IAMGOLD in 4Q16: Cost Reduction on Investors’ Minds



Containing higher costs

IAMGOLD (IAG) is a high-cost producer. The major reason behind its higher costs is the structure of its mines.

IAG’s Rosebel mine in Suriname and Essakane mine in Burkina Faso have higher proportions of hard rock, leading to lower throughput and higher costs. In 3Q16, IAG acquired the Saramacca property near Rosebel. During IAMGOLD’s 3Q16 earnings call, CEO Stephen Letwin said that this property could become a significant source of soft rock for Rosebel, helping it increase production and lower costs going forward.

For its Essakane mine in Burkina Faso, however, the company is expecting higher costs in 4Q16. It expects Essakane’s grades to fall in 4Q16, which could lead to higher costs during the fourth quarter.

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Westwood expansion

Westwood is a very important project for IAMGOLD. To find out more, read Why the Westwood Mine Remains Key for IAMGOLD. 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. Investors look forward to updates on the ramp-up with its fiscal 2016 results.

Sadiola expansion

The Sadiola mine, located in southwest Mali, is 41% owned by IAMGOLD, 41% owned by AngloGold Ashanti (AU), and 18% owned by the government of Mali. The expansion of the Sadiola mine, which would accommodate the processing of sulfides underneath the existing oxide pits, has the potential to add up to ten years to Sadiola’s mine life.

During IAMGOLD’s 3Q16 earnings call, Letwin said that they are “moving towards the initiation of this expansion.” 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 production through organic growth opportunities.


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