What Could Improve Costs at Iamgold’s Essakane Mine?



IAG’s Essakane mine: Weaker production

After achieving record production of 109,000 ounces in the first quarter of 2018, Iamgold’s (IAG) Essakane mine reported weaker production in the second quarter. Its 97,000 ounces in the second quarter was 4% lower YoY (year-over-year). But the decline was expected due to planned mill maintenance.

IAG maintained its guidance for Essakane to produce 380,000–395,000 ounces of gold in 2018. At the midpoint, that guidance would imply almost flat production growth.

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IAG’s improvements in unit costs

Essakane’s AISC (all-in sustaining costs) in Q2 2018 reached $1,003 per ounce, which was 9% lower than its AISC in Q2 2017. The increase was mainly due to lower sales volumes and higher sustaining capex.

Essakane is working to improve its mining efficiency, which should help lower its unit costs, even at a higher proportion of hard rock.

Improvement to mine economics?

IAG is building an oxygen plant at Essakane to increase recoveries through improved leach kinetics and improved efficiency of the circuit. The plant is on track for commissioning in the fourth quarter.

On June 5, IAG announced positive results from its pre-feasibility study (or PFS) for the Heap Leach Project. Based on the PFS, Essakane’s probable reserves increased 39% to 4.7 million ounces. The heap leach method could be a low-cost method for processing marginal and low-grade mineralization as well as existing stockpiles. The PFS is expected to be completed by Q1 2019, and production is expected to start by 2020.

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


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