Iamgold retires Sadiola debt, sees earnings slip

Junior producer Iamgold (IMG-T) is eyeing “significantly” higher cash flow now that all remaining debt relating to the Sadiola mine in western Mali has been retired.

In mid-May, a US$31.5-million payment did away with both senior and subordinated loans. Iamgold’s share of the payment came to US$12 million. During the same second quarter, all of Sadiola’s forward contracts were closed out, resulting in a US$1.5-million, after-tax loss (US$600,000 on Iamgold’s books). At the end of June, Sadiola had 75,000 oz. of call options averaging US$385 per oz. remaining.

During the quarter, Sadiola churned out 117,808 oz. gold (44,767 oz. for Iamgold’s account) at a total cash cost of US$158 per oz. (up from the year-ago US$131 per oz.). For the first six months of the year, production tallied to 248,647 oz. (94,486 oz.) at US$151 per oz. (US$143 per oz.). Production during the periods was off 14% and 7%, respectively, from year-ago levels on lower grades in the second quarter. Throughput fell during the first half of the year as mining encountered more hard oxide ore than expected.

Iamgold plans to mine soft oxide ores until mid-September, when it will commission a crushing and screening plant designed to treat stockpiled hard oxide ores and run-of-mine hard oxides.

The Yatela mine produced 56,868 oz. at US$183 per oz. during the recent quarter (compared with 44,7676 oz. in the corresponding 3-month period of 2001), and 122,628 oz. at US$171 per oz. during the first six months of 2002 (compared with 49,051 oz. in the first half of last year). Iamgold expects 2002 production at Yatela to meet or exceed the budgeted 270,000 oz. at US$161 per oz.

Iamgold has a 40% stake in Yatela and a 38% holding interest in its bigger sister, Sadiola. The remainder is shared among three parties: AngloGold (AU-N), the operator of both mines; International Finance Corp., and the Malian government.

Iamgold’s average realized gold price during the recent quarter climbed US$24 per oz. to US$307 per oz. from the year-earlier period. Spot gold prices averaged US$313 per oz. during the recent quarter. For the first half of 2002, average realized prices came in at US$301 per oz., a US$18 per oz. improvement over the first half of last year and US$5 per oz. better than the quarter’s average spot price.

Iamgold earned US$900,000 (1 per share) on revenue of US$19 million in the recent quarter, compared with year-earlier income of US$2.2 million (3 per share) on US$15 million. Operating cash flow (prior to working capital charges) was US$4.8 million, or US$1 million lower than a year earlier.

For the first half of 2002, net income was US$5.3 million (7 per share), off US$600,000 from the January-to-June period of 2001. Revenue climbed to US$41 million from US$38 million and cash flow from operations crept up US$200,000 to US$13.7 million. At the end of June, Iamgold had cash and gold bullion totalling US$43.5 million, including 83,084 oz. gold worth about US$26 million.