IAMGOLD Corp. Q3 FY2024 earnings call

• Operations performed well with safe, stable production and strong cash flow growth. Year-to-date gold production totals 490,000 gold ounces. - Cote Gold ramped up, achieved commercial production, had positive free cash flow, and made progress in mill throughput and mining strategy. - Westwood had strong quarter with underground activities focusing on operations, production in line with guidance, and margin improvement. - Essakane had steady quarter with production in line with plan, and focus on positioning for next year. - Health and safety: Total recordable injury frequency rate was 0.46 in the third quarter, with Essakane achieving 000 safety incidents in September.

Cote Gold: In the third quarter, Cote achieved commercial production on August 2nd, ramped up, and had its first positive free cash flow quarter. Year-to-date production is 68,000 gold ounces. Annual production guidance is at the lower end of the previous range or closer to 220,000 ounces on a 100% basis. Cash costs are estimated to average approximately $700 to $800 per ounce and all-in sustaining costs to be approximately $1,100 to $1,200 per ounce at the 90% throughput exit rate. Westwood: Produced 32,000 ounces in the third quarter, with year-to-date production of 99,000 ounces. Annual production guidance is 115,000 to 130,000 ounces, with cash costs expected to be at the lower end of $1,200 to $1,300 per ounce sold and all-in sustaining costs $1,775 to $1,900 per ounce sold. Essakane: Attributable gold production was 100,000 ounces in the third quarter, with year-to-date total of 329,000 ounces. Annual production guidance is 380,000 to 410,000 ounces. Cash costs in the third quarter were $1,223 per ounce, and all-in sustaining costs were $1,730 per ounce.

• IAMGOLD reiterated third quarter guidance, with Essakane and Westwood poised to achieve upper end of production guidance. - Cote Gold's annual production guidance is at the lower end of the previous range or closer to 220,000 ounces. - By middle of 2025, expect gold prepayment facility behind us, Cote near nameplate production, and Essakane and Westwood generating near-record cash flows.

• Inflationary pressures continued to ease but key inputs like labor remained elevated. - Pricing for certain consumables like cyanide and grinding media had certain levels. - Potential operational issues at mines during ramp-up or maintenance periods.

Q: Could you start off with a pretty basic cash flow question on working capital? 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 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: Just thinking about your net debt. At spot gold, I think IM Gold could be in the net cash position by year-end of 2025. How are you thinking about what is a sufficient debt reduction target? At what point is your net debt level sufficient?

A: The first part of our -- So, 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. Then in the middle of next year, our second lien notes becomes callable, and we have an opportunity to pay that back at $20 million increments with excess liquidity when we can. So, that would be our next target, using excess liquidity. And then after that, the biggest portion of our debt that remains is our high-yield notes, and that is a 5.75% coupon. We won't be in a rush to pay that down off of our balance sheet. And then lastly, the leases that we have, about $133 million, $130 million. At the moment, we expect to increase that slightly still. We'll pay that down just based on the scheduled payment.

Q: Looking beyond that repayment, which will be mostly wrapped up by some point in the second half of next year, 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: Before we go to the share buyback, 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. As we enter ‘26, as I mentioned, it could be some opportunity of extending the life of mine at Essakane, where you would remain always positive cash flow, but maybe you could take a little bit less in 6-7 and extend the life of mine. So, I think once we turn the company on a positive cash flow side, we'll be capable to first look at unlocking additional organic growth at [indiscernible] assets, as everyone will be capable to take care of themselves, and that's what we'd be. I've mentioned, you know, opportunities at Cote as well, at the low capital requirement, the cross-share. We'd eventually look back after that. On the West side, is there any some opportunities? But, net-net, this company should not be entering any additional important capital allocation more than benefiting, you know, from the free cash flow at each asset to further unlock some potential and continue to improve on the balance sheet. Even though Cote has this voice with some opportunity to increase, we do not see this as a potential important capital allocation, but rather benefit just from the free cash flow.

Q: Just firstly on Westwood, you said there was a mill shutdown in November. Could you tell us how long that mill shutdown would be for? How many days?

A: Yes, 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: Next on Essakane. Just trying to understand what Q4 and 2025 look like there. In Q4, you indicated that you're going to be pulling more stockpiles as you are focusing on stripping waste. Could you just give us an indication of what the strip ratios would be, both the operating and the capitalized strip ratio?

A: Yes. So, 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. But in 2025, we would be back to a more regular inline, probably with what we've done this year or even lower.

Q: The last question on Essakane would be the grade reconciliation. I know you tried to do work on it in the past, but it's clearly beating and continuing to beat. I think the plan for Q2 was lower grade. Plan for Q3 was lower grade, and it's still hanging in there well above the reserve grade. So, how should we think about that on a go-forward basis? I know you'll probably tell me to use the reserve grade, but is that realistic at this point?

A: Well, as I mentioned in my opening comment, 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. So, we'll look at this for next year. Now, we're not at the beginning of the Phase 5, but we should benefit at least another quarter, if not more, from the Phase 5. So, yes, we should normally, should the Phase 5 continue, as I mentioned, we should normally be able to improve beyond the 43-101 in terms of grade for next year.

Q: Great. Thank you for taking my questions. Renaud, maybe just to circle back on Lawson's question on capital allocation, is it, did I understand correctly that the priorities for you in 2025 are obviously paying down, you know, the prepaid and the notes and some of the leases, et cetera, et cetera, dealing with the debt side. And then you have some capital that you puts into Cote on the plant side? And is it safe to assume, and you want to extend the mine life as it can? So that's 2025. And so as we go into 2026, do you think at that point you will have any additional free cash flow to look for returns to shareholders? I'm just trying to see whether returns to shareholders via dividend and or share buyback is a 2026 part of your review. It's not 2025 is what I'm understanding.

A: Thanks for your questions, because our shareholders obviously, you know, means a lot and we'll always be taking into account. So my capital allocation answer was really focusing more on what we see as real kind of mine site capital needs, which we still see within. But as you mentioned, and as we have mentioned in previous sessions, in the previous quarter, as we turn this company positive cash flow and address properly level of debt reductions, we'll continue to generate excess free cash flow. And we have mentioned in the past that we will be looking down the road to how could we find a better way to reward our shareholders. This is not for a ‘25. We will see how, you know, the gold market goes, but I'm expecting this company to be in excess of cash flow as we advance ‘26, ‘25 and beyond, and which will represent some opportunity. We don't have any decision made. This is all part of strategic approach as we advance in time. But I'm looking at ‘24, looking how we are advancing. I'm very excited about what this company could be next year towards the Q3. There are some big priority that would make a difference for the shareholders. As you know, the second need is very expensive, and we must find a way to reduce cost of that. But after that, down the road, once you adjust your balance sheet, I think it would be a fortune for the shareholders.

Q: Looking at ‘26 and beyond for that opportunity.

A: Yes, that cannot really be before that because we do have -- so I think as we advance ‘26 and beyond, looking at the needs, the excess cash flow, we'll be looking at what could be done.

Q: My second question is just on Westwood. I know the 43-101 technical study is coming, and I think Anita asked this on one of the other calls, but 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: Thanks for your question, because we will be filing the 43-101, but in all fairness, the 43-101, by the nature of the mine, it's a deep mine, there's quite a bit of ounces not quite in the reserve category. So you've seen the reserve at the end of December is about a million ounces, and the 43-101 is based on reserve only. But there is quite a significant amount of other ounces that are, of course, part of the life of mine and so forth. 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, and this is just with the current life of mine. But once the Grand Duc is done, there will be further opportunity and extra capacity at the mill, down the road, that could be. So I would say as a base case, it's probably 125, 140. And in terms of cost, I would wait for the 43-101 to highlight a little bit more of that. So I don't want to be ahead of my ski here, so a few weeks will be a better answer to this question. But you will see a drop from the current range just because of the level of rehabilitation that is down, so that would lower some costs. So if we do 1,600 today, you should expect down the road the mine to be capable to do better than that.

Q: Maybe for Maarten, with strong gold prices and, and then what seems to be an improving balance sheet, is there an opportunity to refinance the relatively high cost term loan early?

A: Good morning, Simon. The deadline becomes callable or we can start repaying it now, but there is a prepayment penalty that's quite large at the moment. So in May of next year, that reduces to 104%. So to do anything before then, if you look at the cost of new debt and all of those costs, we don't believe that that is the best way to increase value and reduce our debt carrying costs. But by middle of next year, that's when there would be an opportunity to do that. And we are still delivering into the gold prepay now as well. So that is using a lot of the extra free cash flow at high gold price.