IAMGOLD Corporation (IAG) Q3 2024 Earnings Conference Call Transcript

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Overview

The earnings call summary presents a mixed outlook. Financial performance appears stable with ongoing debt reduction and payment plans. However, management's lack of clarity on future capital allocation decisions and timelines for dividends or share buybacks creates uncertainty. Additionally, labor inflation and operational challenges related to Cote could impact future financial health. The market cap suggests moderate sensitivity to these factors, leading to a neutral prediction for stock price movement.

Key Financial Performance

Gold Production 173,000 ounces (up from 109,000 ounces in Q3 2023), driven by stable operations at Essakane, turnaround at Westwood, and ramp-up of Cote.

Cash Costs $1,165 per ounce (lower than the prior year), with quarter-over-quarter increase in line with expectations.

All-in Sustaining Costs (ASIC) $1,756 per ounce (lower than the prior year), with quarter-over-quarter increase in line with expectations.

Sustaining Capital Expenditure $84.7 million (up from $50.4 million in Q3 2023), due to Cote achieving commercial production.

Revenues $438.9 million from sales of 184,000 ounces at an average realized price of $2,391 per ounce (includes a reduction of $107 per ounce due to gold prepay arrangements).

Net Earnings $598.1 million (includes a reversal of impairment on Westwood of $462.3 million, due to updated long-term gold price assumptions).

Adjusted EBITDA $221.7 million (record quarter), bringing year-to-date EBITDA to $565.2 million.

Operating Cash Flow $161 million (lower by $64.4 million due to deferred revenue from gold prepay arrangements).

Mine Site Free Cash Flow - Essakane $76.6 million.

Mine Site Free Cash Flow - Westwood $20.8 million.

Mine Site Free Cash Flow - Cote $23.3 million (first quarter of positive free cash flow for Cote).

Cash and Cash Equivalents $553.4 million, with total liquidity of approximately $959.3 million.

Dividend Received from Essakane $151.9 million (total received in Q3 2024).

Gold Prepaid Obligations 37,500 ounces delivered in Q3, with $13.3 million received in cash.

Westwood Production 32,000 ounces in Q3, total of 99,000 ounces year-to-date.

Essakane Production 100,000 ounces in Q3, total of 329,000 ounces year-to-date.

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Operating Highlights

Gold Production: Gold production year-to-date totals 490,000 ounces, with a strong performance at Essakane and a turnaround at Westwood.

Cote Gold: Cote Gold achieved commercial production on August 2, 2024, and is on track to reach 90% nameplate throughput by year-end.

Westwood Production: Westwood produced 32,000 ounces in Q3, totaling 99,000 ounces year-to-date.

Essakane Production: Essakane reported 100,000 ounces in Q3, bringing year-to-date total to 329,000 ounces.

Gold Price: The company realized a record average gold price of $2,391 per ounce in Q3.

Cote Gold Interest: IAMGOLD is set to repurchase a 9.7% interest in Cote Gold for approximately $377 million, returning to a 70% interest.

Cash Flow: Cote Gold generated its first positive free cash flow of $23.3 million in Q3.

Cost Management: Essakane's cash costs were $1,223 per ounce, while Westwood's were $1,150 per ounce.

Debt Reduction: The company aims to expedite debt reduction plans due to higher operating cash flows and gold prices.

Mining Strategy: IAMGOLD is evaluating a shift to a more bulk mining approach at Cote to optimize ore handling and improve efficiencies.

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Risk or Challenges

Competitive Pressures: IAMGOLD is facing competitive pressures in the gold mining sector, which may impact its market position and pricing strategies.

Regulatory Issues: The company must navigate regulatory challenges, particularly in regions where it operates, which could affect operational timelines and costs.

Supply Chain Challenges: There are ongoing supply chain challenges, particularly with key inputs like labor and consumables, which remain elevated and could impact production costs.

Economic Factors: Inflationary pressures, although easing, still pose risks to operational costs, particularly in labor and consumables pricing.

Operational Risks: The ramp-up of Cote Gold has seen higher than expected rehandling costs and contractor expenses, which could affect profitability.

Production Guidance Risks: The company has indicated that production costs may exceed guidance ranges due to one-time costs associated with ramp-up initiatives.

Cash Flow Risks: The company has a significant amount of gold prepaid obligations, which could impact cash flow if gold prices fluctuate.

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Guidance & Outlook

Cote Gold Production: Cote Gold achieved commercial production on August 2, 2024, and is on track to reach 90% nameplate throughput by year-end 2024.

Financial Position: IAMGOLD ended Q3 2024 with cash and cash equivalents of $553.4 million, and total liquidity of approximately $959.3 million.

Cote Gold Repurchase: IAMGOLD plans to repurchase a 9.7% interest in Cote Gold for approximately $377 million, expected to close on November 30, 2024.

Exploration Program: IAMGOLD is advancing exploration at Gosselin and Cote zones, with plans to increase drilling efforts in 2025.

Westwood Mine Performance: Westwood generated $53.1 million in mine-free cash flow in 2024, with production expected to be at the top of the guided range.

Essakane Mine Life: Essakane has a current mine life through 2028, capable of generating over $1 billion in cash flow at current gold prices.

Production Guidance: IAMGOLD reiterated its production guidance for Essakane and Westwood, expecting combined production of 495,000 to 540,000 ounces.

Cost Guidance: 2024 cost guidance for Essakane and Westwood is expected to be on the low end of $1,175 to $1,275 for cash costs per ounce.

Cote Gold Cost Projections: At 90% throughput, cash costs at Cote are estimated to average $700 to $800 per ounce, with ASIC at $1,100 to $1,200 per ounce.

Westwood Cost Projections: Westwood's costs are expected to be at the lower end of $1,200 to $1,300 for cash costs per ounce.

Essakane Production Outlook: Essakane's attributable production is expected to be at the top end of the guidance range of 380,000 to 410,000 ounces.

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Shareholder Return Plan

Dividend Declared: Essakane declared a dividend during the second quarter of $180 million, with $151.9 million received by IAMGOLD in the third quarter.

Share Repurchase: IAMGOLD provided notice to Sumitomo to repurchase a 9.7% interest in Cote Gold for approximately $377 million, expected to close on November 30, 2024.

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Key Q&A

Q:At what point do you expect that to stabilize? And then assuming flat gold prices from here, what does the working capital bill look like for Q4? And then what about ‘25?

A:A big part of the working capital this year was at Cote. We had considerable accounts payable balances due to the construction, still outstanding, and we've been paying those down over the course of the year as we are closing out those contracts and paying back holdbacks. That will continue in Q4, but then we will be at the back end of that. Part of the working capital is also some of the taxes that's building up, and then reoccurring taxes at Essakane that is increasing because of higher gold prices. But other than that, we expect our accounts payable to decrease, specifically at Cote, and then stabilize after that from next year onwards.

Q:How are you thinking about what is a sufficient debt reduction target? At what point is your net debt level sufficient?

A:We'll be looking at our debt as it comes due when we look at that and using excess cash and equity to deal with that. But we've restarted paying debt this quarter already by delivering into the gold prepay, and we'll continue doing that over the course of this year and the first half of next year. Based on spot gold prices, that has a significant impact on cash, so getting that off our balance sheet is important for us.

Q:What would be the capital priority considerations at that point? I mean, at what point do you start thinking about a dividend or share buybacks?

A:The most important thing once we put the prepaid behind us is to really turn the company into a net positive cash. So, this would allow, ‘25 for us is a rather, considering the ramp up of Cote, and quite frankly, Westwood and Essakane should be in a pretty steady state type of year, maximizing cash flow.

Q:Are there certain milestones or timelines or pre-established economic considerations that would allow IAMGOLD to even marginally increase that position from 70% at some point in the future?

A:The main limiting factor is this whole thing was designed at a 70-30, right? So, we do have a partner, and we're very, very happy around the partnership we have. Should it be any opportunity down the road with our partners Sumitomo, for sure, we would be considering to increase.

Q:Could you tell us how long that mill shutdown would be for? How many days?

A:We're targeting five. If we see a further opportunity, we'll do it. I would say five to seven, but hopefully, we do it in five.

Q:Could you just give us an indication of what the strip ratios would be, both the operating and the capitalized strip ratio?

A:Next year, we'll be back with more standards. I could already tell you that. It's a year where we should see reductions of total capital as well, as aligned with the 43.01. And the Q4, which should normally increase. It's going to be like a much lower ore grade nine. So, we could go probably as far as probably 4.5:1, depending on how it goes and the opportunity to interface positioning.

Q:How should we think about grade reconciliation on a go-forward basis?

A:One of the big contributors is the Phase 5, and we've seen some extension that's going to prolong in 2025. So, on that point of the Phase 5 alone, it would bring normally opportunity beyond the 43-101.

Q:Can you just remind me what you have kind of said is the long-term production target and cost target for this asset? Was that 150,000 ounces?

A:The reserve at the end of December is about a million ounces, and the 43-101 is based on reserve only. So an average of 130, 140. So I like to see – I see this mine down the road, and it's a steady 125 to 150 type of range.

Q:What is your labor inflation currently and how are you thinking about that into 2025?

A:35% is still the amount for labor and contractors in our cost structure. That will change likely as Cote becomes a bigger part of our organization now going forward.

Q:Can you give me the split of that is? And also what is your thoughts and what is contractors in that 35%?

A:Based on our plan for this year, it was about 25% of the 35% and then 10%. So labor, 25%, contractors 10% of that 35%.

Q:Would we be thinking like 5% would be a reasonable assumption for year-over-year change ‘25 to ‘24?

A:There's lots of other price inputs as well. Like we need to look at oil and that's been changing. So energy costs. So we will be providing our guidance early next year.

Q:Is there an opportunity to refinance the relatively high cost term loan early?

A:The deadline becomes callable or we can start repaying it now, but there is a prepayment penalty that's quite large at the moment.

Q:Review of Unclear Management Responses

A:Management's response lacked clarity on the specific timeline for capital allocation decisions regarding dividends or share buybacks, indicating that it would not be before 2026 without providing concrete details.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

IAG Transcript

IAMGOLD Corporation (IAG) Q2 2025 Earnings Call Transcript

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The earnings call shows mixed signals: strong revenue and EBITDA growth, but high costs and debt remain concerns. Positive aspects include a new agreement at Essakane and expected production increases. However, vague management responses and high costs at Côté and Westwood temper optimism. The market cap suggests moderate volatility, leading to a neutral prediction.

IAMGOLD Corporation (IAG) Q1 2025 Earnings Conference Call Transcript

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The earnings call highlights strong financial performance, with increased production and efficiency, leading to improved cash flow and adjusted EBITDA. The company plans to maintain or increase dividends, enhancing shareholder returns. Despite operational risks and safety concerns, the guidance remains optimistic, with expected cost improvements and stable production. The Q&A session provided additional insights into production stability and cost management, supporting a positive outlook. Considering the market cap of approximately $2.1 billion, the stock price is likely to react positively, within the 2% to 8% range, over the next two weeks.

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The earnings call summary highlights strong financial performance with record revenues, increased production, and improved earnings. Despite some operational challenges, guidance was clear and accounted for known issues. The company's strategic actions, such as repurchasing a stake in Côté Gold and receiving dividends, are positive indicators. The Q&A section did not reveal major concerns, though some management responses lacked clarity. Given the market cap of $2.13 billion, these factors suggest a positive stock price movement in the 2% to 8% range over the next two weeks.

IAMGOLD Corporation (IAG) Q3 2024 Earnings Conference Call Transcript

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