Q3 2012 Earnings Call
November 14, 2012 8:30 a.m. ET
Bob Tait - IR
Steve Letwin - President and CEO
Carol Banducci - EVP and CFO
Gord Stothart - EVP and COO
Craig MacDougall - SVP, Exploration
Jeff Snow - SVP and General Counsel
Paolo Lostritto - National Bank Financial
Donald MacLean - Paradigm Capital
David Haughton - BMO Nesbitt Burns Investment
Alex Kodatsky - CIBC World Markets
Anita Soni - Credit Suisse
Patrick Chidley - HSBC Global Research
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Thank you, operator. Welcome to IAMGOLD's third quarter conference call. On Tuesday, November 13, we announced our financial results for the third quarter of 2012 which, along with the accompanying financial statements, notes, and MD&A, can be found on our website at www.iamgold.com.
Joining me on the conference call today are Steve Letwin, president and CEO of IAMGOLD; Carol Banducci, executive vice president and CFO; Gord Stothart, executive vice president and chief operating officer; Craig MacDougall, senior vice president, exploration; and Jeff Snow, senior vice president and legal counsel.
Our remarks today will include forward-looking statements. I'll refer you to the cautionary language regarding forward-looking information and our disclosure documents, and advise you that the same language applies to our remarks during the call. We have prepared slides which can be viewed via our website and this call, as the operator said, is being recorded for playback purposes.
I'll now turn the call over to our president and CEO, Steve Letwin.
Good morning. The one thing our results tell us this morning is that moving a higher percentage of our gold portfolio to the owner-operator model was the right thing to do. As all of you have seen, the mines we own and operate account for about 85% of our production now. They’re performing well, and have reached three-quarters of the 2012 production target. Year to date cash costs were in line with our expectations at $627 an ounce, and we’re 46% lower than our joint venture operations.
Performance at the mines where we are not the owner-operator, for example Sadiola and Yatela, have been disappointing. As a result, consolidated production for the year is likely to be at the lower end of our guidance. Cash costs are expected to be within plus or minus 3% of the high end.
So I’m not happy about that. Not a lot right now we can do about it. We don’t operate these mines, as you know, and we continue to have discussions with our partner to see if we can improve the performance. And as most of you know, in a joint venture operation you operate with the information you’re given, and do the best you can to manage it from there.
Going forward, even at the mines we do own and operate, we will be moving into harder ore, and there will be challenges, but they will be within our control. And we have to manage the transition expeditiously and cost-effectively, and I feel very confident that we have the team in place, with the leadership of Gord Stothart, to do so.
At a consolidated level, adjusted earnings per share were $0.16, with the year over year decline due mainly to lower gold sales. We’re going to take a look at this going into the last quarter and make sure our gold pours are in line with our calendar. These gold sales were down due to lower production in gold produced late in the quarter that wasn’t sold until October. And the delayed shipments alone cost us about $0.04 a share.
On slide five, turning to some of the highlights, the highlight for us has been our acquisition of Cote Gold, and I think it’s a highlight for sure for our investors. It’s been a challenge to get people to brush aside some of the preconceived notions about Cote, and form opinions based on what we believe are very hard-earned facts. Our positive resource update and tour of the site helped to recast the project in a more positive light. I think we’ve opened a lot of eyes. We’ve got some more work to do. The prefeasibility study is underway, and we look forward to keeping you up to date on this promising project.
On Quimsacocha, we’re in the process of disposing of our interest in this project to INV Metals in the exchange for 221 million common shares of INV. But we will retain a 47% equity stake. With 1.7 million ounces of probable gold reserves, we look forward to participating in any upside potential once INV is able to advance this project.
Negotiations with the government of Suriname and Burkina Faso with respect to our expansion plans have been a little slow. However, we have been making some good progress of late. The agreement on terms related to to the expansion of Suriname provides for an attractive power price to support incremental production. With a signed agreement, we can advance the concept study so as to better understand the expansion potential of the satellite resources. We’re targeting no later than year end for the signing of that agreement, and right now all I can tell you is that we’re working extremely hard to make sure that happens.