Westwood Remains Key to IAMGOLD’s Production Growth


Nov. 11 2016, Updated 10:04 a.m. ET

Challenges at the Westwood mine

IAMGOLD’s (IAG) Westwood project is located in southwest Quebec, Canada. This site started production in 1Q13. It achieved commercial production in 2014, producing 70,000 ounces in the first two quarters of the year.

During the early stages of the mine’s ramp-up, a seismic event occurred, leaving part of the operation in a rehabilitative state for most of 2015. This led to lower production at higher costs in 2015.

Based on its revised plan for Westwood for 2016, IAMGOLD is focused on underground development to expand the mining area. It’s also doing remedial work in the area impacted by the seismic event.

The company has guided that the mill will operate on a reduced schedule throughout 2016 due to the low level of mining taking place. Its ramp-up to full capacity is expected by 2019.

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Operating performance during 3Q16

The company’s management sounded quite hopeful during its 3Q16 earnings call regarding the development of its Westwood mine. IAG’s CEO, Stephen Letwin, mentioned, “Our confidence in this asset is increasing day by day.” Gold production at the mine during 3Q16 was 16,000 ounces, flat quarter-over-quarter.

Cash costs per ounce and all-in sustaining costs (or AISC) for 3Q16 were $888 per ounce and $1,391 per ounce, respectively. Westwood’s underground development during 3Q16 continued to open access to new mining areas. The company expects to reach the higher end of its annual production guidance of 50,000–60,000 ounces for the mine.

Westwood development

For 2017, the company expects to roughly double the production at Westwood due to better grades. A ramp-up to full production of between 180,000 and 200,000 ounces per year is expected by 2019.

The structure of IAMGOLD’s Essakane and Rosebel mines remains high-cost due to the presence of hard rock, making it a high-cost producer. Under these circumstances, Westwood remains key for IAMGOLD to increase its production while reducing its costs.

IAG’s peer Eldorado Gold (EGO) is also facing issues regarding its mines in Greece, while New Gold’s (NGD) capital expenditure requirements for its key project, Rainy River, are creeping higher. Kinross Gold (KGC) has also faced problems with its Tasiast expansion in the past, but things are now going as planned for the company.

Investors looking to invest in gold may also want to look at leveraged ETFs such as the Direxion Daily Junior Gold Miners Bull 3X ETF (JNUG) and the Direxion Daily Gold Miners Bull 3X ETF (NUGT).


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