IAMGOLD Corp

TSX:IMG

Q1-2025 Earnings Call

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD First Quarter 2025, Operating and Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Graeme Jennings, VP, Investor Relations and Corporate Communications for IAMGOLD. Please go ahead, Mr. Jennings.

[Graeme Jennings, executive]

Thank you, operator, and welcome everyone to our conference call today. Joining us on the call are: Renaud Adams, President and Chief Executive Officer; Maarten Theunissen, Chief Financial Officer; Bruno Lemelin, Chief Operating Officer; Annie Torkia Lagace, Chief Legal and Strategy Officer; and Dorena Quinn, Chief People Officer.

We are calling today from IAMGOLD's Toronto office, which is located on Treaty 13 territory, on the traditional lands of many nations, including the Mississaugas of the Credit, the Anishnabeg, the Chippewa, Haudenosaunee, and the Wendat people. At IAMGOLD, we believe respecting and upholding Indigenous rights is founded upon relationships that foster trust, transparency, and mutual respect. Please note that our remarks on this call will include forward-looking statements and refer to non-IFRS measures. We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures included in the presentation and the reconciliations of these measures in our most recent MD&A, each under the heading non-GAAP financial measures.

With respect to the technical information to be discussed, please refer to the information in the presentation under the heading Qualified Person and Technical Information. The slides referenced on this call can be viewed on our website.

I will now turn the call over to our President and CEO, Renaud Adams.

[Renaud Adams, executive]

Thank you, Graeme, and good morning, everyone, and thank you for joining us. And I know it's a busy morning with the earnings results, so we'll do our best to move things along. IAMGOLD began the year with a modest production of 161,000 ounces, but yet achieved several key milestones that further position the company for a much stronger remainder of the year. We remain very confident in our 2025 attributable production guidance target of 735,000 ounces to 820,000 ounces with stronger quarterly production expected from each of our operations over the remainder of the year.

At Cote, we have recently celebrated the best months of operations in March and April, achieving monthly throughput of 1 million tonnes processed with the plant operating now at the 90% plus of nameplate. This progress positions us well to complete the ramp-up to nameplate production of 36,000 tonnes per day by the end of the year.

Meanwhile, we believe we have a significant amount of value yet to uncover. This year, we are conducting a significant drill program in the Cote and Gosselin zones in support of a technical report in 2026, incorporating a mine plan that will bring these zones together into a unified super pit that online a larger scale operation, build up a significant portion of the over 20 million ounces of resources in this zone, making Cote one of the largest gold mines in Canada.

At Essakane, we will continue to -- the safe operation of the mine, prioritizing the ability to maximize cash flow generations and dividend payment out of the country. As mining moves deeper into the pit in Q2, we expect to see improvements in grade reconciliation and stronger quality gold productions for the remainder of the year.

And at Westwood, our focus is on expanding our underground mining areas and continuing our strong record of resource to reserve conversion. Westwood made significant strides last year to become a positive cash flow generating asset, and we believe there is a significant potential to improve the value further through the drill bit and are increasing the feed of higher grade material to the mill.

Financially, we are quickly moving -- working through our gold prepayment arrangement, which is -- which in and of itself is a form of debt retirement. Taken together, with the prepays behind us by midyear, IAMGOLD will be an 800,000 ounce per year producer with full exposure to gold price and significant cash flow generation from 3 free cash flowing assets, but yet trading at a fraction of our mid-tier peers on the price to cash flow basis.

Further, with the Cote expansion scenario and the rapid growth of our Nelligan and Monster Lake assets in Quebec, which combined have nearly 9 million ounces of global resources, means IAMGOLD offer a robust organic growth portfolio within our own backyard.

Now let's dive into the first quarter. Operating performance always starts with safety as ensuring all of our employees and contractors go home safely is priority #1. In the first quarter, our total recordable injury frequency rate was 0.67, a slight uptick from the prior quarter. Management has instituted a new safety program in control with a focus on critical risk management and visible leadership to reduce high potential incidents.

Additionally, yesterday, the company released its 2024 Sustainability Report, which marked the 18th year of IAMGOLD disclosing the sustainability topics and information that are most material to our stakeholders and our business. As an organization and member of the community, we are proud of our dedication to responsible mining practices, the core element of the IAMGOLD culture.

Looking at operations, IAMGOLD started the year with attributable production of 161,000 ounces as both Cote and Westwood production was lighter than the prior quarter, partially offset by modestly higher production at Essakane. The first quarter was expected to be the lightest quarter of production this year due to the ramp-up in associated maintenance activity at Cote, limiting throughput early in the year and the expectation of the transitions to higher grade in the second half at Essakane.

At Westwood, production decreased from the prior quarter, but is expected to resume its recent track record of strong performance as stope development continues to improve flexibility in the mine.

Cash costs averaged $1,459 per ounce and all-in sustaining costs averaged $1,908 per ounce in the first quarter. Costs are expected to decline quarter-over-quarter as production ramps up, and we remain confident in our cost guidance for the year. While lighter, the first quarter production of 161,000 ounces represents a net increase of 7% year-over-year at an increased margin, largely driven by the additions of Cote Gold, which moved from first gold in March 2024 to 90%-plus nameplate in March 2025. This resulted in an increase of our mine site free cash flow to $140 million in Q1 compared to $46 million in the same period of the prior year.

With that, I will pass the call over to our CFO to walk us through our financial results and position. Maarten?

[Marthinus Theunissen, executive]

Thank you, Renaud, and good morning, everyone. In terms of our financial position, at the end of the quarter, IAMGOLD had $316.6 million in cash and cash equivalents and net debt of $882.3 million. The company has $210 million drawn on the credit facility and approximately $428.5 million remains available, resulting in liquidity at March 31 of approximately $745.8 million. We note that within our cash and cash equivalents, $200 million was held by Essakane, Burkina Faso; $46.9 million was held by the Cote Gold unincorporated joint venture; and $60.6 million was held in the Corporate Treasury.

Regarding our excess cash at Essakane, this cash is repatriated through dividend payments, of which the company will receive its share based on its ownership, so 90% currently, net of dividend taxes. The size of the dividend is dependent on cash held and the projected cash generation at Essakane. Last year, we declared $180 million dividend in the second quarter, with the company receiving its net share in September and October. We expect a similar process this year, in which we will be declaring our dividend in the second quarter with disbursement in the second half of the year.

On the debt side of the balance sheet, this year offers a significant inflection point for IAMGOLD with the increase in gold prices are providing us with the ability to accelerate our plan to reduce the amount of cost of our debt -- the amount and cost of our debt. One element of this that we are making good progress on is our delivery into the gold prepay arrangements. During the first quarter of this year, the company delivered 37,500 ounces into the gold prepay arrangements, and we are 75% complete with the last 37,500 ounces deliverable during the second quarter. This is a considerable amount of debt that the company has repaid. The cash flow impact of delivering into the 37,500 ounces totaled approximately $107 million during the quarter.

Subsequent to the quarter end, a further 12,500 ounces was delivered in April, reducing the outstanding balance of ounces remaining to be delivered into the prepay arrangements to 25,000 ounces as of today. Once we have completed delivering into the gold prepay arrangements as part of our plan to reduce our carrying cost of debt and debt levels, the company can start to repay its $400 million term loan at the end of May in $20 million installments at 104% of the face value and 101% of the face value to be paid after May 2026. The term loan has relatively higher interest in our other debt in our capital structure and responsibly paying down this facility would achieve our objective to reduce the amount and cost of our debt.

Looking at the cash flow waterfall for the first quarter at the bottom of Slide 7, we can see the impact of delivering into our gold prepayments has had on our operating cash flows. Cash from operating activities, including the noncash revenue of $77.7 million before financing charges that was received from the gold prepay was entered into and IAMGOLD would have received $107 million if the 37,500 ounces were sold in the market during the quarter. By July this year, the prepay obligations will be completed and IAMGOLD will be fully exposed to the gold price at a time when we expect to see increases in production.

Looking at the quarter and our financial results. Revenues totaled $477.1 million from sales of 174,000 gold ounces at an average realized price of $2,731 per ounce, including the impact of the gold prepay arrangement. Excluding the impact of the gold prepays, our average realized price was $2,909 per ounce. The strong gold price translated to an adjusted EBITDA of $204.5 million compared to $152.5 million in the first quarter 2024. Adjusted earnings were $55.2 million in the first quarter or $0.10 per share. Mine site free cash flow was: $57.6 million at Cote; $65.4 million at Essakane; and $16.6 million at Westwood, totaling $139.6 million for the quarter.

As we look ahead for IAMGOLD, we are continuously analyzing what the appropriate capital structure is for an organization of this size with expected cash flow generation. Ultimately, we look forward to discussing the potential of returning value to our shareholders, whether through share buybacks or dividends. But first, we need to ensure that we achieve our targets and that the business is appropriately funded and we have reduced our debt to appropriate levels.

And with that, I will pass the call to Bruno Lemelin.

[Bruno Lemelin, executive]

Thank you, Maarten. Starting with Cote Gold, it was a critical first quarter at Cote with the first winter at full production. As it is the case for any ramp-up of a large mining project, there is a learning curve for the operations and maintenance teams. They learn the stress points in every process and make adjustment to adapt to real conditions.

During the first quarter, we experienced accelerated maintenance in our grinding area. However, we managed to operate without major interruptions due to weather. We also hit new records for stability and utilization in March with continued improvement through April. This is very positive progress for an operation of this size. A year ago on March 31, Cote poured its first gold bar. Commercial production was then achieved effectively 4 months after starting production. And now we have hit the 90% monthly milestone about 11 months after pouring first gold. This is a great achievement, and we remain on target towards our goal to achieve full nameplate of 36,000 tonnes per day before the end of the year, again, within the 20-month estimate as projected initially.

Looking at the quarter, Cote produced 73,000 ounces on a 100% basis in the first quarter. Production was lower in the quarter due to lower tonnes processed and the revised grade profile of the mine. We need to note that the mine moves away from segregated stockpiling to a more efficient and streamlined bulk mining model. Mining activity totaled 10.8 million tonnes in the first quarter, essentially flat from Q4 2024. Ore mined decreased slightly to 3.1 million tonnes with an associated increase in the strip ratio to 2.5:1. The average grade of mined ore was 0.78 grams per tonne in the quarter, which reflects the updated mining schedule as mining activities expand the pit, as Cote transition towards a bulk mining model and reduces rehandling.

Further, we saw an increase in the volume of blasted ore in the pit provide greater flexibility in supporting the planned mill feed this year. The mining process improvements and the start of the transition towards bulk mining saw some immediate benefits as we saw a decrease in our mining unit cost to $3.49 per tonne, down from $4.19 per tonne in the prior quarter. Costs are expected to continue to decrease over the course of the year as mining operations continue to ramp up closer to the target of 1 million tonnes a week and rehandling is reduced.

On the processing side, mill throughput in the first quarter totaled 2.1 million tonnes as a result of maintenance and repair activities on the HPGR in January and February, as we discussed on our last earnings calls. The changeover of the HPGR rolls was completed in February 2025, and we continue to make improvements to increase the lifespan of the plant equipment. For the HPGR, this includes adding some water to reduce the generation of Ares dust, revising the roller liner material and ensuring that a replacement set of rollers is always at site and ready to go.

Once the repairs were completed in February, the plant was able to resume its momentum, achieving a record monthly throughput of 1 million tonnes in March or 90% of nameplate. This performance continued in April as over the last 30 days, Cote averaged 34,500 tonnes per day or 96% of nameplate, with a record 14 days in which the plant operated above nameplate capacity.

Head grades in the first quarter averaged 1.17 grams per tonne, which were in line with our guidance of 1.1 grams, 1.2 grams per tonne, with feed material comprised of a combination of direct feed ore and stockpiles.

Recoveries in the plant averaged 93% in the quarter, a modest step-up as we saw the gravity circuit come online in the quarter. The reconciliation between the reserve models, grade control models and mill feed continues in line within expected tolerance.

Milling cost was $20.18 per tonne milled during the first 3 months. Unit costs were elevated in the first quarter due to the lower tonnes processed, higher parts and contractor costs from the increased maintenance activities and costs associated with the refeed circuit to support the mill feed during maintenance period.

Unit costs are expected to decrease over the course of the year as throughput increases towards nameplate capacity and as operations and maintenance processes stabilize. For example, in March, when Cote processed 1 million tonnes, processing costs averaged around $15 a tonne. Further improvement can be expected with the installation of the additional secondary crusher that should reduce the use of the refeed circuit and related costs.

Looking ahead, we remain confident in our Cote Gold production guidance of 360,000 ounces to 400,000 ounces on a 100% basis, which is actually a doubling of production from last year to this year. The primary focus continues to be the ramp-up of the processing plants towards the goal of achieving design capacity of 36,000 tonnes per day by the end of this year. The installation of the second cone crusher in Q4 will provide further capacity and redundancy in the dry side of the plant in support of the operation and potential future expansion. The installation will require a multi-day shutdown, which is accounted for in the current guidance estimate.

Of course, achieving nameplate is just the start of our plans for value creation at Cote. Since initial design, the project has seen considerable resource growth where the original mine plan called for a 36,000 tonne per day plan, targeting just over 7 million ounces of reserves. And yet now Cote and Gosselin zones combined for over 16.2 million ounces of measured and indicated, and 4.2 million ounces of inferred and resources -- or over 20 million ounces together. Therefore, our plan this year is to conduct a thorough drill program of 45,000 meters focusing on the resource conversion at Gosselin in support of a technical report in 2026 that outlined a significantly upsized reserve base combining Cote and Gosselin into a super pit.

In the first quarter, we completed about 12,000 meters of this program prior to spring breakup. Operationally, we will continue to look for opportunities to improve, including options to increase processing plant capacity. Several components of the plant have been designed for 42,000 tonnes per day, and we have seen many, many days above 40,000 tonnes per day over the last year.

Longer term, a prudent strategy for mining an open pit, particularly in the gold environment where we are in, is to maximize and monetize the number of tonnes of ore mined as they become available for processing. As currently designed, Cote has a mining capacity to average an annual ore mining rate of approximately 50,000 tonnes per day versus our current nameplate processing of 36,000 tonnes per day. As part of the 2026 technical report, we will look to find the right balance to increase the scope of processing rates with the mining rates targeting a larger reserve base of the Cote-Gosselin super pit. We believe the results of this will outline a low capital intensive path forward, reinforcing Cote Gold's position as one of the largest gold mines in operation.

Turning to Quebec. The first quarter at Westwood saw a step down with production of 24,000 ounces, which was about 10,000 ounces less than the quarterly average last year. Underground mining volumes were generally in line with 89,000 tonnes mined or 987 tonnes per day. However, underground head grade came in at 6.28 grams per tonne compared to 8.78 grams per tonne in the same period last year. Grade mined from the underground mine was lower than the prior year due to temporary equipment challenges impacting blasting efficiency that required stope resequencing and increased dilution in certain stopes. We have seen blasting efficiencies and improvement in April, and we expect to see strong volumes from underground this year as the number of stopes drilled and loaded is nearly double what they were last year.

Mill throughput in the first quarter was 282,000 tonnes at an average blended head grade of 2.89 gram per tonne and 91% recoveries. Mill availability averaged 94% in the quarter, a good achievement and reflective of our team's ongoing maintenance effort. Cash costs and all-in sustaining costs came in above our guidance ranges for the year due to the lower production volumes with cash costs averaging $1,527 an ounce and all-in sustaining averaging $2,124 an ounce. Costs are expected to fall within guidance range seen here as volume increase in the remaining 9 months of the year.

Looking ahead, we remain confident in Westwood's ability to meet our production guidance with production of 125,000 ounces to 140,000 ounces. Open pit activities from Grand Duc are currently planned to be completed by the fourth quarter of 2025, though Grand Duc remain -- though Grand Duc stockpile material will contribute to the mill feed into 2027. However, should gold price remain where they are, there is a strong potential for further expansion and extension of the Grand Duc pit, which will be evaluated this year.

Finally, looking at Essakane, we saw a modest step-up in production from the fourth quarter last year with attributable production of 86,000 ounces. Mining activity totaled 10.9 million tonnes mined in the quarter with 2.4 million tonnes of ore mined, translating to a strip ratio to -- of 3.4:1, a decline from prior quarters as stripping activities required to open up Phase 6 and 7 move into the review mirror. Mill throughput in the first quarter was 3.1 million tonnes, which is in line with the typical quarter at Essakane, with no constraints on supply chain.

Average head grades were 1.08 grams per tonne in the quarter, which reflects mining in the upper benches of Phase 7. Grades tend to reconcile slightly below the reserve model during the earlier stages of mining a new phase and conversely to the positive as mining moves deeper into a phase as was experienced in the first half of 2024 when mining activities were on the later stages of Phase 5.

On a cost basis, Essakane reported cash cost of $1,557 per ounce and all-in sustaining cost of $1,846 an ounce to start the year. Costs are expected to improve as production improves through the year. As a whole, Essakane's costs have increased over the last few years due to higher landed fuel prices in country as well as higher supply chain and transportation costs impacted by the security situation. Further, as the gold price increases, there is an impact to cost due to royalties. For example, in the first quarter, royalties accounted for $203 per ounce.

Looking ahead, Essakane is on track to achieve its attributable production guidance target of 360,000 ounces to 400,000 ounces at the cost seen here. The mill is expected to operate at throughput and head grades in line with the current life of mine, though as mining moves deeper into Phase 6 and 7 in the second half of the year, grades are expected to reconcile positively over this period. While the cost of operations in the country has risen over the recent year, Essakane remains a world-class mine positioned to generate strong free cash flows as waste stripping expenditures are expected to decrease year-over-year.

Finally, it is worth highlighting the work ongoing at our second largest gold mining camp, the Nelligan and Monster Lake project in Chibougamau, Quebec. In the first quarter, we completed over 8,000 meters of drilling on our 13,000-meter program targeting the extension of the Nelligan deposit. Nelligan's mineral resources estimate was updated earlier this year, which saw indicated ounces increased to 3.1 million ounces with an average grade of 0.95 gram per tonne, and an additional 5.2 million ounces in inferred at similar grades. Nelligan mineralization remains open along stides and at depth with some of the most encouraging results at depth, as you can see in the diagram here. In addition, the drilling program at the Monster Lake project is also ongoing, targeting higher-grade underground structure.

With that, I will pass it back to Renaud. Renaud?

[Renaud Adams, executive]

Thank you, Bruno. So we look forward to the results of these programs as Nelligan has seen rapid growth from a relatively conservative drill program over the last 2 years. When you combine Nelligan with a high-grade satellite Monster Lake deposit, they are nearing 9 million ounces of resources in this mining camp already, positioning Nelligan at a relatively early stage among the largest gold projects in Canada with significant potential for further growth. Taken together, there is no question that our Chibougamau asset offers significant organic growth potential in a very mining-friendly jurisdictions in Canada.

So, thank you all. It is really an exciting time for IAMGOLD, and we're very, very positive about what the rest of 2025 holds for the company. Cote is entering the second quarter at 90%-plus throughput rate with further improvements to come, including the second cone crusher installation later this year. Westwood currently has record underground inventory ready to blast to drive up production for the remainder of the year. Essakane is moving into higher grade in the second half of the year, and there is substantial growth to come through the drill bit at Cote and Nelligan. So stay tuned, and thank you for your support.

With that, I would like to pass the call back to the operator for the Q&A. Operator?

[Operator]

[Operator Instructions] And today's first question comes from Anita Soni with CIBC World Markets.

[Anita Soni, analyst]

Just firstly, congratulations on getting Cote up to the 96k tonnes -- sorry, 96% throughput rate in the last 30 days. Secondly, I had a question on the mining rates and the grades that you were delivering from the pit. I think it was 0.78 grams per tonne and which was a little bit lower than what you delivered at the [ processing ] head grade. Can you just give me an idea of where your stockpile levels stand, particularly the high-grade and medium-grade portions?

And kind of give me some color on like how that -- one, firstly, how long is that 0.78 grams per tonne, the lower grades while you try to open up the pit going to persist? And then like are you mining higher grade? Like are you sort of upgrading the direct ore feed and supplementing that to the mill while you do that 0.78 grams per tonne? Just trying to get understanding how the grades and the throughput are going to evolve over the course of the year.

[Renaud Adams, executive]

So I'll ask Bruno for more detail. But just as a general comment, Anita, so I just want to bring this conversation back to when we release our guidance for the year. And just remind everyone that for the first 6 months of the year, there was already a plan to be at the lower grade, as you know, Bruno, the teams in the Cote, they are focused on repositioning the phases and so forth. So we were already kind of planning that we would be a little bit lower, but we will be using stockpile [ and in Essakane ]. So I'll pass it to Bruno for more detail on it. But to me, there is no real surprises there. Maybe slightly a little lower on the mining side, but because we continue to mill, or we were mining -- milling at a lower rate than the mining, so you could still increase your grade to the mill to the [ 1, 1.1, 1.2 ] [indiscernible]. But no real surprises. And maybe a reminder, last year was a bit the same, too. You could mine at the reserve grade, but increase your milling grade by nearly 50%. But now we're slowing down this. We go more direct feed, we avoid any unnecessary selective mining and so forth. So Bruno?

[Bruno Lemelin, executive]

Good morning, Anita. That's exactly right. In the coming quarters, the grade mine is going to increase more towards the 1 gram per tonne. We're also going to be mining more ore grades -- ore mined over time. So there will be some selectivity for sure, but we're trying to minimize that segregation so we can mine closer to reserve grade. So all in all, we're going to be within 1.1, 1.2. We have close to 2 million tonnes grading at over 0.8 gram per tonne, and we have 8 million tonnes grading at 0.55 gram per tonne. So whenever sometime we need to use the stockpile to feed, the stockpile varies in average around 0.8 gram per tonne. But for the next quarter, the mine -- the grade of the ore mine is going to be higher than 0.78 to answer your question.

[Anita Soni, analyst]

And then just in terms of the grades at Essakane, I think you said at the back half of the year you would see positive grade reconciliation. I think I also had a declining grade profile for the year. So does that mean, with positive grade reconciliation, that should be more of a flat profile for the year?

[Bruno Lemelin, executive]

It's going to be quite flat, to be honest. For the remainder of the year, it's going to be a grade that is going to be above the 1 gram per tonne. And because we're mining more ore than we are processing, we're going to be slightly selecting the higher-grade material for the [ new process ]. We also expect to have to see some good -- or to see the reconciliation to be as good as what we see right now.

[Renaud Adams, executive]

So maybe, Anita, just to add to this, like if you look at 2024, it was a bit of the opposite, right? So as we move from phase 5 to eventually exiting it, entering new phases, so I wish and hope that we're going to see very good results as we transition to the higher grade. Of course, we need to use what we see in reserve to plan and so forth. But it's very likely that we see the same phenomenon that we've seen in other phases. And as we transition to the better zones that you will see a significant kick on the head grade. So we're definitely expecting a stronger than Q1. But as Bruno said, we remain consciously prudent to not overstate what we could potentially see as grade, but we should normally see the same phenomenon as we enter better zones and deeper zones.

[Anita Soni, analyst]

And then just on the unit cost at Essakane, the processing cost came in better than I had expected -- I mean, better than any of the quarters you posted last year. So is there anything driving that in particular? Is it currency? Or is that something that will persist over the rest of the year? Or is that just maybe just sort of a onetime [indiscernible]?

[Renaud Adams, executive]

No, nothing specific to -- go ahead, Maarten.

[Marthinus Theunissen, executive]

Morning, Anita. One thing that is happening is, I believe, Essakane is running at a bit higher throughput rate, which is driving down the tonne. So it's a bit of absorbing some of the fixed costs.

[Operator]

[Operator Instructions] And the next question comes from Mohamed Sidibe with National Bank.

[Mohamed Sidibe, analyst]

Maybe just to follow up on Anita's unit cost improvement at Essakane. I was just wondering if this was also maybe positively impacted, or if you expect to see any positive impact from the lower fuel prices or diesel prices that we're seeing. Any comments on that?

[Marthinus Theunissen, executive]

So the total cost that we spent at Essakane was actually in line with what we expected to spend and in line with prior years as well. Fuel cost in Burkina takes a bit longer to adjust to the market prices. So we've not seen the reduction in oil prices coming in there. So it is really because we have processed a bit -- it's more a unit throughput impact that is driving it.

[Renaud Adams, executive]

And maybe I could add to this. When you look at the previous quarter, I wouldn't necessarily say that the mining costs were necessarily lower. I think they were in line with previous. But we did notice reductions of the milling processing costs in the quarter, as Maarten noticed compared to last quarter. But in the last year, we were systematically more like in the $1,850 and so far achieved $1,750. Yes, some yet good results, but we'll see in the next quarter. Sometimes it's just a bit of the timing of certain expenses and so forth. But we're definitely confident that we could repeat, at least minimum repeat, but we achieved that.

[Mohamed Sidibe, analyst]

And then just my second question would be at Westwood, given the lower grade in the quarter because of the temporary equipment challenges, could you maybe give us a little bit more color into what the grades may look into Q2? Is Q2 expected to be slightly still impacted by that? Or should we see a material improvement into Q2 at Westwood?

[Renaud Adams, executive]

So I'll ask Bruno to add some comments to it. So definitely, we're going to see an increase as we advance [indiscernible]. So with the change in the mining sequencing, of course, we went to lower grade. The throughput is there, the total tonnes. So it's just a matter of retransitioning back into. And there is no reason that you do not see the same as we were mining last year as we were approaching the end of the year. Bruno?

[Bruno Lemelin, executive]

Yes. So Mohamed, the grade for Westwood is going to be -- for the underground mine is going to be hovering between 8 and 12, so depending on the sequencing that we're going to be in. So the goal for us is always to try to be as close to the reserve grade [ underground ] as possible, like 9, 10 gram per tonne. So this is what we see for the next quarters and for the year.

[Mohamed Sidibe, analyst]

And if I could maybe slide in one last question, just on Burkina on the security situation and maybe the commentary made recently by the Prime Minister. Renaud, did you have any additional comments and color on that?

[Renaud Adams, executive]

I think internally, we remain extremely confident. Like the security situations, [indiscernible], so we continued to operate another quarter without any disruptions in the supply chains and so forth. To me and to us, there is really nothing new happening. There's a lot of talking and so forth, but it's the same information has been [ revisited ] from the last year and so forth. There is a question a bit on the timing of certain of the aspect. But no, I think our relationship and work with the government remain very strong. We never are even remotely close to think that Essakane could be [indiscernible], if any. A lot of it is interpretation. So no, we remain very confident to continue to operate. Strong operations, maintain the security, allowing us to operate at 100% capacity and so forth. And so far, we haven't seen anything but the strong support from the government in all matters. So no, we do not see it as an increased risk.

[Mohamed Sidibe, analyst]

Congrats on the good quarter at Cote.

[Operator]

The next question comes from Tanya Jakusconek with Scotiabank.

[Tanya Jakusconek, analyst]

Renaud, congrats on getting the mills back up again at Cote, doing quite well. I have a few questions. The first one I wanted to start on was just on Essakane. When you put out your cost guidance, I seem to remember it was at much lower pricing than $3,000. And now that we have the increased royalty rates from the government, it's over $3,000, they get to 8%. Can you remind me if your cash cost guidance reflects that? This is for Essakane.

[Renaud Adams, executive]

So I'll pass it to Maarten. Thanks for that.

[Marthinus Theunissen, executive]

Good morning, Tanya. So our cash cost guidance assumes the dividends and the increases, but our gold price assumption in our guidance was $2,500 an ounce. So if we look at our forecast, even with that increase, we still expect to come within the guidance range.

[Tanya Jakusconek, analyst]

Okay. [ That's fair ].

[Marthinus Theunissen, executive]

Yes.

[Tanya Jakusconek, analyst]

Okay. I just wanted to make sure because everyone's guidance is at that $2,500, $2,600 and all of these things that are moving up, and you just want to make sure that, that still is reflected in that guidance. Okay. So thank you so much for that. And then just maybe continuing on just again, I think when we last spoke, we were expecting a weak Q1, and then the strongest would be the Q4 with a stronger second half. Do we have an ability to -- so we obviously have improvement happening? Essakane seems to be flattish. We have improvements at Westwood and Cote. I think quarter on quarter at Cote and Westwood, I don't know if it's evenly divided in the next 3 quarters. But can we kind of try and break -- are we at that 48:52? Are we at 45:55, just to have an idea of how the year shakes out?

[Renaud Adams, executive]

A lot of components to that, but I'll let Bruno start, and maybe I'll...

[Bruno Lemelin, executive]

So at Essakane, it's going to be clearly a stronger H2 than H1 thing because, as you know, as we dig deeper into phase 6 and 7, we're going to see the higher grade in the second half of the year. For Westwood, we should see like the resume of the average production that we have enjoyed over the last quarters, hovering over 30,000 gold ounces per quarter. And Cote, that's going to be a continuous ramp-up, gradual ramp-up, almost linear toward the end of the year.

[Renaud Adams, executive]

So clearly the second half -- Tanya, so clearly, the second half will be stronger, as you combine the 3 elements that Bruno was mentioning. Of course, we have some tie-in to do in the crusher and so forth. But globally speaking, we see the 3 mines pretty strong in the second half with some sort of a bit of a transition in Q2, to all of those aspects that we have. But it's really the second half that's going to highlight the year.

[Tanya Jakusconek, analyst]

Yes. So maybe Q2 just a bit better than Q1, and then you have the bump up in Q3 and Q4.

[Renaud Adams, executive]

Yes.

[Tanya Jakusconek, analyst]

Yes. Okay.

[Renaud Adams, executive]

The 3 mines should perform well in Q2 compared to Q1.

[Tanya Jakusconek, analyst]

Yes. And then maybe coming back to what Maarten was just saying when he talked about the balance sheet, and he said, ultimately looking to return to shareholders through share buybacks, dividends, et cetera. Maybe we can kind of review what do you need to see both from an operational standpoint and a balance sheet standpoint before you would be comfortable in thinking about shareholder returns?

[Renaud Adams, executive]

Well, I will let Maarten describe how we think. But definitely, we don't see this company in difficulties to carry a certain level of debt. But I would definitely see on this year, we want to see a reduction of our net debt, cost, and volume. And eventually, of course, with the priority on the expensive $400 million term loan, that would be a priority. We don't necessarily see this company with the need to go absolutely free debt -- debt-free in the very short term. But Maarten, maybe you could add to this. But for us, it's really about bringing the level and cost to the, what we call, best-in-class and then after that, rethinking our capital allocation. Maarten?

[Marthinus Theunissen, executive]

Yes. Thanks, Renaud. And our focus will remain over the next 12 months to continue to perform in line with our production guidance. And depending on the gold price, it depends on how we would look at it. First priority is reducing the level of debt and our cost of debt. And then once we get to the back end of that, depending on what the gold price is, it will impact middle of next year or end of next year to see if there are options available. But it's hard because, as you know, the gold price has been very volatile. So our approach would just be to continue to focus on performing and executing on our debt, and then evaluate options when we're ready.

[Tanya Jakusconek, analyst]

Do you have a net debt-to-EBITDA target that you want to get to before -- and that would capture a gold price that you want to get to before you would start thinking about capital returns?

[Marthinus Theunissen, executive]

Our net debt-to-EBITDA ratio at the moment is about 1.1. We would like for it to be at 1 or less than 1, but you can't look at that when the gold price is above $3,000. So you need to look at what that would be if the gold price is lower as well. And that's why we say we continue to look at that, not just based on what the current gold price is, but also what it would potentially be when we are making those decisions.

[Tanya Jakusconek, analyst]

Okay. And I seem to think that you mentioned within 12 months out. So it wouldn't be something that we should think about for 2025. It would probably be in mid-'26 and thereafter. Would that be a fair statement?

[Marthinus Theunissen, executive]

Yes, that would be a fair statement. The [indiscernible] prepays, but it was a big repayment, so big impact on cash. We continue doing that. And then there is a lot of -- we have $200 million drawn on our credit facility and the $400 million on the second lien. So those are still big plans we have.

[Renaud Adams, executive]

But I think as you mentioned, Tanya, so as you hit like mid next year, should the gold price remain [indiscernible], I think we're going to be in a pretty good shape in the second half of next year.

[Tanya Jakusconek, analyst]

And can I ask an exploration question? I wanted to go back to the Chibougamau camp and that emerging district. And maybe just a little -- someone can explain to me like what are you -- how do you see this camp evolving? And how do you see yourself in this camp? Do you think you can do this on your own? Would you bring a partner in for this? Maybe some color on how this camp and your involvement in it?

[Renaud Adams, executive]

No, thank you for that. So what I like about this is not like a kind of a one source. If you're looking at the map and sketches, there is a -- it's really a trend. It's really a camp. It's not just limited to one. So yes, we're thinking big when it comes to Nelligan/Monster Lake. We have seen as well the hit ratios of our drilling in the last 2 years, which is also pretty exceptional, and [ it continues and it now it opens ]. And there is other area within the camp we haven't really touched. But how do I see it? I see it eventually a large gold resource base and the camp that combines open pit of type of average [ Canadian ] grade with underground higher grade. Like 2 things that we're good at doing and the combination of both approach from day 1 will give you a lot of flexibility.

Over the next 2 years, what I keep reminding everyone internally because everyone is excited about Nelligan is drill, drill like our objective in the next 2 years, '25, '26, benefiting from flow through we've taken this earlier this year is to build a resource base. A large open pit [indiscernible] resource base combined with a pretty decent underground high grade. So this is the objective of the next 2 years. I don't like to look at too much of the mineability of it in the short term. I prefer to think that we don't know yet how big that could be. But I don't see how this camp could not be a 15 million-plus ounces over time. And this is what we're focusing on.

So by the time we put the next day at Cote out there, it is our objective to have position already in Nelligan to a certain point as we can look at it as the next. When it comes to bringing partners, I think the situation has changed significantly with this company over the last few years. I don't see any need and a too early timeframe. I think we have more than the capacity, talent and resources in order to bring this resource base to the next level. But we would always consider the derisking aspect when it comes to the next phase and so forth. It's early stage at this stage. We don't have plans to bring, but we have an excellent experience of partnering with someone and building world-class. So we don't necessarily say that it won't happen, but we just don't need to -- absolutely don't see the need for a partner at this stage and prefer to bring this large resource base as a 100% owner.

[Tanya Jakusconek, analyst]

I was looking at it more from a talent perspective, right, because there's only so much, isn't it?

[Renaud Adams, executive]

Yes.

[Tanya Jakusconek, analyst]

Yes. Well, good luck with the drilling, and thank you for the slide. Look forward to hearing more about it as you drill away over the next 2 years.

[Operator]

Our next question comes from Carey MacRury with Canaccord Genuity.

[Carey MacRury, analyst]

Just a question on Essakane. Your reserves are at $1,500. I'm just wondering if you can just remind us what the mine life you're assuming there is? And if your reserves were at $2,000 or $2,500, what's the mine life extension potential there?

[Renaud Adams, executive]

I'll pass it to Bruno.

[Bruno Lemelin, executive]

So. Good morning, Carey. Of course, with the gold price increasing by close to $1,000 over the last 6 months, we'll have to revisit our gold price assumption when revising our mineral resources and mineral reserves. So this is a good question. We're going to challenge our current assumption, and it will certainly have an impact on our Essakane mine. Right now, we have enough material up until 2029. This year, we decided to have a more intense drilling campaign to see what would be the full potential of Essakane inside the fence. As you know, with the security situation, we're not exploring too much outside the premise of the mine. And so far what we're seeing is, we're seeing the deposits continue to extend north and south and at depth. So we're looking at different phases, and that will have to be evaluated with any new gold price assumptions. So I think we'll be able to come up with new information once we have a new mining plan that will dictate how much -- how many years we could gain according to those new gold price assumptions and according to those new block model coming from exploration.

[Renaud Adams, executive]

I'd like to add to this that while definitely, we see the industry, and I think it's just a matter of time, you will see some increase in the gold price used for reserve. We have quite a bit of a gap here. But I also want to stress that our strategy is largely to improve and increase through the drill bit. So don't want this company to be depending on the gold price to perform or to increase and so forth. So the gold price helps in a lot of ways in the debt repayment and so forth and free cash flowing. But it's important to us to measure performance and financial by how good we are to execute. And I think we've come along in the last 2 years in that way. So expect us to use the gold price to increase our drilling efforts. So this is where I want to see most of the ounces coming from the drill bit.

[Carey MacRury, analyst]

Congrats on the progress at Cote.

[Operator]

The next question is from Lawson Winder with Bank of America Securities.

[Lawson Winder, analyst]

Can I ask about Westwood and the potential to expand the -- extend the life of the open pit and add additional resources from Grand Duc? What is it that's being considered there? Is there a conversion of some of that inferred resource to the plan? And would you be able to give us an idea of what we're talking about in terms of ounces? Like there's about a 1.8 million ounce inferred resource there. Is a large piece at the open pitable material?

[Bruno Lemelin, executive]

Good morning, Lawson. So the Grand Duc, it's what we call typically a swing producer. It's very low grade. And what it does, it helps stabilizing the mill. It's a constant feed as opposed to the feed coming from underground that's a little bit more coming in an erratic manner. So we extract from the underground mine close to 400,000 tonnes a year, but we have mill capacity that exceeds that. So we want to capture that excess capacity to monetize any kind of source that would be in and around the Doyon-Westwood complex. So Grand Duc so far ticks all the checkbox. However, now I think we are at a certain limit under which we need to evaluate if further expansion would be making sense because it will require capital and moving some infrastructure. So there's always like a limit at which you can expand, and that's what we're going to be evaluating. Otherwise, Grand Duc has been very good for us, giving us like 30,000, 40,000 gold ounce a year, 20,000 sometimes. And it's a stabilizer. We see it as a stabilizer for the -- as the underground operation progresses.

[Renaud Adams, executive]

And about the same thing, too, is from my previous comment, I think there is an unbelievable opportunity at Westwood here to increase valuation through crystallizing more reserves. We have a resource base over 3 million ounces and just released last year a technical report limited to 1 million ounce. But our confidence, of course, in how we see what's good over the next years is more than [ incidence of ] 1 million. So there is a good room and opportunity as well through the drill bit to convert some and put maybe -- work a bit on modernizations and mine plan. But definitely interesting opportunity there to increase reserve and valuation.

[Lawson Winder, analyst]

No, I agree. It is very interesting. Can I also ask about the underground mine? So you're targeting 1,000 tonnes per day in terms of a mining rate. What -- I guess to put this question in 2 ways. One is, what are the underground process improvements that you're actually working on? And then thinking of those, what is the potential to expand beyond that 1,000 tonnes per day? And like, what's the theoretical limit given the ground conditions and other considerations around the geology and geotech?

[Bruno Lemelin, executive]

So to answer the question, actually, we're aiming at 1,000 tonnes per day. We are seeing good days at 1,100. Ultimately, what we'd like to achieve is 1,200 tonnes per day, and we believe that the limit would be closer to 1,300 tonnes per day, without changing too much the infrastructure. Most of the improvement would come with an improvement in underground transportation of the ore. That's what we did. We made some capital investment on our trucks and scoop trams and trolley and ore-pass system, and as well in terms of mine design and blasting techniques using [ upper ] zones instead of the regular sublevel long-term drilling. So all in all, we're doing a lot of great improvement month after month. And we see, I would say, 30% improvement potential, but yet to be captured.

[Lawson Winder, analyst]

And look, I appreciate you guys making time here. I just realized we're about 2 minutes past the hour. If I can, I'd like to ask one more question, just thinking around capital allocation and the balance sheet and how it's set to improve quite materially here. In the context of the recent Canadian asset sales from like Newmont and Barrick now having this ongoing process to sell Hemlo. How does M&A compete with the internal options, including expansions at Cote and the projects at Chibougamau?

[Renaud Adams, executive]

[indiscernible] it's more than one piece [indiscernible]. If you're really looking at our portfolio, right, where next year we're going to put into a new technical report out there, [indiscernible] significant increase in reserve resources. I would just talk about the Nelligan and so forth. So when you're looking at our organic -- potential organic growth for the next years to come, we truly do not see, at this stage of our company, the need in the short term, absolutely not. We're going to focus on our assets. Down the road, we'll see, right? Down the road, we'll see. But at this stage, for us, it's more than [indiscernible]. It would create more value to focus on organic growth than buying assets. And sorry for the background noise. We're competing with the window cleaner. So perfect timing. Sorry for the background noise.

[Operator]

And this does conclude today's question-and-answer session. At this time, I would like to hand the call back over to Graeme Jennings for any closing remarks.

[Graeme Jennings, executive]

Thank you very much, operator, and thank you, everyone, for joining us this morning. As always, should you have any additional questions, please reach out to Renaud or myself. Thanks. Thank you all. Be safe and have a great day.

[Operator]

Thank you. This brings to a close today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.