IAMGOLD Corp

TSX:IMG

Earnings Call Analysis

Côte Gold Project Update and Outlook

The company is confidently progressing with the Côte Gold project, bolstered by sufficient liquidity from operations, asset sales, and credit facilities to fund its 60.3% interest in completion and ramp-up. First gold is anticipated by late Q1 2024, with commercial production set for Q3 2024, aiming for a 90% throughput rate by year's end. Production is expected to range from 220,000 to 290,000 ounces in 2024, with cash costs around $700 to $800 per ounce and all-in sustaining costs (AISC) between $1,100 and $1,200 per ounce. Updated mineral reserves at Côte show a 5% grade increase to 1.01 grams per tonne, totaling 7.6 million ounces.

Progress and Prospects of Côté Gold

Côté Gold is nearing a pivotal moment, transitioning from construction to operation under the ownership team. To date, $2.786 billion has been spent on construction, aligning with the $2.96 billion budget. The project's finishing touches, including mechanical completion of critical circuits, are close to fruition, and over 5 million tonnes of material is ready for processing. Investors can anticipate $179 million in pending expenses to reach the first gold pour, subsequently followed by another $40 million for infrastructure improvements.

Funding and Financial Readiness

The remaining financial obligation for Côté Gold's construction sits at $142 million, which management believes can be comfortably met through the existing $367 million cash balance, operational cash flows, and liquidity sources. The company's ability to draw on credit facilities is tethered to financial covenants, which may be affected by macroeconomic conditions and the performance of ongoing operations.

Production Estimates and Cost Projections

For 2024, Côté Gold's production is projected to range from 220,000 to 290,000 ounces. Initial production is slated for late Q1, with commercial production commencing in Q3 when the mill should operate at an average throughput of 60% over 30 days. By year-end, the aim is to reach around 90% capacity, leading to cash costs approximately $700 to $800 per ounce and an All-in Sustaining Cost (AISC) of $1,100 to $1,200 per ounce. These costs are expected to decrease as output rises and the effect of inflation subsides.

Côté Gold and Gosselin Reserves and Resources

The mineral reserve at Côté Gold saw a substantial increase by 436,000 ounces, reaching 7.6 million ounces with improved grades. In total, measured and indicated mineral resources surged by 1.9 million ounces, a significant climb to 12.1 million ounces. The neighboring Gosselin deposit also reported impressive growth, with an updated resource estimate showing 4.4 million ounces indicated and 3 million ounces inferred, marking increases of 32% and 74%, respectively.

Operational Snapshot of Other Assets

In 2023, the fourth quarter saw the highest production with 108,000 ounces of gold, culminating in a yearly production of 372,000 ounces. Operations, however, experienced a 13% decrease in processed tonnage due to supply chain constraints. Looking ahead, Essakane is set to produce 330,000 to 370,000 ounces at a cash cost of $1,300 to $1,400 per ounce and an AISC of $1,675 to $1,800 per ounce. Meanwhile, Westwood forecasts production of 100,000 to 120,000 ounces, at a cash cost of $1,250 to $1,375 and an AISC of $1,800 to $2,000 per ounce. The projected sustaining capital expenditure will be roughly stable at $65 million.

Earnings Call Transcript 2023-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Fourth Quarter 2023 Operating and Financial Results Conference Call and Webcast. [Operator Instructions]

At this time, I'd like to turn the conference over to Graeme Jennings, Vice President, Investor Relations and Corporate Communications for IAMGOLD. Please go ahead, Mr. Graeme.

[Graeme Jennings, executive]

Thank you, operator, and welcome, everyone, to the IAMGOLD Fourth Quarter and Year-End 2023 Operating and Financial Results Conference Call. Joining me today on the call are Renaud Adams, President and Chief Executive Officer; Maarten Theunissen, Chief Financial Officer; Bruno Lemelin, Chief Operating Officer; Tim Bradburn, Senior Vice President, General Counsel and Corporate Secretary; and Jerzy Orzechowski, Executive Project Director, Côté Gold.

Before we begin, we are joining today from IAMGOLD's Toronto office, which is located on Treaty 13 territory on the traditional lands of many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, the Haudenosaunee and the Wendat peoples. At IAMGOLD, we believe respecting and upholding indigenous rights is founded upon relationships that foster trust, transparency and mutual respect.

Please note that our remarks on this call will include forward-looking statements and refer to non-IFRS measures. We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures included in the presentation and the reconciliations of these measures in our most recent MD&A, each under the heading non-GAAP financial measures.

With respect to the technical information to be discussed, please refer to the information in the presentation under the heading, Qualified Person and Technical Information. The slides referenced on this call can be viewed on our website.

I'll now turn the call over to our President and CEO, Renaud Adams.

[Renaud Adams, executive]

Thank you, Graeme, and good morning, everyone, and thank you for joining us today. Last year, IAMGOLD made significant strides towards our goal of becoming a leading mid-tier gold producer, to bridging its asset to build a mining platform with a long-life cornerstone asset in Canada. As we will get into more detail shortly, Côté Gold saw a remarkable progress in 2023 with the project starting the year with construction approximately 64% complete, but ending the year at 98% complete.

This progress included a major milestone across the project's goal, including the mechanical piping, electrical and instrumentation of the plant, completion of the first stage of the tailing facility, electrification of the slide to the provincial hydro grid and initiation of and successful ramp-up of our autonomous mining fleet, making Côté Gold North America's first gold mine to be designed and built for the usage of autonomous haulage, which is changing the face of mining today.

Côté is poised to start production shortly, with more than 5 million tonnes of stockpile in place, commissioning activities ongoing and a full hand-off of all primary facet of the project to the ownership team this quarter. Our primary focus and efforts continue to be on positioning the project for a steady ramp-up of gold production through this year to achieve commercial production in the third quarter.

At a steady run rate, Côté Gold will be the third largest gold mine in Canada, and is critical for the repositioning of IAMGOLD as once online. Côté provides a higher production base low cost profile and a long life of cash flow generation and growth opportunities in Canada.

Further, over the last 12 months, the company has seen significant changes in leadership across the organization with a renewed focus on operational excellence and accountability while continuing to build on IAMGOLD's strong and widely recognized sustainability practices.

Operationally, I'm very proud of the team. With attributable load actions from continuing operations of 465,000 ounces, which was the top end of the guidance range of 410,000 to 470,000 ounces. I really want to congratulate the Essakane team who achieved their targets while facing considerable challenges within the region, and the Westwood team who continues to execute on the plan to ramp up on the ground operation while employing industry-leading underground seismic monitoring and management.

Last night, we also announced an update to our year-end mineral reserves and resources with a net increase after depletion of Essakane Westwood reserves, extending the mine life of this asset. Mineral resources saw a significant increase as well driven by update to Côté and Gosselin as we grow our gold pipeline and future for the company.

Longer term, our goals for IAMGOLD remains to be a leading intermediate gold producer with a portfolio of facet centered around a corner asset in Canada that have a proven record in ability to generate strong, consistent free cash flows and attractive returns for shareholders. Built on our pipelines of projects and strategic geographies and organically grow our assets, establish ourselves as a leader amongst peers in health and safety, talent development and ESG, including biodiversity, tailing management, water stewardship and community health and education. And of course, to be recognized as a leader in applying leading proven technologies that drives performance and sustainability across our business.

Financially, we will prioritize returning to the 70% position in Côté with our partner, Sumitomo, as well as use our cash flow to optimize our balance sheet and deliver the company to have a more efficient and balanced capital structure. With that, we will now dive into the operating and financial results and highlights for the quarter.

Starting with health and safety. The company continues to perform extremely well with the days away restricted transfer duty rate of 0.39 and total recordable injury rate at 0.69, both based on 200,000 hours work. I want to take a moment to congratulate Essakane, which achieved its best ever performance in health and safety with days away restricted transfer duty rate of 0.06. This is a testament to the professionalism and commitment to a culture of safety for our people inverting of assets.

Ensuring all of our employees and contractors go home safely would always be the primary focus for IAMGOLD. As we like to say, every gold ounce produced has to be done safely. And our goal continues to be zero harm, zero harm for the people and the places where we operate.

On production, in the fourth quarter, the company produced 136,000 ounces, bringing total annual production to 465,000 ounces on an attributable basis, which was near the top end of our guidance of 410,000 to 470,000 ounces. As we will get into a moment, the production results were driven by Essakane being able to operate with our disruptions and benefiting from positive grade reconciliation and the continued ramp-up in rehabilitation of underground zones at Westwood.

Our cash costs and all-in sustaining costs declined in the fourth quarter to $1,197 an ounce and $1,735 an ounce, respectively. This brings our year-to-date cash cost to $1,261 an ounce and an AISC to $1,783 an ounce, in line with our revised guidance estimates this year.

On a year-over-year basis, we've seen a step-up of costs due to continued pressures at Essakane as well as sustained elevated price from the recent inflationary period. We are seeing some sign of price easing on certain consumables, but on the whole, there are several costs that have a long tail and slow to decline.

With that, I will pass the call over to our CFO to walk us through our financial results and position. Maarten?

[Marthinus Theunissen, executive]

Thank you, Renaud, and good morning, everyone. Looking at our fourth quarter financials, revenues from continuing operations totaled $297.6 million from sales of 147,000 ounces on a 100% basis at an average realized price of $2,005 per ounce. Adjusted EBITDA from continuing operations was $110 million for the quarter and $315.1 million for the year. Adjusted earnings per share from continuing operations was $0.06 for the quarter and $0.09 for the year.

In terms of our financial position, IAMGOLD entered the year with cash and cash equivalents of $367.1 million, and a fully undrawn credit facility equating to the total liquidity of approximately $754 million. As further described in MDA, the company entered into 1-year extension of its credit facility in November, extending the maturity to January 31, 2026, from Jan 31, 2025. As part of the extension, the credit facility was also reduced or rightsized to $425 million based on the company's requirement for a senior revolving credit facility on its overall business. The extension allows for the credit facility to be available in noncurrent during 2024 should we require additional liquidity during the ramp-up of Côté and for working capital purposes.

The company has received gross proceeds of $197.6 million from the Bambouk transactions and the remaining transactions related to the sale of the early-stage assets in Guinea and Mali are expected to close this year for gross proceeds of approximately $84.4 million. We note that within cash and cash equivalents, $81.7 million was held by Côté Gold and $70.9 million was helped by Essakane.

The Côté Gold UJV requires its joint venture partners to fund in advance 2 months of future expenditures and cash calls are made at the beginning of each month, resulting in a month-end cash balance approximating the following month's expenditure. Essakane normally pays a dividend in the second half of the year. As we will outline in a moment, the company's remaining funding requirement to complete construction commissioning of Côté Gold to bring the mine to first gold is estimated to be $142 million, which includes working capital adjustments.

The company believes that its available liquidity at December 31, 2023, combined with cash flows from operations, the expected proceeds from the sale of the remaining Bambouk assets and available liquidity provided by the credit facility is sufficient for the company to fund its 60.3% interest of the Côté unincorporated joint venture to complete the construction, commissioning and ramp-up of the Côté Gold project. It should be noted that the company's ability to draw on the credit facility is impacted by certain covenants, including the net debt to EBITDA and interest coverage ratios of the company, that could be impacted by macroeconomic factors and the performance of the company's existing operations.

We also announced amendments to our gold prepay commitments in December. We entered into a new forward sale announcement and a partial amendment to one of our existing gold prepay arrangements that effectively transfers the gold delivery obligations out of the first quarter of this year into the first quarter of next year. This is an important measure to improve the financial flexibility for the company for a reasonable cost while we were also able to benefit from favorable gold -- forward gold prices, particularly for the first quarter of this year, while we are commissioning Côté head of production by the end of the quarter.

And with that, I will pass back to Renaud. Thank you, Renaud.

[Renaud Adams, executive]

Thanks, Maarten. Turning now to Essakane. The mine reported attributable gold production of 108,000 ounces in the fourth quarter, which was the highest quarter of production for the year, bringing total attributable production in 2023 to 372,000 ounces. Mining activities totaled 12.9 million tons in the quarter, an increase from the third quarter as operations were less impacted by the security situation within the country with minimal disruptions in fuel supply.

On an annual basis, mining operation was 43 million tonnes, 13% lower than the prior year due to the impact to the supply chain in the first and the third quarters. And on ore tonnes mined of 9.6 million tonnes were approximately 24% less than the year prior as a result of an increase in required waste stripping as mining activities move into Phase 5, 6 and 7 of the bit in the second half of the year in support of the '24 and 2025 mine plan.

Head grades increased in the quarter to 1.32 grams a tonne due to positive reconciliations for the deeper benches of Phase 5. This positive grade reconciliation at Essakane is a trend that has continued in the early weeks of this year. However, head grades are still expected to decline in line with the recent life of mine plan as volume from Phases 6 and 7 increase and from increased proportion of stockpile ore.

On a cost basis, Essakane reported fourth quarter cash costs of $1,132 per pound and an all-in sustaining cost to $1,548 an ounce, a significant improvement from the prior quarter, yet year-over-year, the cost profile has increased with 2023 annual cash costs of $1,181 per ounce and an AISC of $1,521 an ounce.

This increase in Essakane cost profile over the last 12 to 18 months is attributed to a combination of the lagging impact on deflation, higher volumes of operating waste from increased strip ratios as the mine enters new phases, the impact of security situation resulting in higher landed fuel prices, transportation and chem cost as well as higher labor cost due to appreciation in the local currency.

In addition, last year, we saw the government of Burkina Faso implement an updated royalty rate that we settle the in-country legal proceedings in the 2018 handling of carbon fine. Looking ahead, Essakane is expected to produce 330,000 to 370,000 ounces at a cash cost of $1,300 to $1,400 an ounce and an AISC of $1,675 and $1,800 per ounce. These metrics are in line with the updated 43-101 and life of mine plan we announced for Essakane in December.

Under the current mine plan, 2024 represents the last year of significant sustaining capital, which is expected to decline notably in the later years of the mine plan, assuming no further extension of mine life. The updated technical report we released in December demonstrated the successes of our teams, have had delineating additional ounces with the site security -- within the site security parameters, which contributed to an increase in our mineral reserve and resources inventory and more than offset mine production deflations in 2023.

As of December 21, 2023, Essakane has proven a probable reserve of 2.2 million ounces at an average grade of 1.1 grams a tonne, of which open pit reserves were estimated to be 1.8 million ounces grading 132 grams a tonne of gold. As result, we were able to extend the mine life of Essakane an additional year, providing visibility for the next 5 years of operations at the project with considerable cash flow-generating potential, particularly as stripping requirements declined in the later year. We continue to seek opportunities for further extension of the mine, the life of mine as we continue to advance in 2024.

Turning to Westwood. The fourth quarter represented the highest quarter of gold production since the mine restarted in 2021, with 28,000 ounces of gold produced bringing the total annual production last year to 93,000 ounces.

The higher production in the fourth quarter is a result of the ramp-up of underground operations, supplying increased volumes of higher grade ore for the mill feed and the introductions of higher grade material from the Fayolle deposit. Our mines from underground totaled 77,000 tonnes in the fourth quarter, contributing to an average head grade from underground ore of 7.92 grams a tonne, which is the highest grade from underground in nearly 6 years since Q1 2018 as rehabilitation efforts have allowed access to previously closed higher grade underground stopes.

The mill throughput in the first quarter -- for the fourth quarter 2023 was 245,000 tonnes at an average head grade of 3.3 to 3.9 grams a tonne. The mill availability in the fourth quarter was rather low at 78%, which compared with 95% in the prior year period. This was due to unplanned maintenance on the SAG mill liners and apron feeder.

The cost profile for Westwood continues to see improvement with the increase in production. Cash costs averaged $1,434 an ounce in the fourth quarter, which was also a record since the restart of operations and notably includes an estimated $190 an ounce of cost related to the development incurred at Fayolle that was expanded due to the short tenure of mining of the deposit.

On an all-in sustaining cost basis, Westwood average an AISC of $2,049 an ounce in Q4, which compare well with a realized gold price of $1,989 an ounce. Further, when adjusted for positive working capital movement, Westwood actually returned positive mine site free cash flow in the fourth quarter, an important step in its return to profitability.

Looking ahead to this year, Westwood gold production is expected to be in the range of 100,000 to 120,000 ounces in '24 with an increasing proportion of ore sourced from the underground mine at higher grades. Production levels are expected to be higher in the first half of '24 due to the mine sequencing in the underground mine as the supplementary mill feed from Fayolle is replaced with lower grade material from Grand Duc in the second half of the year.

Cash costs at Westwood are expected in the range of $1,250 to $1,375 per ounce sold and the AISC per ounce sold are expected in the range of $1,800 to $2,000, with the decrease driven by the expected increase in production and reduced on the ground rehabilitation. Sustaining capital expenditure this year are expected to be essentially flat year-over-year at approximately $65 million as lower rehabilitation is offset with increased underground development as well as an increase in capital for the renewal of the mobile fleet and fixed equipment.

Looking at the long section of the mine here on the right. We can see the increase in underground mining activity in the central and west corridors region of the mine, which were essentially shut down prior to the rehabilitation program of the last 2 years. We currently have 8 zones with a total of 10 zones that we are targeting in 2024, utilizing a revised mining method of pillarless pyramid stope sequencing to deflect the seismic stresses to the outside of the operating areas.

Since the reopening of the mine in 2021, we have now proven that we can mine in these higher grade zones resulting in meaningful changes to Westwood complex inventory. Westwood mineral reserve, including the Grand Duc open pit increased 109% from 582,000 ounces to 1.2 million ounces, net of deflation with grades increasing 26% to 7.14 grams a tonne gold.

Excluding Grand Duc, underground mineral reserves were estimated at 1.1 million ounces at an average grade of 10.6 grams a tonne gold. In the second half of the year, IAMGOLD plans to file an updated NI 43-101 technical report telling the results of ongoing mine optimization efforts and strategic assessment of the Westwood complex.

Turning to Côté Gold. The project saw remarkable progress last year, though when you look at these pictures, you may not see significant visual change from last quarter, aside from the [ snow cover ]. As at the end of the third quarter, all major infrastructure was in place and the focus was shifting to completion of piping, electrical and instrumentation as well as demobilizing certain contractors and ramping up precommissioning and commissioning activity. With first gold on the horizon, we're now executing and ramping up commissioning activities, methodically working through the flow ship starting on the dry side before bringing it together with the wet circuits.

Looking at the pictures, starting at the top left is a view of the processing facilities with 4 primary structures in yellow of note. The first is the primary crusher in the foreground, which you can also see in the photo beside the facilities photo in the top middle. This was commissioned in mid-January where mined rock were delivered to the crusher via our autonomous haul trucks.

The cross material was then conveyed and screened for size for the screening building, which is a facility -- the facilities photo in the building in the upper left of the picture and located between the wet processing building and the [ mill ] before being conveyed and deposited in the course ore dome, which you can see in the top right of the page.

We are now working on commissioning of the secondary crushing building, which comes in the HPGR seen in the bottom left. From there, the crushed ore is conveyed back and forth from the screening building before being deposited in the final bin, which is the white silo you can see, besides the secondary crushing building seen in the upper left picture. This step would account for a total of 3 of the 4 buildings in all conveyors having been commissioned. After this, the final is conveyed into the processing plant where it passes into the ball mill in the bottom center photo and then through the remaining circuits of the plan, which is termed as the wet circuit.

As far as auto progress of note, as I mentioned, we are nearing a major milestone with the full hand-off of all facets of the project to the ownership team. Mining activities, which started with the first autonomous truck over a year ago, progressed very well over the year, with now over 5 million tonnes of stockpile available and in place. Final deliverable include the back end of the plan, where final mechanical completion of the detox and electro-winning circuit are nearing completion. Taken together, we are ready and very excited to turn to chapter on Côté and bring it online for the benefit of our shareholders.

Maarten, you can walk us through the remaining project expenditure, please, and capital outlook for the year.

[Marthinus Theunissen, executive]

Thank you, Renaud. Since commencement of construction and up to December 31, 2023, on a 100% basis, the Côté project has incurred $2.786 billion of the planned $2.96 billion of project expenditures. The remaining expenditures to achieve first gold is estimated to be $179 million for the project as a whole at 100%, which bring the total cost to first gold in line with the $2.96 billion estimate. There is an estimated $40 million of expenditures that will be incurred post the first gold date for additional required infrastructure and earthwork projects.

Our remaining funding obligation for the project expenditure up to first gold based on our 60.3% interest and incorporating changes of working capital, leases and adjustment to the cash balance held by the UJV is $142 million, which, as I noted earlier, can be funded with the $367 million of cash on our balance sheet as well as operating cash flows and other sources of liquidity we discussed earlier.

Turning to the high-level outlook for Côté and everything I will be quoting here is on 100% basis, I will draw your attention to the top right where we outlined an expectation for capital expenditures this year in addition to the construction-related expenditures we just highlighted. We estimate that $40 million of operating expenditures relating to milling surface cost, administration and indirect cost that will be incurred during commissioning, ramp up and up to commercial production will be capitalized and reported as capital expenditure.

These costs represents inefficiencies experienced while the project is ramping up and not operating at design capacity, while the operational team has been fully hired. The estimated capital expenditures related to operations for 2024, excluding capital waste stripping, totaled $145 million. These expenditures will be incurred through the year and include $60 million for the expansion of the next dates of the tailings management facility, $50 million for equipment purchases including additional haulage trucks, drills and other model equipment and $35 million related to other owners cost capital projects.

Then finally, we estimate $50 million to be incurred for capitalized waste stripping. It is worth highlighting that Côté capitals expenditure in 2024 are expected to be higher than the life of mine average as the mine progresses with the completion of the construction of the full tailings down footprint and increase in this volume of material mined.

Over to you, Renaud.

[Renaud Adams, executive]

Thank you, again, Maarten. Production at Côté Gold on a 100% basis is expected to be between 220,000 and 290,000 ounces in 2024. This estimate assumes that following initial gold productions in late Q1 and the operations ramp up in the second quarter 2024 and commercial production is achieved in the third quarter 2024.

The company defines commercial production has an average throughput of the mill of 60% over a period of 30 days. We are targeting Côté to exit the year at a throughput rate of approximately 90% of the nameplate. During the ramp-up of the project and until commercial production is achieved, it is rather difficult to provide a good indication of operating cost estimates.

But as Côté Gold achieves 90% throughput exiting the year, we estimate cash costs at the time to be in the range of approximately $700 to $800 an ounce and an AISC of $1,100 to $1,200 an ounce sold with further decreases as volumes increase and as we move through the lagging impact of the recent inflation on contracts for consumables.

This brings us to what is the future of Côté. We announced an updated mineral resource and reserve estimate for Côté and Gosselin last night that saw material increases in inventory at both of these deposits. At Côté, mineral reserve on a 100% basis increased by 436,000 ounces to 7.6 million ounces with grades increasing 5% to 1.01 grams a tonne gold. The increase in ounces was primarily driven by the increased grade of proven mineral reserve to 1.09 grams a tonne gold based on the increase in stockpile inventory and the ongoing grade control drilling program. On a resource basis, Côté Gold measured an indicated mineral resources increase of 1.9 million ounces or 18% to 12.1 million ounces gold.

At Gosselin, the drilling completed since the maiden resources has been extremely effective with an updated mineral resource estimate on a 100% basis of 4.4 million indicated gold ounces and 3 million inferred ounces. This represents an estimated increase of 1.1 million ounces in indicated and 1.3 million ounces in inferred, representing a 32% and 74% increase, respectively.

This expansion of the Gosselin resource was the result of the 35,000-meter drill program completed over the last 2 years. This year, we are planning an additional 35,000 meter targeting the central zone between the pit shells where we see indication of continuation of mineralization and hydrothermal breccia as well as some deeper holes to understand the continuity of mineralization below the current pit shells.

The updated resource at Gosselin is very exciting for the project. Gosselin is a very large-scale deposit sitting immediately adjacent to Côté that when combined together, have an estimated total measured and indicated mineral resources of 16.5 million ounces with an additional 4.2 million ounces of inferred, putting the project an exclusive company of large-scale Canadian assets.

The August 2022 life of mine plan model was built on mineable reserve of 230 million tonnes of material for just over 7 million ounces. However, when investors consider a combined global resource inventory of the Côté Gold project with its size and scope and for our mine that is effectively built, this is very compelling potential offer for our shareholders. As I've said before, Côté Gold today is a project, but we believe strongly that this is the start of a mining camp and that it will provide strong foundations for IAMGOLD for many years to come.

With that, I would like to pass the call back to the operator for the Q&A.

[Operator]

[Operator Instructions] The first question comes from Wayne Lam with RBC.

[Wayne Lam, analyst]

Just curious, at Côté, the cost guidance implies about $100 million towards sustaining CapEx and capitalized stripping. And there seems to be a bit more spend post first gold budget versus the '22 mine plan. Just wondering how much of the $145 million CapEx has been earmarked for sustaining versus nonsustaining. And then is there a potential for upward revision to AISC guidance if a greater proportion of that falls under the sustaining portion?

[Marthinus Theunissen, executive]

So with the accounting guidelines changing, where we have to report our revenue and cost of sales from first gold and then you've got the impact of costs being inefficient during the ramp-up period up to commercial production, that creates that additional $40 million that we have in there. But what it also does is it's difficult for us to have the exact measurements of what is construction capital or long-term capital and sustaining capital until we actually know these achievements.

So we cannot really give accurate estimates of sustaining capital. The $145 million that we've included in the capital guidance is roughly in line with what we had in the technical report and then similar with the sustaining capital. And those one costs, we expect to decrease as well over the life of mine. So if you take out the construction capital, the accounting -- the capital is in line with the technical report.

[Wayne Lam, analyst]

Okay. Great. And then maybe at Westwood, can you talk about some of the rehabilitation and geotech work done underground that give you greater confidence in ramping up the output rates there? And then just what proportion is budgeted from the main underground this year versus some of the satellite feed?

[Renaud Adams, executive]

With regards to Westwood, the stability of the mine has a lot to do with the change of the mining method sequencing. There's no doubt. It is not that it has eliminated seismic activities, but it has reduced it to the point of the energy is so low that it does not disturb.

We still have, obviously -- this is a systemic area like for mining. But the change and how we address the mining, the matter, the sequencing has reduced the energy to a very, very low level. So this is the main key aspect. Of course, depending on the area, we have adapted very specific approach to ground support and monitoring and so forth.

So this is like I would call more like a global recipe than just like one actions in particular. But after like what, nearly 2 years now, without any event and the monitoring of the activities, and we continue to see very low energy depleted as a result of seismic, we believe that the recipe is successful and will work. So that's what I can say about that.

With regards to the mine plans per se, we'd like to say that we'd like to achieve probably in the range of 900 to 1,000 tonnes a day from the underground as part of the plan for the year.

[Wayne Lam, analyst]

Okay. Great. That's good color, and good to see the ramp-up there. Maybe just last one for me. At Essakane, can you just comment on the security situation in the region and the ongoing management of getting fuel and supplies to site?

[Renaud Adams, executive]

I'd like to say that, as we mentioned in our remarks, is we've seen quite stable for us. Of course, we're not pretending that the security has changed the point in Burkina Faso, it's a continued monitoring. But when it comes to the mine, when it comes to our activities, when it comes to conveying our supplies to site, we've put in place very, very strong security protocols.

As we've mentioned before, we do not use ground transportation for labors and workforce. We actually -- that's part of the higher cost, of course, when we refer to transportation costs for labor. So we fly people around. We use shoppers around there. So I think like we say, everything is about safety and about keeping our people.

So it has proven to be working for us so far. But as of the country per se, we're well aware of that. Unfortunately, some situations continue sometimes and military activities. But in our case, we've been now pretty much the whole year proving that our protocols in place works well, and we keep everyone safe.

[Operator]

The next question is from Anita Soni with CIBC World Markets.

[Anita Soni, analyst]

So a few questions. Just on Westwood. I think you said that the reserves, excluding the grand -- the open pit reserves are -- so the underground stuff is about 10 grams per tonne of material. So if I'm modeling like the additions, life of mine and extending that, would I be using 10 grams ore feed? Or is there a dilution that I should be thinking of?

[Renaud Adams, executive]

Well, I mean, like if our -- the updated 43-101 will be based, of course, on the updated mineral reserve and resource was as such, 1.1 million ounce of underground material leveraging about 10.5 grams a tonne. Now you need to get to the ramp-up situations to leverage those. We're not pretending that this year we'll be necessarily at 10.6 grams a tonne because we're still working and positioning ourselves in all those zones. But as we advance in time, it's fair to say that the underground mine should be performing at the reserve level.

[Anita Soni, analyst]

Yes. I don't have it ramping up until about 2020...

[Renaud Adams, executive]

Yes. So like I mentioned, like 900 to 11 -- to 1,000 tonnes a day. We see the mine down the road capable of probably to be more like 1,000 to 1,200 tonnes a day. We've achieved 7.99 grams a tonne. So we are systematically moving up from the '21 to '23. We're now averaging almost 8 grams a tonne, and we continue to improve from the 6 or so we were at the start of the year. So I'm very comfortable to say that as we advance in '24, should everything works well, we should start seeing those level of grade towards the end of the year.

[Anita Soni, analyst]

Okay. And then secondly, on Essakane. I just want to -- can you remind me what nameplate capacity is? I modeled the technical report you guys delivered in mid-December, but the press release says that we were operating at nameplate. I just wanted to make sure that's still what's in the technical report.

[Renaud Adams, executive]

Yes. So on an average basis, Essakane is capable to operate in the range of the 35,000 to 36,000 tonnes a day.

[Anita Soni, analyst]

Okay. And then just moving to Côté, I just want to get an understanding of the cost. So I guess there was $50 million of cost that you said you would capitalize over and above what you would consider the normal run rate. So any -- so anything above the 700 -- and I guess you said $700 to $800 per ounce on total cash cost. So any -- like you've determined that that's the normalized sort of cost structure this first year. Anything above that is what's going to get capitalized in the $50 million? Is that the case?

[Marthinus Theunissen, executive]

So that $40 million is that abnormal cost portion. So yes, it is -- and we look at it on a per tonne basis. But the guidance range that we gave for cash cost is what we expect at the end of the year, that's not our average for the year. So at the beginning of the year, even after we've taken out those capitalized inefficient costs, it will still be a little bit higher than that.

[Renaud Adams, executive]

What I can add...

[Anita Soni, analyst]

Okay, so -- sorry, go ahead.

[Renaud Adams, executive]

So what I can add to this, Anita, is -- one thing that I'm very, very pleased is, as Maarten mentioned earlier, with the sustaining capital around the 400 -- $145 million, very much aligned with the 43-101. We have capital ways -- capitalized weights about $50 million, yes, that's compared maybe with the $30 million, but as you ramp up, your costs are higher.

But as we exit the year, being now at a sustaining capital level closer to 43-101, we're very pleased with that. So it's up to us now like to put those extra calls behind, complete the construction, everything that is kind of extra capital, put this behind us and exit the year strong within capital aligned, with the 43-101 or nearby. And it's all about, of course, getting our operating unit costs in line as we ramp up the mill in the mine, so we'll be in very good shape as we enter '25.

[Anita Soni, analyst]

Okay. And then a couple of other things in terms of the -- at one point, I thought like there were leases that were coming through. Is that now encapsulated in all of the CapEx guidance? Or are we still thinking about, I think, the $120 million to $140 million of leases starting in this year?

[Marthinus Theunissen, executive]

So for leases, the amount that we refer in capital, that is on an incurred basis, and it excludes funding. Our lease program of USD 125 million at Côté concluded or will conclude shortly. So we don't have any estimates or assumptions in our 2024 plan for leases.

[Anita Soni, analyst]

Okay. So that means you're not incurring leases, though, in 2024 either?

[Marthinus Theunissen, executive]

In the plan, we are not showing that we are incurring additional leases in 2024.

[Anita Soni, analyst]

All right. And then the working capital, like is there something we should be thinking about in terms of working capital? Or is that encapsulated in the capitalization of some of these costs? Just sort of the typical stuff where it takes a while for the circuits to become facturated, and then you get that back at the end of the life. But is there something that we would be thinking about there?

[Marthinus Theunissen, executive]

In our funding estimate...

[Anita Soni, analyst]

Buildup of -- sorry, consumables and things like that.

[Marthinus Theunissen, executive]

So we have been purchasing consumables during 2023, and we've placed a lot of those orders and those are there so that we can operate. So in our $2.965 billion estimate, that included buying first gold and then a lot of these consumables and spare parts.

And when we look at the $142 million, which is our 60.3% that we need to fund, that covers the project expenditures up to first gold and then also the paydown of the accounts payable, so that working capital component. And then as I mentioned, we bought -- purchased inventory in there. And there's a small lease component in there as well.

So that's kind of -- that's the number that we need to fund from liquidity with our assumptions of building up inventory and paying down IP because our accounts payable balance will, of course, be a lot lower once we're in operation compared to when we were building the project.

[Anita Soni, analyst]

Okay. And then my final question pertains to the 200 to 290 (sic) [ 220,000 ounces to 290,000 ounces ] production guidance. Can you give us the parameters around which you're sort of -- like the ranges of -- we expect recovery rates to be X to X, we expect the grade that we're going to feed to be X to X and we expect the tonnage over the course of the year to be X. Like that's the -- just how do you come up with those so that we can keep track of it as the year evolves and we're not offside on either way on the 220 or the 290?

[Renaud Adams, executive]

Again, I can sure help you out a little bit here to put some clarifications around it. So first of all, in terms of grade, we have about over 5 million tonnes on stockpile from which about 1 million tonnes at the 2 grams. So that's what we call -- so as you know, we're segregating -- so we're separating the lower grade. And within the direct feed, there's segregations of 1 million tons of the 2 grams.

So we are seeing this working well. We're seeing the great reconciliation, working very well in the high-grade zones. So 1.5 grams is on achieved mill, for 2024 appears to be in the neighborhood as well is achievable. So getting to the ramp-up schedule as we're planning, that could bring you towards around the 6.5 million tonnes mill recovery.

We don't see any reason why we'll not be aligned with the 43-101 at about 91% to 92%. So that would bring like the top end, right? So around the $6.5 million 92%. Everything below that could be more a factor of tonnes, the timing of ramping up. I think the grade will feel strong, I think the recovery -- but everything else below that, Anita, would be a matter of time.

[Anita Soni, analyst]

Okay. And so you're very confident on the recovery. So we're not going to see you guys feed low grade until the recovery gets up. Like that's one of the factors that sometimes in the first quarter, people do a little bit less on grade because they don't want to waste it. So...

[Renaud Adams, executive]

We don't intend to stay very much in the low grade once we achieve the first gold, and we intend to ramp up -- would not, we do not foresee any issues with the recovery. And if we satisfy what we see at a very early stage, we intend to ramp up the grade as soon as possible.

[Operator]

The next question is from Lawson Winder with Bank of America Merrill Lynch.

[Lawson Winder, analyst]

Great. Could I ask about your overall inflation assumption for the 2 operating assets in 2024 versus 2023? So that's the cost inflation, I should specify. So between Westwood -- sort of an average between Westwood and Essakane.

[Marthinus Theunissen, executive]

If we look at inflation for those 2 mines, energy remains a big impact for both of them. Our assumption is about $85 per barrel that we used in our guidance cost ranges -- well, of course, impacts -- other impacts like commodity linked -- or oil-linked commodities such as steel, but we are seeing those costs kind of coming down.

In Burkina Faso, there is a levy on oil as well as higher transportation costs. We expect those to remain. So overall, on a per tonne basis for Essakane, we actually see costs to be roughly flat with the ins and outs of the different things in inflation because there is certain items that we see are coming down from that perspective.

And similarly, at Westwood, if we look at the contracts that we entered into for '24, there are certain items where we see increases, but then -- but similar offsetting increases. So we don't expect to see a big increase in cost from what we saw at the back end of '23 going into '24 from an inflation perspective.

[Renaud Adams, executive]

Yes. And if I can -- if I may add something. If you look at Essakane in the last 6 months, right, we've seen the beautiful of how it is when you're steady, when you have no disruptions, achieving, as we said, below the $1,600 towards [ $1,550 ]. And we've seen as well like pressure on cost towards $1,800 when we feel sometimes disruption.

So should we have like a year of steady good productions and no issues with the reconciliations and no disruptions, could we rather achieve towards like the lower end of the cost, top hand of the productions. But we've seen that Essakane operates sometimes in tough environments. So I think this is how you should look at it. It's a bit of a balanced weight if you know our product experience over the last 6 months, I should say.

A bit the same with -- at Westwood. I mean we've been consistently improving. We've seen like Q4 achieving nearly $2,000 an ounce. We're going to continue to improve. We're going to continue to improve the grade and so forth. So this is how -- both mines have been like with the Westwood continuously improving, we feel strong that we overall can beat Q4 for the year. And Essakane is very depending on how stable we'll be. But should we be stable, I think we'll have a great year.

[Lawson Winder, analyst]

Okay. And then -- so overall, cost inflation in control for 2024 versus '23, what was actually realized in 2023 in terms of year-over-year cost inflation?

[Renaud Adams, executive]

I will give that to Maarten.

[Marthinus Theunissen, executive]

Lawson, we saw -- we did see a big impact, especially in Burkina Faso and -- but that was impacted by higher landed cost as well because of the cost of getting our convoys to site safely now. So I don't have a specific number for you right now to say what was the impact of inflation. But the cost in the second half of 2024 have those inflation impacts -- impacted, and you can see that compared to what we were doing in the first half of the year.

[Renaud Adams, executive]

I think one is the most obvious one, I guess, like when you look at the impact of fuel costs and Essakane, most mine will say their labor cost is the higher cost, Essakane is more like towards like the power and the user feel has a big impact. And over the last 2 years, we've seen as high as probably like doubling, double price on those.

So this was like -- this is from far the one that has impacted probably the most. And can we see some reductions down the road? We're not necessarily counting on it in the short term. But just to give you a bit of an idea of what fuel power has been the main contributor to that over the last 2 years.

[Lawson Winder, analyst]

Yes, that's really helpful. And then just one final question on cost, really pertaining to Burkina Faso. When does the new sort of higher royalty regime take effect? Was it the first of this year?

[Marthinus Theunissen, executive]

The new royalty regime is in effect, and that's included in our cost.

[Renaud Adams, executive]

And it entered into in the back end of last year in Q4, yes.

[Lawson Winder, analyst]

Great. And then one final question, I guess, on Westwood. At the current gold price of about $2,000 per ounce and with the significant improvements you've seen at that asset, do you anticipate generating positive free cash flow in 2024? And if not, what is kind of your benchmark that you think about internally that you need to get to before that asset is generating material positive free cash flow to the overall business?

[Marthinus Theunissen, executive]

So there isn't any significant expansion CapEx at Westwood. So the all-in sustaining cost range that we have in our guidance for Westwood is also an indication of free cash flow. So if we meet our cost guidance and the gold price is higher, it should be generating cash flow, and that's kind of how we manage that as well.

What we always also did is with those high cost ranges, we saw an opportunity to put in some gold hedges in Q1. So there's 60,000 ounces that we hedged, and it was 0 cost collars. And the puts on those are between $1,915, $1,975. So that's also how we're just making sure that with that higher cost profile at Westwood, that we can be breakeven or cash flow positive.

[Operator]

The next question is from Carey MacRury with Canaccord Genuity.

[Carey MacRury, analyst]

Maarten, could you just remind us what sort of minimum cash balance you'd like to keep through the ramp-up here like corporately?

[Marthinus Theunissen, executive]

So the minimum cash balance is actually driven by one of the covenants in our credit agreements. So we have to maintain $150 million of cash on the balance sheet, our cash and cash equivalents. Now because of the corporate structure, there's always the cash balance at Essakane. And there's actually also a cash balance that needs to be maintained at Côté. So the $150 million covers that. But -- so that's the amount that we need to maintain, and it works well with the cash out by those 2 entities.

[Carey MacRury, analyst]

Okay. Great. And then just on the mining side, you've got 5 million tonnes stockpiled. Is that stockpile going to grow ahead of ramp up? Or is it sort of constrained? And just more broadly, like how does the mining ramp-up look like through this year?

[Graeme Jennings, executive]

Carey, can you speak up? We can't hear you very well.

[Carey MacRury, analyst]

Sorry, I can hear me now? Better? Yes. So I was asking about the stockpile. You've got 5 million tonnes on the stockpile. Is that going to continue to grow over the next couple of quarters as the mill is ramping up? Or is that constrained at 5 million tonnes? And secondly, just broadly, like how does the mining ramp-up look in 2024?

[Renaud Adams, executive]

No, definitely, we see that -- well, there would be an in and out of course, as we ramp up the grid, I was telling Anita earlier. You will be using, of course, some of them. But yes, the mine plan considers, of course, to continue to do that segregation, continue to add high grade and super-high grade to the stockpile and managing the grade 2, roughly a range about 1.5 at the mill for the year, definitely.

The mine is ramping up quite well. We now have commissioned like towards like the 14 trucks. We've got the second shovel now in the pit. So in terms of mining capacity, we're there. If we achieve an overall 50 million tonnes mined for the years, that would allow us to properly produce the ore required and continue to segregate stockpile and feed the mill into proper head grade. So that's roughly what I can say.

[Operator]

Next question is from Tanya Jakusconek with Scotiabank.

[Tanya Jakusconek, analyst]

I'm going to move just to the accounting of all of this. I think -- thank you very much for all the detail on Côté. Maybe, Maarten, over to you just to walk us through how all of this is going to show up through the income statement and cash flow for the year. So maybe I'll start off with the first of the 220,000 to 290,000 ounces on a 100% basis, what is going to be commercial in that amount?

[Marthinus Theunissen, executive]

So after every ounce that will be produced will be reported as revenue. So the concept of commercial production doesn't...

[Tanya Jakusconek, analyst]

So from day one, everything will go through the revenue line? Okay.

[Marthinus Theunissen, executive]

Day 1, everything goes through the revenue line, and then you have to show the cost as well. So -- and that includes some stockpile accounting, where the mining cost comes off stockpile, so you have cost of sales in the beginning part of the year, of course, that cost of sales number would be elevated somewhat. But some of those cost lines up on the balance sheet. And so up to commercial production, the -- cost we will have revenue and the cost to produce that revenue will be split between cost of sales and that $40 million that we mentioned in our capital guidance. So we shouldn't double account that we are showing some of our operating cost in capital in our guidance number.

[Tanya Jakusconek, analyst]

Okay. So if we were to think of it from a high level, so operating costs plus that $40 million, which is on a 100% basis, that would come in through your cost of sales. And then the remaining amount of that capital will be under capital.

[Marthinus Theunissen, executive]

Yes.

[Tanya Jakusconek, analyst]

Okay. Perfect. Okay. So that's through the year. And any -- and the reserves that you reported, which you're reporting on a 100% basis, when you look at and put your 2023 attributable on the website, because the statement is not there yet, will we be looking at it on a 60%? Is that how you're going to report it on a 60% basis, all the attributable versus 70% in 2022?

[Marthinus Theunissen, executive]

So because of that option to repurchase our 9.7% interest, we'll be showing the assets and liabilities at 70% until the point where either we repurchase it or it expires. If it expires, things will go back to 60%. But I think to keep things simple, the balance sheet will be at 70% but revenue and cost of sales will be at 60%. In fact, real cash flows is at 60% as well. So to get it up to 70% is just an accounting adjustment.

[Tanya Jakusconek, analyst]

All right. So it would only go to that 60% should that option not be exercised is what you're saying.

[Marthinus Theunissen, executive]

Yes. On the balance sheet. But the way that we think about it is we fund 60%. And we -- so we have to pay for 60% of the cost -- of operating costs as well as capital and we get 60% of the gold.

[Tanya Jakusconek, analyst]

Yes. No, I understand. Okay. I was just wondering about the 70% and 60% for the reserves and other. Okay, that's fine. And then just lastly, Maarten, to confirm, there's another $84 million or that about coming through to you this year. Is that from some of the asset sales on top of the cash flow?

[Marthinus Theunissen, executive]

Yes, yes. There's the gross asset -- the proceeds from the remaining sales of the Bambouk transaction, we expect to get during the remainder of this year. There's two components of it. The first one we expect to be in Q1 and then the second one later this year.

[Tanya Jakusconek, analyst]

Do we know how much we're getting in Q1? It's just to make sure we're looking at the cash flows in and versus out, just want to get those right.

[Marthinus Theunissen, executive]

Yes. We expect that. It's a little bit commercially sensitive, but it's about half of the transaction.

[Operator]

The next question is from Don DeMarco with National Bank Financial.

[Don DeMarco, analyst]

Gentlemen, I think all my questions have been answered.

[Operator]

And we have a follow-up question from Anita Soni with CIBC World Markets.

[Anita Soni, analyst]

Just a question on that -- you touched on it with Carey's question, but the minimum $150 million liquidity as a covenant of the RCF, can you explain what that means? Like are you -- can you fully draw the entire RCF and drop to 0? And then also -- and then say you have $150 million left on that RCF, can you drop down to 0 and use that as cash?

[Marthinus Theunissen, executive]

Yes, we can. So our cash and cash equivalents, let's say we spend and we get down to $150 million. Then from there on, we can draw on the credit facility up to the full amount. So there's about $37 million, $38 million of letters of credit issued under it. So there's $387 million available. So of the $387 million, we can draw it fully. That $150 million doesn't impact it.

But let's say, we draw the full amount and then we have the cash on the balance sheet, we can't spend below $150 million. So we always have to maintain the cash balance of $150 million. There is other items impacting that as well, of course, other governance on the credit facility, but based on what we're seeing now, the facility is available.

[Anita Soni, analyst]

Okay. And then just to catch what Tanya said. So about $80 million coming from the Bambouk assets probably evenly split between Q1 and Q2 in terms of the receipt of that money?

[Marthinus Theunissen, executive]

Yes, approximately, yes, yes.

[Renaud Adams, executive]

We'd really like to close Guinea in Q1. This is what we're laser-focused on as we speak with our partner, Managem, on that. That would come first for sure. And then Mali would follow somewhere in 2024. So this is really our target. Should we sleep, we're good. I mean it's not -- but that's our focus now, to try to close Guinea in Q1.

[Anita Soni, analyst]

Okay. So you're still trying to close the deal in Q1, you said. And then you said -- and the other one on time in 2024? I'm not...

[Renaud Adams, executive]

Yes. Mali was -- correct. Mali would follow after. So -- that's why we mentioned '24. So it may take a little longer. But the priority right now, the first one is to close Guinea first.

[Anita Soni, analyst]

And that -- the one you're trying to close is the $80 million total. No?

[Renaud Adams, executive]

No, no. The Guinea itself represents about half of it not happen this year on a gross basis.

[Operator]

This concludes the question-and-answer session. I'd like to hand the conference back over to Graeme Jennings for any closing remarks.

[Graeme Jennings, executive]

Thank you very much, operator, and thanks for everyone for joining us this morning. If you have any further questions, please reach out to Renaud or myself. Thank you all. Be safe, and have a great day.

[Operator]

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