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IAMGOLD is experiencing rapid growth – fuelled more today
by success in capitalizing on attractive organic growth
opportunities than by acquisitions, which drove growth in
the early years. Managing rapid growth requires greater
financial discipline across the organization. As Chief
Financial Officer, my focus is on building and preserving a
strong balance sheet, prudently managing our financial
resources, and maximizing return on capital.
Our growth through 2010 was guided by a number of
performance objectives – among them, grow production to
940,000 to 1,000,000 ounces of gold, start up Essakane on
time and on budget, build reserves to outpace depletion, and
advance our development projects. By the end of the year,
we had delivered. The result: strong financial performance
and a solid balance sheet.
Contributing to our success is a sound financial management
strategy focused on managing risk, controlling costs, and
allocating capital to projects with the greatest potential for
attractive returns.
We bring much discipline to risk management. Our business
is impacted by fluctuations in gold prices, commodity prices,
fuel costs and exchange rates. We monitor these external
variables closely and, if necessary, implement measures to
offset any negative impact. In 2010, we entered into option
contracts that hedged 28% of the Company's exposure to the
Canadian dollar and 50% of our exposure to the euro. We
also hedged 50% of planned fuel requirements at the
Rosebel, Essakane, Mupane, Sadiola, and Yatela operations,
and 23% of our planned consumption of aluminum at the
Niobec mine. However, with respect to our exposure to gold
prices, the Company's general policy is not to hedge gold
production, thereby enabling investors to benefit from the
upside potential.
In addition to specific strategies to mitigate the risks inherent
in our business, we have an effective risk management system
that ensures the integrity of our financial reporting process,
internal audit procedures, and accounting controls.
On the cost side, we have been diligent about building a
cost-conscious culture. We practise conservative cash
management and seek innovative ways to improve business
processes and eliminate waste and duplication. To further
reduce our cost structure, we continue to implement
continuous improvement initiatives at our mine sites and
to invest in processes and equipment to enhance
operating efficiency.
We follow a rigorous process to evaluate potential
development and expansion projects. Our objective is to
deploy capital where it will generate the highest returns. The
majority of our $460 million capital budget for 2011 will be
spent on advancing Westwood and expanding our low-cost,
long-life Rosebel, Essakane and Niobec mines.
The same financial rigour underlies our acquisition strategy.
Applying stringent criteria, we will evaluate attractive
acquisition opportunities, but only consider those that are
aligned with our strategic focus and that would be accretive
to earnings.
With a value of $411 million in cash and gold bullion, a
$350 million line of credit and an outstanding cash flow
profile, we have significant financial flexibility to internally
fund our growth initiatives. As always, we will continue
to manage growth with the financial discipline to which we
are accustomed – a sharp focus on managing risk, controlling
costs and generating maximum return on capital.
Thank you to our investors for their continued confidence
in the future growth prospects for IAMGOLD.
Carol Banducci
Executive Vice President and
Chief Financial Officer
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