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
- 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
- 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
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 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
- 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
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.
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 production for 2012 was 4.7 million kilograms, up 2 per cent from the
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
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
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
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
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.
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.
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.
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.
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
(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
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
We seek Safe Harbor.