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IAMGOLD (NYSE:IAG)

Q4 2013 Earnings Call

February 20, 2014 8:30 am ET

Executives

Bob Tait - Vice President of Investor Relations

Stephen Joseph James Letwin - Chief Executive Officer, President and Director

Carol T. Banducci - Chief Financial Officer and Executive Vice President

P. Gordon Stothart - Chief Operating Officer and Executive Vice President

Craig Stephen MacDougall - Senior Vice President of Exploration

Analysts

Patrick T. Chidley - HSBC, Research Division

Josh Wolfson - Dundee Capital Markets Inc., Research Division

Dan Rollins - RBC Capital Markets, LLC, Research Division

David Haughton - BMO Capital Markets Canada

Operator

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the IAMGOLD 2013 Q4 and year end operating and financial results conference call and webcast. [Operator Instructions] At this time, I'll turn the conference over to Bob Tait, Vice President, Investor Relations for IAMGOLD. Please, go ahead, Mr. Tait.

Bob Tait

Thank you, and welcome to the IAMGOLD conference call. Last night, we issued a news release disclosing our 2013 full year and fourth quarter financial results, which along with the accompanying financial statements notes and MD&A can be found on our website.

We also released our 2013 resources and reserves or reserves and resources statement as well. Joining me on the conference 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, Senior Vice President and General Counsel.

Our remarks today will include forward-looking statements. I refer you to the cautionary language regarding forward-looking information in our disclosure documents and advise that the same cautionary language applies to our remarks during the call. During our opening remarks, we will refer to slides which can be found on our website.

And I'll now turn the call over to our President and CEO, Steve Letwin.

Stephen Joseph James Letwin

Thanks, Bob, and good morning, everybody. Many facets of our business are impacted by the price of gold, obviously, our financial results, operating performance, mine plans, reserves and resources, and the current value of our assets.

Early in 2013, we launched a game plan for managing our business in a deteriorating gold price environment. Our objective was to lower our cost structure and conserve cash. By the end of the year, gold prices were down 27%, yet our cash costs and all-in sustaining costs were within guidance. We had spent less capital than planned, and we had more than $1 billion in liquidity.

So let's take a look at the highlights for 2013. We reported adjusted net earnings per share of $0.05 for the fourth quarter, $0.36 for the year. Our attributable gold production was 195,000 ounces in the fourth quarter and 835,000 ounces for 2013. We exceeded our cost-reduction profit target by 25% with $125 million in savings. Cash costs of $801 an ounce. So within guidance for the year, and for the mines we own and operate, better than expected at $743 an ounce.

All-in sustaining costs were within guidance at $1,232 per ounce, and $1,174 per ounce for IAMGOLD owned and operated mines.

Niobec had an outstanding year with production of 13% from 2012 and operating margins up 20%.

On Slide 6, we take you through the highlights. Our new high-grade Westwood mines started pre-commercial production on time. Our combined production from Westwood and Mouska were on target for the year at 136,000 ounces.

The Essakane expansion was completed as planned at the end of December. We expect a ramp-up in the second half of the year for a year-over-year increase in production of about 25%.

At Rosebel, we paved the way forward with a lower power cost agreement for our current operations and future expansions. Our joint venture agreement with the government of Suriname sets the stage for future mining and processing of potentially higher-grade softer ore at a power rate that is even lower at $0.11 per kilowatt hour. This requires that we gain access to additional properties outside of the Rosebel concession. This is a pressing priority for me this year. And 2 weeks ago, I spent time with the President of Suriname, and we are aligned that this is just as important to his country as it is to us. So we have work to do, but, I am encouraged that we are moving in the right direction.

Performance-wise at Rosebel, the mine fell short on grade in the fourth quarter, and we missed our production guidance for the year. I'm going to ask Gord to talk about that during his section.

Our exploration teams have made remarkable progress in a number of fronts. Craig will give you an update on some of the developments in this area.

Capital spending of $669 million for the year was $20 million below guidance. We finished the year with more than $1 billion in cash, bullion and undrawn credit facilities, and we suspended the dividend that further conserved cash.

The net loss reported in the fourth quarter and for the full year reflected a noncash after-tax impairment of $773 million.

With the significant decline in the gold price, we lowered our gold price assumptions, used our most recent life-of-mine plans, this resulted in impairment charges across the carrying values of Essakane; Suriname, which includes Rosebel; and the Doyon division. Included in this amount is $257 million in goodwill writeoffs related to Suriname and Doyon.

While the lower valuations are necessary to reflect the gold price outlook, we believe these assets have the potential to generate small economic benefit over the long term than what the revised value ratio implies. Impairment charge, while lowering reported net earnings, has no impact on cash.

The focus on Slide 7 in our industry has shifted from production growth to mining for profitable ounces. As a low-grade producer, we have to be lean and we have to keep thinking of how we can become more efficient. Having completed the expansion at Essakane, we can now accelerate our efforts to address the high energy costs of this operation. Unlike Rosebel, Essakane is not connected to a power grid, so that's a priority, which, along with solar, we are actively evaluating. If we elect to go this route, we're looking at substantial cost savings.

On the capital spending side. With underground development at Westwood nearing completion and the Essakane expansion completed, we can slow down the pace of spending. These projects alone accounted for approximately 45% of our total capital spending last year. We are targeting capital spending of $400 million for 2014. That will be approximately 40% less than what it was last year, and this includes capitalized stripping at Rosebel and Essakane, which accounts for about 1/3 of the $215 million in sustaining capital.

As we continue to optimize our life-of-mine models under lower price scenarios, the disciplined allocation of resources becomes even more critical to optimizing the returns on our mining assets. For expansion projects not yet off the ground, the decision to move forward will depend on each project's ability to generate a sufficient return on capital along with having secured the necessary funding. Fortunately, we have the option of deferring projects or considering stage development, one of the scenarios we're assessing for Niobec. We made it clear that we will not be -- funding expansions at Niobec and Sadiola on our own, so this will affect timelines. At Rosebel, the full expansion has been deferred until 2015, '16. Our plan is to publish the feasibility study at a later date after incorporating material changes in the assumptions, such as prices, costs, grade, rock hardness that occur between now and the start of expansion.

For all the projects in the pipeline, including Côté, we will continue to evaluate the market conditions and limit our investment to preparing the groundwork necessary to move forward when the time is right.

With that, I'll turn it over to Carol Banducci, our Chief Financial Officer.

Carol T. Banducci

Thanks, Steve, and good morning, everyone. While our financial performance reflects the lower gold price environment, it also reflects the proactive steps we took to counter its effects. The achievement of the $125 million in cost reductions, the tight rein on capital spending and the conservative management of our balance sheet enabled us to end the year meeting cost guidance and with more than $1 billion in liquidity, including undrawn credit facilities.

Revenues for 2013 were $1.1 billion compared to $1.5 billion in the previous year. A 16% decline in our average realized gold price from 2012 accounted for approximately 60% of the variance. Total revenue excludes gold sales from the Westwood mine. This will be the case until the mine commences commercial production, which is planned in the third quarter of this year.

Last year, Westwood produced 73,000 ounces. The benefit from the sales are not included in revenue, but rather, netted against capital expenditures.

Gold sales from the commercial mines were 80,000 ounces lower in 2013, mainly due to lower production at Rosebel and Essakane, partially offset by higher production at Mouska due to stockpiling of ore in the previous year.

Adjusted net earnings were $19.7 million, or $0.05 per share, in the fourth quarter 2013 and $137 million, or $0.36 per share, for the full year.

The most significant adjustment -- adjusting item in the calculation of adjusted net earnings was the impairment of mining assets and goodwill recorded in the fourth quarter. The significant drop in the gold price -- with a significant drop in the gold price, we reduced the gold price assumptions used in the most recent life-of-mine plan.

The company used an estimated gold price of $1,250 per ounce for 2014 and $1,300 per ounce for 2015 and beyond. And for accounting purposes, this is based on observable market data, which includes the current stock price at the end of the year and industry analyst consensus at that time. This resulted in a $773 million after-tax impairment charge against the carrying amounts of our mining assets, including $257 million of goodwill writeoffs. The charges comprised of $291 million for Suriname, $335 million for Essakane and $147 million for the Doyon division.

Suriname and Doyon include goodwill writeoffs of $169 million and $88 million, respectively.

Other adjusting items were write-downs of assets at Sadiola, gains and losses on derivatives, interest expense on long-term debt, foreign exchange gains and losses, and the impairment of marketable securities and investment and associates. The $69 million impairment in 2013 included a $29 million decline in the value of marketable securities and a $40 million decline in the value of our equity investments in Galane Gold and INV Metals.

On an after-tax basis, these items, which are not indicative of normalized operations, reduced reported net earnings per share by $2.28 in the fourth quarter and by $2.57 for the year. Our adjusted effective tax rate for the year was in line with guidance at 38%.

Net cash from operating activities before changes in working capital was $55 million for the fourth quarter, or $0.15 a share, and $306 million, or $0.81 a share, for the full year 2013. The decline quarter-over-quarter and year-over-year resulted from lower revenues partially offset by lower exploration expenses and taxes paid.

Attributable gold production in the fourth quarter was 195,000 ounces and 835,000 ounces for the full year. Compared to 2012, production was higher due to the contribution from the Doyon division. The Westwood mine produced 73,000, pre-commercial ounces of gold, and the Mouska mine produced 63,000 ounces.

Production at Mouska was nominal in 2012 due to the stockpiling of ore while the mill was being refurbished.

Partially offsetting the higher production in the Doyon division was the lower production at Rosebel in the fourth quarter due to grade variations and pit sequencing, and production was also lower at Essakane in 2013, but expected. We guided and said that grades would be lower than life-of-mine average while we were processing lower-grade, softer stockpiles during the expansion period.

In the fourth quarter, attributable commercial production or total [ph] sales lagged commercial production by 2,000 ounces. This small variance was a net effect of timing differences at Rosebel, Essakane and Mouska.

On this slide, you can see that attributable commercial gold production for the year, excluding the noncommercial production from Westwood, was 762,000 ounces compared to gold sales of 740,000 ounces. Sales lagged production by 22,000 ounces due to the timing of shipments, mainly at Rosebel and Essakane, which accounted for 18,000 ounces.

As I mentioned earlier, until Westwood begins commercial production, which is planned for the third quarter this year, we will continue netting revenue and related costs from the sale of pre-commercial ounces against capital expenditures. Total cash costs of $801 per ounce for the year were at the lower end of our guidance range. Cost increases were mitigated by our cost-reduction initiative, including lower power rates at Rosebel and operating efficiency improvements across the mine site. All-in sustaining costs were also within guidance and reflected sustaining capital expenditures necessary to support increased hard rock at both Rosebel and Essakane.

For our owned and operated mines, total cash costs were better than guidance, and all-in sustaining costs were within guidance at $1,174 per ounce.

We also reported all-in sustaining costs after subtracting Niobec's operating margin net of its sustaining capital expenditures to recognize how our overall costs of production across the organization benefits from the cash flow generated by Niobec. For the full year, the benefit from Niobec was $79 an ounce, which reduced all-in sustaining costs to $1,153 per ounce.

The 16% decline in the average realized gold price in 2013 combined with a 12% increase in total cash costs accounted for the lower gold margin for the year of $598 an ounce.

Turning to Niobec, as Steve mentioned, we had a record year at Niobec with the fourth quarter production up 33% from the same period in 2012 and production for the full year up 13%. Higher grades, throughput and recoveries were behind the strong growth in production. The higher recoveries reflect the continuous improvement efforts of our metallurgical team and our operating team on the ground to optimize performance.

Higher production drove revenue up to $200 million in 2013. Topline growth combined with significant improvement in cost efficiencies resulted in a 20% increase in the operating margin year-over-year from $15 to $18 a kilogram.

Niobec continues to be a stable business with steady Niobium prices and sales volume.

This last slide shows our liquidity position of $1.1 billion at the end of December 2013. To conserve cash, we suspended the dividend in December. We continue to be conservative in the management of our balance sheet, and we look for further opportunities to reduce cost. We are targeting a 10% reduction in working capital this year, including monetizing certain noncash items, such as consumables inventory and supply.

So, to conclude, managing our balance sheet [indiscernible] liquidity has and always will be a key focus for the company.

And with that, I'll turn it over to Gord for a closer look at operations.

P. Gordon Stothart

Thanks, Carol. Yesterday evening, we released our 2013 year end reserves and resources estimate for our mine assets. So I'm going to talk about that first, starting with our gold price assumption.

We used a $1,400 per ounce gold price to calculate our year end reserves, which is the same as we used a year ago for most of our assets when prices were much higher and which we feel reflects a fair, long-term price projection for gold, notwithstanding the current volatility in prices. For Rosebel, last year, we had used a different gold price of $1,200 for the reserves, but this was done us we were in the midst of a feasibility study reviewing a number of distinct development scenarios for the operation, and we chose to carryforward the reserve model from 2011 at that point while we completed that work. For this year, we have brought the evaluation back in line with our practices at the rest of our managed assets.

The price sensitivity of the 2013 reserve calculation at our primary asset Essakane and Rosebel was low, with a $100 decline in the gold price assumption only resulting in a 2% drop in contained ounces within the current pit design because of the relatively flat nature of the grade tonnage relationship in the vicinity of cutoff rates.

We regularly review all the economic assumptions that we use to plan our business, and if we feel in future it's appropriate to change the gold price assumptions, we will do so.

Looking at Slide 19, this slide shows the year-over-year comparison of our reserves and resources. Please note that we quote our mineral resource estimate inclusive of mineral reserves. In total, after depletion, proven plus probable attributable mineral reserves are down 11%, or 1.2 million ounces of contained gold, from 2012 and stand at 10.1 million ounces.

Total attributable measured and indicated mineral resources increased by 4%, or 0.8 million ounces, at 23.4 million ounces of contained gold over the totals a year earlier. Inferred resources are up 3% or 0.2 million ounces.

At Rosebel, on an attributable basis, reserves are down 1.4 million ounces lower than a year ago after depletion due to higher cost assumptions associated with harder rock and a more conservative pit shell selection criteria to optimize stripping ratios, partially offset by a higher gold price assumption. The reserve average grade has increased marginally at Rosebel. The reserve reductions at Rosebel represent, for the most part, ounces passing back into the resource category due to economic assumptions as opposed to lost ounces.

Rosebel measured and indicated resources are down 0.3 million ounces, and inferred resources are up 0.1 million ounces year-over-year.

2013 represented a very successful year for the Essakane resource development drilling program, with attributable reserves increasing from 2012 by 0.8 million ounces after depletion or 25%. Importantly, the grade of the reserve at Essakane has improved from 1.0 grams per tonne to 1.1 grams per tonne. Essakane measured and indicated reserves -- resources, excuse me, have increased by 14%, or 0.6 million ounces, year-on-year, while inferred ounces have remained flat.

Westwood has increased reserves by 0.2 million ounces of contained gold to a total of slightly over 0.5 million ounces. Measured and indicated resources at Westwood were flat year-over-year, and the improved resource estimate increased by 0.3 million ounces compared to the end of 2012 with additional areas being brought in the mill inventory through drilling.

Sadiola reserves decreased by 0.7 million attributable ounces year-over-year due to depletion and a lower gold price assumption. Measured and indicated resources at Sadiola are down 0.5 million ounces, and inferred resources are down 0.2 million ounces on an attributable basis, also due to depletion and lower gold price assumptions.

The new resource total for IAMGOLD includes the addition of a new resource at Boto in Senegal of 1.1 million ounces. In 2013, about 15 kilometers of underground diamond drilling was completed in support of the expansion program at Niobec. At year end 2013, the niobium probable mineral reserves were 1.7 billion kilograms of contained Nb2O5, and the measured and indicated resources increased from 2.56 billion to 2.65 billion kilograms based on the block caving scenario.

Turning now to a review of our operations. The success we have with our cost-reduction program reflects a concerted effort to do what is necessary and right for this company. We all played a part, and when I visit the sites, there are a lots of productive, broad-based conversations about what can be done to operate more efficiently. Safety clearly comes first at this company, and we would never take steps that would jeopardize safety. And at the same time, our people are experienced and pragmatic. They've been through these cycles before and are committed to make the operation successful in any economic environment.

On the operations side, we had targeted reductions of $54 million for 2013, including site G&A. By the end of 2013, we had actually achieved savings of $75 million. We don't consider efforts to improve productivity and operating efficiency as special initiatives, rather, we view them as normal operating practices, and all of our sites are working towards achieving their continuous improvement objectives for this year and beyond.

To give you an idea where there is still room to cut costs, we are working on negotiating better terms for suppliers and identifying opportunities to reduce the consumption of reagents, including the reliability of pebble crushers and streamlining our mobile maintenance programs.

We will do a lot more benchmarking. We want every one of our sites to be operating under an optimum cost structure, and this goal is front and center as we continue to optimize our life-of-mine plans under a range of metal price scenarios.

Now I'll walk you through each of our operations. Looking at Rosebel. Rosebel produced 336,000 attributable ounces in 2013. But production dropped in the fourth quarter due mainly to grade variations between the mine grade control model and the metal model [ph] balance and the pit sequencing. Historically, due to the nature of the deposits, Rosebel experiences fluctuations in grade reconciliations, sometimes positive and sometimes negative. The variation in the fourth quarter was atypical, particularly with respect to the duration of the negative reconciliation cycle.

In the past, we had the option of pushing more soft rock through the mill to offset grade variations, but with the transition of hard rock, this option is less available to us now.

There are a number of factors that can cause variations in grade, including the diversity of the deposits as we mine multiple ore bodies. We have been reviewing all steps in the great estimation process and have enacted a number of actions to improve accuracy at both Rosebel and Essakane. While variation will continue, the goal of these actions is to reduce the amplitude of grade variations in the future.

Total cash costs at Rosebel were $674 an ounce in the fourth quarter, continuing their downward trend from the second quarter. The improving trends reflects reduced power rate and increased operating efficiency. For larger trucks and better fuel -- excuse me, through larger trucks and better fuel management, we've mitigated the higher costs of mining deeper in the pits and hauling the ore over long distances. Our focus on equipment availability and operational productivity for the main production fleets of drills, excavators and trucks is yielding results and remains an opportunity for future gains.

Stabilization of the mill feed and full operation of the new gravity circuits installed during 2012 contributed to lower reagent costs. Given the increased demand on crushing and grinding inputs due to the harder ore, paying $0.16 a kilowatt hour compared to $0.21 a year ago has significantly improved the cost profile at Rosebel. Accordingly, we are very pleased that we are able to reach an agreement with the government, and we'll realize the importance of these savings even more with lowered ore grades and higher stripping ratios.

Our next focus is to step up efforts to bring more soft rock into the mix. As Steve said, his recent discussion with the President of Suriname confirms that the government is highly supportive of the need to accelerate the process to acquire additional ore bodies as part of our joint venture agreement.

Now turning to Essakane. The Essakane expansion, which we completed at the end of 2013 as planned, is an example of our strategy for optimizing returns on our existing assets. The expansion was critical to accommodating an increasing proportion of hard rock. With full commissioning of the new processing line targeted for the end of the first quarter, we will be feeding a much higher proportion of the higher grade hard rock through the mill. By the second half of the year, we should see an increase in grades as the current production phase of the pit gains access to the heart of the deposit. With the production ramp-up in the second half, we expect total ounces in 2014 to be approximately 25% higher than 2013 production. Our guidance for 2014 is between 315,000 to 330,000 ounces. In 2013, Essakane produced 250,000 attributable ounces, lower than in 2012 due to grades that were 10% to 15% below the life-of-mine average as expected. The plan for 2013 was to process lower-grade saprolite ore, which had been stockpiled during the pre-stripping of the main pit.

Lower grades, together with higher costs of energy and reagents, drove cash costs higher in 2013. This year, we expect that higher throughput and grades in the second half of the year will help mitigate the cost impact of the higher energy consumption required to treat harder ore.

Having completed the expansion, our next priority of this operation is to reduce power costs. We believe the most viable option is to connect to the Burkina's national power grid, which we expect could reduce power cost by 40%.

As with Rosebel, we continue to pursue cost-reduction initiatives at the site with a focus on increasing mine productivity and mobile equipment availability.

In the Doyon division, we reached another critical milestone in 2013 with the beginning of pre-commercial production at our Westwood mine. While not expected to be in commercial production until the third quarter of this year, the mine still accounted for more than 50% of the entire gold poured by the Doyon division last year.

Westwood is a unique asset for the future of our portfolio, given that it has an average resource grade of more than 10 grams of gold per tonne. As we know, ore bodies with gold grades this rich are becoming harder and harder to find. As we previously stated, the new mine plan currently under review will include a higher proportion of ore to be mined by the less-expensive open stoping technique with cut-and-fill mining still planed for some zones accounting for about 30% of the total mining.

On our third quarter conference call, we talked about how we were reassessing the ramp-up in light of earlier incidents last year that required some design modifications. The rehabilitation work to restore the underground infrastructure is on schedule and access to the affected sublevels has reopened.

Our main focus in the first half of this year is on underground development and productivity improvements in preparation for ore production in the second half.

With Mouska preparing for closure at the end of the first quarter, production from the Mouska mine will be minimum. In light of this, the second half of the year will see a significant ramp-up in gold production compared to the first half with about 80% of the year's total production from the Doyon division occurring in the second half.

Production for the Westwood and Mouska mines combined in 2014 is expected to range between 100,000 and 120,000 ounces.

Looking at Sadiola. We produced 86,000 attributable ounces in 2013. The lower production last year was due to lower grades. The rebound in the fourth quarter production compared to the previous quarter was a result of a 9% increase in mill throughput.

In the third quarter, access to deeper sections of the existing pits was impeded by the rainy season.

In 2014, a minority of the employees at the company's joint venture, Sadiola and Yatela mines in Mali, held a 5-day work stoppage over the issue of redundancy pay packages. The reductions in staffing have resulted from the end of active mining at Yatela as announced on -- in December 2013 and a downsizing of operations at Sadiola to focus on the extraction of higher-grade oxide ore. There was no material interruption of gold production at either mine as a result of this strike.

With respect to the expansion project to mine the sulphides in the Sadiola main pit, we continue to assess our options. The only expansion capital we are putting in the operation at this time is to satisfy prior commitments, sustaining capital and capitalized stripping.

Looking at Niobec. As mentioned by both Steve and Carol, Niobec had an outstanding the year last year with 3 consecutive quarters of production growth. The operation finished the year with annual production of 5.3 million kilograms, up 13% from 2012 and well above guidance. Strong growth in production was due to improving recoveries and a 7% increase in throughput, resulting from work done to optimize mill performance.

Our continued focus on improving underground development productivity and processing efficiencies drove operating margins up 20% from 2012. As you can see on the slide, margins have continued to improve consistently over the past year.

The production outlook for 2014 is between 4.7 million and 5.1 million kilograms of niobium at an operating margin of $15 to $17 per kilogram. The operation continues to be in a transitional stage as we determine the optimum expansion scenario going forward, including evaluating a phased development approach. Capital spending this year is for some mine development, permitting and development studies related to the potential expansion. The final decision for the future plan at Niobec will be driven by expected economic returns. The studies necessary to make that decision are to be completed this year.

Craig MacDougall will now give you an update on exploration.

Craig Stephen MacDougall

Thanks, Gord. The hard work and dedication of our exploration teams in 2013 resulted in some solid achievements. And it is most rewarding that this was accomplished during a period when we had to scale back our exploration program to reduce cost.

Total exploration expenditures, including project studies amounted to $94 million in 2013; 3/4 of our spending was on greenfield and brownfield exploration with the main focus on resource development near existing mines and advanced greenfield projects in Senegal and Brazil. The balance was spent on project studies dominated by the scoping of prefeasibility studies at Côté Gold.

Our outlook for exploration spending and project studies in 2014 is approximately $88 million, down slightly from 2013. This reflects our belief that strong and sustained support of exploration is necessary to create value, while at the same time, balancing our efforts to control and reduce costs across the company.

Building on the momentum established during the 2013 program, we will increase our focus on the discovery of new ounces. In 2014, we plan to spend $38 million on greenfield exploration, ranging from projects where we have earn-in options to those more advanced and wholly owned by us.

With resource development and near mine exploration at Essakane, Rosebel, Westwood and Niobec, we are targeting about $30 million this year. I'll touch briefly on some of the work we're doing at Essakane and Rosebel.

South of the main pit at Essakane, we are evaluating results of follow-up drilling campaigns at the Sokadie and Tassiri prospects. And we have commenced an exploration drilling campaign of 2 priority oxide targets identified from our 2013 aircore drill program.

At Rosebel, resource development work and regional exploration continues with a focus on outlining additional resources of transitional and soft rock to support the ongoing operations.

Now [ph] assessing drilling results over several priority targets on the mining concession. Moving to greenfields, last year, we announced a maiden resource estimate for our wholly owned Boto Gold project in Eastern Senegal. The estimate outlined a 1.1 million ounce indicated resource, averaging 1.62 grams per tonne of gold with potential to further expand the current resource.

Following the completion of our 13,000-meter drill program in 2013, we are continuing a step-up program in 2014 to further expand the resource base, and we anticipate moving forward with the commissioning of a scoping study this year.

The Pitangui Project in the state of Minas Gerais in Brazil, we completed more than 14,000 meters of drilling at the Sâo Sabastiâo project, where a continuous zone of gold mineralization has been outlined for a 1,400-meter strike length. Results of preliminary metallurgical test work have been encouraging, and an initial mineral resource estimate is nearing completion. This will be used to help target further drilling with the objective of continuing to expand the resource inventory.

Although a difficult economic climate faced by our industry has required us to cut back spending on exploration, it has also created opportunities. We've entered into several new option agreements with exploration companies that have promising projects with drill-ready targets, such as TomaGold's Monster Lake project in Québec and Solvista's Caramanta Project in Colombia. Our exploration team has done great work to identify and continue to build a pipeline of growth opportunities, and I'm confident that 2014 will continue to yield positive results.

I'll now turn you back to Steve to wrap up.

Stephen Joseph James Letwin

Thank you, Craig, Carol and Gord. We hope you found our remarks to be helpful. The priorities we introduced last year were necessary to get us through a tough environment and our people executed on them exceptionally well. Our priorities for 2014 will be the same. We believe that gold prices will eventually turn. But obviously, we -- and we recently broke through $1,300, which I think was a pleasant surprise for everybody. We can't count on the gold price solving our cost issues. The reality is that the fundamentals driving demand and supply in our industry have become much more complex, and the markets are very volatile. So the best way for us to create future value for our shareholders is to remain focused on what we need to do to optimize economic returns. That requires rigid control over costs, capital discipline and the preservation of liquidity regardless of where the gold price is headed. And now, let's open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Patrick Chidley of HSBC.

Patrick T. Chidley - HSBC, Research Division

Just a question on the Sadiola, on the future of Sadiola. There is a significant reserve store here, but I just wanted to find out how much of that reserve is in the sulphide project, if at all? And what is the mine life if gold stays less than $1,300 an ounce. Is it -- it's got a fairly short mine life, isn't it?

P. Gordon Stothart

None of the reserve is with respect to the sulphide pit. It is in the resources. I need to confirm that. Reserve lies at 2013 are under $1,300 gold is shorter than obviously with the expansion. If we don't do the expansion, which is justified even at $1,300 gold, but if we don't do it, we will be looking to wind down the mining operations later this year. We would continue to run stockpiles and a little bit of ore mining over the next 3 to 4 years.

Patrick T. Chidley - HSBC, Research Division

Okay, because you got 3.5 million ounces of reserves there, so...

P. Gordon Stothart

Excuse me, that does include the expansion.

Patrick T. Chidley - HSBC, Research Division

So, the decision there on, I mean, you said in the release, you wouldn't do the expansion without a partner. Does that mean without AngloGold's coming in on it?

Stephen Joseph James Letwin

I would say that we obviously from a capital standpoint, we're not going to take on the entire capital commitment for Sadiola. Our preference would be that Anglo steps up and in some form contributes to the expansion at Sadiola. We're believers in that project. We think it is very attractive. Anglo's got it's own views on Mali and their own priorities. We're going to have to, obviously, come to some kind of decision this year. The government of Mali is going to be, I presume, putting pressure on Anglo to move ahead. That's been a key contributor to the Malian budget over the years, well over $100 million in taxes and royalties on an average yearly basis over the last 5 years. So it's a big contributor. Whether or not Anglo is successful and either selling their share or potentially changing their mind somewhat and looking at doing some form of expansion, we'll have to wait and see. But clearly from our standpoint, it isn't something that we can carry on our own. It's -- given our cash position and our desire to conserve cash, it's got too much risk for us relative to the capital we have to deploy. That doesn't mean we're not believers in the project; we are. But we simply can't allocate that level of cash to this project at this time,, not at current gold prices, anyhow.

Patrick T. Chidley - HSBC, Research Division

And so really in conclusion [ph], mining operations will wind down later this year if gold doesn't improve. And then, even if you decide to go ahead with the expansion or the sulphide plan, that would take presumably 1 year, 18 months to actually get it done. [indiscernible]

Stephen Joseph James Letwin

That's right. That's exactly right.

Patrick T. Chidley - HSBC, Research Division

And just a quick question on strip ratios. I wonder if you could give us what your strip ratio would be at Essakane and Rosebel this year.

P. Gordon Stothart

I don't have the numbers handy. I do know that the strip ratio for Rosebel on the new reserve is somewhat less than it was, including capital stripping, I think, last year the last reserve we were in the 6 to 7 range. We're now in the 4 to 5 to 1 range. The Essakane, one, I don't have fresh in my head. I apologize.

Patrick T. Chidley - HSBC, Research Division

And just one final one. What was the grade supposed to be in the fourth quarter at Rosebel versus -- you mentioned you had too negative reconciliation.

P. Gordon Stothart

We had expected the grade to be in around 1.05, and I think in the end, we were around 0.85.

Operator

The next question is from Josh Wolfson of Dundee Capital Markets.

Josh Wolfson - Dundee Capital Markets Inc., Research Division

Just with regards to the Essakane reserve. Looking like some of the additions were significantly higher grade. Have you look into the ability to sequence that earlier in the mine life now or improve the grade profile in near-term years.

P. Gordon Stothart

Well, we are improving the grade in near-term years. And yes, we would have a big wish to try to include it. Unfortunately, a lot of the additional reserves are somewhat deeper in the north end of the pit. So they certainly do pop up from a reserve standpoint quite comfortably and actually relatively insensitive to the gold price assumption, however, they're a lot steeper and somewhat in the future.

Josh Wolfson - Dundee Capital Markets Inc., Research Division

Should we assume that the strip ratio goes up then relative to the prior expectations, life-of-mine.

P. Gordon Stothart

As I said before, I don't have the number fresh in my head. It does go up slightly, Josh, but it doesn't go up a lot. It's one of these -- there's a fairly good zone of ore that once you get it stripped off, once the pit chooses the mine, it contributes a fairly good tonnage of ore.

Josh Wolfson - Dundee Capital Markets Inc., Research Division

Okay. And I guess, if you were sort of comparing the deeper, higher-grade Essakane main pit ore with potential satellite [ph] oxide grades of, let's say, a gram or so, would the deeper ore be more profitable from an economic perspective?

P. Gordon Stothart

Given the time to strip it, I would expect that the shallower oxide stuff will be more profitable.

Josh Wolfson - Dundee Capital Markets Inc., Research Division

Okay and then just one other question, with regards to Westwood, are we still expecting a technical update or an updated 43-101 sometime in the first quarter, or first or second quarter.

P. Gordon Stothart

There won't be an updated 43-101. We have committed to, at some point this quarter, produce an updated technical assessment.

Josh Wolfson - Dundee Capital Markets Inc., Research Division

Would that be issued as a separate release?

P. Gordon Stothart

It will probably come out as a separate release. It will be probably early Q2. We're working on these life-of-mines right now.

Operator

The next question is from Dan Rollins of RBC Capital Markets.

Dan Rollins - RBC Capital Markets, LLC, Research Division

Just going back to Sadiola for a minute. Gord, could you confirm, of the current reserves, how much is the tonnage and how many of the contained ounces are actually in the mine plans before going ahead with the deeper sulphides.

P. Gordon Stothart

I don't have the numbers fresh in hand, Dan. I will dig them up and get them to you.

Dan Rollins - RBC Capital Markets, LLC, Research Division

And then moving on to Rosebel. You've got a new life-of-mine plan there. Just looking for a couple of things. One, will you be submitting a new 43-01 [ph] or releasing a 43-101 document on that, or will you?

P. Gordon Stothart

I don't think we will be in Rosebel, we will be on Essakane because of the difference. We're sort of reviewing where we are with respect to the assessment of whether a 43-101 is required at Rosebel. As Steve mentioned, we do have a feasibility study and part of the conundrum for us right now is -- are the economics going to be there for an expansion or not. We continually evaluate it. We push the expansion off for a year while we look at that. So I don't think you're going to see a new 43-101 for Rosebel, but we are just in the process of reviewing what 43-101s will come out.

Dan Rollins - RBC Capital Markets, LLC, Research Division

If we assume no expansion at Rosebel -- let's just go with that assumption -- the new mine plan, how long can you run at that 12 million to 13 million tonne level before the increase proportion of harder rocks starts to impact your throughput and sort of where would this thing -- where would your throughput end up getting down to?

Stephen Joseph James Letwin

It's Steve, Dan. That's a theoretical response, and let me tell you why. I spent a week down in Suriname about 10 days ago and met with the government. And one of the things that we're pushing pretty hard there is the extension of our current mineral agreement well beyond where we currently exist. So we're looking at acquiring concessions through the UJV that we formed that we believe will be much more attractive economically than we currently have in the mineral agreement. So we're looking at it -- we're looking at concessions that would have softer rock and potentially higher grade. And there are a number -- without extrapolating too much here and naming the concessions, which we hope to do within the next 1 or 2 weeks, it makes it very, very difficult to respond to where Rosebel was going to eventually go. What we're hoping, with the power agreement that we have employed, is that we're going to be able to assimilate and move in these concessions fairly rapidly. Craig has a team on the ground that should be able to drill it up over the next 1 or 2 years, which would have, in our view, potentially a very positive impact on the economics of Rosebel. If you just left the current mineral agreement, and we move to 80% hard rock over the next 3 or 4 years, that, obviously, isn't attractive for us, and moving ahead with the expansion is not in the cards. What could potentially happen is that if we're able to, again, acquire these concessions, we actually might be able to incorporate a lot more softer rock than we have originally planned and reduce the amount of capital we have to -- we thought we had to spend to process what we thought would be harder rocks. So there are a number of variables here, there are a number of scenarios that we're working on. Rosebel continues to perform. We had that hiccup in the fourth quarter, which surprised us. We have experts down there right now looking at how we can basically reduce the variation on that grade going forward. We are seeing positive results from that, but right now, Rosebel's a work in progress, and I can tell you the government is very, very keen on working with us, simply because it affects them just as much as it affects us. So news at 11, that's a long response, but I remain very, very confident and very encouraged that we're going to be able to bring some concessions into the current mineral agreement that are going to be very attractive for our shareholders.

Dan Rollins - RBC Capital Markets, LLC, Research Division

I understand the optionality you have there, but going forward to sort of demonstrate what the implied IRR is of an expansion, what type of dropoff could we actually see in production?

Stephen Joseph James Letwin

Gord can talk to that.

P. Gordon Stothart

Yes, I mean, assuming no additional soft rock sources, if we go to 85% -- 85%, 90% of hard rock with the current plant, production drops down to around 7 million, 7.5 million tonnes a year.

Operator

The next question is from David Haughton of BMO.

David Haughton - BMO Capital Markets Canada

Just going back to Gord on Essakane. I heard what you're saying about moving into the harder rock during the course of the year and potentially going up to at least the reserve grade of 1.1 grams. What kind of profile would we expect for that. Would you be getting into that better grade material in the first or second quarter, or is it more a second half story.

P. Gordon Stothart

It's much more of a second half story. What happens David, right now, we're still continuing to process some soft rock while we commission. Those soft piles will get exhausted as we move through the year. And in the current phase, we start, as I mentioned in my discussion, we start to access what I would call the heart of the deposit, the higher grade zones of the deposit in the third to fourth quarter. I mean, we are certainly getting some higher grade zones now, but to really have a material effect on the average grade going to the mill, it's going to -- it's slated to pop quite nicely in the second half of the year.

David Haughton - BMO Capital Markets Canada

So if we were to think about the split first half/second half on production, is it sort of like a 45/55 ounces output, or is it more pronounced than that?

P. Gordon Stothart

You probably -- not bad there. it's probably slightly more pronounced than that but not a lot more.

David Haughton - BMO Capital Markets Canada

Something like a 40/60.

P. Gordon Stothart

Yes.

David Haughton - BMO Capital Markets Canada

The next questions, if you don't mind, would be for Carol. I noticed in the commentary that you're expecting a 50% effective tax rate. Can you just explain the basis for that. I understand different jurisdictions, but can you just -- that's quite a lift from where we were this year.

Carol T. Banducci

Sure, I can do that David. So what happens in the various different jurisdictions is that we're provided limited tax deductions on some of the expenditures, and so what happens, just mathematically, when you have lower margins due to lower gold price, the impact that those amounts have on your effective tax rate is greater. So we're assuming $1,300 for this year, so the rate is around 50%. If we were looking at $1,400, because again your profitability would be that much higher, so these items that don't -- you have limited tax reductions for have less of an impact and so at $1,400, our tax rate would be closer to that 35%. So it's really that element that drives the effective tax rate.

David Haughton - BMO Capital Markets Canada

So, okay, highly sensitive then.

Carol T. Banducci

Right.

David Haughton - BMO Capital Markets Canada

Next question is your bullion on hand. You still got a sizeable amount there, $160 million, thereabouts. You've had it for quite some time. Can you envisage your circumstance where you would dispose of all or part of that?

Carol T. Banducci

Sure. I mean, what Steve has said previously was that we want to maintain the flexibility around our unutilized credit facilities, and so we do have the optionality if we believe it appropriate to sell the bullion before we dip into our credit facility. So again we treat it as cash. Our average cost is just over $700 an ounce, and so it's there as an investment, and we can liquidate it any time.

David Haughton - BMO Capital Markets Canada

All right. And if you were to make that sale, you'd sell it at spot but, you'd record the cost at the average historic carrying value, I believe?

Carol T. Banducci

That's right, we'd have a large gain.

David Haughton - BMO Capital Markets Canada

And last question, in one of your slides, a kind of waterfall chart, you showed the timing difference on sales of 18,000 ounces, thereabouts. Do you expect that to be caught up during the course of this year, or should we just think about it is a kind of an inventory level that remains about that...

Carol T. Banducci

I think for the most part it -- we should catch up, and as you know, we have got the expansion -- at Essakane, we've got a new line there, and so some of it will get caught up in inventory, but for the most part, we expect that to be realized in future sales.

Operator

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

Stephen Joseph James Letwin

Okay. Thank you. Quite simply, thank you, all, for calling in. If you have any follow-up questions, please, call me, Penelope [ph] or Laura, and we'll be available to answer your call. Thank you so much.

Operator

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

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