Iamgold earnings bolstered by Ghana acquisitions

First-quarter earnings at gold producer Iamgold (IMG-T) rose year-over-year in 2003, partly as a result of higher gold prices and partly because production from the Tarkwa and Damang mines in Ghana is now part of Iamgold’s portfolio following its merger with Repadre Capital.

Iamgold earned US$4.6 million on revenues of US$23.8 million in the three months ended March 31, compared with earnings of US$4 million on revenues of US$21.3 million in the first three months of 2002. Earnings per share in the first quarter fell to US3, from US5 in the first quarter of 2002. Per-share figures fell because the merged company now has 143.5 million shares outstanding, almost double the number that were oustanding a year before.

Production from the company’s Sadiola Hill open pit mine in western Mali came out slightly ahead of expectations, with 104,000 oz. gold produced from 1.2 million tonnes of ore. Head grades, at 3.1 grams gold per tonne, were substantially lower than they had been in the final quarter of 2002, but improvements in plant recovery offset that decrease to some extent.

Higher fuel costs, and the increasing value of the West African franc against the U.S. dollar, pushed cash operating costs at Sadiola to US$211 per oz. Costs at Sadiola have been increasing steadily over the last year; first-quarter cash costs last year were US$136 per oz. Another factor in the cost increase has been progress of the pit into areas of harder ore, which has added to the operation’s contract-mining bill.

Two dividends came through in the quarter from Sadiola’s operating company — owned 38% by Iamgold, 38% by operator AngloGold (AU-N), 18% by the Malian government and 6% by the International Finance Corporation. Iamgold’s share of dividends in the quarter was US$8.4 million.

The Yatela mine, immediately north of Sadiola, produced 53,000 oz. in the quarter, about 12% below budget. Direct cash costs rose to US$213 per oz., from US$205 last quarter and US$143 in the first quarter of last year. Iamgold and AngloGold have 40% interests at Yatela, with the rest held by the government.

The partners gave a green light to development of the small Alamoutala deposit at Yatela this quarter, and expect to see production from the satellite pit in the last quarter of this year. Leaching performance has become a concern at Yatela, with the leach cycle increased to 140 days from the 60 days that had been estimated in testing for the project’s feasibility study. The partners still expect to have ultimate recovery of 85% of the gold from Yatela ore.

The Tarkwa gold mine, in Ghana, produced 136,000 oz. in the three-month period, up from 126,000 oz. in the previous quarter and 8% more than had been budgeted by operator (and 71% owner) Gold Fields (GFI-N). Cash costs rose to US$212 per oz., from US$197 in the last quarter of 2002. The Damang mine, adjoining Tarkwa, produced 77,000 oz. gold in the quarter at a cash cost of US$247 per oz., up from US$235 last quarter.

The partners at Tarkwa have agreed to go forward with a planned US$170-million capital expenditure project at Tarkwa, half earmarked for a new 4.2-million-tonne-per-year mill and half for the purchase of a company-owned fleet of mining equipment (Tarkwa is currently contract-mined). The new mill is supposed to be up and running by the end of 2004, and annual production should increase to 650,000 oz. from the current 600,000 oz.

The incorporation of Repadre assets into Iamgold’s balance sheet during the quarter brought the company’s total assets up to US$430.8 million, from US$189.6 million at year-end. Cash and current assets grew to US$110 million from US$69.6 million. Long-term liabilities — mainly an increase in future tax charges — increased to US$55.7 million from US$38.6 million.

Among Iamgold’s current assets are 129,361 oz. held in gold, carried on the books at US$41.8 million. The holding represents an increase of 31,980 oz. during the quarter.