushed a little bit into Q1, mostly on delivery of some of the supplies, again, related to COVID. Our capital assumptions that we put in place assume that we run it out and it's up and running by the end of the year versus – I mean our original intention was to have it up and running in Q3, but that was one of the areas where we, when we went into reduced or COVID impacted activities, that we did reduce the level of work on that project.

That's it from me. Thanks.

Thanks Carey.

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

Good morning, everyone. Can you hear me?

Yes.

Great. Thank you. First of all, just I want to say congrats to Carol and Jeff on their retirement. Well done. Maybe I have three questions and I wanted to talk about a couple of quite easy, maybe for you, Carol. Just on the incremental COVID-19 expenses, those are going to be included in other expenses going forward and excluded from your total cash costs and all-in sustaining costs.

Yeah. And again, we do a very detailed review of all the COVID costs, Tanya. So, anything that we think is going to continue will fit in the cost of sales, but it's those costs that we think are one-time like for instance premiums that we've paid to employees when we're going through the transition and introducing all the protocols, or if we’ve brought in some additional housing in order to accommodate the employees and do the spacing distancing. So, anything that we've done on a one-time basis has gone through other expenses. So, anything to do with, you know, obviously productivity levels, because of all the protocols we have put in place that we're not excluding that. So, that's the way that you should be looking at it. It's the one-time costs that we're putting through other expenses. And as you said, they will not be included in cash costs or all-in sustaining costs.

Okay, and so Carol, what should we expect going forward on these costs for, let's say, the rest of this year?

Right, I mean, I think we're hoping that the worst of it is over, and so, you know, we had obviously, Westwood in care and maintenance has ramped up really quite nicely, and the same with Essakane. We have very specific administrative sort of quarantines that went in place and country, and again, we're operating Essakane, it's been able to operate without any significant interruption. And we've had obviously – we've just come out of this, the suspended operation at Rosebel. So, we're hoping that the worst of it is behind us, and so we're not expecting the same level of cost going forward into the rest of the year. We are expecting some costs, but not to the degree that we experienced in Q2, but like, you know, like you – I don't think anybody really knows what might happen with COVID and whether we see another sort of outbreak. I think we've put all the measures in place, and we've been very, very diligent in all the things that we've done. And we've worked with the various health officials in country. So, like I said, we're hoping that the worst is over, and we won't see the same thing that we experienced in Q2.

Okay. And then maybe on capital allocation board, Carol, you just said current gold prices, obviously, you're going to be generating a lot more cash flow than you budgeted. Clearly the construction of Côté, you know, we'll get some, you know, the – quite a bit of that, but what are you thinking about in terms of allocation on any incremental cash flow that you generate due to the higher gold prices?

You know, for right now, I'll let Carol chime in, but our expectations will continue to conservatively manage the balance sheet. As we look strategically out with a Côté construction, we're very, very comfortable with the level of cash flow we have. And our internal models are using much lower gold prices to ensure that we get through while maintaining the required cash balances and our leverage ratios hit below the targets that we've set for ourselves. If we generate additional, obviously that helps us work through. We are considering obviously the development of Boto at a later date. So that is also being factored into our analysis where we go, and obviously as prices continue to go up and cash continues to be generated, we'll look at a little bit of redistribution. Certainly at some point in the future, I'd love to be able to get back to paying some dividends back to shareholders, and help everybody sort of share in the higher gold price. You know, beyond that, we're happy with where we're at and we'd like to get sort of a year of Côté behind us and really understand that everything is truly solid for us. Carol would you add anything else?

Yeah, no, I’d just say, you know, as Gord said, like, we expect this company to generate superior returns and Côté is so transformational for us. You know, we've got a significant spin there and with the guidance we provided is $875 million to $925 million. And so our first priority is making sure that we secure sufficient capital to get this project built and running and once that occurs, we're expecting to be significantly generating cash flow. So, I think in the end-term, I think, you know, all of us can appreciate, everybody on the call, I'm sure can appreciate just the significant volatility around the gold price. And so, you know, continues to stay at these levels or continues to rise, definitely, it'll cause us to take a look at sort of what kind of optionality that we have, but you know, it's three and a half years, and we just need to make sure that we protect the balance sheet in the interim, but our goal is absolutely to generate superior returns and provide returns to our shareholders.

And what's the minimum cash balance that you're going to keep on the balance sheet over the next couple of years?

$200 million.

Okay. And my final question, just, you know, for Gord, Bruno, you know, just on the Westwood, I just thought we had moved out 550,000 ounces of reserves into resources, what do you need to see to bring those back into reserves?

Hello Tanya, this is Bruno. So, again, like I explained, we were very conservative in our assumptions. We want to offer a safe, sustainable, and profitable mine. So, we need to increase our knowledge on those specific zones in terms of the extraction strategy. So, just at this moment, we prefer to risk adjust those zones. So, they are not accounted for in the plan as we speak. However, we are doing many activities to be able to put them back in. So, we need more geotech drilling, modeling on those zones, and also looking at the extraction of other stocks and to see the behavior of the ground to see the confidence that we have to extract the metals after that. It's just on this specific zone, seismicity is not applied to all the zones at Westwood, it's only – it is distributed on the other parts, but the main central part was impacted, we have a lot of work to do to further understand some attributes that we want to be comfortable with before we put those ounces back in.

Okay, thank you.

Our last question is from Anita Soni with CIBC World Markets. Please go ahead.

Thank you. So, first off, congratulations, Jeffery and Carol on your impending retirement. And then a second question, Carol, could you just go over – I think you mentioned that you have a policy of hedging going forward, can you just mention those parameters again?

Sure. There are a couple of points to cover, Anita. Regarding our inputs, we have already hedged all fuel exposure for the Côté project during the construction phase, setting an upper limit of $50, which protects us at that price. On the lower end, it's approximately $38.50. Additionally, we are looking to hedge the Canadian Dollar, having secured about $65 million in 2023 at a rate of 1.36. We will keep an eye on the Canadian dollar as it has strengthened against the U.S. dollar. Our plan is to monitor this closely, guided by our internal thresholds. This quarter, we announced our intention to minimize revenue risk for the Côté project by potentially hedging gold production under the right circumstances. We have not taken any action yet as we are observing gold prices, which are currently around $2,060. If we proceed, we are considering hedging 15% to 20% of production over the next three years, particularly focusing on 2021, 2022, and the first half of 2023. We aim to implement this through a mix of options and collars, ensuring that our shareholders retain a significant upside. We are currently evaluating ranges for these collars and may explore some out-of-the-money options to establish a floor price for gold in order to protect our balance sheet. That summarizes our thinking, Anita.

Okay, thank you. Second question, more for Gord, I guess is, so Saramacca, it's been a while since you’ve really delved in-depth into that, you know, in terms of tonnage and grade and what we should have been setting our goal posts for because it's been a while since we talked about that?

Yes. I think probably Bruno is more familiar with the current plan. We do expect to get up to pretty much run rate by Q4 and run rate for Saramacca is in the neighborhood of about – I think its 2.5 million to 3 million tons annually coming into the plant. Can you fill that in a little bit more for me Bruno?

Exactly. So, we expect to have close to in between 0.75 million to 1 million ton of ore per quarter, and this year, it was about 2.5 million like Gord is alluding to. Again, the ramp up is going to depend on the situation at Rosebel, like I mentioned. We are a bit constrained by the number of employees that we can have on the camp. So, we have to add new facilities to increase the workforce on site, so some activities are going to be delayed. Again, we're going to prioritize the treatment of the stockpile Saramacca ore. So we should see a fair ramp-up for the Saramacca mining into Q3 and Q4 and getting to a natural run rate of that sense around 0.75 million tons per quarter, so that's again for 2021, like Carol alluded, we’re going to reaffirm our guidance associated with the other years later.

Okay. And then, in terms of the ore, sorry, the stockpile level, like was that direct ore feed from Saramacca? Was that ore that you had stockpiled from Saramacca?

Yes, we stockpiled ore from Saramacca and then get transferred and all to the processing plant. Again, it's every month since January we've been adding to the stockpile and as we have just started the – restarted the operation, now we are taking part of that stockpile to be processed at the mill and then the mining will resume as well.

Okay. So what's the level of that stockpile right now at Saramacca?

About 0.5 million ton.

In terms of tonnage, yeah.

Sorry, how much?

0.5 million tons.

0.5 million tons. Okay. And then, just in terms of the grade going forward at Rosebel, it was low because you're processing stockpiles or is that kind of – is that – you know once you get through COVID?

Yes, that’s correct.

Okay. So, we should resume sort of closer to the reserve grades or what you've been doing previously, you know, once sort of physical distancing issues are resolved?

Exactly. And so that's the plan. Stockpile in Saramacca and then we're going to start mining other areas. So, the grade should be improving.

And then, the overall tonnage at Rosebel, how much can it process going forward given that you've got, you know, say 2.5 million to 3 million from Saramacca, what would Rosebel provide there?

Probably around 3,000 tons per day. It’s a good number as we speak now. It depends on the hardness of the material that we're adding. So, again, we're adjusting our forecasts as needed.

Okay, sounds good.

We’re talking sort of 12 million to 13 million tons annually, including Saramacca.

Okay, sounds good. Alright, thanks. And then last question, so switching gears to Côté, just as we start to focus on – I mean, you're going to move ahead and you're going to, you know, sort of break ground on this in Q4. I mean, can you just talk about sort of the construction build-out like EPCM, like, are you guys managing the two, who's involved, what's going on? I mean, we've seen a few build-outs in the last few years, but, you know, that we've – given the size of the capital that’s going to be spent, I'd appreciate a few more details on how this is going to unfold.

So, in our relation in July, we sort of laid out the spend on an annual basis or at least the percentage spend of the total on an annual basis. We are using an EPCM contractor. We're using Wood, formerly the guys from AMEC who helped us prepare the feasibility study in a bit involved in the detail engineering that we've been doing as part of the de-risking exercise. So, right now, the model is EPCM. Given the fact that we've advanced a lot of the engineering to such a high level compared to most projects, we are currently evaluating the opportunity to maybe do some of the packages EPC and lock in the fixed price so that we can execute those projects with even lower risk. So, they are the main driver of the project per se. We do have a full owner’s team that is looking after all of the main activities. We will transition as well to an operational readiness team that's being built. We are eager to really start our owner mining towards the end of 2021 as the initial couple of benches and the overburden will be stripped by a contractor, but once we get down to hard rock, we'll start with our own mining fleet towards the end of next year. And the roll-out is, as you said, sort of breaking ground in Q4. We are doing a few activities through the summer here, specifically, we’re looking to do some environmental assessments in the tailings dam area that would allow us to get into tailings dam construction early next year. And I’d sort of leave it like that. I mean, I can – we can certainly elaborate a little bit more one-on-one if you like, Anita.

Oh! That’s okay, thank you.

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

Thank you very much, Claudia. And thanks to everyone for joining us this morning and for your continued interest in IAMGOLD. We look forward to having you join us again for our third quarter 2020 conference call in early November. Goodbye.

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