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What Are the Project Economics for IAMGOLD’s Cote Lake Project?

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Cote Lake project

The Cote Lake project is located in northern Ontario, Canada. Since IAMGOLD (IAG) acquired the project in 2012, its estimates indicate that the project’s resources have grown from less than 1 million ounces to more than 8 million ounces.

The company has been working to move resources into the measured and indicated (or M&I) category for the last three years. At the end of 2015, M&I resources were estimated to be 8.4 million ounces, and inferred resources were estimated to be 1.2 million ounces.

During IAG’s 3Q16 earnings call, its CEO, Stephen Letwin, referred to Cote Gold as “one of Canada’s largest undeveloped gold deposits.”

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Balancing geographical profile

While answering a question during the company’s earnings call, Letwin said that the Cote Lake deposit looked quite attractive, with hard rock that was still softer than had been expected. Because of this, environmental permits should become less of an issue for the project. The company already has federal permits.

The Cote Lake project could be one of the core assets for the company going forward, as it intends to grow in the Americas to balance its geographical profile.

Return expectations from Cote Lake

Letwin also added that the Canadian dollar has moved in IAG’s favor, and at gold’s price of $1,200 per ounce, the project looks “very attractive economically.” IAG has done a preliminary economic assessment (or PEA) and it’s looking at an internal rate of return in the mid-teens at current gold prices. The company, however, won’t be in an investment stage on this project until 2018.

Along with the Sadiola expansion, IAG’s Cote Lake project could help IAMGOLD to replace its depleting production in the medium to long term, reducing its operating costs at the same time.

IAG’s peers Eldorado Gold (EGO), Alacer Gold (ASR), 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 which track gold prices.

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