Iamgold rises on 30% Côté stake sale, positive PFS results

VANCOUVER (miningweekly.com) – The TSX-listed stock of Canadian gold producer Iamgold gained nearly 12% on Tuesday following news late on Monday that it has agreed to sell a 30% stake in its Côté gold project, in Ontario, and the publication of a positive prefeasibility study (PFS) for the mine.

Tokyo-based Sumitomo Metal Mining has agreed to buy a 30% stake in the Côté project from Toronto-based Iamgold for $195-million.

Under the terms of the agreement, $100-million is payable on closing and the remaining $95-million is payable either on the earlier of 18 months following closing, or the date on which a feasibility study on the Côté project is filed with securities regulators.

Iamgold will remain the operator of the project during development and in operation, with each party being responsible for funding its proportionate share of expenditures, including initial and sustaining capital expenditures (capex).

“It will enable us to move the project into development and to significantly diversify our production profile as a result of future production from our Canadian operations," said Iamgold president and CEO Steve Letwin of the deal.

Iamgold noted that both partners have undertaken extensive due diligence since August 2016, which has solidified the relationship, built mutual trust and respect and revealed alignment around strategic priorities.

Iamgold also added that Sumitomo's in-depth expertise in building and operating mines will complement its own proven record as a successful mine builder and operator, and Iamgold will benefit from Sumitomo's access to Japanese suppliers to the mining industry, which will complement, where needed, existing supplier networks within Ontario. Both companies have strong business development capabilities and reach and a common interest in seeking opportunities beyond the Côté project, which will support Iamgold’s objective to grow its production pipeline.

On closing of the transaction, Iamgold and Sumitomo will form an unincorporated joint venture (JV) with respect to the Côté gold project, and will enter into a definitive JV agreement.

Closing of the transaction is expected to occur before the end of June.

PREFE ASIBILITY
Iamgold late on Monday night also released the results of a PFS on Côté, outlining an economically viable project that confirms the development concept previously set out in the preliminary economic assessment, and clearing the way for the company to initiate a feasibility study and to support the permitting process.

For an initial capex outlay of $1.05-billion, the PFS calculated an after-tax net present value of $703-million, based on a $1 250/oz base gold price and using a 5% discount rate. The after-tax internal rate of return is 14%, with a capex payback period of 4.5 years.

According to the PFS, Côté will produce on average 320 000 oz of gold over the 17-year mine life, with mill throughput pegged at 32 000 t/d.

Life-of-mine cash costs are expected to be $605/oz and all-in sustaining costs $689/oz.

Letwin pointed out that with the conversion of nearly six-million ounces from resources to reserves, on a project basis, and with more than 3.8-million ounces attributable to Iamgold, the company's attributable consolidated reserves increased by 49%, something almost unheard of in an industry challenged with reserve replacement.

“The robust project economics generated from the PFS further validate our view that Côté gold is an exceptional organic growth project, particularly when our industry faces a shortage of undeveloped gold deposits in attractive mining jurisdictions with surrounding infrastructure,” he said.

The PFS study identifies the preferred development option as being a conventional truck-and-shovel openpit mining operation and determined that an effective method of mineral processing would be a processing circuit incorporating primary crushing, secondary crushing, tertiary high-pressure grinding roll crushing, ball milling, gravity concentration and cyanide leaching, followed by gold recovery using carbon-in-pulp, stripping and electrowinning.

The PFS is based on proven and probable reserves of 196.08-million tonnes grading 0.94 g/t gold, for 5.93-million ounces of contained gold. The deposit also has compliant indicated resources of 281.17-million tonnes grading 0.89 g/t gold for 8.04-million ounces of gold, and inferred resources of 76.5-million ounces grading 0.5 g/t gold, holding about 1.23-million ounces of yellow metal.

Letwin further noted that Côté also has significant exploration upside potential, with more than 500 km² of exploration rights-held property surrounding the deposit.

Iamgold expects to complete a feasibility study in the second half of 2018.

The company's shares closed Tuesday up 11.7% at C$6.78 apiece.