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IAMGOLD’s Rosebel Mine: More to Come after a Reserve Upgrade?

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Aug. 14 2017, Updated 1:07 p.m. ET

Rosebel mine: significant reserve increase

IAMGOLD’s (IAG) Rosebel mine is located in northeastern Suriname, South America. This mine started commercial production in 2004.

IAG’s Rosebel mine announced its reserve and resource update on July 26, 2017. This mine’s attributable proven and probable (or P&P) gold reserves rose by an impressive 80% to 3.5 million ounces from 2.0 million ounces at the end of 2016. Investors should also note that there was no change in the $1,200-per-ounce gold price assumption the company used to estimate reserves. The majority of the increase in reserves was due to the optimization of mine plans and cost reduction. This increase extends Rosebel’s mine life to 2028.

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The exploration program at Rosebel’s adjacent Saramacca deposit could lead to further enhancement of value at the Rosebel mine. The company is due to announce the maintenance resource from Saramacca in early September 2017. The company will then put together a life-of-mine plan that will include Saramacca, which should improve Rosebel’s economics significantly.

Rosebel mine: production increased

Rosebel’s attributable production for 2Q17 was 78,000 ounces—a 1% increase compared to 2Q16. Higher grades were partially offset by lower recoveries. Notably, the increase in throughput at the site came despite an increase in the proportion of hard rock year-over-year (or YoY) from 36% to 42% because the company had installed a new secondary crusher at its site in the latter half of 2016.

IAG maintained its Rosebel production guidance for 2017 at 295,000–305,000 ounces.

Unit costs fell

Rosebel’s all-in sustaining costs (or AISC) fell 12% YoY in 2Q17 to $923 per ounce due to lower fuel consumption and lower sustaining capital expenditure. Investors might recall that IAG’s initiatives to improve its blasting and drilling efficiencies reduced the consumption of explosives.

Overall, however, IAMGOLD has been less successful in controlling costs than its peers (GDX) Newmont Mining (NEM), Agnico-Eagle Mines (AEM), and Goldcorp (GG).

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