Iamgold holds production steady in Q2; boosts net income 33%

While Iamgold (IMG-T, IAG-N) is down a mine this year with the closure and sale of its Sleeping Giant mine in Quebec at the end of 2008, production remained relatively steady in its second quarter — and the mid-tier producer even managed to trim cash costs.

Iamgold says its flagship Rosebel gold mine in Suriname effectively replaced the ounces lost with Sleeping Giant through a combination of increased productivity and the elimination of a royalty on production held by Euro Ressources. Iamgold purchased Euro late last year and says that at current gold prices, that reduces cash costs at Rosebel by US$40-50 per oz. The quarter was the first to show the effects of a recent expansion of the mill at Rosebel to more than 10 million tonnes per year, and as result, production at the mine increased 38% and cash costs fell by 24% quarter-over-quarter.

Total production from the company’s seven gold mines during the quarter came to 249,000 oz. at a cash cost of US$437 per oz., compared with 255,000 oz. at US$472 per oz. in the same period last year.

Revenues were largely unchanged from the year-earlier quarter at US$225.3 million. Net income, however improved by 33% to US$44.1 million (US12¢ per share) — including an impairment charge of US$9.3 million related to acquisition costs  — up from US$33.2 million (US11¢ per share) in last year’s second quarter. Gold sales remained the same at 252,000 oz. for the quarter, but the average sales price edged up slightly to US$898 per oz. from US$878.

Cash flow suffered a bit, declining to US$38.9 million in the recent quarter from US$44.8 million, as the company stepped up spending on exploration and took on personnel and other costs related to the Euro Ressources acquisition, as well as the purchase of Orezone Resources earlier this year.

During the quarter, Iamgold extended the mine life at its Doyon gold mine in Quebec to the fourth quarter from the second. At the Westwood development project, also in Quebec, the company boosted inferred resources by 9% and gold grades by 31%. And its Essakane project, in Burkina Faso, is on budget and ahead of schedule, and is expected to begin commercial production next August.

Margins at the Niobec niobium mine, in Quebec, remained strong at US$19 per kg, compared with US$15 per kg in last year’s third quarter — mostly due a stronger niobium price. An expansion that will boost throughput at Niobec by 25% is anticipated to be complete in the third quarter.

Joseph Conway, Iamgold’s president and CEO, noted on a conference call that the company has done a better job than many of its peers over the last two years in keeping costs stable or declining, and has increased its margins.

Conway also provided updates for two of the company’s development projects that have been in limbo over the past couple of years –- Quimsacocha in Ecuador and Camp Caiman in French Guiana, a protectorate of France. All permits are in order at Quimsacocha and a new mining law has been in place since January -– the company is just waiting for the final go-ahead from the government. There has been no mining or exploration activity allowed in the country since last April. At Camp Caiman, where the French government denied Iamgold final permits to build a mine in early 2008, there has been less progress. But Conway expects good and growing local support to help its case with the French government.

Iamgold reported US$394.8 million in available capital (cash and equivalents and bullion) as of June 30, plus US$84.3 million under its credit facility.

In afternoon trading in Toronto, Iamgold shares were up 5% or 61¢ to $12.21. The stock has traded in a 52-week window of $2.93-12.54. The company has 367 million shares outstanding.