IAMGOLD (IAG, Financial) recently released solid results recently despite weak gold pricing. Its Westwood deposit that has higher grade and lower cost structure continues to enhance its overall production and cost profile. In addition, the company is seeing positive trends in production, costs and cash generation that should improve its bottom line performance going forward.
The way forward
Looking forward, the company remains quite upbeat to focus on operation, growing production and minimizing costs. IAMGOLD is quite excited about its newest commercial operation for Westwood. It expects its Westwood mine to continue perform well over the coming years. It is producing 1,400 tonnes of gold per day with total cash costs of $772 per ounce, which is higher than its earlier cash costs estimates of $750 to $850 per ounce. For the third-quarter Westwood has accounted nearly 15% in costs savings.
However, the company has reduced total production guidance from its Doyon division to 95,000 to 100,000 ounces of gold. This division has produced 57,000 ounces of gold so far this year including 10,000 pre-commercial ounces of gold from Westwood and 12,000 from its Mouska before closing the mine. Nevertheless, it has maintained its total costs guidance at its Doyon division between $750 and $850 per ounces of gold.
In addition, IAMGOLD should benefit from the mill expansion from its Essakane facility. It is done away with ramp-up of the processing of higher grade hard rock at this mine. It expects the expansion at its Essakane mine to produce higher grades and lower costs going forward and enhance its production in the fourth-quarter. The company has increased production guidance for this mine. It now expects its Essakane facility to 330000 to 335000 ounces of gold from 315,000 to 320,000 ounces of gold.
However, it has reduced its production guidance at its Rosebel facility. It is at present implementing various measures stemming from the grade control audit, along with the move to reverse circulation drilling for in-pit grade control. The company expects its Rosebel facility to yield gold production of 330,000 to 335,000 ounces of gold from 330,000 to 350,000 ounces of gold for the year.
This has led to lower overall production guidance for the company this year. IAMGOLD is now expected to yield total production in the range of 835,000 to 850,000 ounces of gold this year. However, it has maintained its cash cost guidance for the mine of $825 to $875 per ounces and all-in-sustaining costs to range between $1,150 and $1,250 per ounce.
Strategic priorities to enhance its performance….
IAMGOLD remains on track with its strategic priorities of reducing costs, optimizing its CapEx and building solid cash position. It is making significant progress on these premeditated priorities. The company expects these fundamental priorities to enhance its bottom line performance going forward.
The company has drastically reduced its total costs. Its cost-cutting initiatives have resulted in $62 million in savings so far this year. Its cost-cutting pains should certainly enhance its bottom line performance. It has reduced its operational costs at Essakane by $8 million, at Westwood by $9 million, at Niobec by $22 million and at Rosebel by $23 million.
IAMGOLD had generated about $125 million in total cost reduction against targeted $100 million in cost reduction in 2013.
In addition, it remains on track to reduce its capital expenditure about 10% to $360 million this year. This represents total reduction of about 46% as compared to last fiscal year 2013. This includes $118 million less on sustaining capital along with $190 million less on expansion and development.
Closing notes
IAMGOLD looks pretty solid on its production profile and key priorities that should drive its growth in the future. Also, the recent recovery in the gold price should improve its bottom line performance going forward. Its balance sheet carries total cash of $183.20 million. IAMGOLD has operating cash flow of $284.20 million and levered free cash flow of $124.28 million.
