Iamgold Reports 2Q Net Loss; 55% Of Cost Cuts Achieved; Westwood On Schedule

Iamgold Corp. (TSX: IMG, NYSE: IAG) officials said they achieved more than half of their planned savings for 2013 and lowered their guidance on the cost of gold production as a result.

Meanwhile, the company remains on track to hit commercial production at its Westwood mine in Quebec this fall.

As has been the case for the other major North American gold-mining companies, Iamgold reported a net loss for the second quarter late Monday, as results were hurt by lower gold prices and impairment charges.

The net loss for the second quarter was listed at $28.4 million, or 8 cents a share, compared to net earnings of $52.9 million, or 14 cents, in the same period a year ago. Impairment charges included $16.1 million related to a decline in the value of marketable securities and $23.2 million for equity account investments in Galane Gold Ltd. and INV Metals Inc. due to a decline in the market value of the shares.

Adjusted net earnings were $30.2 million, or 8 cents a share, compared to $75.3 million, or 20 cents, for the same quarter of 2012.

Iamgold reported second-quarter revenue of $301.1 million that was down $63.4 million in the same period a year ago.

“Falling gold prices accounted for two-thirds of the decline, or $42 million, as the average realized gold price went down $220 an ounce year-on-year,” said Carol Banducci, chief financial officer, on a conference call Tuesday morning in which company officials reviewed the results with investors and analysts. “The balance of the revenue decline was due to lower gold sales.”

The lower sales volume was related to expected lower output at Essakane in Burkina Faso and Rosebel in Suriname due to lower throughput and lower grades, plus timing differences between production and sales.

Iamgold reported an operating margin for gold of $586 an ounce in the second quarter, down from $856 in the year-ago period. The average realized price of gold fell to $1,373 from $1,593.

“Falling gold prices have put the industry in a very, very tough position, as you know,” said Steve Letwin, president and chief executive officer, in the conference call. The company has joined other miners in trimming costs.

“By the end of the second quarter, we had achieved 55% of our $100 million cost-reduction target,” Letwin said.

Iamgold outlined a goal of cutting operating costs this year by $54 million, exploration expenses by $40 million and corporate general and administrative expenses by $6 million.

Officials reported that the Rosebel mine will benefit from lower costs due to a new power agreement with Suriname. This will help Iamgold process harder rock more affordably makes Rosebel “a much more viable entity,” both improving the margin and extending the life of the mine, Letwin explained. The pact potentially could reduce costs at the mine under the current mineral agreement by up to $50 an ounce, he added.

Further, the lower power rate will be factored into a feasibility study under way at Rosebel to determine an optimum expansion plan. Letwin said officials hope to announce the results at the end of the third quarter.

Iamgold reported second-quarter total cash costs of $787 an ounce, unchanged from the first quarter but up 7% from the year-ago period. “This is the second quarter in a row that total cash costs were below the bottom of the guidance range,” Letwin said. “It’s about $100 below what we were forecasting about eight months ago.”

Iamgold trimmed its 2013 guidance for total cash costs to $790 to $840 an ounce from $850-$925 previously.

The all-in sustaining cost for all mines was listed at $1,196 an ounce, up 10% from the prior-year period. The company lowered its 2013 guidance to $1,150-$1,250 from $1,200-$1,300 previously.

“Our dividend remains intact and we will do what is necessary to preserve cash and a good liquidity position,” Letwin said.

Production Up In 2Q; Westwood On Track

Iamgold listed gold production of 224,000 ounces that was up 20,000 ounces from the year-ago period. Excluding pre-commercial output from the Westwood mine, commercial production was 214,000 ounces, while sales volume was 201,000. Of the 13,000-ounce variance between commercial output and sales, 6,000 was for gold produced in late June at Mouska in Quebec, which was not sold until the first week of July, officials said.

Iamgold also produced 1.2 million kilograms of niobium in the second quarter, unchanged from the same period a year ago.

The bulk of Iamgold’s commercial gold output during the quarter came from Rosebel, 82,000 ounces; and Essakane, 62,000. Another 41,000 came from the Doyon division in Quebec, which includes the Mouska and Westwood mines, while 29,000 ounces came from a pair of joint ventures in Mali.

“Overall, our operations are performing as expected and we should see production trending higher in the third quarter,” Letwin said.

Westwood is on pace to hit commercial production in October and should result in 130,000 to 150,000 ounces for the year, Iamgold officials said. For the full year, Iamgold is maintaining company-wide guidance of 875,000 to 950,000 ounces.

Also, Letwin said, a plant expansion at Essakane, to accommodate an increasing proportion of hard rock, is on track for completion by the end of the year.