IAMGOLD reports record first quarter net earnings operating cash flow up 177% year-over-year
IAMGOLD Corporation reported its unaudited consolidated financial and operating results for the first quarter ended March 31, 2011. Net earnings were $162.3 million ($0.41 per share), an increase of $102.1 million compared to the first quarter of 2010, and operating cash flow was $205.8 million ($0.55 per share1), representing an increase of 177% from the first quarter of 2010.
"Our strong first quarter results reflect our focused strategy to maximize the value of mines that we own and operate," said Steve Letwin, IAMGOLD's President and CEO. "Attributable gold production was up 41% year-over-year driven chiefly by the inclusion of Essakane along with higher recoveries at Rosebel. We continue to benefit from higher gold prices and are implementing various initiatives to reduce our cash costs."
Mr. Letwin further commented: "On our strategic agenda, we have also taken the first two steps to enhance shareholder value. The sale of our minority interests in Ghana for $667 million, as announced in April, is aligned with our overarching financial objective to invest in assets where we can maximize return on capital. The second step is to execute our recently announced plan to realize the value of Niobec and examine opportunities to monetize the value of the asset."
FIRST QUARTER2011 HIGHLIGHTS
- Revenues of $432.5 million were up 80% from $240.1 million in the first quarter of 2010.
- The attributable gold production of 290,000 ounces was up 41% from 206,000 ounces in the first quarter of 2010 mainly due to the commencement of production at Essakane in the third quarter of 2010.
- Record net earnings of $162.3 million ($0.41 per share) increased by 170% from $60.2 million ($0.15 per share) in the first quarter of 2010.
- Strong adjusted net earnings2 of $144.9 million ($0.36 per share2) increased by 163% from $55.0 million ($0.14 per share) in the first quarter of 2010.
- Strong operating cash flow of $205.8 million ($0.55 per share1) increased by 177% compared to $74.3 million ($0.20 per share) in the first quarter of 2010.
- Financial position strengthened with cash, cash equivalents and gold bullion (at market) of $621.4 million and availability under the credit facility of $350.0 million at March 31, 2011.
- Proceeds of $48.8 million received on the sale of the La Arena project resulting in a pre-tax gain of $10.5 million. In addition, as part of the option and earn-in agreement in June 2009, IAMGOLD received 8 million shares and 1.5 million warrants of Rio Alto Mining Limited for a total value of $1.4 million at inception. These shares and warrants had a market value of $21.2 million as at the end of March 2011.
- Raised gross proceeds of $43.3 million through a private placement of flow-through shares, with 1.7 million shares issued at a price of C$25.48 per share.
- On April 15th, IAMGOLD announced the agreement to sell its 18.9% interest in the Tarkwa and Damang gold mines in Ghana, West Africa to Gold Fields Limited for $667 million in cash. The deal is expected to close no later than July 31, 2011.
- On May 4, 2011, IAMGOLD announced the result of an independent technical report confirming the potential to increase measured and indicated resources at its niobium mine by 691% to 1.93 billion kilograms of contained niobium pentoxide with an after-tax net asset value in the range of $1.6 billion to $2.0 billion.
- IAMGOLD commenced reporting its unaudited consolidated financial statements for the first quarter of 2011 in accordance with International Financial Reporting Standards ("IFRS") with comparative information for 2010 restated under IFRS.
- On March 7, 2011, IAMGOLD signed a Memorandum of Understanding ("MOU") with the China National Gold Group Corporation ("China Gold"). This MOU confirms the mutual intention of IAMGOLD and China Gold to cooperate in the pursuit and development of mineral deposits in the regions of IAMGOLD's focus.
- REVIEW OF FIRST QUARTER 2011 RESULTS
Production and Cash Costs
Attributable gold production of 290,000 ounces at an average cash cost3 of $575 an ounce compared to 206,000 attributable ounces at an average cash cost of $524 per ounce in the first quarter of 2010.
Niobium production of 1.1 million kilograms in the first quarter of 2011, down from 1.2 million kilograms in the first quarter of 2010. Operating margin4 of $16 per kilogram compared to $19 per kilogram in the first quarter of 2010.
Revenues in the first quarter of 2011 reached $432.5 million, an 80% increase from $240.1 million in the first quarter of 2010, primarily due to the addition of production from the Essakane mine and higher gold prices. For IAMGOLD's operations and joint ventures, the number of ounces of gold sold increased by 57% while the average realized gold price rose by 26% compared to the first quarter of 2010.
In the first quarter of 2011, net earnings increased by 170% to $162.3 million ($0.41 per share), compared to $60.2 million ($0.15 per share) in the first quarter of 2010. Adjusted net earnings2 of $144.9 million ($0.36 per share2) increased by 163% compared to $55.0 million ($0.14 per share) in the first quarter of 2010. The impact of higher sales and gold prices was partially offset by increases in mining costs and income and mining taxes.
Operating cash flow in the first quarter of 2011 was $205.8 million ($0.55 per share1), an increase of 177% compared to $74.3 million ($0.20 per share1) in the first quarter of 2010. The increase is mainly due to increased sales partially offset by higher mining costs and income and mining taxes.
Cash, cash equivalents and gold bullion (at market value) increased to $621.4 million as at March 31, 2011, compared to $411.3 million at the end of 2010. The increase in cash and cash equivalents is mainly due to cash flow from operating activities, the issuance of flow-through shares and the proceeds received from the disposal of the La Arena project, partially offset by capital expenditures in mining assets and exploration and evaluation projects.
In the first quarter of 2011, the Company issued 1.7 million flow-through shares at a price of C$25.48 per share with gross proceeds of $43.3 million to fund prescribed resource expenditures on the Westwood project. On February 9, 2011, IAMGOLD received $48.8 million for the sale of its La Arena project.
As at March 31, 2011, $350.0 million of unused credit remained available under the Company's credit facility. In addition, the Company had $31.2 million available from the $50.0 million revolving facility for the issuance of letters of credit.
On April 15, 2011, IAMGOLD announced that it has reached an agreement to sell its 18.9% interest in the Tarkwa and Damang gold mines in Ghana, West Africa to Gold Fields Limited ("Gold Fields") for $667 million in cash. This transaction is subject to the approval of Gold Fields' shareholders and is expected to close no later than July 31, 2011. The Company expects to record an after-tax gain on this sale of approximately $400 million. Including the funds from the disposition of Tarkwa and Damang, IAMGOLD's projected liquidity position would be over $1.6 billion.
Development and Expansion Projects
Canada – Westwood Project
The Westwood project expenditures in the first quarter of 2011 totaled $27.5 million (before tax credit) with significant infrastructure preparation and construction, including the completion of a number of hoist elements, the fire detection system with the new pump house, final breakthrough of the six-metre diameter ventilation shaft completed and the installation of ground support infrastructure. Shaft sinking reaching 1,157 metres at the end of the first quarter of 2011, with the excavation of a spill pocket and the safety bulkhead, and underground development work including 2,106 metres of lateral and vertical excavation achieved.
Ecuador – Quimsacocha
The Company has obtained the requisite permits and authorization to advance feasibility work. The Company maintains regular contact and dialogue with senior government officials in order to obtain needed clarity on fiscal and other matters, including the analysis of the model mining contracts recently released by the Ecuadorian government.
Mali – Sadiola Sulphide Project
The feasibility study on the Sadiola sulphide initiative was completed in 2010 and progress continues towards a construction decision in 2011.
Suriname – Rosebel Mine
The Company is reviewing steps to expand the capacity at the Rosebel mine.
Burkina Faso – Essakane Feasibility Study to Expand the Mine
A feasibility study to expand the mine is currently in progress and is expected to be completed in the third quarter of 2011. The current mine plan includes processing soft rock for the first three years at a rate of 9.0 million tonnes per year starting in 2011, followed by approximately nine years of processing hard rock. The study is expected to demonstrate that the hard rock capacity of the mine could be expanded to process approximately 10.8 million tonnes per year, compared to the current estimate of 5.4 million tonnes per year. The expectation is for life-of-mine average annual gold production of between 450,000 and 470,000 ounces (on a 100% basis), compared to the current estimate of 315,000 ounces. Assuming a positive outcome of the study, construction could commence in the fourth quarter of 2011.
IAMGOLD's exploration efforts remain focused in West Africa, select countries of South America, and the province of Quebec in Canada. With a strategic mandate for organic growth, the Company has numerous projects already underway and continues to pursue additional advanced exploration joint venture or acquisition opportunities that will provide the foundation for future growth.
In the first quarter of 2011, IAMGOLD incurred $18.9 million on exploration projects, a 17% increase from $16.2 million in the first quarter of 2010. The 2011 expenditures included:
- near-mine exploration and resource development expenditures of $9.8 million including the initial stages of a planned resource expansion and delineation drilling program of more than 95,000 metres at Rosebel in Suriname for $2.3 million, a drill delineation program of more than 72,000 metres at Essakane in Burkina Faso for $1.3 million, and $2.6 million directed at an exploration and resource delineation drilling program of more than 82,000 metres at the Westwood development project in Quebec; and
- greenfield exploration of $9.1 million conducted at 16 projects, including two advanced exploration sites, in 8 countries in Africa and the Americas as part of IAMGOLD's long-term commitment to reserves replenishment and organic growth.
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