Most gold stocks have moved down lately, along with gold prices. (Gold is down from almost $1,800 U.S. an ounce in September 2012 to $1,384 today.)
Gold’s most recent drop came in response to concerns that Cyprus may sell some of its gold reserves as it deals with its financial crisis. Gold often becomes highly volatile and erratic in response to factors like this. These short term trends can reverse overnight. That’s why we see gold as a good investment only for aggressive investors.
However, the best way for aggressive investors to invest in gold is to buy shares of companies with rising gold production. That will give them strong cash flow even if gold prices fall further. Here is one such gold stock that we cover in our advisory for more aggressive investing, Stock Pickers Digest.
IAMGOLD (Toronto symbol IMG; www.iamgold.com) owns 38% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 90% of its new Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 100% of the Rosebel mine in Suriname, South America.
IAMGold also has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories. As well, it owns the Niobec niobium mine in Quebec. When used as an additive, niobium makes steel stronger, more heat resistant and easier to weld.
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IAMGold cost cuts partly offset losses from declining gold prices
In the three months ended March 31, 2013, IAMGold’s revenue fell 13.8%, to $305.3 million from $354.l million a year earlier. Cash flow per share fell 35.4%, to $0.49 from $0.57.
The declines mostly resulted from lower gold prices, partly offset by a decline in the company’s costs.
IAMGold’s is diversifying away from Africa. Last year, it acquired the Côté Lake gold project, located between Timmins and Sudbury, when it bought Trelawney Mining and Exploration for $608 million. Côté Lake holds an estimated 8.2 million ounces of gold, and there’s lots of room for more drilling to further expand the project’s reserves.
In the latest edition of Stock Pickers Digest, we look at the longer-term outlook for gold stocks in general. We also look at the production outlook for IAMGold and the impact of its plan to diversify away from Africa. We conclude with our clear buy-hold-sell advice on this stock.
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When the price of gold reached new highs, most gold stocks did not experience a corresponding surge. Does the decline in gold prices make these stocks even less attractive? Or do you think gold stocks should be judged independently of the state of gold prices? Let us know what you.
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