Despite posting a second-quarter loss of US$28.4 million compared to a US$52.9-million profit a year ago, Iamgold (TSX: IMG; NYSE: IAG) says its operations are performing as expected, as it reins in spending amid declining quarterly revenues, higher sales costs and US$39.3 million in impairment charges.
Revenue fell 17% to US$301.1 million owing to lower average realized gold prices and gold sales, partially offset by stronger niobium sales.
Impacting the bottom line were impairment charges of US$23.2 million from Iamgold’s investments in Galane Gold and INV
Metals, and another US$16.1-million charge related to the slump in market value of its marketable securities.
Taking out those charges and other one-time items, adjusted earnings came to US$30.2 million, or US8¢ per share, which is slightly below the consensus of US9¢, but in line with BMO analyst David Haughton’s forecast. Following the financial results, Haughton has increased his target to $5.75 from $5 per share, but has kept a “market perform” rating on the stock.
Highlights from the three months ended June 2013 include a 10% year-over-year increase in attributable total gold production of 224,000 oz., which included 10,000 oz. pre-commercial gold from the Westwood project in Quebec. The stronger production resulted from higher output from Westwood and the Mouska mine in Quebec, and from the company’s 41%-held Sadiola gold mine in Mali. But this was partially offset by lower-than-anticipated gold grades at the Essakane mine in Burkina Faso and lower grades and throughput, as expected, at the Rosebel mine in Suriname.
Iamgold recorded attributable gold sales of 201,000 oz. from commercial production of 214,000 oz., at total cash costs of US$787 per oz. gold. Costs were unchanged from the first quarter and up 7% from the year-ago period, but below the company’s guidance and Haughton’s forecast of US$883 per oz. All-in sustaining costs were US$1,196 per oz. for the quarter.
Iamgold says the Westwood mill appears on schedule to contribute 130,000 to 150,000 oz. gold in 2013. At Essakane, it notes the plant expansion to accommodate the higher proportion of hard rock is on track for completion by year-end. At Rosebel, it adds that a recent power agreement with the local government should lead to lower costs. The producer also plans to hold off on future expansion and development projects, including the Sadiola sulphide project, until it finds a partner and the gold price improves.
On that end, Iamgold is advancing the US$100-million cost savings initiative that it implemented in March due to the lower gold price. The program aims to reduce this year’s operating costs by US$54 million, exploration expenses by US$40 million and corporate general and administrative costs by US$6 million. So far the miner has saved US$55 million in spending, causing it to trim its cost guidance for the year. It now forecasts total cash costs of US$790 to US$840 per oz. gold, down from US$850 to US$925 per oz., and all-in sustaining costs of US$1,150 to US$1,200 per oz., down from US$1,200 to US$1,300 per oz.
For niobium, the Niobec mine in Quebec produced 1.2 million kg in the second quarter, in line with Haughton’s estimate and unchanged from last year. For 2013, Iamgold expects output from its sole niobium mine to equal 4.7 to 5.1 million kg.
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