The price of gold has continued to rise into 2018. Gold stocks with the means to increase their output will be in the best position to profit from higher prices.
This Canadian gold stock concluded two agreements in the past year that should boost its output significantly in the long term. The company currently produces 850,000 ounces of gold annually from four operating mines. It also has the cash to fund more production.
IAMGOLD (Toronto symbol IMG; www.iamgold.com) owns 41% of the Sadiola mine in Mali; 90% of the Essakane mine in Burkina Faso; 100% of the Westwood mine in Quebec; and 95% of the Rosebel mine in Suriname. It also owns 92.5% of the Cote gold project in Ontario.
In August 2017 IAMGold paid $2.5 million (Canadian) for a 19.98% stake in TomaGold Corp., (symbol LOT on the TSX Venture Exchange). TomaGold holds interests in several gold projects, mainly in northern Quebec. Those include a 50/50 joint venture with IAMGold to develop the Monster Lake field, 50 km southwest of Chibougamau, Quebec.
IAMGold can further increase its stake in Monster Lake to 75% provided it spends a further $10 million on the project by the start of 2022. The company’s decision to purchase a stake in TomaGold suggests that Monster Lake has already strong potential.
Earlier, the company had reached an agreement with Japan’s Sumitomo Metal Mining to help build a mine at IAMGold’s Côté gold property near Timmins, Ontario.
Sumitomo will pay $100 million U.S. when the deal closes. A final $95 million U.S. is due within 18 months, or when IAMGold provides authorities with its final feasibility study on the economics of building the mine.
The Côté deposit holds as much as 5.93 million ounces of gold. The partners hope to start construction in 2019. Production is scheduled to begin in 2021 at a rate of 320,000 ounces per year.
IAMGold now produces around 850,000 ounces of gold per year, so the Côté mine will push it well over the million-ounce mark.
Mining Stocks: Company in a strong position with high cash reserves
In the quarter ended September 30, 2017, IAMGold’s revenue fell 4.8%, to $268.8 million from $282.4 million a year earlier. (All figures except share price and market cap in U.S. dollars.) Cash flow dropped 34.0%, to $73.5 million, or $0.16 a share, from $111.3 million, or $0.26.
The company’s gold production increased 3.3% in the latest quarter, to 217,000 ounces from 210,000 a year earlier. However, gold prices fell during the quarter, and costs rose.
IAMGold’s long-term production outlook is positive. Meantime, the company holds a high $835.3 million in cash. Those reserves put it in a strong position to pay down its long-term debt of $388.7 million. It could also expand its existing gold projects, pay dividends, buy back shares or make timely acquisitions from distressed sellers at low prices.
Recommendation in Stock Pickers Digest: IAMGold is a buy.
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