Iamgold continues cost-cutting crusade with bid for Euro resources

| Wednesday September 3, 2008 00:00

Based on current gold prices, the acquisition, if successful, is expected to lower cash costs at the mine by some $50/oz.

Euro has a participation right royalty on production from the Rosebel gold mine, in Suriname, that entitles it to payments of 10 percent of the gold price above $300/oz for production from soft rock and above $350/oz for production from hard rock.

The French firm said in a seperate statement that its board was reviewing the offer, and would not speculate on the matter until it was in a position to make a recommendation to shareholders.

The Rosebel mine produced 75 000 oz of gold in the second quarter of this year, at total cash costs of $485/oz.

The offer for Euro Ressources will be conditional on Iamgold acquiring at least 50% plus one of the total diluted Euro shares, including the 4,9 percent that is already owns, and is expected to open on or about September 17.

The offer represents a premium of 30 percent based on the closing price of Euro shares on Euronext on August 28, 2008 and a premium of 27 percent based on the one month weighted average share price of Euro on Euronext.

Iamgold shares rose 0,6 percent on Friday morning, to C$6,83 a share by 9:43 in Toronto.

Euro Ressources, which also has a TSX listing, gained 28,6 percent, to C$1,80 a share.

In a bid to take better advantage of high gold prices, Iamgold has a implemented a series of measures this year to lower costs across its portfolio of mines.

The company last month repurchased a royalty on its Doyon mine, in Quebec, from Barrick Gold for $13-million in cash, and it has also switched to owner mining at its Mupane mine, in Botswana, which is expected to lower cash costs by at least $40 per ounce compared to the previous life-of-mine plan.

?We continue to demonstrate our focus on operational efficiencies and costs at our operations with the long term objective of reducing our cash costs below the industry average, president and CEO Joseph Conway said on Friday.

Earlier this month, the group raised its production guidance for the full year to 950 000 oz of gold, from an earlier forecast of 920 000 oz.

?However, projected cash costs were revised upwards, to between $485/oz and $495/oz, an increase from its previously published expectations of between $455/oz and $470/oz. (MiningWeekly)