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IAMGOLD Corporation (IAG)
Q2 2010 Earnings Call Transcript
August 11, 2010 11:00 am ET
Bob Tait – VP, IR
Peter Jones – Interim President and CEO
Carol Banducci – EVP and CFO
Gordon Stothart – EVP and COO
Larry Phillips – EVP, Corporate Affairs
Mike Donnelly – SVP, Exploration
Sabrina Grandchamps – HSBC
Don MacLean – Paradigm Capital
Haytham Hodaly – Salman Partners
Dan Rollins – UBS Securities
Steven Butler – Canaccord Genuity
Barry Cooper – CIBC
David Christie – Scotia Capital
Izuro Sanivi [ph] – Equinox Partners
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Thank you, and good morning. Welcome to IAMGOLD's second quarter conference call. Earlier today, we published a news release outlining our operating performance and financial results for the second quarter. The accompanying financial statements, notes, and MD&A have been posted to the SEDAR, EDGAR, and the company's Web site.
Joining me today are Peter C. Jones, president and CEO of IAMGOLD; Gordon Stothart, executive vice president and chief operating officer; Carol Banducci, executive vice president, CFO; Larry Phillips, executive vice president, corporate affairs; and, Mike Donnelly, senior vice president, exploration.
Please note that management's remarks will include forward-looking statements related to this news release. I'll refer you to the cautionary language regarding forward-looking information in the release and advise you that the same cautionary language apply to our remarks during the call. We have prepared slides, which can be viewed via our Web site. And at this time, I'll turn the call over to our president and CEO, Peter C. Jones.
Thanks, Bob, and good morning, everybody. As the price of gold remains high, IAMGOLD realized healthy margins, strong net earnings, and robust cash flows in the face of higher cash costs in the second quarter. On a year-over-year basis, second quarter adjusted net earnings rose 24% to $39.1 million or $0.11 a share, while operating cash flow rose 32% to $51.4 million or $0.14 a share. Revenues declined 5% when compared to the second quarter of 2009 due to lower gold production.
Our realized gold margin increased 25% to $577 an ounce in the second quarter, up from $461 a year ago. Costs have increased year-over-year due to anticipated lower grades of Rosebel, Sadiola, Yatela, and Mupane; lower levels of gold production, and higher royalty and energy costs.
Gold production in the second quarter of 2010 was 190,000 ounces to our account, down 59,000 ounces or 24% from a year ago. The decline is mainly due to the closure of the Doyon mine in December 2009, and the ongoing stockpiling of ore at Mouska for batch processing in the fourth quarter.
Niobec, our niobium mine, continues to perform well. On a year-over-year basis, production increased 18% to 1.1 million kilograms in the second quarter. Sales also rose 11% to 1.058 million kilograms in the same period. And we continued to realize a steady margin of $19 a kilogram.
We're also revising upwards our guidance for 2010. With the startup of Essakane and the completed expansion at Niobec, we now anticipate that gold production will range higher between 980,000 ounces and just over 1 million ounces this year. And niobium output will jump to between 4.5 million and 4.7 million kilograms. We expect gold cash costs in the range of $530 to $550 an ounce. Several initiatives are already underway to lower cash costs. And we're confident that improvements will be realized in the second half of the year.
Let's take a closer look at the financial details. As I mentioned, total realized revenues were down 5% to $240 million in the second quarter, compared to $225.3 million a year ago. Lower gold sales were partially offset by 35% increase in the realized gold price and an 11% increase in niobium sales.
Adjusted net earnings rose 24% to $39.1 million or $0.11 a share, compared to $31.5 million or $0.09 a share a year earlier. This takes into account an adjustment of $7.4 million on the unrealized derivative loss on gold hedging and other normalizing adjustments. IAMGOLD benefited from higher earnings from equity interests, lower taxes, lower corporate expense, and lower depreciation.
As you can see from this slide, second quarter operating cash flow climbed by $12.5 million to $51.4 million or $0.14 a share as IAMGOLD received dividends from its equity interests. Development, capital expenditures were $90 million in the second quarter, including $25.8 million at Westwood and $46.6 million at Essakane.
IAMGOLD remains well-positioned to fund its remaining 2010 capital requirements of $158 million in the second half of the year. We hold $228 million in cash and bullion, and have an available credit facility of $350 million. As gold production from Essakane grows, we anticipate that our financial position will strengthen further and allow us to pursue additional growth opportunities.