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Where Investors Stand on IAMGOLD’s Transformation

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Part 4
Where Investors Stand on IAMGOLD’s Transformation PART 4 OF 7

Understanding IAMGOLD’s Essakane Mine Catalysts in 2018

IAG’s Essakane mine: lower production

IAMGOLD’s (IAG) Essakane mine produced 93,000 ounces of attributable gold in 3Q17—11% lower than in 3Q16. Lower production was mainly due to lower grades due to mine sequencing, partially offset by higher recoveries and mill throughput.

Essakane’s mill throughput rose 8%, despite the 90% hard rock content (compared with 77% in 3Q16). Higher throughput is due to the new SAG (semi-autogenous grinding) mill liner design. This increased mill capacity, speed, and circuit availability.

Understanding IAMGOLD’s Essakane Mine Catalysts in 2018

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IAMGOLD maintained its 2017 production guidance for Essakane at 370,000–380,000 ounces.

Improvement to mine economics?

The company mentioned in its press release that the mill is performing significantly above its nameplate capacity of 10.8 million tons per annum. It provides an upside to the current life of the mine plan.

To further increase the reserves and resources at Essakane, a heap leach PFS (pre-feasibility study) has been initiated. This study is expected to get completed by the second quarter of 2018. The heap leach method could be a low-cost method for processing marginal and low-grade mineralization as well as existing stockpiles.

In addition to these catalysts, Essakane has many untapped satellite deposits near the mine. These deposits could mean an upside to the mine life at Essakane.

IAG’s improvements in unit costs

In-line with lower production, Essakane’s AISC (all-in sustaining costs) in 3Q17 were higher than in 3Q16, coming in at $944 per ounce, or 16% higher YoY (year-over-year). The main factors contributing to higher costs during the quarter include:

  • lower capitalized stripping costs
  • higher fuel prices
  • higher processing costs during to higher hard-rock content
  • lower ounces produced

While Essakane’s costs rose in 3Q17, IAG is making every possible effort to bring costs down. Investors should note that this focus on cost reduction isn’t unique to IAMGOLD. Other gold miners (GDX) are trying to reduce their costs to maximize margins. Peers Agnico-Eagle Mines (AEM), Newmont Mining (NEM), and Goldcorp (GG) have also made significant progress in cutting costs, though Harmony Gold (HMY) has fallen behind on that front.

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