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Essakane Achieved Record Production, Mine Economics to Improve

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IAG’s Essakane mine: Record production

IAMGOLD (IAG) reported significant progress at its operations in its Essakane mine. This mine achieved record production of 109,000 ounces for 1Q18 after the delivery of record annual production of 389,000 ounces in 2017.

Its quarterly production was 17.0% higher year-over-year (or YoY). Higher grades and recoveries drove these impressive volumes. The company is reaping the benefits of the improvements realized at the mill in 2017.

IAG is guiding for Essakane to produce 380,000–395,000 ounces of gold in 2018. At the midpoint, this guidance would imply almost flat production growth. The company is expecting its lowest production in 2Q18 as mill maintenance is scheduled during that quarter.

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Improvement to mine economics?

To further improve the reserves and resources at Essakane, a heap leach PFS (pre-feasibility study) has been initiated. This study is expected to be completed in 2Q18. The decision for construction is expected in 2H18. The heap leach method could be a low-cost method for processing marginal and low-grade mineralization as well as existing stockpiles.

Essakane is also working on declaring a maiden resource estimate for the Gossey satellite prospect later this year.

IAG’s improvements in unit costs

Essakane’s AISC (all-in sustaining costs) in 1Q18 reached $914.00 per ounce, which was 6.0% lower than its AISC in 1Q17. This decline is mainly due to higher sales volume, which was partially offset by higher sustaining capital expenditures. Essakane is working on improving mining and mining efficiency, which should help lower the unit costs—even at a higher proportion of hard rock.

IAG noted that it’s making every possible effort to reduce costs. Investors should note that this focus on cost reduction isn’t unique to IAMGOLD. Other gold miners (GDX)(GDXJ) are trying to reduce their costs to maximize margins. Among IAG’s peers, Agnico Eagle Mines (AEM), Newmont Mining (NEM), and Goldcorp (GG) have also made significant progress in cutting costs, although Harmony Gold (HMY) has fallen behind on that front.

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