IAMGOLD Corp

TSX:IMG

Earnings Call Transcript 2017-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD 2017 Fourth Quarter and Full Year Operating and Financial Results Conference Call and Webcast. [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, Mr. Chernin.

[Ken Chernin]

Great. Thank you, Ariel. Welcome to the IAMGOLD fourth quarter 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 Tim Bradburn, Vice President, Legal and Corporate Secretary.Our remarks on this call will include forward-looking statements. Please refer to the cautionary language regarding forward-looking information and our discussion documents and be advised that the same cautionary language applies to our remarks during the call today. The slides that are referred to during the presentation can be viewed on our website.I will now turn the call over to our President and CEO, Steve Letwin.

[Stephen Joseph James Letwin, President, CEO & Director]

Thanks, Ken, and good morning everyone. I'm going to start on Slide 4. I think as you already know, we had an outstanding finish to the year, exceptional exploration results drove our goal reserves up 86%, our operating performance was robust as core assets proved to be significant catalysts for growth. Our achievements in 2017 set us up with a growing long-life production profile at a time when many of our peers are struggling with reserve life. And I do recall, when I joined the company, it's coming up to 8 years, where our reserve life was literally less than 8 years and when you look at it today at 1 million ounces a year we believe by the end of the year it will be on 16 years. So literally, a doubling in our life of mine around the planet, which has been a very, very positive experience and a lot of thanks to Craig MacDougall and Gordon Stothart for that.Our growth in the gold business, whether organic driven or through acquisition, is a major challenge for a lot of companies, but for us, we have a great organic pipeline in front of us. We've had a lot of great success, and as I said, a lot of that credit goes to the people at the sites and the people at corporate that headed that up.On Slide 5, I think you've seen this math many, many times. We focused, as you know, on extending the life of our mines and lowering our cost. At Rosebel itself there is significant increase in reserves as a result of mine plan optimization and cost reduction that allowed us to extract more value from this asset than we could otherwise. Our strategy to consolidate properties within the vicinity of the Rosebel mill is working. Saramacca has proven to be a significant discovery. We expect an initial reserve estimate in the second half of this year followed by a production start a year later. Just last month, we secured the exploration rights of Brokolonko. If you look on your map, up to the Northwest, we see the Saramacca deposit in the red dot. In between that, you see the Sarafina Concession and then Brokolonko. That little dark area is where you've seen some, what I would call, just small-scale mining that's been there for years. A lot of that from more Brazilian influx than the Surinamese people. In fact, the President of the country lived there and grew up there.So we were just out there about 2 weeks ago and I can tell you that Brokolonko looks very, very attractive and looks very, very robust. And I know Craig is going to talk about his program coming up. But we are extremely excited about the fact that this is about a 15 to 20 kilometer stretch of very prospective property that we now have 70% of. And the government is working in a very accelerated pace to get us all the permits that we need. So Gord is going to talk about where Saramacca is going. But as most of you know, this has totally transformed Rosebel. And given that we're within 20 to 25 kilometers of the mill that's been paid for, our strategy of maximizing and leveraging off of current infrastructure has really paid dividends. So the economic returns of these properties are going to be very significant for the company and obviously our shareholders.So a lot of excitement in and around this new gold district that's developing and we're going to be paying a lot of attention obviously. With very small amounts of capital, we're going to be getting and realizing some very significant increases in cash flow, lowering of costs and overall economic returns.At Essakane, Slide 6, we're seeing a similar experience and Gord is going to talk more about this. We're heading to Essakane in 2 weeks. So March 10, I'm heading out there to basically start the solar hybrid operation, which we're very, very excited about. And the Heap Leach project will be announced in June, and we're going to have an analyst tour celebrating that in the second week of June.We believe that this Heap Leach project could potentially increase Essakane's mine life by 2 to 5 years. The completion of the pre-FEED study in the second quarter is expected to lead to an increase in reserves and resources and satellite prospects surrounding the mine could add more years to the -- to Essakane. So Essakane has basically the same look as Rosebel. And you saw that with Falagountou, where we -- 8 kilometers from our mill, Essakane main zone, we added about 1 million ounces at a higher grade and softer rock. And I know Craig is having success north of the mill and south of the mill that we believe over time will do what is happening at Rosebel. We're going to add life to Essakane, we're going to lower costs, and as we do that we're bringing in new technology like the solar hybrid farm which is going to, I guess at the end of the day, be a legacy for us, because it's going to change the region significantly and lowers our overall cost and time. It brings in the fact that we no longer have to rely on hydrocarbons and that provides a source of energy for people in the community. All of these are huge pluses for the company and for the people that live in the region in Burkina Faso.Last word, we were just there about 2 weeks ago, Gord, a week ago, had a great of tour of Westwood, now operating at a normal level, production targets are being achieved, unit costs are declining, a ramp-up to full production is expected by 2020. Last year, Westwood produced 125,000 ounces. So 2 years from now, we hope to see production nearly 50% higher. I was very pleased when I went out there. We have a new GM in place, Martial Tremblay, a seasoned gentleman from -- had spent 4 years at our Essakane operation. The morale is high. The productivity is higher than what we were forecasting. They're looking at again new technology coming in the Westwood, which is very, very exciting. I was in China in January. I went to Nanchang where Nerin Engineering exists. And I spent a couple of days looking at new robotic tools that are used for underground mining and digital mining. And I will tell you that Westwood is in front of this and we're seeing some really nice opportunities to improve productivity and improve safety over time with this new technology.On Slide 8, the Côté is advancing towards the development. And as you know the second way we're achieving organic growth is by moving ahead with one of Canada's largest undeveloped gold projects. We were never in a rush to build Côté. It was more important to do it at the right time and with a partner. As a result, we have a project with 6 million ounces in reserve. Together with our partner Sumitomo we're working towards completing the FEED study in the first half of 2019 with a potential production start in 2021. And again, I think what you're going to see, as you've seen at Rosebel and Essakane, the opportunity to see some short cycle opportunities around Côté over time. It's a large land package. It's surrounded by infrastructure. As you know, we're basically 6 kilometers off the highway and all energy infrastructure we need, the labor force et cetera. So as the Côté infrastructure is developed and mines start to operate and we do further exploration I'm convinced that we're going to be able to bring more ounces into this mine and improve the economics, which are already quite healthy.Slide 9, Boto, and as you know we've had some great success in exploration. Craig is going to talk about this. One thing we didn't do during the tough years was cut back to the point where it could be detrimental to our future production pipeline and we're seeing some great results and benefits because of that. The 86% increase in gold reserves was driven by the conversion of resources at Côté, the significant increase in the reserves at Rosebel and most recently the 1.4 million ounce reserve that Boto Gold.Based on the pre-FEED study Boto has the potential to produce nearly 100,000 ounces annually for 13.5 years. This is organic growth. It's not the result of acquisitions. Future growth in our reserves and resources is expected this year. We're pursuing expansion opportunities at existing deposits and expect initial resource estimates at Monster Lake, Nelligan, and Eastern Borosi.Slide 10. We are looking at our strategy to increase the value of our assets, advance attractive development projects and invest in exploration. And this has all worked very well for us over the last number of years. We're confident we can keep growing production and reducing costs. We're going to see this company grow to about 1.2 million or 1.3 million ounces by 2022 and all-in sustaining cost dropping towards $800 an ounce. This improves our cash flow significantly as you know. You could do the math, 1 million ounces times $200 an ounce, $200 million in free cash flow that basically flows to the bottom line. This is huge for us and because our portfolio is changing so dramatically with the short cycle and long cycle strategy we've had, our cost structure is dropping at a rapid rate and our production is moving up in concert with that. And here's the extra set of good news is that as we moved from about 7.5 million ounces of reserves towards 15 million ounces in the last 2 years, I am completely convinced and confident that that reserve base will continue to grow. And when you match that up against some of our peers, and I'm not being critical of them at all, we've been in the tough spot ourselves for a number of years. But when you measure us up against our peers, we have a good look and it's a byproduct of a lot of good work. But the profile of the company looks very robust going forward.On that note, I'm going to pass it over to Carol Banducci to review our financial results.

[Carol T. Banducci, Executive Vice President & CFO]

Thanks, Stephen, and good morning, everyone. We had another solid year. Our financial results in 2017 reflects strong operating performance and continued cost improvement. Our balance sheet is in excellent shape providing us with significant financial flexibility. Last year we completed steps to improve our capital structure and I'll talk more about that in a moment. And Gord will cover our capital spending plans around our growth projects.This slide presents key performance highlights for the fourth quarter and for the full year. The fourth quarter attributable gold production was 228,000 ounces, bringing full production to 882,000 ounces for the year. The increase in all-in sustaining costs in the fourth quarter from the previous year was due to higher sustained capital expenditures due to timing and higher cost of sales. Higher energy costs and a weaker U.S. dollar relative to the euro and the Canadian dollar contributed to the increase in the cost of sales. We made excellent progress in reducing costs over the past 5 years. All-in sustaining costs for the year were $1,003 per ounce, 5% lower than 2016. Revenue of $291 million in the fourth quarter was up 15% from the same period in 2016.Revenue for the full year of $1.1 billion was up 11% from 2016 with revenue increasing at all sites. And more specifically Westwood accounted for 2/3 of the increase as sales nearly doubled from the previous year. Gross profit in the fourth quarter increased by 116% to $41 million and for the year it was up 50% to $153 million. Net operating cash flow was $65 million in the fourth quarter, up slightly from the fourth quarter 2016. Net operating cash flow for the year was $295 million.Turning to the earnings slide. Pre-tax earnings were $13.4 million. Fourth quarter net earnings was impacted by a significant tax expense of $30.3 million. This resulted in a reported net loss attributable to IAMGOLD equity holders of $17.7 million for the fourth quarter. There are very few adjusting items in the quarter including a $8.4 million increase for changes and asset retirement obligations. However, those few items required recognition of an additional tax expense of $9.1 million. So reflecting these adjustments we had adjusted net loss of $0.03 per share. So the fourth quarter, as I mentioned, had a significant tax expense relative to both income before tax and adjusted earnings before tax. And the principal factor producing that result was fluctuations in foreign currency exchange rates. I'm just going to pause here to better explain what happened in the quarter. So what happened was the euro got stronger relative to the U.S. dollar and we have a deferred tax asset in Burkina Faso and that deferred tax asset when you translated into U.S. dollar terms was actually reduced which means you've got fewer tax deductions in the future. And so historically, we've not actually adjusted for FX movement in the tax expense line. And from a compliance perspective, we didn't adjust this quarter because we, in fact, had a favorable movement in the third quarter. So it wouldn't have been appropriate to just adjust for the fourth quarter, but it's something that we will definitely be looking at in the future.So turning to the full year reported net earnings for 2017. That included a $524 million impairment reversal for both Côté project and Rosebel Mine. And these reversals were recorded in the second quarter 2017. The $43 million tax adjustment was mainly related to the reversal of the impairment charge at Rosebel. And again what I'll mention here is that when you take a look at the reversal for the Côté Gold project, in fact, we didn't actually have to recognize a deferred tax expense on that, because we had a deferred tax asset that was -- that we have not recognized that we were able to offset that deferred tax expense. On an adjusted basis net earnings attributable to equity holders for 2017 were $29.3 million or $0.06 per share.The next slide presents the company's hedge positions which have been updated since those reported at year-end. In the new year, we took the opportunity to layer in some additional hedges. So as of today, we have hedges in place for the Canadian dollar and euro for 2018 while hedges for oil are in place out to 2022. Turning to our financial position, we had $816 million in cash, cash equivalents, short-term investments in money market instruments and restricted cash as of December 31, 2017. We have a manageable level of debt. The refinancing of our long-term bonds reduced our long-term debt to $400 million and extended the maturity date by 5 years out to 2025. Excluding our long-term debt and the $25 million in restricted cash, we had a net cash position of $391 million. So total liquidity exceeded $1 billion and this included virtually undrawn $250 million credit facility. Amendments to our credit facility in December extended the maturity date out to March 2022, improving the pricing and it also provides us an accordion option to add another $100 million.So as Steve said the year ahead is all about execution. We have an enviable pipeline of growth projects with many catalysts ahead and as we execute, we'll continue to manage our business prudently and with much financial discipline.So with that, I'll turn it over to Gord.

[Gordon Stothart]

Well, thank you, Carol. On February 12, we released our 2017 year-end reserves and resources statement. This slide compares reserves and resources year-over-year. Our gold price assumptions at our owner-operated mines remained unchanged. Reserves, including the Côté Gold and Boto Gold projects, were based on $1,200 per ounce, resources for Essakane and Rosebel were based on $1,500 per ounce and for Westwood, $1,200 per ounce. Resource estimates for Côté Gold, Boto, Pitangui and Diakha Siribaya remain unchanged at $1,500 per ounce. Reserve and resource estimates at Sadiola prepared by our JV partner use price assumptions of $1,200 per ounce for reserves, up from $1,100 in previous year and $1,400 per ounce for resources unchanged from 2016. Proven and probable attributable gold reserves after depletion increased by 86% to 14.5 million ounces from 7.8 million ounces at the end of 2016. The main drivers were initial reserves of 3.8 million attributable ounces at Côté Gold and 1.4 million ounces for the Boto Gold project following positive results from pre-feasibility studies and a significant increase in reserves at Rosebel. Last July, we reported an 80% increase in reserves for Rosebel. Taking into account depletion, Rosebel's reserves at the end of 2017 were up 69% or 1.4 million ounces. As well, both Essakane and Westwood more than replaced depletion year-over-year. Attributable, measured and indicated resources, inclusive of reserves increased by 6% to 24.7 million ounces. The increase was mainly due to a 51% increase at Rosebel and the initial resource estimate of 0.7 million attributable ounces for Saramacca.This was partially offset by lower attributable resources at the Côté Gold project following the sale of 30% interest to Sumitomo Metal Mining. Attributable inferred ounces increased by 44% to 8.8 million ounces driven primarily by Rosebel, Boto, Saramacca, and Diakha where inferred resources doubled after acquiring our 50% JV partner Merrex Gold last year.Turning to the production and costs summary for 2017. Consolidated attributable production increased 8% to 882,000 ounces, which was at the top end of guidance. Production from our owner-operated sites was up 11%. All-in sustaining costs at $1,003 an ounce came in at the bottom end of guidance and we were down $54 an ounce from 2016. Note that all-in sustaining costs at the consolidated level include corporate G&A costs. All-in-sustaining costs at each of our owner-operated sites were below $975 an ounce.Now for a recap of performance by site and starting with Essakane. Essakane received -- achieved a record production of 389,000 attributable ounces in 2017. Annual mill throughput of $13.9 million tonnes was up 16% from 2016 and exceeded nameplate capacity by 29% despite hard rock content reaching 86%. In 2017 an updated SAG mill liner design and improved operating and maintenance practices increased mill capacity, speed, and circuit availability.In 2018, we expect grades and recoveries to improve further. The results of the geometallurgical study at the end of this quarter should allow us to better anticipate and mitigate the impact of graphitic ores. And the oxygen plant, which will help as well is expected to go into operation at the end of this year.All-in sustaining costs of $957 an ounce at Essakane improved from the previous year, mainly due to the timing of sustaining capital expenditures, which were 35% lower than 2016. Essakane year-end reserves were up 2% after depletion to 3.1 million attributable ounces. Measured and indicated resources declined by 7.5% after depletion and inferred ounces were down by about [ 90,000 ] ounces. Essakane continues to work at improving mining and milling efficiency, which will help lower unit costs further even at higher proportions of hard rock.We expect the solar power plant, which will be integrated with the existing thermal generating plant to be in operation by the end of this quarter. The pre-feasibility study on the Heap Leach project is expected to be completed during the second quarter of 2018 and we are expecting to begin construction later this year. In addition to allowing us to process marginal and low-grade mineralization, heap leaching when used in combination with the carbon and leach plant justifies additional push-backs of the main pit. Although the pre-feasibility study is not completed, we are contemplating treating about 10 million tonnes per year of Heap Leach ore which would give us incremental gold production of about 20% annually and potentially increase the life of the mine by 2 to 5 years. I'll talk a little bit more about the project when we get to the CapEx summary slide for 2018. When you consider Essakane's robust operating performance, improving cost efficiencies, growth potential from heap leaching and highly prospective land package, this mine has significant upside potential as Steve talked about earlier.Turning to Rosebel, it's well into its transformation. With a significant increase in reserves as reported previously, with Saramacca advancing towards production, with the granting of exploration rights to the Brokolonko concession on the same mineralization trend at Saramacca and with the continued trajectory of cost reductions over the past 2 years with the optimization of the workforce and improvements in productivity, all-in sustaining costs are down 20% [ or $230 ] an ounce since 2015. And of course, more news is expected to come. Rosebel produced 302,000 attributable ounces in 2017. Marginal increases in throughput and grade were partially offset by a slight decline in recoveries. Throughput continues to benefit from strategic mill improvements over the past few years. The percentage of hard rock in the mill was 49% in the fourth quarter of 2017, nearly twice the previous year's 26%, yet throughput has held steady. We expect grades to improve in 2018, which will help offset an expected decrease in throughput as hard rock content approaches 60%. Like Essakane, Rosebel continues to work at improving SAG mill performance and reducing power consumption. In 2017, Rosebel's all-in sustaining costs were $931 per ounce, 6% lower than the previous year due to lower sustaining capital expenditures. Note that all-in sustaining costs of $1,018 per ounce in the fourth quarter 2017 were higher than the third quarter. This was expected due to the timing of sustaining capital expenditures related to fleet and mill maintenance. Efforts to improve cost efficiency continue such a strategic pit dewatering to increase tire life and lower dilution. We're also seeing drill yield improvements and higher payloads for the hauling fleet to increase mining capacity. Additionally, Rosebel's unit production cost profile is expected to further improve once Saramacca with its higher grades and soft rock comes online.With Saramacca project is on track, we expect the preliminary reserve estimate and completion of permitting by the second half of this year. There has been excellent progress with mine design and infrastructure design. We've determined that the most cost-effective mode of transporting ore to the mill would be by road, haul trucks. Hydrogeology and geotechnical work has been completed and we're waiting on final reports. And comprehensive metallurgical test work is currently underway at COREM in Quebec City as we speak.New mine designs and integrated scheduling with the main Rosebel resources will happen this year, as they move towards production start in the second half of 2019. Looking at Westwood, as Steve mentioned, Westwood had a pivotal year, as it resumed operating at normal level of production in the second quarter. Production was nearly double the previous year.Progress with ramp breakthroughs and infrastructure development has been outstanding. 18 kilometers of underground development were completed in 2018 with another 12 kilometers to be completed this year.Cost of sales and all-in sustaining cost per ounce continue to improve with a significant increase in the volume of sales. Cost of sales per ounce at $844 was 36% lower than in 2016 and AISC fell by 18% to $972 an ounce. The drilling program focused on resource conversion continues to yield positive results with reserves up 12% year-over-year to 1.2 million ounces after depletion. Overall, great progress at Westwood as we head towards a full ramp-up in production by 2020.Turning to our Sadiola joint venture. Annual production was 63,000 attributable ounces, down from 2016, with lower grades, partially offset by lower throughput. Steve [ alluded -- Steve will drill down ] with where we stand on the SSP. So I'll just add that the retrenchment plan at Yatela was completed in December of last year.The next slide presents our production and cost guidance for 2018. Total attributable production is expected to range between 850,000 and 900,000 ounces. At Rosebel, the production outlook reflects expectations for higher grades and improving productivity, together with lower throughput, as a proportion of hard rock approach 60%. At Essakane, grades and recoveries are expected to improve, while throughput is planned to be slightly lower than it was in 2017. And at Westwood, guidance reflects planned production from 2 of the 6 designed mining blocks during the year. This is our annual guidance and as always there will be some quarterly variation. Production is expected to be somewhat lighter in the first half of the year compared to H2. So we expect cash costs and AISC per ounce to trend lower in the second half of the year with the higher production.Turning to our capital expenditure outlook for 2018. We're anticipating $365 million, plus or minus 5% in total. The significant increase over 2017 is due to the advancement of our growth projects. Sustaining capital is expected to be similar to 2017. Of the $75 million of sustaining capital for Essakane, $40 million is for capitalized waste stripping.Non-sustaining CapEx is estimated at $225 million, $147 million higher than 2017, again due to growth projects. The increase is entirely related to Essakane and Rosebel as the $45 million for Westwood related development work is unchanged from 2017. $75 million of non-sustaining CapEx for Essakane includes the heap leaching project and the tailings raise and $85 million for Rosebel is predominantly for the development work at Saramacca.Both the heap leaching project at Essakane and the Saramacca project at Rosebel are spread over 2 years. Only the portion of the capital required for this year is included in this year's guidance. The full cost estimates for these projects will be refined as we work through the ongoing technical studies. We plan to disclose that information once those studies are complete.The $15 million for corporate and development is mainly for the Côté Gold feasibility studies currently underway. And talking about -- further about Côté, the study at Côté should be completed in the first half of 2019. Subject to acceptable results, a favorable development environment and a corporate decision to proceed with construction from both ourselves and our partner, we would be targeting a commercial production start in 2021.As part of the feasibility work, the drilling program continues with the objectives of upgrading in-pit inferred resources to indicated and further evaluating grade continuity in the starter pit.I'll now turn you over to Craig to talk about exploration.

[Craig Stephen MacDougall, Senior Vice President of Exploration]

Thank you, Gord, and good morning, everyone. By any measure, 2017 was a standout year with 86% increase in reserves and multiple exploration successes. It's important to note that this was not just a one-year effort, but the result of a disciplined approach to exploration over time. And I would say it was well worth the wait.In 2017, we spent $57 million on greenfield and brownfield exploration projects. The 46% increase over the previous year, mainly reflects increased spending on brownfield exploration, including Saramacca. In 2018, we plan to spend $60 million, a level similar to 2017. Investment and feasibility and other studies will be higher this year with the advancement of such projections as Boto and Côté Gold.Before I begin, please note that the results I talk about today have been previously disclosed in accordance with the security regulations and signed off by the qualified persons within the company reporting [ norm ].Let's start with our Boto Gold project in Senegal. Most of you probably saw the February 12 news release. The exploration teams have done an outstanding job to advance this project from its initial discovery nearly 5 years ago to a feasibility stage project. Boto is located on mineralized trend that holds a number of significant producing gold mines and therefore has the right address. The pre-feasibility study supported an initial reserve estimate of 1.4 million ounces, creating 1.64 grams per tonne gold. The study is demonstrated that Boto has potential to be a low-cost, long life operation.At this stage, we're looking at a 13.5 year mine life, with annual production of nearly 100,000 ounces, and a life of mine, all-in sustaining cost of $829 per ounce. With optimization of the project design and our feasibility study that's using a 25% higher mill throughput as the base case, we could see higher annual gold production and better project returns. Feasibility study is scheduled for completion in the second half of this year. Additionally, we continue to explore priority targets with potential for increasing the size of the resource. So this too will contribute towards improving project economics and increasing the life of the mine.Moving on to Saramacca. The development work is on track, as Gord said and significant exploration activity continues at the site. While the declared resource is significant, it does have potential to grow both the depth and a long strike in both directions. Drilling completed and the initial resource estimate has been focused on increasing our confidence in the resource and in the deposits and discovering new zones of mineralization.In the second half of 2017, we completed nearly 30 kilometers of diamond and reverse circulation drilling. On November 16, we announced drilling results from an initial 37 holes that continued to indicate high-grade intersections from both infill and expansion drilling. Highlights included 3.47 grams per tonne gold over 39 meters and 4.5 grams per tonne gold over 34.5 meters. These results are expected to have a positive impact on the future resource estimates. As Gord said, we expect to declare initial reserve estimate in the second half of 2018.The mineralized structure at Saramacca appears to trend northwest onto the Sarafina and the Brokolonko properties. As Steve has mentioned earlier, much of our future exploration work will be focused on exploring this highly prospective trend in these areas.On the next slide, you can see that the Brokolonko property is located immediately northwest of Saramacca. It's about 30 kilometers from the Rosebel mill. Comprising of 105 square kilometers, it's similar in size to the Serafino concession and larger than Saramacca. Together they represent an important consolidation of exploration rights along the Saramacca trend. Early stage exploration work by previous owners identified a series of gold anomalies on the property, which is our starting point for the exploration program. We have commissioned an airborne, magnetic and VTEM survey due to start this quarter, which will cover 15 kilometers long corridor extending from Saramacca through Sarafina and onto the Brokolonko concession. This will be followed by the fieldwork and a first pass drilling program later this year designed to confirm the location and intensity of the historical gold anomalies.Let's turn to our other projects.At Pitangui in Brazil, our objective in 2017 was to evaluate the up-plunge extension of the São Sebastião deposit, an area where we saw potential to -- for additional resources. We completed the drilling program which identified a number of ore body extensions resulting in a 21% year-over-year increase in the inferred resource to now 819,000 ounces. In 2018, we will continue to assess the remaining targets on the property. At our Eastern Borosi joint venture project in Nicaragua, our drilling program in 2017 focused on evaluating the resource potential of the Guapinol, Riscos de Oro, East Dome and Cadillac vein systems. We're in the process of updating a 43-101 resource estimate which will incorporate an additional 26,000 meters of drilling that we've completed over the past 4 years.At our Siribaya project in Mali, the indicated -- indicated and inferred resource doubled its size from the end of 2016 as the result of consolidating our ownership to 100%. On January 31 of this year, we announced the results of the 2017 drilling program. Highlights included 6.79 gram per tonne gold over 26 meters, which included 20.5 grams per tonne gold over 8 meters. These results not only better delineate high-grade structures within the known resource, they also confirm the extensions of mineralization both to the north and south along strike beyond the current resource pit shell. These extensions have nearly doubled the strike length of the mineralized footprint. Our drilling program this year will continue to advance towards our objective of achieving a targeted resource threshold of 2 million ounces. We'll use the estimate -- we will use these results to refine a deposit model and deliver an updated resource estimate by year-end.Lastly, at Monster Lake and Nelligan projects in Quebec, the drilling programs were completed last year that will continue in 2018. This year our objective is to declare initial resource estimates for both projects. To wrap up, we plan to build on last year's exploration successes and to advance earlier-stage projects in the pipeline. Major catalysts for 2018 are the initial reserve estimate at Saramacca, updated resource estimate at Diakha-Siribaya, an initial resource estimate at Eastern Borosi, Monster Lake and Nelligan. At the same time, we will continue to advance near-mine exploration, including a potential initial resource estimate for the Gossey prospect at Essakane.With that, I'll call on Steve to wrap up.

[Stephen Joseph James Letwin, President, CEO & Director]

Thanks, Craig. So, Slide 33 really was meant to give you an idea of what we're looking at for 2018 in terms of growth catalysts. And as Carol mentioned, it really is a year of execution, but it's also a year of some pretty important events for us. And as I said earlier we're looking at some really good opportunities and Craig talked about this at Saramacca in the second half of '18, some fantastic opportunities there to improve our production profile at Rosebel, both from a volume standpoint and a cost standpoint. And we're looking at second half of 2019 that that would get going. But then between now and then you're going to see a lot of announcements around our reserves and certainly as we develop our projects, and we have an outstanding project leader down there who will be giving you more news, we're going to be doing further acceleration of Brokolonko as Craig indicated. I'm really excited about seeing that program get started as Craig will tell you. I bother him pretty well every day about it. And I am excited to see what that mineralization looks like and we'll be walking that property in the next few weeks down in Suriname. So I am excited about going back there and taking a look at what we're going to be able to do, given that we now have the property in our hands. And that will result in further consolidation of additional concessions at Rosebel. We're looking at some great opportunities to the north of the mill and into the northwest -- further northwest. There are some great opportunities that people are presenting to us now that we have this gold district established to southwest.The completion of the heap leach, as I mentioned earlier, I'll be heading there in the next couple of weeks to take a look at the solar hybrid which will begin commercial operation here first part of March and certainly be operating and ramping up by the end of the quarter. We're also going to walk the property there and take a look at some of the exploration opportunities that we're seeing on the concession. Essakane has been a first-class performer as Gordon indicated. And again as Falagountou East comes on we are expecting to see Essakane perform as well, if not better than it did in 2017.Mentioned again that Westwood, I was there just 2 weeks ago, performing extremely well. Westwood is the topic of our President's message this month. Nothing but kudos and appreciation for the hard work there. Martial is doing a great job. He's only been in the job for a few months, but he is making a big impact already. And this mine is going to be a long life asset for our company and producing as we said in the next couple of years around that 180,000 ounces a year.And then, of course, Côté we're working very closely with Sumitomo. We have an Oversight Committee, which consists of representation from both companies. We have a number of Sumitomo employees stationed in [indiscernible] that are working daily with our people. The relationship is very strong. We're really pleased with the partnership and some of you may know IAMGOLD is the recipient of the Viola MacMillan Award where we received the deal of the year from PDAC and Sumitomo will be joining us for that award ceremony on March 6. So we'll be walking arm in arm to receive that. It really has been a great team effort by both companies and we are excited about what the future might bring with the relationship that we have with Sumitomo. What I say to our people is, we've had a good run here. We want to stay humble. We want to do the blocking and tackling. We don't want to get to full of ourselves. Let's just continue to execute our strategy, keep our heads down, keep delivering results in line with expectations and execute on what we believe is a very robust set of projects that will take the company in a very positive direction over the next number of years.So on that note, thank you very much for listening in.

[Operator]

[Operator Instructions] Our first question comes from David Haughton of CIBC.

[David Haughton, MD & Head of Mining Research]

Got a couple of questions. Perhaps I could start with Essakane and the heap leach. Maybe for Gord. I am looking at Page 6 of the presentation at the Main Zone Pit. And I think I heard you correctly in looking at [ layback ] of that pit, there is just not a lot of space looking at the image that we've got on Page 6. Can you just talk us through what your idea would be there?

[Stephen Joseph James Letwin, President, CEO & Director]

The layback is mostly to the north and east. You can see there is actually -- there is a couple of hundred meters between the current rim of the pit and the base of the stockpile there. So that -- that's -- the primary area for expansion is to the north and east.

[David Haughton, MD & Head of Mining Research]

Okay. And for the heap leach, you were saying that there is potential for a 2 to 5-year life extension. I guess that I have been presuming that the heap leach of around about 10 million tonnes per annum would be operating simultaneously with the existing pit. Is it because you can reduce your cut-off grade, reduce your strip ratio that you could think about an extension of life?

[Stephen Joseph James Letwin, President, CEO & Director]

Exactly, exactly. It's the strip ratio reduction, it's the combined value of both the heap leach ore, the newly defined heap leach ore plus the CIL ore that's helping to drive -- to pay for that stripping on that push-back.

[David Haughton, MD & Head of Mining Research]

Okay. So we will stay tuned for later in the year getting an update on this. Going over to Saramacca, you've changed your plan of transportation from rail to road. Was that to allow you more flexibility for other satellites in that area such as the Brokolonko deposit and Sarafina?

[Stephen Joseph James Letwin, President, CEO & Director]

Yes, I mean it was certainly one of the considerations. As part of some of the scoping work that was ongoing at Saramacca, the team there went through a detailed sort of review of number of different hauling options. I know previously we discussed rail. As they looked into it more deeply they felt that the capital costs were moving up more aggressively for rail than they had expected and there were some potential uncertainties around that option. And obviously, as we move towards consolidating Brokolonko and understanding that the district was going to be expanding, the flexibility offered by road haul trucks sort of made it rise to the top -- to the top of the pile in terms of options.

[David Haughton, MD & Head of Mining Research]

As you're working through more detail on Saramacca, has your thinking about how it could contribute to Rosebel changed from when it was first introduced maybe about 6 months ago?

[Stephen Joseph James Letwin, President, CEO & Director]

As of right now, I mean the work we've done so far is more or less along the same lines as we talked about previously, i.e., incremental ore delivery as a satellite operation, taking advantage of the soft rock primarily or initially from Saramacca to supplement primary hard rock feed from Rosebel. That being said, we're quite literally just in the last week and a half sort of started to move into new long planning. So there's actually quite a matrix of options that are being looked at as part of that long exercise right now. I don't want to presume, what the final answers will be. So we're all sort of watching very closely in making sure that the team there has the resources to do the evaluations properly as we move forward. And one of the interesting exercises for us there will be that we don't always do with the long exercise, but for Rosebel this year, we are -- is really looking at some Bluesky options if we can fully exploit resources, what does this thing need to look like, because that will really drive how we'll think about things later this year.

[Operator]

Our next question comes from Dan Rollins of RBC Capital Markets.

[Dan Rollins, Head of Global Mining Research and Analyst]

I was wondering if you might be able to provide some color on what the run of mine network at Essakane on the Heap Leach has been if you're able to release that right now?

[Gordon Stothart]

Yes, I mean we reported previously that we've seen -- we saw last year sort of results in the 70% to 80%. Maybe in our internal evaluations, we sort of looked at 60% to 65%. Currently, we're running a lot more columns, a lot more variability, plus some additional composites. We're seeing those results repeated. I was at a presentation here last week. Results are showing anywhere from 65% to 85% recoveries depending on what type of material and what part of the pit. In the initial round of work, we looked at crushers of 19 mills and 8 mills. This time we're looking at crushers of 8 mills and also considering HPGR down to a finer grind and including some agglomerations really trying to find where the sweet spot is in terms of the project for throughputs and capital intensity. But yes, those recoveries, they're certainly I would describe them as far as heap leach recoveries certainly towards the good end of heap leach recovery and very consistent.

[Dan Rollins, Head of Global Mining Research and Analyst]

Okay. So you're -- right now you're favoring going to crush then stacking, instead of just going direct run of mine?

[Gordon Stothart]

Yes, we did some evaluation work on run of mine. We didn't do any met test on run of mine. But understanding the really close correlation we're seeing between the crush size and the recovery results and also understanding that run of mine sounds cheap, but there is still capital involved for pads and distribution systems and so forth. Right now the dump leach stuff seems to be of lower priority for us.

[Dan Rollins, Head of Global Mining Research and Analyst]

Okay. And then quickly just at Saramacca, any ability to give us cost to haul that ore to the mill?

[Gordon Stothart]

I don't have the number in my head right now. But I mean -- I'll follow up on it. When we look at haulage from Rosebel pit to the mill, which is about half the distance, that's in the order of about $1.25, something like that.

[Dan Rollins, Head of Global Mining Research and Analyst]

And then, Steve, maybe a question for you, just on Sadiola. We've asked this before and I know your level of frustration seems to ebb and flow the progress there. But when is sort of the deadline to pull the trigger on this care and maintenance and then just run the stockpiles out? How much more can your new partner really go along with this plan without pulling the trigger or something?

[Stephen Joseph James Letwin, President, CEO & Director]

Well, Dan, nothing has changed there. We continue to work with Anglo. I'm hoping to meet up with Venkat here next week. We continue to try and negotiate. The good news for IAMGOLD is that we have so many other things happening at Sadiola which is a very -- I mean it's a world-class opportunity, but it's got to have the right economics and it's got to have the right fiscal regime associated with it. And more and probably right at the top of the list, what I call, protection of tenure which ensures the sustainability of the agreement. So I'd love to see Sadiola grow ahead. We're just seeing a lot of Chinese companies coming into Mali right now. They are donating a lot of money to the government. And the Chinese I think are running into a very quick great degradation in their own country. Their gold supply is being challenged. And as you probably know, Dan, China has now become the #1 gold buyer in the world. They surpassed India. And so what we're running into, and if you look at the Shanghai Gold Exchange, it's very robust. So we're seeing the Chinese take a very, I would call, aggressive position in gold worldwide. So we're bumping into them in Mali. And they can probably offer more aggressive terms than what we're willing to agree to. I'm not saying that we're going to roll over there at all. But realistically when we have something like Saramacca, Sarafina, Brokolonko, we have what's going on at Essakane with the heap leach and exploration opportunities in the concession, you take a look at Côté, you take a look at Westwood ramping up, you look at Boto, you look at some of the exploration success we're having at Monster Lake and Nelligan, I just reiterate I don't worry about it from a growth standpoint. We have plenty on our plate. Does it frustrate me with respect to the 1,200 to 1,400 people that work there that will lose their jobs ultimately if nothing moves ahead, of course, it does. We've been there 20 years. We've built a hospital, we've built a school. It's sad. So I'd love to see Sadiola grow ahead. But I'm not going to compromise our principles to get a deal done and our shareholders are very much aligned with that philosophy. Mali has its own risks at the best of times. And we've been able to manage it. We've never had a problem with our mine at Sadiola. And I would stand up today and tell you that we would invest tomorrow if they were willing to meet what I would call and what Venkat would call the terms that work for us under the 1991 Code. It's not a big ask, but the government for whatever reason seems to be taking a much more aggressive stand on the terms of the agreement, which leaves in my opinion, and I'm not being critical of anybody else in Mali, but in our opinion a much riskier position than we're able or wanting to accept. So a long answer to a short question, but we need to see it or we will go in care and maintenance, we will start retrenchments in a more aggressive way and the mine will sit there. We have the concession till 2024. We have a lot of time to realize those reserves. And at my age, Dan, and you'll find this so when you get to my age, you learn to be patient. And I'm not rushing this, I'm going to wait and make sure that the deal we put in front of our shareholders is the right deal.

[Dan Rollins, Head of Global Mining Research and Analyst]

Okay. And one last question from me, quickly. Just Rosebel, you talked about potentially buying a larger chunk of the new JV from the Suriname Government. Any discussions on that front to update?

[Stephen Joseph James Letwin, President, CEO & Director]

While we were just -- Carol and I were just down in the jungle there 2 weeks ago and the President was supposed to have a walk with me like we did originally 7 years ago when we developed the JV on the back of a cigarette package with them. And -- so he said he wanted to have a walk with me and I -- and at the end of the day he did because he has got a lot on his plate. As you know, Suriname is struggling with their economy and they have had some challenges. We have an excellent relationship with the President and we're proud that we have an excellent relationship with the necessary resources. We would look at the opportunity to acquire more of Saramacca if we could reach deal terms that made sense and would make -- will be much more efficient for us. But honestly, I am agnostic about it in many respects. We've got a lot in front of us at Sarafina and Brokolonko. If the government of Suriname would like to dispose of their 30% in Saramacca on terms that are fair to them and fair to us we would -- we could do that and would do that. It would help them, it would help us in terms of our operations but again it has to be the right kind of deal. So the answer is yes, we would look to expand our position if the deal terms are right. If the deal terms are right we have so much in front of us in terms of upside there. I'm not going to push it. And my relationship with the President which has developed over the years is so strong that he knows at the end of the day whatever deal we work out will be a win-win and you've seen that happen there over the last few years. It's been a great relationship and it's been a great strategic move for our company. It just changed our company, changed Rosebel so -- and same has happened at Essakane. And that's where we're at.

[Operator]

Our next question comes from Mike Parkin of National Bank.

[Michael Parkin, Mining Analyst]

Just a couple of questions. With the Saramacca initial reserve coming in the second half, how much of the drilling post the maiden resource will be factored into that if any?

[Stephen Joseph James Letwin, President, CEO & Director]

All of the stuff that's been done certainly until recently will be factored into it. We are starting another campaign. So Craig's exploration teams have now moved off of the footprint of the base deposit and they've moved into other exploration zones. The mine geology team has now sort of taken over accountability for Saramacca. So Craig's team completed their program. That is going to be factored into the next block model. And we're going to be doing some infill drilling. And by the time we actually come out in the second half with the reserves and resources, there may be a second model to try incorporate as much of this current infill program as possible. So I guess the short answer is as much as we can, Mike.

[Michael Parkin, Mining Analyst]

Okay. And are we still waiting on a fair number of drill results of the tailwind of that first campaign?

[Stephen Joseph James Letwin, President, CEO & Director]

We've put out about 30% of the drill results and the rest will be coming out in the next couple of weeks. We're just looking at that now. So as soon as we complete all the QA-QC work and validation then we'll be ready to put the rest of them out.

[Michael Parkin, Mining Analyst]

Okay. And then with the next campaign there, what will be the timing that you possibly expect to update the market on how that campaign is going? Do you wait till half of it's done or whatever?

[Stephen Joseph James Letwin, President, CEO & Director]

Yes, we quite honestly haven't had a huge discussion about it. Given that it's really infill drilling, we can discuss it. But it probably won't be -- it will be more around conversion than addition. That being said Craig's exploration campaigns may be -- obviously if we start to see some material results there, we would be very aggressively looking to put those out.

[Michael Parkin, Mining Analyst]

Okay. And then, one other thing on the Essakane heap leach, do you feel like you will need any agglomeration on that project or would it just be a crush and stack?

[Stephen Joseph James Letwin, President, CEO & Director]

We've looked at it both ways, Mike. And as I said I just saw a presentation on it. At pre-feasibility the current estimate what we're going to be looking at is HPGR with a single stage of agglomeration, so yes.

[Michael Parkin, Mining Analyst]

And then can you just remind us the impact on cost per tonne at Essakane once the solar plant comes up and running in fairly soon here?

[Stephen Joseph James Letwin, President, CEO & Director]

Yes, I mean, Essakane the current cost of the hydrocarbon side is probably in the $0.21, $0.22 kilowatt and the solar is running at [ $0.17 ] on a take or pay for 9.5 years. And then after 9.5 years, which we didn't think actually we have to worry or think about goes literally to [ 0 ]. But now with the extension of the Essakane mine life that's going to be a huge help to us. I would say because you're looking at probably a 20% efficiency factor there, Mike, so on 15 megawatts, probably 3 megawatts of plus, it's not a huge help. But here is the upside and this is what I'm excited about. We've got batteries there where we're at the front end with [ Erin Energy ], which is a fair space firm of testing new batteries. And the real upside here is whether or not these batteries can capture the solar power and then feed the mill. And we believe with the amount of advancement that's happening on that side and the technology improvements that long term it will have a dramatic impact on our costs there. As you know, probably about 30% of our cash costs are related to energy there and it would be significant for us. So we're very, very pleased about where that is going and we're very optimistic about the long term into that. And you'll notice as well that Carol's genius hedging has helped us out on the oil side because we've got some nice costless callers and voice there which are really helping us with the volatility in oil. So good look to the year already. She is going to ask that against deferred taxes next quarter.

[Carol T. Banducci, Executive Vice President & CFO]

I wish I could.

[Operator]

Our next question comes from Steven Butler of GMP Securities.

[Steven Howard Butler, Vice President and Senior Security Analyst]

Quick question here. A couple have been asked -- asked and answered already. With respect to Essakane, Gord the strip ratio, what's the effective decline at strip ratio that comes with this Heap Leach project?

[Gordon Stothart]

I mean, I don't have the number right in my head, but I believe we go from our current 3.5% to below 3%.

[Steven Howard Butler, Vice President and Senior Security Analyst]

Okay, that's fine. We will see more on the delivery of the state.

[Operator]

This concludes time allocated for questions on today's call. I will now hand the call back over to Ken Chernin for closing remarks.

[Ken Chernin]

Thank you very much, Ariel, and thank you, ladies and gentlemen, for your continued interest in IAMGOLD. We look forward to having a join us for our first quarter 2018 conference call in May. Thanks again.

[Operator]

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