Earnings Call Transcript - IAG Q3 2020

Operator, Operator

Thank you for your patience. This is the conference operator. Welcome to IAMGOLD's Third Quarter 2020 Operating and Financial Results Conference Call and Webcast. Please note that all participants are in listen-only mode and this conference is being recorded. Following the presentation, there will be a chance to ask questions. Now, I would like to hand the conference over to Indi Gopinathan, Vice President of Investor Relations and Corporate Communications for IAMGOLD. Please proceed, Miss Gopinathan.

Indi Gopinathan, Vice President Investor Relations and Corporate Communications

Thank you very much and welcome, everyone, to the IAMGOLD Third Quarter 2020 Conference Call. 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 Tim Bradburn, Vice President, Legal and Corporate Secretary. 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 in the 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.

Gord Stothart, President and CEO

Well, thank you, Indi. Good morning, everyone, and thank you for joining us. Last night, we issued our third quarter 2020 operating results reflecting how we've adapted to our new normal with COVID-19, solid operating cash flows of $105 million on increased margins, and solid mine site free cash flows of $80 million underpinned by production of 159,000 ounces of gold despite the challenges of the quarter. Our strong balance sheet is supplemented by the enhanced flexibility from our debt refinancing, wherein we issued new bonds and retired the old bonds extending the maturity date by three years to 2028 and lowering our annual interest rate cost and the transformational growth we anticipate that the Côté gold project following the formal construction announcement in July. As reported on Monday, we had a seismic event at Westwood with all employees safely brought above ground. I would like to recognize our Westwood team for their safe and successful response to this event. The Westwood mill restarted yesterday evening on stockpiles and open pit ore from Grand Duke while the underground operation remains suspended as we assess our business continuity plan. We are now in our eighth month of adapting to a new normal with COVID like most of the world. The rapid crisis response at the end of the first quarter through extended rotations at Essakane, shut down and restart at Westwood, suspension and restart at Rosebel, we've come full circle with embedded protocols, operations at full capacity are close to normal, zero COVID cases and ongoing vigilance. At Essakane, we completed the expansion of the sleeping quarters adding 200 beds. Operations are substantially back to normal capacity. At Westwood, following the Quebec government's COVID-19 care and maintenance directive, we were back online as of mid-April. At Rosebel, we continue to expand our camp capacity to facilitate social distancing, adding 300 beds, and we expect to be back to our full workforce complement in Q1 2021. For our construction project Côté, we have taken our learnings from our operating sites and instituted protocols including screening, assessments, mandatory protective wear, social distancing, and temperature tests. Our response to COVID-19 also has an important community support and engagement perspective. A few examples from the quarter include in Burkina Faso, where we donated 10 respirators worth $100,000 to the Ministry of Health and the Regional Health Directorate of the Central Region to support its COVID-19 efforts. Essakane further donated medical equipment to the Dori Hospital. And in Colombia, we provided financial support and technical training to 23 families in the beekeeping sector of the Antioquia municipality, with expected production of 100 kilos of pollen and one ton of honey in 2020. This project comes as an economic alternative to improve the quality of life of these families. IAMGOLD is committed to achieving high standards in environmental, social and governance practices, which reflects our long held zero-harm vision. Highlights from the quarter include recognition and rankings by Moody's affiliate; GIO IRS has 4 out of 45 sector peers including senior producers on its assessment of environmental, social and governance practices. IAMGOLD's assessment reflected notable strengths in community involvement, environmental strategy, health and safety, and governance. Donations to local communities totaled $1.5 million year-to-date, including cleaning equipment and supplies such as handwashing stations and hand sanitizing gel, protective medical equipment including masks, gloves, and face shields, and life support equipment in the nature of ventilators and hospital beds. Essakane's respirator donations as mentioned on the prior slide, and our Rosebel operation has partnered with Global Impacts, a global personal protective equipment supplier to provide previously trained women and community with internship opportunities at one of Global Impacts' local factories. We are also lobbying our partners and other stakeholders for the second phase of the Ouagadougou project in Burkina Faso, now that Phase 1 has been completed, with the goal of extending water infrastructure to two other communities nearby our Essakane mine. Looking at 2020, we have further refined our guidance. We are lowering our 2020 production guidance range to 630,000 from 680,000 ounces for 2020 due to the suspension of operations at Westwood underground, resulting from the seismic event reported earlier this week. We are adjusting upward our cost of sales guidance by approximately 5% to between $1,045 and $1,075 per ounce sold. Total cash costs guidance is adjusted upward by approximately 4% to between $980 and $1,010 per ounce sold, and all-in sustaining costs are adjusted upward by approximately 3% to between $1,240 and $1,270 per ounce sold. The revisions to cost of sales and total cash cost reflect higher costs incurred from processing lower rate stockpiles to compensate for lower levels of production as a result of the COVID-19 crisis. All-in sustaining costs were adjusted to reflect higher operating costs incurred to date, lower Westwood production, and higher royalties. I would note here that we are withdrawing our 2021 production guidance, which had been under review and expect to provide regular annual guidance in early 2021. Our outlook for capital expenditures was modestly adjusted. At Essakane, the non-sustaining capital expenditures forecast was increased by $5 million to $70 million. At Westwood, sustaining and non-sustaining capital expenditures have been decreased by $10 million and $8 million respectively. At Côté, our development capital expenditures for 2020 were revised down to $66 million from $77 million, reflecting a timing difference for expenditures. At Boto, planned capital expenditures were lowered by $1 million to $24 million for 2020. These adjustments reflect a net decrease of $10 million in our sustaining capital and a net decrease of $15 million in our non-sustaining capital guidance. Our resulting updated total capital spend for 2020 is expected to be $325 million for a net decrease of $25 million versus prior guidance. In the quarter, we've progressed in a number of areas. At Rosebel, we continue to ramp up Saramacca production with an aim to complete the road by year-end. We continue to expect to be at the target run rate of mining at Saramacca later in the year. We advanced the mill optimization project at Essakane and adjusted the startup date to the first quarter of 2021. Again, in the quarter, Westwood continued to deliver steady production with Grand Duc pit providing supplemental ore. We also continue de-risking Boto, with investment in local infrastructure and advancement of detailed engineering. In exploration, we continued our resource delineation work at various projects, including Nelligan, the Rouyn project and the recently-acquired Fayolle property in Quebec, as well as Gosselin near Côté and the new Karita discovery in Guinea. As we have indicated before, for 2021, Westwood has potential to expand production with supplemental feed from the Grand Duc open pit, subject to the assessment of our business continuity plan. We also see Rosebel production ramping up with Saramacca online and an optimized Essakane mill to demonstrate increased throughput. For our growth projects, the Côté work plan will be focused on major earthworks during 2021 while we continue to de-risk the Boto project, and for Gosselin, we are targeting a main resource. On that note, I will pass the call over to Carol to review our financial results.

Carol Banducci, Executive Vice President and Chief Financial Officer

Thank you, Gord, and good morning, everyone. We are pleased to say that the company continued to trend up robust gold margins in the third quarter, demonstrating both strong operating cash flows and strong mine site free cash flows. We completed a bond refinancing for $450 million, lowering the interest rate to 5.75% from 7% and importantly, extending the maturity of the senior notes to 2028. Following this, credit agencies S&P and Moody's reaffirmed IAMGOLD's stable outlook. We continue our well-established approach of prudently managing our balance sheet with cash, cash equivalents and short-term investments of $897 million, excluding restricted cash of $30.8 million at the end of the quarter, and our largely undrawn credit facility of $500 million. We implemented a gold hedging strategy to mitigate gold price exposure and to further de-risk the balance sheet during the Côté gold project construction period. The company intends under appropriate conditions to hedge 15% to 20% of the total production between 2021 and mid-2023 to a combination of options and/or collars. During the quarter, we executed gold bullion collar option contracts with a minimum floor price of $1,800 per ounce and a ceiling of $3,000 per ounce on 114,000 ounces for 2021 and 18,000 ounces for 2022. Subsequent to the end of the third quarter, we added to our gold hedge position for 2021 using a zero-cost collar of $1,600 to $2,505 per ounce on 28,000 ounces, as well as a collar of $1,700 to $2,800 per ounce on 50,040 ounces. In the third quarter, we also executed hedges for the Côté gold project, including Canadian dollar forward for approximately 6% of our exposure at a blended exchange rate of 1.3604 and zero cost fuel collars for 90% of our exposure with floors starting at $33.80 per barrel and a ceiling of $50 per barrel. Our earnings before adjustment items were impacted by the redemption premium paid on the early redemption of our 7% senior notes, a non-cash loss on the embedded derivative related to the 7% senior notes, the time value of our input cost derivative in addition to COVID-19 expenses. We continue to expect depreciation expense in 2022 being in the range of $245 million to $255 million, where their cash taxes guidance remains unchanged at $30 million to $45 million. Turning to the third quarter results. Revenues were $335.1 million supported by strong gold prices for cost of sales were up compared to the same prior year period in the prior quarter. Adjusted net earnings for the quarter were $52.1 million or $0.11 per share. Net cash from operating activities before changes in working capital totaled $108.4 million. Our gross profit margin has steadily improved quarter-over-quarter with the third quarter at 23%. Starting this quarter, we are presenting mine site free cash flows which reflects free cash flows from our operating mine sites with development capital and non-mine site activities adjusted out. We believe this measure demonstrates how far we have come in the past year with $80 million in mine site free cash flow, up almost four times from the third quarter of 2019. On a year to date basis. We have generated $145.5 million in mine site free cash flows, up dramatically from just $3.7 million year-to-date last year. Following the strength in gold prices and our prudent management of the balance sheet, our liquidity excluding restricted cash and including our largely undrawn $500 million credit facility totaled $1.4 billion. Again, our 5.75% bond for $450 million is not due until 2028. Therefore, we are well-positioned financially for the construction of the Côté gold project. Finally, our disciplined approach enables us to continue to be a leader among our peers with a net cash position and leading liquidity. Our liquidity combined with anticipated free cash flows from our existing operations, together with our risk management measures is expected to enable us to cover the construction of our transformational Côté gold project. I will now pass the call to Bruno to discuss operations.

Bruno Lemelin, Senior Vice President Operations and Projects

Thank you, Carol. I am encouraged for the health and safety of our employees and we are pleased to say that our statistics from the quarter continue to reflect this commitment. In the third quarter of 2020, we again achieved better than target rates for both DARTS (which stands for days away, restricted or transfer duty) and TRI (which stands for total recordable injuries), recording at 0.36 and 0.48, respectively, toward 200,000 hours' worth. At the end of last week, we were tested on our connectivity toward as needed and when needed to ensure the safety of our colleagues, applied our colleagues at Westwood for their success and ensuring the safety of our workforce. Our goal every day is to meet or exceed our safety targets, implementing and refreshing a number of initiatives to ensure a safer work environment including a comprehensive safety program. For the quarter, we are reporting total consolidated attributable production of 159,000 ounces, cost of sales of $1,098 per ounce sold, total cash cost of $1,006 per ounce produced, and all-in sustaining costs of $1,206 per ounce sold. I will now review each operation in turn. At this I can attribute the Boto production for the third quarter 2020 was 94,000 ounces, compared to 83,000 ounces in the second quarter, reflecting a material increase in third quarter production. Higher rates in the quarter relative to the second quarter were offset by the impact of ore recovery in line with expectation and by the impact of maintenance on throughput. We did have a slightly higher capitalized stripping in the third quarter compared to the second quarter with total cash costs impacted by higher royalties, while all-in sustaining costs were impacted by maintenance, higher input costs, and royalties. All-in sustaining costs were $1,045 for the quarter, compared to $1,123 in the second quarter. COVID-19 protocols are now embedded at this account with zero cases and operations effectively back to normal. For the balance of 2020, we continue to expect deficit ore with the negative impact on recovery. But despite this, we expect a solid finish to the year. As Gord noted earlier, we now expect the mill optimization project to be delivered in the first quarter of next year due to equipment certification and then refining billings. At wholesale, attributable gold production for the third quarter was 42,000 ounces, impacted by the suspension which ended on July 24 and processing of low grade stockpiles mixed with ore material from Saramacca. At Saramacca, we resumed activity to complete the final construction touches on the overall target for the fourth quarter. I will remind you that we have been utilizing the whole road since the first quarter while this work was being completed. Total cash costs were impacted by lower production volumes and royalties with all-in sustaining costs lowered due to lower milling costs and sustaining capital. All-in sustaining costs were $1,164 per ounce for the quarter. Our COVID-19 protocols have been updated with the current expansion underway. We expect to reach our normal workforce capacity in the first quarter of 2021 with our mining complement ramping up over the fourth quarter. The fourth quarter is expected to be a full quarter of continuous nil operations. We expect to complete non-critical path infrastructure for Saramacca in the first half of 2021. We are also in the preparatory stage of our upcoming collective labor agreement discussion. You can see our progress in this picture of the truck shop, the run of mine facility fund and the formwork and concrete at the facility. Westwood produced 23,000 ounces in the third quarter of 2020. In August and September, we achieved record throughput rates. We achieved our target production by blending open technology for Westwood underground ore. The increased production of Grand Duke relative to the second quarter was due to the timing of stop sequencing, along with ore Grand Duke contributions. The ore Grand Duke contributed to our total cash costs with all-in sustaining costs also impacted by equipment replacement and deferred development. As a result, all-in sustaining costs were high at $1,515 per ounce sold. To provide an update from our news release on Monday, the Westwood restarted yesterday evening while the underground operation remains suspended. You would have seen this slide before but I wanted to remind you that the up and spoke model we have for Westwood is based on the excess capacity we have at the mill which acts as a hub, with original targets acting as spokes. This model would see Grand Duke ore feed eventually followed by pending permitting with target production profile commencing at the end of 2022 and running for two years. I will now provide an update on our construction project Côté Gold. We believe the Côté Gold project leads as a tier-one asset, boasting a long life potentially in excess of 18 years 493,000 gold ounces annually in the first five years on a 100% attributable basis, second quarter total cash cost of $600 per ounce, second quarter all-in sustaining cost of $771 per ounce and location in a mining-friendly jurisdiction with further potential upside from exploration. We expect the Côté gold project to provide tremendous value to IAMGOLD with a net present value of $2.5 billion based on the gold price of $1900 per ounce, an internal rate of return of 25.9%. We are proud to have strong stakeholder relationships with our Joint Venture Partners Sumitomo, as well as indigenous communities Flying Post in Mattagami and of course, our northern communities. Today, detailed engineering for Côté has advanced to approximately 66% and we expect to ramp up activities in Q4. These include early works activities such as limiting of the campaign, to salvage operations in the future tailings area, expansion of the site access road network, and aggregate production. In the fourth quarter, we plan to focus on camp construction to increase the recommendation capacity on-site and the imminent manpower ramp up. Other construction work will also include site preparation and the finalization of the fish salvage activity. Detailed engineering will continue to advance and procurement will focus on the fabrication phase for critical equipment. Major earthworks are on track to start in the second quarter of 2021. We have continued to advance our permitting for construction. We recently received two key permits under the Lakes and River Improvement Act, the TMF starter dam approval under that act for the key priority structures under that application for construction. We also received the relevant environmental approval for the watering activities within the tailings management for our TMF footprint to support the conception of the TMF starter dam structure. We received the permit to take water. We have a few pictures here from our groundbreaking official ceremony in September which was attended by the Prime Minister of Canada, Premier of Ontario, First Nation and other industries and stakeholders. There are also some pictures of the fish mitigation program underway. This slide really highlights Côté's sensitivity to the gold price, with both after-tax net present value and internal rates of return shifting dramatically up in the current gold price environment. While we are pleased to see this potential, our internal modeling for Côté is based on conservative prices and assumptions so that the structure is defensively positioned for both price volatility. I will now turn the call over to Craig to discuss development and exploration.

Craig MacDougall, Senior Vice President Exploration

Thanks, Bruno, and good morning, everyone. As usual, please note that the results I talked about today have been previously disclosed in accordance with securities regulations and signed off by the qualified persons within the company reporting. In 2020, our planned exploration spend has been reduced to $41 million from $52 million excluding project development activities and studies. The main drivers of these adjustments were the various regional restrictions caused by COVID-19 during key program activity windows, followed by the usual work reductions from seasonal impacts such as the rainy season in West Africa. I have included here a few updates from the quarter. In Quebec, drilling activities resumed at the Nelligan project with 2,600 meters of diamond drilling completed from both infill and step out hole. Recall that resources on 100% basis for the project total 3.2 million ounces in an inferred category at a grade of 1.02 grams per tonne gold. We also reported results from the winter drilling program, with highlights of 39.1 meters at 2.14 grams per tonne gold and 34.5 meters at 1.85 grams per tonne gold. At the Monster Lake project located 15 kilometers north of the Nelligan project, we reported drilling results from the anti-shear zone targets including 3.8 meters at 16.9 grams per tonne gold, 2.8 meters at 5.63 grams per tonne gold and 12.3 meters at 2.09 grams per tonne gold. Also during the quarter, our joint venture partner at Monster Lake, TomaGold announced that both companies had signed an asset purchase agreement under which IAMGOLD would acquire the remaining 25% interest in the project held by TomaGold. Upon closing, this will increase IAMGOLD's ownership to an undivided 100% interest in the project. The completion of the sale is subject to usual shareholder and regulatory approvals for TomaGold, which are expected in the fourth quarter. We announced further results at the Rouyn gold project from our infill diamond drilling program to support the completion of a maiden resource estimate for the Lac Gamble zone, which we feel may have potential to provide future satellite feed to our Westwood operation. Highlights include 4.1 meters at 10.4 grams per tonne gold, 8.9 meters at 4.3 grams per tonne gold and 7.4 meters at 8.3 grams per tonne gold. During the quarter we also completed some 5,600 meters of additional diamond drilling to evaluate the resource potential of the nearby historic Astoria deposit located several kilometers to the east of the Lac Gamble area. As we have shown before, industry reserves have been on a steady decline since 2012, representing a significant challenge to the future of our industry. IAMGOLD has worked hard to differentiate ourselves from this industry trend. Our objective is more than just replacing reserves at the rate of annual mine depletion, but also to grow and expand our reserves. Because mine sites constantly deplete reserves and eventually mature, reserve replacement becomes increasingly difficult over time. To counter this, resource and reserve growth must also be achieved through exploration success at Greenfield development and early-stage projects. As shown on the slide, our success to date has been commendable. Besides our continued efforts at our mine sites and development projects, our greenfield exploration program has delivered a number of important exploration discoveries that will continue to supply the building blocks necessary to not only sustain reserves, but to provide opportunities for further reserve growth in the years ahead. As I've said many times, this can only be achieved through a sustained commitment to exploration through the cycle, and of course, the tireless dedication of our mine geology and exploration teams. At the Côté Gold Project, we were able to advance our work relating to assessing the resource potential of our new Gosselin discovery located 1.5 kilometers northeast of the Côté Gold deposit. Drilling activities resumed during the third quarter, and we completed approximately 3000 meters of diamond drilling from a bird-supported program. Drilling continues to focus on infill and step out drilling to support an initial resource estimate expected in 2021. Switching gears a little bit to talk about development at Boto. We continue de-risking activities in the quarter, with detailed engineering advancing to approximately 50% complete. Activities included engineering and preparations for the access road construction and upgrades to the installation of the camp. We also awarded engineering contracts related to plant equipment designs, as well as for the start of construction of the access road site. Restrictions related to the COVID-19 crisis have delayed the advancement of certain local site initiatives, such as community engagement and environmental activities; we expect to reschedule these as local conditions allow. In West Africa, exploration activities were restricted during the third quarter due to the rainy season. Efforts focused on data compilation of exploration results and target generation to guide future programs across our portfolio. At the Boto Gold Project in Senegal, drilling data obtained in the previous quarters is being incorporated to refine the resource and reserve models. Again highlighting 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, we're working to advance a strategic development concept we refer to as the 'Bambouk Gold Complex,' which will prioritize and advance resource development and delineation programs as at the Diakha-Siribaya and Karita projects to support the evaluation of potential development scenarios and identify regional synergies. Finally, we'll finish with our project pipeline. A robust and balanced project pipeline strategically assembled and advanced is a fundamental asset to the future viability of any mining company. And this is even more important in the current environment of bullish gold prices and declining global resources. Competition for access to quality exploration projects at acceptable entry costs remains challenging for the industry. IAMGOLD has developed and continues to invest in a healthy pipeline of early to advanced Greenfield exploration projects to support our future growth, as well as support near-mine Brownfield exploration with a view to sustain mine lives and leverage our existing infrastructure. With that, I will now pass the call back over to Gord to conclude.

Gord Stothart, President and CEO

Well, thanks, Craig. So IAMGOLD's transformational strategy centers on delivering the top-tier Côté Gold project, de-risking the Boto Gold project, optimizing our current operations, and continuing to invest in our pipeline of Brownfield and Greenfield exploration. Together with our financial strategy of maintaining a strong balance sheet, opportunistically securing favorable hedges on cost inputs and protective hedges on a portion of gold production during Côté construction, we believe IAMGOLD is positioned to deliver on its goal of superior returns to shareholders. In this context, we look forward to updating you on our ongoing progress in our operations and at Côté. I would like to close by acknowledging the hard work and dedication of our teams across the globe in these particularly challenging and unusual times. And thanks to everyone for joining our call today. And I'll now pass the call back over to the operator.

Operator, Operator

Our first question is from Fahad Tariq from Credit Suisse. Please go ahead.

Fahad Tariq, Analyst

Hi, good morning. Thanks for taking my two questions. First on Westwood. Look, I think, you know, there has been a history of seismic events at the mine and you revised the mine plan already and try to accommodate or deal with it a little bit. What more can be done that is in the company's control? And is there an increased focus now on Brownfield exploration near Westwood, perhaps recognizing that, the seismic events at the underground mine might be just a reality going forward? So maybe there are other deposits that need to be brought forward? Thanks.

Gord Stothart, President and CEO

Yes, I'll take that one Fahad. Look, obviously, we're still investigating what happened with this specific incident. It was in an area distinct from earlier incidents, and it's also in an area in a different rock unit than the prior incidents. But it was an area that was developed before the last round of engineering that was done. And the work we're looking at going forward is focusing on a different type of development sequencing. So we will continue to look at it, we are aggressively looking at the hub and spoke model and what the regional opportunities are. And some of that is in hand. And, and or just in the process of permitting or developing it, including Grand Duc sale. Obviously, the opportunity at that role continues to improve for us, the more we drill it out. And as we complete our business recovery plan at Westwood underground, we'll assess what that opportunity is. At the end of the day our goal is to have a safe, profitable operation. And that'll be first and foremost in our minds; if we're not able to achieve that safely, we'll have to adapt the plan going forward to get us there.

Fahad Tariq, Analyst

Okay, great. And my only other question on the cost guidance that's higher now, how much of that is Westwood related? Meaning lower production? And how much of it is something else? Because I'm trying to bridge that with? I think in another slide, you said that the COVID incremental COVID costs are not being included in the unit cost. So it sounds like the higher cost guidance is not necessarily COVID related, maybe just some color on, you know, the components of the higher cost guidance. That'd be helpful. Thanks.

Gord Stothart, President and CEO

Yes, I don't have a detailed breakdown of the components of the cost. But the adaptation in the cost is related to the incident at Westwood and us taking a conservative view of what the rest of the fourth quarter is going to look like at Westwood, and what the impacts then were on our consolidated costs. You know, we looked at it fairly closely. There are some impacts from lower production in Q3 for Rosebel, although that certainly is ramping up nicely and seeing some nice costs. Sorry, it's a nice production again, as well. You know, in the absence of the event at Westwood, I don't believe we would have adjusted all of the cost parameters; we may have adjusted one of them just to adapt to the actual from Q3, but it certainly was a significant driver for the decision to modestly change our cost guidance.

Carol Banducci, Executive Vice President and Chief Financial Officer

And Gord, I could add to that. What we are also seeing is higher royalties as a result of the higher gold price. And we had to push off some of our sustaining capital during, you know, COVID occurrences up at the mine site. So you'll see more of that coming into the fourth quarter.

Fahad Tariq, Analyst

Okay, that's clear. That's it for me. Thank you very much.

Operator, Operator

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

Jackie Przybylowski, Analyst

Thanks very much. I guess my first question I just want to follow up with Fahad's first question on Westwood, the guidance revision you gave for 2020 specifically the production guidance at Westwood. Do you assume in that production guidance that Westwood restarts in Q4 2020 or is the guidance reflecting processing of lower grade stockpiled ore through the entire quarter?

Gord Stothart, President and CEO

So, Jackie, yes, we took a very conservative view. We've obviously started our investigation but we don't want to be pressuring the operation to restart until we're ready to restart. The guidance is based as you sort of stated on the production, up until the actual incident. So basically through the end of November, and sort of the end of October, and then two months of processing from the open pit and from stockpile so that's what that guidance analysis is based on.

Jackie Przybylowski, Analyst

I guess that's helpful because we can't read into your guidance that you're expecting 2021 to be back up and running at full run rate or anything like that. It's still open-ended in terms of when the restart will happen and what it would look like.

Gord Stothart, President and CEO

As we said, I think starting with the Q1 and Q2 results, we have been reviewing the 2021 guidance not obviously just for Westwood but also the larger picture. At this point in time, we're withdrawing that guidance, and we'll be working really diligently over the next couple of months to firm up what the picture looks like going forward. As of right now, pending the outcome from this investigation, we're not comfortable saying anything about Westwood until we understand it. We will be updating in early 2021 with the 2021 guidance for the larger picture as well.

Jackie Przybylowski, Analyst

Okay, that's, that's helpful. Thank you. My second question would be I'm on the hedge program that you've reported for 2021 I guess, specifically. So you've said that you're aiming for about 15% to 20% of total production. I'm assuming that's attributable production to IAMGOLD? Based on that, and based on the information that you gave, it looks like you're kind of there for 2021 already with the hedges that you've disclosed. Is that fair or do you expect that you'll be adding additional hedges for 2021? Or do you think that you're sort of at your target already for next year?

Carol Banducci, Executive Vice President and Chief Financial Officer

Hi, Jackie, it's Carol. Yes, you're correct. We don't anticipate making any further additions for 2021. We're set as is. Looking at the weighted average, we have around $1,747 on the floor and close to $2,900 on the ceiling. So we feel confident about our position for 2021.

Jackie Przybylowski, Analyst

Perfect, I was actually going to be my last little tiny question. So thanks very much for that, Carol. And that's it for me. Thanks, everybody.

Operator, Operator

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

Anita Soni, Analyst

Hi, good morning, everyone. I'm just a little further on Westwood. Gord, you mentioned it was in a different zone that were separate from where their previous issues have occurred. Can you just remind me which zone that was?

Gord Stothart, President and CEO

I'm just trying to think of what information is out there.

Anita Soni, Analyst

I think you labeled them one through six.

Gord Stothart, President and CEO

I'm just trying to remember by sequencing. What it is it's dissolving, it's on the hanging wall side of Corridor 2, whereas the prior incidents had been on the footwall side of Zone 2.

Anita Soni, Analyst

Okay, but how close is it to the main infrastructure?

Gord Stothart, President and CEO

It's a lot which is quite distant from the main infrastructure. This was a set of workings to recover a zone that was a little bit further to the west. We actually have about 90%, 95% of that panel completely removed so far.

Anita Soni, Analyst

Okay. Relative to the average grade of the asset there, what was the average grade in that zone?

Gord Stothart, President and CEO

I don't have the exact figure, but my understanding is that it was a reasonable grade, probably close to average. It wasn’t the best material, but it certainly wasn’t low grade.

Anita Soni, Analyst

All right, and then just moving to 2021. I think within Q1 or Q2, you had already started to talk about 2021 guidance not yet revoked, but definitely being under review. And with all this prioritizing that was happening with last year, more COVID-related impact. So, outside of the Westwood impacts, can you talk about some of the other moving parts that might be impacting 2021 guidance, anything? Like one thing that I would be thinking about would be the slower ramp up at Rosebel, this quarter post-COVID-related shutdowns and how that winds and sways into 2021.

Gord Stothart, President and CEO

Yes, it went well, Anita. Part of the situation is related to the impacts of COVID, which led us to resequence some of our zones. This is particularly true for Rosebel, but it has affected all operations. The adjustments to our guidance are linked to when we have the information in hand, so we will be examining those timing impacts and how the sequencing now aligns with 2021. We are also conducting regular geological assessments to evaluate how the various deposits are performing as part of our ongoing operations. The timing changes due to COVID are likely the most significant factor, and we recognize that the situation at Westwood is also having a considerable impact.

Anita Soni, Analyst

Okay, and then my last question is back to Rosebel again, just on the back of VM. I was just looking at the operations, it looks like Saramacca has delivered some good grade and pretty good tonnage. But I guess the Rosebel proper was delivering a little bit more stockpile than I had anticipated. So can you just give us an idea of what the rest is, like outside of Saramacca, what the split was in terms of stockpile and/or source from the Rosebel pipe?

Gord Stothart, President and CEO

I'll pass that question to Bruno. The impact mainly relates to the drought, the gradual increase in our workforce after the suspension, and our efforts at the camp. We managed to get Saramacca operational again fairly quickly. At the main Rosebel section, we were mining and focusing on some priority pits. However, due to a decrease in the number of people able to stay at the camp while we expanded it, we had to utilize some of the lower grade stockpiles on-site to keep the mill supplied. I'll let Bruno provide more details on that.

Bruno Lemelin, Senior Vice President Operations and Projects

Yes, so we put into three, we were able to ramp up our details, close to 1000 ton today, after the resumption of our activities. Actually, we have close to 600,000 tons of stockpile at Saramacca. So we'll continue to ramp up for Q4. That's what is done.

Gord Stothart, President and CEO

Bruno, the question was for the Rosebel proper contribution. Do we understand the tonnage split between stockpiles and direct pit feed in Q3?

Bruno Lemelin, Senior Vice President Operations and Projects

I would like to come back to the number.

Anita Soni, Analyst

Yes, I just want to get an idea of what the actual run rate is relative to full throttle production at the Rosebel?

Gord Stothart, President and CEO

Yes. Understood. Okay.

Operator, Operator

The next question is from Josh Wilson with RBC. Please go ahead.

Josh Wilson, Analyst

Thanks. Another question on Westwood. Is there any context you could provide as to what the damage is right now, or maybe how you would compare it to the prior incidents on the 104 level.

Bruno Lemelin, Senior Vice President Operations and Projects

Sorry, can you repeat the question, please?

Josh Wilson, Analyst

Is there any ability to characterize or quantify the level of damage as it would have compared to prior seismic events? I guess, the closest one would be the 104 level incident a number of years ago.

Bruno Lemelin, Senior Vice President Operations and Projects

Well, as we mentioned, we need to assess what caused the event; and, like what you're saying is the impact on the production schedule right now in that zone. We were about to finish completely the mining of the zone. I would say that we will be giving you more details after the investigation, and looking at what is the consequence of the event on future production. We'll provide an update on these in the course.

Josh Wilson, Analyst

Okay, and is there any ability to maybe quantify the reserve volume that would be in that area?

Bruno Lemelin, Senior Vice President Operations and Projects

I mentioned that we are nearly finished with the zone. Currently, we are examining how this affects the mine plan, but when it comes to valuation or reserves, there's not much to discuss at this stage; our focus is primarily on the mining plan. The impact is less significant and is located on the far west side of the mine, to be precise.

Josh Wilson, Analyst

Okay. And then for Saramacca. You mentioned the stockpile that was in place. If I recall, looking at the old tech report mine plan, there's about a two-ish year ramp up, including I guess, 2021, which would have been in there, where the mine or Saramacca's contribution would be below its steady state. So when you say the guidance for full throughput is expected at a year-end, is that rate expected to be in line with what the old mine plan was? Or should that be close to that 6700, 6800 tons per day processing?

Bruno Lemelin, Senior Vice President Operations and Projects

Yes, actually, we see stronger and positive impacts in Q4 differently with great impact at the mill. So the contribution for Saramacca for Q4 is expected to be positive. As we speak right now, we are finalizing the loan for 2021; so we will be able to guide on this with regard to what Saramacca is expected to give versus the original plan.

Josh Wilson, Analyst

Okay, and then last question, just in terms of gold price assumptions for year-end reserves and resources. Any thoughts on that?

Gord Stothart, President and CEO

We are not planning to change our gold price assumptions for reserves or resources this year. As part of our overall strategy, which we have mentioned multiple times, our focus is on generating cash flow from existing operations, at least during the construction period for Côté. At this time, we do not intend to modify or adjust grades away from that plan. In the medium term, if higher gold prices continue, we will eventually start to consider adjusting our approach, particularly in relation to projects with shorter mine lives and understanding the impacts of those changes. The long-term planning team is regularly assessing what those impacts might be. However, for corporate disclosure, we will not be altering our figures.

Josh Wilson, Analyst

Great. That's all my questions. Thank you very much.

Operator, Operator

The next question is from Don MacLean with Paradigm Capital. Please go ahead.

Don MacLean, Analyst

Good morning, most of my questions on Westwood were answered. I guess it's unfortunate that a relatively small contributor to the production and cash flow is occupying so much intellectual horsepower at the company. Gord, I guess the underlying question here is, at what point do you throw in the towel on this thing? Do you get to that point? Is it sufficiently profitable if you look at it from a macro perspective, to be worth all this effort?

Gord Stothart, President and CEO

It's a great question, Don, and it's certainly something we've been discussing internally. For now, we will wait for the analysis of the incident and the business recovery plan. Our assessment will be similar to any evaluation of an asset: how can we best provide returns for shareholders through our capital allocation? That's the question our efforts at Westwood will need to address in relation to our other opportunities. It's too early to discuss this now. As I mentioned before, the incident hasn't significantly impacted our reserve ounces. However, as we consider whether we need to adjust anything about how we mine this deposit to enhance hazard abatement, we need to determine if that would require a different capital plan than what we've previously outlined. We haven't reached that stage yet, but it is a matter of capital allocation, particularly in the context of our commitment to safe mining practices.

Don MacLean, Analyst

It's a tough one if we just stand back and look at it from a market perspective when you're being held or judged operationally on something that is really totally out of your control. The Essakane and Rosebel are challenging in their own right but it's something you can manage. But Westwood is just, you get these situations that are totally outside of all your best efforts that really throw your whole sort of operational perception on the market, off-kilter. So it's most unfortunate, it'd be nice if you could somehow isolate it in some ways that people can judge Essakane and Rosebel the real backbone of the company on a fair basis without it being colored by Westwood.

Gord Stothart, President and CEO

Those are the questions we are asking ourselves now.

Don MacLean, Analyst

Can Grand Duke and other projects possibly sustain the mill as a profitable entity?

Gord Stothart, President and CEO

Yes, again, that's a question. None of them were intended to be 100% producers, so we'll have to look at it. Maybe there are other opportunities as well. It really is a holistic picture. The hub and spoke concept that Bruno described very well really, the underlying assumption there was that Westwood was profitable in and of itself and providing a baseload fill of the mill. If that sequencing is different, then we need to evaluate sort of the overall picture. As you pointed out earlier, on most models, the proportion of value that's assigned to Westwood within our portfolio is relatively small. The whole hub and spoke concept that Bruno and the team at site and the team at long have been driving towards was to provide a longer-term valuation superior to sort of the Westwood base case and we'll need to understand that all sort of in a holistic way.

Don MacLean, Analyst

Then just, you may not be able to answer this but have you ever had expressions of interest from potential buyers for Westwood?

Gord Stothart, President and CEO

I'd like to say, Don, that's something we really don't typically answer publicly until things get a little further along if that were to ever happen.

Don MacLean, Analyst

Okay. Just thought I'd ask that question. And then lastly, Gord, any kind of color on 2021 compared to what we've seen in Q3 if we cross out Westwood, how Rosebel and Essakane will look in a broad sense, will they look better or pretty much the same?

Gord Stothart, President and CEO

At a high level, my expectation is that Essakane will continue to be a fairly steady producer. Yes, we experienced some COVID impacts this year. If you exclude those impacts, I believe Westwood next year will resemble the steady-state without those disruptions, assuming no further impacts occur in the future. As Saramacca begins to contribute significantly to production for a full year, we anticipate some improvement at Rosebel. We are currently assessing the extent of that improvement, and as I mentioned earlier, we are also trying to understand how the COVID impacts have affected our sequencing plan at Rosebel and how that will influence 2021. We are in the process of compiling all that information.

Operator, Operator

This concludes the question and answer session. I'll now turn the call back over to Indi Gopinathan for closing remarks.

Indi Gopinathan, Vice President Investor Relations and Corporate Communications

Thank you very much. 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 a fourth quarter and full year 2020 conference call in February. Goodbye.

Operator, Operator

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