Yatela boosts Iamgold’s earnings

With the Yatela mine in western Mali three months into its first full year of commercial production, Iamgold (IMG-T) has posted solid first-quarter earnings.

The company earned US$4.5 million (or 6 per share), compared with income of US$3.6 million (5 per share) in the first quarter of 2001. Operating cash flow (before working capital changes) totalled US$8.9 million, up from US$7.8 million, while revenue slid US$1.7 million to US$21.3 million.

Yatela processed 656,818 tonnes of material from which were extracted 65,760 oz. gold; of that, Iamgold reaped 26,304 oz. (Iamgold owns 40% of Yatela and 38% of its bigger sister, Sadiola. The remaining share of production is divided among AngloGold [AU-N], which operates both mines, the Malian government and International Finance Corp.)

Total cash costs rang in at US$161 per oz., just US$3 per oz. higher than in the final three months of 2001. The mine, which entered commercial production in July of last year, is expected to churn out 270,000 oz. in 2002.

Reserves at the end of the quarter were 12.3 million tonnes averaging 3.6 grams gold, or 1.4 million contained ounces.

Bottle-roll cyanidation tests on oxide samples from the nearby Alamoutala prospect suggest that the mineralization might be amenable to heap leaching. The average recovery from 11 samples was 94%.

Alamoutala hosts an inferred resource of about 2 million tonnes grading 2.4 grams gold per tonne; if the deposit it developed into a mine, it would add another year of life to the Yatela operation.

Iamgold’s take from the Sadiola mine was 49,719 oz. at US$144 per oz. In all, the mine pumped out 130,839 oz., little-changed from a year earlier. Lower throughput and recovery rates were offset by higher head grades.

Higher recoveries

In early March, plant modifications for pre-oxidation and oxygen-enriched high-cyanide leaching were commissioned. The changes have raised gold recoveries from sulphidic saprolites to 79% from 65% and are expected to increase recoveries further to 81%. (Originally, the partners pegged recoveries at 85%.)

As a result of the lower recoveries, Sadiola’s proven and probable reserves have been lowered to 33.5 million tonnes running 3.2 grams gold, for 3.4 million contained ounces. That’s down about 400,000 oz. from the previous estimate.

At the end of March, Sadiola had a total of 65,000 oz. gold sold forward at US$267 per oz. through 2002. Another 110,000 oz. were covered by call options sold forward through 2004 at prices of US$349-385 per oz. The net market value of the contracts amounted to an after-tax loss of US$1.95 million. Iamgold’s share of the loss was US$740,000.

After a 5-year tax holiday, Sadiola became taxable at the end of February 2002. For March, taxes amounted to US$700,000.

For the three-month period, average total cash costs fell US$6 per oz. to US$150 per oz. The average realized gold price was US$296 per oz., US$6 per oz. better that the average spot price, and up from US$277 per oz. in the first quarter of 2001.

A US$2-million, 14,000-metre drill program will soon begin testing below the Sadiola pit. Immediately adjacent to the pit, along the northern extension of the Sadiola Fracture zone, drilling returned 2-6.3 grams gold over widths ranging from 10 to 78 metres.

Tambali South

To the south, at the Tambali South prospect, infill drilling along 400 metres of the central core zone returned up to 3.5 grams gold over 20 metres and 2.3 grams over 64 metres.

At the quarter’s end, Iamgold had US$35 million in cash and gold bullion. Believing gold to be significantly undervalued, Iamgold decided earlier this year to hold its discretionary cash in the form of gold bullion. At the end of March, the company had 30,369 oz., which netted it a US$504,000 gain during the quarter. At last report, the bullion inventory had risen to 36,000 oz.

In January, Iamgold paid its inaugural dividend of 5 per share. Shareholders have the option of receiving future dividends in gold or Canadian dollars.

In financial news, the final Sadiola payment (both senior and subordinated loans) totalling US$30 million is due in mid-May. Over the past five years, Sadiola has retired US$300 million of debt at the project level.