Exhibit 99.3
CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2009
2 | ||
3 | ||
Financial statements | ||
4 | ||
5 | ||
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9 to 55 |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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MANAGEMENT’S RESPONSIBILITYFOR FINANCIAL REPORTING
To the Shareholders and Directors of IAMGOLD Corporation
The accompanying consolidated financial statements of IAMGOLD Corporation (“the Company”), their presentation and the information contained in the annual report, including information determined by specialists, are the responsibility of management. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada. The financial information on the Company presented elsewhere in the annual report is consistent with that in the consolidated financial statements.
The integrity of the consolidated financial reporting process is the responsibility of management. Management maintains systems of internal controls designed to provide reasonable assurance that transactions are authorized, assets are safeguarded and reliable financial information is produced. Management selects accounting principles and methods that are appropriate to the Company’s circumstances, and makes certain determinations of amounts reported in which estimates or judgments are required.
The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting. The Board carries out this responsibility principally through its Audit Committee which consists of outside directors. The Board of Directors has also designated the Chairman of the Audit Committee as the Company’s financial expert. The Audit Committee meets periodically with management and the external auditors to discuss internal controls, auditing matters and financial reporting requirements. The Audit Committee satisfies itself that each party is properly discharging its responsibilities; reviews the quarterly and annual consolidated financial statements and any reports by the external auditors; and recommends the appointment of the external auditors for review by the Board and approval by the shareholders.
The external auditors audit the consolidated financial statements annually on behalf of the shareholders. The external auditors have full and free access to management and the Audit Committee.
Peter C. Jones | Carol T. Banducci | |||
Chief Executive Officer | Chief Financial Officer | |||
March 25, 2010 | March 25, 2010 |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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To the Shareholders of IAMGOLD Corporation
We have audited the consolidated balance sheets of IAMGOLD Corporation (“the Company”) as at December 31, 2009 and 2008, and the consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009 in accordance with Canadian generally accepted accounting principles.
KPMG LLP
Chartered Accountants, Licensed Public Accountants Toronto, Canada March 25, 2010 |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 3
(Expressed in thousands of US dollars)
At December 31 | Note | 2009 | 2008 | |||||
$ | $ | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | 7 | 191,374 | 117,989 | |||||
Gold bullion (market value $108,749; December 31, 2008: $151,079) | 8 | 40,408 | 70,191 | |||||
Receivables and other | 9 | �� | 83,082 | 64,163 | ||||
Inventories | 10 | 162,033 | 92,801 | |||||
476,897 | 345,144 | |||||||
Other long-term assets | 11 | 136,122 | 105,235 | |||||
Working interests | 12 | 173,278 | 153,171 | |||||
Royalty interests | 13 | 28,688 | 30,801 | |||||
Mining assets | 14 | 1,053,348 | 1,004,913 | |||||
Exploration and development | 15 | 786,079 | 158,331 | |||||
Goodwill | 16 | 334,004 | 342,046 | |||||
Other intangible assets | 8,373 | 12,045 | ||||||
2,996,789 | 2,151,686 | |||||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | 175,320 | 146,668 | ||||||
Dividends payable | 24,507 | 17,740 | ||||||
Credit facility | 19 | — | 50,000 | |||||
Current portion of long-term liabilities | 18 | 12,257 | 25,291 | |||||
212,084 | 239,699 | |||||||
Long-Term Liabilities: | ||||||||
Future income and mining tax liability | 20 | 237,379 | 159,739 | |||||
Asset retirement obligations | 21 | 97,337 | 70,490 | |||||
Other long-term liabilities | 10,216 | 11,706 | ||||||
344,932 | 241,935 | |||||||
Non-Controlling Interests | 23,112 | 14,386 | ||||||
Shareholders’ Equity: | ||||||||
Common shares | 23 | (b) | 2,203,269 | 1,655,755 | ||||
Contributed surplus | 36,693 | 39,242 | ||||||
Warrants | 23 | (d) | 148 | — | ||||
Retained earnings | 113,887 | 21,897 | ||||||
Accumulated other comprehensive income (loss) | 24 | 62,664 | (61,228 | ) | ||||
2,416,661 | 1,655,666 | |||||||
2,996,789 | 2,151,686 | |||||||
Commitment and Contingencies (note 30)
Subsequent events (notes 19, 23 and 29)
See the accompanying notes, which are an integral part of these consolidated financial statements.
On behalf of the Board
WILLIAM D. PUGLIESE Director | PETER C. JONES Director |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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CONSOLIDATED STATEMENTSOF EARNINGS
(Expressed in thousands of US dollars, except per share amounts)
Years ended December 31 | Note | 2009 | 2008 | 2007 | ||||||||
$ | $ | $ | ||||||||||
Revenues | 914,339 | 869,636 | 678,131 | |||||||||
Expenses: | ||||||||||||
Mining costs, excluding depreciation, depletion and amortization | 446,819 | 451,991 | 426,091 | |||||||||
Depreciation, depletion and amortization | 153,847 | 169,629 | 117,581 | |||||||||
600,666 | 621,620 | 543,672 | ||||||||||
313,673 | 248,016 | 134,459 | ||||||||||
Earnings from working interests | 12 | 36,036 | 24,273 | 25,392 | ||||||||
349,709 | 272,289 | 159,851 | ||||||||||
Other: | ||||||||||||
Corporate administration | 49,148 | 41,953 | 32,231 | |||||||||
Exploration and development | 39,762 | 33,628 | 28,446 | |||||||||
Impairment charges | 25 | 98,069 | 129,861 | 99,628 | ||||||||
Net interest expense (income) | 26 | 680 | (1,697 | ) | (2,486 | ) | ||||||
Foreign exchange loss (gain) | (26,967 | ) | 1,068 | 1,911 | ||||||||
Derivative loss (gain) | 27 | (7,047 | ) | 4,341 | (549 | ) | ||||||
Gain on sale of gold bullion | (36,628 | ) | — | — | ||||||||
Other net expense (income) | 1,804 | 1,510 | (411 | ) | ||||||||
118,821 | 210,664 | 158,770 | ||||||||||
Non-controlling interests | 8,784 | 3,120 | 1,764 | |||||||||
127,605 | 213,784 | 160,534 | ||||||||||
Earnings (loss) before income and mining taxes | 222,104 | 58,505 | (683 | ) | ||||||||
Income and Mining Taxes: | 20 | |||||||||||
Current taxes | 92,274 | 76,340 | 26,958 | |||||||||
Future taxes expense (recovery) | 15,707 | (7,919 | ) | 14,419 | ||||||||
107,981 | 68,421 | 41,377 | ||||||||||
Net earnings (loss) | 114,123 | (9,916 | ) | (42,060 | ) | |||||||
Weighted average number of common shares outstanding (in thousands) | 23 | (j) | ||||||||||
Basic | 352,755 | 295,430 | 293,284 | |||||||||
Diluted | 354,631 | 295,430 | 293,284 | |||||||||
Basic and diluted net earnings (loss) per share | 0.32 | (0.03 | ) | (0.14 | ) | |||||||
See the accompanying notes, which are an integral part of these consolidated financial statements.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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CONSOLIDATED STATEMENTSOF COMPREHENSIVE INCOME
(Expressed in thousands of US dollars)
Years ended December 31 | Note | 2009 | 2008 | 2007 | |||||||
$ | $ | $ | |||||||||
Net earnings (loss) | 114,123 | (9,916 | ) | (42,060 | ) | ||||||
Other comprehensive income, net of tax: | |||||||||||
Cumulative translation adjustment | |||||||||||
Unrealized gain (loss) on translating financial statements of net investment in self-sustaining foreign denominated operations | 103,040 | (78,561 | ) | 29,883 | |||||||
Reversal of unrealized foreign exchange gain on disposal of the Sleeping Giant Mine | — | (2,045 | ) | — | |||||||
103,040 | (80,606 | ) | 29,883 | ||||||||
Change in unrealized gain (loss) on available-for-sale financial assets | |||||||||||
Unrealized gain (loss) | 22,161 | (6,158 | ) | (3,978 | ) | ||||||
Income tax impact | (3,279 | ) | 912 | 434 | |||||||
18,882 | (5,246 | ) | (3,544 | ) | |||||||
Reversal of unrealized loss following the impairment and disposal of available-for-sale financial assets | |||||||||||
Unrealized loss | 2,449 | 409 | 1,624 | ||||||||
Income tax impact | (479 | ) | (4 | ) | (180 | ) | |||||
1,970 | 405 | 1,444 | |||||||||
Total other comprehensive income (loss), net of tax | 24 | 123,892 | (85,447 | ) | 27,783 | ||||||
Comprehensive income (loss) | 238,015 | (95,363 | ) | (14,277 | ) | ||||||
See the accompanying notes, which are an integral part of these consolidated financial statements.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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CONSOLIDATED STATEMENTSOF SHAREHOLDERS’ EQUITY
(Expressed in thousands of US dollars)
Years ended December 31 | Note | 2009 | 2008 | 2007 | ||||||||
$ | $ | $ | ||||||||||
COMMON SHARES | ||||||||||||
Balance, beginning of year | 1,655,755 | 1,633,119 | 1,625,994 | |||||||||
Issuance of shares, net of issue costs | 547,514 | 22,636 | 7,125 | |||||||||
Balance, end of year | 23 | (b) | 2,203,269 | 1,655,755 | 1,633,119 | |||||||
CONTRIBUTED SURPLUS | ||||||||||||
Balance, beginning of year | 39,242 | 20,034 | 19,153 | |||||||||
Options issued on acquisition of Orezone | 5 | 684 | — | — | ||||||||
Exercise of options | (8,475 | ) | (9,218 | ) | (1,974 | ) | ||||||
Transfer of fair value of expired warrants | — | 24,391 | — | |||||||||
Share bonus plan | (838 | ) | — | — | ||||||||
Stock-based compensation | 23 | (i) | 6,080 | 4,035 | 2,855 | |||||||
Balance, end of year | 36,693 | 39,242 | 20,034 | |||||||||
WARRANTS | ||||||||||||
Balance, beginning of year | — | 24,391 | 24,391 | |||||||||
Transfer of fair value of expired warrants | — | (24,391 | ) | — | ||||||||
Warrants issued on acquisition of Orezone | 5 | 148 | — | — | ||||||||
Balance, end of year | 23 | (d) | 148 | — | 24,391 | |||||||
RETAINED EARNINGS | ||||||||||||
Balance, beginning of year | 21,897 | 49,553 | 109,238 | |||||||||
Net earnings (loss) | 114,123 | (9,916 | ) | (42,060 | ) | |||||||
Dividends | (22,133 | ) | (17,740 | ) | (17,625 | ) | ||||||
Balance, end of year | 113,887 | 21,897 | 49,553 | |||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||
Balance, beginning of year | (61,228 | ) | 24,219 | (3,564 | ) | |||||||
Other comprehensive income (loss) of the period | 123,892 | (85,447 | ) | 27,783 | ||||||||
Balance, end of year | 24 | 62,664 | (61,228 | ) | 24,219 | |||||||
TOTAL SHAREHOLDERS’ EQUITY | 2,416,661 | 1,655,666 | 1,751,316 | |||||||||
See the accompanying notes, which are an integral part of these consolidated financial statements.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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CONSOLIDATED STATEMENTSOF CASH FLOWS
(Expressed in thousands of US dollars)
Years ended December 31 | Note | 2009 | 2008 | 2007 | ||||||||
$ | $ | $ | ||||||||||
Operating Activities: | ||||||||||||
Net earnings (loss) | 114,123 | (9,916 | ) | (42,060 | ) | |||||||
Disbursement to asset retirement obligations | (6,661 | ) | (9,769 | ) | (359 | ) | ||||||
Settlement of derivatives | (4,416 | ) | (2,260 | ) | — | |||||||
Items not affecting cash: | ||||||||||||
Earnings from working interests | (36,036 | ) | (24,273 | ) | (25,392 | ) | ||||||
Depreciation, depletion and amortization | 153,847 | 169,629 | 117,581 | |||||||||
Impairment charges | 98,069 | 129,861 | 99,628 | |||||||||
Amortization of forward sales liability | (10,472 | ) | (17,874 | ) | (34,935 | ) | ||||||
Future income and mining taxes | 15,707 | (7,919 | ) | 14,419 | ||||||||
Stock-based compensation | 23 | (i) | 6,080 | 4,035 | 2,855 | |||||||
Unrealized derivative loss (gain) | 27 | (6,131 | ) | 4,341 | (549 | ) | ||||||
Gain on sale of gold bullion | (36,628 | ) | — | �� | — | |||||||
Asset retirement obligations adjustments | 21,726 | 4,984 | 8,361 | |||||||||
Non-controlling interests | 8,784 | 3,120 | 1,764 | |||||||||
Foreign exchange loss (gain) | (27,434 | ) | 2,867 | 2,018 | ||||||||
Other | 4,980 | 2,073 | (1,878 | ) | ||||||||
Change in non-cash working capital | (38,580 | ) | 9,346 | (22,306 | ) | |||||||
256,958 | 258,245 | 119,147 | ||||||||||
Investing Activities: | ||||||||||||
Acquisitions | (7,765 | ) | (98,273 | ) | (173 | ) | ||||||
Short-term deposits | — | — | 39 | |||||||||
Investments | (8,061 | ) | (1,961 | ) | — | |||||||
Restricted cash | 5,311 | (4,205 | ) | (379 | ) | |||||||
Mining assets | (105,868 | ) | (159,506 | ) | (96,959 | ) | ||||||
Exploration and development | (346,696 | ) | (9,813 | ) | (23,179 | ) | ||||||
Long-term ore stockpiles | (9,342 | ) | (17,808 | ) | (9,586 | ) | ||||||
Net proceeds (acquisitions) of other assets | (1,032 | ) | (968 | ) | 14,977 | |||||||
Proceeds from sale of gold bullion | 66,411 | — | — | |||||||||
(407,042 | ) | (292,534 | ) | (115,260 | ) | |||||||
Financing Activities: | ||||||||||||
Proceeds from loan | 72,000 | 50,000 | 7,500 | |||||||||
Repayment of long-term liabilities and credit facility | (166,581 | ) | (4,960 | ) | (36,694 | ) | ||||||
Issue of common shares, net of issue costs | 308,356 | 14,465 | 5,089 | |||||||||
Share purchase loan | — | — | 295 | |||||||||
Dividends paid | (17,740 | ) | (17,625 | ) | (17,570 | ) | ||||||
196,035 | 41,880 | (41,380 | ) | |||||||||
Impact of foreign exchange on cash and cash equivalents | 27,434 | (2,867 | ) | (2,018 | ) | |||||||
Increase (decrease) in cash and cash equivalents from continuing operations | 73,385 | 4,724 | (39,511 | ) | ||||||||
Cash and cash equivalents from discontinued operations | 6 | — | — | 28,451 | ||||||||
Net increase (decrease) in cash and cash equivalents | 73,385 | 4,724 | (11,060 | ) | ||||||||
Cash and cash equivalents, beginning of year | 117,989 | 113,265 | 124,325 | |||||||||
Cash and cash equivalents, end of year | 7 | 191,374 | 117,989 | 113,265 | ||||||||
Information related to consolidated statements of cash flows (note 29)
See the accompanying notes, which are an integral part of these consolidated financial statements.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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NOTESTO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in notes are in US dollars, and tabular amounts are in thousands of US dollars, except where otherwise indicated)
1. NATUREOF OPERATIONSAND BASISOF PRESENTATION
IAMGOLD Corporation (“IAMGOLD” or “the Company”) is engaged in the exploration, development and operation of gold mining properties and the operation of a niobium mine. The consolidated financial statements of IAMGOLD are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). Summarized below are those policies considered significant to the Company. Reference to the Company included herein means the Company and its consolidated subsidiaries and joint ventures.
Certain 2008 and 2007 comparative figures have been reclassified to conform to the consolidated financial statement presentation adopted in 2009.
2. SIGNIFICANT ACCOUNTING POLICIES
(i) Basis of consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. Interests in joint ventures are accounted for by the proportionate consolidation method. The Company applies the equity method of accounting for its working interests. All significant intercompany balances and transactions have been eliminated.
Significant properties of the Company are accounted for as follows:
Name | Location | Ownership Interest | Status | ||||
Rosebel Mine | Suriname | 95 | % | Consolidated | |||
Doyon Division including the Westwood Project | Canada | 100 | % | Consolidated | |||
Mupane Mine | Botswana | 100 | % | Consolidated | |||
Sadiola joint venture(1) | Mali | 41 | % | Proportionate consolidation | |||
Yatela joint venture | Mali | 40 | % | Proportionate consolidation | |||
Tarkwa Mine | Ghana | 18.9 | % | Equity method of accounting | |||
Damang Mine | Ghana | 18.9 | % | Equity method of accounting | |||
Essakane Project | Burkina Faso | 90 | % | Consolidated | |||
Quimsacocha Project | Ecuador | 100 | % | Consolidated | |||
Niobec Mine | Canada | 100 | % | Consolidated |
(1) | On December 29, 2009, the Company purchased an additional 3% interest in Société d’Exploitation des Mines d’Or de Sadiola S.A. (“SEMOS”) from the International Finance Corporation (“IFC”), increasing the Sadiola joint venture ownership interest to 41% (note 5). |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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(ii) Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported year. The most significant estimates relate to mineral reserves and resources, purchase price allocation, depreciation, depletion and amortization, long-lived asset and goodwill valuations, fair value of financial instruments, asset retirement obligations, stock-based compensation, income and mining taxes, and contingent liabilities. Actual results could be materially different from those estimates.
(iii) Functional and reporting currency
The US dollar is the functional and reporting currency of the Company.
The functional currency of Canadian mining activities is the Canadian dollar. Assets and liabilities of Canadian mining activities are translated into US dollars at the exchange rate in effect at the balance sheet date and revenues and expenses are translated at the average rate in effect during the period. Within the Canadian operations, translation adjustments arising from changes in exchange rates are deferred and included in cumulative translation adjustment within accumulated other comprehensive income.
The US dollar is the functional currency for the Company’s activities in Guyana, Suriname, Ecuador, Peru and Africa as all proceeds from the sale of production and a significant portion of disbursements are in US dollars.
(iv) Financial instruments
Cash and cash equivalents, and restricted cash
Cash and cash equivalents, and restricted cash are designated as held-for-trading and are recorded at fair value.
Receivables, accounts payable and accrued liabilities
Receivables excluding prepaid expenses, derivative contracts (note 9), accounts payable and accrued liabilities are recorded at amortized cost.
Marketable securities
Investments in marketable securities designated as available-for-sale are accounted for at their fair value, which is determined based on the last quoted market price. Changes in market value as well as the related tax impact are accounted for in other comprehensive income (“OCI”) until the marketable security is sold or is determined to be other than temporarily impaired. When marketable securities are sold or are determined to be other than temporarily impaired, the related accumulated change in OCI is reversed and the actual gain or loss on disposal or the impairment charge is accounted for in the consolidated statement of earnings. Investments in equity instruments that do not have a quoted market price in an active market are measured at cost.
Warrants
Warrants held in other companies are classified as held-for-trading and measured at fair value using the Black-Scholes pricing model. Unrealized gains or losses related to changes in fair value are reported under “Derivative gain or loss” in the consolidated statement of earnings.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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Gold receivable
Gold receivable was considered a hybrid instrument composed of a receivable and an embedded derivative that were accounted for separately. The receivable was accounted for as an interest bearing receivable, with accrued interest charged to earnings. The embedded derivative was marked-to-market at each balance sheet date based on the change in gold price with the variation charged to earnings as a derivative gain or loss.
Credit facility
The credit facility is accounted for at amortized cost, using the effective interest method. Credit facility issue costs are capitalized in other long-term assets and the current portion is included in prepaid expenses. Amortization is calculated on a straight-line basis over the term of the credit facility.
Commodity and currency contracts
The gold forward sales contracts, assumed through the acquisition of Gallery Gold Limited (“GGL”), were accounted for as normal purchase and sales contracts whereby deliveries were recorded at their respective forward prices. On delivery of gold into the forward contracts, the related acquired liability was amortized and recorded into gold revenue.
The change in market value of forward contracts, assumed through the acquisition of Cambior Inc. in 2006, was included in the statement of earnings as a derivative gain or loss. On delivery of gold into the forward contracts, the related marked-to-market value was amortized and recorded into gold revenue.
The derivative instruments related to currency, heating oil and aluminum entered into in 2008 and 2009, and gold forward contracts assumed following the acquisition of EURO Ressources, are accounted for at their fair value on the balance sheet date. The valuation is based on forward rates considering the market price, rate of interest and volatility and takes into account the credit risk of the financial instrument. The fair value of these derivative instruments is included on the balance sheet and the change in fair value from the acquisition or inception is included in the statement of earnings as a derivative gain or loss.
Gold bullion
Investments in gold bullion are valued at the lower of average cost and net realizable value.
(v) Inventories
Gold production inventory, niobium production inventory and concentrate inventory are valued at the lower of cost and net realizable value. Production costs include the cost of materials, labor, mine site production overheads and depreciation to the applicable stage of processing.
Ore stockpiles are valued at the lower of cost and net realizable value. The cost of ore stockpiles is increased based on the related current mining cost of the period, and decreases in ore stockpiles are charged back to mining costs using the weighted average cost per tonne. Ore stockpiles are segregated between current and long-term inventory.
Mine supplies are valued on an average purchase cost basis with appropriate provisions for redundant and slow-moving items.
(vi) Capital assets
Capital assets include furniture and equipment, computer equipment, software, scientific instruments and equipment, vehicles, land and leasehold improvements. Depreciation is calculated on a straight line basis based on the estimated useful lives of the assets and in the case of leasehold improvements, over the remaining lease term determined at the time of acquisition.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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(vii) Working interests
Working interests are accounted for using the equity method. Any fair value increment related to the original acquisition of the working interests is amortized on a units-of-production basis over the estimated economic life of the mine corresponding to the proven and probable reserves. Working interests include changes in the investment as a result of income or loss reported by the company in which IAMGOLD has invested. This change is accounted for in the statement of earnings as earnings from working interests. Cash received from working interests is accounted for as a decrease of working interests in the balance sheet.
(viii) Royalty interests
The Company records its royalty interests at cost. Amortization of producing royalty interests is calculated using the units-of-production method with an estimated economic life of mine corresponding to the property’s reserves and resources.
(ix) Mining assets and stripping costs
Mining assets represent the capitalized expenditures related to the operation of mineral properties including plant and equipment, mining properties, deferred costs and construction in progress. Upon commencement of commercial production, related capital expenditures for any given mining assets are amortized on a straight-line basis or using the units-of-production method over the estimated economic life of the mine which refers to proven and probable reserves. If the expected useful life of the assets is less than the life of the deposit, depreciation is based on their anticipated useful life on a straight-line basis. If a property is abandoned or deemed economically unfeasible, the related project balances are written off. Amounts relating to values beyond proven and probable (“VBPP”) reserves are not amortized until resources are converted into reserves.
Mining costs associated with stripping activities in an open pit mine are expensed unless the stripping activity can be shown to represent a betterment to the mineral property which requires such costs be capitalized. Capitalized stripping costs are amortized over the reserves that directly benefit from the stripping activity on a units-of-production basis.
(x) Exploration and development
Exploration expenses incurred prior to the date of establishing that a property has mineral resources with the potential of being economically recoverable are charged against earnings. Development costs incurred subsequent to this date are capitalized until such time as the projects are brought into production or are deemed economically unfeasible. All administrative costs that do not directly relate to specific exploration and development activity are expensed as incurred. Interest costs are not capitalized until the decision to develop a property is made.
(xi) Business combinations
Business combinations are accounted for using the purchase method of accounting, whereby identifiable assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition with the excess of the purchase price over such fair value recorded as goodwill.
If a transaction does not meet the definition of a business combination as per Canadian GAAP standards, the transaction is recorded as an acquisition of an asset.
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(xii) Impairment of long-lived assets
Long-lived assets are reviewed for impairment periodically or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss must be recognized if the carrying amount of a long-lived asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. In that event, the asset must be written down to its fair value (present value of future cash flows) and an impairment loss is recorded in earnings. Net estimated future cash flows from each long-lived asset are calculated based on anticipated future production (proven and probable reserves as well as value beyond proven and probable reserves), estimated metal prices, operating costs, capital expenditures and site restoration expenses. The Company will determine fair value from recent transactions involving sales of similar properties, if deemed more appropriate in the circumstances. Management’s estimate of future cash flows is subject to risk and uncertainties and it is reasonably possible that changes could occur with evolving economic conditions, which may affect the recoverability of the Company’s long-lived assets and may have a material effect on the Company’s results of operations and financial position.
(xiii) Goodwill and goodwill impairment
Goodwill assigned to the reporting units following a business combination is not amortized. The carrying value of goodwill on the balance sheet is tested for impairment at least annually or when there is evidence of potential impairment. The fair value of each reporting unit, that includes goodwill, is compared to the total carrying amount (including goodwill) of that reporting unit. If the fair value exceeds the carrying value, goodwill is not considered to be impaired. If the fair value is less than the carrying value, the fair values of the assets and liabilities within the reporting unit are estimated. The difference between the fair value of the identifiable assets and liabilities within the reporting unit and the fair value of the entire reporting unit represents the implied fair value of the goodwill of the reporting unit. When the carrying value of goodwill exceeds the implied fair value, the excess is charged to earnings in the period in which the impairment is determined.
(xiv) Other intangible assets
Other intangible assets are related to the fair value of favourable supplier contracts accounted for following the purchase of Cambior in 2006. Fair value was determined using a differential cost method based on the costs expected to be saved due to the favorable terms of the supplier contracts. Other intangible assets are amortized under the straight-line method based on the terms of each contract.
(xv) Income and mining taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, future income and mining tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future income and mining tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded against any future income and mining tax asset if it is more likely than not that the asset will not be realized. The effect on future income and mining tax assets and liabilities of a change in tax rates is recognized in earnings in the year that includes the date of enactment or substantive enactment. Mining taxes represent Canadian provincial taxes levied on mining operations and are classified as income taxes since such taxes are based on a percentage of mining profits.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 13
(xvi) Asset retirement obligations
The Company recognizes, when the legal obligation is incurred, the fair value of an estimated liability for the future cost of restoring a mine site upon termination of the operation with a corresponding increase in the carrying value of the related long-lived asset. The Company amortizes the amount added to the asset using the depreciation method established for the related asset. An accretion expense in relation with the discounted liability over the remaining life of the mining properties is recorded in mining costs. The liability is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation with a corresponding increase in the carrying value of the related long-lived asset. Adjustments to asset retirement obligations for closed mines and environmental and ongoing site reclamation costs at operating mines are charged to the statement of earnings in the period during which they occur.
(xvii) Flow-through shares
Flow-through common shares require the Company to incur an amount equivalent to the proceeds of the issue on prescribed resource expenditures in accordance with the applicable tax legislation. The Company recognizes future income tax liability for flow-through shares, and reduces shareholders’ equity, on the date that the tax credits associated with the expenditures are renounced and provided there is reasonable assurance that the expenditures will be made.
(xviii) Stock-based compensation plans
The Company has the following stock-based compensation plans with related costs included in corporate administration expenses in the statement of earnings.
a. Share options
Share option compensation costs are accounted for as an expense in the statement of earnings and credited to contributed surplus within shareholders’ equity. This cost is measured based on the fair value of the option on the grant date, calculated by the Black-Scholes option pricing model, and is recognized over the related service period. Consideration paid by employees on exercise of the options and the grant-date fair value of options exercised are added to common shares.
b. Share bonus plan
The Company expenses share bonuses granted to employees over the three-year or five-year vesting period. Share bonuses to directors are expensed on issuance as they vest immediately.
c. Deferred share plan
The Company expenses deferred share units granted to employees over a three- or four-year vesting period.
d. Share purchase plan
Effective January 1, 2007, the Company initiated a share purchase plan where the Company contributes towards the purchase of shares on the open market. The Company’s contribution vests on December 31 of each year and is charged to earnings in the year of contribution.
(xix) Revenue recognition
Revenues from the sale of gold and by-products (silver and copper concentrate) are recognized when the metal is delivered and title transfers to the counterparties to the transaction.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 14
Revenues for the sale of niobium (ferroniobium) are recognized when legal title (rights and obligations) to the ferroniobium is transferred to the buyer.
Royalty revenue is recognized when the Company has reasonable assurance as to measurement and collectability. The Company holds two types of royalties:
• | Revenue based royalties such as Net Smelter Return (“NSR”) or Gross Proceeds Royalties: |
Revenue based royalties are determined based on the proceeds from the sale or other disposition of minerals recovered from the property on which the royalty interest is held. The form, manner and timing of the receipt of any specific royalty payment are governed by the corresponding royalty agreement with the owner of the royalty property.
• | Profits based royalties such as Net Profits Interests (“NPI”): |
An NPI royalty is based on the profit after allowing for costs related to production as defined in the relevant royalty agreement. Payments generally begin once the Company has received pay-back of capital costs. The royalty holder is responsible neither for providing capital, nor covering operating losses or environmental liabilities. Revenue is recognized in accordance with the relevant agreement.
(xx) Earnings per share
Basic earnings per share are calculated by dividing net earnings by the weighted average number of common shares outstanding during the year. The calculation of diluted earnings per share uses the treasury stock method which adjusts the weighted average number of shares for the dilutive effect of share options and warrants.
The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. No potential common shares are included in the computation of any diluted per share amount when the Company has a loss before discontinued operations.
3. CHANGESINACCOUNTINGPOLICIES
(a) Goodwill and intangible assets
In February 2008, the Canadian Institute of Chartered Accountants (“CICA”) replaced Section 3062, Goodwill and other intangible assets and Section 3450, Research and development costs, with Section 3064, Goodwill and intangible assets. This section gives the definition and establishes standards for the recognition, measurement and disclosure of goodwill subsequent to its initial recognition, and intangible assets. Standards for goodwill and intangible assets following a business combination remain unchanged. Section 3064 gives guidance about internally generated intangible assets. This section was effective for the Company in 2009. The adoption of this new standard did not have a material impact on the Company’s consolidated financial statements in 2009.
(b) Credit risk and the fair value of financial assets and financial liabilities
In January 2009, the Emerging Issues Committee (“EIC”) issued EIC-173, Credit risk and the fair value of financial assets and financial liabilities. The EIC reached a consensus that an entity’s own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities, including derivative instruments. This accounting treatment should be applied retrospectively without restatement of prior periods. The application of EIC-173 did not have a material impact on the Company’s consolidated financial statements in 2009.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 15
(c) Mining exploration costs
In March 2009, the CICA issued EIC-174, Mining exploration costs replacing EIC-126, Accounting by mining enterprises for exploration costs. EIC-174 provides guidance on the capitalization and the impairment of exploration costs. This standard was effective in 2009. The application of the EIC did not have an impact on the Company’s consolidated financial statements.
(d) Amendment to Section 3862, Financial instruments – Disclosures
In June 2009, the CICA issued amendments to Section 3862, Financial instruments – Disclosures, effective for the Company in its 2009 annual consolidated financial statements. These amendments include additional disclosure requirements about fair value measurements of financial instruments using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. In addition, these amendments enhance liquidity risk disclosure requirements. Disclosure requirements are reflected in note17.
(e) Amendment to Section 3855, Financial instruments – Recognition and measurement
In August 2009, Section 3855, Financial instruments – Recognition and measurement was amended following changes made to Section 3855 in December 2008 which allow the reclassification of certain held-for-trading financial assets in certain circumstances. The amendments add guidance concerning the assessment of embedded derivatives upon reclassification of a financial asset out of the held-for-trading category. The amendment applies to reclassifications made on or after July 1, 2009.
Section 3855 was also amended with the new definition of loans and receivables, to change the categories of financial assets into which a debt instrument is required or permitted to be classified; to change the impairment model for held-to-maturity financial assets to the incurred credit loss model of Section 3025, Impaired loans; and to require reversal of previously recognized impairment losses on available-for-sale financial assets in specified circumstances. These amendments applied to the Company’s annual consolidated financial statements for 2009.
The application of these amendments did not have an impact on the Company’s consolidated financial statements.
4. FUTURE ACCOUNTING POLICIES
(a) Section 1582, Business combinations; Section 1601, Consolidated financial statements; Section 1602, Non-controlling interests; and Amendments to Section 3251, Equity
The CICA issued three new accounting standards in January 2009: Section 1582, Business combinations; Section 1601, Consolidated financial statements; Section 1602, Non-controlling interests; and amendments to Section 3251, Equity. These new standards will be effective for the Company in 2011 and earlier adoption is permitted as of the beginning of a fiscal year. The Company is in the process of evaluating the requirements of the new standards.
Section 1582 replaces Section 1581 and establishes standards for the accounting for a business combination. It provides the Canadian equivalent to International Financial Reporting Standards IFRS 3R – Business Combinations.
Sections 1601 and 1602 together replace Section 1600, Consolidated financial statements. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of International Financial Reporting Standard lAS 27 – Consolidated and separate financial statements.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 16
Amendments to Section 3251 apply to entities that have adopted Section 1602 and require separate presentation on the statements of operations and comprehensive income of income attributable to owners of the Company and those attributable to non-controlling interests. The amendments also require that non-controlling interests be presented separately as a component of equity.
(b) Amendment to Section 3855, Financial instruments – Recognition and measurement
In June 2009, Section 3855, Financial instruments – Recognition and measurement was amended to:
• | Clarify the application of the effective interest method following an impairment loss of an investment in a debt instrument. This clarification applies to investment in debt instruments classified as held-to-maturity and to those classified as available for sale. This amendment will be effective for the Company in 2010. |
• | Clarify the situation where the embedded prepayment option is considered closely related and, therefore, is not separated from the host debt instrument for recognition purposes. This amendment will be effective for the Company in 2011. |
The Company is in the process of evaluating the requirements of these new standards.
(c) International Financial Reporting Standards (“IFRS”)
In February 2008, the Accounting Standards Board (“AcSB”) confirmed that IFRS, as issued by the International Accounting Standards Board (“IASB”), will replace Canadian GAAP for publicly accountable enterprises and must be adopted for fiscal years beginning on or after January 1, 2011.
5. ACQUISITIONS
Orezone Resources Inc. (“Orezone”)
On February 25, 2009, the Company acquired all of the outstanding common shares of Orezone. The principal asset of Orezone is a 90% interest in the Essakane gold Project in Burkina Faso. Prior to the 100% acquisition of Orezone, other exploration properties that were not related to the Essakane Project were spun out into a new exploration company, Orezone Gold Corporation (“Orezone Gold”), a new public company. The holders of common shares of Orezone received, for each share, 0.08 of an IAMGOLD common share and 0.125 of a common share of Orezone Gold. As a result of the transaction, IAMGOLD held approximately 16.6% of Orezone Gold.
In accordance with Canadian GAAP, CICA Section 1581, Business combinations, this transaction does not meet the definition of a business combination as the primary asset (Essakane Project) has not commenced planned principal operations and is in the development stage. Consequently, the transaction has been recorded as an acquisition of an asset.
On February 25, 2009, a total of 28,817,244 IAMGOLD shares valued at $220,735,000, were issued for the acquisition of Orezone. The value was determined based on the market value of the IAMGOLD shares at the closing date of the transaction. The Company also settled the convertible debenture assumed from Orezone by paying cash of $4,021,000 and issuing to the holder 555,425 common shares of IAMGOLD.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 17
The Company’s private placement in Orezone acquired on December 31, 2008, for a gross consideration of $16,420,000, was accounted for using the equity method of accounting within working interests. The Company recognized an equity loss of $491,000 (note 12) for the period between the acquisition date and February 25, 2009. In conjunction with the Orezone Gold spin off, an amount of $3,416,000 representing the Company’s 16.6% interest in Orezone Gold was reclassified out of working interests into marketable securities. The Company’s investment in Orezone Gold has been designated as available-for-sale marketable securities. The remaining private placement balance of $12,513,000 has been included as part of consideration for the transaction. Also included as part of consideration were the issuance of options and warrants of IAMGOLD and a cash subscription of $3,975,000 into the shares of Orezone Essakane (BVI) Limited, a wholly-owned subsidiary of Orezone.
The purchase price of $238,105,000 was allocated to the assets acquired and the liabilities assumed based on the fair value of the total consideration at the closing date of acquisition. All financial assets acquired and financial liabilities assumed were recorded at fair value. The excess of the amounts assigned to the acquired assets over the consideration paid was allocated on a pro rata basis to reduce values assigned to mining assets and exploration and development assets acquired. The future tax liability attributable to the asset acquisition was calculated using the appropriate method in order to allocate the purchase price to the assets and the related future tax liability.
$ | |||
Assets acquired and liabilities assumed | |||
Current assets | 2,414 | ||
Other long-term assets | 18 | ||
Exploration and development | 339,241 | ||
Current liabilities | (15,013 | ) | |
Debt | (40,000 | ) | |
Convertible debenture | (8,276 | ) | |
Future income and mining tax liability | (40,279 | ) | |
238,105 | |||
Consideration paid | |||
Issuance of shares | 220,735 | ||
Initial private placement investment | 12,513 | ||
Additional subscription | 3,975 | ||
Options issued | 684 | ||
Warrants | 148 | ||
Transaction costs | 5,369 | ||
Less: Cash and cash equivalents acquired | (5,319 | ) | |
238,105 | |||
Investment in Oromin Explorations Ltd. (“Oromin”)
In June 2009, the Company acquired 16,088,636 common shares at C$0.70 per share for a total investment of $10,316,000 (C$11,262,000), representing 17% of issued and outstanding shares of Oromin. Oromin is the owner of a joint venture interest in a large property in Senegal at the exploration and preliminary feasibility stage. The Company acquired these common shares for investment purposes. As of December 31, 2009, the Company was holding approximately 15.7% of the outstanding shares of Oromin. This investment is classified as available-for-sale marketable securities (included in Other long-term assets).
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 18
Acquisition of an additional 3% interest in Sadiola
During 2009, IAMGOLD held a 38% interest in the Sadiola joint venture. Other shareholders included AngloGold Limited (“AGA”) (38%), the Republic of Mali (“ROM”) (18%) and the International Financial Corporation (“IFC”) (6%). On December 29, 2009, IAMGOLD and AGA each acquired an additional 3% interest in the Sadiola joint venture from IFC, increasing ownership interest to 41%. The ROM has until March 31, 2010, to elect to take up its proportionate entitlement of 0.574% interest in SEMOS from each of the Company and AGA.
The consideration for the 3% interest in SEMOS was $6,000,000 in cash followed by contingent payments of:
• | $250,000 in each of 2010, 2011 and 2012 for which the average gold price exceeds $900 per ounce, or $500,000 in each of the aforementioned years that the average gold price exceeds $1,000 per ounce; based on future estimated gold price, the Company determined that it is likely that payments will be required and recognized a discounted contingent liability of $1,108,000. |
• | $500,000 upon approval by the board of directors of SEMOS and the ROM to proceed with the development of the Sadiola deep sulphide project. The deep sulphide project is in the feasibility stage and the timing and the decision is unknown, making it difficult to estimate the current value of the payment; therefore, this contingent payment has not been accrued at year-end. |
The Sadiola Mine is a joint venture and the interest in the joint ventures is accounted for by the proportionate consolidation method. The total purchase price of $5,573,000 was net of cash and cash equivalents acquired of $1,535,000. The purchase price was allocated to the assets acquired and the liabilities assumed based on the fair value of the total consideration at the closing date of acquisition. All financial assets acquired and financial liabilities assumed were recorded at their proportionate fair value. The excess of the amounts assigned to the acquired assets over the consideration paid was allocated to reduce the value assigned to mining assets acquired. The future tax asset attributable to the asset acquisition was calculated using the appropriate method in order to allocate the purchase price to the assets and the related future tax asset.
$ | |||
Assets acquired and liabilities assumed | |||
Current assets | 2,639 | ||
Other long-term assets (ore stockpiles) | 3,251 | ||
Mining assets | 1,206 | ||
Future income and mining tax asset | 413 | ||
Current liabilities | (997 | ) | |
Asset retirement obligations | (939 | ) | |
5,573 | |||
Consideration paid | |||
Cash payment | 6,000 | ||
Discounted contingent liability recognized | 1,108 | ||
Less: Cash and cash equivalents acquired | (1,535 | ) | |
5,573 | |||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 19
ACQUISITIONOF EURO RESSOURCES S.A. (“EURO Ressources”)
In 2008, the Company acquired 52,838,639 shares of EURO Ressources, representing 84.55% of the current share capital of EURO Ressources. EURO Ressources has a participation right royalty on production from IAMGOLD’s Rosebel Gold Mine. The total purchase price amounted to $82,030,000, including transaction costs of $3,514,000 less cash and cash equivalents acquired of $2,063,000.
In 2009, the purchase price allocation of EURO Ressources has been adjusted from that disclosed in 2008 as a result of the final review of future income and mining tax liabilities, and additional transaction costs resulting in an increase of goodwill and future income and mining tax liabilities.
Preliminary Fair Value | Adjustment | Final Fair Value | |||||||
$ | $ | $ | |||||||
Assets acquired and liabilities assumed | |||||||||
Other current assets | 5,407 | — | 5,407 | ||||||
Mining assets | 81,584 | — | 81,584 | ||||||
Goodwill | 23,179 | 7,625 | 30,804 | ||||||
Current liabilities | (3,363 | ) | — | (3,363 | ) | ||||
Debt | (657 | ) | — | (657 | ) | ||||
Forward sales liability | (4,950 | ) | — | (4,950 | ) | ||||
Future income and mining tax liabilities | (16,659 | ) | (7,448 | ) | (24,107 | ) | |||
Non-controlling interest | (2,688 | ) | — | (2,688 | ) | ||||
81,853 | 177 | 82,030 | |||||||
Consideration paid | |||||||||
Cash | 80,579 | — | 80,579 | ||||||
Transaction costs | 3,337 | 177 | 3,514 | ||||||
Less: Cash and cash equivalents acquired | (2,063 | ) | — | (2,063 | ) | ||||
81,853 | 177 | 82,030 | |||||||
6. ASSETS HELDFOR SALE
On February 13, 2007, the Company completed an agreement for the sale of its bauxite operation with an effective date at December 31, 2006. The transaction was completed on March 21, 2007, with the receipt from the purchaser of $28,451,000 and the assumption of third party debt of $17,724,000.
7. CASHAND CASHEQUIVALENTS
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Cash | 182,570 | 111,113 | ||
Cash equivalents: | ||||
Short-term deposits with initial maturities of less than three months | 8,804 | 6,876 | ||
Cash and cash equivalents | 191,374 | 117,989 | ||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 20
8. GOLD BULLION
At December 31 | 2009 | 2008 | ||||
Ounces held | (oz) | 99,999 | 173,704 | |||
Weighted average acquisition cost | ($/oz) | 404 | 404 | |||
Acquisition cost | (in $000s) | 40,408 | 70,191 | |||
End of year spot price for gold | ($/oz) | 1,088 | 870 | |||
End of year market value | (in $000s) | 108,749 | 151,079 |
In 2009, the Company sold 73,705 ounces of its gold bullion at an average price of $901 per ounce with proceeds of $66,411,000 resulting in a gain of $36,628,000.
9. RECEIVABLESAND OTHER
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Gold trade receivable | 7,693 | 10,547 | ||
Settlement receivables from sales of niobium | 20,720 | 13,351 | ||
Receivables from government related to taxes, mineral rights and exploration tax credit | 24,717 | 25,610 | ||
Royalty receivable | 1,188 | 2,487 | ||
Other receivable | 7,911 | 6,094 | ||
62,229 | 58,089 | |||
Derivatives – currency contracts | 142 | — | ||
Derivatives – heating oil option contracts | 2,723 | 1,457 | ||
Derivatives – aluminum option contracts | 186 | — | ||
Prepaid expenses | 17,802 | 4,617 | ||
83,082 | 64,163 | |||
10. INVENTORIES
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Gold production inventory | 43,548 | 27,016 | ||
Niobium production inventory | 7,436 | 10,138 | ||
Concentrate inventory | 703 | 151 | ||
Ore stockpiles – current | 26,408 | 8,221 | ||
Mine supplies | 83,938 | 47,275 | ||
Inventories | 162,033 | 92,801 | ||
The amount of inventories recognized as an expense during the period is included in mining costs in the consolidated statement of earnings. The cost of inventory that was charged to expense represents all mining costs and amortization of mining assets. During 2009, there was no write-down of inventories recognized as an expense.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 21
11. OTHER LONG-TERM ASSETS
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Receivables from governments related to taxes, mineral rights and exploration tax credits | 6,229 | 13,055 | ||
Restricted cash | — | 5,579 | ||
Marketable securities | 46,407 | 4,318 | ||
Warrants | 1,382 | 364 | ||
Convertible debenture | — | 2,873 | ||
Long-term ore stockpiles | 70,370 | 70,937 | ||
Capital assets | 6,275 | 4,703 | ||
Other assets | 5,459 | 3,406 | ||
136,122 | 105,235 | |||
12. WORKING INTERESTS
The Company holds an 18.9% working interest in Gold Fields Ghana Limited (“Tarkwa Mine”), an unlisted Ghanaian company holding 100% of the Tarkwa gold Mine in Ghana. The carrying value of this asset was recorded on the balance sheet on January 7, 2003, at its fair value of $42,742,000. This amount included a fair value increment of $4,617,000, which is amortized on a units-of-production basis over the life of the mine corresponding to the proven and probable reserves.
The Company also holds an 18.9% working interest in Abosso Goldfields Limited (“Damang Mine”), an unlisted Ghanaian company holding 100% of the Damang gold Mine in Ghana. The carrying value of this asset was recorded on the balance sheet on January 7, 2003, at its fair value of $15,298,000. This amount included a fair value increment of $6,261,000, which is amortized on a units-of-production basis over the life of the mine corresponding to the proven and probable reserves.
On December 31, 2008, IAMGOLD acquired 71,428,571 common shares of Orezone at a price of C$0.28 per share for total consideration of C$16,420,000. The investment was recorded using the equity method of accounting until February 25, 2009, when the Company completed the acquisition of 100% of Orezone (note 5). Effective February 25, 2009, Orezone’s results have been consolidated into IAMGOLD’s consolidated financial statements.
Tarkwa | Damang | Orezone | Total | |||||||
$ | $ | $ | $ | |||||||
Balance, December 31, 2006 | 73,431 | 13,655 | — | 87,086 | ||||||
Earnings from working interests in 2007 | 22,118 | 3,274 | — | 25,392 | ||||||
Balance, December 31, 2007 | 95,549 | 16,929 | — | 112,478 | ||||||
Acquisition | — | — | 16,420 | 16,420 | ||||||
Earnings from working interests in 2008 | 22,223 | 2,050 | — | 24,273 | ||||||
Balance, December 31, 2008 | 117,772 | 18,979 | 16,420 | 153,171 | ||||||
Consolidation of Orezone | — | — | (15,929 | ) | (15,929 | ) | ||||
Earnings from working interests in 2009 | 30,810 | 5,717 | (491 | ) | 36,036 | |||||
Balance, December 31, 2009 | 148,582 | 24,696 | — | 173,278 | ||||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 22
13. ROYALTY INTERESTS
Cost | Accumulated Amortization | Net Royalty Interests | ||||
$ | $ | $ | ||||
At December 31, 2009 | ||||||
Revenue producing royalties | ||||||
Diavik(a) | 49,446 | 23,365 | 26,081 | |||
Magistral(b) | 3,109 | 502 | 2,607 | |||
52,555 | 23,867 | 28,688 | ||||
$ | $ | $ | ||||
At December 31, 2008 | ||||||
Revenue producing royalties | ||||||
Diavik(a) | 49,446 | 21,252 | 28,194 | |||
Magistral(b) | 3,109 | 502 | 2,607 | |||
52,555 | 21,754 | 30,801 | ||||
Revenue producing royalties
(a) | The Company owns a 1% gross proceeds royalty on certain claims in the Lac de Gras region of the Northwest Territories, including the Diavik lands controlled by Harry Winston Diamond Corporation and Diavik Diamond Mines Inc. |
(b) | The Company owns a sliding scale NSR royalty on mineral production from the Magistral gold property in Mexico owned by US Gold Corporation. The royalty rate is 3.5% until 380,000 ounces of gold have been produced and 1% thereafter. In July 2005, mine operations were suspended. In 2008, the Company assessed the estimated fair value of the royalty against its carrying value including the associated goodwill, and determined an impairment charge was required. The $2,772,000 carrying value of goodwill was charged to earnings. No additional impairment was required in 2009. |
14. MINING ASSETS
Cost | Accumulated Depreciation and Depletion | Net Mining Assets | ||||
$ | $ | $ | ||||
At December 31, 2009 | ||||||
Plant and equipment | 628,479 | 375,482 | 252,997 | |||
Mining property and deferred costs | 1,481,679 | 731,566 | 750,113 | |||
Construction in progress | 50,238 | — | 50,238 | |||
2,160,396 | 1,107,048 | 1,053,348 | ||||
$ | $ | $ | ||||
At December 31, 2008 | ||||||
Plant and equipment | 522,810 | 302,406 | 220,404 | |||
Mining property and deferred costs | 1,320,477 | 574,778 | 745,699 | |||
Construction in progress | 38,810 | — | 38,810 | |||
1,882,097 | 877,184 | 1,004,913 | ||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 23
15. EXPLORATIONAND DEVELOPMENT
Capitalized investments in exploration and development properties, net of impairment charges, were as follows:
At December 31 | Note | 2009 | 2008 | ||||
$ | $ | ||||||
Burkina Faso – Essakane Project | 5 | 596,630 | — | ||||
Canada – Westwood Project | 131,286 | 36,642 | |||||
Ecuador – Quimsacocha Project | 22,180 | 11,894 | |||||
Tanzania – Buckreef | 25 | — | 9,197 | ||||
Tanzania – Other | 726 | 726 | |||||
French Guiana – Camp Caiman Project | 25 | 3,476 | 71,142 | ||||
Peru – La Arena Project | 30 | (g) | 30,008 | 26,768 | |||
Peru – Other | 1,773 | 1,962 | |||||
786,079 | 158,331 | ||||||
16. GOODWILL
At December 31 | Note | 2009 | 2008 | |||||
$ | $ | |||||||
Balance, beginning of year | 342,046 | 361,648 | ||||||
Adjustment – Cambior | 13,892 | (8,611 | ) | |||||
Adjustment – La Arena Project | (1,320 | ) | — | |||||
Adjustment and Acquisition – EURO Ressources | 7,625 | 23,179 | ||||||
Impairment – Camp Caiman Project | 25 | (28,239 | ) | — | ||||
Impairment – Buckreef Project | 25 | — | (25,668 | ) | ||||
Impairment – Other exploration and development | 25 | — | (4,387 | ) | ||||
Impairment – Gold Royalty – Magistral | 25 | — | (2,772 | ) | ||||
Adjustment – Sale of Sleeping Giant Mine | — | (1,343 | ) | |||||
Balance, end of year | 334,004 | 342,046 | ||||||
Goodwill adjustments include final purchase price adjustments, foreign exchange impacts and disposals.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 24
17. FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments.
2009 | 2008 | |||||||||||
At December 31 | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||
$ | $ | $ | $ | |||||||||
Financial Assets | ||||||||||||
Cash and cash equivalents(1) | 191,374 | 191,374 | 117,989 | 117,989 | ||||||||
Restricted cash | — | — | 5,579 | 5,579 | ||||||||
Receivables excluding derivative contracts, and prepaid expenses (2) | 62,229 | 62,229 | 58,089 | 58,089 | ||||||||
Derivatives – Currency contracts(3) | 142 | 142 | — | — | ||||||||
Derivatives – Heating oil option contracts(3) | 2,723 | 2,723 | 1,457 | 1,457 | ||||||||
Derivatives – Aluminum option contracts(3) | 186 | 186 | — | — | ||||||||
Marketable securities(3) | 46,407 | 46,407 | 4,318 | 4,318 | ||||||||
Warrants(3) | 1,382 | 1,382 | 364 | 364 | ||||||||
Convertible debenture(4) | — | — | 2,873 | 2,873 | ||||||||
Financial Liabilities | ||||||||||||
Accounts payable and accrued liabilities(5) | (175,320 | ) | (175,320 | ) | (146,668 | ) | (146,668 | ) | ||||
Credit facility(6) | — | — | (50,000 | ) | (50,000 | ) | ||||||
Gold forwards sales liability – Mupane(3) | — | — | (10,472 | ) | (20,777 | ) | ||||||
Derivatives – Gold forward sales(3) | — | — | (3,440 | ) | (3,440 | ) | ||||||
Derivatives – Currency contracts(3) | — | — | (573 | ) | (573 | ) |
(1) | The related interest income totaled $790,000 in 2009 ($1,735,000 in 2008). |
(2) | Refer to the credit risk section below. The fair value approximates the carrying amount given the short maturity period. |
(3) | Derivatives, marketable securities and warrants held in other companies are discussed below in the market risk section. |
(4) | The Company’s convertible debenture received as part of the proceeds for the sale of the Sleeping Giant Mine in 2008 was converted into marketable securities in 2009 resulting in a derivative gain of $2,827,000. |
(5) | Refer to the Liquidity risk section below. The fair value approximates the carrying amount given the short maturity period. |
(6) | Refer to the Liquidity risk section below. The credit facility is recorded at amortized cost. Since the credit facility is variable rate debt, the fair value is equivalent to the carrying amount. |
Risks
The Company is subject to various financial instrument risks that could have a significant impact on profitability, levels of operating cash flow and financial conditions. Ongoing financial market conditions may have an impact on interest rates, gold prices and currency rates.
The Company is exposed to various credit, market and liquidity risks associated with its financial instruments, and manages those risks as follows:
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 25
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk is associated with cash and cash equivalents, receivables and derivatives. Where applicable, the fair value of derivatives has been evaluated to account for counterparty credit risk.
The Company holds cash and cash equivalents in creditworthy financial institutions and does not hold any asset-backed commercial paper.
For derivatives, the Company mitigates credit risk by entering into derivatives with high quality counterparties, limiting the exposure per counterparty, and monitoring the financial condition of the counterparties.
Receivables excluding prepaid expenses and derivatives contracts are summarized in note 9.
The credit risk related to gold trade receivables is considered minimal as gold is sold to creditworthy major banks and settled promptly, usually within the following month.
Niobium sales credit risk on settlement receivables is related to difficulties buyers may have in meeting their payment obligations. At December 31, 2009, 55% of outstanding settlement receivables from sales of niobium were outstanding less than 30 days and 29% between 30 and 60 days. In order to minimize the credit risk related to receivables from sales of niobium, credit limit exposure reviews are performed on a regular basis. As at December 31, 2009, an impaired settlement receivable for $133,000 has been recognized and fully provided for through a doubtful account provision, and there was no amount that would otherwise be past due or impaired whose terms have been renegotiated. The Company does not hold any security or any other credit enhancements in relation to these receivables.
The credit risk is also related to receivables from governments related to taxes, mineral rights and exploration tax credits. Pending completion of certain government audits the full balance recorded may not be ultimately realized. Management does not expect the amount realized to be materially different from that currently recorded. In 2008, a write-down related to value added tax (“VAT”) receivables of $5,440,000 was recorded against other income in the consolidated statement of earnings.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. For hedging activities, it is the risk that the fair value of a derivative might be adversely affected by a change in underlying commodity prices or currency exchange rates, and that this in turn affects the Company’s financial condition. It is the risk that, in respect of certain derivative products, an adverse change in market prices for commodities, currencies or interest rates will result in the Company’s incurring an unrealized mark-to-market loss.
The Company mitigates market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken, establishing trading agreements with counterparties under which there are no requirements to post any collateral or make any margin calls on derivatives. Counterparties cannot require settlement solely because of an adverse change in the fair value of a derivative. Market risk comprises three types of risk:
• | Share, gold and commodity market price risk, |
• | Currency risk, and |
• | Interest rate risk. |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 26
Fair value measurements
The following fair value hierarchy, which reflects the significance of the inputs, is used in making the measurements of the fair value of financial assets and liabilities.
Level 1. | Quoted prices (unadjusted) in active markets for identical assets or liabilities; | |
Level 2. | Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and | |
Level 3. | Inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
Fair values of the Company’s financial assets and liabilities were as follows:
December 31, 2009 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Aggregate Fair Value | ||||||
$ | $ | $ | $ | |||||||
Financial assets: | ||||||||||
Derivatives: | ||||||||||
Currency contracts | — | 142 | — | 142 | ||||||
Heating oil option contracts | — | 2,723 | — | 2,723 | ||||||
Aluminum option contracts | — | 186 | — | 186 | ||||||
Held-for-trading: | ||||||||||
Warrants | — | 1,382 | — | 1,382 | ||||||
Available-for-sale: | ||||||||||
Marketable securities | 46,407 | — | — | 46,407 | ||||||
Total | 46,407 | 4,433 | — | 50,840 | ||||||
December 31, 2008 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Aggregate Fair Value | ||||||
$ | $ | $ | $ | |||||||
Financial assets: | ||||||||||
Derivatives: | ||||||||||
Heating oil option contracts | — | 1,457 | — | 1,457 | ||||||
Held-for-trading: | ||||||||||
Warrants | — | 364 | — | 364 | ||||||
Available-for-sale: | ||||||||||
Marketable securities | 4,318 | — | — | 4,318 | ||||||
Total | 4,318 | 1,821 | — | 6,139 | ||||||
Financial liabilities: | ||||||||||
Derivatives: | ||||||||||
Gold sales commitments | — | (3,440 | ) | — | (3,440 | ) | ||||
Currency contracts | — | (573 | ) | — | (573 | ) | ||||
Total | — | (4,013 | ) | — | (4,013 | ) | ||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 27
Valuation techniques
Marketable securities:
The fair value of available-for-sale marketable securities is determined based on a market approach reflecting the closing price of each particular security at the balance sheet date. The closing price is a quoted market price obtained from the exchange that is the principal active market for that particular security and is therefore classified within Level 1 of the fair value hierarchy.
Warrants:
The fair value of warrants held in other companies is obtained through the use of Black-Scholes pricing models which use share price inputs and volatility measurements and are therefore classified within Level 2 of the fair value hierarchy.
Derivatives:
For its derivative contracts (gold, currency, heating oil and aluminum), the Company obtains a valuation of the contracts from counterparties of its portfolio of contracts. Valuations are based on forward rates considering the market price, rate of interest and volatility, and take into account the credit risk of the financial instrument, and are therefore classified within Level 2 of the fair value hierarchy.
Marketable securities and warrants, and market price risk
IAMGOLD holds certain marketable securities following the settlement of specific transactions (e.g., disposal of a project in exchange for the shares of the counterparty) or as a strategic investment. These investments relate to mining companies which are part of a volatile market. Share market price exposure risk is related to the fluctuation in the market price of marketable securities.
Investments in marketable securities are classified as available-for-sale and are recorded at fair value in other long-term assets on the consolidated balance sheet. Exposure to share market price risk is related to the fluctuation in the market price of marketable securities. In 2009, an unrealized gain related to the change in market price of marketable securities classified as available-for-sale of $22,161,000 was recorded in other comprehensive income compared to unrealized losses of $6,158,000 in 2008 and $3,978,000 in 2007. The Company sold some of its marketable securities during 2009. The gain of $2,130,000 initially included in other comprehensive income was transferred to the statement of earnings. At the end of the year, the Company reviewed the value of marketable securities for impairment based on both quantitative and qualitative criteria and determined that a related impairment charge of $4,579,000 was required ($409,000 in 2008) and recorded in other expenses. Factors considered in determining impairment included a decreasing trend of these investments’ market value and other information available on these companies.
The Company also has share purchase warrants included in other long-term assets on the consolidated balance sheet. These warrants are considered held-for-trading and are measured at fair value. The unrealized gain or loss related to changes in fair value is reported under derivative gain or loss in the consolidated statement of earnings. An unrealized gain of $828,000 related to the change in the fair value of warrants classified as held-for-trading was recorded in 2009 compared to losses of $897,000 during 2008 and $1,236,000 in 2007. In addition, the Company realized a gain of $1,479,000 following the exercise of certain warrants in 2009.
At December 31, 2009, the impact of a change of 10% in the fair value of marketable securities and warrants would have resulted in a change in unrealized net of tax gain/loss of $3,825,000 that would be included in other comprehensive income, and a change of $119,000 in net earnings.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 28
Gold price market risk
The market risk related to the fluctuation in the price of gold has an impact on the fair value of the gold forward contracts. Following the acquisition of Gallery Gold Limited (Mupane) in 2006 and the acquisition of EURO Ressources in late 2008, the Company assumed existing gold forward commitments.
At the end of 2009, there were no remaining gold derivative contracts.
At December 31 | 2009 | 2008 | ||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||
$ | $ | $ | $ | |||||||
Normal sales contracts (Mupane) | — | — | (10,472 | ) | (20,777 | ) | ||||
Forward sales contracts (EURO Ressources) | — | — | (3,440 | ) | (3,440 | ) | ||||
— | — | (13,912 | ) | (24,217 | ) | |||||
The assumed Mupane forward sales contracts were accounted for as normal purchase and sales contracts whereby deliveries were recorded at their respective forward prices.
On the acquisition date of EURO Ressources in 2008, there were outstanding forward sale agreements for 17,100 ounces of gold at $459 per ounce for settlement in 2009. During the first quarter of 2009, the Company paid the settlement obligation of $3,617,000 outstanding for ounces bought back in December 2008. During 2009, all the ounces came to maturity with a fair value of $1,429,000 paid in October 2009 and $3,654,000 expiring in December 2009 with settlement in January 2010. These contracts did not qualify for hedge accounting and the decrease in fair value in 2009 totaling $1,643,000 ($2,107,000 between the acquisition date and December 31, 2008) was accounted for as a derivative loss.
In February 2010 the Company entered into forward sales option contracts to protect a portion of Mupane’s production for 2010 and 2011. The hedges are specific to the Mupane Mine production and intended to support a positive operating cash flow from the operation.
Currency risk
Movements in the Canadian dollar, the €uro and the South African Rand (“Rand”; symbol: “ZAR”) against the US dollar have a direct impact on the Company’s Canadian divisions and executive office cost base, and on development projects’ capital expenditures. International operations have exposure to currencies; however metal sales are mainly transacted in US dollars and a significant portion of each international operation’s cost base is denominated in US dollars.
The impact of conversion of transactions denominated in foreign currencies is accounted for in the statement of earnings and presents increased risk as the Canadian dollar and other currency rates fluctuate in relation to the US dollar. As the Company’s Canadian mines are considered self-sustaining foreign operations, the foreign exchange impact of translating their financial statement balances to US dollars is accounted for in accumulated other comprehensive income, as a cumulative translation adjustment, which shelters the operations from having this impact on the consolidated statement of earnings until the investment is repatriated.
The Company uses foreign exchange contracts to mitigate the risk of variability of the US dollar compared to the Canadian dollar, the €uro and the Rand.
In late 2008, the Company entered into option and forward contracts to hedge its exposure to the Canadian dollar in the 2009 spending plan. Following the Canadian dollar equity financing completed in March 2009, the Company reduced its hedging position for 2009 Canadian dollar requirements. At December 31, 2009, there were no outstanding hedge contracts for the exposure to the Canadian dollar.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 29
During 2010, the Company will have a significant Canadian dollar requirement due to capital expenditures required to advance the Westwood Project and operating and capital expenditures at the Niobec Mine.
As a result of the 2010 Essakane Project spending plan, the Company hedged its exposure to the €uro and the Rand resulting from the construction of the Essakane Project. This resulted in total net commitments to buy ZAR 20,000,000 (equivalent of $2,539,000; 25% of its annualized exposure), and €23,000,000 (equivalent of $33,457,000; 33% of its annualized exposure). These contracts will expire in 2010 and do not qualify for hedge accounting. At December 31, 2009, the positive fair value of $142,000 was included in receivables and other on the consolidated balance sheet.
Fair value adjustments were recognized during the year and recorded as an unrealized derivative gain.
Years ended December 31 | 2009 | 2008 | 2007 | ||||
$ | $ | $ | |||||
Unrealized loss (gain) on contracts expiring in 2009 | (573 | ) | 573 | — | |||
Realized gain | (2,890 | ) | — | — | |||
Total included in derivative loss (gain) | (3,463 | ) | 573 | — | |||
As at December 31, 2009, a 10% variation in the exchange rate as compared to the US dollar would create the following change in the fair value of these contracts:
Fair value | December 31, 2009 | Increase of 10% | Decrease of 10% | ||||||
$ | $ | $ | |||||||
€uro | 290 | 3,100 | (3,864 | ) | |||||
Rand | (148 | ) | (244 | ) | 298 | ||||
Total | 142 | 2,856 | (3,566 | ) | |||||
The 2009 foreign exchange gain of $26,967,000 was mainly due to the appreciation in the value of the Canadian dollar compared to the US dollar and the higher level of Canadian dollars in cash and cash equivalents. In relation to Canadian dollars held at the end of the year, a 10% weaker Canadian dollar against the US dollar would negatively impact net earnings by $5,292,000. A 10% stronger Canadian dollar against the US dollar would positively impact net earnings by $6,468,000.
Heating oil option and market price risk
Diesel is a key input to extract tonnage and, in some cases, to wholly or partially power operations. Since fuel is produced by the refinement of crude oil, changes in the price of oil directly impact fuel costs. The Company uses heating oil option contracts to mitigate the risk of oil price volatility on fuel consumption. Heating oil is traded in an active market and the Company believes there is a strong relationship between heating oil prices and diesel prices. As a result of the major disruption in the world oil markets, the Company initiated a hedging strategy in 2008 to limit the impact of price fluctuations for 2009. In 2009, the Company entered into additional option contracts at a cost of $1,630,000, hedging 36% or 8,610,000 gallons of 2010 planned fuel requirements. These option contracts cover consumption at the Rosebel, Mupane, Sadiola, Yatela and Essakane operations.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 30
The fair value is included in receivables and other in the consolidated balance sheet. At December 31, 2009, fair values of outstanding contracts were as follows:
Number of Gallons | December 31, 2009 | December 31, 2008 | ||||
$ | $ | |||||
Expiring in 2009(1) | — | — | 1,457 | |||
Expiring in 2010(2) | 8,610,000 | 2,723 | — | |||
Total | 8,610,000 | 2,723 | 1,457 | |||
(1) | Acquired during 2008 at a premium average price of $0.30 per gallon, for a total price of $2,260,000. |
(2) | Acquired in 2009 at a premium average price of $0.19 per gallon, for a total price of $1,630,000. |
Changes in fair values resulted in a derivative loss as follows:
Years ended December 31 | 2009 | 2008 | 2007 | ||||
$ | $ | $ | |||||
Unrealized loss (gain) on contracts expiring in 2009 | (803 | ) | 803 | — | |||
Unrealized gain on contracts expiring in 2010 | (1,093 | ) | — | — | |||
Realized loss | 1,974 | — | — | ||||
Total included in derivative loss | 78 | 803 | — | ||||
As of December 31, 2009, the valuation of these contracts was based on a heating oil price of between $1.45 and $2.00 per gallon with a net premium of $0.19 per gallon. The fair value, after an increase and a decrease of 10% in the price per gallon, would have been as follows:
Fair value | December 31, 2009 $0.19/gallon | Increase of 10% | Decrease of 10% | |||
$ | $ | $ | ||||
Heating oil options contracts | 2,723 | 4,316 | 1,328 |
Aluminum option contracts and market price risk
Aluminum is a key input in the production of niobium. During 2009, the Company initiated a hedging strategy to limit the impact of fluctuations of aluminum prices and to hedge a portion of its future consumption of aluminum for 2010. The Company used zero-cost collared option contracts to hedge 25% of its annualized aluminum exposure at the Niobec Mine. The valuation of these contracts was based on an aluminum price of between $1,667 and $2,076 per metric tonne, at no cost, for the 2010 consumption. At December 31, 2009, the fair value of contracts was as follows:
Number of Metric Tonnes | December 31, 2009 | December 31, 2008 | ||||
$ | $ | |||||
Expiring in 2010(1) | 900 | 186 | — |
(1) | Acquired in 2009 at no cost. Resulted in an unrealized derivative gain of $186,000 during 2009. |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 31
The relating fair value, after an increase and a decrease of 10% in the price per metric tonne, would have been as follows:
Fair value | December 31, 2009 | Increase of 10% | Decrease of 10% | |||
$ | $ | $ | ||||
Aluminum option contracts | 186 | 358 | 61 |
Interest rate risk
The Company is exposed to interest rate risk on its cash and cash equivalents and revolving credit facility. Related interests are based on market interest rates. The revolving credit facility provides for an interest rate margin above LIBOR and Base rate advances which varies according to the senior debt ratio. Fees related to the letter of credit and standby fees also vary according to the senior debt ratio. A change in the debt interest rates would have an impact on net earnings and/or capitalized costs according to the project the debt is related to. The Company does not take any particular measures to protect itself against fluctuations in interest rates.
If interest rates in 2009 had been 10% lower or higher with all other variables held constant, the impact on net earnings would not have been material on the interest expense recorded during 2009.
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.
As at December 31, 2009, the Company’s cash and cash equivalents, and gold bullion position valued at the year-end gold market price, was $300,123,000. In 2008, the Company signed a revolving credit facility agreement with a bank syndicate, which provides access to a high level of additional liquidity and capital resources. The Company’s credit facility is a $140,000,000 five-year revolving credit facility which may be used for general corporate purposes including acquisitions (note 19). As at December 31, 2009, no funds have been drawn against the credit facility and $17,406,000 in letters of credit were used to guarantee certain asset retirement obligations.
On July 29, 2009, the Company filed a base shelf prospectus with the securities regulators in each province and territory of Canada (except for Quebec) and a corresponding registration statement with the SEC in the United States. These filings allow the Company to make offerings of common shares, warrants, debt securities, subscription receipts or any combination thereof of up to $700,000,000 until August 29, 2011.
On March 25, 2010, the Company increase its $140,000,000 secured revolving credit facility to a $350,000,000 unsecured revolving credit facility.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 32
The Company has a treasury policy designed to support managing of liquidity risk as follows:
• | Investments in financial instruments in order to preserve capital, maintain required liquidity and realize a competitive rate of return while considering an appropriate and tolerable level of credit risk; |
• | Investments in gold bullion until a combination of factors indicates that a sale or use of gold bullion is strategically advantageous for the Company, or as part of the overall treasury management; |
• | Monitor cash balances within each operating entity; |
• | Perform short- to medium-term cash flow forecasting, as well as medium and long-term forecasting incorporating relevant budget information; |
• | Consider the need for expanding treasury activity if and when appropriate (including but not limited to hedging and derivatives); and |
• | Establish credit limits for counterparties and review limits periodically. |
The market liquidity risk is the risk that the Company has entered into a derivative position that cannot be closed out quickly, by either liquidating such derivative instrument or by establishing an offsetting position. Under the terms of the Company’s hedging agreements, counterparties cannot require the immediate settlement of outstanding derivatives, except upon the occurrence of customary events of default such as covenant breaches, including financial covenants, insolvency or bankruptcy. The Company generally mitigates liquidity risk by spreading out the maturity of its derivatives over time.
18. CURRENT PORTIONOF LONG-TERM LIABILITIES
At December 31 | Note | 2009 | 2008 | |||
$ | $ | |||||
Current portion of: | ||||||
Asset retirement obligations | 21 | 7,810 | 6,524 | |||
Gold forward sales liability – Mupane | 17 | — | 10,472 | |||
Derivatives – Gold forward sales – EURO Ressources | 17 | — | 3,440 | |||
Gold forward sales agreement payable – EURO Ressources | 17 | 3,654 | 3,617 | |||
Derivatives – Currency contracts | 17 | — | 573 | |||
Other | 793 | 665 | ||||
12,257 | 25,291 | |||||
19. CREDIT FACILITY
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Credit facility | — | 50,000 |
In 2008, the Company signed a $140,000,000 five-year revolving credit facility. This credit facility provides for an interest rate margin above LIBOR and Base rate advances which varies according to the senior debt ratio. Fees related to the letter of credit and standby fees also vary according to the senior debt ratio. This credit facility is guaranteed and secured by the Company’s major subsidiaries and by a pledge of IAMGOLD’s shares in these subsidiaries.
As at December 31, 2009, no funds have been drawn against the credit facility and $17,406,000 in letters of credit were issued to guarantee certain asset retirement obligations.
On March 25, 2010, the Company increased its $140,000,000 secured revolving credit facility to a $350,000,000 unsecured revolving credit facility.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 33
Credit facility issue costs:
In 2008, following the signature of the five-year revolving credit facility, the Company capitalized the credit facility issue costs of $1,589,000 in other long-term assets and the current portion is included in prepaid expenses. Amortization is calculated on a straight-line basis over the term of the credit facility. The carrying value of these costs at December 31, 2009 was $1,046,000.
20. INCOMEAND MINING TAXES
Income and mining tax expense differs from the amount that would have been computed by applying the combined federal and provincial statutory income tax rate of 33% in 2009 (34% in 2008 and 36% in 2007) to earnings before income and mining taxes. The reasons for the differences are as follows:
Years ended December 31 | 2009 | 2008 | 2007 | ||||||
$ | $ | $ | |||||||
Earnings (loss) before income and mining taxes | 222,104 | 58,505 | (683 | ) | |||||
Income tax provision calculated using statutory tax rates | 73,294 | 19,599 | (246 | ) | |||||
Increase (reduction) in income and mining taxes resulting from: | |||||||||
Earnings not subject to taxation | (13,551 | ) | (8,729 | ) | (9,126 | ) | |||
Earnings in foreign jurisdictions subject to different tax rates | 35,692 | 9,264 | 12,974 | ||||||
Provincial mining taxes | (6,283 | ) | 8,934 | 1,907 | |||||
Change in enacted corporate income tax rates | (229 | ) | (1,943 | ) | (3,676 | ) | |||
Losses not tax benefited | 13,651 | 15,367 | 36,499 | ||||||
Impairment charges | — | 12,501 | — | ||||||
Amounts not deductible for tax purposes | (696 | ) | 10,464 | 5,759 | |||||
Other | 6,103 | 2,964 | (2,714 | ) | |||||
Total income and mining taxes | 107,981 | 68,421 | 41,377 | ||||||
The provision for income and mining taxes is made up of the following components:
Years ended December 31 | 2009 | 2008 | 2007 | |||||
$ | $ | $ | ||||||
Current: | ||||||||
Foreign income tax | 91,004 | 68,665 | 26,958 | |||||
Provincial mining tax | 1,270 | 7,675 | — | |||||
92,274 | 76,340 | 26,958 | ||||||
Future: | ||||||||
Foreign income tax (recovery) | 1,643 | (23,539 | ) | 12,207 | ||||
Federal and provincial income tax | 21,618 | 14,362 | 73 | |||||
Provincial mining tax (recovery) | (7,554 | ) | 1,258 | 2,139 | ||||
15,707 | (7,919 | ) | 14,419 | |||||
Total | 107,981 | 68,421 | 41,377 | |||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 34
The components that give rise to future tax liabilities are as follows:
At December 31 | 2009 | 2008 | ||||
$ | $ | |||||
Future tax assets: | ||||||
Other assets | 3,008 | 6,433 | ||||
Exploration and development expenses | 42,348 | 39,862 | ||||
Share issue costs | 4,324 | 162 | ||||
Non-capital losses | 83,682 | 68,864 | ||||
Net capital losses | 474 | 980 | ||||
Mining assets | 20,098 | 17,921 | ||||
Corporate minimum tax credits | 89 | 160 | ||||
Asset retirement obligations | 26,989 | 18,634 | ||||
Accrued benefit liability | 852 | 533 | ||||
Long-term portion of forward sales liability | — | 5,163 | ||||
Mining duties | 2,768 | 3,479 | ||||
184,632 | 162,191 | |||||
Valuation allowance | (84,174 | ) | (85,473 | ) | ||
Future tax asset after valuation allowance | 100,458 | 76,718 | ||||
Future tax liabilities: | ||||||
Mining assets | (264,553 | ) | (195,688 | ) | ||
Exploration and development | (4,852 | ) | (5,901 | ) | ||
Royalty interests | (38,015 | ) | (27,235 | ) | ||
Intangibles | (3,014 | ) | (4,336 | ) | ||
Other | (27,403 | ) | (3,297 | ) | ||
(337,837 | ) | (236,457 | ) | |||
Net future tax liability | (237,379 | ) | (159,739 | ) | ||
The Company has non-capital loss carry forwards for Canadian income tax purposes of approximately $228,572,000, which may be used to reduce taxable income on or prior to 2029. The Company also has cumulative Canadian exploration and cumulative Canadian development expenses of approximately $45,448,000 and mining assets capital cost allowance of approximately $218,197,000, which may be carried forward indefinitely, subject to certain restrictions, to reduce taxable income in the future. Valuation allowances have not been recorded for these tax attributes.
In 2009, governmental assistance in the form of the Quebec resources tax credit reduced capitalized exploration expenditures by approximately $6,803,000 ($5,292,000 in 2008).
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 35
Losses carried forward as at December 31, 2009, will expire as follows:
Canada | United States | Ecuador | Barbados | Argentina | ||||||
$ | $ | $ | $ | $ | ||||||
2010 | 4,454 | 1,548 | — | 1,856 | 551 | |||||
2011 | — | 1,026 | — | 2,347 | 1,432 | |||||
2012 | — | 347 | 522 | 445 | 8 | |||||
2013 | — | — | 490 | 535 | 88 | |||||
2014 | — | — | 5,869 | 162 | 166 | |||||
2015-2029 | 224,118 | 3,107 | — | 2,286 | — | |||||
228,572 | 6,028 | 6,881 | 7,631 | 2,245 | ||||||
Peru(1) | Guyana(2) | Botswana | Brazil | Tanzania | ||||||
$ | $ | $ | $ | $ | ||||||
Unlimited | — | 69,135 | 78,076 | 21,745 | 64,942 | |||||
Undetermined | 9,985 | — | — | — | — | |||||
9,985 | 69,135 | 78,076 | 21,745 | 64,942 | ||||||
(1) | According to fiscal legislation in Peru, losses can be carried forward until the end of the fourth year following the first year in which a fiscal profit is realized (no fiscal profit has been realized to date). |
(2) | In accordance with the Mineral Agreement concluded with the government of the country. |
21. ASSET RETIREMENT OBLIGATIONS
The Company’s activities are subject to various laws and regulations regarding the environmental restoration and closure provisions for which the Company estimates future costs. These provisions may be revised on the basis of amendments to such laws and regulations and the availability of new information such as changes in reserves corresponding to a change in the mine life, acquisition or construction of a new mine. The liability for asset retirement obligations has been considered in the annual impairment test process. As at December 31, 2009, the Company had letters of credit in the amount of $17,406,000 to guarantee asset retirement obligations.
At December 31, 2009, estimated undiscounted amounts of cash flows required to settle the obligations, expected timing of payments and the average credit-adjusted risk-free rate assumed in measuring the asset retirement obligations were as follows:
Undiscounted Amounts Required | Expected Timing of Payments | Average Credit- Adjusted Risk-Free Rate | ||||
$ | ||||||
Rosebel Mine | 36,760 | 2010–2024 | 6.87% | |||
Doyon Mine | 66,935 | 2010–2127 | 5.74% | |||
Mouska Mine | 1,096 | 2012–2016 | 3.91% | |||
Mupane Mine | 6,602 | 2010–2016 | 5.08% | |||
Sadiola Mine (41%) | 15,690 | 2010–2026 | 5.76% | |||
Yatela Mine (40%) | 10,057 | 2010–2019 | 4.72% | |||
Niobec Mine | 4,445 | 2010–2024 | 5.71% | |||
Essakane Project | 2,079 | 2017–2026 | 5.18% | |||
Westwood Project | 1,301 | 2028–2029 | 5.77% | |||
Other sites | 3,730 | 2010–2109 | 4.17%–5.72% | |||
148,695 | ||||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 36
The schedule of estimated future disbursements for rehabilitation and for security deposits is as follows:
$ | ||
2010 | 8,024 | |
2011 | 7,376 | |
2012 | 11,259 | |
2013 | 8,475 | |
2014 | 10,489 | |
2015 onwards | 103,072 | |
148,695 | ||
The following table presents the reconciliation of the liability for asset retirement obligations:
Years ended December 31 | Note | 2009 | 2008 | |||||
$ | $ | |||||||
Balance, beginning of year | 77,014 | 85,259 | ||||||
New obligations relating to the acquisition of Sadiola 3% interest | 5 | 939 | — | |||||
Sale of Sleeping Giant Mine | — | (3,339 | ) | |||||
Revision in the estimated cash flows and timing of payments | 24,640 | 7,959 | ||||||
Accretion expense | 4,825 | 4,984 | ||||||
Disbursements | (6,661 | ) | (9,769 | ) | ||||
Foreign exchange variation | 4,390 | (8,080 | ) | |||||
Balance, end of year | 105,147 | 77,014 | ||||||
Less current portion | 18 | 7,810 | 6,524 | |||||
Long-term portion | 97,337 | 70,490 | ||||||
22. TERMINATION BENEFITS
Contractual termination benefits of $4,928,000 were recorded in 2008 for both the Doyon and Mouska Mines in Canada. In 2009, the mine life of the Doyon Mine was extended from May 2009 to December 2009 due to improved operating efficiencies. In addition, the Company approved a program to extend the life of the Mouska Mine from 2009 into early 2012 through the use of paste backfill to extract additional ore. In 2009, termination benefits provisions were reduced by $1,588,000 due to mine life extension at the Mouska Mine and the continued employment of certain Doyon Mine employees at the Westwood and Essakane sites.
In 2007, contractual termination benefits totaling $2,132,000 were recorded for the Sleeping Giant Mine in Canada. The Sleeping Giant Mine closed in October 2008 following the depletion of reserves.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 37
Liabilities relating to termination benefits for the closure of the Company’s Doyon, Mouska and Sleeping Giant Mines in Canada as of December 31, 2009, were as follows:
December 31, 2008 | Termination Benefits Adjustments in 2009 | Paid During 2009 | December 31, 2009 | |||||||
$ | $ | $ | $ | |||||||
Doyon and Mouska | 4,928 | (1,588 | ) | (61 | ) | 3,279 | ||||
Sleeping Giant | 72 | — | (72 | ) | — | |||||
Total | 5,000 | (1,588 | ) | (133 | ) | 3,279 | ||||
Termination benefit liabilities as of December 31, 2008 were as follows:
December 31, 2007 | Termination Benefits Incurred in 2008 | Paid During 2008 | December 31, 2008 | ||||||
$ | $ | $ | $ | ||||||
Doyon and Mouska | — | 4,928 | — | 4,928 | |||||
Sleeping Giant | 2,132 | — | (2,059 | ) | 72 | ||||
Total | 2,132 | 4,928 | (2,059 | ) | 5,000 | ||||
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Current portion included in Accounts payable and accrued liabilities | 1,372 | 4,388 | ||
Long-term portion included in Other long-term liabilities | 1,907 | 612 | ||
Total | 3,279 | 5,000 | ||
23. SHARE CAPITAL
(a) Authorized
Unlimited first preference shares, issuable in series
Unlimited second preference shares, issuable in series
Unlimited common shares
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 38
(b) Issued and outstanding common shares
Years ended December 31 | 2009 | 2008 | 2007 | |||||||||
Number of shares | Amount ($) | Number of shares | Amount ($) | Number of shares | Amount ($) | |||||||
Outstanding, beginning of year | 295,716,675 | 1,655,755 | 293,763,672 | 1,633,119 | 292,559,957 | 1,625,994 | ||||||
Shares issued on acquisition of Orezone | 28,817,244 | 220,735 | — | — | — | — | ||||||
Shares issued following the conversion of a debenture in Orezone | 555,425 | 4,254 | — | — | — | — | ||||||
Public offerings | 39,445,000 | 273,430 | — | — | — | — | ||||||
Flow-through shares(c) | 1,379,310 | 17,403 | 928,962 | 7,041 | — | — | ||||||
Exercise of options(e) | 2,878,030 | 30,855 | 952,892 | 15,069 | 1,141,231 | 6,590 | ||||||
Share bonus and deferred share plans(f)(g) | 95,527 | 837 | 71,149 | 526 | 53,091 | 444 | ||||||
Share purchase plan | — | — | — | — | 5,613 | 50 | ||||||
Warrants exercised | — | — | — | — | 3,780 | 41 | ||||||
Outstanding, end of year | 368,887,211 | 2,203,269 | 295,716,675 | 1,655,755 | 293,763,672 | 1,633,119 | ||||||
These amounts are net of issue costs.
On February 25, 2009, 28,817,244 shares valued at $220,735,000 were issued for the acquisition of Orezone (note 5). The value was determined based on the market value of the IAMGOLD shares on the date of transaction. The Company settled a convertible debenture assumed from Orezone by paying cash of $4,021,000 and issuing 555,425 common shares of IAMGOLD at a price equal to 95% of the volume weighted average price of one IAMGOLD share on the Toronto Stock Exchange for the 20 trading days prior to the date of the Orezone acquisition.
On March 26, 2009, the Company issued 39,445,000 common shares, at a price of C$8.75 per common share to raise gross proceeds of $281,474,000 (C$345,144,000). The net proceeds were $273,430,000.
(c) Flow-through common shares
Flow-through common shares require the Company to incur an amount equivalent to the proceeds of the issue on prescribed resource expenditures in accordance with the applicable tax legislation. In June 2009 the Company issued flow-through shares at C$14.50 per share with gross proceeds of C$20,000,000 (March 2008, at C$9.15 per share with gross proceeds of C$8,500,000). The proceeds from the flow-through shares fund prescribed resource expenditures on the Westwood Project.
The Company had applied all of the flow-through share proceeds raised by the prescribed deadlines. Under CICA EIC-146, Flow-through shares, the Company is required to record a provision at the time the actual renunciation forms are filed with the tax authorities. The Company plans to fulfill its commitments under the subscription agreement and satisfy the requirements under applicable Canadian federal income tax legislation in the first quarter of 2010. In conjunction with the filing of the renunciation of tax credits, the Company will record a future tax liability and corresponding reduction of shareholders’ equity of approximately C$3,000,000. The documents required to renounce the tax credits associated with the 2008 expenditures were filed by the Company in late 2008, and the Company recorded a future tax liability and corresponding reduction of shareholders’ equity in the amount of $1,047,000 in 2008.
In March 2010, the Company issued 1,575,000 flow-through shares at C$20 per share with gross proceeds of C$31,500,000 to fund prescribed resource expenditures on the Westwood Project.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 39
(d) Warrants
On acquisition of Orezone (note 5), in the first quarter of 2009, 2,000,000 warrants were issued, exercisable for 160,000 shares of IAMGOLD, at a price of C$14.79 each, expiring on August 1, 2010, with a risk-free interest rate of 1.27% and dividend yield of 0.76%. These warrants have a carrying value of $148,000.
(e) Share options
The Company has a share option plan for its full-time employees, directors and officers and self-employed consultants. The options vest over three or four years and expire no later than 10 years from the grant date. As at December 31, 2009, the total number of shares reserved for the grants of share options was 20,257,401. As of December 31, 2009, 10,048,251 shares remained in reserve. Options issued on the acquisition of Repadre Capital Corporation (in 2003), and Cambior (in 2006) are excluded from this reserve number.
A summary of the status of the Company’s share option plan as of December 31, 2009, 2008 and 2007, and changes during the three years then ended is presented below. All exercise prices are denominated in Canadian dollars. The exchange rates at December 31, 2009, 2008, and 2007, between US dollar and Canadian dollar were 1.0491, 1.2180 and 0.9913 respectively.
2009 | 2008 | 2007 | |||||||||||||
Years ended December 31 | Options | Weighted average exercise Price (C$) | Options | Weighted average exercise price (C$) | Options | Weighted average exercise price (C$) | |||||||||
Outstanding, beginning of year | 6,510,807 | 8.15 | 5,741,858 | 8.63 | 5,685,495 | 7.66 | |||||||||
Granted | 1,722,200 | 12.16 | 2,230,500 | 6.41 | 1,976,000 | 9.84 | |||||||||
Assumed on acquisition of Orezone assets | 367,456 | 17.83 | — | — | — | — | |||||||||
Exercised | (2,878,030 | ) | 8.62 | (952,892 | ) | 6.70 | (1,141,231 | ) | 4.80 | ||||||
Forfeited | (309,200 | ) | 9.54 | (508,659 | ) | 8.66 | (778,406 | ) | 10.21 | ||||||
Outstanding, end of year | 5,413,233 | 9.75 | 6,510,807 | 8.15 | 5,741,858 | 8.63 | |||||||||
Exercisable, end of year | 1,598,108 | 10.22 | 2,851,686 | 8.51 | 3,187,858 | 7.56 | |||||||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 40
The following table summarizes information relating to share options outstanding at December 31, 2009:
Options Outstanding | Options exercisable | |||||||||||
Range of Prices | Number Outstanding | Weighted Average Remaining Contractual Life - Years | Weighted Average Exercise Price C$ | Number Exercisable | Weighted Average Remaining Contractual Life - Years | Weighted Average Exercise Price C$ | ||||||
1.01 – 2.00 | 53,667 | 0.9 | 1.28 | 53,667 | 0.9 | 1.28 | ||||||
3.01 – 4.00 | 11,000 | 1.9 | 3.90 | 11,000 | 1.9 | 3.90 | ||||||
4.01 – 5.00 | 7,140 | 0.4 | 4.65 | 7,140 | 0.4 | 4.65 | ||||||
5.01 – 6.00 | 59,560 | 2.6 | 5.45 | 52,060 | 2.4 | 5.47 | ||||||
6.01 – 7.00 | 1,666,000 | 3.4 | 6.41 | 209,875 | 3.4 | 6.43 | ||||||
7.01 – 8.00 | 216,160 | 1.6 | 7.49 | 194,410 | 1.8 | 7.53 | ||||||
8.01 – 9.00 | 215,000 | 2.8 | 8.62 | 75,000 | 2.9 | 8.69 | ||||||
9.01 – 10.00 | 88,334 | 1.9 | 9.71 | 38,334 | 1.5 | 9.62 | ||||||
10.01 – 11.00 | 1,254,716 | 1.9 | 10.28 | 729,966 | 1.7 | 10.40 | ||||||
11.01 – 12.00 | 1,385,000 | 4.4 | 11.59 | — | — | — | ||||||
12.01 – 13.00 | 6,800 | 4.4 | 12.50 | 6,800 | 4.4 | 12.50 | ||||||
13.01 – 14.00 | 45,000 | 4.6 | 13.13 | — | — | — | ||||||
14.01 – 15.00 | 44,000 | 4.1 | 14.93 | 44,000 | 4.1 | 14.93 | ||||||
15.01 – 16.00 | 25,000 | 4.7 | 15.18 | — | — | — | ||||||
17.01 – 18.00 | 109,400 | 5.1 | 17.73 | 34,400 | 5.3 | 17.52 | ||||||
18.01 – 19.00 | 85,000 | 4.9 | 18.49 | — | — | — | ||||||
19.01 – 20.00 | 68,800 | 7.0 | 20.00 | 68,800 | 7.0 | 20.00 | ||||||
21.01 – 22.00 | 4,000 | 5.6 | 21.75 | 4,000 | 5.6 | 21.75 | ||||||
23.01 – 24.00 | 36,000 | 7.6 | 23.67 | 36,000 | 7.6 | 23.67 | ||||||
24.01 – 25.00 | 26,656 | 6.3 | 25.00 | 26,656 | 6.3 | 25.00 | ||||||
26.01 – 27.00 | 6,000 | 7.2 | 26.25 | 6,000 | 7.2 | 26.25 | ||||||
5,413,233 | 3.3 | 9.75 | 1,598,108 | 2.6 | 10.22 | |||||||
The Company uses values calculated by the Black-Scholes option pricing model as a proxy for such fair value.
The fair value of the options granted has been estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions. The weighted average expected life of these options is between one and eight years depending upon the life of the option. The estimated fair value of the options is expensed over the options’ vesting period of three or four years.
2009 | 2008 | 2007 | |||||||
Risk-free interest rate | 2 | % | 3 | % | 4 | % | |||
Volatility | 56 | % | 53 | % | 37 | % | |||
Dividend | 1 | % | 1 | % | 1 | % | |||
Weighted average expected life of options issued (years) | 4.4 | 4.2 | 4.1 | ||||||
Weighted average grant-date fair value (C$ per share) | 4.94 | 2.45 | 2.62 |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 41
(f) Share bonus plan
The Company has a share bonus plan for employees with a maximum allotment of 600,000 common shares. As of December 31, 2009, 372,555 shares remained in reserve.
Years ended December 31 | 2009 | 2008 | 2007 | ||||||
Number | Number | Number | |||||||
Outstanding, beginning of year | 86,652 | 137,801 | 89,892 | ||||||
Granted | 18,000 | 20,000 | 122,000 | ||||||
Issued | (64,152 | ) | (71,149 | ) | (53,091 | ) | |||
Forfeited | (3,000 | ) | — | (21,000 | ) | ||||
Outstanding, end of year | 37,500 | 86,652 | 137,801 | ||||||
(g) Deferred share plan
On April 11, 2007, the Company initiated a deferred share plan for employees with a maximum allotment of 500,000 common shares. As of December 31, 2009, 468,625 shares remained in reserve.
Years ended December 31 | 2009 | 2008 | ||||
Number | Number | |||||
Outstanding, beginning of year | 127,000 | — | ||||
Granted | 10,000 | 135,000 | ||||
Issued | (31,375 | ) | — | |||
Forfeited | (10,500 | ) | (8,000 | ) | ||
Outstanding, end of year | 95,125 | 127,000 | ||||
(h) Share purchase plan
On January 1, 2007, a new share purchase plan was implemented whereby the Company matches 75% of the first 5% of salary of employee contribution towards the purchase of shares on the open market. No shares are issued from treasury under the current purchase plan.
(i) Stock-based compensation
The Company expenses the fair value of all stock-based compensation granted.
Years ended December 31 | 2009 | 2008 | 2007 | |||
$ | $ | $ | ||||
Share options | 5,326 | 3,504 | 2,195 | |||
Share bonus plan | 499 | 263 | 660 | |||
Deferred share plan | 255 | 268 | — | |||
6,080 | 4,035 | 2,855 | ||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 42
(j) Earnings per share
Basic earnings (loss) per share computation
Years ended December 31 | 2009 | 2008 | 2007 | |||||
$ | $ | $ | ||||||
Numerator: | ||||||||
Net earnings (loss) | 114,123 | (9,916 | ) | (42,060 | ) | |||
Denominator: | Number | Number | Number | |||||
Weighted average common shares outstanding | 352,755,443 | 295,430,161 | 293,284,391 | |||||
$ | $ | $ | ||||||
Basic earnings (loss) per share | 0.32 | (0.03 | ) | (0.14 | ) | |||
Diluted earnings (loss) per share computation
Years ended December 31 | 2009 | 2008 | 2007 | |||||
$ | $ | $ | ||||||
Numerator: | ||||||||
Net earnings (loss) | 114,123 | (9,916 | ) | (42,060 | ) | |||
Denominator: | Number | Number | Number | |||||
Weighted average common shares outstanding | 352,755,443 | 295,430,161 | 293,284,391 | |||||
Dilutive effect of employee share options | 1,745,438 | — | — | |||||
Dilutive effect of employee deferred share plan | 130,289 | — | — | |||||
Total average common shares outstanding | 354,631,170 | 295,430,161 | 293,284,391 | |||||
$ | $ | $ | ||||||
Diluted earnings (loss) per share | 0.32 | (0.03 | ) | (0.14 | ) | |||
Equity instruments excluded from the computation of diluted earnings per share which could be dilutive in the future were as follows:
2009 | 2008 | 2007 | ||||
Number | Number | Number | ||||
Share options | 294,856 | 6,510,807 | 3,320,393 | |||
Warrants | 160,000 | — | 8,396,220 | |||
454,856 | 6,510,807 | 11,716,613 | ||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 43
24. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Cumulative Translation Adjustment | Unrealized Gain (Loss) on Debenture Receivable | Unrealized Gain (Loss) on Marketable Securities | Income Tax Impact | Accumulated Other Comprehensive Income (Loss) | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Balance as at December 31, 2006 | (4,836 | ) | 280 | 1,165 | (173 | ) | (3,564 | ) | |||||||
Change in 2007 | 29,883 | (280 | ) | (2,074 | ) | 254 | 27,783 | ||||||||
Balance as at December 31, 2007 | 25,047 | — | (909 | ) | 81 | 24,219 | |||||||||
Change in 2008 | (80,606 | ) | — | (5,749 | ) | 908 | (85,447 | ) | |||||||
Balance as at December 31, 2008 | (55,559 | ) | — | (6,658 | ) | 989 | (61,228 | ) | |||||||
Change in 2009 | 103,040 | — | 24,610 | (3,758 | ) | 123,892 | |||||||||
Balance as at December 31, 2009 | 47,481 | — | 17,952 | (2,769 | ) | 62,664 | |||||||||
25. IMPAIRMENT CHARGES
Years ended December 31 | 2009 | 2008 | 2007 | ||||
$ | $ | $ | |||||
Camp Caiman Project – Exploration and development assets and goodwill | 88,814 | — | — | ||||
Buckreef – Exploration and development assets and goodwill | 9,255 | 111,582 | — | ||||
Mupane – Mining assets and goodwill | — | — | 93,725 | ||||
Doyon – Development costs | — | — | 5,903 | ||||
Kitongo – Capitalized exploration expenditures and goodwill | — | 5,336 | — | ||||
Nyangombe – Exploration and development assets and goodwill | — | 1,896 | — | ||||
Magistral gold property – Goodwill on gold royalty | — | 2,772 | — | ||||
Other exploration properties – Goodwill | — | 2,470 | — | ||||
Other – Exploration and development assets | — | 5,805 | — | ||||
98,069 | 129,861 | 99,628 | |||||
Impairment of mining assets | — | — | 60,943 | ||||
Impairment of exploration and development assets | 73,967 | 97,034 | 5,903 | ||||
Impairment of goodwill | 28,239 | 32,827 | 32,782 | ||||
Reversal of a long-term liability | (4,137 | ) | — | — | |||
98,069 | 129,861 | 99,628 | |||||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 44
Camp Caiman, French Guiana
In June 2009, the French authorities published a draft-mining framework identifying the Camp Caiman Project location as an excluded zone for mining. There has been no definitive progress towards a final framework and no assurance that the final framework would permit the development of the Camp Caiman Project. The results of the January 10, 2010 referendum, in which French Guiana rejected greater autonomy from France, supported the Company’s view that it was appropriate to record a non-cash impairment of $88,814,000 for the net carrying value of the project, including $28,239,000 for goodwill. As part of the impairment charge, the Company eliminated the balance payable of the purchase price for the Camp Caiman Project of $4,137,000 assumed on acquisition of Cambior in 2006. This balance was interest-free and was payable within 120 days of the commencement of commercial production.
Buckreef Project and other Tanzanian exploration sites
Since the acquisition of the Buckreef Project in early 2006, comprehensive exploration programs have been completed. This work did not materially increase the resource base. As a result of estimated capital costs for mine development being significantly higher than anticipated, an impairment charge of $111,582,000 was recorded in 2008, including a goodwill impairment of $25,668,000. Other Tanzanian exploration sites were also impaired for $9,532,000, including goodwill impairment of $4,217,000.
In 2009, in consultation with the Tanzanian Government, the Company took steps to terminate the Buckreef joint venture agreement. Exploration activities were suspended earlier in the year as part of a strategic reorientation of the Company’s exploration focus. Transactions contemplated for the sale of the Buckreef Project did not meet the Company’s valuation criteria and the Company elected to relinquish the associated properties. This decision resulted in a 2009 impairment charge of $9,255,000 related to the Buckreef acquisition costs and exploration properties in Tanzania.
Magistral gold property, Mexico
In 2008, a goodwill impairment of $2,772,000 was accounted for in respect of the goodwill of the Magistral Gold Royalty property in Mexico, which has not yielded the production that was expected on acquisition.
Mupane Mine, Botswana
During 2007, the Company reviewed the exploration potential of the area, the current mineral resources, the projected operating costs, metallurgical performance and gold price of the Mupane Mine. These resulted in an impairment charge to the Mupane operations of $93,725,000 (reduction of goodwill of $32,782,000, $8,038,000 to other long-term assets (stockpiles) and $52,905,000 in the carrying value of the Mupane Mine).
Other exploration properties
An impairment of $5,975,000 in 2008, including goodwill impairment of $170,000, was accounted for in respect of exploration and development projects in Botswana and Peru which have shown unsuccessful results. In 2007, the Company also recorded an impairment charge of $5,903,000 related to resource development costs incurred at the Doyon Division which were unsuccessful in increasing the division’s resource profile.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 45
26. NET INTEREST EXPENSE (INCOME)
Years ended December 31 | 2009 | 2008 | 2007 | ||||||
$ | $ | $ | |||||||
Interest expense on credit facility | 639 | 380 | 1,236 | ||||||
Credit facility fees | 851 | 478 | — | ||||||
Other | 50 | 26 | 469 | ||||||
1,540 | 884 | 1,705 | |||||||
Less: Interest on debt capitalized | — | (209 | ) | — | |||||
Total interest expense | 1,540 | 675 | 1,705 | ||||||
Interest income on cash and cash equivalents | (790 | ) | (1,735 | ) | (2,924 | ) | |||
Other interest income | (70 | ) | (637 | ) | (1,267 | ) | |||
Total interest income | (860 | ) | (2,372 | ) | (4,191 | ) | |||
Net interest expense (income) | 680 | (1,697 | ) | (2,486 | ) | ||||
27. DERIVATIVE LOSS (GAIN)
Years ended December 31 | Note | 2009 | 2008 | 2007 | |||||||
$ | $ | $ | |||||||||
Unrealized change in fair value of: | |||||||||||
Derivative gold forward sales | 17 | 1,643 | 2,107 | 2,086 | |||||||
Derivative foreign exchange instruments | 17 | (573 | ) | 573 | — | ||||||
Derivative heating oil option instruments | 17 | (1,896 | ) | 803 | — | ||||||
Derivative aluminum option instruments | 17 | (186 | ) | — | — | ||||||
Embedded derivative in gold receivable | — | (285 | ) | (3,871 | ) | ||||||
Other (warrants and embedded derivatives) | (5,119 | ) | 1,143 | 1,236 | |||||||
Unrealized derivative loss (gain) | (6,131 | ) | 4,341 | (549 | ) | ||||||
Realized loss (gain) on: | |||||||||||
Derivative foreign exchange instruments | 17 | (2,890 | ) | — | — | ||||||
Derivative heating oil instruments | 17 | 1,974 | — | — | |||||||
Realized derivative gain | (916 | ) | — | — | |||||||
Derivative loss (gain) | (7,047 | ) | 4,341 | (549 | ) | ||||||
28. INFORMATION RELATEDTO CONSOLIDATED STATEMENTSOF CASH FLOWS
Years ended December 31 | 2009 | 2008 | 2007 | |||
$ | $ | $ | ||||
Interest paid | 1,350 | 339 | 1,400 | |||
Income and mining taxes paid | 29,022 | 42,420 | 43,992 |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 46
29. CAPITAL DISCLOSURES
IAMGOLD’s objectives when managing capital are:
• | To ensure the Company has sufficient financial capacity to support its operations, current mine development plans and long-term growth strategy; |
• | To provide a superior return to shareholders; |
• | To ensure the Company complies with its credit facility covenants; and |
• | To protect the Company’s value with respect to markets and risk fluctuations. |
The Company’s capital items are the following:
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Cash and cash equivalents | 191,374 | 117,989 | ||
Credit facility | — | 50,000 | ||
Common shares | 2,203,269 | 1,655,755 |
The Company’s capital structure reflects the requirements of a company focused on significant growth in a capital intensive industry that experiences lengthy development lead times as well as risks associated with capital costs and timing of project completion. Factors affecting these risks, which are beyond the Company’s control, include the availability of resources, the issuance of necessary permits, costs of various inputs and the volatility of the gold price.
The adequacy of the Company’s capital structure is assessed on an ongoing basis and adjusted as necessary after taking into consideration the Company’s strategy, the forward gold and niobium prices, the mining industry, economic conditions and the associated risks. In order to maintain or adjust its capital structure, the Company may adjust its capital spending, adjust the amount of dividend distributions, issue new shares, purchase shares for cancellation pursuant to normal course issuer bids, extend its credit facility, issue new debt, repay existing debt or sell gold bullion.
There were no changes in the Company’s approach to capital management during the year. The Company’s capital structure was modified with the objective to finance the Company’s growth such as the acquisition of Orezone and the development of the Essakane and Westwood Projects in 2009.
The Company has declared a 2009 annual dividend payment of $0.06 per share payable on January 12, 2010, totaling $22,133,000 ($0.06 per share payable on January 12, 2009 for $17,740,000 in 2008).
The Company’s capital structure was modified during 2009 following the issuance of shares as described in note 23. During 2009, the Company also sold gold bullion as mentioned in note 8.
In 2008, the Company replaced the previous credit facility by signing a $140,000,000 five-year revolving credit facility (described in note 19) which provided additional financial capacity in meeting its goals. This credit facility is in line with the Company’s objectives in managing capital. During 2009, the Company repaid a net $50,000,000 on its revolving credit facility. In addition, the Company repaid in full the assumed outstanding bridge financing of $40,000,000 following the acquisition of Orezone in 2009 (note 5). At December 31, 2009, no funds have been drawn against the credit facility and $17,406,000 in letters of credit were used to guarantee certain asset retirement obligations. The Company has complied with its credit facility covenants.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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On July 29, 2009, the Company filed a base shelf prospectus with the securities regulators in each province and territory of Canada (except for Quebec) and a corresponding registration statement with the SEC in the United States. These filings allow the Company to make offerings of common shares, warrants, debt securities, subscription receipts or any combination thereof of up to $700,000,000 until August 29, 2011.
On March 25, 2010, the Company increased its $140,000,000 secured revolving credit facility to a $350,000,000 unsecured revolving credit facility. The Company continues to assess the requirement and timing of a further equity offering through the prospectus filed in July 2009.
In March 2010, the Company issued 1,575,000 flow-through shares at C$20 per share with gross proceeds of C$31,500,000 to fund prescribed resource expenditures on the Westwood Project.
30. COMMITMENTAND CONTINGENCIES
(a) Royalty expenses
Production from certain mining operations is subject to third party royalties (included in mining costs) based on various methods of calculation summarized as follows:
Years ended December 31 | 2009 | 2008 | 2007 | |||
$ | $ | $ | ||||
Rosebel(1) | 18,356 | 29,458 | 19,850 | |||
Doyon(2) | — | 4,613 | 6,171 | |||
Mouska(3) | 1,102 | 1,006 | 770 | |||
Sleeping Giant(4) | — | 398 | — | |||
Mupane(5) | 2,792 | 4,344 | 3,023 | |||
Sadiola(6) | 7,795 | 9,025 | 6,102 | |||
Yatela(6) | 5,254 | 3,464 | 5,008 | |||
Total included in mining costs | 35,299 | 52,308 | 40,924 | |||
(1) | 2% in-kind royalty per ounce of gold production and price participation of 6.5% on the amount exceeding a market price of $425 per ounce when applicable, using for each calendar quarter the average of the market prices determined by the London Bullion Market, P.M. Fix. |
0.25% of all minerals produced at Rosebel payable to a charitable foundation for the purpose of promoting local development of natural resources within Suriname.
10% of the excess, if any, of the average quarterly market price above $300 per ounce for gold production from the soft and transitional rock portions and above $350 per ounce from the hard rock portion of the Rosebel property, after commencement of commercial production and up to a maximum of 7,000,000 ounces produced. In 2008, IAMGOLD acquired 84.55% of outstanding shares of EURO Ressources, the owner of this participation right royalty. The resulting mining asset is being depreciated over the reserves and resources of the Rosebel Mine.
(2) | 24.75% of any excess of the annual average market price over $375 per ounce of gold produced. In July 2008, the Company acquired the participation royalty for the Doyon/Westwood property for a cash consideration of $13,050,000. The payment was accounted for as a reduction of $4,574,000 of accrued liabilities for royalty expenses incurred during the first half of 2008, and as an increase of mining assets for $8,476,000. This mining asset will be depreciated over the reserves and resources of the Doyon Mine (closed in December 2009) and Westwood Project (beginning of commercial production planned for early 2013). |
(3) | Two royalties of 0.2% and 2.0% respectively of gold production. |
(4) | 2% of gross operating profit for one and 15% of net operating profit for the other taking into consideration cumulative capital investment and restoration expenses. The Sleeping Giant Mine ceased its activities in 2008 after depletion of its reserves. |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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(5) | Royalty of 5% of revenues based on market prices at date of shipment. |
(6) | A royalty of 3% of revenue and a royalty of 3% of the net amount of sales less refining and treatment charges. |
The Company is also subject to a royalty of 3% of the net amount of sales less refining and treatment charges related to its working interests (Tarkwa and Damang Mines). These royalty expenses totaling $4,785,000 in 2009 (2008 – $4,097,000 and 2007 – $3,297,000) are included in Earnings from working interests in the consolidated statement of earnings.
(b) Management fees
Years ended December 31 | 2009 | 2008 | 2007 | |||
$ | $ | $ | ||||
Joint ventures: | ||||||
Sadiola (1% of revenues) | 1,301 | 1,505 | 1,018 | |||
Yatela (1% of revenues) | 876 | 578 | 835 | |||
Included in mining costs | 2,177 | 2,083 | 1,853 | |||
Working interests: | ||||||
Tarkwa (2.5% of revenues) | 3,064 | 2,600 | 2,157 | |||
Damang (fixed amount) | 284 | 284 | 284 | |||
Included in earnings from working interests | 3,348 | 2,884 | 2,441 | |||
Total management fees | 5,525 | 4,967 | 4,294 | |||
(c) Operating contractual obligations
Payments Due by Period | ||||||||||
At December 31, 2009 | Total | Less than 1 Year | 2–3 Years | 4–5 Years | After 5 Years | |||||
$ | $ | $ | $ | $ | ||||||
Capital commitments | 29,624 | 12,072 | 17,552 | — | — | |||||
Purchase obligations | 34,916 | 34,916 | — | — | — | |||||
Operating leases | 8,158 | 2,271 | 3,412 | 1,752 | 723 |
Capital commitments relate to contractual commitments to complete facilities at some of the Company’s mines. Purchase obligations relate to agreements to purchase goods and services that are enforceable and legally binding on the Company. Operating leases refer to total payment obligations related to operating lease agreements.
(d) Claims
The Company is subject to various claims, legal proceedings, potential claims and complaints arising in the normal course of business. The Company is also subject to the possibility of new income and mining tax assessments for some years. The Company does not believe that unfavourable decisions in any pending procedures or threat of procedures related to any future assessment or any amount it might be required to pay will entail a material adverse effect on the Company’s financial condition. No amounts have been accrued in the financial statements.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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(e) Camp Caiman Project
Camp Caiman is a development project located about 45 kilometres southeast of Cayenne, the capital city of French Guiana. In January 2008, the Company’s application to begin construction of the Camp Caiman Project was denied by the French Government. The French authorities published a draft-mining framework in June 2009 but there has been no significant progress towards a final framework and no assurance that the final framework would permit the development of the Camp Caiman Project. In 2009, an impairment charge of $88,813,000 was accounted for (note 25). In order to protect the interests of the Company and its shareholders for damages incurred to date, appropriate legal claims were prepared and, on September 28, 2009, the Company through IAMGOLD Guyane S.A.S., its indirect subsidiary in French Guiana, sent a preliminary request for indemnification to the Prefect of French Guiana for €275,000,000. This was followed by a motion sent to the Administrative Tribunal in Cayenne, French Guiana, on December 23, 2009, to appeal the Prefect of French Guiana’s implicit refusal to grant the preliminary request for indemnification.
(f) Quimsacocha Project in Ecuador
In November 2009, detailed mining and environmental regulations relating to the Ecuadorian mining law passed in February 2009 were completed and approved by President Correa. The final step to allow the resumption of work at the Company’s Quimsacocha Project is the review and confirmation of water permits for the project area. In 2009, the Company continued the advancement of engineering for the concentrator. The Company intends to resume drilling and other feasibility work at the Quimsacocha Project once the necessary authorization is received. A feasibility study and an environmental impact assessment (at a cost of $14,000,000) are expected within 15 months of receiving the authorization to resume mining activity.
If the Company is unable to reach an agreement with the government of Ecuador on an acceptable project development plan, there may be an adverse impact on existing rights, interests and carrying value, the impact of which is difficult to assess at this time. Based on information currently available, the Company believes there is insufficient evidence to indicate an impairment exists. The Company will continue to monitor the situation. The carrying value of the Quimsacocha Project included in exploration and development capitalized assets was $22,180,000 at December 31, 2009.
(g) La Arena Project
In June 2009, an option and earn-in agreement was entered into for the sale of the La Arena Project in Peru. The Company received 8,024,511 common shares (10.6% interest) and 1,500,000 warrants of Rio Alto Mining Limited (“Rio Alto”) for a total value of $1,418,000. Rio Alto has the option to purchase all of the outstanding shares of La Arena S.A., an IAMGOLD wholly-owned subsidiary, for a cash payment of $47,550,000. During the option term, Rio Alto may also earn-in newly issued shares of La Arena S.A. up to a maximum of 38.7% by incurring up to $30,000,000 in expenditures on the La Arena Project. In 2009, Rio Alto was appointed the manager of La Arena S.A. and the La Arena Project, and $3,700,000 was incurred on the project under the earn-in agreement.
Rio Alto can partially exercise the option and purchase shares currently held by IAMGOLD during the option term to a maximum of 49% of the outstanding shares of La Arena S.A. The term of the option and earn-in agreement is two years and may be extended twice in increments of nine months if Rio Alto spends at least $10,000,000 over the initial two years of the option term. An additional consideration of $2,500,000 for the first extension and up to $5,000,000 for the final extension are payable upon extending the option term.
31. RELATED PARTY TRANSACTIONS
There were no material related party transactions in 2009, 2008 and 2007.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 50
32. SEGMENTED INFORMATION
The Company’s gold mine segment is divided into geographic segments, as follows:
• | Suriname: |
• | Rosebel Mine |
• | Canada: |
• | Doyon Division including the Doyon Mine closed in December 2009, the Mouska Mine and the Westwood Project |
• | Sleeping Giant Mine closed in October 2008 |
• | Botswana: |
• | Mupane Mine |
• | Mali: |
• | Joint venture in the Sadiola Mine; on December 29, 2009, the Company purchased an additional 3% interest increasing the Sadiola joint venture ownership interest to 41% (note 5) |
• | Joint venture in the Yatela Mine (40%) |
• | Ghana: |
• | Working interests in the Tarkwa Mine (18.9%) |
• | Working interests in the Damang Mine (18.9%) |
The Company’s segments also include non-gold activities for the Niobec Mine located in Canada, Exploration and development, and Corporate, which also includes royalty interests located in Canada.
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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Year ended December 31, 2009
Gold Mines | |||||||||||||
Suriname | Canada | Botswana | Mali | Ghana | Total | ||||||||
$ | $ | $ | $ | $ | $ | ||||||||
Revenues | 374,637 | 112,715 | 45,090 | 217,675 | — | 750,117 | |||||||
Depreciation, depletion and amortization | 52,043 | 21,161 | 14,757 | 26,167 | — | 114,128 | |||||||
Earnings from working interests | — | — | — | — | 36,527 | 36,527 | |||||||
Exploration and development expenses | 711 | 3,813 | 67 | 2,251 | — | 6,842 | |||||||
Impairment charges | — | — | — | — | — | — | |||||||
Net interest expense (income) | — | 211 | — | — | — | 211 | |||||||
Other expense (income) | — | — | — | — | — | — | |||||||
Income and mining taxes (recovery) | 57,578 | — | — | 31,391 | — | 88,969 | |||||||
Net earnings (loss) | 103,319 | 11,454 | (9,771 | ) | 60,613 | 36,527 | 202,142 | ||||||
Expenditure for mining assets and capitalized exploration and development | 70,104 | 82,430 | 3,898 | 5,461 | — | 161,893 | |||||||
Increase (decrease) to goodwill | — | 13,892 | — | — | — | 13,892 | |||||||
At December 31, 2009: | |||||||||||||
Working interest, royalty interest, mining assets, exploration and development, and other intangible assets | 426,812 | 282,532 | 29,445 | 27,252 | 173,279 | 939,320 | |||||||
Total assets | 661,769 | 404,640 | 54,866 | 182,901 | 232,438 | 1,536,614 | |||||||
Year ended December 31, 2009 |
Total Gold Mines | Niobium | Exploration and Development | Corporate | Total | |||||||||
$ | $ | $ | $ | $ | |||||||||
Revenues | 750,117 | 159,332 | — | 4,890 | 914,339 | ||||||||
Depreciation, depletion and amortization | 114,128 | 24,973 | 1,758 | 12,988 | 153,847 | ||||||||
Earnings from working interests | 36,527 | — | (491 | ) | — | 36,036 | |||||||
Exploration and development expenses | 6,842 | — | 32,920 | — | 39,762 | ||||||||
Impairment charges | — | — | 98,069 | — | 98,069 | ||||||||
Net interest expense (income) | 211 | 38 | — | 431 | 680 | ||||||||
Other expense (income) | — | — | 802 | 1,002 | 1,804 | ||||||||
Income and mining taxes (recovery) | 88,969 | 10,775 | (727 | ) | 8,964 | 107,981 | |||||||
Net earnings (loss) | 202,142 | 49,653 | (131,955 | ) | (5,717 | ) | 114,123 | ||||||
Expenditure for mining assets and capitalized exploration and development | 161,893 | 26,299 | 264,372 | — | 452,564 | ||||||||
Increase (decrease) to goodwill | 13,892 | — | (29,559 | ) | 7,625 | (8,042 | ) | ||||||
At December 31, 2009: | |||||||||||||
Working interests, royalty interest, mining assets, exploration and development, and other intangible assets | 939,320 | 351,485 | 653,711 | 105,250 | 2,049,766 | ||||||||
Total assets | 1,536,614 | 394,422 | 939,421 | 126,332 | 2,996,789 |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
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Year ended December 31, 2008
Gold Mines | |||||||||||||||
Suriname | Canada | Botswana | Mali | Ghana | Total | ||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||
Revenues | 281,729 | 167,078 | 62,129 | 208,338 | — | 719,274 | |||||||||
Depreciation, depletion and amortization | 42,299 | 50,712 | 15,233 | 24,996 | — | 133,240 | |||||||||
Earnings from working interests | — | — | — | — | 24,273 | 24,273 | |||||||||
Exploration and development expenses | 5,130 | 5,667 | 13 | 1,751 | — | 12,561 | |||||||||
Impairment charges | — | — | — | — | — | — | |||||||||
Other expense (income) | (4,420 | ) | 2,314 | — | 5,440 | — | 3,334 | ||||||||
Income and mining taxes (recovery) | 33,047 | (1 | ) | — | 27,545 | — | 60,591 | ||||||||
Net earnings | 45,391 | 19,951 | 10,997 | 40,954 | 24,273 | 141,566 | |||||||||
Expenditure for mining assets and capitalized exploration and development | 85,079 | 36,057 | 2,184 | 13,324 | — | 136,644 | |||||||||
Increase (decrease) to goodwill | — | (8,972 | ) | — | — | — | (8,972 | ) | |||||||
At December 31, 2008: | |||||||||||||||
Working interest, royalty interest, mining assets, exploration and development, and other intangible assets | 409,465 | 177,775 | 37,528 | 51,049 | 136,751 | 812,568 | |||||||||
Total assets | 605,996 | 290,719 | 70,102 | 178,872 | 195,911 | 1,341,600 |
Year ended December 31, 2008
Total Gold Mines | Niobium | Exploration and Development | Corporate | Total | ||||||||||
$ | $ | $ | $ | $ | ||||||||||
Revenues | 719,274 | 143,134 | — | 7,228 | 869,636 | |||||||||
Depreciation, depletion and amortization | 133,240 | 27,235 | 1,044 | 8,110 | 169,629 | |||||||||
Earnings from working interests | 24,273 | — | — | — | 24,273 | |||||||||
Exploration and development expenses | 12,561 | — | 18,551 | 2,516 | 33,628 | |||||||||
Impairment charges | — | — | 127,089 | 2,772 | 129,861 | |||||||||
Net interest expense (income) | — | 25 | — | (1,722 | ) | (1,697 | ) | |||||||
Other expense (income) | 3,334 | — | 2,113 | (3,937 | ) | 1,510 | ||||||||
Income and mining taxes (recovery) | 60,591 | 29,540 | (14,713 | ) | (6,997 | ) | 68,421 | |||||||
Net earnings (loss) | 141,566 | 49,356 | (136,472 | ) | (64,366 | ) | (9,916 | ) | ||||||
Expenditure for mining assets and capitalized exploration and development | 136,644 | 22,862 | 9,813 | — | 169,319 | |||||||||
Increase (decrease) to goodwill | (8,972 | ) | — | (30,055 | ) | 19,425 | (19,602 | ) | ||||||
At December 31, 2008: | ||||||||||||||
Working interests, royalty interest, mining assets, exploration and development, and other intangible assets | 812,568 | 292,321 | 138,109 | 116,263 | 1,359,261 | |||||||||
Total assets | 1,341,600 | 322,719 | 160,052 | 327,315 | 2,151,686 |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 53
Year ended December 31, 2007
Gold Mines | ||||||||||||||||
Suriname | Canada | Botswana | Mali | Ghana | Total | |||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||
Revenues | 188,285 | 133,449 | 53,814 | 185,345 | — | 560,893 | ||||||||||
Depreciation, depletion and amortization | 31,407 | 24,581 | 22,230 | 14,320 | — | 92,538 | ||||||||||
Earnings from working interests | — | — | — | — | 25,392 | 25,392 | ||||||||||
Exploration and development expenses | — | 832 | 552 | 1,482 | — | 2,866 | ||||||||||
Impairment charges | — | 5,489 | 93,725 | — | — | 99,214 | ||||||||||
Other expense (income) | — | — | 564 | — | — | 564 | ||||||||||
Income and mining taxes (recovery) | 10,799 | (340 | ) | 1,736 | 28,293 | — | 40,488 | |||||||||
Net earnings (loss) | 20,896 | 10,454 | (114,548 | ) | 51,948 | 25,392 | (5,858 | ) | ||||||||
Expenditure for mining assets and capitalized exploration and development | 39,332 | 17,909 | 1,146 | 18,104 | — | 76,491 | ||||||||||
Increase (decrease) to goodwill | (45,504 | ) | 1,551 | (38,823 | ) | — | — | (82,776 | ) |
Year ended December 31, 2007
Total Gold Mines | Niobium | Exploration and Development | Corporate | Total | ||||||||||
$ | $ | $ | $ | $ | ||||||||||
Revenues | 560,893 | 107,753 | — | 9,485 | 678,131 | |||||||||
Depreciation, depletion and amortization | 92,538 | 19,370 | 71 | 5,602 | 117,581 | |||||||||
Earnings from working interests | 25,392 | — | — | — | 25,392 | |||||||||
Exploration and development expenses | 2,866 | — | 27,779 | 2,801 | 28,446 | |||||||||
Impairment charges | 99,214 | — | — | 414 | 99,628 | |||||||||
Net interest expense (income) | — | 69 | — | (2,555 | ) | (2,486 | ) | |||||||
Other expense (income) | 564 | — | (310 | ) | (665 | ) | (411 | ) | ||||||
Income and mining taxes (recovery) | 40,488 | 2,479 | (971 | ) | (619 | ) | 41,377 | |||||||
Net earnings (loss) | (5,858 | ) | 20,936 | (24,338 | ) | (32,800 | ) | (42,060 | ) | |||||
Expenditure for mining assets and capitalized exploration and development | 76,491 | 20,453 | 23,194 | — | 120,138 | |||||||||
Increase (decrease) to goodwill | (82,776 | ) | — | (20,551 | ) | — | (103,327 | ) |
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 54
33. JOINT VENTURES
The following amounts represent the Company’s proportionate interest in the joint ventures of the:
• | Sadiola Mine: On December 29, 2009, the Company purchased an additional 3% interest increasing the Sadiola joint venture ownership interest to 41% (note 5), and |
• | Yatela Mine (40%). |
In 2009, the Company’s share of mining asset additions in the Company’s joint ventures was $5,461,000 (2008 – $13,324,000; 2007 – $18,104,000).
At December 31 | 2009 | 2008 | ||
$ | $ | |||
Current assets | 112,333 | 67,213 | ||
Long-term assets | 70,568 | 111,659 | ||
182,901 | 178,872 | |||
Current liabilities | 30,911 | 43,354 | ||
Long-term liabilities | 16,964 | 18,104 | ||
47,875 | 61,458 | |||
Years ended December 31 | 2009 | 2008 | 2007 | ||||||
$ | $ | $ | |||||||
Revenues | 217,675 | 208,338 | 185,345 | ||||||
Expenses (including income taxes) | 157,062 | 167,384 | 133,397 | ||||||
Net earnings | 60,613 | 40,954 | 51,948 | ||||||
Cash flows from operating activities | 81,483 | 32,244 | 54,386 | ||||||
Cash flows used in investing activities | (7,780 | ) | (22,071 | ) | (18,104 | ) | |||
IAMGOLD CORPORATION – CONSOLIDATED FINANCIAL STATEMENTS – 2009
PAGE 55