IAMGOLD Corp

TSX:IMG

Earnings Call Transcript 2021-Q1

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD First Quarter 2021 Operating and Financial Results Conference Call and Webcast. [Operator Instructions]At this time, I would like to turn the conference over to Indi Gopinathan, Vice President, Investor Relations and Corporate Communications for IAMGOLD. Please go ahead.

[Indi Gopinathan]

Thank you very much, Ariel, and welcome, everyone, to the IAMGOLD First Quarter 2021 Operating and Financial Results Conference Call. Joining me today on the call are Gordon Stothart, President and Chief Executive Officer; Daniella Dimitrov, Executive Vice President and Chief Financial Officer; Craig MacDougall, Executive Vice President, Growth; Bruno Lemelin, Senior Vice President, Operations & Projects; and Tim Bradburn, Senior Vice President, General Counsel and Corporate Secretary.Our remarks on this call will include forward-looking statements. Please refer to the cautionary language regarding forward-looking information in our disclosure documents and be advised that the same cautionary language applies to our remarks during the call.During the call, non-GAAP measures will be referenced, and we will direct you to review the reconciliations in our disclosures relating to these measures. With respect to the technical information to be discussed, please refer to the Technical Information and Qualified Persons slide. The slides referenced on this call can be viewed on our website.I will now turn the call over to our President and CEO, Gordon Stothart.

[Peter Gordon Stothart, President, CEO & Director]

Well, thank you, Indi. Good morning, everyone, and thanks for joining us. I hope everyone is happy and healthy in these fun times.I'd like to start by saying how pleased I am to introduce Daniella Dimitrov as our new CFO. Daniella joined us at the end of March, upon the retirement of Carol Banducci, who had been with IAMGOLD for almost 15 years. I'm sure that Daniella is well known to many of you, having been involved in our sector as a seasoned executive in the investment, corporate and banking components of the mining industry at various times through her career. I'm very happy that she's agreed to join us, bringing her wide skill set to further enhance our strong executive and finance teams as we move forward through this exciting growth phase we're in.Now let's get into our overview of our first quarter of 2021. So at the corporate and strategic level, IAMGOLD generated $89.5 million in mine-site free cash flow during the period, with adjusted earnings of $6 million, or $0.01 per share.On our balance sheet at quarter-end, we have $968 million in cash and approximately $1.5 billion in total liquidity, which fully funds our construction plans.For each of our sites, we have continued our proactive management of COVID-19 with rapid response and strict protocols, some of which I will expand on in a moment.We continue our comprehensive community engagement programs, including funding the infrastructure improvement projects through the Rosebel Community Fund in Suriname and starting the planning for Phase 2 of the Burkina Faso Triangle d'Eau project to bring much needed potable water to the communities around Essakane in northeastern Burkina.The board has amended its renewal and diversity policies, targeting the average tenure of the board to be 10 years or less and 30% or better female representation. As well, the policy has been adjusted to limit the board chair and each committee chair to a maximum tenure of 10 years in their respective roles.From an operations and growth perspective, we continue to execute on our growth plan, with Cote construction well underway and advancing rapidly and the project achieving 18% overall completion at quarter-end. Overall completion is a composite metric taking into account progress on all aspects of the project, including engineering, procurement, fabrication, construction and commissioning.At Essakane, we delivered strong operating performance, and we have completed the CIL upgrade project.At Rosebel, our first quarter of the year was impacted by heavy rain and capacity restrictions. However, we are expecting a much stronger second half, with the completion of the camp expansion in Q2 and as we move past the rainy season.At Westwood, we continue to take a cautious approach, targeting a safe restart of the underground operations in the second half of the year following a decision point this quarter.In addition, we continue to advance our development pipeline by derisking Boto Gold project, continuing delineation drilling at the Gosselin target near Cote and advancing exploration work targets, including at Nelligan and in the Bambouk district. Bruno and Craig will provide some additional color on all of this activity in a few minutes.IAMGOLD is committed to achieving high standards in environmental, social and governance practices which reflect our long-held zero-harm vision. In the first quarter, we committed to investing $950,000 in a 4-year Giants of Africa program aimed at encouraging the development of youth through sports in Burkina Faso, Senegal and Mali.We also joined a few of our like-minded peer companies in sponsorship of the Artemis Project, which aims to promote female business owners and entrepreneurs in the mining sector, including innovative and award-winning social and natural scientists.As mentioned earlier, we applied $400,000 in funding from the Rosebel Community Fund towards solar LED street lights for public security, electrification and potable water supply in the communities around Rosebel and Saramacca.And we continue our public-private partnership with Canada's government, the One Drop Foundation, and Cowater on the Triangle d'Eau project by completing Phase 1, which provides potable water to 60,000 people near Essakane, and advancing Phase 2, which aims to bring potable water to an additional 75,000 people.We are humbled to receive recognition for our efforts, and we were recognized in the prestigious Corporate Knights 2021 Global 100 Sustainability scorecard, where we have been ranked out of 116 -- we've been ranked 10th out of 116 global mining companies reviewed and among 8,000 global companies spanning various industries.IAMGOLD was recognized for a third consecutive year as part of Bloomberg's 2021 Gender-Equality Index among 380 global companies across various industries that foster a more inclusive and equitable workplace.And we received the Mining Association of Canada's prestigious Towards Sustainable Mining, or TSM, Excellent Award in the environmental category for innovative recycling of plastic at Essakane. Essakane recognized in 2010 that there was a need to enhance its public and plastic waste management, particularly as there were no recycling facilities in the region, which meant public and plastic waste had to be buried. Working with local entrepreneurs, Essakane has been able to recycle, rather than bury, plastic while supporting local businesses and creating jobs, with over 65 tons recycled to date. On behalf of the whole company, I offer our congratulations to the Essakane team on their well-deserved recognition.COVID-19 health and safety protocols are embedded in our operations and projects. These protocols are continuously adapted and enhanced. And in the quarter, Essakane implemented additional measures, including thermal screening of all personnel and visitors entering the mine site and the Ouagadougou office. The 20-bed field hospital and medical confinement house established in Ouagadougou in 2020 remains available to accommodate any future COVID-19 cases.At Westwood, in addition to existing protocols, random antigen testing was implemented on-site to further protect the workforce against COVID-19.And at Rosebel, following the increase of COVID-19 cases in country, there was a temporary suspension of daily commuting by employees during the quarter, with off-site employees required to remain at site during their shift cycle. To enable mining capacity to increase to full-site complement while respecting COVID-19 protocols and accommodating the workforce, Rosebel added 150 beds to the camp in the first quarter, with an additional 210 beds expected to be completed in the second quarter.And at Cote, in addition to existing protocols, a combination of PCR and antigen testing for all personnel and visitors entering the site has been established. Further, mandatory antigen testing at the Sudbury and Timmins bus terminals has been implemented to detect COVID-19 cases before there is an opportunity for contact as personnel board the bus.COVID-19-related community activities include financing the new Suriname Bureau of Public Health cooling system of the central laboratory which provides critical testing capacity for HIV, malaria, influenza, tuberculosis and, more recently, COVID-19. Funding was provided through the Rosebel Community Fund and the Suriname Environmental and Mining Foundation, also known as SEMIF, and both of these entities are funded wholly or partly by Rosebel.As well, IAMGOLD contributed $250,000 to UNICEF to support the International ACT-A/COVAX emergency vaccination response effort in West Africa.Now looking at our operating results. In the first quarter, on a global basis, attributable production was 156,000 ounces. Total cash costs were $1,052 per ounce produced, and all-in sustaining costs were $1,238 per ounce sold.In addition, capital expenditures, including both sustaining and expansion expenditures at our operating sites as well as capital spent at our construction and development projects, was just over $102 million in the quarter.We've included a few bar charts to provide a comparison of results over time. Attributable gold production was low compared to recent quarters due to the heavy rains and COVID-19 restrictions impacting Rosebel as well as Westwood's reliance on open-pit feed following the cessation and suspension of underground activities.Total cash costs have increased in the quarter due to the lower production base. All-in sustaining costs were a bit lower in the quarter, primarily reflecting lower sustaining capital spend.And operating capital expenditures were also relatively lower in the quarter, due to lower capitalized stripping at Essakane and impact of rainy season and COVID restrictions at Rosebel.In the quarter, we made good progress in a number of areas while experiencing some setbacks in others. At Essakane, the mill optimization project was completed, with expected improvement in hard rock ore processing capacity over the balance of the year. The site is working on optimization following the upgrade.At Rosebel, we achieved approximately 85% of mining capacity by the end of the quarter, with Saramacca noncritical path infrastructure work ongoing.At Westwood, we announced a couple of weeks ago that we have started recalling our underground employees for rehabilitation work underground and training in April. And we expect to make a decision this quarter on a second half restart of the mine.At the Cote construction project, we've commenced major earthworks ahead of our target schedule and continue to expand the construction camp. Bruno and I had an opportunity for a quick COVID-safe visit to Cote a couple of weeks ago, and I'm very excited about the progress that I saw.We have continued to progress the access road construction and project infrastructure derisking work at the Boto project.And in exploration, resource delineation work continues at Gosselin, where we are targeting a maiden resource later this year.Finally, we have ongoing resource delineation work at Nelligan; the Rouyn project and the [indiscernible] property, in Quebec; at Diakha, in Mali; and a Karita discovery, in Guinea.I will now pass it over to Daniella to review our financial results.

[Daniella Elena Dimitrov, Executive VP & CFO]

Thank you, Gord, and good morning, everyone. I'm very pleased to be joining IAMGOLD at such a transformational stage of the company. With my diverse background and experiences, I am confident I will add value. I look forward to working alongside the entire team to successfully drive the company to its next major milestone: 1 million-plus ounce producer at all-in sustaining costs of less than $1,000 per ounce by 2024.The following are key highlights of our first quarter financial results. We generated revenues of $297.4 million, down from the previous quarter due to lower sales and lower realized average gold price of $1,781 per ounce.Earnings were $19.5 million, or $0.04 per share, and adjusted earnings were $6.2 million, or $0.01 per share.We generated $89.5 million in mine-site free cash flow, reflecting lower operating CapEx this quarter.In terms of our financial position, we ended the quarter with cash and equivalents of $967 million, benefiting from net VAT inflows of $36 million at Essakane and net proceeds of $36 million from our noncore royalty portfolio sale.We maintain a largely undrawn credit facility of $500 million, resulting in total available liquidity of approximately $1.5 billion at quarter-end. In the quarter, we extended the term of $490 million available under the credit facility to January 31, 2025.Subsequent to quarter-end, we entered into a new gold sale prepay arrangement for 50,000 ounces at $1,753 per ounce and a cost of 4.44% per annum. We will receive a prepayment of $80.3 million in equal monthly payments in 2022, with the obligation to physically deliver such 50,000 ounces in equal monthly installments in 2024. This transaction effectively rolls 1/3 of our obligation to physically deliver 150,000 ounces under the 2019 prepay from 2022 to 2024, after Cote is in production.Looking forward, sales are expected to improve on stronger expected production in the second half of the year at Rosebel and Westwood. Unit costs are expected to trend down in the second half of the year, driven by higher production and sales, potentially offset by some cost pressures on energy and supplies, along with continued strength in the Canadian dollar and euro. CapEx is expected to trend up for the balance of 2021, reflecting increased activity at our operating sites, Cote construction and Boto derisking.Taking a closer look at our cash flows in the quarter, cash inflows from operating activities reflect earnings after adjustments and before changes in noncash working capital of $87.3 million, partially offset by $7.5 million in income tax paid.The inflow from working capital of $19.2 million benefited from cash received from the Essakane VAT refund, partially offset by the timing of payments of approximately $13 million.Net cash used in investing activities of $63 million reflects $102 million CapEx spend, partially offset by the cash received from the royalty sale. Please note that an additional $10.5 million was received from the sale in April as the final payment.Net cash used in financing activities of $14.2 million reflects payments for financing costs, leases and loans as well as dividends to minority interests.Our cash position was $970 million at quarter-end, with net cash at $436 million and total available liquidity of almost $1.5 billion. Our senior notes mature in 2028.Our financial position, combined with mine-site free cash flow, continuous improvement at our operations and the disciplined management of our growth pipeline, supports the transformation of IAMGOLD into a lower-cost, higher-margin, 1 million ounce-producer in a few years' time.I will now pass the call to Bruno to discuss the operations.

[Bruno Lemelin, Senior Vice President of Operations & Projects]

Thank you, Daniella. I am happy to report that we started the first quarter of the year with our safety performance metrics tracking better than target levels. Our DART and TRI rates were 0.46 and 0.67, respectively, per 200,000 hours worked. We continue to implement several initiatives, including I AM SAFE, the revamped health and safety management program, to promote a safe work environment.I will now review operating performance at each site in turn. At Essakane, attributable gold production was 102,000 ounces for the quarter. Production reflected above-plan grade due to complex ore, partially offset by lower gold recoveries on the same material.We have completed the mill optimization project, with an anticipated 10% improvement in hard rock processing over the course of the year, from an annualized 10.8 million tonnes to 11.7 million tonnes. This improvement in capacity is important, as this [ major ] site moves to greater volumes of transition in hard rock versus softer ore in the coming years.All-in sustaining costs for the quarter was $1,061 per ounce sold, reflecting lower sustaining capital.Looking forward to the balance of the year, production remains on track relative to guidance, and we expect higher capital in the second half of the year due to the initiation of strategic pushbacks.At Rosebel, attributable gold production for the first quarter was 47,000 ounces, impacted by lower-grade stockpile feed and lower throughput caused by unusually heavy rains.At the Saramacca pit, we still experienced a lower grade, due to mining at the edges of the top of the deposit in some areas. The community bypass road part of the Saramacca infrastructure program was completed in the quarter.All-in sustaining costs at Roswell were $1,450, reflecting lower sales on this lower production. With the ramp-up of accommodations, which Gord mentioned earlier, we expect to reach normal capacity in the second half of the year.To generate increased recoveries, we have started the engineering and procurement process for the adsorption, desorption and recovery, or ADR, circuit continuous improvement project.At Saramacca, completion of the noncritical infrastructure work has been rescheduled, and the project is now planned for completion in the fourth quarter due to the lodging restrictions.Finally, we have been progressing negotiation on the collective labor agreement, and these efforts continue into the second quarter.Westwood produced 7,000 ounces in the first quarter 2021, with the mill processing [ Grand Duc open pit core ], while the underground remains on care and maintenance. The business continuity assessment is ongoing, including geotechnical engineering work.All-in sustaining costs for the quarter were $1,187 per ounce sold, lower quarter-over-quarter due to lower sustaining capital level.In April, we announced the recall of underground employees for Reb work and training.A decision to restart the underground operations is under consideration in the second quarter, after which we would anticipate a restart at Westwood in the second half of 2021. The restart would target lower-[indiscernible] extraction zones, starting with the A zone.We are advancing the Fayolle study to assess the potential of the asset in the Westwoods Hub & Spoke concept. Work on Fayolle includes further engineering and permitting.I will now provide an update on our construction project, Cote Gold. This slide highlights the key metrics that we believe make the Cote Gold project a tier one asset.Cote has 18-year mine life under the extended case, almost 500,000 ounces per year of production in the first 5 years, second-quartile total cash costs, with all-in sustaining costs of $770 per ounce sold, and Cote is located in mining-friendly Ontario, with access to experienced labor and close proximity to key infrastructure.The first quarter was a busy one at Cote. I will start with a few key metrics. As of March 31, detailed engineering for Cote has advanced to approximately 83% complete. We are at 18% project completion.Procurement and expediting of major equipment contracts are progressing, with the contract for the mining fleet being awarded in the first quarter. Securing pricing of major items as part of early works has helped mitigate pricing pressure. However, we remain cautious given recent copper and steel price movement. The project incurred $67 million in the quarter and $143 million since July 1, 2020.In the first quarter, the team started major earthworks ahead of the milestone schedule and focused on road widening and overburden stripping. We commenced water management and infrastructure for the tailings management facility, and we set up temporary camps, with the construction of permanent camp underway.From a health and safety perspective, to date we have not experienced any impact to schedule due to COVID-19.For the balance of the year, we will focus on earthworks, construction, whole road construction, initial open pit pre-stripping and water management infrastructure around the pit. We aim to commission a portion of the permanent camp in the second quarter and fully commission the final camp in the third quarter.Civil works are also underway at the plant site, with concrete activities expected to start in the second quarter as planned.This slide summarizes our progress to date. We remain on track, and we are working steadily to meet our time and cost targets. We look forward to providing you with our quarterly updates as we progress the project.I will now turn the call over to Craig to discuss development and exploration.

[Craig Stephen MacDougall, Executive Vice President of Growth]

Thanks, Bruno, and Good morning, everyone.Before I begin, please note that the results I talk about today have been previously disclosed in accordance with securities regulations and signed off by the qualified persons within the company reporting them.In the quarter, our brownfield exploration work included, at Essakane, an air core drilling and sampling program to help screen a large sand covered area, which we refer to as GEM, for potential targets located northwest of the Essakane operation and within trucking distance. Results will be used to guide a planned follow-up drilling program expected to commence in the second half of the year.At Rosebel, the team completed approximately 13,300 meters of diamond and RC drilling, with a focus on resource development and conversion at our known deposits as well as targeting selected high-priority targets within our exploration concession.At Westwood, surface drilling focused on upgrading inferred resources at the Grand Duc satellite pit, with underground drilling focused on supporting the potential restart of underground mining operations.Greenfield exploration in the quarter included the reporting of assay results from the Gosselin zone at the Cote Gold project from an ongoing delineation drilling program, which will support an initial resource estimate expected in the second half of the year.The commencement of a further round of drilling at the Lac Gamble zone at our Rouyn project in Quebec to also support a future maiden resource estimate as well as the reporting of assay results from the drilling program completed at the Astoria Zone.And we initiated infill drilling at the Diakha deposit in Mali, which is located south of the Boto Gold development project.Exploration spend in the quarter was $10.4 million, split roughly evenly between brownfield and greenfield programs.On this slide, you can see a few assay results reported during the quarter at the Gosselin zone, where drilling continues to intersect wide zones of mineralization with locally high grades.Over the balance of the year, the greenfield exploration budget for the Cote district is $2.8 million, reflecting approximately 13,000 to 16,000 meters of planned diamond drilling, which includes 12,000 to 14,000 meters of delineation drilling on the Gosselin zone itself. As noted earlier, we are targeting a maiden resource for Gosselin in the second half of the year.At the Boto Gold development project in Senegal, we continue to make progress in derisking the project. We have advanced the construction of year-round access road and permanent camp construction, with the award of a camp contract during the second quarter.Geotechnical and hydrogeological assessments are underway to refine the mine facilities and pit design, and plant detailed engineering has advanced to 75%.COVID-19 restrictions have eased somewhat since the first quarter, allowing work on-site to progress with appropriate protocols in place.Our development capital guidance for the year reflects the early works package, which includes completion of the year-round access road and an airstrip, engineering for critical plant equipment and the implementation of local sustainability programs. We've included a few pictures here of the access road, campsite and bridge work on this slide.The Boto Gold project anchors the Bambouk district, where our exploration efforts have led to several additional discoveries, building on the resource potential of this part of the Senegal-Mali Shear Zone. Infill drilling has commenced at the Diakha deposit in Mali, with 2 diamond and 1 RC rig currently operating. The program is designed to upgrade additional inferred ounces. While at Karita, in Guinea, a diamond drill rig is on-site and will commence an initial delineation drilling program to support a future maiden resource estimate.We've updated this slide to show not only industry reserve trends over the past few years, but also measured and indicated resource trends. The story, unsurprisingly, is the same. Our industry has been on a steady decline since 2012, which represents a significant challenge to maintain future production levels.Finally, as a bit of a recap, I will finish with our project pipeline. As I have said many times previously, competition for and access to quality exploration projects at acceptable entry costs remains challenging for the industry and especially in the face of the current environment of bullish gold prices. At IAMGOLD, we believe that a balanced project pipeline, strategically advanced, is a fundamental asset for the future growth and viability of any mining company. As such, IAMGOLD has developed and continues to invest in a healthy pipeline of early to advanced greenfield exploration projects to support future growth as well as support near-mine brownfield exploration programs with a view to extend the mine life and leverage our existing infrastructure.I will now pass the call over to Gord to conclude.

[Peter Gordon Stothart, President, CEO & Director]

Well, thank you, Craig. So in the first quarter 2021, the IAMGOLD team made good progress towards our operating and development goals. With the normalization of operations and continuous improvement, we expect to see better production levels and costs over the balance of the year and to continue to steadily advance our development projects and pipeline.We look forward to continuing our quarterly conversations with you on performance and cash generation from IAMGOLD's operating mines, on construction progress at Cote and derisking progress at Boto as we realize our transformational growth strategy and our exploration and development pipeline news as we set the business up for the long run.On an editorial note, I'd encourage everyone to get your vaccines as soon as you can if you haven't already done so. It's important for the safety of us all as we get the world restarted.So thank you to everyone for joining our call today. I will now pass the call back over to the operator, and we'll be happy to answer a few questions.

[Operator]

[Operator Instructions] Our first question comes from Fahad Tariq of Credit Suisse.

[Fahad Tariq, Research Analyst]

Maybe first on Cote Gold and the spend for the rest of the year, you mentioned, I think you used the word “cautious” on some of the cost pressures you're seeing on copper and steel, maybe even timber. Can you talk a little bit about the potential risk to the CapEx spend this year? Like, how much higher could it be? How much has already been locked in, in contracts already? Any color there would be helpful.

[Peter Gordon Stothart, President, CEO & Director]

Thanks very much. So look, we're having a good hard look at all of our costs right now. We don't see a significant vulnerability for this year or for the rest of the project. However, steel prices have moved up; concrete prices as well, concrete supply prices. And there's some general inflation pressures on labor costs for construction.So we are over -- currently over 50% of the total spend is already locked up in firm contracts. Some of those are unit price contracts or cost-plus contracts. So there is still some exposure to inflation, but not huge.I think as we move towards the end of this year we're going to have a very, very clear picture of where the total cost spend is going to go, and we're comfortable that there's nothing coming at us that provides too much concern for us in terms of cost, other than some minor aspects of what we're looking at.I guess the other thing I would add is 85% of the total costs at Cote are Canadian dollar-based. We have done quite a bit of hedging, and we do have a lot of Canadian dollars in the bank to support that. I think we're covered over 70% of our Canadian dollar exposure for 2021. However, the Canadian dollar does continue to strengthen. We look at it on a regular basis, and we continue to monitor where it's at. And our expectation is that it's going to move a little bit more back in our favor as we head towards the end of the year and the economy start to shake out.

[Fahad Tariq, Research Analyst]

Okay. Great. Okay. That's helpful. And then maybe just switching gears, on the labor agreement negotiations at both Rosebel and Essakane. Any updates on how, maybe it's too early for Essakane, but maybe how Rosebel is proceeding? Any potential hurdles there?

[Peter Gordon Stothart, President, CEO & Director]

Look, Rosebel is very near the end of the process. We have a presentation into the board. They are looking for ratification in the coming couple of weeks here. So we do hope that the Rosebel situation will clear up here very, very shortly.Essakane is just entering into their process. I think they've been -- it's 2 or 3 years since they last negotiated. So that one is still ahead of us. With all of these projects, we start that work very early and start the discussions to make sure that we get alignment on what the issues to be talked about are. But I'm certainly hoping that Rosebel shakes out sooner rather than later.

[Operator]

Our next question comes from Anita Soni of CIBC World Markets.

[Anita Soni, Research Analyst]

My first question comes on Cote. Could you just give me an idea of when you're measuring the 18% completion what basis are you using? Is it dollars or units of production?

[Peter Gordon Stothart, President, CEO & Director]

So the 18% of total project completion is a composite measure. So it incorporates a weighted-average score between engineering, procurement, construction, commissioning and fabrication. So each of those components is weighted. Construction is by far the biggest component, but it's not the only component.And each of the metrics is measured under a different KPI. So construction is based on construction spend. Procurement is based on advancement towards the schedule. Procurement is a weighted average based on the value of contracts but sort of tied to the number of contracts to get negotiated and signed off. Engineering is based on hours. So each of the components is a different weighting to it.When we get into construction, like I said, it will tie quite closely to spend. That being said, I don't want to give anybody the impression that where we're at with the spend versus advancement can be extrapolated to final cost.I guess what's a little different with Cote compared to some other projects is the fact that because engineering and procurement was so far advanced compared to traditional project execution models, we are right now seeing a lot perhaps of additional value in that 18% metric because of that advancement in engineering and procurement versus a traditional project which might follow a little more closely with the spend timeline.

[Anita Soni, Research Analyst]

Switching to some of the operations. So on Westwood, I noticed you guys said you were focused on remediation and training. So does that mean that maybe there's not as much focus on pulling ore and putting it through the mill in Q2?

[Peter Gordon Stothart, President, CEO & Director]

Well, with respect to Westwood, what we said, we want to get underground. There's some rehabilitation. There's some training. There's some new development protocols that we want to put in place.Right now, we're working internally to reach a decision on when to start pulling ore, and our guidance estimate contemplates that, that ore production from underground will start relatively early in the second half. So we're not pulling ore right yet, but it shouldn't be too, too long before we get there, assuming we reach that go-ahead decision internally.

[Anita Soni, Research Analyst]

So Grand Duc would be at similar grades for Q2?

[Peter Gordon Stothart, President, CEO & Director]

Bruno, could you help with that?

[Bruno Lemelin, Senior Vice President of Operations & Projects]

Yes. Grand Duc is going to be similar, around the 1 gram per tonne. Also what is interesting with Grand Duc is that we have increased the amount of reserve. We have more than 50,000 ounces additional than when we first started the project. So Grand Duc is going to be helping Westwood to complement its production feed over the next 2 years, easy.

[Anita Soni, Research Analyst]

Okay. And then my last question, and I'll leave it for others to ask, is Rosebel. So a little bit more detail on that one. So you had some rain in Q1. I'm looking at one of my weather maps and stuff. And Q2 is your traditional rainy season. So could we expect similar types of sort of softness in the throughput levels and in the grades?And I noticed the mill did well. It seems like there was some stockpiles that you were pulling from. And so could you give us an idea of what the stockpile level is so that we can get an idea of where Q2 will shake out?

[Peter Gordon Stothart, President, CEO & Director]

Bruno?

[Bruno Lemelin, Senior Vice President of Operations & Projects]

So Anita, you're right. Rosebel has experienced unusual amount of seasonal rain. Usually, it starts in Q2, but you have a smaller season in Q1. This year, we had twice the volume as in the same period in 2020, so twice as much as what we usually get.So what happened is we were limited in terms of rock all-in capacity. So we were impacted also in terms of production. Also the material had a greater content in humidity. So we had to rely on lower-grade material from the stockpiles, as you mentioned. And these stockpiles are at elevated numbers still for the moment. I don't have the precise number, but it's certain that as we are going to go through H2 the rainy season is going to subside.Also, we will have additional rooms to increase the mining capacity. Right now with the COVID restriction, we have to limit the number of people on-site to favor social distancing.So with the additional of rooms and the seasonal rains that will subside in H2, we forecast and we target an increase in production and also to have a better grade, mainly in Q4, with Saramacca coming strong as we will be at the other areas of the deposit where we expect to revert back towards the average reserve grade.

[Operator]

Our next question comes from Tanya Jakusconek of Scotiabank.

[Tanya M. Jakusconek, Senior Gold Research Analyst]

Just following off Anita's questions just on the performance of some of these mines. Essakane, that was very high costs in Q1. Maybe Bruno, can you talk us through what you're expecting cost-wise as we go through the rest of the year?

[Bruno Lemelin, Senior Vice President of Operations & Projects]

Certainly, Tanya. We had some cost increase due to the higher consumption of reagents due to the complexity of the material that we have in the Phase 3. Phase 3 is a wonderful material, very high grade, higher than what we forecasted, although that recovery on some of that complex ore requires more consumption of reagents. We also were a bit impacted by higher energy costs and also higher royalties due to the higher realized gold price, as you know. So for the remaining of the year we expect to remain within the guidance.And also we had some maintenance activity done in Q1, and those maintenance are going to be -- since they are done, they're not going to be repeated in the coming quarters. So we expect to have a cost profile that will revert back to our targeted planning. [ That's for Essakane ].

[Tanya M. Jakusconek, Senior Gold Research Analyst]

Okay. So just on Essakane on its own, is it safe to assume then because of some of these maintenance and so forth that we would see a bit of relief in the cost structure for Essakane going into the rest of the year?

[Bruno Lemelin, Senior Vice President of Operations & Projects]

Look, again, it's going to -- it depends on many parameters, as you know, Tanya, on, like, how is going to be the fuel price is going to be. Also, if we continue to hit the higher-grade material in Phase 3, which will also have some impact on our region. So we expect to have, again, a very good, a strong production for Essakane in 2021 and, over all, a good performance in terms of costs. But again, that depends on the variance of those input parameters.

[Tanya M. Jakusconek, Senior Gold Research Analyst]

Okay. Maybe just then over all as a company, what I'm getting from the presentation, and maybe correct me if I'm wrong, is that Q2, over all, appears as though it's going to be similar to Q1 from a production standpoint and then better second half of the year, with a stronger Q4, because of Saramacca. Is that a correct way of looking at it?

[Peter Gordon Stothart, President, CEO & Director]

I think that's a pretty safe way of looking at it, Tanya. We will see some rebound in Q2 from a couple of things. But overall, I think your assessment is pretty fair.

[Tanya M. Jakusconek, Senior Gold Research Analyst]

Okay. And then maybe, Gordon, now that I have you on, just a couple of things I wanted to touch base on. Partly, it was the comment you made on inflationary pressures. You talked about the copper, the steel, concrete, but you also mentioned labor, and labor is a big portion of the cost structure. Should we expect then from these labor agreements that your costs should go higher in the next few years? Should we be factoring in, and maybe you can share with us what your wage inflation that you're seeing looks like? Is it 3% to 5%? Or am I off?

[Peter Gordon Stothart, President, CEO & Director]

Your numbers aren't bad. They're more or less. Certainly in U.S. dollars, they may even be a little bit high. I really can't share the exact numbers with you right now because we don't have everything signed up. But I will say that when we've done our cost estimates and our cost guidance it's based on an assumption of an increase, and we're within those assumptions currently. So the cost guidance you see for this year is already incorporating the higher labor costs. When I said that earlier, I was specifically relating to construction labor costs for Cote.So it's an area we're keeping an eye on. There seems to be a little bit of COVID premium in some of the estimates we're seeing. So we're working hard to bring those down.But the remainder of the costs, as we move forward you're going to see better production at Westwood and at Rosebel in future years, which will more than over-dominate any sort of cost inflation that we're seeing on the labor side, for sure.

[Tanya M. Jakusconek, Senior Gold Research Analyst]

Okay. That's good to hear. And then just lastly, I looked on the slide of the catalysts, and I didn't see Westwood's new mine plan. I thought we were supposed to get one this year. Where do we stand on that?

[Peter Gordon Stothart, President, CEO & Director]

Assuming we get a positive decision to move ahead, our expectation is later this year we'll certainly be putting out a mine plan for the next couple of years. We want to get a little bit of empirical information from the underground restart on some of the new development design we're putting in place. We want to see what that looks like. We're also looking at a little bit more higher use of remote equipment.But later this year, our expectation is towards the end of the year, we'll be able to put out a multi -- at least a short-term plan for the coming 3 to 5 years and then revisit the overall long after that.

[Operator]

[Operator Instructions] Our next question comes from Don MacLean of Paradigm Capital.

[Don MacLean, Senior Analyst of Gold]

I just wanted to start with Cote. Usually, the civil side of things is the part that's hardest to gauge. How is that coming along, Gord and Bruno? Is your earthworks and your construction civil coming along as expected so far?

[Peter Gordon Stothart, President, CEO & Director]

Yes, generally, the civils are coming along as expected. We have encountered less overburden and more rock in a few areas, which has sort of changed the mix a little bit. But in terms of actual progress, things are looking really good. As I said, Bruno and I were up at site a couple of weeks ago and had a good look around, and it's quite amazing. With COVID, I hadn't been there in about 7 months, which is a little weird for me, but it is what it is.Over all, we're not getting really any surprises. The project is more or less following the recipe that we laid out for ourselves, and we're pretty excited about how it's moving forward.

[Don MacLean, Senior Analyst of Gold]

Good. Good. So you're not finding situations where the mill footings have 30 feet of extra [ loon shift? It's better you're into rock. ]

[Peter Gordon Stothart, President, CEO & Director]

It's actually the other way around. The overburden was shallower in most places than we had anticipated.

[Don MacLean, Senior Analyst of Gold]

Good. And then can you just touch on, you or Bruno, touch on this lease cost of $120 million versus $80 million, give us some color on that?

[Peter Gordon Stothart, President, CEO & Director]

So when we originally set the project, our anticipation on what was available for lease was just around the mining fleet. As we've gotten into the project and as we went out to look for leasing support, we saw that there is opportunity to do some additional leasing, specifically with respect to camp and some other pieces of equipment. And obviously, from a payback point of view, given how this project develops, it's much better if we can lease things and have those costs occur commensurate with when that work is happening, rather than having all the cost upfront.So we are looking at leasing. It gives us -- we have some pretty aggressive opportunities to do some additional leasing. So we continue to look at it. And that's what's buried into the current estimate.

[Don MacLean, Senior Analyst of Gold]

And how does, say, the mining fleet cost for the lease compared to what you had expected?

[Peter Gordon Stothart, President, CEO & Director]

The total cost of the mining fleet, we haven't ordered it all yet, but we've certainly put the biggest order in here last month. And the costs are, I think they're about 1% or 2% below what our capital estimate was on the mining fleet. So it has come in pretty much dead on plan.

[Don MacLean, Senior Analyst of Gold]

That's great. It's good to hear. At Saramacca, the grade wasn't particularly stellar at all, and it was said because of the mine sequencing. Can we get a little bit more color on how the grade is going to improve over the year?

[Peter Gordon Stothart, President, CEO & Director]

Sure. I'll let Bruno answer that.

[Bruno Lemelin, Senior Vice President of Operations & Projects]

So right now, because we are at the very beginning of this project, we're mining at the very edge of the deposit, on top of the deposit in some areas. And once we're going to get more at the heart of the deposit you'll see the grade to improve nicely and getting toward the average grade that we have in our block model.So right now we see that rate to be lower than the average grade for the whole project, but in H2 that grade is going to improve nicely above the 1 gram per ton [ assay ] and then will help Rosebel to increase its production even for the second half of the year and mainly also in Q4.So it's an average for the block model. Some areas, you will hit 0.8 gram per tonne; other areas, you will hit 2 grams per tonne. That's just the mine sequencing that we are right now to get access to the richest part of the zone of Saramacca as we speak.

[Peter Gordon Stothart, President, CEO & Director]

I think the other thing I'd add, Don, is with respect to Saramacca we are still -- we're seeing positive reconciliation versus the block model. So it really is a sequencing issue, in that the highest elevation-wise areas of Saramacca that we're accessing first as we mine top-down are more towards the southeast in lower-grade areas. But as we mine down more to the northwest and extend the benches to the northwest, you are going to see those higher grades coming at us.

[Don MacLean, Senior Analyst of Gold]

That's encouraging to hear that you've got -- we know it's only a snapshot at the very beginning, but at least it's starting off positive, the reconciliation.Then, Bruno, maybe you could just touch on security at Essakane?

[Bruno Lemelin, Senior Vice President of Operations & Projects]

Security for Q1, we had no event that impacted our production for us, the mine. We are good. The region also. There are some activities done by some stakeholders from countries, the G5, the Barkan forces. And we are always -- they keep having a focus in the region, increasing security details and protocols. And also for us, that's what we do. We continue to monitor the situation as we speak. But so far, it's very stable for us at Essakane.

[Operator]

Our next question comes from Mike Parkin of National Bank.

[Michael Parkin, Mining Analyst]

Just with Cote, can you give us an idea for the steel work in terms of the mill framing and cladding? Has that been ordered? And is there any of it at risk of price adjusting for the inflationary pressures you are hearing and reading about on steel prices? Or are those prices largely locked in at this point?

[Peter Gordon Stothart, President, CEO & Director]

Most of the steel contract for the building has been locked in, but there are -- for the main mail building. For some of the other structures, they haven't been locked in yet.

[Michael Parkin, Mining Analyst]

Okay. And then, I guess same for, like, steel going into all the heavy equipment like mills and stuff, those are under fabrication already?

[Peter Gordon Stothart, President, CEO & Director]

The stuff for the mills and the mining equipment, the steel, most of that has been resolved, most of the manufacturers of that larger stuff. They'll hedge their supply costs at the time we place the order so that they're not exposed to changes in the steel price. So a lot of that is there. Where we're still outstanding is there's steel. Obviously, there's rebar in concrete. There's a number of other buildings. And there's timber for scaffolding and framing and forming. And so there are some other bits yet that we're waiting to come in. We're working through them now. We would expect to have almost everything locked up here certainly by the time we get into Q4 this year.

[Operator]

This concludes time allocated for questions on today's call. I'll now hand the call back over to Indi Gopinathan for any closing remarks.

[Indi Gopinathan]

Thank you very much, Ariel, and thanks to everyone for joining us this morning and for your continued interest in IAMGOLD. We look forward to having you join us again for our second quarter 2021 conference call in August. Goodbye.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.