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IAMgold Corporation

$608 million bet on Cote Lake may be paying off for IAMgold

By Gregory Reynolds

One hurdle to the development of an open pit gold mine near Gogama has been jumped but there are several more facing owner IAMgold Corporation. On April 14, 2016 the Canadian Environmental Assessment Agency gave the green light to the project but IAMgold needs to obtain other federal permits.

Environment and Climate Change Minister Catherine McKenna in her approval announcement said the project “is unlikely to cause significant adverse environmental effects.” The minister established certain conditions that include mitigation measures and follow-up requirements that IAMgold must comply with during the life of the project.

Approvals and permits from the environment, fisheries, and natural resource departments are pending. The next move is up to the company as regards to the approvals and permitting stage. The project belongs 92.5% to IAMgold of Toronto and 7.5% to Treelawn Investment Corp.

In public speeches company officials put the estimated cost of the proposed mine at $1 billion before a $600 drop in the world price of gold occurred in 2015 led to a shutdown of the project. (However, the company never gave an official reason)

IAMgold is planning an open pit mine, operations estimated to have a throughput rate of approximately 60,000 tonnes per day, on-site mill, tailings management facility, four structures for diverting water and other infrastructure as necessary. The project would involve mining in an area beneath the lake.

Proven and probable reserves at Cote total 69.80 million tonnes grading 1.94 g/t Au and containing more than 4.35 million oz of gold. The project belongs 92.5% to IAMgold of Toronto and 7.5% to Treelawn Investment Corp., original owner of the property.

IAMGOLD acquired Trelawney Mining and Exploration Inc. in 2012 in a $608 million deal. Trelawney had carried out exploration activities at the project site since 2009 under a pact with Treelawn.

IAMgold informed the project’s employees in 2015 that “after much deliberation, it has taken the difficult decision to reduce staff at Côté Gold from 33 permanent employees to two, effective Aug. 20.

“The regional exploration team will remain staffed to support the economic study, and we will continued to have an environmental specialist on-site to ensure that all work needed for the Environmental Assessment and future regulatory requirements is maintained.” Steve Letwin, IAMgold President and CEO, commented “the second quarter 2016, that ended June 30 thrust us back into an earnings position and operating cash flow rose 125%. Positive support for a higher gold price continued in the quarter, with significant strengthening in June in anticipation of Brexit. Higher gold prices and lower cash costs drove margins up 36% from the previous year, as we continued our focus on cost reduction and productivity improvement.

Operating performance continues to be in line with our expectations.  With year-to-date production of 388,000 ounces and unit costs expected to be lower in the next two quarters, we remain confident in our guidance for the year.

Rosebel and Essakane are generating free cash flow and, despite our capital spending needs this year with the development work at Westwood and the secondary crusher at Rosebel, we expect positive consolidated free cash flow for the second half of the year if gold remains above $1,300 an ounce. The best opportunities for future growth will come from the assets we own today. We intend to move ahead with the Sadiola Sulphide Project by the end of the year conditional upon the timely decision by our partner to proceed.

Westwood, with an estimated mine life of at least 20 years, is expected to ramp up to full production in 2019. We have scalable expansion opportunities at our existing mines, and development projects which look increasingly attractive in a higher gold price environment.

Longer term, we’re paving the way for growth through exploration, with recent results at Boto and Monster Lake confirming high grades and expansion of mineralized zones, all very positive for sustaining future growth,” said Letwin.

Exploration activities have been ongoing in the area of Cote since the early 1900s by various companies and government agencies.

More concentrated mineral exploration efforts were conducted in the early 1940s and from the early 1970s to about 1990. Since its discovery in 2010, extensive diamond drilling activities have been undertaken to delineate the Côté Gold deposit.

The Côté Gold Project is located in the Chester and Neville Townships, District of Sudbury, in Northeastern Ontario. It is approximately 20 km southwest of Gogama  (roughly 5 km west of Highway 144), 130 km southwest of the City of Timmins, and 200 km northwest of Sudbury.

IAMgold has four operating gold mines on three continents. A solid base of strategic assets in North and South America and West Africa is complemented by development and exploration projects, and continued assessment of accretive acquisition opportunities.

IAMGOLD says it is in a strong financial position with extensive management and operational expertise.

The major Cote Project original components were expected to include: an open pit; an ore processing plant; a maintenance garage, fuel and lube facility, warehouse and administration complex; a construction and operations accommodations complex; an explosives manufacturing and storage facility (emulsion plant); various stockpiles (low-grade ore, overburden and mine rock (MRA); aggregate extraction with crushing and screening plants; a tailings management facility (TMF); on-site access roads and pipelines, power infrastructure and fuel storage facilities; potable and process water treatment facilities; domestic and industrial solid waste handling facilities (landfill); water management facilities and drainage works, including watercourse realignments; and a transmission line and related infrastructure.