What Could Improve Economics at IAMGOLD’s Essakane Mine
IAG’s Essakane mine- Improved production
IAMGOLD’s (IAG) Essakane mine is situated in Burkina Faso, West Africa. It’s 90% owned by IAMGOLD and 10% owned by the government of Burkina Faso.
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Essakane’s production in 2Q17 was 13% higher at 101,000 ounces than in 2Q16. Higher throughput led to this increase in production. The mill throughput was 24% higher year-over-year (or YoY) despite 85% hard rock content in 2Q17 compared to 70% in 2Q16. This improved throughput was due to increased circuit availability and the new SAG (semi autogenous grinding) mill, which increased capacity and mill speed.
IAMGOLD maintained its 2017 production guidance for Essakane at 370,000–380,000 ounces.
Improvement to mine economics?
During its 2Q17 earnings call, management outlined several catalysts for the Esskane Mine, which could substantially enhance its value. The first variable is the updated resource from Falagountou, which is expected by the end of this year. Secondly, the heap leach could potentially add another three to five years to Essakane’s mine life because it’s not economical to mine marginal-grade stockpiles at the site with existing processing methods. Heap leaching could provide a viable alternative. The pre-feasibility study (or PFS) for heap leaching is expected to be completed by mid-2018. In addition to these catalysts, Essakane has many untapped satellite deposits surrounding the mine. These deposits could also add mine life to Essakane.
IAG’s improvements in unit costs
Essakane’s AISC (all-in sustaining costs) also improved during the quarter, which is in line with its improvements in its production. Its AISC were $922 per ounce, an improvement of 15% compared to 2Q16. This improvement was due to lower sustaining capital expenditure and higher sales volumes.
Investors should note that the focus on cost reduction isn’t unique to IAMGOLD. Most gold miners (GDX) are trying to lower their costs to weather the volatile gold price environment. Notably, Newmont Mining (NEM), Agnico-Eagle Mines (AEM), and Goldcorp (GG) have also made significant progress in cutting costs while Harmony Gold (HMY) has fallen behind on that front.