Iamgold boosts production while costs rise

Gold production by Iamgold (IMG-T, IAG-N) rose 3% to 447,000 oz. in 2005, while costs, reflecting the falling U.S. dollar, rose about 11% from the year before.

Meanwhile, reserves were depleted slightly at the company’s main mines, Sadiola and Yatela in western Mali, while the new resource outlined at the Quimsacocha gold-silver deposit in Ecuador substantially increased the company’s resource base.

Iamgold reported 2005 production of 442,000 oz. gold from Sadiola, where it has a 38% interest, AngloGold Ashanti (AU-N, AGD-L, AGG-A) has 38%, and the government of Mali and the International Finance Corp. hold the balance. In 2004, Sadiola produced 458,000 oz. gold.

Cash production costs at Sadiola rose to US$270 per oz. from US$246 in 2004. Reserves at the end of 2005, 21.1 million tonnes grading 3.4 grams gold per tonne, were an increase over the previous year-end figure of 22.4 million tonnes at 3 grams. New reserves were brought in from resources thanks to infill drilling and changes to the pit design and cutoff grade.

At the nearby Yatela mine, also an AngloGold-Iamgold joint venture, Iamgold had a 40% share of 246,000 oz. gold produced in 2005, down from 242,000 oz. in 2004. Cash costs rose to US$269 per oz. from US$263 the previous year. Marginal reserve increases did not keep up with production; reserves at year-end stood at 5.1 million tonnes grading 3.3 grams gold per tonne.

Production from the Tarkwa and Damang gold mines in Ghana increased to 955,000 oz., up 106,000 oz. from 2004. Cash costs increased considerably at Damang, to US$347 per oz. from US$221 the year before, but rose by only US$18 at Tarkwa, to US$268 per oz. The two mines are a joint venture with Gold Fields (GFI-N, GOF-L), which is the operator.

In October, Iamgold announced an indicated resource of 22.5 million tonnes grading 3.9 grams gold and 25 grams silver, plus 0.16% copper, at its wholly owned Quimsacocha gold deposit in Ecuador.

Later drilling along the southern extension of the Quimsacocha structure has indicated another 500 metres of strike length beyond the 1,000-metre length of the resource. Gold grades appear to drop off slightly, but silver grades increase substantially, toward the south, while the typical mineralized widths — generally 10 to 30 metres — are maintained.

Iamgold’s proposed takeover of Australian gold producer Gallery Gold (GLYGF-O, GGN-A), at a 1-for-22 share exchange, values Gallery at A46 per share, or US$202 million. The merger, to be put to a vote of Gallery shareholders late this month, increases production by 125,000 oz. gold from Gallery’s Mupane mine in Botswana. Mupane, an open-pit mine with cash costs around US$280 per oz., has reserves of 6 million tonnes grading 3.2 grams per tonne, bringing about 600,000 oz. of reserves into Iamgold.