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IAMGOLD Corp
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Thank you for standing by. This is the conference call conference operator. Welcome to the IAMGOLD Third Quarter 2018 Operating and Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time, I would like to turn the conference over to Ken Chernin, Vice President, Investor Relations for IAMGOLD. Please go ahead, Ken Chernin.
Great. Thank you very much, Savice. Welcome to the IAMGOLD conference call. Joining me on the call are Steve Letwin, President and CEO of IAMGOLD; Gord Stothart, EVP and COO; Carol Banducci, EVP and CFO; Craig MacDougall, SVP, Exploration; and Jeff Snow, Counsel and SVP, Business Development. 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. The slides that are referred to during the presentation can be viewed on our website. I'll now turn the call over to our President and CEO, Steve Letwin.
Well, thanks, Ken, and good morning, everyone. Just a quick note; Laura Young, who is sitting across from me today, is attending her last conference call with us. And or those of you on the call, Laura has been very, very instrumental in putting together all of our press releases, our MD&A, our conference call scripts. She started around the same time I did, which is 8 years ago, and I just want to say thank you, Laura. We're going to miss you terribly. And we wish you all the best in your retirement. So just to reinforce what we said in the press release, we expect to have a solid finish to the year. Gord is going to take you through this. And we've made it clear that we confirm our 2018 production and cost guidance. We had a tougher quarter than we expected, than you expected. It was mixed. It results in reflecting gold margins under pressures for a number of reasons that Gord and Carol are going to talk to. But my job is to reinforce the positive developments that are occurring at this company that you have seen press release after press release that's enabling us to build a better future for this company. We are heading to Saramacca Sunday morning. We've got 3 planeloads of investors and shareholders and analysts. We're going to see the start of construction of the road. We've already started work on the road. Saramacca has a beautiful look to it. We've seen the Cote feasibility study and the way it looks. It's extremely attractive. It's a beautiful project for the company. It's transformational. You've seen Boto for the future. You see Westwood ramping up. This is a company that is completely changed. Production is moving up significantly over the next 3 to 4 years. Costs are coming down. Our reserve lifes, our increases. So look; the quarter is important. We wish it would have been a little stronger. But it doesn't deter us from our quest to bring this company into the top quartile as a performer on a margin basis, on a reserve basis and on a production basis. And we are on that road and we're seeing some really successful execution around it. So as our -- on Slide 5, as our transformation continues, you will see that we will turn ourselves into a low-cost producer. It's the one challenge that's always been there when gold gets to around $1,200. You can see how much our stock gets affected. We're very aware of that. We're very focused on it, very motivated on it. Our compensation metrics are aligned to bring those costs down, to bring the reserve life up and increase our production. So we're targeted this. We are hoping that gold, obviously, strengthens or increases in price, but it's not what we're counting on when we do our plans. And these higher expected returns will be there for our shareholders over the next couple of years. Saramacca, as you know, has proven to be an exceptional deposit. Significantly, it was the main driver behind Rosebel's 51% reserve increase that we announced on September 23. With Saramacca now folded into the mine plan, Rosebel is headed towards higher production and an improving cost structure and has added 5 more years to its life expectancy. With exploration work continuing along the Saramacca-Brokolonko trend, we expect more years beyond 2033. The outlook for Boto Gold has stepped up dramatically with the recent results of the feasibility study. This is simply a fantastic project with a 23% after-tax rate of return. We still have permitting to complete and a final investment decision, but clearly Boto is a high-value project that could take the place of Sadiola. Our Cote Gold project, we just announced the results of the feasibility study. Many of you were on the call last week when we presented the positive outcome. With the amount of de-risking that has been completed over the past 6 years, the value of this asset has continued to grow. Cote has 10 million measured and indicated ounces, 6 miles -- 6 kilometers off the highway, between 2 major cities in Northern Ontario. It has 70% converted to reserves. We presented 2 scenarios, both very robust with a 15% rate of return. The mine plan that exploits all of the reserves increased the NPV by 29%. Cote is a solid low-cost, long-life project. It's one of the very few that are actually going into operation in this country, in this province and in the world, when you look around what projects are out there. Once in operation, we expect it to nearly double our operating cash flow. At our Essakane mine, we have an opportunity to add ounces by optimizing the performance of the existing CIL mill rather than proceeding with heap leaching at this time. Gord will talk to that. The capital cost would be significantly lower and free up funds for our other growth projects. Heap leaching is not off the table, but would be deferred until closer to the end of Essakane's life. Essakane has been running, as you know, extremely well and will continue to do so well into the future. All of these organic growth initiatives, Saramacca, Cote, Boto, Essakane, are the bolts of a strategy to transform our company into a long-life, low-cost producer. I'll add that, in terms of sequencing, Saramacca is already out of the gate. Essakane can happen in parallel. It makes sense that Cote would be next. The infrastructure is there. The distance from the pit to the mill is only a kilometer. And Boto would follow that. And I want to emphasize this again and again and again; we will never put our balance sheet at risk for a project. Financing has to be in place before we begin. Carol is doing an outstanding job to ensure that our capital structure is aligned with our growth needs. And with that, I'll pass it over to Carol.
Thanks, Steve, and good morning, everyone. As Steve said, as anticipated, we had a somewhat mixed quarter with margins under pressure, yet positive developments around our growth project and capital resources. I'll begin with a summary of our financial results for the third quarter. Although up on a year-to-date basis, revenues of $244.8 million for the third quarter were 9% lower than the same quarter in 2017. The main factors were a lower realized gold price and lower sales volume at Rosebel partially offset by higher sales volume at Essakane. Lower revenue with an increase of cost of sales was the reason for the decline in gross profit to $7.5 million for the quarter. However, year-to-date gross profit rose slightly from the prior year. Adjusted net loss in the third quarter was $6.9 million, or minus $0.01 per share. Net cash from operating activities, before changes in working capital, was $39.7 million, down from the same period in 2017 primarily due to lower earnings. Year-to-date, we are up from the previous year. The next slide presents our hedges as of September 30, 2018. The Canadian dollar and the euro are hedged for 2018 and 2019, but oil hedges extend out to 2022. To hedge our current exposure, we use 0-cost collars and, in addition, we opportunistically purchase the Canadian dollar and euro to add to our foreign account balances. For oil, we use collars and have hedged between 47% and 75% of our annual consumption. Our balance sheet remains strong with $715 million in cash, cash equivalents and short-term investments primarily in money market funds. Net cash at the end of the third quarter was $315 million. In the fourth quarter of this year, we expect to receive a $95 million final payment from Sumitomo for its purchase of a 30% interest in the Cote Gold project. The payment is triggered by the filing of the Cote feasibility study, which will be within 45 days from the date the feasibility study results were announced on November 1. During the quarter, Moody's upgraded our long-term credit rating with a stable outlook. Total liquidity, including a $250 million credit facility, was $965 million at the end of the quarter. I'll also add that we are in advanced discussions with a syndicate of lenders to double the existing credit facility from $250 million to $500 million and, to date, we have received commitments. The facility is expected to close before the end of 2018. The additional funds will provide further financial flexibility as we continue to execute our growth strategy. Our financial strength continues to set us apart from the industry. As we move ahead with our growth projects, we will continue to make investment decisions and allocate capital in a way that maintains financial discipline of our balance sheet. And with that, I'll turn it over to Gord.
Thanks, Carol. So operationally, we had a decent quarter; not as strong as the first 2 quarters, but solid enough to confirm total production and cost guidance for the year. Despite the lighter production at Rosebel, the site is making excellent progress with initiatives to increase productivity and reduce costs. Essakane's mill output continues to be stellar and Westwood's production ramp-up is on track. We finalized a new 2-year collective labor agreement at Rosebel, and union members at Westwood voted favorably on a new 5-year collective labor agreement. We continue to execute on our growth projects with success in enhancing expected returns. Attributable production for the third quarter of 208,000 ounces brings year-to-date production to 651,000 ounces. Although Rosebel's lower grades and mining tonnage impacted their performance during the quarter, after 9 months, we are 75% of the way to achieving the midpoint of our consolidated annual guidance. So we're right on track. Year-to-date, all-in sustaining costs were $1,035 an ounce. All-in sustaining costs for the quarter were impacted by lower sales at Rosebel and lump-sum payments to employees at Rosebel and Westwood in accordance with the new collective labor agreements. Although there's no change to our total production and cost guidance for the year, we have revised relative allocation of production guidance between the operations. Essakane's guidance has been raised to reflect higher throughput and grades, and Rosebel's was lowered with the decline in mined tonnes and head grades in the third quarter due to timing issues. Sadiola's guidance has been revised slightly upwards, and Westwood's remains unchanged. At the consolidated level, 2018 production guidance remains unchanged at 850,000 to 900,000 ounces. We reassessed our CapEx outlook and have lowered guidance for 2018 to $305 million, plus or minus 5%. This reflects a $20 million reduction in non-sustaining capital expenditures to $145 million. The $10 million reduction at Rosebel is mainly the result of deferred spending for the Saramacca project based on final engineering work, lower spending on indirect costs and the removal of a 2018 cost contingency. This has no impact on the completion date for the Saramacca project. The $5 million reduction at Essakane reflects the deferral of the heap leach project as we refocus the feasibility study on mill optimization. The $5 million decrease at Sadiola reflects where we stand with the Sadiola sulfide project. Turning to a site-by-site review of our operations and beginning with Essakane, so Essakane continues to perform very well. Attributable production of 96,000 ounces in the third quarter was up 3,000 ounces from the same quarter of 2017. The increased output was mainly due to higher grades. As I said, Essakane's production guidance has been increased for the year. With commissioning of the oxygen plant this quarter, we expect a 0.5% increase in recoveries moving into 2019. Throughput, as well, has increased for the year as mill availability has been running higher than originally programmed. The mill continues to run 25% above nameplate capacity with annualized throughput of approximately 13.5 million tonnes on an 85% hard rock blend. The third quarter all-in sustaining costs at Essakane were $993 per ounce. The increase from the same quarter last year was due to higher sustaining capital expenditures. On last quarter's conference call, we talked about the 39% increase in reserves at Essakane with the higher grades encountered during PFS drilling accounting for about a third of the increase. We indicated that we could run heap leaching in parallel with the existing carbon and leach processing. After reevaluating our options, we have decided that, due to encouraging drill results in the pushback zones, it is strategically and economically better to refocus the feasibility study on optimizing the performance of the carbon and leach circuit in the near term. We will still build the heap leach facility, but not until the end of the CIL operations. In the interim, we will stockpile the heap bleach grade ore, protecting the reserve declaration from June. This alternative will reduce our capital requirements at Essakane by at least $100 million next year, freeing up capital that can help fund our other growth projects. Turning to Rosebel, attributable production of 67,000 ounces in the quarter was 11% lower than the same period in 2017. The main reasons were lower head grade and throughput. We are already seeing good improvement in the fourth quarter along with further improvements expected once Saramacca, with grades nearly double that of Rosebel's, is brought into production. Mine production was lower than the same period in 2017 mainly due to lower labor productivity during the collective labor agreement negotiations. With the new agreement signed on September 14, we are now seeing an improvement in mining productivity particularly with components of the variable compensation, which are tied to productivity targets. Rosebel's all-in sustaining costs per ounce were significantly higher than the previous year reflecting the lower sales. Additionally, there was a $1.7 million lump-sum payment to employees in accordance with signing the new CLA and that had a $26 per ounce impact. Other factors were higher energy costs, increased preventative maintenance and lower capitalized stripping due to mine sequencing. On September 23, we announced a 51% increase in Rosebel's reserves. A number of you were on the call, so to briefly recap the highlights. The declaration of 1 million ounces in reserves for Saramacca on a 100% basis accounted for nearly 2/3 of the increase. Incorporating soft rock from Saramacca provided greater flexibility around blending ores so we were able to add 400,000 ounces from the Koolhoven deposit. The additional 1.6 million ounces of reserves extends Rosebel's mine life by 5 years to 2033. Once Saramacca is in or close to full production, Rosebel's average annual production would increase by 11% to 295,000 attributable ounces with 362,000 ounces during the peak years. We're progressing towards a production start in the second half of 2019. Permitting is expected to be completed this quarter. Engineering and construction work is progressing well. Firm orders have been placed for the acquisition of the long haul fleet and the initial mining equipment fleets. The haul road between Saramacca and Rosebel is in the final phases of detailed engineering and road construction work has commenced on the Rosebel mining concession. The project team continues to work at improving the project economics. We feel it's too early to be publishing definitive cost number when we see several strong opportunities for improvement. As I mentioned last quarter, we are also planning to begin conceptual studies next year to look at the potential for underground mining given the high grades intercepted during the initial exploration of the project. Once we've completed a preliminary round of the life-of-mine plan incorporating Saramacca, we should be in a much better position to provide more color so you can update your models. At Westwood, third quarter production was 30,000 ounces. The 3,000-ounce decrease from the previous year reflected lower grades and slightly lower throughput. As per plan, Westwood mined lower-grade stopes during the quarter. As in previous periods, reported mill grades were lower than mined grades, which is due to processing a proportion of marginal ore stockpiles to leverage available mill capacity as the mine continues to ramp up. A new 5-year collective labor agreement was signed on September 20, 2018. The inclusion of a $1.1 million lump-sum payment had a $38 per ounce impact on cost of sales. All-in sustaining costs increased by 15% year-over-year due to the higher cost of sales as well as lower sales volumes and higher sustaining capital expenditures. The increase was partly offset by a stronger U.S. dollar relative to the Canadian dollar. As we progress towards a ramp-up to full production in 2020, underground development continues to open up new mining areas. During the third quarter, the central ramp breakthrough was completed. And while development work continued on the ramp breakthrough on Level 132, this breakthrough at this level should provide access to higher-grade areas for 2019. Infrastructure development continues in blocks at the lower levels, including the 180 West Level, from which production is expected in 2019. At our Sadiola joint venture, attributable production in the third quarter of 2018 was 14,000 ounces, down slightly from Q3 '17 with the lower head grades. As in past quarters, the continued draw-down of marginal ore stockpiles is reflected in the higher cash costs. Lower all-in sustaining costs reflect a nominal amount of sustaining capital expenditures compared to the previous year. The processing of stockpiles will come to an end midway through next year. While the agreement with the government of Mali has not been reached around the terms necessary to proceed with the Sadiola sulfide project, we have, together with our partner, AGA, initiated a process to identify third parties who may be interested in acquiring our collective interests in Sadiola. This process is at a preliminary stage and there is no certainty of its outcome. Now turning to our development projects, we announced feasibility study results for the Cote Gold project on November 1 that demonstrated significant economic and operational improvements from the pre-feasibility study. For the benefit of those not on the conference call following the announcement, I'll recap the highlights. And I'll speak to the numbers on a 100% basis. So compared to the PFS, proven and probable reserves increased by 23% to 7.3 million ounces. Measured and indicated resources, inclusive of reserves, increased by 24% to nearly 10 million ounces. And inferred resources nearly doubled to 2.4 million ounces. A significant amount of de-risking has been completed with multiple reserve and resource updates. So when we acquired Cote in 2012, the deposit comprised 6 million inferred ounces and just under 1 million indicated ounces. And since then, M&I resources have increased 10-fold on 100% basis. The feasibility study presented both a base case mine plan and an extended mine plan. The base case is supported by 88% of the reserves and is aligned with the current permitting process. The extended mine plan exploits all of the mineral reserves, demonstrating the full potential of this project. Both scenarios assume a $1,250 gold price, unchanged from the PFS. Compared with the pre-feasibility study, both plans show mill throughput increasing to 36,000 tonnes per day, a lower strip ratio and slightly higher grades. With the base case mine plan, the after-tax IRR has increased to 15.2% and the after-tax NPV by 13% to $795 million. The mine life for the baser case is 16 years. The average annual production increased by 15% to 367,000 ounces and actually averages 428,000 ounces for the first 12 years. LOM average total cash costs were $594 per ounce and all-in sustaining costs were $694 per ounce. With the extended mine plan, the after-tax NPV increased by 29% versus the PFS to $905 million with an after-tax internal rate of return of 15.4%. In this case, the mine life would be 18 years with average annual production increasing 16% to 372,000 ounces per year, averaging 407,000 for the first 15 years of production. LOM average total cash costs were $606 per ounce and all-in sustaining costs were $703 per ounce. The payback period of under 4.5 years remains the same for both scenarios with no change in the initial CapEx. With the extended mine plan, additional permits to raise the height of the mine rock area and the tailings management facility may be required. We expect a construction decision in the first half of 2019, which would allow us to begin production around mid-2021. Turning to our Boto Gold project. We published the feasibility study results on October 22. Again having gone through the details in the conference call, I'll just run through the highlights. And these results showed significant economic and operational improvement compared to the pre-feasibility study, which we announced earlier this year. On a 100% basis and compared to the PFS, reserves increased by 36% to 1.9 million ounces. Indicated resources, inclusive of reserves, increased by 29% to 2.5 million ounces. After-tax IRR increased to 23% with a 3.4 year payback period compared to 13.3% after-tax IRR in the PFS. After-tax NPV increased by 151% to $261 million despite a lower gold price assumption of $1250 per ounce. Life-of-mine average annual production increased to 140,000 over 12.8 years with 160,000 ounces being produced, on average, in the first 6 years. Life-of-mine total production is expected to be 35% higher at approximately 1.7 million ounces. Life-of-mine AISC average is $753 per ounce. Mill throughput is 37% higher with only a minor change in upfront capital costs. We're still in the early stages of preparing a development timeline as a final investment decision needs to be made and there's permitting work to be completed. An application for a mine concession for the project has been submitted to the government of Senegal and we expect approval in the first half of next year. In the meantime, we're working to optimize certain aspects of the project design and exploration is focused on expanding resources near the pits and identifying targets for additional resources. And on that note, I'll turn it over to Craig to talk about exploration at our other projects.
Thank you, Gord, and good morning, everyone. Before I begin, as usual, 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. Also note that any references to exploration target potential, including the potential quantity and grade, are conceptual in nature and insufficient exploration work has been completed to define a mineral resource, and there can be no certainty that an exploration target will result in a mineral resource being delineated. Recently, I came across some comments in a third-party research report that really resonated for me. They said exploration discoveries that make it to the resource stage are rare and that companies with large portfolios of exploration projects will have a competitive advantage in the future. Given the scarcity of new discoveries in our industry, we believe that exploration value of resource projects is not currently being recognized by investors. As an explorationist, these points remain near and dear to my heart. In 2017, IAMGOLD increased its reserves by 86%. Since then, our reserves have continued to grow a further 39% at Essakane, 51% at Rosebel, 36% at Boto and 23% at Cote. We have a robust portfolio of brownfield and greenfield exploration projects, which provide opportunities for further increases. At Rosebel, we believe there is excellent potential to increase resources and reserves on the Rosebel concession and along the plus-20 kilometer long Saramacca-Brokolonko trend. With success, there is strong potential for extending Rosebel's mine life beyond 2033. During the quarter, we continued drilling on the Saramacca property and on the adjacent Brokolonko and Sarafina properties. At Saramacca, the drilling program included ongoing hydrogeology studies to support pit optimization and continued to target both potential resource extensions and additional zones of mineralization along strike of the deposit. At Essakane, exploration is focused on extending the mine life beyond 2030. During the quarter, we continued drilling on the mine lease and surrounding concessions. This included infill and expansion drilling on the Essakane main zone and at Falagountou where we are evaluating the potential to increase resources at both the West and East deposits. At the Gossey prospect, we continue to validate and finalize resource modeling to support the completion of initial resource estimate in the fourth quarter of this year as we continue to evaluate other projects along the Gossey-Korizena trend. In addition to Essakane's 1,200 square kilometer land package, over the past few years, we have also secured more than 2,000 square kilometers of exploration concessions on highly prospective gold belts in central and western regions of the country. And this is just in Africa. We have a number of other early-stage projects underway in other jurisdictions, which I hope to speak about in the future as they progress. At our Siribaya project, we announced results from our 2018 drilling program. Delineation drilling over the past year has focused on confirming the resource and targeting the expansion of the Diakha deposit. These results will support a resource update at the end of the year. The results announced on October 18 continue to demonstrate wide zones of mineralization. High grades were reported from both infillables within the existing resources and from expansion drill holes. Highlights included 13 meters grading 6.05 grams per tonne gold, 22 meters grading 2.96 grams per tonne gold and 13 meters grading 11.6 grams per tonne gold. With the deposit now extending 3 kilometers along strike, this should have a positive bearing on the resource update. I'll remind you that Diakha is directly on the same mineralized trend as our own Boto project, which Gord spoke to a few minutes ago, as well as the Fekola mine operated by B2 Gold, which also continues to demonstrate strong resource upside. At our Pitangui project in Brazil, we completed approximately 5,000 meters of drilling. The focus continues to be on expanding the Sao Sebastiao deposit and testing priority targets for additional zones of mineralization. At our Eastern Borosi project in Nicaragua, assay results were reported during the quarter from the ongoing 2018 drilling program. Highlights included 16 meters of 5.75 grams per tonne gold and 34.3 grams per tonne silver. During the quarter, we completed a further 1,400 meters of diamond drilling targeted on selected mineralized zones for potential extensions as well as testing other vein targets for the resource potential. Moving on to our projects in Quebec, at Monster Lake, the drilling results disclosed in the second quarter are now being incorporated into the resource model and will help guide further drilling programs in the deposit area. The exploration team is continuing to work at identifying additional targets along the Monster Lake structural corridor that could potentially host additional zones of mineralization. At the Nelligan project, we announced the initial assay results from the 2018 drilling program. The results have been focused on evaluating the resource potential of the Renard Zone, a large mineralized system located immediately north of their previously known Liam and Dan Zones. The reported results were from 12 holes with highlights including 56.6 meters grading 1.8 grams per tonne gold and 23.1 meters grading 2.59 grams per tonne gold. Results from another 20 holes are still pending. As we work towards a 43-101 initial resource estimate, the results to date have been very encouraging as they have confirmed wide zones of alteration and mineralization. Overall, excellent progress by the exploration team continues at all of our projects. With that, I'll hand you back to Steve.
Thanks, Craig. And to wrap up, we confirm our 2018 production and cost guidance. As Carol talked about, the balance sheet remains very sound. As Craig and Gord both talked about, reserves continue to grow. And expected returns from our organic growth projects are looking increasingly attractive. So we continue to tick the boxes. Execute and communicate is our theme song. We look forward to more updates as our projects move forward. With that, I'll open it up to questions.
[Operator Instructions] Our first question comes from Fahad Tariq with Credit Suisse.
I know it's early and the feasibility study is expected next year. But for the Essakane heap leach project, can you talk high level about what that means, what the change means for production, the production profile, or the mine life or the throughput now that the heap leach will be run after the CIL operation rather than in parallel? I'm just trying to get some more color on the change.
Yes. So what we're looking to do next year is there's some obvious de-bottlenecking items we can complete for the mill. So currently, I mean this year we're going to process about 13.5 million tonnes, but that's at an 85% hard rock. At 100% hard rock, we state sort of the throughput capacity for Essakane right now to be 12 million tonnes a year. That's based on a -- that's over and above the 10.8 nameplate when we built the thing. But we're comfortable with 12 million tonnes. We're going to be doing some work on de-bottlenecking work in the secondary crusher, the secondary crusher circuit, the gravity circuit and a couple other areas. Not big expenditures. But our estimate right now is that will guarantee us 13 million to 13.5 million tonne capacity on 100% hard rock. And in parallel, we're going to continue some feasibility work looking at a 15 million tonne per year option. If we were to do that, that feasibility would be completed somewhere around the middle of next year. And if it proves to be something we want to do, we would then move into a capital spend later next year to put that in place. So you can think of it sort of as a 10% increase in throughput over where we are right now. Grades next year aren't has high as they are this year, but working off of your reserve grades, it's not bad. Beyond that is a potential to add another, it's about a 15% increase, I guess, 15%-18% increase down the road. Probably ready for operation in 2021. So I don't have the ounce numbers exactly, but it does represent a throughput increase from where we're at right now.
Okay, great. That was helpful. Just switching gears to Rosebel. I know in Q3 it was higher hard rock content, which led to the lower throughput, and the sequencing led to lower grade. Any indication of how Q4 is trending one month in?
Well, I obviously don't want to say too, too much, but the last 3 weeks, 3.5 weeks, we've gotten into the high grade that we were expecting to actually hit in September in both Pay Caro and the Royal Hill pits. So Q4 is trending to be a much better quarter than Q3 at Rosebel. And talking with the guys -- everybody is in town this week, actually, for budget meetings -- there's a strong confidence that we'll finish out the year within the guidance profile that we laid out and starting to accelerate, certainly, from where Q3 was.
The next question comes from David Haughton with CIBC.
Just touching on Essakane again. For the de-bottlenecking, Gord, what's your expectation for the CapEx to be able to get that higher throughput on the 100% hard ore?
Well, the exercise for next year -- obviously, none of this is approved. We still are in the middle of doing budgets with the board and everything. But that work for next year is sub-$20 million.
Okay. So sub-$20 million to get what is ordinarily 12 million tonnes per annum of 100% hard ore up towards the 13-plus million tonnes per annum of hard ore.
Exactly.
And then further consideration down the road on getting --
And I mean I really only have preliminary numbers on the step to go to 15, but it's probably -- it's probably another $30 million give or take. Maybe even $40 million. We need to do a lot of feasibility work there so I really don't want to be quoting too many numbers for you.
Okay. So one of the tricks there is that it puts the pressure back on Craig to be able to get the ore to feed a 15 million tonne per annum plant for a life that, as Craig was saying, to extend beyond 2030.
Exactly. That's one of the considerations in the feasibility study. And as I said, as we've been drilling off this pushback, we're actually finding additional higher-grade material. So it's less of a bogeyman for us, but yes, it is certainly a consideration.
Okay. Just going back to Rosebel and specifically having a look at the 43-101 that was provided. I've got to say that for Saramacca I was very surprised at how erratic the strip ratio and grade is. So strip ratio life of mine is just under 11 to 1, grade is 1.8, but looking at the table that's provided here, it just whipsaws all over the place as far as the grade and the strip ratio. And I'm trying to visualize what the pit must look like. Is there an opportunity to smooth out the strip and the grade compared to what was disclosed?
There's certainly an opportunity to smooth out the grade. And there are a lot of opportunities in the Saramacca plan. That's why we're a little reticent to come out with too many cost numbers because none of us internally believe that the plan that we've put together so far is the one we'll execute on. There's a lot of opportunity to, one, smooth out the grade. When I was talking during the presentation, I mentioned the opportunity to go to underground and that looks -- our preliminary work makes that look very, very attractive, which then gets rid of your 11 to 1 stripping ratio overall and really brings it back into something more in line. We're doing work as we speak on hydrogeology and de-watering opportunities in the pit. What went into the feasibility -- or the technical study in terms of geo-tech was a very conservative pit wall angle in saprolite material. And there's a thick saprolite blanket on this deposit so it really does lack the stripping rate. We'll get into that a little bit more when we go on the analyst tour next week. But we're, I don't want to say confident, but we're certainly hopeful that the work we're doing on hydrogeology and geo-tech right now would allow us to steepen up the wall angles slightly for Saramacca in the saprolite. I mean the wall angles that have been used in the design that went into the 43-101 are 8 degrees to 10 degrees shallower than we see at Rosebel itself just down the road.
The other part of that 43-101 that maybe you can talk to is that right now we've got Rosebel throughput around about the 12 million tonne per annum kind of level. But even with the addition of the softer material coming out of Saramacca, at least in the early phases, you're only really looking at 10 million to 11 million tonnes per annum. And I'm wondering whether there's a degree of conservatism in that expectation as well.
There is a degree of conservatism in that expectation.
Okay. So should we be thinking more like the supplemental softer feed should at least maintain the 12 million tonnes per annum for quite a number of years from where we are?
Again, as I said, there's a lot of engineering ongoing right now. But yes, I'm not uncomfortable saying that we should be able to run 12 million through that plant with the appropriate level of soft feed. Obviously, a lot of the work that Craig is doing and the min [indiscernible] team is doing right now is to extend Saramacca on strike. And we, fingers crossed, there is an expectation that the amount of saprolite ore will grow as we do that.
Okay. Last question for Steve, probably. Sadiola, now interested in putting up for sale. Have you received any inbound inquiries on Sadiola?
Yes, a lot.
Okay. So given that very brief comment, could you see the possibility of it being sold this year?
I think that's tight, David. But the interest level is very high. And Jeff Snow is quarterbacking that from our end with AGA. And I feel first quarter next year is probably a better time to look at. But we've been quite pleased with the responses. And there's a lot of heavy lifting yet. We've got to talk to the government and so on. But no, we've been very pleased with the response.
Our next question comes from Carey MacRury with Canaccord Genuity.
I had a question on the chart that's on Page 27. You show a pretty steady ramp-up of production by 2022 and a step-down in the all-in sustaining costs. I'm just wondering for 2019 specifically, is that what we should expect? And what are kind of the key drivers into 2019 versus 2018?
So as I said, the report, Carey, we're in the midst of working on that right now. Next year being a couple of things to think about. One, Sadiola goes away from us. The other operations, we do consider, continue to see a bit a ramp-up with Westwood. Essakane is having an exceptional year this year in terms of grade and I'm not expecting that to carry forward. And Rosebel next year is more or less flat. If we can accelerate Saramacca a little bit on the back end, obviously that will help. And we're looking to see what we can do in that regard. So 2019 versus this year is relatively flat.
So it's more of a 2020 that things start to pick up.
Yes. Yes.
And then secondly, maybe for Carol, just on working capital. I know it's negative $30 million working capital this quarter. I think it's, what, $65 million for the year. Can you just talk a little bit about what's driving that? And should we expect a reversal on that at some point?
Yes. No, that's a great observation. What happened this quarter is, as Gord is rolling out his maintenance program with his team at sites, we saw a buildup of supplies both at Essakane and at Rosebel with a focus of increasing our up time. So we have had to add some additional supplies and equipment to support the operations. But we are taking a look at that to see, with this initiative, if we can bring that down a bit for the next quarter. So that's something that's a work in progress. And the other contributor to the working capital was we did pay some tax installments this quarter as well. So it's not always even every quarter. And there was a VAT receivable from the Burkina Minister of Finance. And so that was expected this quarter. It looks like it might come in next quarter. So again, it was up significantly this quarter and we are working to bring it down.
And then maybe one final question. I noticed on the language around Cote it talks about a potential decision in H1 '19. Last week it was Q1. Is that -- should we read something into that? Or is that just more or less the same timing?
I would say early H1.
Our next question comes from Steven Butler with GMP Securities.
Guys, a question was previous asked and answered on Essakane. Just to reiterate again, Gord, remind us again, the pre-feas study that envisioned the heat leach starting sooner rather than later, was the mill scenario only running at 10.5 million tonnes per year in that pervious PFS?
It was running at 12. 12 on hard rock. That was the assumption. But there was no de-bottlenecking assumed at that point in time.
Okay. So it was 12 on hard rock life of mine.
Yes. Yes.
Okay. And you're running higher than that right now.
Yes.
13-13.5, you said.
13.5, but we're at about 85% hard rock right now.
Right, okay. And you may look at 15.
Yes. And look, we look at things like Gossey and some of these outside targets, we recognize that if we're 13-13.5 hard rock there is opportunity to shove some additional soft rock through there once we identify it.
Right. And I can't remember, are you running towards, rushing towards a resource update, Craig, this year for Gossey or other areas of Essakane?
Yes, we are. Gossey will be out in the fourth quarter.
Maybe just a comment. I'm not sure how many more questions we have. But I just want to reiterate that when we look at there the company is going over the next few years, it's obviously very attractive, we believe, from a shareholder standpoint. Two things. We're bringing on satellite reserves like at Saramacca. And I am constantly challenging Gord about how conservative we are on Saramacca, but we've learned in the industry to under-promise and over-deliver. So you're going to find that because of the penalties we pay and the punishment that is administered if we don't follow that line. But I can tell you that my confidence level in this company has never been higher. When I look at what the potential of Saramacca is and changing Rosebel, I believe that we are going to meet our targets that we've indicated. And Essakane continues to perform. We're deferring $100 million of capital, which really improves our ability to finance Cote going down the road. And Essakane just looks better under this scenario that Gord described where we take a CIL approach versus heap leach. Production numbers will be a little lower than what we had thought under heap leach, but the rate of return on the economics is much stronger. So this point to and where we said a very attractive future for the company where we'll be bringing down our costs significantly, bringing up our production significantly, and our reserve life will continue to improve. So it's a long -- it's always a long haul in the mining business, as you know. It takes a lot of heavy lifting. We're in a market right now where it's extremely tough, as we all have observed. But this company has a very good look going forward and we continue to have the confidence that we're going to be able to deliver on what we've indicated.
[Operator Instructions] Our next question comes from Tanya Jakusconek with Scotiabank.
I just wanted to make sure that I understood this both from an operating side and then from a financial side. It's got to do with Essakane again. So just from an operating side, just to start with the fact that you're looking at this option for increasing your throughput. It looks like about, you said, about under $20 million to go to 13 million to 13.5 million tonnes per annum on 100% hard rock then moving up to 15 million tonne option probably in the $30 million-$40 million range or thereabout. And when are we getting that feasibility study on that option, Gord, that 15 million tonnes?
On the second option, as we complete the feasibility study for the heap leach, we're going to be completing the feasibility sort of level of study on the second phase of de-bottlenecking. So it will be mid next year.
Okay. So mid next year we get the heap leach and the 15 million tonnes.
Yes. On the heap leach, the neat thing about putting the heap leach after the CIL is if we do that we don't have to construct the front end of the plant. We can use the existing primary, secondary crushers. We can use the pebble crushers. So we don't have to do that. We actually are able to do it within the existing footprint of the mine industrial area so we don't have to extend the fence. We don't have to relocate anybody. The processing, the carbon columns, we can use existing equipment. So there's an actual really hard savings to putting the heap leach after CIL.
Yes. Okay. And just before getting to the savings and those numbers. The mining aspect of the heap leach, you're going to continue parallel. So it would be coming in, in 2020, like you originally had planned, Gord, and then you're just stockpiling it.
Yes. The mining rates are pretty much the same because we need to -- and it was the CIL feed that was always driving those mining rates. So we needed to mine at that rate to keep the plant full. Obviously, if we increase the throughput, we have to work even a little bit harder. But yes, that was what was driving it. It wasn't so much the heap leach production that was driving the mining rate. It's always been the CIL rate that's been driving the mining.
Okay. So we would just assume that you just keep mining for the heap leach, stockpiling it and then putting it in after 2026 or thereabout.
Yes.
Okay. So that's from the operating standpoint. And then from the financial standpoint, what I understood from you is that the heap leach option I think was $150 million -- correct me if I'm wrong -- to build. It looks like $100 million of it was next year, which you've removed. And from that instead would be the $20 million you mentioned for going up to 13 million to 13.5 million tonnes. And so ultimately, the financial gain, is it that we have saved $100 million? Is that it?
So yes. The number was about $155 million. As I said, we've deferred at least $100 million from next year and maybe even a little bit more. The net savings -- I mean we still have to build pads. We still have to buy some stacking equipment, things of that nature. Probably the net savings from the heap leach, you've deferred, I've got to say, $30 million or $40 million from next year. Again, it will come out with the feasibility study. But I would think in 2026 you're going to be spending, pick a number, $20 million or $30 million in order to build the heap leach. And it starts to get a little more complicated. When we look at the 15 million tonne per year option, again the piece that is involved there is an HPGR that's put into the crushing circuit. If we do that as part of a 15 million tonne expansion, that will even more reduce what gets spent later on for heap leach. There's some commonalities in the front end of the circuit here. So all we're looking at is what we pull forward or what we delay.
Okay. So just to wrap up so I understand. There's the $20 million to $30 million to be spent on the heap leach at the back end.
Yes.
You've deferred this $100 million, but then you've got to spend another, let's say, $60 million or so to get up to that 15 million tonnes.
My numbers, I'm really sorry, I'm racking my head here. It's in that neighborhood. It's in that neighborhood. As I said, when we come out with the feasibility study, there will be certainly better numbers behind that.
So looking at it, is it reasonable to assume -- maybe Carol will jump in here -- that at least $50 million of savings, net-net?
Oh, at least. At least.
Yes. I think you said it right at the beginning. It's about $100 million in savings. And as Gord has tried to articulate or as he has articulated, we're looking at where it sits in our budget cycle in terms of the spending and what that difference is right now. We're in meetings kind of reviewing that from a preliminary perspective. But bottom line, you're right; it's about $100 million less.
Okay. That's good. Yes, it's good. And it gives you a bit more flexibility on your other projects, Carol.
That's right.
We'll hopefully understand all of this when we get more details mid next year.
This concludes time allocated on today's call for questions. I will now hand the call back over to Ken Chernin for closing remarks.
Great. Thank you very much, Savice, and thank you, everyone, for joining us this morning and for your continued interest in IAMGOLD. We look forward to you joining us for our Q4 2018 conference call on February 21. Thank you very much.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.