Mr. Bob Tait reports
IAMGOLD REPORTS OPERATING AND FINANCIAL RESULTS FOR THE SECOND QUARTER 2012
Iamgold Corp. has released its unaudited consolidated
financial and operating results for the second quarter ended June 30,
2012 (all amounts are expressed in U.S. dollars, unless otherwise indicated). Revenues increased 19 per cent to $410.6-million compared with $345.7-million in the second quarter 2011. Adjusted net earnings (from continuing operations attributable to equityholders) were up 9 per cent
to $74.0-million (20 cents per share) compared with $67.7-million (18 cents per
share) in the second quarter 2011. Adjusted net earnings exclude the
impact of items not indicative of underlying business performance, such
as impairment of marketable securities and foreign exchange
translation. Including these items, net earnings were $52.9-million
(14 cents per share) compared with $74.5-million (20 cents per share) in the
second quarter 2011.
Operating cash flow (from continuing operations) before changes in working capital was
$72.4-million (19 cents per share) compared with $76.4-million (20 cents per
share) for the second quarter 2011. Operating cash flow in the second
quarter 2012 included tax payments of $70.4-million (19 cents per share)
previously accrued in 2011, compared with $52.0-million (14 cents per share)
in the same period in 2011. Guidance respecting the tax payments was
provided by the company at the end of the first quarter.
"Our second quarter results were solid and in line with our
expectations," said Steve Letwin, president and chief executive
officer. "When you look at the income generated by our underlying
business, adjusted net earnings rose 9 per cent from the same quarter last
year. This is consistent with our focus on sustaining profitability
through a commitment to projects with attractive rates of return. This
discipline drove our decision to acquire the Cote gold project in
Northern Ontario, which increases our resource base by close to 30 per cent and
geographically balances our future production profile. The objective of
the drilling program now under way is to convert a significant portion
of Cote's inferred mineral resources to the indicated category.
"As we stated in our outlook for the second quarter, the higher costs
were expected, and we maintain our guidance for the year. Our annual
production and capital expenditure guidance remains unchanged, and we
continue to have a strong balance sheet."
Second quarter 2012 highlights
Financial performance and position
Revenues were $410.6-million, up $64.9-million or 19 per cent from the same
prior-year period. The increase in revenues was mainly due to higher
gold sales and gold prices.
Adjusting for items not indicative of future operating performance,
adjusted net earnings were $74.0-million (20 cents per share) compared with $67.7-million (18 cents per share) in the same prior-year period.
Net earnings from continuing operations attributable to equityholders
were $52.9-million (14 cents per share) compared with $74.5-million (20
cents per share) in the same prior-year period.
The effective tax rate for the second quarter 2012 was 45 per cent (35 per cent for the
first six months of 2012) compared with the same prior-year period of 37 per cent
(29 per cent for the first six months of 2011). The increase in the effective
tax rate is primarily attributable to the non-recognition of tax
benefits and items that are not indicative of the company's future
operating performance.
Operating cash flow was $52.7-million (14 cents per share), up 332 per cent from
the same prior-year period. Adjusting for the changes in non-cash
working capital items, such as accounts receivables, inventories and
long-term stockpiles, operating cash flow before changes in working
capital was $72.4-million (19 cents per share).
The company's cash, cash equivalents and gold bullion (at market value)
position was $614.9-million at June 30, 2012, compared with $1.3-billion
at the end of the first quarter 2012. The variance reflects the $480.4-million payment for the acquisition of Trelawney.
Gold production of 204,000 ounces increased by 9 per cent from
188,000 ounces in the second quarter 2011. The increase was primarily
the result of having effectively addressed the technical issues that
limited production in 2011.
The gold margin increased by 5 per cent to $856 per ounce from $818 per ounce in the second
quarter 2011 as the increase in the average realized gold price offset
the increase in mining costs.
Total cash costs were $737 per ounce, up from $697 per ounce in the second quarter 2011.
The increase was mainly due to higher costs at the Sadiola and Yatela
joint ventures due to high strip ratios and lower grades. Cash costs at
Iamgold-operated sites were $641 per ounce, down from $666 per ounce in
the second quarter 2011.
Niobec mine
Niobium production was 1.2 million kilograms for the second quarter 2012
compared with 1.1 million kilograms produced in the same prior-year
period.
The operating margin of $15 per kilogram increased from $14 per kilogram in the second
quarter 2011.
Operating highlights
On June 21, 2012, Iamgold completed the acquisition of Trelawney Mining
and Exploration Inc. The main asset acquired in this transaction is the
Cote gold project, formerly known as Cote Lake, located adjacent to the
Swayze greenstone belt in Northern Ontario, Canada. Since the
acquisition, approximately 3,600 metres of drilling have been completed,
and an NI 43-101 technical report will be filed in October, 2012. A
prefeasibility study is expected to begin in the fourth quarter 2012.
On June 20, 2012, the company entered into a definitive arrangement to
sell the Quimsacocha project in Ecuador to INV Metals Inc. for
150 million shares (40-per-cent to 45-per-cent interest) of INV. The acquisition is
subject to INV raising $20-million (Canadian) in financing, which brings the total
value of the deal to approximately $30-million (Canadian). The closing of the
transaction is subject to certain conditions, including INV shareholder
approval, government consent and financing by INV.
In April, 2012, the company filed the resource study for the Westwood
project. The start-up date for production remains on track for early
2013.
At the Essakane mine in Burkina Faso, the development study to double
the hardrock processing was completed at the end of 2011. The outcome
of negotiations with the government of Burkina Faso on fiscal terms
related to mine expansions has been favourable. This includes import
duties applicable to expansion-related equipment and significant
improvements on the timely reimbursement of value-added taxes. The
construction of the expanded plant commenced in early July, 2012, with
completion expected by the end of 2013.
At the Rosebel mine in Suriname, the completed installation of a
temporary precrusher, a larger pebble crusher and an expanded gravity
recovery circuit this year are expected to have a positive impact in
the second half 2012. A third ball mill is under construction and will
be completed early in the first quarter 2013. In addition, a
feasibility study expected to be completed by the first quarter 2013
will provide greater design detail around various aspects of the
expansion project and is intended to increase the capacity to
treat harder ore at the mill further.
In December, 2011, Iamgold announced an initial agreement with the
Surinamese government on the terms and conditions related to further
expansion at Rosebel. The company is making good progress toward
reaching a definitive agreement, which will be followed by a concept
study to define the expansion potential further of bringing in the
satellite resources.
Production at Iamgold's joint venture operations with AngloGold Ashanti
in Mali remains largely unaffected by the unrest in that country,
although the Sadiola sulphide project has progressed cautiously as a
result, with the expectation that the project will be back on track in
the coming months. A number of steps have been taken to improve
performance following some technical and mechanical issues experienced
in the first half of the year. These steps include the installation of
an additional crusher to increase throughput of harder ore, the
installation of equipment to increase the usage of the gravity circuit
to improve recovery and accelerated access to higher-grade ore in the
satellite pits.
The company continues to move forward in unlocking the value of Niobec,
including progress on the feasibility study based on block-caving and
the establishment of the financing framework for the expansion. The
completion of the feasibility study is expected by the third quarter
2013, and the permitting process should be finalized by 2014. Additional
financing is not required until the commencement of construction.
Iamgold continues to evaluate options for exploiting the large rare
earth elements resource near its Niobec mine operation. An
expanded drilling program is under way to infill and upgrade the
resource and to delineate the deposit to a depth of 700 metres.
The completion of a scoping study is anticipated by the end of
September, 2012.
The exploration budget for 2012 is $157.3-million, which is higher than
the initial budget as it now includes $19.4-million for continuing
exploration at the recently acquired Cote gold project in Ontario.
Commitment to zero harm
The company received approval from the Quebec provincial authorities to
use the inactive Doyon open pit to store tailings generated from the
Westwood mine.
The frequency of all types of serious injuries (measured as Dart rate) across Iamgold was 1.04 for the current year to date compared with 1.12
for full-year 2011, representing a 7-per-cent improvement.
The total recordable injury rate, which measures all injuries
across Iamgold, is improving, with a 27-per-cent reduction from the end of
2011.
Second quarter financial review
Revenues from continuing operations in the second quarter 2012 were
$410.6-million, a 19-per-cent increase from $345.7-million in the second
quarter 2011. The increase was driven mainly by higher gold sales
($49.5-million) and higher realized gold prices ($17.7-million). For
Iamgold's continuing operations, including joint ventures, the number
of ounces sold in the second quarter 2012 increased by 33,000 ounces
from the same prior-year period. Gold sales in the second quarter 2012
included inventory buildup of 13,000 ounces in the first quarter 2012,
which were sold in April, 2012.
Mining costs for the second quarter 2012 were $250.1-million, up $50.1-million or 25 per cent from the same prior-year period. The increase primarily
related to higher operating costs ($11.1-million), inventory movements
mostly from sales exceeding production ($21.0-million), and higher
depreciation, depletion and amortization ($12.9-million).
The gold margin increased from $818 per ounce during the second quarter
2011 to $856 per ounce in the same current-year period as the increase
in the average realized gold price offset the increase in costs.
Net earnings attributable to equityholders were $52.9-million (14
cents per share) during the second quarter 2012, compared with $74.5-million
(20 cents per share) in the same prior-year period.
Adjusted net earnings from continuing operations attributable to equityholders of $74.0-million (20 cents per share) in the second quarter 2012
increased by 9 per cent from $67.7-million (18 cents per share) in the same prior-year period.
Operating cash flow from continuing operations in the second quarter
2012 was $52.7-million compared with $12.2-million in the same prior-year
period. Operating cash flow from continuing operations before changes
in working capital in the second quarter 2012 was $72.4-million (19
cents per share), compared with $76.4-million (20 cents per share) in the same
prior-year period.
Financial position
The company's cash, cash equivalents and gold bullion (at market value)
position was $614.9-million at June 30, 2012, compared with $1.3-billion
at the end of the first quarter 2012. The variance reflects the $480.4-million payment for the acquisition of Trelawney.
Working capital as at June 30, 2012, was $549.0-million, a decrease of $641.8-million
compared with Dec. 31, 2011, mostly due to the drawdown of cash and
cash equivalents of $652.1-million. The drawdown took place mainly for
the acquisition of the Cote gold project ($480.4-million), capital
expenditures related to mining assets and exploration and evaluation
assets ($304.5-million), the payment of dividends ($50.9-million), and
acquisition of investments ($46.3-million), offset partially by net
cash generated from operating activities ($223.0-million) and other
cash movements ($7.0-million). Offsetting increases in non-cash working
capital of $10.3-million were mainly the result of lower income and
mining taxes payable.
At June 30, 2012, no funds had been drawn against the unsecured
revolving credit facilities of Iamgold ($500-million) or Niobec ($250-million). At June 30, 2012, the company had letters of credit in the
amount of $66.1-million to guarantee certain asset retirement
obligations compared with $17.9-million at Dec. 31, 2011. The
increase in collateral support to guarantee asset retirement
obligations was the result of Quebec, Canada, regulators accepting a
revised asset retirement plan. The company also has cash legally
restricted of $2.8-million included in other non-current assets for the
purposes of settling asset retirement obligations.
SUMMARY OF FINANCIAL AND OPERATING RESULTS
($ millions, except where noted)
Three months ended June 30, Six months ended June 30,
2012 2011 2012 2011
Financial data
Revenues $ 410.6 $ 345.7 $ 814.8 $ 759.7
Mining costs including depreciation, depletion and amortization $ 250.1 $ 200.0 $ 465.7 $ 409.5
Gross earnings from mining operations $ 160.5 $ 145.7 $ 349.1 $ 350.2
Net earnings attributable to equityholders of Iamgold (1) $ 52.9 $ 74.5 $ 172.1 $ 207.7
Basic net earnings per share ($/share) (1) $ 0.14 $ 0.20 $ 0.46 $ 0.56
Adjusted net earnings attributable to equityholders (1, 2) $ 74.0 $ 67.7 $ 166.4 $ 185.5
Basic adjusted net earnings per share ($/share) (1, 2) $ 0.20 $ 0.18 $ 0.44 $ 0.50
(1) Amounts represent results from continuing operations and do not include discontinued operations.
(2) The company has included the following non-generally accepted accounting principles measures:
adjusted net earnings attributable to equityholders of Iamgold, adjusted net earnings per share,
operating cash flow before changes in working capital per share, total cash cost per ounce, gold
margin per ounce and operating margin per kilogram of niobium sold at the Niobec mine. Refer to the
supplemental information attached to the management's discussion and analysis for reconciliation to
GAAP measures.
KEY OPERATING STATISTICS
Three months ended Six months ended
June 30, June 30,
2012 2011 2012 2011
Key operating statistics -- gold mines
Gold sales -- 100% (000s oz) (1) 226 193 434 459
Gold sales -- attributable (000s oz) (1) 212 182 407 431
Gold production -- attributable (000s oz) (2) 204 188 411 421
Average realized gold price ($/oz) (1) $1,593 $ 1,515 $ 1,645 $1,447
Total cash cost ($/oz) (1, 3) $ 737 $ 697 $ 708 $ 613
Gold margin ($/oz) (1, 3) $ 856 $ 818 $ 937 $ 834
Key operating statistics -- Niobec mine
Niobium production (millions of kg Nb) 1.2 1.1 2.3 2.2
Niobium sales (millions of kg Nb) 1.2 1.3 2.4 2.3
Operating margin ($/kg Nb) (3) $ 15 $ 14 $ 15 $ 15
(1) Amounts represent results from continuing operations and do not include
discontinued operations.
(2) Excludes attributable ounces from discontinued operations of nil for the
three and six months ended June 30, 2012 (three months ended June 30, 2011:
10,000 ounces and six months ended June 30, 2011: 67,000 ounces). Discontinued
operations include Mupane, Tarkwa and Damang, which were sold in 2011.
(3) The company has included the following non-generally accepted accounting
principles measures: adjusted net earnings attributable to equityholders of
Iamgold, adjusted net earnings per share, operating cash flow before changes
in working capital per share, total cash cost per ounce, gold margin per
ounce and operating margin per kilogram of niobium sold at the Niobec mine.
Refer to the supplemental information attached to the management's discussion
and analysis for reconciliation to GAAP measures.
Attributable gold production and cash costs
Operations
Rosebel mine, Suriname
Operating performance
Attributable gold production of 94,000 ounces for the second quarter
2012 was 8 per cent higher than the same prior-year period, primarily as a
result of higher throughput and higher recoveries. Recoveries have
shown an improving trend with the partial installation of the gravity
circuit. Mine tonnage for the current quarter was adversely impacted by
the heavy rainfall and was lower than the same prior-year period due to
longer hauls.
Total cash costs were lower than the same period in the prior year
mainly due to higher gold production partially offset by higher
royalties as a result of higher realized gold prices.
Capex
Of the $145-million 2012 capital plan, $70.2-million has been expended
year to date. During the second quarter, capital expenditures were
$48.1-million and consisted of new mining equipment ($21.9-million),
the third ball mill project ($8.5-million), resource delineation and
near-mine exploration ($4.5-million), precrusher unit ($3.5-million),
new gravity circuit project ($2.4-million), capital spares ($1.7-million), infrastructure development for Rosebel pit ($1.4-million),
tailings dam ($1.1-million), and various smaller projects
($3.1-million).
Exploration
Approximately 36,000 metres of diamond drilling were completed during the
quarter, mainly at the Mayo, Koolhoven and Pay Caro deposits, to
increase the confidence in the existing resource inventory and target
resource expansions.
Essakane mine, Burkina Faso
Operating performance
Attributable gold production of 81,000 ounces for the second quarter
2012 was 30 per cent higher than the second quarter 2011. The increase was
primarily the result of having effectively addressed the technical
issues that limited production in 2011, partially offset by lower
grades in 2012.
Total cash costs in the second quarter 2012 were lower compared with the
second quarter 2011 mainly due to higher production.
Capex
Of the $320-million 2012 capital plan, $88.4-million has been expended
to date, including $22.8-million of capitalized stripping costs. During
the second quarter 2012, capital expenditures were $47.3-million and
consisted of capitalized stripping costs on the pushback of the pit
($12.5-million), mill expansion including advances toward long-lead
equipment ($23.2-million), liner installation at the bulk water storage
facility ($3.9-million), resource development ($4.2-million), capital
spares ($1.2-million) and other sustaining capital ($2.3-million).
Exploration
More than 41,600 metres of drilling were completed, including
approximately 15,600 metres targeting the Essakane Main zone on the
northern extensions of the current life of mine pit, as well as within
or immediately below the expansion feasibility study pit design.
Systematic drilling is also testing for southeast extensions of the
Falagountou deposit and evaluating the resource potential of selected
targets along the 10-kilometre-long Gossey-Korizena trend.
Doyon division, Canada
During the quarter, the Mouska mine recovered 2,000 ounces as a result
of the mill cleanup activities. The site continues to stockpile ore
which will be processed in the refurbished mill upon the start-up of
Westwood in 2013.
Sadiola mine, Mali
Operating performance
Attributable gold production of 22,000 ounces for the second quarter
2012 was 33 per cent lower than the prior-year period. This was due to lower
throughput resulting from low mill availability, lower grades mined
and lower recoveries due to graphitic ore. Lower production had an
adverse impact on total cash costs, which rose significantly from the
same quarter in 2011.
Capex
Of the $40-million 2012 capital plan (attributable portion), $23.6-million has been expended to date, including $9.5-million of
capitalized stripping costs. During the second quarter 2012,
attributable capital expenditures were $9.7-million and consisted of
spending on the sulphide project ($5.6-million), capitalized stripping
($2.7-million) and various smaller projects ($1.4-million).
Sadiola did not distribute any dividends in the second quarter 2012 or
2011.
Yatela mine, Mali
Operating performance
Attributable gold production of 5,000 ounces for the second quarter 2012
was lower than the prior-year period as a result of comparably lower
ore tonnage being fed to the heap leach pads.
Total cash costs in the second quarter 2012 were higher than the same
quarter in 2011 due to a 25-per-cent increase in tonnage mined attributed to a
focus on mining the main pit while the north pit had a short-term waste-stripping campaign. By the third quarter 2012, the short-term waste-stripping campaign will be complete as ore in the pit will be
accessible.
There were no significant capital expenditures year to date for both
2012 and 2011. Yatela did not distribute any dividend during the
second quarter 2012 or 2011.
Niobec niobium mine, Canada
Operating performance
Niobium production of 1.2 million kilograms in the second quarter 2012
was 9 per cent higher than the same period in 2011. This was due to the higher
conversion of niobium pentoxide and higher recoveries, offset to some
extent by lower grades mined.
Niobium revenues increased to $48.4-million in the second quarter 2012
from $48.1-million in the same period in 2011 due to a higher realized
niobium price offset by lower sales volume. Operating margin during the
second quarter 2012 was higher than the second quarter 2011 as a result
of the higher realized niobium price partially offset by higher labour
and consumables costs.
Capex
Of the $90-million 2012 capital plan, $34.5-million has been expended to
date. During the second quarter, capital expenditures were
$19.6-million and included mining equipment ($4.8-million), underground
development ($4.6-million) and the expansion feasibility study ($800,000).
Exploration
Iamgold's exploration efforts remain focused in west Africa, select
countries in South America, and the provinces of Ontario and Quebec in
Canada. With a mandate for organic growth, the company has
numerous projects already under way and continues to pursue additional
advanced exploration joint venture or acquisition opportunities that
will provide the foundation for future growth.
These advanced opportunities include a continuing resource expansion and
delineation drilling program of more than 95,000 metres at Rosebel in
Suriname, an underground exploration and resource delineation drilling
program of more than 89,000 metres at the Westwood development project
in Quebec, and a resource delineation program of approximately 49,000
metres at Essakane in Burkina Faso.
In the second quarter 2012, Iamgold incurred $36.6-million on
exploration projects compared with $27.5-million in the same prior-year
period. The second quarter 2012 expenditures included:
- Near-mine exploration and evaluation expenditures of $13.4-million;
- Greenfield exploration expenditures of $23.2-million conducted at 20
projects, including two advanced-exploration sites in eight countries
in Africa and the Americas, as part of Iamgold's long-term commitment to
reserves replenishment and organic growth.
Effective tax rate
The effective tax rate for the second quarter 2012 was 45 per cent (35 per cent for the
first six months 2012) compared with the same prior-year period of 37 per cent
(29 per cent for the first six months 2011). The higher rate this year is due
mainly to the non-recognition of tax benefits related to increased
exploration activity and the valuation of marketable securities.
Accounting principles generally prohibit the recognition of tax
benefits on these losses.
In light of the company's non-recognition of tax benefits on its record
exploration spend anticipated for this year, the company now expects its adjusted
annual effective tax rate to be in the range of 33 per cent to 35 per cent and an
effective tax rate of between 35 per cent and 37 per cent on the company's reported earnings.
Tax payments
Tax payments include the final payment of the prior-year liability,
which was accrued in the prior year, and instalments to be applied to
the current-year liability. While the timing of the final payments
varies depending on the jurisdiction, the majority of the payments are
made in the second quarter. The large catch-up payment is expected
when earnings are growing year over year, as tax instalments are
generally based on prior-year earnings.
Conference call
A conference call will be held on Aug. 14, 2012, at 8:30 a.m. (Eastern
Daylight Time) for a discussion with management regarding the company's
second quarter 2012 operating performance and financial results. A
webcast of the conference call will be available through the company's
website.
Conference call information
North America toll-free: 1-866-206-0240 or
1-646-216-7111
Passcode: 62156682 followed by the number sign
A replay of this conference call will be available from Aug.
14 at 5 p.m. to Sept. 14, 2012. Access this replay by dialling in North America toll-free
1-866-206-0173 or 1-646-216-7204, passcode 273287 followed by the number sign.
We seek Safe Harbor.
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