Iamgold up 26% on Cote mine funding news

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Iamgold Corp [IMG-TSX, IAG-NYSE] is equipped to meet its share of the remaining construction costs at the Cote gold project in Ontario after striking a deal with Managem Group to sell its interests in a basket of exploration and development projects in Senegal, Mali and Guinea for US$282 million.

Mangem is a Pan-African and fully integrated mining group with 6,000 people on the payroll and operations in six African countries, including Morocco.

The assets being sold are entities that hold Iamgold’s 90% interest in the Boto Gold Project in Senegal, and 100% interest in each of the Diakha-Siribaya Gold Project in Mali, Karita Gold Project and associated exploration properties in Guinea, and the early-stage exploration properties in Boto West, Senala West, Daorala and the vested interest in the Senala Option Earn-in join venture, also located in Senegal. The remaining 10% interest in Boto will continue to be held by the Government of Senegal.

The announcement came after Iamgold said it had reached a deal with partner Sumitomo Metal Mining Co. Ltd. of Japan to amend its joint venture agreement in relation to the Cote gold construction project, which is located north of Sudbury.

Iamgold will remain as operator of the Cote project. The asset sale, combined with a financing transaction with Sumitomo means Iamgold is now fully funded for the remaining financial requirements for completion of construction at the Cote project, where the company is on track for production in 2024.

The revised agreement allows Sumitomo to fund Iamgold’s portion of the capital cost for the project in 2023 for a total of $340 million (consisting of $250 million cash calls and $90 million of funding cost) in return for a 10% interest in the project, which Iamgold has the option of buying back.

Iamgold will pay a repurchase option fee to Sumitomo, leaving the gold miner with the right to exercise the repurchase option on seven dates between November 30, 2023 and November 30, 2026, to return to its full 70% interest in the Cote project.

Iamgold shares rallied strongly on the news, rising 26% or 65 cents to $2.15 on volume of 2.11 million. The shares are currently trading in a 52-week range of $4.74 and $1.26.

Iamgold is an intermediate gold producer with operations in three regions globally: North and South America and West Africa. The company’s three operating mines include Essakane, Rosebel in Suriname, and Westwood in Canada.

Earlier this year, Iamgold said it was facing a sharp rise in the estimated completion costs at its Cote project, which will be the company’s fourth mine. It is expected to produce an average of 367,000 ounces of gold annually over a projected lifespan of 18 years at an average grade of 0.96 g/t.

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