Record Q3 Earnings Lift Iamgold

VANCOUVER — Iamgold’s (IMG-T, IAG-N) shares jumped 24% over four days to reach a new all-time high surrounding news that the gold producer pulled in record earnings of US$64.9 million in the third quarter.

Iamgold, which operates eight mines in Africa and the Americas, produced 244,000 oz. gold between the start of July and the end of September, at an average cash cost of US$457 per oz. The production success prompted the company to boost its 2009 production guidance by 60,000 oz. to at least 940,000 oz.

The company’s Rosebel mine in Suriname was the main driver in production growth. The open pit mine, which produced only 315,000 oz. gold last year, churned out 106,000 oz. gold in the recent quarter at a cash cost of just US$403 per oz. In 2008, Rosebel’s cash costs averaged US$466 per oz. gold.

A variety of initiatives are behind the production and cash cost improvements at Rosebel. In late 2008, Iamgold bought an 84.5% stake in Euro Ressources, which held a participation royalty in Rosebel. As a result, cash costs went down US$40 to US$50 per oz. Iamgold also worked through a mill expansion and optimization program in 2008 that increased throughput by 11%.

An average realized gold price of US$961 per oz. pushed Iamgold’s revenues to US$235.2 million. The company’s higher revenues and improvements in mining costs were partially offset by increased spending on exploration, but net earnings still came in at US$64.9 million or US18¢ per share.

Capital expenditures totalled US$126.2 million. The majority of those funds went towards construction of two developing mines: the Essakane open-pit gold mine in Burkina Faso, where Iamgold is targeting commercial production in August 2010, and the Westwood underground gold operation in Quebec, which Iamgold hopes to have in production in 2013.

Some capital spending also went towards mining fleet improvements at Rosebel.

Another chunk went towards the Niobec niobium mine, where Iamgold is spending US$47 million to expand the mill and install a paste-backfill plant. The expansion will increase mill throughput by 24% and should be complete before the end of 2010. The paste-backfill project will enable miners to extract almost all of the deposit’s ore reserve in the lower levels of the mine by using mill tailings mixed with binding material as a substitute for natural ore pillars.

By the end of the year, Iamgold expects to have spent US$422 million on its various operating and development-stage projects.

Another third-quarter highlight for the company was a decision by the joint-venture operators of the Sadiola mine to go ahead with a US$9-million deep sulphide feasibility study.

The year-long study will investigate the feasibility of deepening the open pit at Sadiola to reach the sulphide portion of the deposit and constructing a new crushing, grinding, and carbon-in-leach plant for treating the ore.

A prefeasibility study on the concept concluded that mining sulphide ores would add 2.2 million oz. and four years of mine life to the Sadiola operation. Treating only oxide ores, Sadiola is expected to produce 350,000 oz. ore this year and lesser amounts over the ensuing years until reaching its endpoint in 2015.

The Sadiola mine, in Mali, is a joint venture. Operator Anglo-Gold Ashanti (AU-N, AGD-L) owns 38% of the mine, Iamgold also owns 38%, the government of Mali owns 18%, and the International Finance Corp. (IFC) holds the remaining 6%.

In early November, Iamgold reached an agreement to buy the IFC’s 6% interest in Sadiola for US$12 million. Iamgold would also pay another US$500,000 each year until 2012 if the average gold price for the year is above US$900 per oz. or an extra US$1 million per year if the price of gold averages better than US$1,000 per oz.

Under the terms of the Sadiola joint-venture agreement, Iamgold’s other partners — Anglo- Gold and the government of Mali — may elect to take up their proportional share of the IFC interest on the agreed terms. Iamgold expects the deal will close before the end of the year.

And an Iamgold project that has sat idle for a year and a half will soon see activity again. Iamgold’s Quimsacocha project is in Ecuador, where the government suspended all mineral exploration, development, and mining operations in April 2008.

On Nov. 4, Ecuador’s president, Rafael Correa, gave final approval to the country’s new mining laws. Iamgold is now awaiting authorization from the Minister of Mines to resume mining activities. Quimsacocha is a feasibility-stage gold-silver-copper project in central Ecuador.

Iamgold’s financial position is strong: the company has US$343.7 million in cash and gold bullion in the bank, and could draw as much as US$123 million from a standing credit facility. Availability under the credit facility increased during the quarter as Iamgold repaid US$40 million that had previously been drawn down.

In the first week of November Iamgold’s share price gained $3.43 or 24% to close at $17.78, its highest share price ever. The company has a 52-week low of $3.50 and has 368 million shares outstanding.