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IAMGOLD eyes the cost curve at Gogama mine building project

Côté Gold project expected to start commercial production in mid-2023
Cote plant
Processing plant at Côté Gold Project in February 2022 (IAMGOLD photo)

COVID-19, inflation and other cost pressures are starting to impact the budget for the gold mine IAMGOLD is building near Gogama.

The open-pit Côté Gold Project is roughly at the halfway point of construction.

Last week, the Toronto mine builder web-chatted with mining analysts about its fourth quarter and 2021 year-end results and dove into some of the details on some red-flag issues that company executives are monitoring to keep the cost curve under control and plans to stay on schedule for a 2023 production start. At the end of December, the Côté Gold Project was 43 per cent complete with detailed engineering work at 92 per cent.

The development is located 125 kilometres south of Timmins and 175 kilometres north of Sudbury. It's a 70-30 joint venture between IAMGOLD and Sumitomo Metal Mining of Japan.

Chief financial officer Daniella Dimitrov, IAMGOLD's interim CEO, said the workforce at Côté made it through most of another pandemic year with minimal disruptions at the site until December hit. At year's end there was a rapid rise in cases at the construction camp from Omicron that began to have an impact on the pace of work after the holidays.

"Absenteeism in the first part of January was high," said Dimitrov.

At one point in January, only 60 per cent of the workforce was active, with many infections among the earthworks and processing plant teams. The contractor responsible for putting up the cladding on the processing plant was impacted by COVID during the first two months of this year.

Dimitrov said they "pivoted" and made arrangements to work inside the building, making progress in assembling and installing the mechanical workings. Overall, she said, the project timetable shouldn't be impacted. The processing plant is more than 50 per cent cladded. That job is expected to be done some time in the second quarter this year.

Last month, things began to return to normal with between 750 and 800 workers on site.

A mandatory vaccination policy was instituted in January. All workers on site must have received one jab and must have two by April 1.

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By way of progress at the site, $412 million has been spent to date as of Dec. 31. The remaining costs to completion in 2023 at Côté are in the range of $710 million to $760 million.

But there are signs of a gradually increasing project price tag, with prices increasing on camp consumables, parts and components and labour. Inflation and other cost pressures, such as the strengthening Canadian dollar, could put a strain on the budget.

It's resulted in the appointment of Jerzy Ozechowski as new project manager. The upward trending cost curve has been eating into the project contingency fund, which dropped from $85 million in July to $25 million March, "forming a trend that we are flagging today," Dimitrov said.

The situation is being monitored on a weekly basis by Ozechowski, who's in the process of writing up a risk analysis of the project, due out before the end of the second quarter. His team is keeping any eye out for any supply chain disruptions and figuring out how to best manage the remaining 36-month construction schedule to get Côté over the finish line on time and on budget.

Dimitrov said Côté remains on track to start commercial production in the second half of 2023, provided there are no supply chain disruptions or COVID outbreaks.

"We do caution that further disruption could impact the timing of actual commercial production." All things considered, Dimitrov said IAMGOLD is at a "critical juncture" with Côté, a mine development project she called "transformative" for the company and a "generational asset."

Early mining activities have started, with ore being stockpiled for the production start in the second half of 2023.

On the exploration front, ongoing drilling is confirming Gogama is becoming an emerging gold district. IAMGOLD said it's 540-square-kilometre property sits on a massive gold-bearing system and they are confident of making more discoveries.

The current mine life for Côté is 18 years, based on 7.2 mllion ounces of reserves with another 6.4 million in the upcoming measured and indicated categories.

"We are still in the early innings of uncovering the full potential at Côté."

Close by the pit is a sister deposit dubbed Gosselin. Last October, the company posted a first-time resource estimate for Gosselin of 3.35 million ounces of indicated gold and 1.71 million ounces as inferred. More favourable drill results were released at the end of December, suggesting there's great potential to grow the resource there with more drilling to come in 2022.

Besides working on this project, IAMGOLD runs mines in Burkina Faso, in Suriname and northwestern Quebec with its Westwood Gold Mine between Rouyn-Noranda and Val d’Or.