IAMGOLD Corp

TSX:IMG

Earnings Call Transcript 2018-Q4

[Operator]

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the IAMGOLD 2018 Fourth Quarter and Full Year 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 Indi Gopinathan, Investor Relations Lead for IAMGOLD. Please go ahead, Indi Gopinathan.

[Indi Gopinathan, Investor Relations Lead]

Thank you very much, and welcome, everyone, to the IAMGOLD conference call. Joining me today on the call are Steve Letwin, President and CEO of IAMGOLD; Gord Stothart, Executive Vice President and Chief Operating Officer; Carol Banducci, Executive Vice President and Chief Financial Officer; Craig MacDougall, Senior Vice President, Exploration; and Jeff Snow, General Counsel and Senior Vice President, Business Development. I'll turn you to Slide Number 3, our cautionary statement. 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 referenced on this call 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]

Good morning, everybody. Well, the cover slide basically shows you a picture of our haul road from our Rosebel mine to Saramacca. Gord will update you on that, but that's going extremely well, and it's fitting because our theme song is Building a Cash Flow Pipeline. 2018 was a transitional year for us as we build our company for the future. We remain focused on creating superior shareholder value through operational improvements and a disciplined approach to realizing the value of our portfolio, and by maintaining a strong balance sheet and ensuring a robust and geopolitically diverse pipeline. At Slide 6, in addition to achieving guidance on 2018 production at 882,000 attributable ounces of gold and on 2018 all-in sustaining costs at $1,057 per ounce sold, we increased proven and probable reserves by 23% for a 3-year increase of 129%, and delivered robust feasibility studies for both the Cote Gold and Boto Gold projects. We began commissioning of the hot oxygen plant at Essakane and the carbon-in-column plant at Rosebel. These low capital, quick return projects add low-cost marginal ounces to production. In 2018, we declared reserves at Saramacca and commenced development to deliver that ore to the Rosebel mill. We consolidated the district as well, acquiring rights to Brokolonko exploration. We also announced initial resources at monster Lake, Eastern Borosi, and Gossey, and enjoyed significant greenfield success at both Nelligan and Diakha-Siribaya. In addition, we are building a framework for the role of technology in mining. In 2018 we completed a 15 megawatt-peak hybrid solar-thermal power plant for our Essakane operations. This installation is expected to save approximately 6 million liters of fuel per year and reduce carbon dioxide emissions by 18,500 tonnes annually. In fact, for the period ending December 31, 2018, we exceeded expectations with Essakane, saving approximately 3.9 million liters of fuel and reducing carbon dioxide emissions by approximately 12,000 tonnes over 7 months of service. So on a prorated basis, we're well ahead of our estimates. We invested in enhanced systems to identify that our gold production is ethically sourced. We believe the future is showing our commitment to the highest standards of ethics through traceable production and in differentiating our product on that basis. Subsequent to the year-end, based on feedback from our shareholders, we announced we would defer the Cote construction decision. This was not an easy decision for us as a company, as you might expect, but we spent a great deal of time listening to investor concerns and absorbing that information, to arrive at the conclusion that this is not the right time, given market conditions, to make a construction decision on Cote. We will continue, however to progress early works, and you'll see that in some of the capital we're spending, and engineering, so when the time is right, we'll be ready to start. We simply are continuing to de-risk the project, and we have no intention of making a construction decision on Cote in the near term. Upcoming in 2019 are significant milestones in our ongoing operational improvement work. We anticipate the Essakane CIL feasibility study in the first half of the year, with Saramacca first production, maiden Nelligan resource, and an updated Westwood plan in the second half of the year. We are also conducting a scoping study on the underground potential of Saramacca, which may substantially reduce waste volumes. When I joined the company almost 9 years ago, our reserve life was less than 8 years. Today, assuming a production rate of a million ounces a year, we have about 18 years of reserve life. We have doubled our life-of-mine, setting the stage for a long future for the company. I'd like to thank Craig MacDougall and Gord Stothart, who are sitting here with me. Thank you, gentlemen, for your efforts in making this happen. This is an outstanding achievement. These two individuals have led our company from a very small margin around life-of-mine in terms of time into the future to a very significant increase in cushion to protect our assets and our shareholders going forward. We maintain our financial strength -- thank you, Carol Banducci -- with over $750 million in cash and cash equivalents. Kudos to you and your team for ensuring this continues to be a strength of our company, and always will. We have a tremendous organic pipeline, which we continue to advance and expand, robust operations, a strong balance sheet, and great people making it all happen. I just want to say a few things about strategy before I turn it over to Carol, and I know that we're going to get a number of questions, so let me just talk a little bit about our strategy, because logically, people are asking us, okay, well, what next, Steve, deferred Cote. And without naming names, I had a lot of good input, not only from our shareholders, but a number of analysts that have been very, very, I would say helpful in giving us feedback and helping guide us as we look at our strategy going forward. And this is I think part of our culture at IAMGOLD. We may not always agree with everything that's being said, but we do listen. And one analyst, who's a very senior individual in the industry, said to me, you know, Steve, you really do need to work off a proof-of-concept strategy where the market today really wants to be shown that you can add value on a step-by-step basis going forward. They don't like big bets right now, they're not in the mood to see more risk. There have been a lot of, say, missteps over the last couple of years with various projects, which gives the market a lot of concern. I understand that, and we're not going to sit back here at IAMGOLD and be stubbornly inattentive or un-attentive to views of our shareholders and analysts. So when we look at the strategy, we literally are going to go to what I would call a greater emphasis on short-cycle economics. So, Stothart, who's one of the best operations guys I've ever worked with and certainly technically superior, from what I can tell, to most in the industry, he is going to be focused on making sure Saramacca delivers what we are expecting it to deliver. We're going to focus on making sure that that haul road gets completed and that we can start moving ore into the mill, which runs like a charm thanks to John Grignon down at Rosebel, who I call magic man. We're going to get that ore into the mill in the second half of 2019, and that will boost economics at Rosebel significantly and add to the value of our shareholders. At Essakane, we're going to be doing de-bottlenecking, enhancing our CIL network, and the oxygen plan as an example, to enhance recovery. All these things that add to short cycle boost in economics are where we're focusing. At Cote, this was not easy, believe me, personally and for Jeff Snow, who is sitting across from me today, who is our Henry Kissinger on negotiating this; and Gord Stothart, who has a team of people, some of the best I've ever run into, to build this; and Craig MacDougall, who's done such a great job building those ounces from less than 2 million to close to 10 million M&I. Listen, this is not an easy decision, but it's the right decision, and we do what's right. So, do we have a partner who doesn't agree with us? Of course we do. But we'll deal with that. They're a good partner, they're a strong partner, but we have to make sure we do what's right for our shareholders and for all of our stakeholders. So we will be focusing on short-cycle economics, boosting our returns, reducing our costs, improving our cash flow, and improving returns. The fact that we have an inventory of resources that is not matched by anybody in our peer group -- thanks to some great success, we have 18 million ounces of reserves, and this is a huge improvement from where we were just 3 years ago. And our mines, because of our focus on leveraging off our asset base, have got an economic picture that's far more robust than it was 3 years ago. So I think that's why people have got buy ratings on us. They see us as a great opportunity as a leverage to gold prices. We're going to take that advice, we're going to take that good counsel from both analysts and shareholders, and we're going to put it to work. We haven't come out with a new plan on what our volumes are going to look like because we're still working on it. Gord Stothart is working diligently on a Westwood update, but he's going to do it right, and these things take time. We will finish de-risking Cote. And by the way, we have a lot of interest in Cote outside of us, outside of our company. So I want to make sure that asset is as clean, has got as much potential as possible. We need to finish off permitting, we need to finish off things that basically put that asset as shiny and new as possible going forward, so we need to spend a little money to do that. So I'm happy with the strategy. We had to make a tough decision. We made the decision. We made that decision with some great feedback from a lot of people, our key shareholders being part of that, and we listen to our shareholders. So that's where we're headed. More news as we move along. And I like to say news at 11, because we will update you as we go forward, as we get the right information, to make sure you are as knowledgeable as we are about what our overall strategy is. We are very transparent, as you know, with our reporting, and we're going to continue to be that way. So, on that note, I'll turn it over to Carol.

[Carol T. Banducci, Executive VP & CFO]

Thank you, Steve, and good morning, everyone. Turning to Slide 8, 2018 was another solid year of performance while we continue to advance our various projects. We continue to have a strong balance sheet, which provides us with significant financial flexibility, and we've taken some steps during 2018 and subsequent to the year-end to improve our capital structure, which I'll speak to in a few minutes. This slide presents key performance highlights for the fourth quarter and the full-year 2018. Revenues of $274 million in the fourth quarter were down 6% from the same period in 2017. Revenues for the full year of $1.1 billion were up slightly from 2017 on stronger Essakane sales volumes and a higher realized gold price during 2018, partially offset by lower sales volume at Rosebel and Westwood. Gross profit in the fourth quarter decreased to $24 million, primarily due to the lower sales volume combined with a lower realized gold price. For the year, gross profit was down 10% to $137 million, primarily due to slightly higher cost of sales. The adjusted net loss for the fourth quarter was $16.1 million, or $0.03 per share. For the full year, adjusted net earnings were $29.8 million, or $0.06 per share. Net cash from operating activities was $23 million in the fourth quarter and $191 million for the full year. The decrease of net cash from operating activities from the same period in 2017 was primarily due to an increase in non-cash working capital items and noncurrent ore stockpiles and lower earnings from non-cash adjustments, partially offset by lower income taxes paid. For the full year, net cash from operating activities before changes in working capital for 2018 was $288 million, down $5.6 million from 2017. For the fourth quarter, net cash from operating activities before changes in working capital was $56 million, down $13 million from the fourth quarter of 2017. Turning to Slide 9, changes in working capital, I'm focusing on the full-year 2018 in this draft. The $97.3 million change in movement in non-cash working capital items and noncurrent ore stockpiles was due to 4 main drivers. The first driver was a $48 million increase in mine supplies at Rosebel and Essakane. This amount resulted from a number of maintenance initiatives to improve equipment availability at a lower cost and the strategic decision to rebuild our in-house rather than outsourcing. Both these initiatives are in the early stages of being realized, and we do expect to see benefits going forward, and we will be focusing on bringing that working capital on supplies down during this year. The second driver was a $32 million increase in total ore stockpiles due to planned increases in ore production at Rosebel and Essakane, and a buildup of low-grade heap leach ore stockpiles at Essakane. The third driver was an $11 million temporary increase in VAT receivable at Essakane, solely due to timing over year-end. And finally, the fourth driver was a temporary increase in $7 million in finished goods inventory due to the timing of shipments, primarily at Essakane. The next slide summarizes our hedge position as of December 31, 2018. For our fuel hedges, we have hedged between 49% and 90% of our annual WTI oil consumption for the next 5 years, and between 50% and 90% of our annual [indiscernible] oil consumption for the next 4 years. We use zero cost option collars in both cases. For our FX exposures, we have hedged between 75% and 50% of our Canadian dollar expenditures for 2019 and 2020 respectively, and 75% of our euro expenditures for 2019. This was done using zero collar options as well as opportunistically purchasing Canadian dollar and euros to add to our foreign account balances. Turning to our financial position, we had $734 million in cash, cash equivalents and short-term investments as of December 31, 2018. Our net cash position at the end of the year was $334 million. In the fourth quarter, we amended our revolving credit facility to [indiscernible] the amount to $500 million and extend the term out to January 2023, with an option to increase commitments by $100 million, as well as provide [ leasing ] for up to $250 million. On January 15, 2019, we entered into a forward gold sale arrangement to receive $170 million in December of this year in exchange for delivering 150,000 ounces of gold in 2022. The prepaid provides additional liquidity to IAMGOLD at attractive terms while also mitigating any downside price risks below $1,300 an ounce on 150,000 ounces of production. Including our un-drawn $500 million credit facility, total liquidity exceeded $1.2 billion at the end of the year. As Steve said, our focus is on creating superior shareholder value. We are executing on our operational improvements and hold an enviable pipeline of growth projects, and we will continue to manage our business in a prudent and disciplined manner. I would now like to turn it over to Gord.

[Peter Gordon Stothart, Executive VP & COO]

Thanks, Carol. So we continue to focus on safety and improving our performance in this area. Based on 200,000 man hours, our total recordable injury rate or TRI for 2018 was 1.13, slightly above target of 1.09. The DART rates, or days away, restricted or transferred duty, was 0.66, also above our objective of 0.50. We are working to meet or exceed our safety goals, implementing several initiatives, including behavior-based safety programs, to ensure a safer working environment. On February 19, we released our 2018 year-end reserves and resources statement. This slide compares reserves and resources year-over-year. Our gold price assumptions at our owned and operated mines remain unchanged. All reserves numbers, including the Cote Gold and Boto Gold projects, are based on $1,200 an ounce. M&I resources are inclusive of reserves, and resources for Essakane, Rosebel, and our resource-stage projects were based on $1,500 per ounce, and for Westwood, $1,200 per ounce. Reserves and resources estimates at Sadiola, prepared by our joint venture partner, used price assumptions of $1,200 per ounce for reserves and $1,400 per ounce for resources, both unchanged from 2017. Proven improbable attributable gold reserves after depletion increased by 23% year-over-year to 17.9 million ounces from 14.5 million ounces at the end of 2017. The main drivers were an increase in reserves at Rosebel as we declared initial reserves at Saramacca of 1.0 million attributable ounces in September 2018, plus further additions due to upgrading resources at the Koolhoven deposit to reserves. Essakane saw an increase of 29% net of depletion to 3.9 million attributable ounces, primarily due to the pre-feasibility completed in June, incorporating heap leach ore. Increases in reserves attributable to IAMGOLD at Cote of 0.9 million ounces and at Boto of 0.3 million ounces, primarily due to successful infield drilling campaigns to support the feasibility studies released during the second half of 2018. Attributable measured and indicated resources inclusive of our reserves increased by 13% to 27.9 million ounces. The increase was mainly due to a 24% increase in M&I resources at Cote, to 6.5 million ounces, and a 16% increase at Boto to 2.2 million ounces as part of the feasibility studies, combined with a 24% increase at Essakane to 4.8 million ounces as part of the pre-feasibility study. Even with the increase in M&I resources through conversion, we maintained attributable inferred ounces at a comparable level to 2017, at 8.7 million ounces in the inferred category due to discovery of additional resources. Turning to the production and cost summary for 2018, consolidated attributable production was unchanged from 2017 at 882,000 ounces, which was at the top end of guidance. All-in sustaining costs at $1,057 an ounce came in at the top end of guidance, and we are up $54 an ounce from 2017. Note that all-in sustaining costs at the consolidated level include corporate G&A costs. Now for a recap of performance site-by-site, starting with Essakane. So Essakane, in 2018, achieved record production for the second consecutive year, at 405,000 attributable ounces, up 4% compared to 2017, and fourth quarter attributable gold production of 103,000 ounces, up 1% compared to Q4 of 2017. The higher production was due to ore feed being sourced from higher-grade zones. The impact of higher grades was partially offset by lower realized throughput caused by a higher proportion of hard rock in the mill feed as well as lower mill availability due to planned major maintenance shutdowns on the crushing and grinding circuits. Full-year all-in sustaining costs were $1,002 an ounce, an increase of 5% from the previous year, mainly due to higher sustaining capital partly offset by lower cost of sales. Q4 AISC was 13% higher than in 2017, at $1,114 an ounce for the same reasons. Dry commissioning of the oxygen plant started in December, and the plant is now operational. We expect overall recoveries to increase by a minimum of 0.5% as a result. Essakane continues to work at improving fleet availability through a planned maintenance initiative designed to support increased mining volumes while decreasing maintenance cost. In 2019 we are guiding to 375,000 to 390,000 attributable ounces at Essakane. We are focusing on CIL optimization, with a heap leach facility planned after CIL rather than parallel, as this scenario yields superior economics. The 2019 mill de-bottlenecking project at Essakane will increase CIL capacity to 13.5 million tonnes per annum at 100% hard rock, representing a 13% increase to current capacity and a 25% increase above the original 10.8 million ton-per-year nameplate capacity. Top projects include replacing the secondary crusher, modifying the [ core store ] screening system, and enhancing the gravity recovery circuit through additional screen capacity. Optimizing the gravity circuit is expected to deliver an increase in the overall CIL recovery. A feasibility study is expected to be completed in the second quarter, which will outline opportunities to further optimize the CIL in addition to end-of-life heap leach processing. I'll talk more about the expected capital numbers in a few moments when we get to the CapEx summary slide for 2019. Turning now to Rosebel, attributable gold production for 2018 was 85,000 ounces in the fourth quarter and 287,000 ounces for the full year, 8% higher and 5% lower compared to the same prior year periods respectively. For the quarter, the difference was primarily due to higher head grades and recoveries partially offset by lower throughput. Our mine sequencing took us into higher-grade zones but also harder rock. For the year, production was lower due to higher planned maintenance levels, which impacted throughput. All-in sustaining costs for the quarter in full-year were $981 and $1,006 per ounce respectively. For the quarter, costs were 4% lower compared to the same prior year period, primarily due to lower sustaining capital expenditures partially offset by higher cost of sales per ounce. Year-over-year, costs were 8% higher, primarily due to higher cost of sales per ounce, partially offset by lower sustaining capital expenditures. 2019 attributable traction at Rosebel is forecast to be in the range of 315,000 to 330,000 ounces. Key efforts for this year include strategic pit pushbacks, downlock higher-grade ore zones, and mill improvements to improve recoveries in throughput, including the addition of a carbon-in-column plant and revisions for the SAG mill liner. In 2019, Rosebel is conducting a study on enhancing the mill design by running an open-circuit SAG mill combined with a secondary pebble crusher to enhance hard rock throughput and increase gold production. While mill throughput in 2019 is expected to be at levels consistent with 2018, head grades are expected to improve, benefiting from the commencement of ore deliveries from the Saramacca deposit in the second half of the year. At Saramacca, construction continues on the 23 kilometers of new haul road, linking the deposit to the Rosebel mill, with targeted completion by mid-2019. Construction of infrastructure items at Saramacca is expected to commence in the second quarter of 2019, and Rosebel is also conducting a study to evaluate the underground mining potential of Saramacca, which could substantially reduce waste volumes, thereby reducing overall cost. Open pit mining of saprolite in the initial years will continue as planned, with future potential for underground mining once hard rock is reached. Moving at Westwood, gold production at Westwood was 28,000 ounces for the fourth quarter 2018, 3% lower than the same prior year period, primarily due to lower head grade. Gold production for full-year 2018 was 129,000 ounces, was 3% higher than the prior year, primarily due to higher throughput partly offset by lower head grades. The lower grades reflected mining activity that sequenced through lower-grade stopes as part of the mine plan. Head grade, including marginal ore for the fourth quarter and year ended 2018, was 6.78 grams per tonne gold and 7.6 grams per tonne gold respectively. During the quarter, development continued to focus on the ramp rates on level 132, in line with our safety protocol, 3 new bolting equipment units which can operate remotely and reduce worker exposure in challenging ground [indiscernible] for the quarter. [Indiscernible] development continued in [indiscernible] of $1,334 for the fourth quarter and $1,073 for the full year ended 2018, were higher compared to the same prior year periods by 31% and 10% respectively, primarily due to higher cost of sales per ounce and higher sustaining capital expenditures. 2019 production guidance is 100,000 to 120,000 ounces for the year as mining and development activities continue to progress. Sadiola attributable gold production of 14,000 ounces for the fourth quarter and 59,000 ounces for the year ended 2018 was lower by 22% and 6% respectively compared to the same prior year period, primarily due to lower head grades as a result of greater drawdowns and marginal ore stockpiles. All-in sustaining cost per ounce sold of $871 for the fourth quarter and $930 for the full year ended 2018 were lower than compared to the same prior year periods as a result of lower sustaining capital expenditures. Mining activity ceased at Sadiola during the second quarter of 2018, while processing of ore stockpiles continued from the second through fourth quarters. Processing of the oxide ore stockpiles is expected to be completed by midyear 2019, at which time the operation will be suspended. While not included in the slide set here, I will add that the Yatela mine, which is on residual leach, IAMGOLD, along with JV partner AngloGold Ashanti, have entered into an agreement with the government of Mali for the sale of the partner's 80% indirect interest in the Yatela mine for $1, subject to conditions and a one-time payment to cover costs related to rehabilitation, closure and social programs. At the Cote Gold project here in Ontario, we announced a positive feasibility study with [ 2P ] reserves of 7.3 million ounces and M&I resources, including reserves, of 10 million ounces on a 100% basis. Highlights of the extended mine plan include a mine life of 18 years, with average annual production of 372,000 ounces at an AIS fee of $703 per ounce sold, low strip ratio, and a 15.4 IRR at a gold price of $1,250 per ounce with a 4.4-year payback. Following our announcement to defer the construction decision on the Cote Gold project pending improved and sustainable market conditions, we plan to refocus on further de-risking the project in 2019 through advancement of engineering, permitting and definition drilling. We also announced positive feasibility study results for the Boto Gold project in Senegal. Highlights included reserves of 1.9 million ounces on a 100% basis, mine life of 12.8 years, average production of 140,000 ounces, and a life-of-mine all-in sustaining cost of $753 per ounce sold, with a 23% return and a 3.4-year payback. For 2019, our global guidance includes total owner-operated production of 709,000 to 840,000 ounces, with total attributable ounces, including joint venture production, of 810,000 to 870,000 ounces. Our projected total cash costs are $765 to $815 per ounce, with our AISC guidance at $1,030 to $1,080 per ounce. Turning to our capital expenditure outlook for 2018, we are guiding to $355 million plus or minus 5%. The significant increase over 2017 is due to the advancement of our growth project. Sustaining capital is expected to be similar to 2017, at $160 million. Of the $75 million of the sustaining capital for Essakane, $40 million is for capitalized waste stripping.Non-sustaining CapEx is estimated at $195 million, with $75 million allocated to Rosebel for the development of Saramacca and $50 million at Essakane for tailings liners, dams and a thickening plant, as well as the mill de-bottlenecking upgrade. Westwood's $30 million is mainly for expansion development. The $40 million for corporate and development projects is inclusive of our 70% proportional expenditures at Cote for further de-risking activities, as well as Boto work. I'll now turn the presentation over to Craig to talk about exploration.

[Craig Stephen MacDougall, Senior Vice President of Exploration]

Thanks, Gord, and good morning, everyone. Before I begin, please note that the results they 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 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. As Gord noted, in 2018 we continued the trend in increasing the company reserve and resource profile with a 23% increase in proven and probable reserves, combined with a 13% increase in measured and indicated resources. When combined with 2017's reserving increase, this represents a 129% increase in [ 2P ] reserves over the prior 2 years. Achieved with our own organic projects, this is a significant achievement and is in contrast to the current state of the industry. Not only have we been able to upgrade resources to reserves, we've been able to more than replenish and grow our resource ounces, including the declaration of initial resource estimate at multiple projects during 2018. Starting with Rosebel and the surrounding land packages, during 2018 we declared initial attributable reserves at Saramacca of 1 million ounces. During the fourth quarter, we announced drill results of 27 drill holes totaling just over 4.5 kilometers along the Saramacca-Brokolonko trend, with highlights including 7.5 meters creating 4.58 grams per tonne gold and 10.5 meters creating 1.73 grams per tonne gold. During 2018 we completed approximately 56 kilometers of reverse circulation in diamond drilling. In 2019, we plan to continue these exploration efforts along the Saramacca-Brokolonko trend, as well as on the Rosebel concession, with approximately 45 kilometers of reverse circulation in diamond drilling. We continue to evaluate potential resource expansion and exploration targets in the vicinity of the existing operations. At Essakane, exploration focused on extending the mine life beyond 2030. During 2018, approximately 56 kilometers of reverse circulation in diamond drilling was completed on the mine [indiscernible] and surrounding concessions. Drilling was focused on infill and resource conversion at the Essakane main zone to support the ongoing feasibility study, and infield drilling at Falagountou West to improve the resource models. At the Gossey prospect, we announced an initial resource estimate 10.5 million tonnes of indicated resources creating 0.87 grams per tonne gold for 291,000 ounces, and 2.9 million tonnes of inferred resources, creating 0.91 grams per tonne gold for 85,000 contained ounces. 2019, we will continue our efforts in evaluating other potential prospects along the Gossey-Korizena trend. At our Diakha-Siribaya project in Mali, the attributable indicated resources increased by 539,000 ounces to 668,000 ounces, while our inferred resources more than replace the upgraded ounces and remained relatively unchanged at 1.1 million ounces. During 2018, as part of our infield program, we completed over 14.5 kilometers of reverse circulation in diamond drilling, which included highlights such as 13 meters, creating 6.05 grams per tonne gold and 13 meters at 11.6 grams per tonne gold. We plan to continue our efforts to validate the mineralization north and south of the current pit shell with a further 10 kilometers of drilling planned in 2019. And as I always like to remind our listeners, Diakha is on the same mineralized trend as our own Boto projects in Senegal, as well B2Gold's Fekola projects in Mali, which continues to impress with strong resource upside. At Pitangui in Brazil, we completed approximately 17.6 kilometers of drilling to evaluate potential resource extensions at the Sao Sebastiao deposits, as well as test priority targets elsewhere on the property for additional zones of mineralization. We continue to incorporate these results into the resource model and guide ongoing drilling programs. At our Eastern Borosi joint venture project in Nicaragua, our drilling program in 2018 focused on testing selective vein structures for mineralized extensions. In early 2018, we announced the updated resource estimate comprising 4.4 million tonnes creating 5.7 grams per tonne of gold equivalent for 812,000 contained gold equivalent ounces. In addition to that, we completed just under 11 kilometers of diamond drilling, of which highlights include 15.9 meters creating 5.75 grams per tonne gold and 34.3 grams per tonne silver, as well as 8 meters creating 10.9 grams per tonne gold and 859 grams per tonne silver. Lastly, moving to our Monster Lake and Nelligan projects in Quebec, Monster Lake, we reported an initial resource estimate, assuming an underground operation, of 1.1 million tonnes of inferred resources, creating 12.15 grams per tonne gold for 433,000 contained ounces. Subsequently, we released highlights from additional drilling, from 8.3 kilometers of drilling, which included high-grade results such as 2.6 meters creating 72.17 grams per tonne gold, and 5.3 meters creating 40.9 grams per tonne gold. The team will complete approximately 6 kilometers of drilling in 2019 to continue to evaluate target areas with potential to host additional zones of mineralization. At Nelligan, we completed 13.4 kilometers of diamond drilling to evaluate the resource potential of the Renard Zone, which intersected wide zones of alteration and associated mineralization. Highlights reported from the 2018 program include 42.1 meters creating 3.6 grams per tonne gold, 27.8 meters creating 5.7 grams per tonne gold, and 82.6 meters creating 3.3 grams per tonne gold. During 2019, we plan to drill between 12 and 15 kilometers of infill to test the continuity of the mineralization of the Renard Zone, which will be integrated to complete an initial resource estimate during 2019. To wrap up exploration, you have seen that we have not only advanced projects successfully to the feasibility level, but have also advanced our greenfield project through discovery to initial resource stage, and we continue to conduct exploration programs on a number of medium and long-term discovery stage projects which we hope will become the future catalyst for the company. We plan to build on our 2018 exploration successes. We will work to advance some of these early-stage projects, including the [indiscernible] resource at Nelligan, while continuing to support our near mine exploration to leverage our existing infrastructure. With that, I'll pass it over to Steve to wrap up.

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

Thanks, Craig. So, just to repeat what I said earlier, we've got a very focused strategy going forward. We've listened to our shareholders, we've listened to all of our stakeholders, and our aim simply is to create as much superior shareholder value as possible by building strong cash flows from our current operations while maintaining a disciplined approach to realizing the value of our portfolios. You know, we have almost 30 million ounces in measured and indicated resources and we're at a market cap of $2.3 billion Canadian. Our company has a lot of inherent value that can be realized. And thanks to the hard work of the operations and financial team, we not only have a very robust inventory of resource, we have a very strong balance sheet to support it. So from an operating perspective in the near term, this simply means, again, back to the proof-of-concept strategy that we're putting in place, let's de-bottleneck the Essakane mill. We're going to continue the Saramacca development. We're going to progress the development of Westwood, and we're going to complete the Essakane CIL feasibility study. For our development growth opportunities, this means finishing up the work of engineering and permitting at Cote and pausing, as we said. We are not going to be making any kind of construction decision at Cote. Expecting delivery of the mine permit at Boto. Issuing a maiden resource for Nelligan, and making sure we get that first production from Saramacca in the second half of 2019. Again, proof of concept. With a strong balance sheet, robust pipeline of projects and balanced geopolitical risk, plus the commitment and skill of our people at all our sites and offices, we're very confident with the belief that we can achieve our goals. Thank you for joining us. We're happy to take questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Fahad Tariq with Credit Suisse.

[Fahad Tariq, Research Analyst]

Just one from me. In the release you mentioned $34 million of growth CapEx in the first half for Cote, for engineering, permitting and drilling. Were these contracts that you were locked into and couldn't get out of even though you shelved the project? Any color on that would be helpful. Just trying to figure out why the CapEx for that particular project went from under $20 million to $34 million in the first half, or am I missing something in the numbers?

[Carol T. Banducci, Executive VP & CFO]

Maybe I can start off answering that question. So the outlook that we had originally for Cote included the spend up until really the first quarter, because we said that we would be making the construction decision in the first quarter. And so we had nothing forecast for Cote beyond that spend initially identified for the first few months.

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

Yeah, and I'll let Gord answer it, but it's one of those things where we've got a great asset there. We're not moving ahead with it, so I don't want anybody seeing it as a signal that we're sort of tucking it in a quarter and going to surprise anybody. We're not surprising anybody here, but we need to finish off what we started. We do have some commitments. We're de-foresting now, because we need to do it now given environmental constraints. We have permitting we have to finish, we have work with the First Nations. We need to clean it up, and that's what it's going to require to put it in the kind of shape that we want to put it in. And Gord, maybe you can add to that.

[Peter Gordon Stothart, Executive VP & COO]

Yeah. And I mean, we've never used the word shelved. We said deferred. The project needs to be put in a shape in an orderly fashion. It's not like you pull the lights and unplug the refrigerator and run away from the house. There's a lot of work needs to be done to put it in the right shape.

[Operator]

Our next question comes from Mike Jalonen with Bank of America.

[Michael Jalonen, Managing Director]

Steve, going to your original comments at the start talking about what happened at Cote, talking to your shareholders, talking to analysts, I guess maybe a philosophical question for you, a bit unfair when you hear the comparison. But it brought me back to January of 1989 when American Barrick announced a $900 million Betze-Post development plan. At the time, Betze-Post had about 5 million ounces of gold and was going to produce 900,000 ounces and had a lot more in resources. But this plan faced huge criticism from the buy and sell side, and autoclaving wasn't really a known technology. In fact, a year earlier, an autoclave in Nevada had blown up at one of the mines. There was analysts saying you couldn't dewater 40,000 gallons per minute, and the capital cost of $900 million. That was eye-opening for that era.And remember, this was after the market crash of 1987, when confidence in the market was low. Bob Smith is the CEO then. I remember talking to him, saying he believed in his team, that they could deliver this. And obviously, we have the benefit of hindsight, it worked out. But I remember investors back then -- I had a buy on Barrick -- telling me that I was going to ruin my career if I put a buy on it because this wouldn't work. Well, I'm still here and they're not, but -- so I guess it's more philosophical for you. Obviously, Goldstrike turned out to be one of the best mines ever, but there was an example where the buy and sell side were against us, a lot of people, and they were wrong. So I just wonder what you think about that in terms of Cote now.

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

Well, you know, it's an excellent commentary, and you've been around a long time, Mike, and you're one of the guys we listen to the most, and we always appreciate, whether it's over a beer or a coffee, what you have to say, because you have a lot of fantastic advice for us. But I'll very simply tell you, and I think you guys know me by now after 9 years in this job, we try to be as truthful as we can without selective disclosure. But this is probably one of the toughest things I've had to do, certainly at my career at IAMGOLD, and I've had to make similar decisions in the oil and gas space when I was there.I mean, we have a tremendous team of people that have been working on this, and a tremendous group of people from Sumitomo, and a relationship with Sumitomo, which we treasure. But I was very worried when -- and we weren't scheduled to make a decision until the end of the first quarter, and when we did the gold prepay, because we knew investors were concerned about the gold price and the fact that our AISC sits higher than average, we were worried if that gold price fell, it would squeeze our margins and it would drain our cash. So the $1,300 to $1,500 collar that we put in place with the prepay was meant to not only protect our margins, but also give us extra cash to complete the project. And it's not new news that markets saw that as an indirect decision on Cote, which it wasn't, but in many respects it was good to see the reaction to Cote. And in fairness to our investors, we started to hear rumblings of concern back at the Denver gold show. We had gone from, geez, Cote, let's move ahead, to, hang on, maybe you need to go to the sidelines. So when you look at a company like IAMGOLD, with 18 million ounces in reserves and close to 30 million ounces of measured and indicated resources, valued at a very attractive price, and the fact that we dropped almost 20% in 2 days after the prepay announcement -- and now, in fairness, that was also tied to the revision we had or the expected revision -- not expected, but a revision of the expectation around Westwood -- it put us into a territory where we could have easily lost the company to bids from others seeing a value buy at a deep discount. So you have to make a hard choice and protect your shareholders, and I'm the biggest independent shareholder of IAMGOLD, as you know, so I have a lot of skin in the game, and I think I can think like a shareholder given how many shares I have. I just said, look, we believe in this project, we think it's an asset that's going to add a lot of value to our shareholders over time, but I'm not going to be bullheaded and move ahead with a decision on this in the face of shareholder discontents and lack of support. And Gord Stothart, 2 years from now, may say to me, I told you we should have gone ahead with it, you dope -- because he says that to me every morning -- but my job as CEO is to take a balanced approach, and maybe it's the wrong decision right now, but it's the right decision for our shareholders and our stakeholders and I would do it again, because my job is to protect our shareholders, and right now in the short term, nobody wants to hear about large CapEx, bulk tonnage opportunities in Canada. They just don't want to hear about it. They want us to focus on our near-term short-cycle economics and produce as much cash flow as we can. With 18 years of mine life at a million ounces a year, we have the luxury of doing that where we're not going to hurt ourselves economically by doing that. So that's what we're going to do. But was this easy for me? Not at all. But I want to underline, and for everybody on the line, what we said we are going to do. We're not going to surprise anybody, we're not going to come out and surprise them with some sort of decision here to the contrary of what I just talked about. This is the path we are following, and if there's a change in the market conditions out there, if there's a change in the sentiment, if somebody wakes up in the morning all of a sudden and the market starts saying we need to go back to a longer-cycle growth prospect, then we can do that with the support of the market. But right now, I think it would be foolhardy to go against where the market sentiment is, and again, we can do what we're talking about without losing any value for our shareholders because of the robust resource space we have and the strong technical capability that we have at our sites. That's a long answer, but it was a great question, Mike, and I appreciate you asking it.

[Operator]

Our next question is from Don MacLean with Paradigm Capital.

[Don MacLean, Senior Analyst of Gold]

Comment from another fossil out there like Mike. I think I like the way Gord put it, that it's deferred, not shelved Cote, and I think most of us that have been around for a while know that there's a cost of doing that, but there's a value de-risking the project and making it ready to progress quickly into production when the time's right. But that understood, when one takes a look at Boto, that's a good-looking project. How does that fit into the development strategy and schedule now?

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

Boto is an extremely attractive project, and we haven't worked out the sequencing yet of what we're going to do now that we have deferred the construction decision on Cote. But again, we are looking at a proof-of-concept strategy, and all I can say right now is that if the economics of Boto hold and we're able to get the kind of permits that we need to move ahead and our shareholders support that kind of strategy, which is far less capital-intensive than Cote today, then we are going to take a hard look at whether we should move it ahead or not.And again, we don't want to lose value, because it's great value, but it'll be a consultation process where we get feedback, and we have the balance sheet to do it, and we certainly have the resource, both human resource and technical support around the resource to move ahead. So we haven't decided, Don, but it certainly would be an attractive project for us to pursue if everything lines up.

[Don MacLean, Senior Analyst of Gold]

And Gord, how straightforward is the permitting that remains to be done?

[Peter Gordon Stothart, Executive VP & COO]

Well, I mean, effectively, it's a negotiation with the government of Senegal. We've had several meetings with them, they're going very well. We're still apart on a few specific issues, but it's certainly a collegial negotiation. Just to remind everybody, there is a presidential election underway in Senegal I believe this week, so that will obviously cause a little bit of disruption to the regulatory bodies there for a period of time, especially when you're talking about a negotiation of a mineral lease. We're still projecting that sometime midyear, second half of the year, that that negotiation and that should be completed and we'll have that lease in hand.

[Don MacLean, Senior Analyst of Gold]

Great, thanks. And then one last comment while I've got you, Gord, on this underground potential at Saramacca. Maybe that should be Craig that touches on it too.

[Craig Stephen MacDougall, Senior Vice President of Exploration]

Well, obviously, with the grades and thicknesses, Don, that we see there, there's quite an opportunity for us with the underground potential. The rock conditions are very favorable, the geometry of the main structure is very favorable to us, so we see quite an opportunity there and we're currently evaluating how far that main structure projects below the current resource pit, and as those results kind of come in to hand, our team will be looking at that with a scoping study approach to see what it's going to do.Gord has already foreshadowed that if we are able to go underground, it does fundamentally change what kind of pit we need, how much waste stripping, what kind of waste rock piles will be around this thing so there's some big impacts and there are a lot of moving parts. The first thing we've got to deliver to them, though, is some grade over thickness of depth, which is what we're trying to do, and then he'll turn his engineers on it and we'll be able to compare the outcomes from the two scenarios. But on first blush, it looks pretty interesting to us.

[Don MacLean, Senior Analyst of Gold]

Your ounces per vertical meter are below the resource -- they stand up well?

[Craig Stephen MacDougall, Senior Vice President of Exploration]

We think they're going to stand up well, yes.

[Operator]

Our next question is from Tanya Jakusconek with Scotiabank.

[Tanya M. Jakusconek, Analyst]

I have more technical questions for you. Maybe a quick one just on the Essakane mill de-bottlenecking upgrade. Gord, how much is that in total capital to be spent this year and next?

[Peter Gordon Stothart, Executive VP & COO]

We've allocated about $15 million.

[Tanya M. Jakusconek, Analyst]

1-5?

[Peter Gordon Stothart, Executive VP & COO]

1-5, yep.

[Tanya M. Jakusconek, Analyst]

And that's it for the whole program?

[Peter Gordon Stothart, Executive VP & COO]

Yep.

[Tanya M. Jakusconek, Analyst]

Okay. That's an easy one. And then just turning to Westwood, appreciate that you're going to have a new life-of-mine plan coming out at the end of the year, but just from a high level, what triggered the change to getting this new mine plan? Is it the difficult ground condition and seismicity? Are we looking at potentially a more selective mining method obviously impacting throughput and grade and cost? Maybe a little bit from how you're approaching it.

[Peter Gordon Stothart, Executive VP & COO]

I guess the short answer is yes. So, yeah, we are looking at the seismicity, we are looking at mining methods, and we will be examining the opportunity to use differential mining methods in different parts of the deposit. The whole deposit is not affected by seismicity, but there are some specific areas that are, and we need to be able to deal with that. We'll be looking at, you know, what's the size of the workforce, what's the development rate, and selectivity is a very significant piece of what we'll be looking at.

[Tanya M. Jakusconek, Analyst]

So can we assume, Gord, that that 180,000 ounces ramping up in a longer term is probably too optimistic for this asset from what we know today?

[Peter Gordon Stothart, Executive VP & COO]

I'm not assuming that yet. Again, I'd really put it in the hands of the team, and my job is to sort of give them the space to come up with the answers.

[Tanya M. Jakusconek, Analyst]

Okay, and when you say year-end, is that with year-end results or is it in calendar 2019 that we will actually get this life-of-mine plan?

[Peter Gordon Stothart, Executive VP & COO]

Hopefully in calendar 2019. That's the goal that's been put in place. And it will be an interim plan. I mean, we actually feel it'll probably take a little longer to put all of the bells and whistles on it, but we will certainly have a good indication by the fourth quarter of this year.

[Tanya M. Jakusconek, Analyst]

Okay, that helps. And then maybe, Steve, just for you, and I appreciate you've got the deferral of Cote, and I know you've come back and said a few times on pending market conditions. Maybe just for us to understand, we appreciate that large capital and investors and analysts don't want you to build it, but what would it take you for you to go ahead with it? I mean, you mentioned market conditions. Is it a gold price? [ 13-50 ] long term, if we stay here for a year? Is that enough? Or what do you see as it going ahead? What will it take?

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

Well, Tanya, you're one of the people as well that we pay a lot of attention to and you've always given us good advice. And I know your advice was to certainly hold off on Cote. I got that messaging. And again, we're very appreciative of the feedback, and I know you've been here as long as I've been here. And I know when I first joined from the oil and gas side, the complete focus of the industry was on ounces. In fact, you will recall in 2011 the euphoria around this industry, $8 billion in equity raised that year. You can't raise a dollar today. And I remember selling [ Tarqued and Demang ] for $666 million after tax and getting criticized for selling ounces, even though the deal was unbelievable for us.So it's almost going to be a place where our shareholders stand up and say, you know what, depletion is running at a very high rate relative to replacement in the industry. Of course, we believe that it makes sense to move ahead and add more production to the system. We want to see you take your cash flow and invest it in a mine in Canada that's [ 12 ] tonnage low grade, but surrounded by infrastructure and has all the bells and whistles that we believe it has. So I honestly, Tanya, will probably be talking to you, I will be talking to Mike, Don, and our shareholders, Don Smith, Tocqueville, Fidelity, the guys over in London, Ruffer. I mean, we spend a lot of time with them, and we garner their feedback, and it's important to me. I don't run the company by consensus, but when the majority of our investment community is opposing a large CapEx project, I'm just not going to stubbornly go ahead and do it just because I think I'm right. At 63 years of age, I've learned that it's best to listen and take everybody's feedback and make the right decision. So I don't know when that decision to construct is going to be made. I do know I don't see anything in the near term that would move us in that direction unless there's a change at our company, unless we get bigger in some fashion, unless somebody comes up to us and says, boy, we can help you really de-risk this. It's going to be basically tied to a bunch of factors that enhance the attractiveness to the market that we haven't seen yet. So, right now, we're on the sidelines.

[Operator]

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

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

Appreciate the candor, Steve, around Cote. Not to nitpick or sort of continue on this focus, but I think the last cycle -- I think we can all agree, and a lot of investors -- there are some long-term investors, there are some short-term investors, what we saw the last cycle was more of a flavor-of-day approach where people were telling companies pay a dividend, lever up, build, and then everyone complained when everyone built at the top of the market and there was write-downs. Do you think listening fully to investors and saying not going with the project right now is the best way, or, you know, maybe when the environment is right for people, that's when the attitudes change and everyone wants growth, but then you potentially miss -- you [ top tick ] the cycle and then you basically turn on Cote during a down cycle where then you have the reflective write-downs. Is there not a way you can say, okay, I know it's not the right time to build it now, but we think Gold's going in the right direction, we know we still have a lot of people that don't like the project, want to go with it, but we think it's the right time to build it? Are you going to come to a period where that's going to be the argument from a company basis, or are you going to make the decision based on what investors are telling you to do with Cote?

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

Well, you know, Gord's been around here longer than I have. He's forgotten more than what I know about building mines, and I value -- when I met him at the Royal York when I first came to join the company, he was extremely patient with my complete ignorance about the industry. And he says to me, we should be building in the low part of the cycle. This is the way you make money. You build it in the low part of the cycle and then when the gold price moves up, we're going to lever off of that and our shareholders will make tonnes and tonnes of money.And the problem with that right now, Dan, and you know this as well as anybody, is that we make that decision, our stock -- because people don't want to own our stock today if we're taking risk on Cote, they're going to wait to buy our stock 2 years out when we've finally proven we can build it. And so what we're going to get is a bunch of people saying, well, why would I want to own IAMGOLD with all the construction risk that goes with Cote, why wouldn't I just wait. That makes us extremely vulnerable to unsolicited offers for the company at a very low share price. That isn't doing our shareholders any favors today. And it's the shareholders today that I have to worry about the most, not the shareholders of tomorrow. So I am driven, without a doubt, by the shareholders of today, and I'm one of them, by the way. And I sure don't want to see our share price whacked 20% to 25% and then have a company come in and say, geez, at a 30% premium I can take all these resources, all these projects, all these enhancements for $0.50 on the dollar. That isn't happening. So, not going to do it. We're going to focus on adding value on the short cycle time until we see some evidence that our shareholders are willing to walk with us and support us on a bigger project that they aren't going to exit on and make us vulnerable in the short term. So that's where my head is. I'm not deviating from it. Do I get beat up every morning over it? Yeah, I do, internally, and from our partner, by the way, but I'm big enough and old enough to deal with that and we are sticking to that strategy.

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

Okay. That brings me to my next point, or question is, basically noted the differential between the short-cycle investment horizon and the fact that mining is a multi-decade game and those two strategies sometimes compete viciously against each other. And it sounds like right now you don't have the free cash flow within the current portfolio to support the development of Cote Gold at this point in time. Does that open IAMGOLD up to deploying its excess cash and strong balance sheet towards adding producing mines through non-core asset sales that could come up over the next 2 to 3 years, to build a base which then would justify and help support the development of Cote in 3 to 4 years?

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

The short answer would be yes, and we're always looking at those opportunities. I think there's a fallacy, you know, when [ Cristo ] gets up and talks about disposing of 2.5 million ounces of production and Goldcorp Newmont talk about 1.5 billion of assets, you've been around long enough, generally those are the straps and roadkill that you get that they don't want. And we will always look at these opportunities, but I'm not optimistic that anybody's going to get deals of the century from the sale of these assets. I think that's naïve. Having said that, we have an obligation and fiduciary responsibility to look at all these opportunities, and we will. We always do. So, if they come up for sale, we're going to take a look at them and we always have done that. I don't know whether or not that'll give us an opportunity or not.

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

Okay. That's great. Appreciate the color.

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

Okay. Thanks, buddy. And thanks for all your feedback.

[Operator]

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

[Indi Gopinathan, Investor Relations Lead]

Thank you very much, and thanks to everyone for joining us this morning and for your continued interest in IAMGOLD. We look forward to having you join us for our Q1 2019 Conference Call in early May. Thank you.

[Operator]

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