Earnings Call Transcript - IAG Q2 2023

Operator, Conference Operator

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Second Quarter 2023 Operating and Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. At this time, I'd like to turn the conference over to Graeme Jennings, Vice President, Investor Relations and Corporate Communications for IAMGOLD. Please go ahead.

Graeme Jennings, Vice President, Investor Relations and Corporate Communications

Thank you, operator. Welcome everyone to the IAMGOLD second quarter 2023 results conference call. Joining me today on the call are Renaud Adams, President and Chief Executive Officer; Maarten Theunissen, Chief Financial Officer; Bruno Lemelin, Senior Vice President, Operations and Projects; Tim Bradburn, Senior Vice President, General Counsel, and Corporate Secretary; and Jerzy Orzechowski, Executive Project Director Cote Gold. Before we begin, we are joined today from IAMGOLD’s Toronto office, which is located on traditional lands. At IAMGOLD, we believe respecting and upholding indigenous rights is founded upon relationships that foster trust, transparency, and mutual respect. Please note that our remarks on this call will include forward-looking statements and refer to non-IFRS measures. We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures, including the presentation and the reconciliations of these measures in our most recent MD&A. With respect to the technical information to be discussed, please refer to the information on the presentation under the heading qualified person and technical information. The slides referenced on this call can be viewed on our website. And I will now turn the call over to our President and CEO, Renaud Adams.

Renaud Adams, President and Chief Executive Officer

Thank you, Graeme, and good morning, everyone. Thank you for joining us. The second quarter for IAMGOLD was an important period for the company, as our operating teams made significant strides at both Essakane and Westwood, to bring our year-to-date attributable production to 220,000 ounces of gold at cash costs of $1,234 per ounce while keeping a safe work environment. We will walk through the quarterly operating results in more detail in a moment, but I want to congratulate our Essakane team for their remarkable resilience, which allowed the mine to resume both mining and milling at full capacity in a very complex environment. Secondly, we resolved significant progress on the Cote Gold Project. In June, the site reached over 1,900 workers working together to push the project to approximately 86% completion. We remain on track for the top end of our cost to complete guidance in line with the project planned capital. Further, we are now seeing transition activities from bulk construction to finishing activities and operational readiness. At Westwood, we continue to execute our optimization plan, with the objective to turn the mine into a positive cash flow producer in the near term. The second quarter was my first four quarters as CEO in IAMGOLD, and my conviction has only grown that this is a company poised to position itself amongst our peers. We are entering a transformational period for the company, and I'm extremely pleased with the expertise, relevant experience, and leadership in place at IAMGOLD. Our zero harm mission continues to be our number one priority, and we are looking at our corporate ESG strategy and execution. Looking ahead to 2024, once Cote Gold comes online and should Westwood take the next step in production post rehabilitation, the company will have a significantly higher production base and lower cost profile, providing a strong foundation for cash flow and growth opportunities in Canada. Yet, before we get there, the short-term goals for IAMGOLD are clear: bring Cote online with a strong focus on achieving a steady and sustainable ramp-up of operations and manage operations at Essakane and Westwood to improve our margin while ensuring the safety of people in the community in which we operate. Longer-term, our goal is for IAMGOLD to become a high-margin intermediate gold producer with a strong operating base in Canada. Financially, we will characterize returning our 70% position in Cote with our partners, Sumitomo, as well as use our cash flow to optimize our balance sheet and to deliver the company a more efficient and balanced capital structure. With that, we will now dive into the operating and financial results and highlights for the quarter. Starting with health and safety, the company has seen an improving trend year-over-year, with a days away, restricted transferred duty rate of 0.39 and a total recordable injury rate of 0.66 based on 200,000 hours worked, ensuring a safe work environment is always our primary focus at IAMGOLD, and our goal continues to be Zero Harm. In production for Q2, the company produced 107,000 ounces of gold on an attributable basis, putting us well on the path for our guidance target of 410,000 to 470,000 ounces of gold this year. As we will get into a moment, the production results were driven by performing to plan and higher grades recently revalidated in the underground zone at Westwood, which helped mitigate the impact of some operating restrictions due to poor air quality in the region from the forest fires in the quarter. The second quarter saw IAMGOLD report cash cost of $1,376 per ounce sold and an all-in sustaining cost of $1,912 per ounce. Our cost increase over the year prior mainly due to increased costs of blended supplies, including fuel, higher power costs, and previously forecasted lower grades at Westwood, as well as increased rehabilitation costs at Westwood. As a result, we expect costs to come in at the top end of our annual guidance ranges. Turning to Essakane. The mine reported Q2 attributable gold production of 88,000 ounces, bringing the year-to-date total to 180,000 ounces of gold. Mining activities totaled 13.5 million tonnes, a significant increase quarter-over-quarter as the mining fleet returned operations to full capacity. Mining activity in the second quarter completed the transition to Phase 5, resulting in a higher strip ratio, in line with our plans as the operations move to new mining phases and lower grades from the prior quarter when grades were positively influenced by desired feed material from the bottom of Phase 4 of the pit. Mill throughput in the second quarter was 3.1 million tonnes at an average head grade of 1.11 grams per tonne, with throughput 42% higher than the first quarter. The mill reported an average recovery of 89%, which declined slightly from the prior quarter and the year prior due to lower grades, including a higher concentration of gravity carbon and sulfur. On a comp basis, the cash cost reported was $473 per ounce, an increase from the first quarter as head grades declined 30% from Q1 at the highest strip ratio. Additionally, we saw sustained system higher prices for consumables as inflation pressures eased, but with few signs of reversal as well. There was an increase in the landed cost of fuel due to the impact of the security situation in the supply chain, along with higher labor costs and depreciation of the local currency, and an increase in power generation costs as heavy fuel, normally used for power generation, was periodically substituted with more expensive fuel in order to maintain operations during the period when supplies were limited. We are currently building additional tank capacity at this site, which will increase the HFO storage capacity by approximately 50%. We expect that the extra capacity will be in place in early Q4. On an all-in sustaining basis, costs increased to $1,587 per ounce due to the higher operating costs as well as scheduled higher volume stripping as the mine enters new phases. Looking ahead, Essakane is on track for production in the range of 340,000 to 380,000 ounces of gold. Mining activity is expected to maintain normal operating levels in the second half of the year, including increased levels of waste stripping to open phases for 2024 onwards. The mill feed will consist of a combination of direct feed and stockpile as the mine fleet sequences through the targeted phases of waste stripping. Capital expenditure guidance for Essakane remains unchanged at approximately $155 million. We increased the volume of capital that provides waste in the second half of the year. Total tonnes moved are in line with the second quarter to provide access to mine areas in support of the 2024 and 2025 production plan. It is important to note that the mining activity and stripping programs assume no significant disruptions in the supply chain resulting from the security situation in the country and the region. The company plans to file an updated life of mine or an updated mineral resource during the fourth quarter of 2023. This will include the details of assessing the 9.9 million tonnes of stockpile material through the CIO circuit versus the prior plan to outline a capital-intensive heap leach scenario. Turning to Westwood. Gold production was 19,000 ounces in the quarter and 40,000 ounces year-to-date. Westwood continues to be in a unique position, as IAMGOLD has been essentially rebuilding the underground mine at the same time as active mining operations are being conducted. The mine has made significant strides over the year towards taking the next step in production entering 2024. Mining activity in the second quarter totaled 212,000 tonnes of ore, which was lower than the prior quarter due to the impact of heavy wildfire smoke in the vicinity of the mine operations requiring multiple underground shifts to be canceled to ensure the continued safety of our workforce. However, it is worth highlighting that underground mining activities returned 56,000 tonnes of ore at a grade of 7.6 grams per tonne, which is the highest grade mined from underground in over five years. Mill throughput within the second quarter was 251,000 tonnes at an average head grade of 2.52 grams per tonne and improved recoveries of 94%. Cash costs and all-in sustaining costs continue to apply at Westwood with a very high sensitivity to line output due to the increased levels of ground support required for development and rehabilitation work relative to the annual plan. Additionally, mining activity started at the satellite open pit Fayolle with minimal productions in the quarter, yet adding $2.4 million of failed development capital to operating costs. Looking ahead, Westwood is well on track with our guidance range of 78,000 to 90,000 ounces this year. Production levels and unit costs are expected to improve into the second half of the year, benefiting from the continued advancement of underground development, providing access to more and higher grade stope sequences. I just want to take a moment to dive a little deeper into our activities at Westwood. Underground development year-to-date is near record development rate with 2,855 meters of lateral development completed to secure safe access to multiple ore faces, including high-grade pass producing areas, which would allow for increased operational flexibility in support of the 2024 and beyond production plan. We have increased the sustaining capital expenditure guidance for Westwood by $35 million. Underground rehabilitation and development has been progressing ahead of schedule due to better-than-planned productivity rates, moving some of the 2024 work into 2023 and reducing the work required in 2024, while some of the rehabilitation work requires more ground support, increasing costs. This work is not only allowing the return of mining into higher grade areas that were previously closed, but it also opens the door for potential mineral reserve increases should this variance be upgraded from resources as they are proven to be mineable. We will have an update in Q4 for Westwood. As production volumes increase and rehabilitation work decreases, we expect to see cost cut down, with the goal of positioning the assets for positive free cash flow for a better and profitable 2024 and beyond. Turning to Côté Gold. I am pleased to have our executive project director here with us today, to walk us through the developments and progress in the quarter.

Jerzy Orzechowski, Executive Project Director, Côté Gold

Thank you, Renaud. In the second quarter, considerable progress was made at Côté Gold, achieving significant milestones in earthworks, processing plant, and operational readiness. It was a critical quarter as we started the quarter in the spring thaw season. Water management systems have been put in place. I must compliment the teams for their planning and management. At the end of the quarter, the project was approximately 86% complete. As Renaud mentioned, we are now seeing activities move from bulk construction to the more detailed and very important finishing activities. The physical changes of the site have been remarkable. We currently have over 1,900 workers on site, with the camp at peak capacity. Our construction teams, contractors, and subcontractors have done a great job, and we have reached the milestone of 225 million hours of work. On earthworks, we completed phase 1 on the TMF and have started to accumulate water in preparation for the pump startup. The primary and secondary crushing circuit made considerable achievements with the HPGR arriving on-site and installation progressing at the first phase. Inside of the plant, the installation of the ball and new liners is ongoing, and the multi-server active site will facilitate installation in early Q3. We have completed the installation of the leach tanks and agitators, though our timeline was approximately six to eight weeks later than originally planned due to prioritizing the workforce on the critical installations of the crushing circuits. Finally, the power substation is now being commissioned, with the connection to the provincial hydro grids scheduled for this month to allow for the full electrification of the site and the deployment of the electric shovel later this quarter. Moving to recent pictures, let me walk you through the main project areas of the site. Here we can see the TMF, and the second liner boundary at 396 has completed phase 1, allowing for accumulation of water for the startup that you can see was also done. The next phase will see the down-rising to 409 elevation, allowing for the full first 12 months of operations. The middle top is the high-voltage substation. The substation focus has shifted from construction to commissioning to prepare for the electrification and connection to the hydro grid. Top right is the view of the primary crusher, where the fueling auxiliaries are complete, and we are now putting the roof decking in place to commission the bridge crane for the final lifts of the crusher components. Bottom left illustrates very advanced mechanical installation in the HPGR area. The bottom middle is grinding; we are transitioning to the final stage of the sub-construction and early commissioning activities. On the bottom right, you see the leach tank farm area, where we are focusing on the finalization of mechanical action, electrical, and the completion of the piping installation. The Côté Gold project is tracking well to our updated project schedule and we work towards production in early 2024. We are closely aligned with our partners, Sumitomo, and our contractors to ensure that the project is completed safely, on time, and within the current budget and scope. Our focus in Q3 will be on completing the construction of the remaining portions of the plant and starting pre-commissioning activities. Q4 will be focused on the finalization of pre-commissioning and preparation for ore introduction early in the year. With that, I will turn the call back to you, Renaud. Thank you.

Renaud Adams, President and Chief Executive Officer

Thank you, Jerzy. On Côté, I'd like to add that our goal is straightforward. We want to ramp up Côté to be among the most successful major gold projects. That is not to say we are naive about the challenges ahead, but the team we have in place and continue to build has done this before. We're excited about the future at Côté and what it means for IAMGOLD. When talking about the future, we need to continue to highlight Gosselin. We are continuing to drill at Gosselin with nearly 1,000 meters complete this year. The deposit has only been drilled with a fraction of the meters compared to Côté, and it remains open over a long strike. Our last batch of assays released earlier this year successfully intersected mineralization to the south and below the current resource boundary of the deposit. The goal of the current drill program is two-fold: continue to expand the mineralized envelope of Gosselin, as well as infill to support ongoing technical studies and advance metallurgical testing to support mining and infrastructure studies. We expect to have results from the ongoing drilling program in early Q4. We believe Gosselin, with its initial resources of 3.4 million indicated ounces and 1.7 million ounces inferred, continues to be in the early stages of discovery. Its location immediately adjacent to the Côté deposit has the potential to add real value to the Côté project. With that, I will pass the call over to our CFO, who will walk us through Côté funding and financial review.

Maarten Theunissen, Chief Financial Officer

Thank you, Renaud, and good morning, everyone. Looking at project spending, the Côté Gold UJV incurred $270.1 million in project expenditures on a 100% basis or $189.1 million on a 70% basis during the quarter. It is worth highlighting that for accounting purposes, the JV funding and amending agreement does not meet the requirements under IFRS to recognize the dilution of the company's interest in the Côté UJV as a sale, so the company will continue to account for 70% of the assets and liabilities of the joint venture, as well as 70% of the incurred project expenditures. The company has recognized a financial liability on the balance sheet that approximates the current repurchase price, representing the $250 million funding contribution that Sumitomo made on IAMGOLD's behalf, which resulted in our interest being diluted to 60.3% as well as incremental funding that Sumitomo made due to their increased ownership. This liability will continue to increase with the 9.7% of incremental funding that Sumitomo provides until Côté achieves commercial production. Since the commencement of construction, $2.23 billion of the planned $2.965 billion of project expenditure has been incurred. Looking ahead, the remaining cost to complete Côté is estimated at $665 million to $735 million at 100%, or $416 million to $515 million at 70%. The higher range of the estimate to complete of $735 million will take us to the $2.965 billion outlined in the August 2022 technical report. During Q2, Sumitomo funded the remaining $61 million of the $250 million total as per the agreement on behalf of the company, and an additional $18 million due to increased ownership. Sumitomo funded all of the joint venture cash flows up to May, and the company commenced funding in June, providing approximately $60 million to the UJV during Q2. IAMGOLD will now fund 60.3% of the UJV cash flows, which is approximately $425 million to $475 million during the construction phase. Turning to the Q2 financials, revenue from continuing operations totaled $238.8 million from sales of 111,000 ounces at an average realized price of $1,973 per ounce. Adjusted EBITDA from continuing operations was $63.8 million for the quarter, translating to an adjusted loss per share of $0.01. In terms of our financial position, IAMGOLD ended the quarter with $747.7 million in cash and cash equivalents and $452.5 million available via the fully undrawn credit facility, which equates to total liquidity of approximately $1.2 billion. We are investing excess cash funds in Canada at rates close to 5%. We note that within cash and cash equivalents, $91.3 million was held by Côté Gold and $170.1 million was held by Essakane. For Côté, the Côté Gold UJV requires its joint venture partners to fund in advance two months of future expenditures and cash flows prior to the beginning of each month, resulting in the month-end cash balance approximating the following month's expenditure. For Essakane, the company mainly uses dividends to repatriate funds, of which the company will receive 90% based on its ownership net of dividend taxes. There's a planned dividend during the second quarter of $120 million, which was received by IAMGOLD subsequent to the quarter end, net of minority interest and withholding taxes. We note that the full extent of the credit facility availability is subject to a net debt to EBITDA ratio and interest coverage covenants. Therefore, the full extent of additional liquidity of the facility relies on the ability of our operations to generate sufficient EBITDA to support the covenants of the company. This is one of the reasons we announced the $400 million term loan in the quarter, which allowed the company to pay down the credit facility and use the term loan for capital requirements of Côté, de-linking Côté funding from macroeconomic pressures and our other operations. The term loan improves both the balance sheet and strength and flexibility, allowing the credit facility to be available to support working capital requirements during a pivotal year when ramping up Côté and delivering legacy gold. IAMGOLD aims to fund the remaining portion of the Côté UJV funding estimate of $425 million to $475 million from available cash balances and the remaining proceeds from the Bambouk asset sales. As Renaud noted at the beginning of the call, as Côté wraps up, we can turn our attention to key longer-term financial goals of returning to 70% in the Côté UJV and delivering our balance sheet towards a more optimal capital structure. Thank you, Renaud. I want to take a moment here to thank everyone on the IAMGOLD team for their tireless efforts and dedication. This is an exciting time for this company. I should also note that we will be holding a tour for our investors and analysts in October, and I encourage you to reach out to Graeme and myself to be part of the trip. We expect it would be very well attended considering the progress at Côté to date.

Operator, Conference Operator

We will now begin the question-and-answer session. Our first question is from Lawson Winder with Bank of America Securities. Please go ahead.

Lawson Winder, Analyst

Thank you, operator. Good morning, Renaud and team. Renaud, it's very nice to hear from you. I want to just ask a question to get an idea of your long term vision for IAMGOLD now that you've been in the role for about a quarter, particularly with respect to geographic focus and whether IAMGOLD could potentially exit Burkina Faso once Côté has ramped up?

Renaud Adams, President and Chief Executive Officer

I appreciate the question. Our priority right now is definitely focused on Côté, building a strong Canadian platform, and continuing to operate safely while generating cash flow. We appreciate the situation in Burkina and the regions; our efforts continue to make the mine work well for us and serve as a significant contributor. As we move forward in the future, we'll address step-by-step the building of this company. But at this stage, while we continue to focus on the strong and safe operation of Essakane, we are developing and growing a very strong base in Canada.

Lawson Winder, Analyst

I wanted to ask about the plan to update the life of mine plan for Essakane. Is the thinking that the mine life might be reduced as a result of the move away from heap leach?

Renaud Adams, President and Chief Executive Officer

No, we're definitely not seeing a reduction. There were questions about those tonnes that were previously meant to be on the heap leach, but the team has worked very hard and diligently to address those issues. We've been capable of replacing some mined ounces, so we do not expect a reduction in the life of the mine.

Lawson Winder, Analyst

I wanted to touch on Westwood, just given that you've had knowledge of this asset for quite some time. You've painted a picture of an improved outlook going forward in your prepared remarks and in the MD&A. What is the upside for this mine? Is anything in the 100,000-ounce range potentially achievable?

Renaud Adams, President and Chief Executive Officer

We're already under guidance this year with 70,000 to 90,000 ounces, and we feel pretty confident we will meet that. While you mentioned the 200,000 ounces, pushing the mine to its limit is not our goal in the near future. I would rather see this mine focused on quality, returning to strong and higher grades on the ground, which we are currently prioritizing. In the short term, we are using surface satellite resources. But the real strategy here is to prepare the mine for higher-grade areas to ensure the economic viability. We don’t see the mine returning to 200,000 ounces, but we are confident it could be a 125,000 to 150,000 ounces producer at a much better margin.

Lawson Winder, Analyst

Regarding Côté and the autonomous truck haulage, is the assumption that you will be operating at 100% autonomous truck haulage from day one, or is there flexibility to address potential hiccups?

Renaud Adams, President and Chief Executive Officer

I'm looking forward to the site tour in October to see the progress firsthand. I will ask Bruno to add to that question.

Bruno Lemelin, Senior Vice President, Operations and Projects

It was part of the original assumption to start with the autonomous fleet right from the get-go. We see a ramp-up that is on target. There is no need for operating the fleet via operators; we are commissioning trucks one after the other, and they are fully utilized autonomously, and it works really well.

Lawson Winder, Analyst

Thank you all very much.

Operator, Conference Operator

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

Anita Soni, Analyst

Good morning, Renaud and team. A few questions regarding Côté. Can you talk a bit more about the process of the leach tanks? How many of the total leach tanks are you building that will be up and running at the beginning? How does that impact the ramp-up going into 2024?

Renaud Adams, President and Chief Executive Officer

I'll ask Jerzy for the details, but I can assure you that overall, we are not seeing issues with the tanks that would impact the commissioning of the mine.

Jerzy Orzechowski, Executive Project Director, Côté Gold

Thank you, Renaud. Regarding the leach tanks, the installation is quite advanced. We are in the electrical and piping installation phase. Most of the detectors are installed, and we have to adjust the workforce to focus on some critical areas, such as the crushing circuit. The installation is in an advanced stage, and we are preparing for pre-commissioning work and hydro tests. We will start with the first four or five tanks and gradually introduce more tanks into the circuit as the startup progresses.

Anita Soni, Analyst

Can I get another question regarding the tailings facility? How much capacity do you have in Phase 1? How much additional capacity are you looking for in Phase 2 of the dam?

Jerzy Orzechowski, Executive Project Director, Côté Gold

Phase 2 of the dam is designed for the full one-year capacity of production. Phase 1 is about 1.5 million cubic meters, which allows us to accumulate enough water for startup. Phase 1 is complete, and this is why I emphasized it; the best way to visualize it is with the liner lines.

Anita Soni, Analyst

So, the Phase 2 is the full capacity. You would definitely want that completed by Q4, correct?

Jerzy Orzechowski, Executive Project Director, Côté Gold

That's correct, yes.

Renaud Adams, President and Chief Executive Officer

Just to clarify, we currently have enough capacity to startup.

Anita Soni, Analyst

So when we think about next year, you indicated early 2024. Can you provide color on what early means? When do you expect the first gold pour?

Jerzy Orzechowski, Executive Project Director, Côté Gold

We are not prepared to give a finer date than early Q1. Our focus is on ramp-up and achieving the nameplate capacity rather than on the gold pour.

Renaud Adams, President and Chief Executive Officer

We’re confident that the gold pour will occur in early Q1.

Anita Soni, Analyst

I want to circle back on Westwood. You talked about achieving 125,000 to 150,000 ounces. You also mentioned the La Fayolle property should contribute to the production mix in the latter half of the year. Could you remind me of the grades at that one in the open pit?

Renaud Adams, President and Chief Executive Officer

Bruno?

Bruno Lemelin, Senior Vice President, Operations and Projects

Hello, Anita. Fayolle is expected at around 4 to 5 grams per tonne. We intend to move about 100,000 tonnes this year from Fayolle.

Anita Soni, Analyst

How much have you done to date there at Fayolle?

Bruno Lemelin, Senior Vice President, Operations and Projects

Just starting with minimal amounts.

Anita Soni, Analyst

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

Renaud Adams, President and Chief Executive Officer

Thank you, Anita.

Operator, Conference Operator

We will now take the next question from Mike Parkin with National Bank. Please go ahead.

Mike Parkin, Analyst

Hi guys. Thanks for taking my questions. Can I just confirm the timing of the life of mine update for Essakane? When is that due?

Renaud Adams, President and Chief Executive Officer

We're targeting Q4, likely mid-Q4. We want to ensure everyone has a chance to digest the report prior to our early 2024 earnings.

Mike Parkin, Analyst

You've guided to higher costs. Essakane has been tracking around $110 million over the last 12 months. Can you provide context on what is driving the $120 million direct operating cost in Q2? What's going to drive it down in the second half to align with your guidance?

Renaud Adams, President and Chief Executive Officer

If you look at the last couple of years, a significant driver has been the increased spending around security to keep everyone safe, and the team has done an outstanding job. Fuel costs are also a big ticket item affecting Q2 significantly. Moving forward, we expect capitalized waste stripping to pursue its current plant program. Additionally, we are improving our storage capability, which will ensure we can operate fully powered with a more cost-efficient heavy fuel oil. Overall, the team is performing well; we're facing procurement challenges, security issues, and some difficulties providing HFO for power generation.

Mike Parkin, Analyst

Thanks very much.

Operator, Conference Operator

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

Tanya Jakusconek, Analyst

Good morning. Thank you for taking my questions. When is the technical study of Gosselin coming out? You mentioned that you are working on that one as well?

Renaud Adams, President and Chief Executive Officer

The metallurgical studies are a priority. We are aggressive with drilling and growing the deposit, and we won't rush into integration studies until we have a solid understanding of Gosselin's size. We expect late 2024 or 2025 for updates on the technical study.

Tanya Jakusconek, Analyst

For Essakane, should we see costs balance out for the rest of the year? Will the production be evenly split?

Renaud Adams, President and Chief Executive Officer

We expect a moderate decrease in Q3 and Q4 as the fuel situation normalizes. We should see capitalized waste stripping maintain its plan, and mining overall should reflect a stable cost structure.

Tanya Jakusconek, Analyst

Regarding cash flow from Essakane, we have higher risks with security issues in the country. Can you remind me what you are doing to mitigate this risk? What inventory levels do you have?

Renaud Adams, President and Chief Executive Officer

We're increasing our working capital to secure supplies. We are building additional fuel storage capacity, which will help us address our inventory levels. This will mitigate risks related to security as we ensure we can operate smoothly.

Maarten Theunissen, Chief Financial Officer

We are seeing an increase in inventory on-site as we try to build capacity when opportunities arise. There's been an increase in cash at Essakane, around $170 million, which we've partly repatriated via dividends. We're successful in moving funds from the country without any issues.

Tanya Jakusconek, Analyst

Are your inventory levels for fuel, explosives, and other consumables at six months?

Maarten Theunissen, Chief Financial Officer

For fuel, we typically maintain an inventory of about 15 to 30 days but are aiming to increase that to 40 to 45 days due to our current operational context.

Tanya Jakusconek, Analyst

Thank you very much. Good luck.

Renaud Adams, President and Chief Executive Officer

Thank you.

Operator, Conference Operator

This concludes the time allocated for questions on today's call. I would like to hand the call back over to Graeme Jennings for closing remarks.

Graeme Jennings, Vice President, Investor Relations and Corporate Communications

Thank you very much, operator, and thank you to everyone for joining us this morning. Should you have any additional questions, please reach out to Renaud or myself via phone or email. Thank you all. Be safe and have a great day.

Operator, Conference Operator

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