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Iamgold Corp
Symbol C : IMG
Shares Issued 376,559,554
Close 2013-02-20 C$ 7.57
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Iamgold earns $371.2-million (U.S.) in 2012

2013-02-20 18:50 ET - News Release

Mr. Steve Letwin reports

IAMGOLD REPORTS 2012 OPERATING AND FINANCIAL RESULTS

Iamgold Corp. has released its consolidated financial and operating results for the year and fourth quarter ended Dec. 31, 2012. (All amounts are expressed in U.S. dollars, unless otherwise indicated.) Revenues of $1.7-billion for 2012 were virtually flat with the prior year, as margins rose slightly to $952 an ounce. Net earnings from continuing operations attributable to equityholders were $334.7-million (89 cents per share) in 2012 compared with $391.3-million ($1.04 per share) in 2011. Excluding items not indicative of underlying operating performance, adjusted net earnings attributable to equityholders were $316.9-million (84 cents per share) compared with $405.7-million ($1.08 per share) in 2011. The year-over-year earnings decline is the result of lower gold production and higher operating costs and increased exploration expenses, partly offset by higher gold prices. Operating cash flow before changes in working capital was $504.0-million ($1.34 per share) compared with $656.7-million ($1.75 per share) in the previous year.

For the fourth quarter 2012, adjusted net earnings, excluding items not indicative of underlying operating performance, were $90.3-million (24 cents per share), down 16 per cent from the fourth quarter 2011. Operating cash flow before changes in working capital was $130.1-million (35 cents per share) compared with $190.1-million (51 cents per share) in the same prior-year period.

"Operating performance was solid, but it needs to be better," said president and chief executive officer, Steve Letwin. "Despite the lower grades at our core gold assets and the disappointing performance at our joint venture operations, we achieved a level of production that wasn't too far off the mark. Cash costs were in line with our latest guidance for 2012, but the outlook for 2013 reflects the challenges of mining and processing an increasing proportion of hardrock, particularly on the power side. We have a lot of work to do. Our recent share price is not acceptable, and we are determined to improve performance.

"We have to be more innovative in our assault on costs. This requires day-to-day cost containment, along with big steps, such as our landmark deal with the government of Suriname to partner with them to target satellite resources beyond the current concession at a significantly reduced power rate. Beyond 2013, which I'd characterize as a transitional year, we should see an operational reset -- including the ramp-up at Westwood, the winding down of Mouska and Yatela, and the throughput expansion for hardrock processing at Essakane, which should improve economies of scale.

"Reducing the unit costs associated with mining an increasing proportion of hardrock requires an investment in capacity expansion," continued Mr. Letwin, "but we will not commit capital to projects, such as the throughput expansion at Rosebel, unless we're confident they can meet our targeted returns on investment. While we've moved the vast majority of the resource from inferred to indicated in only six months at Cote gold, we won't need development capital there for another two years. Our financial position remains strong with $1-billion in cash and bullion and nearly $2-billion in liquidity."

Fourth quarter 2012 highlights

Financial performance:

  • Revenues in the fourth quarter 2012 were $468.4-million, down 3 per cent from the fourth quarter 2011. The decline was mainly due to a lower volume of gold sales.
  • Cost of sales for the fourth quarter 2012 was $259.9-million, up 2 per cent from the same prior-year period due to the increasing cost of consumables and the impact of maturing ore deposits, partially offset by lower costs arising from lower production volumes.
  • Net earnings attributable to equityholders were $84.6-million (22 cents per share), down 37 per cent from $133.6-million (36 cents per share) in the same period 2011. Lower net earnings were mainly due to lower revenues, higher cost of sales, higher exploration costs and lower gains on sales of assets.
  • Adjusting for items not indicative of underlying operating performance, adjusted net earnings were $90.3-million (24 cents per share) compared with $107.8-million (29 cents per share) in the same prior-year period.
  • Operating cash flow for the fourth quarter 2012 was $118.9-million (32 cents per share), down from $205.5-million (55 cents per share) in the same prior-year period mainly due to lower revenues, higher exploration expenses, higher taxes paid and changes in non-cash working capital.
  • Operating cash flow before changes in non-cash working capital items and long-term ore stockpiles was $130.1-million (35 cents per share) in the fourth quarter 2012 compared with $190.1-million (51 cents per share) in the same quarter 2011.

Production, cash costs and margins gold operations:

  • Attributable gold production was 214,000 ounces in the fourth quarter 2012 compared with 253,000 ounces in the same period 2011. The decline was mainly due to lower grades at Essakane and the stockpiling of ore at Mouska for processing in 2013.
  • Cash costs for the fourth quarter 2012 were $731 an ounce, compared with $643 an ounce in the same prior-year period. Cash costs for Iamgold operated mines were $665 an ounce in the fourth quarter 2012 compared with $562 an ounce in the same quarter 2011.
  • The gold margin in the fourth quarter 2012 was $973 per ounce, down marginally from the same period in 2011, as higher cash costs were partially offset by higher gold prices.

Niobium operations:

  • Niobium production in the fourth quarter 2012 of 1.2 million kilograms was flat with the fourth quarter 2011.
  • The operating margin in the fourth quarter 2012 was $15 per kilogram, down from $16 per kilogram in the same period 2011, due to the impact of increasing costs and the strength of the Canadian dollar.

Full-year 2012 highlights

Financial performance:

  • Revenues were $1.7-billion in 2012, virtually flat with the prior year, as the impact of a lower volume of gold sales ($111.2-million) was offset by a higher realized gold price ($98.8-million) and higher niobium revenues ($12.7-million).
  • Cost of sales for 2012 was $948.0-million, up $56.2-million or 6 per cent from the prior year. The increase is mainly related to higher costs associated with mining and processing an increasing proportion of harder rock at Essakane and Rosebel, as well as a longer haul distance at Rosebel. Depreciation expense year over year was marginally higher.

The company's mines have three types of ore: softrock, transition rock and hardrock, with the transition rock and hardrock progressively more energy intensive to process than softrock. The attached changing ore types table shows how the mix of these three ore types is changing at both Essakane and Rosebel.

           CHANGING ORE TYPES                     
                    
            Essakane             Rosebel      
     Soft Transition Hard  Soft Transition Hard

2012   66%        31%   3%   31%        49%  20% 
2013E  42%        37%  21%   33%        35%  32% 

As the company's mines move to a mix with a much higher proportion of hardrock, the demand for power per tonne of ore processed will increase significantly. At Essakane and Rosebel, the company expects the proportion of hardrock to approach 100 per cent somewhere in the 2015-2016 time frame, at which time the number of kilowatt hours per tonne of ore processed is expected to be approximately two times greater for both mines.

This ore mix reflects the resources under the current mine plan. However, the company has a robust near-mine exploration program under way at both Rosebel and Essakane and is actively exploring for softrock resources in potential satellite deposits.

Net earnings from continuing operations attributable to equityholders for 2012 were $334.7-million (89 cents per share), down $56.6-million or 14 per cent from the prior year. The decrease was mainly due to the higher cost of sales ($56.2-million), as noted herein, and higher exploration expenses ($39.4-million), partially offset by higher foreign exchange gains ($18.8-million) and lower income tax expense ($21.6-million).

Adjusted net earnings for 2012 were $316.9-million (84 cents per share), down $88.8-million (24 cents per share) or 22 per cent from the prior year.

Operating cash flow for 2012 was $441.0-million ($1.17 per share), down $151.8-million or 26 per cent from $592.8-million ($1.58 per share) in the prior year. The decrease in operating cash flow is mainly due to higher cost of sales ($56.2-million) and exploration expenses ($39.4-million), as well as higher income taxes paid ($73.5-million).

Operating cash flow before changes in working capital for 2012 was $504.0-million ($1.34 per share), down $152.7-million (41 cents per share) or 23 per cent from the prior year.

Financial position

Cash, cash equivalents and gold bullion (at market value) were $1,036.8-million at Dec. 31, 2012, down $225.7-million from Dec. 31, 2011. The decline was mainly due to the acquisition of the Cote gold project ($485.7-million), capital expenditures related to mining assets and exploration and evaluation assets ($700.5-million), the payment of dividends ($106.9-million), and acquisitions of investments ($49.7-million), offset partially by cash generated from the issuance of senior unsecured notes ($650.0-million), operating activities ($441.0-million) and sale of investments ($28.2-million).

As at Dec. 31, 2012, no funds were drawn against the company's $750-million total unsecured revolving credit facilities.

Production, cash costs and margins gold operations

Attributable gold production from continuing operations for 2012 was 830,000 ounces, down 66,000 ounces or 7 per cent from the prior year. Gold production was lower, mainly the result of lower grades at Essakane (22,000 ounces) and Sadiola (21,000 ounces), as well as the stockpiling of ore at Mouska (20,000 ounces) for processing in 2013.

Cash costs for 2012 were $715 per ounce, up $79 per ounce or 12 per cent from the prior year. Cash costs at Iamgold operated mines were $637 per ounce, compared with $573 per ounce in 2011. Cash costs increased mainly due to lower grades, the processing of an increasing proportion of hardrock and inflationary cost pressures across all sites.

Niobium operations

Niobium production for 2012 was 4.7 million kilograms, up 2 per cent from the prior year.

The operating margin per kilogram of niobium for 2012 was $15 per kilogram, the same as the previous year.

All-in sustaining cost metric

Iamgold is working with its fellow members of the World Gold Council in developing guidelines to reflect the total cost better of producing gold, including an all-in sustaining cost metric. As these guidelines have not been finalized, the company has chosen not to present all-in sustaining costs as part of its 2013 guidance. The company intends to adopt these guidelines once approved.

Reserves and resources

Reserves and resources, excluding the discontinued operations of Mupane, Tarkwa and Damang in 2011, changed as follows:

The company is reporting total attributable proven and probable gold reserves of 11.3 million ounces at the end of 2012 compared with 13.3 million ounces at the end of 2011. Excluding the 2012 sale of Quimsacocha, which accounted for 1.7 million ounces, reserves are down slightly by 2 per cent from 2011. In light of the feasibility study currently under way at Rosebel and due out shortly, it was appropriate for 2012 to reflect Rosebel's December, 2011, reserves, net of the year's depletion. A positive reconciliation adjustment for actual production versus the 2011 resource model was observed in 2012. The reserves and resources for Rosebel will be reviewed and updated as part of the feasibility study.

Total attributable measured and indicated gold resources (inclusive of reserves) increased by 24 per cent or 4.4 million ounces to 22.6 million ounces at the end of 2012, mainly due to the acquisition and further infill and exploration drilling of Cote gold.

At the end of 2012, Niobium probable reserves were 1,768 million kilograms of contained niobium pentoxide, up nominally from the prior year.

In February, 2012, the company announced an inferred resource estimate of 466.8 million tonnes at an average grade of 1.65 per cent total rare earth oxides on the rare earth elements zone adjacent to its niobium mine. Subsequent to the company's diamond drilling in 2012, total indicated resources are now estimated at 531 million tonnes at an average grade of 1.64 per cent TREO representing 8.7 billion kilograms of contained TREO. An inferred resource of 527 million tonnes at an average grade of 1.83 per cent TREO representing 9.7 billion kilograms of contained TREO was delineated.

Commitment to zero harm continues

The company regrets the drowning of a gardener employed at the company's exploration office in Ouagadougou, Burkina Faso, in November, 2012.

Regarding health and safety, the frequency of all types of serious injuries (measured as Dart rate) across Iamgold for 2012 was 1.08 compared with 1.12 for the prior year, representing a 4-per-cent improvement over 2011.

Corporate developments and operating highlights

Cote gold

On June 21, 2012, the company completed the acquisition of all issued and outstanding common shares of Trelawney through a plan of arrangement. Under the terms of the transaction, former shareholders of Trelawney received $3.30 (Canadian) in cash for each common share of Trelawney held. The main asset acquired in this transaction is the Cote gold project located adjacent to the Swayze greenstone belt in Northern Ontario, Canada.

On Oct. 4, 2012, Iamgold announced a mineral resource update for the Cote gold project, which included all validated drill results as at Aug. 1, 2012. The results showed a 274-per-cent increase in indicated resources and a substantial increase in total ounces compared with the last release (preacquisition) by Trelawney Mining in February, 2012. On Jan. 22, the company announced another resource update, including all validated drill results as at Dec. 31, 2012. The result was a further increase in indicated resources, up 114 per cent from the Oct. 4, 2012, announcement. The indicated resource is now estimated at 269 million tonnes averaging 0.88 gram per tonne gold for 7.61 million ounces. The inferred resource is estimated at 44 million tonnes, averaging 0.74 gram per tonne gold. A positive attribute of the deposit is its accessibility for open-pit mining. The deposit locally outcrops at surface and on average is covered with fewer than six metres of barren overburden.

Senior notes offering

On Sept. 21, 2012, the company completed the issuance of $650.0-million of senior unsecured notes bearing interest at 6.75 per cent due in 2020. The company intends to use the proceeds for general corporate purposes, including the financing of capital expenditures and exploration.

Disposal of Quimsacocha

On Nov. 14, 2012, the company disposed of its interest in the Quimsacocha project in Ecuador to INV Metals Inc. through the disposal of all shares of its wholly owned subsidiary Iamgold Ecuador S.A. in exchange for 231.3 million common shares of INV Metals. The company holds approximately 47 per cent of the issued and outstanding INV Metals shares immediately after the closing of the transaction.

Westwood

The Westwood project in Quebec remains on track for a production start by the end of the first quarter 2013. Total gold production from Westwood in 2013, including the processing of ore stockpiled at Mouska, is expected to range between 130,000 to 150,000 ounces. The gradual ramp-up typical during the start-up of an underground mine will result in higher unit costs in the first year of production. Subsequent to year-end, the depth of the shaft reached its interim target of 1,958 metres. Commercial production is projected to begin by October, 2013. In October, 2012, the union membership ratified a six-year contract, effective from Dec. 1, 2011.

Essakane

At the Essakane mine in Burkina Faso, the completion of the plant expansion to accommodate an increasing proportion of hardrock is expected by the end of 2013. The company negotiated an agreement with the government of Burkina Faso on fiscal terms related to mine expansions, including a reduction in the import duty on expansion-related materials from 7.5 per cent to 2.5 per cent.

Gold production is expected to range between 255,000 to 275,000 ounces in 2013, down from 315,000 ounces in 2012. Ore grades are expected to be 10 to 15 per cent lower than the life-of-mine average, mainly due to the processing of lower-grade softer ore that had been stockpiled in the early years as the mine expansion gears up to process higher-grade ore. As the company moves into harder rock, the higher grades will help mitigate the impact of the higher energy consumption required to treat harder ore and improve grades in line with the life-of-mine average. The company is also focused on bringing in softer ore from the Falagountou satellite resource, eight kilometres east of the main pit.

A contract was signed with employees allowing for a 5-per-cent increase over each of the next three years.

Rosebel

At the Rosebel mine in Suriname, the company completed the installation of a temporary precrusher, a larger pebble crusher and an expanded gravity recovery circuit, all of which are having a positive impact on recoveries. Also, to address the transition to harder ore, a third ball mill is under construction and is expected to be brought into production at the end of the first quarter 2013. Further capacity expansion to address the increasing ore hardness will depend on the outcome of the feasibility study to be completed at the end of the first quarter 2013. Gold production in 2013 is expected to range between 365,000 to 385,000 ounces compared with 382,000 ounces in 2012, as grades are expected to remain fairly constant with some minor variation.

In November, 2012, the President of Suriname announced that an agreement had been reached with Iamgold with respect to a joint venture that would target satellite resources beyond the current concession, with attractively priced power. Final approval by the National Assembly of the Republic of Suriname is expected in the near future.

Sadiola

In Mali, the company is reassessing its strategy with respect to its joint venture operations with AngloGold Ashanti. Until such time as an agreement is reached on how to proceed with the sulphide expansion project, the company is freezing capital expenditures related to the expansion. The expansion project is necessary to accommodate hardrock processing, as the existing mill was not designed to do so. While production at the joint venture operations was not disrupted by the conflict in Mali, the company has reduced its exploration activity in more remote regions of the country.

Niobec

The company plans to complete the feasibility study for the Niobec expansion in the third quarter of 2013. The timing of capital spending related to the Niobec expansion project will depend on the outcome of the study and will be aligned with the advancement of the permitting process. The permitting process should be finalized by 2014.

Rare earth elements

Iamgold continues to evaluate options for exploiting the large rare earth elements resource near its Niobec mine operation.

                                   KEY OPERATING STATISTICS                    

                                            Quarters ended Dec. 31,    Years ended Dec. 31,
                                                  2012        2011        2012        2011
Key operating statistics -- gold mines
Gold sales -- 100% (000s oz) (1)                   246         263         881         953
Gold sales -- attributable (000s oz) (1)           232         248         827         896
Gold production -- attributable
(000s oz) (3)                                      214         253         830         896
Average realized gold price ($/oz) (1)        $  1,704     $ 1,638     $ 1,667     $ 1,555
Total cash cost ($/oz) (1, 2)                 $    731     $   643     $   715     $   636
Gold margin ($/oz) (1, 2)                     $    973     $   995     $   952     $   919
Key operating statistics -- Niobec mine
Niobium production (millions of kg Nb)             1.2         1.2         4.7         4.6
Niobium sales (millions of kg Nb)                  1.1         1.3         4.7         4.6
Operating margin ($/kg Nb) (2)                $     15     $    16     $    15     $    15

(1) Amounts represent results from continuing operations and do not include 
discontinued operations.  
(2) The company has disclosed 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 non-GAAP performance measures section of the management's 
discussion and analysis for reconciliation to GAAP measures.
(3) Excludes attributable ounces from discontinued operations of nil for the 
year ended Dec. 31, 2012 (year ended Dec. 31, 2011: 76,000 ounces). 
Discontinued operations include Mupane, Tarkwa and Damang, which were sold 
in 2011.

                          CONSOLIDATED STATEMENTS OF EARNINGS  
                 (in millions of U.S. dollars, except per-share amounts)        

                                                                 Fourth quarter ended      Year ended
                                                                           Dec. 31,          Dec. 31,
                                                                        2012     2011     2012     2011

Revenues                                                              $468.4   $481.6 $1,670.0 $1,673.2
Cost of sales                                                          259.9    253.9    948.0    891.8
General and administrative expenses                                     15.5     16.5     58.3     54.2
Exploration expenses                                                    35.8     21.0    112.7     73.3
Other                                                                    4.1     12.1      4.8     25.7
Operating costs                                                        315.3    303.5  1,123.8  1,045.0
Earnings from operations                                               153.1    178.1    546.2    628.2
Share of net earnings (loss) from investments in associates
(net of income tax)                                                      3.5     (1.6)    12.0     (1.6)
Finance costs                                                          (11.2)    (1.4)   (18.5)    (7.1)
Foreign exchange gains (losses)                                          2.2      4.0     10.7    (8.1)
Interest income, derivatives and other investment gains                 (0.6)    26.6     20.2     37.6
Earnings from continuing operations before income and mining taxes     147.0    205.7    570.6    649.0
Income taxes                                                           (52.4)   (59.9)  (199.4)  (221.0)
Net earnings from continuing operations                                 94.6    145.8    371.2    428.0
Net earnings from discontinued operations                                 --       --       --    415.3
Net earnings                                                            94.6    145.8    371.2    843.3
Net earnings from continuing operations attributable to
Equityholders of Iamgold                                                84.6    133.6    334.7    391.3
Non-controlling interests                                               10.0     12.2     36.5     36.7
Net earnings from continuing operations                                 94.6    145.8    371.2    428.0
Net earnings attributable to
Equityholders of Iamgold                                                84.6    133.6    334.7    806.6
Non-controlling interests                                               10.0     12.2     36.5     36.7
Net earnings                                                            94.6    145.8    371.2    843.3
Earnings from continuing operations per share ($ per share)
Basic                                                                   0.22     0.36     0.89     1.04
Diluted                                                                 0.22     0.35     0.89     1.04
Earnings per share ($ per share)
Basic                                                                   0.22     0.36     0.89     2.15
Diluted                                                                 0.22     0.35     0.89     2.14

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