What Does IAMGOLD Need to Do to Start Its Sadiola Expansion?



Reducing production at the Sadiola mine

The Sadiola mine, located in southwest Mali, West Africa, is 41% owned by IAMGOLD (IAG), 41% owned by AngloGold Ashanti (AU), and 18% owned by the government of Mali. The Sadiola mine accounts for ~9% of IAMGOLD’s production.

The existing plant at this site wasn’t meant for handling hard rock processing. Now, as the mine is nearing the end of its supply of soft rock, an expansion is necessary. The company expects Sadiola to continue mining oxides into early 2018 and processing oxides into early 2019.

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Sadiola’s operational performance

Gold production at the Sadiola mine was 16,000 ounces in 3Q16, as compared to 18,000 ounces in 2Q16. The mine’s cash costs came in at $999 per ounce, higher than the $941 per ounce it achieved in 2Q16.

Sadiola expansion

The expansion of the Sadiola mine, which would accommodate the processing of sulfides underneath its existing oxide pits, has the potential to add up to ten years to Sadiola’s mine life.

During its 3Q16 earnings call, the company’s CEO, Stephen Letwin, said, “Our alignment with AngloGold, our partner, is full and complete. We are walking together, moving towards the initiation of this expansion. Our plan would be to have a construction start to prevent any gap in production once the milling of oxides comes to an end in early 2019.”

The timing of the project, however, is conditional upon the decision of IAG’s partner AngloGold Ashanti and the government of Mali’s renewal of its construction and operating permits.

The project could be a good organic opportunity for the company, as it could add ~130,000 ounces of gold per year to IAG’s production profile.

Given higher gold prices, the Sadiola expansion’s economics look favorable for IAG and AU. An expansion could lead to long-term production upsides for these companies.

Other miners (RING) (GDXJ) such as Eldorado Gold (EGO), Coeur Mining (CDE), Yamana Gold (AUY), and Kinross Gold (KGC) are also trying to expand their productions through organic growth opportunities.


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