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We finished 2010 with an outstanding fourth quarter, as a year-over-year
35% increase in gold production drove record
highs in net earnings and cash flow. For the full year, gold
production was 967,000 ounces. Net earnings grew by
145%, reaching a record $280 million, and operating cash
flow climbed 62% to $415 million. It's gratifying to join a
company filled with great achievements. Chief among
IAMGOLD's many successes was bringing into production a
major gold development project. Our low-cost, long-life Essakane gold
mine in West Africa is estimated to have more than 4 million
attributable ounces of probable gold reserves. In its first
six months of operation the mine produced 122,000 ounces
of gold, with 80,000 ounces in the fourth quarter.
Year of Essakane
Essakane is the first gold mine built and brought into
production by IAMGOLD. That milestone was accomplished
well ahead of schedule and close to budget. This was a
remarkable achievement. There had been no supporting
infrastructure and, as with any new mine, there were a
number of operating challenges. Were it not for the expertise
of the development and operational teams, a timely start-up
would not have been possible, nor would the mill have been
operating at design capacity within six months of start-up.
Situated on a vast land package in one of the fastest-growing
gold regions in the world, Essakane has significant
opportunity for expansion. In 2011, pending the favourable
outcome of a feasibility study, we plan to begin an
aggressive expansion program, which is expected to increase
the current average production estimate of 315,000 ounces
to between 450,000 and 470,000 ounces per year.
A New Strategic Plan to Unlock Value
With Essakane up and running, 2011 will be the year we
accelerate organic growth and unlock the hidden value of our
assets. We know our stock trades at a discount to our peers,
and this is as troubling to us as it is to our shareholders.
Over the past few months we have looked closely at how the
market values IAMGOLD. The market is not attributing fair
value to our minority interests in West Africa and our niobium
mine in the Canadian province of Quebec. As a result, we have
launched a new strategic plan to maximize return on capital
and address valuation. This plan has four key strategies:
1. Advance Organic Development
First, we will advance organic development at, and within
close proximity to, existing ore bodies at Rosebel, Essakane
and Westwood, where we have well-established
infrastructures. This is our core focus and where we can
create the most value. It's less risky and more cost effective
to focus on proven gold districts where the geology is well
understood. Expansion of the Rosebel mine will begin this
year, a feasibility study to expand Essakane is underway, and
the Westwood project is on track to begin commercial
production in early 2013.
2. Restructure our Portfolio of Mining Assets
Second, we are changing the mix of our asset portfolio.
IAMGOLD's mining assets range from projects wholly owned
and operated by us to projects in which we have a small
minority interest. The common denominator of our high-margin,
high-growth projects is that we are the operator and majority owner. Presently, the mines that we own produce approximately 70% of attributable gold production. Our objective is to restructure our portfolio of assets so that
close to 90% of attributable gold production comes from
mines owned by IAMGOLD.
The advantage of being the owner is that you can better
manage the deployment of capital. Your hands are not tied, so
you can effect changes to improve performance and advance
projects forward at a faster rate. At our 95% owned Rosebel
mine, for example, the Company is moving ahead with a seven-year
mine optimization plan which is expected to generate an
estimated 60% return on capital. As the owner, we call the
shots and can advance the project at our own pace.
3. Unlock the Value of Niobec
The third leg of our strategic plan is to unlock the hidden
value of Niobec. IAMGOLD is one of only three major niobium
producers in the world and the only one in North America.
Despite niobium representing a significant portion of
operating cash flow, we are viewed as a pure gold company.
We are exploring several options to move this undervalued
asset outside of our core gold-driven business, where it will
shine on its own. The 34% increase in niobium reserves in
2010 from 2009 further reinforces our strategy to unlock the
value of this long-life asset.
4. Focus on Exploration Opportunities in Select
Geographic Regions
While expanding our existing assets is the most cost-effective
way to grow, our exploration group remains focused
on select under-explored regions where there is good
potential to discover long-life assets. We target ore bodies
with at least 2 million ounces in reserves and that have the
potential to produce more than 150,000 ounces annually.
With an interest in more than 20,000 square kilometres
of mineral lands in nine countries in West Africa and the
Americas, our fourth strategy is to continue to maintain a
robust pipeline of highly prospective exploration projects.
Effective Leadership
These strategies support our goal of having a stable of long-life,
low-cost mines, with close to 90% of attributable gold
production coming from mines owned by IAMGOLD. As this
letter is being written, the leadership team is putting these
strategies into action. My predecessors did an outstanding
job of assembling a balanced and well-seasoned executive
team. Collectively, this group has expertise in developing and
operating mines, liaising with foreign governments and
fostering strong community relations. They know how to
build, strengthen and grow a company. The result: a talented
and productive workforce, a portfolio of long-life producing
mines, a strong cash flow profile, a debt-free balance sheet
and a commitment to safety and sustainability.
On a final note, and a very important one, we have not
forgotten that our achievements in 2010 were overshadowed
by the death of an employee at our Niobec mine. And, in
February of this year we lost an employee of a contractor at
our Rosebel mine in Suriname. We are saddened by these
tragic accidents – a solemn reminder of the need to remain
vigilant to the hazards of mining. Of all the performance
metrics against which we measure success, none is more
important than safety.
With the continued hard work and dedication of our people,
I'm confident 2011 will be the year we unlock value,
enriching the lives of all our stakeholders.
Stephen J.J. Letwin
President and Chief Executive Officer
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