Why Iamgold’s Production Growth Remains Constrained



Production guidance

Iamgold (IAG) highlighted in its 1Q16 results that it expects 2Q16 production to be slightly lower than 1Q16. In 1Q16, the company reported a production of 191,000 ounces of gold. The expected decline is mainly due to seasonal factors.

The company expects production to take off in the second half of the year to reach its full-year guidance of 770,000–800,000 ounces. This guidance is lower year-over-year since its Yatela mine reached the end of its mine life.

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Factors impacting production

There are various factors that are impacting IAG’s production growth:

  • Rosebel: The proportion of harder rock at the Rosebel mine is generally increasing, which is leading to lower throughput. To address this concern, Rosebel is enhancing the performance of its grinding circuit, which includes the commissioning of a new flex drive that helps increase the grinding capacity of hard rock. In addition, the operation is focused on securing soft rock from in and around its operations.
  • Essakane: Similar to Rosebel, the proportion of higher rock at the Essakane mine is high. Its percentage of hard rock rose from 60% to 79% in 1Q16, which reduced its mill throughput by 12%.
  • Westwood: Iamgold’s Westwood mine is key to its future production growth. However, the mine has been plagued with issues since its start. Gold production at Westwood in 1Q16 was 15,000 ounces, which is 32% lower than 1Q15. Next year, the company expects to significantly increase its production due to better grades. A ramp-up to full production of 180,000–200,000 ounces per year is expected by 2019.

IAG’s peers, including Eldorado Gold (EGO) and New Gold (NGD), are also trying to extend the lives of their assets. Investors can get exposure to gold by investing in the iShares Gold Trust ETF (IAU) and the SPDR Gold Shares ETF (GLD). Both of these ETFs track gold prices.


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